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 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’ (deficit) 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 7. 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. Amounts for prior periods have been revised to reflect the status of guarantors and non-guarantors as of December 31, 2017. Condensed Consolidating Statement of Loss Year Ended December 31, 2017 Parent Guarantor Issuer Other Guarantors Non - Guarantors Eliminations Consolidated (In millions) Operating revenues (net of contractual allowances and discounts) $ - $ (22) $ 10,765 $ 7,655 $ - $ 18,398 Provision for bad debts - - 2,063 982 - 3,045 Net operating revenues - (22) 8,702 6,673 - 15,353 Operating costs and expenses: Salaries and benefits - - 3,614 3,762 - 7,376 Supplies - - 1,628 1,044 - 2,672 Other operating expenses - - 2,376 1,488 - 3,864 Government and other legal settlements and related costs - - (31) - - (31) Electronic health records incentive reimbursement - - (12) (16) - (28) Rent - - 198 196 - 394 Depreciation and amortization - - 501 360 - 861 Impairment and (gain) loss on sale of businesses, net - - 1,212 911 - 2,123 Total operating costs and expenses - - 9,486 7,745 - 17,231 Loss from operations - (22) (784) (1,072) - (1,878) Interest expense, net - 327 587 17 - 931 Loss from early extinguishment of debt - 40 - - - 40 Equity in earnings of unconsolidated affiliates 2,459 1,955 865 - (5,295) (16) Loss from continuing operations before income taxes (2,459) (2,344) (2,236) (1,089) 5,295 (2,833) Provision for (benefit from) income taxes - 115 (297) (267) - (449) Loss from continuing operations (2,459) (2,459) (1,939) (822) 5,295 (2,384) Discontinued operations, net of taxes: Loss from operations of entities sold or held for sale - - (4) (2) - (6) Impairment of hospitals sold or held for sale - - (5) (1) - (6) Loss from discontinued operations, net of taxes - - (9) (3) - (12) Net loss (2,459) (2,459) (1,948) (825) 5,295 (2,396) Less: Net income attributable to noncontrolling interests - - - 63 - 63 Net loss attributable to Community Health Systems, Inc. stockholders $ (2,459) $ (2,459) $ (1,948) $ (888) $ 5,295 $ (2,459) Condensed Consolidating Statement of Loss Year Ended December 31, 2016 Parent Guarantor Issuer Other Guarantors Non - Guarantors Eliminations Consolidated (In millions) Operating revenues (net of contractual allowances and discounts) $ - $ (25) $ 11,089 $ 10,211 $ - $ 21,275 Provision for bad debts - - 1,707 1,130 - 2,837 Net operating revenues - (25) 9,382 9,081 - 18,438 Operating costs and expenses: Salaries and benefits - - 3,754 4,870 - 8,624 Supplies - - 1,660 1,351 - 3,011 Other operating expenses - - 2,238 2,010 - 4,248 Government and other legal settlements and related costs - - 16 - - 16 Electronic health records incentive reimbursement - - (37) (33) - (70) Rent - - 199 251 - 450 Depreciation and amortization - - 614 486 - 1,100 Impairment and (gain) loss on sale of businesses, net - - 1,262 657 - 1,919 Total operating costs and expenses - - 9,706 9,592 - 19,298 Loss from operations - (25) (324) (511) - (860) Interest expense, net - 241 631 90 - 962 Loss from early extinguishment of debt - 30 - - - 30 Gain on sale of investments in unconsolidated affiliates - - (94) - - (94) Equity in earnings of unconsolidated affiliates 1,721 1,466 585 - (3,815) (43) Loss from continuing operations before income taxes (1,721) (1,762) (1,446) (601) 3,815 (1,715) (Benefit from) provision for income taxes - (41) 19 (82) - (104) Loss