Exhibit Number
99.1
(COMMUNITY HEALTH SYSTEMS, INC. LOGO)
Investor Contact: W. Larry Cash
Executive Vice President
and Chief Financial Officer
(615) 373-9600
COMMUNITY HEALTH SYSTEMS, INC. ANNOUNCES
THIRD QUARTER 2005 RESULTS WITH NET OPERATING REVENUES UP 14.5%
BRENTWOOD, TN. (October 26, 2005) -- Community Health Systems, Inc. (NYSE: CYH)
today announced financial and operating results for the third quarter and nine
months ended September 30, 2005.
Net operating revenues for the third quarter ended September 30, 2005,
totaled $929.3 million, a 14.5% increase compared with $811.8 million for the
same period last year. Income from continuing operations increased 13.4% to
$44.1 million for the quarter ended September 30, 2005, compared with $38.9
million for the same period last year. Income from continuing operations per
share (diluted) increased 23.7% to $0.47 on 98.5 million weighted average shares
outstanding for the quarter ended September 30, 2005, compared with $0.38 on
107.9 million weighted average shares outstanding for the same period last year.
Net income increased 33.9% to $42.9 million for the quarter ended September 30,
2005, compared with $32.0 million for the same period last year. Net income per
share (diluted) increased 43.8% to $0.46 for the quarter ended September 30,
2005, compared to $0.32 for the same period last year. Loss on discontinued
operations for the quarter ended September 30, 2005, consists of an after-tax
loss of approximately $1.2 million, approximately $0.01 per share (diluted),
related to the operations from one hospital designated during the second quarter
of 2005 as being held-for-sale. Refer to pages 3 and 4 for "Financial
Highlights."
Adjusted EBITDA for the third quarter of 2005 was $137.5 million, compared
with $120.6 million for the same period last year, representing a 14.1%
increase. Adjusted EBITDA is EBITDA adjusted to exclude discontinued operations
and minority interest in earnings. The Company uses adjusted EBITDA as a measure
of liquidity. Net cash provided by operating activities for the third quarter of
2005 was $59.4 million, compared with $57.2 million for the same period last
year, an increase of 3.8%.
The consolidated financial results for the third quarter ended September
30, 2005, reflect a 7.6% increase in total admissions compared with the same
period last year. On a same-store basis, admissions increased 2.3% and adjusted
admissions increased 2.6% compared with the same period last year. On a
same-store basis, net operating revenues increased 8.6%, compared with the same
period last year.
The series of hurricanes in the Texas, Louisiana and Gulf Coast regions did
not materially impact the volumes and operating results of the Company.
Net operating revenues for the nine months ended September 30, 2005,
totaled $2.756 billion, compared with $2.363 billion for the same period last
year, a 16.6% increase, again demonstrating the Company's successful integration
of acquisitions over the last several years. Income from continuing operations
increased 16.2% to $139.3 million or $1.48 per share (diluted), on 98.6 million
weighted average shares outstanding for the nine months ended September 30,
2005, compared with $119.9 million, or $1.16 per share (diluted) on 108.7
million weighted average shares outstanding, for the same period last year.
Loss on discontinued operations for the nine months ended September 30,
2005, consists of an after-tax loss of approximately $19.9 million, or $0.20 per
share (diluted), related to the sale of four hospitals during the first quarter
of 2005, one of which was designated as being held-for-sale at December 31,
2004, the termination of one hospital's lease during the first quarter of 2005
and an impairment write-down related to the designation of one additional
hospital as being held-for-sale during the second quarter of 2005. Net income
increased 7.4% to $119.4 million, or $1.28 per share (diluted), for the nine
months ended September 30, 2005, compared with $111.2 million, or $1.08 per
share (diluted) for the same period last year.
- MORE-
CYH Announces Third Quarter 2005 Results
Page 2
October 26, 2005
Adjusted EBITDA for the nine months ended September 30, 2005, was $421.4
million, compared with $363.6 million for the same period last year, a 15.9%
increase. Net cash provided by operating activities for the nine months ended
September 30, 2005, was $335.8 million, compared with $263.2 million for the
same period last year, an increase of 27.6%.
The consolidated financial results for the nine months ended September 30,
2005, reflect a 9.0% increase in total admissions compared with the same period
last year. On a same-store basis, admissions increased 2.3%, adjusted admissions
increased 2.2%, and net operating revenues increased 8.9%, compared with the
same period last year.
