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Share Name | Share Symbol | Market | Type |
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Quorum Health Corporation | NYSE:QHC | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 0.3044 | 0 | 01:00:00 |
Quorum Health Corporation (NYSE: QHC) (the “Company”) today announced its operating and financial results for the three months and year ended December 31, 2017.
Net operating revenues for the three months ended December 31, 2017 decreased $0.2 million to $515.1 million, compared to $515.3 million for the same period in 2016. Net operating revenues for the quarter decreased $44.8 million from the two hospitals divested in 2016 and the five hospitals divested in 2017 (collectively, “the divested hospitals”), which was partially offset by a benefit of $29.9 million of revenues from the California Hospital Quality Assurance Fee (“HQAF”) program as the program approval process for Centers for Medicare & Medicaid Services (“CMS”) for the 2017-2019 period was completed in the fourth quarter of 2017, of which $22.5 million related to the first three quarters of 2017. Excluding the divested hospitals and the California HQAF revenues of $22.5 million related to the first three quarters of 2017, net operating revenues increased $22.1 million in the three months ended December 31, 2017 compared to the same period in 2016, primarily due to favorable volume and payor rate variances. Net loss for the three months ended December 31, 2017 was $(26.0) million compared to $(90.1) million for the same period in 2016. Net loss attributable to Quorum Health Corporation for the three months ended December 31, 2017 was $(26.8) million, or $(0.95) per share, compared to $(90.7) million, or $(3.19) per share, for the same period in 2016. The net loss for the three months ended December 31, 2017 was impacted by $25.8 million of impairment related to certain hospitals intended for divestiture. On a same-facility basis, as defined in footnote (k), the Company’s operating results for the three months ended December 31, 2017 reflect a 0.4% increase in admissions and a 0.6% increase in adjusted admissions compared to the same period in 2016.
As of December 31, 2017, the Company recorded a change in estimate of $21.0 million to reduce the net realizable value of its patient accounts receivable. During the fourth quarter of 2017, the Company analyzed self-pay patient accounts receivable at a more comprehensive and disaggregated level and refined its estimate of the collectability of the portion of self-pay accounts receivable related to insured patients, primarily co-payments and deductibles. The Company’s analysis also included an evaluation of patient accounts receivable retained in the divestitures of six of the Company’s seven divested hospitals. This adjustment negatively impacted the provision for bad debts in the net operating revenues components of the statement of income for both the three months and year ended December 31, 2017.
Adjusted EBITDA for the three months ended December 31, 2017 was $49.0 million, compared to $30.7 million for the same period in 2016. Adjusted EBITDA was positively impacted by the Company’s ability to accrue for the California HQAF program in the 2017 period, as stated above. The divested hospitals negatively impacted EBITDA by $5.1 million and $13.1 million for the three months ended December 31, 2017 and 2016, respectively. As a result, Adjusted EBITDA, Adjusted for Divestitures, was $54.1 million and $43.9 million for the three months ended December 31, 2017 and 2016, respectively.
Net operating revenues for the year ended December 31, 2017 decreased $66.3 million to $2,072.2 million, compared to $2,138.5 million for the same period in 2016. Net operating revenues decreased $108.8 million related to the divested hospitals and decreased $15.4 million related to the California HQAF program. Excluding the divested hospitals and the California HQAF, net operating revenues increased $57.9 million for the year ended December 31, 2017 compared to the same period in 2016, primarily due to favorable volume and payor rate variances. Net loss for the year ended December 31, 2017 was $(112.4) million compared to $(345.2) million for the same period in 2016. Net loss attributable to Quorum Health Corporation for the year ended December 31, 2017 was $(114.2) million, or $(4.06) per share, compared to $(347.7) million, or $(12.24) per share, for the same period in 2016. The 2017 period included impairment of $47.3 million related to hospitals held for sale or identified for potential divestiture and a net gain of $5.2 million on the sale of hospitals. The 2016 period included $291.9 million of impairment, $5.5 million of transaction costs related to the spin-off from Community Health Systems, Inc. in April 2016 (the “Spin-off”) and a net loss of $2.1 million on the sale of hospitals. On a same-facility basis, the Company’s operating results for the year ended December 31, 2017 reflect a 0.5% decrease in admissions and a 0.4% increase in adjusted admissions compared to the same period in 2016.
