Supplemental Condensed Consolidating Financial Information Disclosure | 20. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION The Senior Notes due 2019, 2020 and 2022, which are senior unsecured obligations of CHS, the 5⅛% Senior Secured Notes due 2021, and the 6¼% Senior Secured Notes due 2023 (collectively, “the Notes”) are guaranteed on a senior basis by the Company and by certain of its existing and subsequently acquired or organized 100 % owned domestic subsidiaries. The Notes are fully and unconditionally guaranteed on a joint and several basis, with exceptions considered customary for such guarantees, limited to the release of the guarantee when a subsidiary guarantor’s capital stock is sold, or a sale of all of the subsidiary guarantor’s assets used in operations. The following condensed consolidating financial statements present Community Health Systems, Inc. (as parent guarantor), CHS (as the issuer), the subsidiary guarantors, the subsidiary non-guarantors and eliminations. These condensed consolidating financial statements have been prepared and presented in accordance with SEC Regulation S-X Rule 3-10 “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.” The accounting policies used in the preparation of this financial information are consistent with those elsewhere in the condensed consolidated financial statements of the Company, except as noted below: • Intercompany receivables and payables are presented gross in the supplemental condensed consolidating balance sheets. • Cash flows from intercompany transactions are presented in cash flows from financing activities, as changes in intercompany balances with affiliates, net. • Income tax expense is allocated from the parent guarantor to the income producing operations (other guarantors and non-guarantors) and the issuer through stockholders’ equity. As this approach represents an allocation, the income tax expense allocation is considered non-cash for statement of cash flow purposes. • Interest expense, net has been presented to reflect net interest expense and interest income from outstanding long-term debt and intercompany balances. The Company’s intercompany activity consists primarily of daily cash transfers for purposes of cash management, the allocation of certain expenses and expenditures paid for by the Parent on behalf of its subsidiaries, and the push down of investment in its subsidiaries. This activity also includes the intercompany transactions between consolidated entities as part of the Receivables Facility that is further discussed in Note 12. The Company’s subsidiaries generally do not purchase services from one another; thus, the intercompany transactions do not represent revenue generating transactions. All intercompany transactions eliminate in consolidation. From time to time, subsidiaries of the Company sell and/or repurchase noncontrolling interests in consolidated subsidiaries, which may change subsidiaries between guarantors and non-guarantors. Effective with the spin-off of QHC, all subsidiaries of the Company that were part of that distribution have been removed as guarantors. Condensed Consolidating Statement of Loss Three Months Ended June 30, 2017 Parent Guarantor Issuer Other Guarantors Non - Guarantors Eliminations Consolidated (In millions) Operating revenues (net of contractual allowances and discounts) $ - $ (6) $ 2,970 $ 1,859 $ - $ 4,823 Provision for bad debts - - 438 241 - 679 Net operating revenues - (6) 2,532 1,618 - 4,144 Operating costs and expenses: Salaries and benefits - - 990 930 - 1,920 Supplies - - 440 