Commenting on the results, Wayne T. Smith, chairman, president and chief
executive officer of Community Health Systems, stated, "Community Health
Systems' operating strategy and focus on quality care continued to deliver
outstanding results in the third quarter of 2005. The solid year-over-year gains
in revenues and higher patient volumes reflect our consistent ability to improve
operating efficiencies, introduce new services and technologies, and actively
recruit qualified physicians. Our same-store growth metrics for the third
quarter clearly demonstrate the strength of our operating model. We believe that
we are well positioned to continue to leverage this model and execute our growth
strategy through a combination of market share opportunities and acquisitions.
Clearly, Community Health Systems is building momentum and we remain very
enthusiastic about our prospects for the remainder of 2005."
On September 30, 2005, the Company acquired the assets of Newport Hospital
and Clinic, an 83-bed acute care general hospital in Newport, Arkansas, which
was closed by its former owner simultaneous with this transaction. The
operations of this hospital will be consolidated with Harris Hospital, also
located in Newport, which is owned and operated by a subsidiary of Community
Health Systems. By entering into this transaction, the Company becomes the sole
provider of acute care hospital services in the Newport market.
On October 1, 2005, the Company completed the acquisitions of Bradley
Memorial Hospital, a 251-bed acute care general hospital located in Cleveland,
Tennessee, and Sunbury Community Hospital, a 123-bed acute care general hospital
in Sunbury, Pennsylvania. A subsidiary of the Company currently operates a
smaller hospital, Cleveland Community Hospital, in the same market as Bradley
Memorial Hospital. By acquiring Bradley Memorial Hospital, the Company becomes
the sole provider of acute care hospital services in the Cleveland, Tennessee,
market.
"Our successful acquisition strategy has and will continue to provide
substantial growth opportunities for Community Health Systems," added Smith. "We
have consistently demonstrated an ability to selectively acquire new hospitals
and improve both services and operational efficiencies in ways that not only
enhance their financial performance, but enable them to more effectively provide
healthcare services in their respective communities. Our recognition in the
marketplace as the acquirer of choice has allowed us to continue a steady pace
of growth in acquisitions. Furthermore, we believe there are additional
opportunities to expand our portfolio as more hospitals look beyond their own
communities for a proven operator who will enable them to deliver a higher
standard of care. We believe our proven track record is the best indicator for
our future success, and we will continue to balance our operating strategy to
build better communities with our objective to build shareholder value."
Included on pages 10, 11 and 12 of this press release is a table setting
forth selected information concerning the updated projected consolidated
operating results of the Company for the year ending December 31, 2005, and the
Company's initial projected consolidated operating results for the year ending
December 31, 2006.
Located in the Nashville, Tennessee, suburb of Brentwood, Community Health
Systems, Inc. is a leading operator of general acute care hospitals in non-urban
communities throughout the country. Through its subsidiaries, the Company
currently owns, leases or operates 71 hospitals in 21 states. Its hospitals
offer a broad range of inpatient medical and surgical services, outpatient
treatment and skilled nursing care. Shares in Community Health Systems, Inc. are
traded on the New York Stock Exchange under the symbol "CYH".
Community Health Systems, Inc. will hold a conference call to discuss this
press release on Thursday, October 27, 2005, at 10:30 a.m. Central, 11:30 a.m.
Eastern. Investors will have the opportunity to listen to a live Internet
broadcast of the conference call by clicking on the Investor Relations link of
the Company's website at www.chs.net, or at www.fulldisclosures.com. To listen
to the live call, please go to the website at least fifteen minutes early to
register, download, and install any necessary audio software. For those who
cannot listen to the live broadcast, a replay will be available shortly after
the call and continue through November 29, 2005. A copy of the Company's Form
8-K (including this press release) and conference call slide show will also be
available on the Company's website at www.chs.net.
Statements contained in this news release regarding expected operating
results, acquisition transactions and other events are forward-looking
statements that involve risk and uncertainties. Actual future events or results
may differ materially from these statements. Readers are referred to the
documents filed by Community Health Systems, Inc. with the Securities and
Exchange Commission, including the Company's annual reports on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K. These filings
identify important risk factors and other uncertainties that could cause actual
results to differ from those contained in the forward-looking statements.
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.
-MORE-
CYH Announces Third Quarter 2005 Results
Page 3
October 26, 2005
COMMUNITY HEALTH SYSTEMS, INC.