Adjusted EBITDA for the year ended December 31, 2017 was $141.8 million, compared to $162.9 million for the same period in 2016. The divested hospitals negatively impacted EBITDA by $20.6 million and $33.1 million for the years ended December 31, 2017 and 2016, respectively. As a result, Adjusted EBITDA, Adjusted for Divestitures was $162.5 million and $196.0 million for the years ended December 31, 2017 and 2016, respectively.
As of December 31, 2017, the Company had combined net proceeds from seven hospital divestitures of $45.9 million, of which $44.4 million was utilized to pay down the Company’s term loan under its Senior Credit Facility. In addition, in October 2017, the Company received approximately $31 million from the State of California related to the 2015-2016 HQAF Program, a portion of which was utilized to pay down additional principal on the Company’s term loan. On March 14, 2018, the Company executed an agreement with its lenders pursuant to its Senior Credit Facility to amend the calculation of the Secured Net Leverage Ratio beginning July 1, 2017 through maturity, among other provisions.
Commenting on the results, Thomas D. Miller, President and Chief Executive Officer of Quorum Health Corporation, said, “With eight divestiture transactions completed as of today and more expected in 2018, we are executing on our strategy to pay down debt in alignment with our key strategic goals. We’re seeing volume improvements in core hospitals, primarily as a result of physician recruiting efforts in specialty areas. We also continue to strongly focus on quality and safety and are very proud of the accomplishments of our physicians and nurses in their efforts to improve safety and quality in their community hospitals.”
Financial Outlook
Set forth below is selected information concerning the Company’s financial outlook for the year ending December 31, 2018. These projections are based on the Company’s historical operating performance, current economic, demographic and regulatory trends and other assumptions that the Company believes are reasonable at this time. The 2018 guidance should be considered in conjunction with the assumptions included herein. See “Forward-Looking Statements” below for a list of factors that could affect the future results of the Company or the healthcare industry generally.
The Company expects net operating revenues for the year ending December 31, 2018 to range from $1.925 billion to $1.975 billion. The Company expects Adjusted EBITDA for the year ending December 31, 2018 to range from $145 million to $165 million and Adjusted EBITDA, Adjusted for Divestitures to range from $160 million to $180 million. The guidance for Adjusted EBITDA gives effect to: (i) approximately $23 million of California HQAF revenues, net of provider taxes, (ii) the reduction of approximately $3 million in electronic health records incentives earned in 2018 compared to 2017, (iii) the inclusion of approximately $10 million to $12 million of non-cash stock-based compensation and other non-cash benefits expense and approximately $20 million to $25 million of non-cash insurance expense, and (iv) no estimate for the effects of any changes to the Affordable Care Act, its interpretation or its implementation. The guidance for Adjusted EBITDA, Adjusted for Divestitures through December 31, 2018 includes the same assumptions above, in addition to excluding the negative (positive) EBITDA of hospitals divested and expected to be divested through December 31, 2018.
A reconciliation of the Company’s projected 2018 Adjusted EBITDA, and Adjusted EBITDA, Adjusted for Divestitures, each a forward-looking non-GAAP financial measure, to net income (loss), the most directly comparable U.S. GAAP financial measure, is omitted from this press release because the Company is unable to provide such reconciliation without unreasonable effort. This inability results from the inherent difficulty in forecasting generally and in quantifying certain projected amounts that are necessary for such reconciliation. In particular, sufficient information is not available to calculate certain items required for such reconciliation without unreasonable effort, including interest expense, provision for (benefit from) income taxes and other adjustments that would be necessary to prepare a forward-looking statement of net income (loss) in accordance with U.S. GAAP. For the same reasons, the Company is unable to address the probable significance of the unavailable information.
