community health systems annual reports2007


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community health systems annual reports2007

  1. 1. Building on Success Community Health Systems, Inc. Annual Report 2007
  2. 2. Corporate Profile Located in the Nashville, Tennessee, suburb of Franklin, Community Health Systems, Inc. is a leading operator of general acute care hospitals in non-urban and mid-size markets throughout the country. Through its subsidiaries, the Company currently owns, leases or operates approximately 116 hospitals in 28 states and, with an aggregate of over 17,000 licensed beds. Its hospitals offer a broad range of inpatient medical and surgical services, outpatient treatment and skilled nursing care. In addition, through its QHR subsidiary, the Company provides management and consulting services to over 160 non-affiliated general acute care hospitals located throughout the United States. Shares in Community Health Systems, Inc. are traded on the New York Stock Exchange under the symbol “CYH.”
  3. 3. Hospital Locations / Community Health Systems, Inc. Operating Revenues (in billions) Alaska Indiana Ohio Texas 05 06 07 Palmer, Mat-Su Regional Medical Center Bluffton, Bluffton Regional Medical Center Massillon, Affinity Medical Center, Doctors and Abilene, Abilene Regional Medical Center Fort Wayne, Dupont Hospital Massillon Campuses Alpine, Big Bend Regional Medical Center $7.6 Alabama Fort Wayne, Lutheran Hospital of Indiana Big Spring, Scenic Mountain Medical Center Oklahoma Birmingham, Trinity Medical Center Fort Wayne, St. Joseph Hospital Brownwood, Brownwood Regional Medical Center $6.6 Centre, Cherokee Medical Center Peru, Dukes Memorial Hospital Claremore, Claremore Regional Hospital Cedar Park, Cedar Park Regional Medical Center $5.6 Dothan, Flowers Hospital Valparaiso, Porter Health Oklahoma City, Deaconess Hospital Cleveland, Cleveland Regional Medical Center Enterprise, Medical Center Enterprise Warsaw, Kosciusko Community Hospital Ponca City, Ponca City Medical Center College Station, College Station Medical Center $4.6 Foley, South Baldwin Regional Medical Center Tulsa, SouthCrest Hospital Corsicana, Navarro Regional Hospital $3.6 Kentucky Fort Payne, DeKalb Regional Medical Center Woodward, Woodward Regional Hospital Denton, Presbyterian Hospital of Denton Gadsden, Gadsden Regional Medical Center Fulton, Parkway Regional Hospital Granbury, Lake Granbury Medical Center $2.6 Oregon Greenville, L.V. Stabler Memorial Hospital Jackson, Kentucky River Medical Center Hillsboro, Hill Regional Hospital Huntsville, Crestwood Medical Center Louisa, Three Rivers Medical Center Springfield, McKenzie-Willamette Medical Center Jourdanton, South Texas Regional Medical Center Laredo, Laredo Medical Center Arkansas Louisiana Pennsylvania Longview, Longview Regional Medical Center Bentonville, Northwest Medical Center Bentonville Lake Charles, Women and Children's Hospital Berwick, Berwick Hospital Center Lufkin, Woodland Heights Medical Center Hospitals Forrest City, Forrest City Medical Center Leesville, Byrd Regional Hospital Coatesville, Brandywine Hospital San Angelo, San Angelo Community Medical Helena, Helena Regional Medical Center Ruston, Northern Louisiana Medical Center Easton, Easton Hospital Center 05 06 07 Johnson, Willow Creek Women's Hospital Lock Haven, Lock Haven Hospital Victoria, DeTar Hospital North and Navarro Missouri Newport, Harris Hospital Philadelphia, Chestnut Hill Hospital Weatherford, Weatherford Regional Medical Center 120 Springdale, Northwest Medical Center Springdale Kirksville, Northeast Regional Medical Center Phoenixville, Phoenixville Hospital 105 Utah Moberly, Moberly Regional Medical Center Pottstown, Pottstown Memorial Medical Center Arizona Sunbury, Sunbury Community Hospital Tooele, Mountain West Medical Center 90 Mississippi Bullhead City, Western Arizona Regional Medical West Grove, Jennersville Regional Hospital 75 Virginia Center Hattiesburg, Wesley Medical Center South Carolina Payson, Payson Regional Medical Center Vicksburg, River Region Health System Emporia, Southern Virginia Regional Medical 60 Tucson, Northwest Medical Center and Oro Valley Bennettsville, Marlboro Park Hospital Center North Carolina 45 Cheraw, Chesterfield General Hospital Franklin, Southampton Memorial Hospital California Williamston, Martin General Hospital Florence, Carolinas Hospital System Petersburg, Southside Regional Medical Center Barstow, Barstow Community Hospital Lancaster, Springs Memorial Hospital Nevada West Virginia Fallbrook, Fallbrook Hospital Spartanburg, Mary Black Healthcare Watsonville, Watsonville Community Hospital Mesquite, Mesa View Regional