FINANCIAL HIGHLIGHTS
(Unaudited)
(In thousands, except per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- -------------------------
2005 2004 (a) 2005 2004 (a)
-------- -------- ---------- ----------
Net operating revenues $929,269 $811,815 $2,756,250 $2,362,882
Adjusted EBITDA (b) $137,497 $120,553 $ 421,431 $ 363,551
Income from continuing operations $ 44,066 $ 38,873 $ 139,295 $ 119,876
Net income $ 42,886 $ 32,039 $ 119,402 $ 111,204
Income from continuing operations
per share-basic $ 0.50 $ 0.40 $ 1.57 $ 1.22
Income from continuing operations
per share-diluted $ 0.47 $ 0.38 $ 1.48 $ 1.16
Net income per share - basic $ 0.49 $ 0.33 $ 1.35 $ 1.13
Net income per share - diluted $ 0.46 $ 0.32 $ 1.28 $ 1.08
Weighted average number of shares
outstanding - basic 88,325 97,795 88,463 98,430
Weighted average number of shares
outstanding - diluted 98,529(c) 107,870(c) 98,644(c) 108,666(c)
Net cash provided by operating activities $ 59,367 $ 57,189 $ 335,763 $ 263,174
(a) Pursuant to SFAS No. 144, the Company has restated its third quarter and
nine months ended September 30, 2004, financial statements and statistical
results to reflect the reclassification as discontinued operations, the
sale of four hospitals during the first quarter of 2005, one of which was
designated as being held-for-sale at December 31, 2004, the termination of
one hospital's lease during the first quarter of 2005, and the addition of
one hospital as being held-for-sale during the second quarter of 2005. Two
hospitals were previously classified as discontinued operations in 2004.
(b) EBITDA consists of income before interest, income taxes, and depreciation
and amortization. Adjusted EBITDA is EBITDA adjusted to exclude
discontinued operations and minority interest in earnings. The Company has
from time to time sold minority interests in certain of its subsidiaries or
acquired subsidiaries with existing minority 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 the
Company believes it provides investors with additional information about
its 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 its 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. The Company's calculation of adjusted EBITDA may not be
comparable to similarly titled measures reported by other companies.
-MORE-
CYH Announces Third Quarter 2005 Results
Page 4
October 26, 2005
The following table reconciles adjusted EBITDA, as defined, to net cash provided
by operating activities as derived directly from the Company's consolidated
financial statements for the three months and nine months ended September 30,
2005, and 2004 (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2005 2004 2005 2004
-------- -------- -------- --------
Adjusted EBITDA $137,497 $120,553 $421,431 $363,551
Interest expense, net (24,170) (18,509) (69,963) (54,319)
Provision for income taxes (28,056) (24,669) (88,684) (77,454)
(Loss) Income from operations of hospitals
sold or held for sale (1,180) (3,189) (7,804) (5,027)
Depreciation and amortization of
discontinued operations -- 2,552 1,600 5,661
Other non-cash expenses, net 1,813 1,023 3,286 934
Net changes in operating assets and
liabilities, net of effects of acquisitions (26,537) (20,572) 75,897 29,828
-------- -------- -------- --------
Net cash provided by operating activities $ 59,367 $ 57,189 $335,763 $263,174
======== ======== ======== ========
(c) Adjusted to include assumed exercise of employee stock options and assumed
conversion of convertible notes. Since the income per share impact of the
conversion of the convertible notes is less than the basic income per share
for both periods presented, the convertible notes are dilutive and
accordingly must be included in the fully diluted calculation (after tax
interest savings of $2.2 million per quarter and 8.6 million shares added
to the calculation of fully diluted earnings per share).