About Quorum Health Corporation
The principal business of Quorum Health Corporation is to provide hospital and outpatient healthcare services in its markets across the United States. As of December 31, 2017, the Company owned or leased 31 hospitals in rural and mid-sized markets located across 15 states and licensed for 2,979 beds. Through Quorum Health Resources LLC, a wholly-owned subsidiary, the Company provides hospital management advisory and healthcare consulting services to non-affiliated hospitals across the country. Over 95% of the Company’s net operating revenues are attributable to its hospital operations business.
The Company’s headquarters are located in Brentwood, Tennessee, a suburb south of Nashville. Shares in Quorum Health Corporation are traded on the NYSE under the symbol “QHC.” More information about the Company can be found on its website at www.quorumhealth.com.
Quorum Health Corporation will hold a conference call on Friday, March 16, 2018, at 10:00 a.m. Central time, 11:00 a.m. Eastern, to review operating and financial results for the three and twelve months ended December 31, 2017. 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.quorumhealth.com. To listen to the live call, please go to the website at least 15 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 will continue to be available for approximately 30 days. Copies of this press release and the Company’s Current Report on Form 8-K (including this press release) are available on the Company’s website at www.quorumhealth.com.
QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME (LOSS)
(In Thousands, Except Earnings per Share and Shares)
Three Months Ended December 31, 2017 2016 % of % of Amount Revenues Amount Revenues Operating revenues, net of contractual allowances and discounts (a) $ 596,648 $ 593,855 Provision for bad debts 81,566 78,615 Net operating revenues 515,082 100.0 % 515,240 100.0 % Operating costs and expenses: Salaries and benefits (b) 253,106 49.1 % 268,559 52.1 % Supplies 63,932 12.4 % 66,829 13.0 % Other operating expenses (a) 156,669 30.5 % 163,276 31.8 % Depreciation and amortization 18,714 3.6 % 26,434 5.1 % Rent 13,599 2.6 % 11,966 2.3 % Electronic health records incentives earned (229 ) — % (1,691 ) (0.3 )% Legal, professional and settlement costs (518 ) (0.1 )% 1,166 0.2 % Impairment of long-lived assets and goodwill 25,820 5.0 % 41,470 8.0 % Loss (gain) on sale of hospitals, net (131 ) — % 2,150 0.4 % Transaction costs related to the Spin-off 49 — % 44 — % Total operating costs and expenses 531,011 103.1 % 580,203 112.6 % Income (loss) from operations (15,929 ) (3.1 )% (64,963 ) (12.6 )% Interest expense, net 31,873 6.2 % 28,684 5.6 % Income (loss) before income taxes (47,802 ) (9.3 )% (93,647 ) (18.2 )% Provision for (benefit from) income taxes (21,779 ) (4.2 )% (3,555 ) (0.7 )% Net income (loss) (c) (26,023 ) (5.1 )% (90,092 ) (17.5 )% Less: Net income (loss) attributable to noncontrolling interests 785 0.1 % 574 0.1 % Net income (loss) attributable to Quorum Health Corporation $ (26,808 ) (5.2 )% $ (90,666 ) (17.6 )% Earnings (loss) per share attributable to Quorum Health Corporation stockholders: Basic and diluted (d) $ (0.95 ) $ (3.19 ) Weighted-average shares outstanding: Basic and diluted (e) 28,248,527 28,416,801QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME (LOSS)
(In Thousands, Except Earnings per Share and Shares)