257 - 697 Other operating expenses - - 669 348 - 1,017 Government and other legal settlements and related costs - - 7 - - 7 Electronic health records incentive reimbursement - - (11) (6) - (17) Rent - - 55 49 - 104 Depreciation and amortization - - 137 86 - 223 Impairment and (gain) loss on sale of businesses, net - - 89 (9) - 80 Total operating costs and expenses - - 2,376 1,655 - 4,031 (Loss) income from operations - (6) 156 (37) - 113 Interest expense, net - 87 148 4 - 239 Loss from early extinguishment of debt - 10 - - - 10 Equity in earnings of unconsolidated affiliates 137 51 23 - (216) (5) (Loss) income from continuing operations before income taxes (137) (154) (15) (41) 216 (131) (Benefit from) provision for income taxes - (17) 33 (31) - (15) (Loss) income from continuing operations (137) (137) (48) (10) 216 (116) Discontinued operations, net of taxes: Loss from operations of entities sold or held for sale - - 2 (3) - (1) Impairment of hospitals sold or held for sale - - (5) - - (5) Loss from discontinued operations, net of taxes - - (3) (3) - (6) Net loss (137) (137) (51) (13) 216 (122) Less: Net income attributable to noncontrolling interests - - - 15 - 15 Net loss attributable to Community Health Systems, Inc. stockholders $ (137) $ (137) $ (51) $ (28) $ 216 $ (137) Condensed Consolidating Statement of Loss Three Months Ended June 30, 2016 Parent Guarantor Issuer Other Guarantors Non - Guarantors Eliminations Consolidated (In millions) Operating revenues (net of contractual allowances and discounts) $ - $ (6) $ 3,220 $ 2,076 $ - $ 5,290 Provision for bad debts - - 452 248 - 700 Net operating revenues - (6) 2,768 1,828 - 4,590 Operating costs and expenses: Salaries and benefits - - 1,130 1,024 - 2,154 Supplies - - 495 264 - 759 Other operating expenses - - 683 373 - 1,056 Electronic health records incentive reimbursement - - (21) (10) - (31) Rent - - 56 56 - 112 Depreciation and amortization - - 181 95 - 276 Impairment and (gain) loss on sale of businesses, net - - 1,134 505 - 1,639 Total operating costs and expenses - - 3,658 2,307 - 5,965 Loss from operations - (6) (890) (479) - (1,375) Interest expense, net - 39 186 21 - 246 Loss from early extinguishment of debt - 30 - - - 30 Gain on sale of investments in unconsolidated affiliates - - (94) - - (94) Equity in earnings of unconsolidated affiliates 1,432 1,384 462 - (3,292) (14) Loss from continuing operations before income taxes (1,432) (1,459) (1,444) (500) 3,292 (1,543) Benefit from income taxes - (27) (57) (54) - (138) Loss from continuing operations (1,432) (1,432) (1,387) (446) 3,292 (1,405) Discontinued operations, net of taxes: (Loss) income from operations of entities sold or held for sale - - (2) 1 - (1) (Loss) income from discontinued operations, net of taxes - - (2) 1 - (1) Net loss (1,432) (1,432) (1,389) (445) 3,292 (1,406) Less: Net income attributable to noncontrolling interests - - - 26 - 26 Net loss attributable to Community Health Systems, Inc. stockholders $ (1,432) $ (1,432) $ (1,389) $ (471) $ 3,292 $ (1,432) Condensed Consolidating Statement of Loss Six Months Ended June 30, 2017 Parent Guarantor Issuer Other Guarantors Non - Guarantors Eliminations Consolidated (In millions) Operating revenues (net of contractual allowances and discounts) $ - $ (12) $ 6,336 $ 3,667 $ - $ 9,991 Provision for bad debts - - 928 434 - 1,362 Net operating revenues - (12) 5,408 3,233 - 8,629 Operating costs and expenses: Salaries and benefits - - 2,125 1,856 - 3,981 Supplies - - 952 494 - 1,446 Other operating expenses - - 1,420 654 - 2,074 Government and other