-MORE-
CYH Announces Third Quarter 2005 Results
Page 5
October 26, 2005
COMMUNITY HEALTH SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------------
2005 2004 2005 2004
-------- -------- ---------- ----------
Net operating revenues $929,269 $811,815 $2,756,250 $2,362,882
-------- -------- ---------- ----------
Operating expenses:
Salaries and benefits 371,881 324,443 1,097,211 945,372
Provision for bad debts 92,980 83,520 277,613 239,737
Supplies 110,481 100,135 333,566 286,776
Other operating expenses 216,430 183,164 626,429 527,446
Depreciation and amortization 40,490 37,373 120,770 109,419
Minority interests in earnings 715 341 2,719 1,695
-------- -------- ---------- ----------
Total expenses 832,977 728,976 2,458,308 2,110,445
-------- -------- ---------- ----------
Income from operations 96,292 82,839 297,942 252,437
Interest expense, net 24,170 18,509 69,963 54,319
Loss from early extinguishment of debt -- 788 -- 788
-------- -------- ---------- ----------
Income from continuing operations
before income taxes 72,122 63,542 227,979 197,330
Provision for income taxes 28,056 24,669 88,684 77,454
-------- -------- ---------- ----------
Income from continuing operations 44,066 38,873 139,295 119,876
-------- -------- ---------- ----------
Discontinued operations, net of taxes;
Loss from operations of hospitals
sold or held for sale (1,180) (3,189) (7,804) (5,027)
Net loss on sale of hospitals -- (3,645) (7,618) (3,645)
Impairment of long-lived assets of hospital
held for sale -- -- (4,471) --
-------- -------- ---------- ----------
Loss on discontinued operations (1,180) (6,834) (19,893) (8,672)
-------- -------- ---------- ----------
Net income $ 42,886 $ 32,039 $ 119,402 $ 111,204
======== ======== ========== ==========
Income from continuing operations per share-basic $ 0.50 $ 0.40 $ 1.57 $ 1.22
======== ======== ========== ==========
Income from continuing operations per share-diluted $ 0.47 $ 0.38 $ 1.48 $ 1.16
======== ======== ========== ==========
Net income per share - basic $ 0.49 $ 0.33 $ 1.35 $ 1.13
======== ======== ========== ==========
Net income per share - diluted $ 0.46 $ 0.32 $ 1.28 $ 1.08
======== ======== ========== ==========
Weighted average number of shares outstanding:
Basic 88,325 97,795 88,463 98,430
-------- -------- ---------- ----------
Diluted 98,529 107,870 98,644 108,666
-------- -------- ---------- ----------
Net income per share calculation:
Net income $ 42,886 $ 32,039 $ 119,402 $ 111,204
Add - Convertible notes interest, net of taxes 2,189 2,189 6,567 6,567
-------- -------- ---------- ----------
Adjusted net income $ 45,075 $ 34,228 $ 125,969 $ 117,771
======== ======== ========== ==========
Weighted average number of shares outstanding - basic 88,325 97,795 88,463 98,430
Add effect of dilutive securities:
Unvested common shares -- 23 -- 23
Employee stock options 1,622 1,470 1,599 1,631
Convertible notes 8,582 8,582 8,582 8,582
-------- -------- ---------- ----------
Weighted average number of shares outstanding - diluted 98,529 107,870 98,644 108,666
======== ======== ========== ==========
-MORE-
CYH Announces Third Quarter 2005 Results
Page 6
October 26, 2005
COMMUNITY HEALTH SYSTEMS, INC.
SELECTED OPERATING DATA
(Unaudited)
($ in thousands)
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------
CONSOLIDATED SAME-STORE
------------------------------ ------------------------------
2005 2004 % CHANGE 2005 2004 % CHANGE
-------- -------- -------- -------- -------- --------
Number of hospitals 68 66 66 66
Licensed beds 7,684 7,441 7,358 7,441
Beds in service 6,239 6,054 5,991 6,054
Admissions 71,337 66,269 7.6% 67,826 66,269 2.3%
Adjusted admissions 134,952 125,047 7.9% 128,300 125,047 2.6%
Patient days 286,340 266,735 7.3% 270,787 266,735 1.5%
Average length of stay (days) 4.0 4.0 4.0 4.0
Occupancy rate (average beds in service) 50.0% 48.3% 49.6% 48.3%
Net operating revenues $929,269 $811,815 14.5% $881,083 $811,265 8.6%
Net inpatient revenue as a % of total net
operating revenues 50.2% 49.6% 50.0% 49.7%
Net outpatient revenue as a % of total net
operating revenues 48.5% 49.1% 48.6% 49.1%
Income from operations $ 96,292 $ 82,839 16.2% $ 94,634 $ 83,023 14.0%
Income from operations as a % of net
operating revenues 10.4% 10.2% 10.7% 10.2%
Depreciation and amortization $ 40,490 $ 37,373 $ 39,248 $ 37,289
Minority interest in earnings $ 715 $ 341 $ 759 $ 341
Liquidity Data:
Adjusted EBITDA $137,497 $120,553 14.1%
Adjusted EBITDA as a % of net operating
revenues 14.8% 14.8%
Net cash provided by operating activities $ 59,367 $ 57,189
Net cash provided by operating activities as
a % of net operating revenue 6.4% 7.0%
- ----------
Continuing operating results and statistical data exclude discontinued
operations for all periods presented.
