Supplemental Information Health Management Associates, Inc. (“HMA”) December 31, 2013 Exhibit 99.2 |
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainties. All statements in this presentation other than statements of historical fact, including statements regarding projections, expected operating results, and other events that depend upon or refer to future events or conditions or that include words such as “expects,” anticipates,” “intends,” “plans,” “believes,” “estimates,” “thinks,” and similar expressions, are forward-looking statements. Although Community Health Systems, Inc. (the “Company”) believes that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and are beyond the control of the Company. Accordingly, the Company cannot give any assurance that its expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements. A number of factors could affect the future results of the Company or the healthcare industry generally and could cause the Company’s expected results to differ materially from those expressed in this presentation. The consolidated operating results for the year ended December 31, 2013, are not necessarily indicative of the results that may be experienced for any such future period or for any future year. The Company cautions that the projections for calendar year 2014 set forth in this presentation are given as of the date hereof based on currently available information. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. 2 |
HMA’s Change in Estimates and Fourth Quarter Adjustments Change in Estimate to Allowance for Doubtful Accounts and Contractual Allowances • Centralizing business offices • Changes in key management personnel • Estimated deterioration in net realizable value in A/R • Analysis on historical write-offs and subsequent cash collections Additional Legal Contingencies Write-offs of Discontinued Construction Projects, Recovery Audit Contractor Adjustments and Other • Change in estimates based on additional facts and circumstances • Recovery Audit Contractor adjustments • Change in construction project priorities Change in Estimates to Amounts Due to Third Party Payors and Other Government Receivables • Review of certain claims by CHS 3 $5.9 $37.0 $246.3 $34.0 Area of Impact * HMA’s Financial Impact * Triggering Events * ($ in millions) * Please note statement on slide 4. |
Change in Estimate Adjustments of HMA’s 2013 Financials The adjustments for the change in estimate to the allowance for doubtful accounts and contractual allowances were $246 million. In previous acquisitions, adjustments to the allowance for doubtful accounts and contractual allowances have typically occurred in periods following the acquisition. Since these changes in estimate were recorded in 2013, material conforming changes are not expected in the first quarter of 2014. In the case of our acquisition of Triad, in the third quarter of 2007, adjustments related to conforming accounting policies and estimation processes totaled $166 million in the fourth quarter of 2007 and affected the run rate by approximately $20 million, as previously stated. 4 |
HMA’s Reconciliation of Loss from Continuing Operations to Adjusted EBITDA Prior to Change in Estimate Adjustments Year Ended 12/31/2013 Loss from continuing operations (235,990) $ Depreciation and amortization 390,993 Interest expense 281,254 Income tax benefit (135,341) Change in control and other related expenses 133,033 Write-offs of deferred debt issuance costs and other related expenses 584 Other 1,928 Adjusted EBITDA prior to change in estimate adjustments 436,461 $ 5 |
HMA’s Year Ended 2013 Adjusted EBITDA Year Ended 12/31/2013 Adjusted EBITDA prior to add backs of change in estimate adjustments 436,461 $ Change in estimate adjustments Change in estimate to allowance for doubtful accounts and contractual allowances 246,293 Additional legal contingencies 36,959 Change in estimates to amounts due to third party payors and other government receivables 33,973 Write-offs of discontinued construction projects, Recovery Audit Contractor adjustments and other 5,912 Adjusted EBITDA (previously disclosed on February 18, 2014) 759,598 $ 6 |
EBITDA consists of net income attributable to Health Management Associates, 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, change in control and other related expenses and net income attributable to noncontrolling interests. HMA 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 HMA’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 generally accepted accounting principles. 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 generally accepted accounting principles. 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. HMA’s Unaudited Supplemental Information 7 |
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): HMA’s Unaudited Supplemental Information Year Ended December 31, 2013 Adjusted EBITDA 436,461 $ Interest expense (281,254) Income tax benefit 135,341 Change in control and other related expenses (133,033) Amortization of debt discounts 11,902 Amortization and fair value adjustment of interest rate swap 74,633 Deferred income taxes (36,719) Stock-based compensation expense 58,909 Equity compensation excess tax benefits (19,056) Other non-cash expenses, net 796 Changes in operating assets and liabilities, net (21,404) Net cash provided by operating activities 226,576 $ 8 |