from continuing operations (1,721) (1,721) (1,465) (519) 3,815 (1,611) Discontinued operations, net of taxes: (Loss) income from operations of entities sold or held for sale - - (9) 2 - (7) Impairment of hospitals sold or held for sale - - (1) (7) - (8) Loss from discontinued operations, net of taxes - - (10) (5) - (15) Net loss (1,721) (1,721) (1,475) (524) 3,815 (1,626) Less: Net income attributable to noncontrolling interests - - - 95 - 95 Net loss attributable to Community Health Systems, Inc. stockholders $ (1,721) $ (1,721) $ (1,475) $ (619) $ 3,815 $ (1,721) Condensed Consolidating Statement of Income Year Ended December 31, 2015 Parent Guarantor Issuer Other Guarantors Non - Guarantors Eliminations Consolidated (In millions) Operating revenues (net of contractual allowances and discounts) $ - $ (20) $ 11,063 $ 11,521 $ - $ 22,564 Provision for bad debts - - 1,944 1,183 - 3,127 Net operating revenues - (20) 9,119 10,338 - 19,437 Operating costs and expenses: Salaries and benefits - - 3,688 5,303 - 8,991 Supplies - - 1,586 1,462 - 3,048 Other operating expenses - - 2,120 2,400 - 4,520 Government and other legal settlements and related costs - - 4 - - 4 Electronic health records incentive reimbursement - - (76) (84) - (160) Rent - - 189 268 - 457 Depreciation and amortization - - 615 557 - 1,172 Impairment and (gain) loss on sale of businesses, net - - 55 13 - 68 Total operating costs and expenses - - 8,181 9,919 - 18,100 (Loss) income from operations - (20) 938 419 - 1,337 Interest expense, net - 107 717 149 - 973 Loss from early extinguishment of debt - 16 - - - 16 Equity in earnings of unconsolidated affiliates (158) (220) (125) - 440 (63) Income from continuing operations before income taxes 158 77 346 270 (440) 411 (Benefit from) provision for income taxes - (81) 130 67 - 116 Income from continuing operations 158 158 216 203 (440) 295 Discontinued operations, net of taxes: Loss from operations of entities sold or held for sale - - (7) (20) - (27) Impairment of hospitals sold or held for sale - - - (5) - (5) Loss on sale, net - - - (4) - (4) Loss from discontinued operations, net of taxes - - (7) (29) - (36) Net income 158 158 209 174 (440) 259 Less: Net income attributable to noncontrolling interests - - - 101 - 101 Net income attributable to Community Health Systems, Inc. stockholders $ 158 $ 158 $ 209 $ 73 $ (440) $ 158 Condensed Consolidating Statement of Comprehensive Loss Year Ended December 31, 2017 Parent Guarantor Issuer Other Guarantors Non - Guarantors Eliminations Consolidated (In millions) Net loss $ (2,459) $ (2,459) $ (1,948) $ (825) $ 5,295 $ (2,396) Other comprehensive income, net of income taxes: Net change in fair value of interest rate swaps, net of tax 19 19 - - (19) 19 Net change in fair value of available-for-sale securities, net of tax 8 8 8 - (16) 8 Amortization and recognition of unrecognized pension cost components, net of tax 14 14 14 - (28) 14 Other comprehensive income 41 41 22 - (63) 41 Comprehensive loss (2,418) (2,418) (1,926) (825) 5,232 (2,355) Less: Comprehensive income attributable to noncontrolling interests - - - 63 - 63 Comprehensive loss attributable to Community Health Systems, Inc. stockholders $ (2,418) $ (2,418) $ (1,926) $ (888) $ 5,232 $ (2,418) Condensed Consolidating Statement of Comprehensive Loss Year Ended December 31, 2016 Parent Guarantor Issuer Other Guarantors Non - Guarantors Eliminations Consolidated (In millions) Net loss $ (1,721) $ (1,721) $ (1,475) $ (524) $ 3,815 $ (1,626) Other comprehensive income (loss), net of income taxes: Net change in fair value of interest rate swaps, net of tax 17 17 - - (17) 17 Net change in fair value of available-for-sale securities, net of tax (11) (11) (11) - 22 (11) Amortization and recognition of unrecognized pension cost components, net of tax 3 3 3 - (6) 3 Other comprehensive income (loss) 9 9 (8) - (1) 9 Comprehensive loss (1,712) (1,712) (1,483) (524) 3,814 (1,617) Less: Comprehensive income attributable to noncontrolling interests - - - 95 - 95 Comprehensive loss attributable to Community Health Systems, Inc. stockholders $ (1,712) $ (1,712) $ (1,483) $ (619) $ 3,814 $ (1,712) Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2015 Parent Guarantor Issuer Other Guarantors Non - Guarantors Eliminations Consolidated (In millions) Net income $ 158 $ 158 $ 209 $ 174 $ (440) $ 259 Other comprehensive (loss) income, net of income taxes: Net change in fair value of interest rate swaps, net of tax (6) (6) - - 6 (6) 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 loss (10) (10) (4) - 14 (10) Comprehensive income 148 148 205 174 (426) 249 Less: Comprehensive income attributable to noncontrolling interests - - - 101 - 101 Comprehensive income attributable to Community Health Systems, Inc. stockholders $ 148 $ 148 $ 205 $ 73 $ (426) $ 148 Condensed Consolidating Balance Sheet December 31, 2017 Parent Other Non - Guarantor Issuer Guarantors Guarantors Eliminations Consolidated (In millions) ASSETS Current assets: Cash and cash equivalents $ - $ - $ 497 $ 66 $ - $ 563 Patient accounts receivable, net of allowance for doubtful accounts - - 355 2,029 - 2,384 Supplies - - 288 156 - 444 Prepaid income taxes 17 - - - - 17 Prepaid expenses and taxes - - 146 52 - 198 Other current assets - - 152 310 - 462 Total current assets 17 - 1,438 2,613 - 4,068 Intercompany receivable - 13,381 5,857 7,109 (26,347) - Property and equipment, net - - 4,448 2,604 - 7,052 Goodwill 2,882 1,841 - 4,723 Deferred income taxes 62 - - - - 62 Other assets, net 15 39 1,594 939 (1,042) 1,545 Net investment in subsidiaries - 21,717 10,890 - (32,607) - Total assets $ 94 $ 35,137 $ 27,109 $ 15,106 $ (59,996) $ 17,450 LIABILITIES AND EQUITY Current liabilities: Current maturities of long-term debt $ - $ - $ 25 $ 8 $ - $ 33 Accounts payable - - 663 304 - 967 Accrued interest - 228 - 1 - 229 Accrued liabilities - - 644 483 - 1,127 Total current liabilities - 228 1,332 796 - 2,356 Long-term debt - 12,998 216 666 - 13,880 Intercompany payable 833 21,582 24,028 13,310 (59,753) - Deferred income taxes 19 - - - - 19 Other long-term liabilities 9 1,018 997 378 (1,042) 1,360 Total liabilities 861 35,826 26,573 15,150 (60,795) 17,615 Redeemable noncontrolling interests in equity of consolidated subsidiaries - - - 527 - 527 Equity: Community Health Systems, Inc. stockholders’ (deficit) equity: Common stock 1 - - - - 1 Additional paid-in capital 2,014 (252) 204 234 (186) 2,014 Accumulated other comprehensive loss (21) (21) (4) (4) 29 (21) (Accumulated deficit) retained earnings (2,761) (416) 336 (876) 956 (2,761) Total Community Health Systems, Inc. stockholders’ (deficit) equity (767) (689) 536 (646) 799 (767) Noncontrolling interests in equity of consolidated subsidiaries - - - 75 - 75 Total (deficit) equity (767) (689) 536 (571) 799 (692) Total liabilities and equity $ 94 $ 35,137 $ 27,109 $ 15,106 $ (59,996) $ 17,450 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 $ - $ - $ 174 $ 64 $ - $ 238 Patient accounts receivable, net of allowance for doubtful accounts - - 799 2,377 - 3,176 