-MORE-
CYH Announces Third Quarter 2005 Results
Page 7
October 26, 2005
COMMUNITY HEALTH SYSTEMS, INC.
SELECTED OPERATING DATA
(Unaudited)
($ in thousands)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------------
CONSOLIDATED SAME-STORE
---------------------------------- ---------------------------------
2005 2004 % CHANGE 2005 2004 %CHANGE
---------- ---------- -------- ---------- ---------- -------
Number of hospitals 68 66 66 66
Licensed beds 7,684 7,441 7,358 7,441
Beds in service 6,239 6,054 5,991 6,054
Admissions 217,671 199,623 9.0% 204,122 199,623 2.3%
Adjusted admissions 402,274 368,237 9.2% 376,295 368,237 2.2%
Patient days 899,159 816,182 10.2% 838,249 816,182 2.7%
Average length of stay (days) 4.1 4.1 4.1 4.1
Occupancy rate (average beds in service) 53.5% 51.5% 53.3% 51.5%
Net operating revenues $2,756,250 $2,362,882 16.6% $2,568,205 $2,358,609 8.9%
Net inpatient revenue as a % of
total net operating revenues 50.8% 50.4% 51.0% 50.5%
Net outpatient revenue as a % of
total net operating revenues 47.9% 48.2% 47.9% 48.3%
Income from operations $ 297,942 $ 252,437 18.0% $ 288,222 $ 251,324 14.7%
Income from operations as a
% of net operating revenues 10.8% 10.7% 11.2% 10.7%
Depreciation and amortization $ 120,770 $ 109,419 $ 114,445 $ 109,177
Minority interest in earnings $ 2,719 $ 1,695 $ 2,369 $ 1,695
Liquidity Data:
Adjusted EBITDA $ 421,431 $ 363,551 15.9%
Adjusted EBITDA as a % of net
operating revenues 15.3% 15.4%
Net cash provided by operating activities $ 335,763 $ 263,174
Net cash provided by operating activities as
a % of net operating revenue 12.2% 11.1%
- ----------
Continuing operating results and statistical data exclude discontinued
operations for all periods presented.
-MORE-
CYH Announces Third Quarter 2005 Results
Page 8
October 26, 2005
COMMUNITY HEALTH SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
($ in thousands)
SEPTEMBER 30, DECEMBER 31,
2005 2004
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 184,280 $ 82,498
Patient accounts receivable, net 629,862 597,261
Other current assets 146,649 135,690
---------- ----------
TOTAL CURRENT ASSETS 960,791 815,449
---------- ----------
Property and equipment 1,984,274 1,924,843
Less accumulated depreciation and amortization (484,584) (440,295)
---------- ----------
Property and equipment, net 1,499,690 1,484,548
---------- ----------
Goodwill, net 1,236,623 1,213,783
---------- ----------
Other assets, net 146,979 118,828
---------- ----------
TOTAL ASSETS $3,844,083 $3,632,608
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 22,790 $ 26,867
Accounts payable and accrued liabilities 417,544 335,492
---------- ----------
TOTAL CURRENT LIABILITIES 440,334 362,359
---------- ----------
Long-term debt 1,787,293 1,804,868
---------- ----------
Other long-term liabilities 265,617 225,390
---------- ----------
Stockholders' equity 1,350,839 1,239,991
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,844,083 $3,632,608
========== ==========
-MORE-
CYH Announces Third Quarter 2005 Results
Page 9
October 26, 2005
COMMUNITY HEALTH SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
2005 2004
--------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 119,402 $ 111,204
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 122,370 116,776
Minority interest in earnings 2,719 1,088
Other non-cash expenses, net 16,298 5,367
Net changes in operating assets and liabilities, net of
effects of acquisitions 74,974 28,739
--------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 335,763 263,174
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of facilities and other related equipment (60,953) (131,815)
Proceeds from sale of facilities 51,998 7,850
Purchases of property and equipment, net (130,671) (124,138)
Increase in other assets (29,840) (23,576)
--------- -----------
NET CASH USED IN INVESTING ACTIVITIES (169,466) (271,679)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 40,146 4,071
Stock repurchase (79,853) (290,481)
Deferred financing costs (1,122) (4,669)
Redemption of minority investments in joint ventures (317) (2,218)
Distribution to minority investors in joint ventures (1,487) (998)
Proceeds from sale of minority investments in
joint ventures 1,383 --
Borrowing under credit agreement (9,000) 1,632,911
Repayments of long-term indebtedness (14,265) (1,326,490)
--------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES (64,515) 12,126
--------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 101,782 3,621
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 82,498 16,331
--------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 184,280 $ 19,952
========= ===========
-MORE-
CYH Announces Third Quarter 2005 Results
Page 10
October 26, 2005
REGULATION FD DISCLOSURE
The following table sets forth selected information concerning the updated
projected consolidated operating results of the Company for the year ended
December 31, 2005, and the Company's initial projected consolidating operating
results for the year ending December 31, 2006. These projections are based on
the Company's historical operating performance, current trends and other
assumptions that the Company believes are reasonable at this time. The revision
to the Company's previous guidance provided on July 28, 2005, reflects the solid
performance above guidance in the third quarter of 2005.