Year Ended December 31, 2017 2016 % of % of Amount Revenues Amount Revenues Operating revenues, net of contractual allowances and discounts (a) $ 2,327,655 $ 2,419,053 Provision for bad debts 255,485 280,586 Net operating revenues 2,072,170 100.0 % 2,138,467 100.0 % Operating costs and expenses: Salaries and benefits (b) 1,034,797 49.9 % 1,057,119 49.4 % Supplies 250,523 12.1 % 258,639 12.1 % Other operating expenses (a) 623,063 30.1 % 645,802 30.3 % Depreciation and amortization 82,155 4.0 % 117,288 5.5 % Rent 50,230 2.4 % 49,883 2.3 % Electronic health records incentives earned (4,745 ) (0.2 )% (11,482 ) (0.5 )% Legal, professional and settlement costs 6,001 0.3 % 7,342 0.3 % Impairment of long-lived assets and goodwill 47,281 2.3 % 291,870 13.6 % Loss (gain) on sale of hospitals, net (5,243 ) (0.3 )% 2,150 0.1 % Transaction costs related to the Spin-off 253 — % 5,488 0.3 % Total operating costs and expenses 2,084,315 100.6 % 2,424,099 113.4 % Income (loss) from operations (12,145 ) (0.6 )% (285,632 ) (13.4 )% Interest expense, net 122,077 5.9 % 113,440 5.3 % Income (loss) before income taxes (134,222 ) (6.5 )% (399,072 ) (18.7 )% Provision for (benefit from) income taxes (21,865 ) (1.1 )% (53,875 ) (2.6 )% Net income (loss) (c) (112,357 ) (5.4 )% (345,197 ) (16.1 )% Less: Net income (loss) attributable to noncontrolling interests 1,833 0.1 % 2,491 0.2 % Net income (loss) attributable to Quorum Health Corporation (b) $ (114,190 ) (5.5 )% $ (347,688 ) (16.3 )% Earnings (loss) per share attributable to Quorum Health Corporation stockholders: Basic and diluted (d) $ (4.06 ) $ (12.24 ) Weighted-average shares outstanding: Basic and diluted (e) 28,113,566 28,413,247QUORUM HEALTH CORPORATION
UNAUDITED CONSOLIDATED AND COMBINED SELECTED OPERATING DATA
Three Months Ended December 31, 2017 2016 $ Variance % Variance Consolidated and combined: Number of licensed beds at end of period (f) 2,979 3,459(480
)
(13.9
)%
Admissions (g) 20,932 23,200(2,268
)
(9.8
)%
Adjusted admissions (h) 50,788 57,202(6,414
)
(11.2
)%
Emergency room visits (i) 155,746 174,754(19,008
)
(10.9
)%
Medicare case mix (j) 1.45 1.41 0.04 2.8 % Same-facility: (k) Number of licensed beds at end of period (f) 2,979 2,979 — — % Admissions (g) 20,864 20,788 76 0.4 % Adjusted admissions (h) 50,583 50,290 293 0.6 % Emergency room visits (i) 154,874 152,620 2,254 1.5 % Medicare case mix (j) 1.45 1.39 0.06 4.3 % Year Ended December 31, 2017 2016 $ Variance % Variance Consolidated and combined: Number of licensed beds at end of period (f) 2,979 3,459 (480 ) (13.9 )% Admissions (g) 88,504 95,313 (6,809 ) (7.1 )% Adjusted admissions (h) 217,583 235,263 (17,680 ) (7.5 )% Emergency room visits (i) 660,246 726,155 (65,909 ) (9.1 )% Medicare case mix (j) 1.43 1.38 0.05 3.6 % Same-facility: (k) Number of licensed beds at end of period (f) 2,979 2,979 — — % Admissions (g) 84,459 84,905 (446 ) (0.5 )% Adjusted admissions (h) 205,905 205,110 795 0.4 % Emergency room visits (i) 622,049 631,346 (9,297 ) (1.5 )% Medicare case mix (j) 1.43 1.39 0.04 2.9 %QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Par Value per Share and Shares)
December 31, 2017 2016 ASSETS Current assets: Cash and cash equivalents $ 5,617 $ 25,455 Patient accounts receivable, net of allowance for doubtful accounts of $352,509 and $360,796 at December 31, 2017 and 2016, respectively 343,145 380,685 Inventories 53,459 58,124 Prepaid expenses 21,167 23,028 Due from third-party payors 97,202 116,235 Current assets of hospitals held for sale 8,112 1,502 Other current assets 47,440 57,942 Total current assets 576,142 662,971 Property and equipment, at cost 1,405,184 1,519,975 Less: Accumulated depreciation and amortization (729,905 ) (786,075 ) Total property and equipment, net 675,279 733,900 Goodwill 409,229 416,833 Intangible assets, net 64,850 84,982 Long-term assets of hospitals held for sale 7,734 6,851 Other long-term assets 95,607 88,833 Total assets $ 1,828,841 $ 1,994,370 LIABILITIES AND EQUITY Current liabilities: Current maturities of long-term debt $ 1,855 $ 5,683 Accounts payable 171,250 169,684 Accrued liabilities: Accrued salaries and benefits 77,803 98,803 Accrued interest 10,466 19,915 Due to third-party payors 47,705 42,537 Current liabilities of hospitals held for sale 2,577 492 Other current liabilities 43,687 53,268 Total current liabilities 355,343 390,382 Long-term debt 1,212,035 1,241,142 Deferred income tax liabilities, net 7,774 31,474 Other long-term liabilities 137,954 108,996 Total liabilities 1,713,106 1,771,994 Redeemable noncontrolling interests 2,325 6,807 Equity:Quorum Health Corporation stockholders’ equity:
Preferred stock, $0.0001 par value per share; 100,000,000 shares authorized; none issued — — Common stock, $0.0001 par value per share; 300,000,000 shares authorized; 30,294,895 shares issued and outstanding at December 31, 2017 and 29,482,050 shares issued and outstanding at December 31, 2016 3 3 Additional paid-in capital 549,610 537,911 Accumulated other comprehensive income (loss) (1,956 ) (2,760 ) Accumulated deficit (448,216 ) (334,026 )Total Quorum Health Corporation stockholders’ equity
99,441 201,128 Nonredeemable noncontrolling interests 13,969 14,441 Total equity 113,410 215,569 Total liabilities and equity $ 1,828,841 $ 1,994,370QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(In Thousands)
Year Ended December 31, 2017 2016 2015 Cash flows from operating activities: Net income (loss) $ (112,357 ) $ (345,197 ) $ 4,735 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 82,155 117,288 128,001 Non-cash interest expense 5,770 2,496 — Provision for (benefit from) deferred income taxes (22,137 ) (56,339 ) 2,542 Stock-based compensation expense 9,952 7,441 — Impairment of long-lived assets and goodwill 47,281 291,870 13,000 Loss (gain) on sale of hospitals, net (5,243 ) 2,150 — Changes in reserves for self-insurance claims, net of payments 22,519 27,994 — Changes in reserves for legal, professional and settlement costs, net of payments (3,651 ) 3,651 — Other non-cash expense (income), net 190 (575 ) 380 Changes in operating assets and liabilities, net of acquisitions and divestitures: Patient accounts receivable, net 29,091 10,205 (16,639 ) Due from and due to third-party payors, net 24,201 7,005 (18,198 ) Inventories, prepaid expenses and other current assets 673 1,457 8,000 Accounts payable and accrued liabilities (14,743 ) 20,760 (78,944 ) Long-term assets and liabilities, net 3,269 (9,120 ) 12 Net cash provided by (used in) operating activities 66,970 81,086 42,889 Cash flows from investing activities: Capital expenditures for property and equipment (61,530 ) (79,920 ) (59,455 ) Capital expenditures for software (6,898 ) (7,269 ) (8,845 ) Acquisitions, net of cash acquired (1,920 ) (785 ) (8,019 ) Proceeds from the sale of hospitals 32,081 13,746 — Proceeds from asset sales — 1,082 3,114 Other investing activities — — (5,387 ) Net cash provided by (used in) investing activities (38,267 ) (73,146 ) (78,592 ) Cash flows from financing activities: Borrowings under revolving credit facilities 508,000 50,000 — Repayments under revolving credit facilities (508,000 ) (50,000 ) — Borrowings of long-term debt 376 1,256,281 372 Repayments of long-term debt (39,195 ) (15,222 ) (1,563 ) Increase in Due to Parent, net — 24,796 262,775 Increase (decrease) in receivables facility, net — — (224,774 ) Payments of debt issuance costs (3,119 ) (29,146 ) — Cash paid to Parent related to the Spin-off — (1,217,336 ) — Cancellation of restricted stock awards for payroll tax withholdings on vested shares (1,508 ) (13 ) — Cash distributions to noncontrolling investors (3,851 ) (2,850 ) (1,623 ) Purchases of shares from noncontrolling investors (1,244 ) (101 ) (937 ) Net cash provided by (used in) financing activities (48,541 ) 16,409 34,250 Net change in cash and cash equivalents (19,838 ) 24,349 (1,453 ) Cash and cash equivalents at beginning of period 25,455 1,106 2,559 Cash and cash equivalents at end of period $ 5,617 $ 25,455 $ 1,106FOOTNOTES TO UNAUDITED FINANCIAL STATEMENTS AND SELECTED OPERATING DATA