legal settlements and related costs - - (34) - - (34) Electronic health records incentive reimbursement - - (13) (10) - (23) Rent - - 116 98 - 214 Depreciation and amortization - - 291 167 - 458 Impairment and (gain) loss on sale of businesses, net - - 273 57 - 330 Total operating costs and expenses - - 5,130 3,316 - 8,446 (Loss) income from operations - (12) 278 (83) - 183 Interest expense, net - 157 300 11 - 468 Loss from early extinguishment of debt - 31 - - - 31 Equity in earnings of unconsolidated affiliates 335 171 77 - (592) (9) Loss from continuing operations before income taxes (335) (371) (99) (94) 592 (307) (Benefit from) provision for income taxes - (36) 69 (48) - (15) Loss from continuing operations (335) (335) (168) (46) 592 (292) Discontinued operations, net of taxes: Loss from operations of entities sold or held for sale - - (1) (1) - (2) Impairment of hospitals sold or held for sale - - (5) - - (5) Loss from discontinued operations, net of taxes - - (6) (1) - (7) Net loss (335) (335) (174) (47) 592 (299) Less: Net income attributable to noncontrolling interests - - - 36 - 36 Net loss attributable to Community Health Systems, Inc. stockholders $ (335) $ (335) $ (174) $ (83) $ 592 $ (335) Condensed Consolidating Statement of Loss Six Months Ended June 30, 2016 Parent Guarantor Issuer Other Guarantors Non - Guarantors Eliminations Consolidated (In millions) Operating revenues (net of contractual allowances and discounts) $ - $ (12) $ 6,507 $ 4,549 $ - $ 11,044 Provision for bad debts - - 929 526 - 1,455 Net operating revenues - (12) 5,578 4,023 - 9,589 Operating costs and expenses: Salaries and benefits - - 2,235 2,235 - 4,470 Supplies - - 991 568 - 1,559 Other operating expenses - - 1,362 867 - 2,229 Government and other legal settlements and related costs - - 1 - - 1 Electronic health records incentive reimbursement - - (29) (20) - (49) Rent - - 113 118 - 231 Depreciation and amortization - - 366 208 - 574 Impairment and (gain) loss on sale of businesses, net - - 1,145 511 - 1,656 Total operating costs and expenses - - 6,184 4,487 - 10,671 Loss from operations - (12) (606) (464) - (1,082) Interest expense, net - 74 366 56 - 496 Loss from early extinguishment of debt - 30 - - - 30 Gain on sale of investments in unconsolidated affiliates - - (94) - - (94) Equity in earnings of unconsolidated affiliates 1,421 1,325 469 - (3,249) (34) Loss from continuing operations before income taxes (1,421) (1,441) (1,347) (520) 3,249 (1,480) Benefit from income taxes - (20) (19) (73) - (112) Loss from continuing operations (1,421) (1,421) (1,328) (447) 3,249 (1,368) Discontinued operations, net of taxes: (Loss) income from operations of entities sold or held for sale - - (3) 1 - (2) Impairment of hospitals sold or held for sale - - - (1) - (1) Loss from discontinued operations, net of taxes - - (3) - - (3) Net loss (1,421) (1,421) (1,331) (447) 3,249 (1,371) Less: Net income attributable to noncontrolling interests - - - 50 - 50 Net loss attributable to Community Health Systems, Inc. stockholders $ (1,421) $ (1,421) $ (1,331) $ (497) $ 3,249 $ (1,421) Condensed Consolidating Statement of Comprehensive Loss Three Months Ended June 30, 2017 Parent Guarantor Issuer Other Guarantors Non - Guarantors Eliminations Consolidated (In millions) Net loss $ (137) $ (137) $ (51) $ (13) $ 216 $ (122) Other comprehensive income, net of income taxes: Net change in fair value of interest rate swaps, net of tax (2) (2) - - 2 (2) Net change in fair value of available-for-sale securities, net of tax 2 2 2 - (4) 2 Amortization and recognition of