The following is provided as guidance to analysts and investors:
2005 2006
Projection Projection
Range Range
------------------ ---------------------
Net operating revenues (in millions) $3,700 to $3,725 $4,150 to $4,200
Adjusted EBITDA (in millions) $560 to $570 (a) $635 to $655 (a)
Income from continuing operations per share - diluted $1.95 to $1.98 (b) $2.22 to $2.30 (b)(c)
Income from continuing operations per share - diluted
- Including all equity-based compensation expense $1.84 to $1.87 (c) $2.14 to $2.18
Same hospitals annual admissions growth 1.5% to 3.0% 1.5% to 3.0%
Weighted average diluted shares (in millions) 99 to 100(b) 99 to 100 (b)
Acquisitions of new hospitals 5 2 to 4
Income from Continuing Operations Per Share -
Diluted Estimated by Quarter:
4th quarter ending December 31, 2005 $0.47 to $0.51
- ----------
For Footnotes (a), (b) and (c) see page 11.
The following assumptions were used in developing the guidance provided
above:
- - For comparative purposes, the 2005 projected income from continuing
operations per share - diluted - including all equity-based compensation
expense of $1.84 to $1.87, includes the pro-forma after tax impact of all
equity-based compensation expense as if Statement of Financial Accounting
Standards ("SFAS") No. 123 was adopted and reflected in the Company's
reported earnings for 2005, as disclosed in the Company's footnotes to the
financial statements.
- - The 2006 projected income from continuing operations per share - diluted -
including all equity-based compensation expense of $2.14 to $2.18, includes
the after tax impact related to the adoption, on January 1, 2006, of SFAS
No. 123R. The 2006 projection ranges also include an estimate for
anticipated 2006 equity-based awards of new restricted shares and stock
options. Compensation expense for equity-based awards will vary depending
on many factors, including the number of awards and the variables used to
determine the fair value of those awards at the date of the grant. Adjusted
EBITDA for 2006 as shown above does not take into account the pre-tax
impact of the projected equity-based compensation expense.
- - Expressed as a percentage of net operating revenue, provision for bad debts
is projected to be approximately 10.2% to 10.5% for 2005 and 2006.
- - Capital expenditures are as follows (in millions):
Actual Guidance Guidance
2004 2005 2006
------ ------------ ------------
Total $164 $190 to $200 $240 to $260
- - Expressed as a percent of net operating revenues, total depreciation and
amortization is projected to be approximately 4.3% to 4.6% for 2005 and
4.2% to 4.6% for 2006; however, this is a fixed cost and the percentages
may vary as revenue varies.
-MORE-
CYH Announces Third Quarter 2005 Results
Page 11
October 26, 2005
- - Expressed as a percentage of income before income taxes, provision for
income tax is projected to be approximately 38.5% to 39.0% for 2005 and
2006.