(a) The California Department of Health Care Services implemented the HQAF program, imposing a fee on certain general and acute care California hospitals. Revenues generated from these fees provide funding for the non-federal supplemental payments to California hospitals that serve California’s Medicaid (“Medi-Cal”) and uninsured patients. Under Phase IV of the program, covering the period January 2014 through December 2016, the Company recognized $11.5 million of net operating revenues less $2.7 million of provider taxes for the three months ended December 31, 2016. The Company recognized $45.4 million of net operating revenues less $11.0 million of provider taxes for the year ended December 31, 2016. In November 2016, California voters approved a state constitutional amendment measure that extends indefinitely the statute that imposes fees on California hospitals seeking federal matching funds. However, Phase IV of the program expired on December 31, 2016, and CMS approval was received in December 2017. Consistent with the first four phases of the HQAF program, the Company did not recognize any revenues under the new program until CMS completed the approval process. The Company recognized $29.9 million of net operating revenues less $7.9 million of provider taxes for the three months and year ended December 31, 2017. Of this amount, $22.5 million of net operating revenues less $5.9 million of provider taxes related to the first three quarters of 2017 and $7.5 million of net operating revenues less $2.0 million of provider taxes related to the three months ended December 31, 2017. (b) Salaries and benefits were impacted by a net decrease in discretionary employee benefits as the Company continues to implement cost savings plans. (c) EBITDA is a non-GAAP financial measure that consists of net income (loss) before interest, income taxes, depreciation and amortization. Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to add back the effect of certain legal, professional and settlement costs, impairment of long-lived assets and goodwill, net loss (gain) on sale of hospitals, transaction costs related to the Spin-off, post-spin headcount reductions and change in estimate related to the collectability of patient accounts receivable. The Company uses Adjusted EBITDA as a measure of financial performance. Adjusted EBITDA is a key measure used by the Company’s management to assess the operating performance of its hospital operations business and to make decisions on the allocation of resources. Additionally, management utilizes Adjusted EBITDA in assessing the Company’s results of operations and in comparing the Company’s results of operations between periods. Adjusted EBITDA, Adjusted for Divestitures, also a non-GAAP financial measure, is further retrospectively adjusted to exclude the effect of EBITDA of hospitals divested in 2016 and 2017. Adjusted EBITDA, Adjusted for Potential Divestitures, also a non-GAAP financial measure, is further retrospectively adjusted to exclude the effect of EBITDA of seven hospitals that management has identified for potential divestiture over the next twelve to twenty four month period as of December 31, 2017. The Company continually evaluates other hospitals for potential divestiture, which could result in changes to the hospitals included in this group in future periods. The Company has presented Adjusted EBITDA and Adjusted EBITDA, Adjusted for Divestitures and Adjusted EBITDA, Adjusted for Potential Divestitures in this press release because it believes these measures provide investors and other users of the Company’s financial statements with additional information about how the Company’s management assesses its results of operations. Adjusted EBITDA, Adjusted EBITDA, Adjusted for Divestitures and Adjusted EBITDA, Adjusted for Potential Divestitures are not measurements of financial performance under U.S. GAAP. These calculations should not be considered in isolation or as a substitute for net income, operating income or any other measure calculated in accordance with U.S. GAAP. The items excluded from Adjusted EBITDA, Adjusted EBITDA, Adjusted for Divestitures and Adjusted EBITDA, Adjusted for Potential Divestitures are significant components in understanding and evaluating the Company’s financial performance. The Company believes such adjustments are appropriate, as the magnitude and frequency of such items can vary significantly and are not related to the assessment of normal operating performance. Additionally, the Company’s calculation of Adjusted EBITDA, Adjusted EBITDA, Adjusted for Divestitures and Adjusted EBITDA, Adjusted for Potential Divestitures may not be comparable to similarly titled measures reported by other companies.FOOTNOTES TO UNAUDITED FINANCIAL STATEMENTS AND SELECTED OPERATING DATA