unrecognized pension cost components, net of tax 1 1 1 - (2) 1 Other comprehensive income 1 1 3 - (4) 1 Comprehensive loss (136) (136) (48) (13) 212 (121) Less: Comprehensive income attributable to noncontrolling interests - - - 15 - 15 Comprehensive loss attributable to Community Health Systems, Inc. stockholders $ (136) $ (136) $ (48) $ (28) $ 212 $ (136) Condensed Consolidating Statement of Comprehensive Loss Three Months Ended June 30, 2016 Parent Guarantor Issuer Other Guarantors Non - Guarantors Eliminations Consolidated (In millions) Net loss $ (1,432) $ (1,432) $ (1,389) $ (445) $ 3,292 $ (1,406) Other comprehensive loss, net of income taxes: Net change in fair value of interest rate swaps, net of tax (2) (2) - - 2 (2) Net change in fair value of available-for-sale securities, net of tax (3) (3) (3) - 6 (3) Amortization and recognition of unrecognized pension cost components, net of tax 2 2 2 - (4) 2 Other comprehensive loss (3) (3) (1) - 4 (3) Comprehensive loss (1,435) (1,435) (1,390) (445) 3,296 (1,409) Less: Comprehensive income attributable to noncontrolling interests - - - 26 - 26 Comprehensive loss attributable to Community Health Systems, Inc. stockholders $ (1,435) $ (1,435) $ (1,390) $ (471) $ 3,296 $ (1,435) Condensed Consolidating Statement of Comprehensive Loss Six Months Ended June 30, 2017 Parent Guarantor Issuer Other Guarantors Non - Guarantors Eliminations Consolidated (In millions) Net loss $ (335) $ (335) $ (174) $ (47) $ 592 $ (299) Other comprehensive income, net of income taxes: Net change in fair value of interest rate swaps, net of tax 3 3 - - (3) 3 Net change in fair value of available-for-sale securities, net of tax 5 5 5 - (10) 5 Amortization and recognition of unrecognized pension cost components, net of tax 1 1 1 - (2) 1 Other comprehensive income 9 9 6 - (15) 9 Comprehensive loss (326) (326) (168) (47) 577 (290) Less: Comprehensive income attributable to noncontrolling interests - - - 36 - 36 Comprehensive loss attributable to Community Health Systems, Inc. stockholders $ (326) $ (326) $ (168) $ (83) $ 577 $ (326) Condensed Consolidating Statement of Comprehensive Loss Six Months Ended June 30, 2016 Parent Guarantor Issuer Other Guarantors Non - Guarantors Eliminations Consolidated (In millions) Net loss $ (1,421) $ (1,421) $ (1,331) $ (447) $ 3,249 $ (1,371) Other comprehensive (loss) income, net of income taxes: Net change in fair value of interest rate swaps, net of tax (21) (21) - - 21 (21) Net change in fair value of available-for-sale securities, net of tax (1) (1) (1) - 2 (1) Amortization and recognition of unrecognized pension cost components, net of tax 3 3 3 - (6) 3 Other comprehensive (loss) income (19) (19) 2 - 17 (19) Comprehensive loss (1,440) (1,440) (1,329) (447) 3,266 (1,390) Less: Comprehensive income attributable to noncontrolling interests - - - 50 - 50 Comprehensive loss attributable to Community Health Systems, Inc. stockholders $ (1,440) $ (1,440) $ (1,329) $ (497) $ 3,266 $ (1,440) Condensed Consolidating Balance Sheet June 30, 2017 Parent Other Non - Guarantor Issuer Guarantors Guarantors Eliminations Consolidated (In millions) ASSETS Current assets: Cash and cash equivalents $ - $ - $ 685 $ 83 $ - $ 768 Patient accounts receivable, net of allowance for doubtful accounts - - 684 2,255 - 2,939 Supplies - - 281 157 - 438 Prepaid income taxes 22 - - - - 22 Prepaid expenses and taxes - - 157 53 - 210 Other current assets - - 489 189 - 678 Total current assets 22 - 2,296 2,737 - 5,055 Intercompany receivable 282 14,341 4,781 5,955 (25,359) - Property and equipment, net - - 4,557 2,755 - 7,312 Goodwill - - 3,404 2,761 - 6,165 Other assets, net 14 14 2,512 1,020 (1,219) 2,341 Net investment in subsidiaries 1,402 22,217 9,347 - (32,966) - Total assets $ 1,720 $ 36,572 $ 26,897 $ 15,228 $ (59,544) $ 20,873 LIABILITIES AND EQUITY Current liabilities: Current maturities of long-term debt $ - $ - $ 38 $ 8 $ - $ 46 Accounts payable - - 596 321 - 917 Accrued interest - 235 - 1 - 236 Accrued liabilities 14 - 694 471 - 1,179 Total current liabilities 14 235 1,328 801 - 2,378 Long-term debt - 13,802 197 703 - 14,702 Intercompany payable - 19,915 21,925 12,370 (54,210) - Deferred income taxes 396 - - - - 396 Other long-term liabilities 12 1,218 1,117 328 (1,219) 1,456 Total liabilities 422 35,170 24,567 14,202 (55,429) 18,932 Redeemable noncontrolling interests in equity of consolidated subsidiaries - - - 548 - 548 Equity: Community Health Systems, Inc. stockholders’ equity: Common stock 1 - - - - 1 Additional paid-in capital 1,984 549 907 732 (2,188) 1,984 Accumulated other comprehensive loss (53) (53) (20) (6) 79 (53) (Accumulated deficit) retained earnings (634) 906 1,443 (343) (2,006) (634) Total Community Health Systems, Inc. stockholders’ equity 1,298 1,402 2,330 383 (4,115) 1,298 Noncontrolling interests in equity of consolidated subsidiaries - - - 95 - 95 Total equity 1,298 1,402 2,330 478 (4,115) 1,393 Total liabilities and equity $ 1,720 $ 36,572 $ 26,897 $ 15,228 $ (59,544) $ 20,873 Condensed Consolidating Balance Sheet December 31, 2016 Parent Other Non - Guarantor Issuer Guarantors Guarantors Eliminations Consolidated (In millions) ASSETS Current assets: Cash and cash equivalents $ - $ - $ 162 $ 76 $ - $ 238 Patient accounts receivable, net of allowance for doubtful accounts - - 843 2,333 - 3,176 Supplies - - 324 156 - 480 Prepaid income taxes 17 - - - - 17 Prepaid expenses and taxes - - 133 54 - 187 Other current assets - - 283 285 - 568 Total current assets 17 - 1,745 2,904 - 4,666 Intercompany receivable 295 14,966 667 6,985 (22,913) - Property and equipment, net - - 5,403 2,746 - 8,149 Goodwill - - 3,735 2,786 - 6,521 Other assets, net 15 - 2,820 995 (1,222) 2,608 Net investment in subsidiaries 1,728 22,205 8,607 - (32,540) - Total assets $ 2,055 $ 37,171 $ 22,977 $ 16,416 $ (56,675) $ 21,944 LIABILITIES AND EQUITY Current liabilities: Current maturities of long-term debt $ - $ 149 $ 56 $ 250 $ - $ 455 Accounts payable - - 715 280 - 995 Accrued interest - 205 1 1 - 207 Accrued liabilities 17 - 775 438 - 1,230 Total current liabilities 17 354 1,547 969 - 2,887 Long-term debt - 14,018 233 538 - 14,789 Intercompany payable - 19,811 17,508 13,393 (50,712) - Deferred income taxes 411 - - - - 411 Other long-term liabilities 12 1,259 1,187 339 (1,222) 1,575 Total liabilities 440 35,442 20,475 15,239 (51,934) 19,662 Redeemable noncontrolling interests in equity of consolidated subsidiaries - - - 554 - 554 Equity: Community Health Systems, Inc. stockholders’ equity: Common stock 1 - - - - 1 Additional paid-in capital 1,975 676 1,080 816 (2,572) 1,975 Accumulated other comprehensive loss (62) (62) (22) (9) 93 (62) (Accumulated deficit) retained earnings (299) 1,115 1,444 (297) (2,262) (299) Total Community Health Systems, Inc. stockholders’ equity 1,615 1,729 2,502 510 (4,741) 1,615 Noncontrolling interests in equity of consolidated subsidiaries - - - 113 - 113 Total equity 1,615 1,729 2,502 623 (4,741) 1,728 Total liabilities and equity $ 2,055 $ 37,171 $ 22,977 $ 16,416 $ (56,675) $ 21,944 Condensed Consolidating Statement of Cash Flows Six Months Ended June 30, 2017 Parent Other Non - Guarantor