- - The Company is exposed to London Inter-Bank Offer Rate ("LIBOR") based
interest rates, which have been increasing over the past two years. The
following is a summary of the three-month LIBOR rates at various dates:
December 31, 2003 1.15188%
December 31, 2004 2.56438%
September 30, 2005 4.06500%
To partially offset the rise in LIBOR rates, the Company is currently a
party to nine separate interest swap agreements to limit the effect of
changes in interest rates on a portion of the Company's long-term
borrowings. On each of the swaps, the Company receives a variable rate of
interest based on the three-month LIBOR, in exchange for the payment by the
Company of a fixed rate of interest. Currently, the Company pays on a
quarterly basis a margin above LIBOR of 175 basis points for revolver loans
and term loans under the senior secured credit facility. The details of
these interest swap agreements are discussed in the Forms 10-Q previously
filed by the Company. For the purpose of providing 2006 projection range
guidance, the Company has assumed that future LIBOR rates for borrowings
under the Company's $1.625 billion Senior Secured Credit Facility will
increase based on market quotations of the forward yield curve and other
economic forecasts.
- ----------
Footnotes from page 10
(a) The following table reconciles adjusted EBITDA, as defined, to the
Company's estimated net cash provided by operating activities as presented
in the above guidance:
2005 Projection Range 2006 Projection Range
(in millions) (in millions)
--------------------- ---------------------
Adjusted EBITDA ................................ $ 560* $ 570* $ 635* $ 655*
Taxes and interest expense .................. (209) (215) (230) (246)
Other non-cash expenses and net changes in
operating assets and liabilities ......... 14 25 20 36
----- ----- ----- -----
Net cash provided by operating activities ...... $ 365 $ 380 $ 425 $ 445
===== ===== ===== =====
- ----------
* Excludes stock option compensation expense.
(b) For purposes of calculating earnings per share the Company's convertible
notes are dilutive in 2005 and are assumed to be dilutive in 2006.
Accordingly, the Company has applied the if-converted method with after-tax
interest savings of $8.7 million and 8.6 million shares added to the
calculation of fully diluted earnings per share. Effective October 15,
2005, the Company has the right to redeem this convertible issue. The
number of shares needed to fully satisfy the noteholders' conversion option
is included in fully diluted shares. If the Company exercises the optional
redemption right there would be no impact on earnings per share to the
extent all of the notes are converted into shares prior to redemption. The
Company has included the interest expense in this guidance for 2005 and
2006, since at this time no decision has been made to redeem the notes.
There is no time period within which the Company needs to make a decision
as to whether to redeem the notes.
(c) Non-GAAP computations presented for comparative purposes.
The projections set forth in this report constitute 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.
Although 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
filing.
-MORE-
CYH Announces Third Quarter 2005 Results
Page 12
October 26, 2005
These factors include, among other things:
- - general economic and business conditions, both nationally and in the
regions in which we operate; demographic changes;
- - existing governmental regulations and changes in, or the failure to comply
with, governmental regulations;
- - legislative proposals for healthcare reform;
- - the impact of the Medicare Prescription Drug, Improvement and Modernization
Act of 2003, which includes specific reimbursement changes for small urban
and non-urban hospitals;
- - our ability, where appropriate, to enter into managed care provider
arrangements and the terms of these arrangements;
- - changes in inpatient or outpatient Medicare and Medicaid payment levels;
- - uncertainty with the Health Insurance Portability and Accountability Act of
1996 regulations;
- - increases in wages as a result of inflation or competition for highly
technical positions and rising supply cost due to market pressure from
pharmaceutical companies and new product releases;
- - liability and other claims asserted against us, including self-insured
malpractice claims;
- - competition;
- - our ability to attract and retain qualified personnel, key management,
physicians, nurses and other health care workers;
- - trends toward treatment of patients in less acute or specialty healthcare
settings, including ambulatory surgery centers or specialty hospitals;
- - changes in medical or other technology;
- - changes in generally accepted accounting principles;
- - the availability and terms of capital to fund additional acquisitions or
replacement facilities;
- - our ability to successfully acquire and integrate additional hospitals;
- - our ability to obtain adequate levels of general and professional liability
insurance;
- - potential adverse impact of known and unknown government investigations;
- - timeliness of reimbursement payments received under government programs;
and
- - the other risk factors set forth in our public filings with the Securities
and Exchange Commission.
The consolidated operating results for the quarter and the nine months
ended September 30, 2005, are not necessarily indicative of the results that may
be experienced for any future quarter or for any future fiscal year, including
this fiscal year.
The Company cautions that the annual projections for 2005 and 2006 set
forth herein are given as of the date hereof based on currently available
information. The Company is not undertaking any obligation to update these
projections as conditions change or other information becomes available.
-END-