Supplies - - 297 183 - 480 Prepaid income taxes 17 - - - - 17 Prepaid expenses and taxes - - 124 63 - 187 Other current assets - - 158 410 - 568 Total current assets 17 - 1,552 3,097 - 4,666 Intercompany receivable 295 14,996 3,150 7,597 (26,038) - Property and equipment, net - - 4,965 3,184 - 8,149 Goodwill - - 3,947 2,574 - 6,521 Deferred income taxes 15 - - - - 15 Other assets, net - - 1,869 1,946 (1,222) 2,593 Net investment in subsidiaries 1,728 21,224 10,122 - (33,074) - Total assets $ 2,055 $ 36,220 $ 25,605 $ 18,398 $ (60,334) $ 21,944 LIABILITIES AND EQUITY Current liabilities: Current maturities of long-term debt $ - $ 149 $ 53 $ 253 $ - $ 455 Accounts payable - - 628 367 - 995 Accrued interest - 205 1 1 - 207 Accrued liabilities 17 - 626 587 - 1,230 Total current liabilities 17 354 1,308 1,208 - 2,887 Long-term debt - 14,018 232 539 - 14,789 Intercompany payable - 18,861 20,517 15,071 (54,449) - Deferred income taxes 411 - - - - 411 Other long-term liabilities 12 1,259 1,082 444 (1,222) 1,575 Total liabilities 440 34,492 23,139 17,262 (55,671) 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 1,975 675 939 768 (2,382) 1,975 Accumulated other comprehensive loss (62) (62) (22) (9) 93 (62) (Accumulated deficit) retained earnings (299) 1,115 1,549 (290) (2,374) (299) Total Community Health Systems, Inc. stockholders’ equity 1,615 1,728 2,466 469 (4,663) 1,615 Noncontrolling interests in equity of consolidated subsidiaries - - - 113 - 113 Total equity 1,615 1,728 2,466 582 (4,663) 1,728 Total liabilities and equity $ 2,055 $ 36,220 $ 25,605 $ 18,398 $ (60,334) $ 21,944 Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2017 Parent Other Non - Guarantor Issuer Guarantors Guarantors Eliminations Consolidated (In millions) Net cash (used in) provided by operating activities $ (12) $ (317) $ 750 $ 352 $ - $ 773 Cash flows from investing activities: Acquisitions of facilities and other related businesses - - (1) (5) - (6) Purchases of property and equipment - - (365) (199) - (564) Proceeds from disposition of hospitals and other ancillary operations - - 596 1,096 - 1,692 Proceeds from sale of property and equipment - - 4 3 - 7 Purchases of available-for-sale securities - - (91) (34) - (125) Proceeds from sales of available-for-sale securities - - 154 54 - 208 Increase in other investments - - (106) (37) - (143) Net cash provided by investing activities - - 191 878 - 1,069 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 - (65) - (1) - (66) Proceeds from noncontrolling investors in joint ventures - - - 5 - 5 Redemption of noncontrolling investments in joint ventures - - - (6) - (6) Distributions to noncontrolling investors in joint ventures - - - (100) - (100) Changes in intercompany balances with affiliates, net 17 1,566 (575) (1,008) - - Borrowings under credit agreements - 795 30 16 - 841 Issuance of long-term debt - 3,100 - - - 3,100 Proceeds from receivables facility - - - 105 - 105 Repayments of long-term indebtedness - (5,079) (73) (239) - (5,391) Net cash provided by (used in) financing activities 12 317 (618) (1,228) - (1,517) Net change in cash and cash equivalents - - 323 2 - 325 Cash and cash equivalents at beginning of period - - 174 64 - 238 Cash and cash equivalents at end of period $ - $ - $ 497 $ 66 $ - $ 563 Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2016 Parent Other Non - Guarantor Issuer Guarantors Guarantors Eliminations Consolidated (In millions) Net cash provided by (used in) operating activities $ 14 $ (335) $ 1,218 $ 240 $ - $ 1,137 