(Continued)
The following table reconciles Adjusted EBITDA, Adjusted EBITDA, Adjusted for Divestitures and Adjusted EBITDA, Adjusted for Potential Divestitures, each as defined above, to net income (loss), the most directly comparable U.S. GAAP financial measure, as derived directly from the Company’s consolidated and combined financial statements for the respective periods (in thousands): Three Months Ended December 31, Year Ended December 31, 2017 2016 2017 2016 Net income (loss) $ (26,023 ) $ (90,092 ) $ (112,357 ) $ (345,197 ) Interest expense, net 31,873 28,684 122,077 113,440 Provision for (benefit from) income taxes (21,779 ) (3,555 ) (21,865 ) (53,875 ) Depreciation and amortization 18,714 26,434 82,155 117,288 EBITDA 2,785 (38,529 ) 70,010 (168,344 ) Legal, professional and settlement costs (518 ) 1,166 6,001 7,342 Impairment of long-lived assets and goodwill 25,820 41,470 47,281 291,870 Loss (gain) on sale of hospitals, net (131 ) 2,150 (5,243 ) 2,150 Transaction costs related to the Spin-off 49 44 253 5,488 Post-spin headcount reductions — 1,617 2,543 1,617 Change in estimate related to collectability of patient accounts receivable (l) 21,000 22,799 21,000 22,799 Adjusted EBITDA 49,005 30,717 141,845 162,922 Negative EBITDA of divested hospitals 5,144 13,140 20,637 33,107 Adjusted EBITDA, Adjusted for Divestitures 54,149 43,857 162,482 196,029 Negative (Positive) EBITDA of potential divestitures 3,114 2,102 8,337 (8,232 ) Adjusted EBITDA, Adjusted for Potential Divestitures $ 57,263 $ 45,959 $ 170,819 $ 187,797 (d) The following table reconciles net income (loss) attributable to Quorum Health Corporation, as reported and on a per share basis, with the adjustments described herein: Three Months Ended December 31, Year Ended December 31, 2017 2016 2017 2016 (per share - basic and diluted) (per share - basic and diluted) Earnings (loss) per share attributable to Quorum Health Corporation stockholders, as reported $ (0.95 ) $ (3.19 ) $ (4.06 ) $ (12.24 ) Adjustments: Legal, professional and settlement costs (0.01 ) 0.04 0.18 0.22 Impairment of long-lived assets and goodwill 0.50 1.40 1.41 8.89 Loss (gain) on sale of hospitals, net — 0.07 (0.16 ) 0.07 Transaction costs related to the Spin-off — — 0.01 0.17 Post-spin headcount reductions — 0.05 0.08 0.05 Change in estimate related to collectability of patient accounts receivable 0.40 0.77 0.63 0.69 Net operating losses of divested hospitals 0.10 0.44 0.61 1.01 Earnings (loss) per share attributable to Quorum Health Corporation stockholders, excluding adjustments $ 0.04 $ (0.42 ) $ (1.30 ) $ (1.14 )FOOTNOTES TO UNAUDITED FINANCIAL STATEMENTS AND SELECTED OPERATING DATA
(Continued)
(e) For comparative purposes, the Company used 28,412,054 shares as the number of weighted-average shares to calculate basic and diluted earnings per share for periods prior to the Spin-off. This number represents the number of shares issued on the Spin-off date. Due to the net loss attributable to Quorum Health Corporation in the three months and year ended December 31, 2017, no incremental shares are included in diluted earnings per share for these periods because the effect of the incremental shares would be anti-dilutive. No incremental shares were considered for any periods prior to the Spin-off. (f) Licensed beds are the number of beds for which the appropriate state agency licenses a hospital, regardless of whether the beds are actually available for patient