Issuer Guarantors Guarantors Eliminations Consolidated (In millions) Net cash (used in) provided by operating activities $ (11) $ (163) $ 381 $ 296 $ - $ 503 Cash flows from investing activities: Acquisitions of facilities and other related equipment - - - (4) - (4) Purchases of property and equipment - - (182) (92) - (274) Proceeds from disposition of hospitals and other ancillary operations - - 921 - - 921 Proceeds from sale of property and equipment - - 2 1 - 3 Purchases of available-for-sale securities - - (27) (10) - (37) Proceeds from sales of available-for-sale securities - - 38 9 - 47 Increase in other investments - - (51) (9) - (60) Net provided by (cash used) in investing activities - - 701 (105) - 596 Cash flows from financing activities: Repurchase of restricted stock shares for payroll tax withholding requirements (5) - - - - (5) Deferred financing costs and other debt-related costs - (62) - - - (62) Proceeds from noncontrolling investors in joint ventures - - - 5 - 5 Redemption of noncontrolling investments in joint ventures - - - (4) - (4) Distributions to noncontrolling investors in joint ventures - - - (53) - (53) Changes in intercompany balances with affiliates, net 16 578 (536) (58) - - Borrowings under credit agreements - 795 26 19 - 840 Issuance of long-term debt - 3,100 - - - 3,100 Proceeds from receivables facility - - - 26 - 26 Repayments of long-term indebtedness - (4,248) (49) (119) - (4,416) Net cash provided by (used in) financing activities 11 163 (559) (184) - (569) Net change in cash and cash equivalents - - 523 7 - 530 Cash and cash equivalents at beginning of period - - 162 76 - 238 Cash and cash equivalents at end of period $ - $ - $ 685 $ 83 $ - $ 768 Condensed Consolidating Statement of Cash Flows Six Months Ended June 30, 2016 Parent Other Non - Guarantor Issuer Guarantors Guarantors Eliminations Consolidated (In millions) Net cash (used in) provided by operating activities $ (5) $ (294) $ 599 $ 332 $ - $ 632 Cash flows from investing activities: Acquisitions of facilities and other related equipment - - (3) (111) - (114) Purchases of property and equipment - - (282) (125) - (407) Proceeds from disposition of hospitals and other ancillary operations - - 8 4 - 12 Proceeds from sale of property and equipment - - 4 3 - 7 Purchases of available-for-sale securities - - (21) (42) - (63) Proceeds from sales of available-for-sale securities - - 14 219 - 233 Proceeds from sale of investments in unconsolidated affiliates - - 403 - - 403 Distribution from Quorum Health Corporation - 1,219 - - - 1,219 Increase in other investments - - (84) (29) - (113) Net cash provided by (used in) investing activities - 1,219 39 (81) - 1,177 Cash flows from financing activities: Repurchase of restricted stock shares for payroll tax withholding requirements (5) - - - - (5) Deferred financing costs and other debt-related costs - (22) - - - (22) Redemption of noncontrolling investments in joint ventures - - - (16) - (16) Distributions to noncontrolling investors in joint ventures - - - (47) - (47) Changes in intercompany balances with affiliates, net 10 497 (469) (38) - - Borrowings under credit agreements - 2,783 2 21 - 2,806 Proceeds from receivables facility - - - 31 - 31 Repayments of long-term indebtedness - (4,183) (25) (71) - (4,279) Net cash provided by (used in) financing activities 5 (925) (492) (120) - (1,532) Net change in cash and cash equivalents - - 146 131 - 277 Cash and cash equivalents at beginning of period - - 32 152 - 184 Cash and cash equivalents at end of period $ - $ - $ 178 $ 283 $ - $ 461 |