Cash flows from investing activities: Acquisitions of facilities and other related businesses - - (3) (120) - (123) Purchases of property and equipment - - (474) (270) - (744) Proceeds from disposition of hospitals and other ancillary operations - - 16 127 - 143 Proceeds from sale of property and equipment - - 6 9 - 15 Purchases of available-for-sale securities - - (263) (242) - (505) Proceeds from sales of available-for-sale securities - - 218 246 - 464 Proceeds from sale of investments in unconsolidated affiliates - - 403 - - 403 Distribution from Quorum Health Corporation - 1,219 - - - 1,219 Increase in other investments - - (156) (86) - (242) Net cash provided by (used in) investing activities - 1,219 (253) (336) - 630 Cash flows from financing activities: Repurchase of restricted stock shares for payroll tax withholding requirements (6) - - - - (6) Deferred financing costs and other debt-related costs - (26) - - - (26) Redemption of noncontrolling investments in joint ventures - - - (19) - (19) Distributions to noncontrolling investors in joint ventures - - - (92) - (92) Changes in intercompany balances with affiliates, net (8) 801 (925) 132 - - Proceeds from sale-lease back - - 147 12 - 159 Borrowings under credit agreements - 4,848 28 3 - 4,879 Proceeds from receivables facility - - - 107 - 107 Repayments of long-term indebtedness - (6,507) (64) (144) - (6,715) Net cash (used in) provided by financing activities (14) (884) (814) (1) - (1,713) Net change in cash and cash equivalents - - 151 (97) - 54 Cash and cash equivalents at beginning of period - - 23 161 - 184 Cash and cash equivalents at end of period $ - $ - $ 174 $ 64 $ - $ 238 Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2015 Parent Other Non - Guarantor Issuer Guarantors Guarantors Eliminations Consolidated (In millions) Net cash (used in) provided by operating activities $ (25) $ 159 $ 349 $ 438 $ - $ 921 Cash flows from investing activities: Acquisitions of facilities and other related businesses - - (21) (36) - (57) Purchases of property and equipment - - (600) (353) - (953) Proceeds from disposition of hospitals and other ancillary operations - - 21 134 - 155 Proceeds from sale of property and equipment - - 6 9 - 15 Purchases of available-for-sale securities - - (53) (109) - (162) Proceeds from sales of available-for-sale securities - - 46 110 - 156 Increase in other investments - - (143) (62) - (205) Net cash used in investing activities - - (744) (307) - (1,051) Cash flows from financing activities: Proceeds from exercise of stock options 25 - - - - 25 Repurchase of restricted stock shares for payroll tax withholding requirements (20) - - - - (20) Stock buy-back (159) - - - - (159) Deferred financing costs and other debt-related costs - (30) - - - (30) Proceeds from noncontrolling investors in joint ventures - - - 47 - 47 Redemption of noncontrolling investments in joint ventures - - - (36) - (36) Distributions to noncontrolling investors in joint ventures - - - (100) - (100) Changes in intercompany balances with affiliates, net 179 (181) 89 (87) - - Borrowings under credit agreements - 4,880 34 8 - 4,922 Proceeds from receivables facility - - - 206 - 206 Repayments of long-term indebtedness - (4,828) (77) (145) - (5,050) Net cash provided by (used in) financing activities 25 (159) 46 (107) - (195) Net change in cash and cash equivalents - - (349) 24 - (325) Cash and cash equivalents at beginning of period - - 372 137 - 509 Cash and cash equivalents at end of period $ - $ - $ 23 $ 161 $ - $ 184 |