use. (g) Admissions represent the number of patients admitted for inpatient services. (h) Adjusted admissions are computed by multiplying admissions by gross patient revenues and then dividing that number by gross inpatient revenues. (i) Emergency room visits represent the number of patients registered and treated in the Company’s emergency rooms. (j) Medicare case mix index is a relative value assigned to a diagnosis-related group of patients that is used in determining the allocation of resources necessary to treat the patients in that group. Medicare case mix index is calculated as the average case mix index for all Medicare admissions during the period. (k) Same-facility financial and operating data excludes hospitals that were sold prior to and as of the end of the current reporting period. Same-facility operating results have been adjusted to exclude the operating results of Sandhills Regional Medical Center, Barrow Regional Medical Center, Cherokee Medical Center, Trinity Hospital of Augusta, Lock Haven Hospital, Sunbury Community Hospital and L.V. Stabler Memorial Hospital, which were sold on December 1, 2016, December 31, 2016, March 31, 2017, June 30, 2017, September 30, 2017, September 30, 2017 and October 31, 2017, respectively. (l) As of December 31, 2017, the Company recorded a change in estimate of $21.0 million to reduce the net realizable value of its patient accounts receivable. During the fourth quarter of 2017, the Company analyzed its self-pay patient accounts receivable at a more comprehensive and disaggregated level and refined its estimate of the collectability of the portion of self-pay accounts receivable related to insured patients, primarily co-pays and deductibles. The Company’s analysis also included an evaluation of patient accounts receivable retained in the divestitures of six of the Company’s seven divested hospitals. This adjustment negatively impacted the provision for bad debts in the net operating revenues component of the statements of income for both the three months and year ended December 31, 2017. As of December 31, 2016, the Company recorded a change in estimate of $22.8 million to reduce the net realizable value of its patient accounts receivable. This adjustment negatively impacted both contractual allowances and the provision for bad debts in the net operating revenues component of the statements of income for both the three months and year ended December 31, 2016. The portion of this change in estimate that impacted contractual allowances was $11.4 million and related to increasing delays associated with collections on Illinois Medicaid accounts receivable. The remainder of the change in estimate, also $11.4 million, impacted the provision for bad debts and related to an assessment of the collectability of managed care and commercial accounts receivable aged greater than one year based on a review of historical cash collections for these accounts.Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainties. All statements in this press release 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 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 may be 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 press release.
These factors include, but are not limited to, the following:
Although the Company believes that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant regulatory, economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and may be beyond its control. 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. Given these uncertainties, prospective investors are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this filing. 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.
View source version on businesswire.com: http://www.businesswire.com/news/home/20180315006430/en/
Quorum Health CorporationMichael J. Culotta, 615-221-3502Executive Vice President and Chief Financial Officer
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