Hospital Oak Hill, Plateau Medical Center Earnings Per Tennessee Ronceverte, Greenbrier Valley Medical Center Share (diluted) Florida New Jersey Brownsville, Haywood Park Community Hospital Wyoming Crestview, North Okaloosa Medical Center Salem, The Memorial Hospital of Salem County Clarksville, Gateway Medical Center 05 06 07 Lake Wales, Lake Wales Medical Center Cleveland, SkyRidge Medical Center Evanston, Evanston Regional Hospital New Mexico Dyersburg, Dyersburg Regional Medical Center $2.00 Georgia Carlsbad, Carlsbad Medical Center Jackson, Regional Hospital of Jackson Augusta, Trinity Hospital of Augusta Deming, Mimbres Memorial Hospital Lexington, Henderson County Community Hospitals are owned or leased and operated by $1.65 Blue Ridge, Fannin Regional Hospital Hobbs, Lea Regional Medical Center Hospital subsidiaries of Community Health Systems, Inc. $1.30 Las Cruces, MountainView Regional Medical Martin, Volunteer Community Hospital Illinois Center McKenzie, McKenzie Regional Hospital $0.95 Anna, Union County Hospital Las Vegas, Alta Vista Regional Hospital Morristown, Lakeway Regional Hospital $0.60 Galesburg, Galesburg Cottage Hospital Roswell, Eastern New Mexico Medical Center Selmer, McNairy Regional Hospital Granite City, Gateway Regional Medical Center Shelbyville, Bedford County Medical Center $0.25 Marion, Heartland Regional Medical Center Mt. Vernon, Crossroads Community Hospital Red Bud, Red Bud Regional Hospital Waukegan, Vista Medical Center
  4. 4. Financial Highlights (a) (b) Year Ended December 31, 2007 (c) 2006 (In thousands, except per share amounts) Operating Results Net operating revenues $ 7,127,494 $ 4,180,136 Income from continuing operations $ 59,897 $ 177,695 Income per share from continuing operations Basic 0.64 $ 1.87 Diluted $ 0.63 $ 1.85 Weighted average number of shares outstanding: Basic 93,517 94,984 Diluted 94,642 96,233 (a) Continuing operating results exclude discontinued operations for all periods presented. (b) The Company updated its analysis of the fair value of the assets and liabilities acquired in the Triad acquisition and revised our purchase price allocation of the Triad acquisition based upon the most current estimates. This purchase price allocation remains preliminary and material adjustments to the fair value of assets, liabilities and goodwill may result upon completion of the Company’s analyses. (c) The effective date of the Triad acquisition was July 25, 2007. As of December 31, 2007 2006 Balance Sheet Data Working capital $ 1,104,963 $ 446,101 Total assets 13,493,643 4,506,579 Long-term debt 9,077,367 1,905,781 Stockholders’ equity 1,710,804 1,723,673 Year Ended December 31, Consolidated Same Store 2007 2006 % Change 2007 2006 % Change Selected Operating Data Number of hospitals (at end of period) 115 70 112 112 Licensed beds (at end of period) 16,971 8,406 16,434 16,544 Beds in service (at end of period) 14,604 6,753 14,159 14,066 Admissions 463,212 307,964 50.4% 434,317 439,056 -1.1% Adjusted admissions 848,707 570,969 48.6% 792,190 789,184 0.4% Patient days 1,941,887 1,264,256 53.6% 1,824,399 1,872,581 -2.6% Average length of stay (days) 4.2 4.1 4.2 4.3 Occupancy rate (average beds in service) 52.4% 54.3% 52.6% 54.4% Net operating revenues $ 7,127,494 $ 4,180,136 70.5% $ 6,571,528 $ 6,308,656 4.2% Net inpatient revenue as a % of total net operating revenues 49.3% 50.0% 49.5% 50.9% Net outpatient revenue as a % of total net operating revenues 48.6% 48.8% 48.4% 46.7% Income from operations $ 485,685 $ 385,057 26.1% $ 460,110 $ 550,519 -16.4% Income from operations as a % of net operating revenues 6.8% 9.2% 7.0% 8.7% Depreciation and amortization $ 316,215 $ 179,282 $ 293,977 $ 279,485 Equity in earnings of unconsolidated affiliates $ 25,132 $ – $ 23,627 $ 20,105 Liquidity Data: Adjusted EBITDA $ 827,032 $ 564,339 46.5% Adjusted EBITDA as a % of net operating revenues 11.6% 13.5% Net cash provided by operating activities $ 687,738 $ 350,255 Net cash provided by operating activities as a % of net operating revenues 9.6% 8.4% • Continuing operating results and statistical data exclude discontinued operations for all periods presented. • Same-store operating results and statistical data include comparable information for hospitals acquired in the Triad acquisition for the months of August through December 2007 and 2006.
  5. 5. Letter to Shareholders commitment to improve the quality of most attractive growth opportunity for healthcare for the people who live and the future. We are the sole provider of work in these communities. At the same general acute care hospital services in time, we have continued to focus on our approximately 65 percent of our markets, ultimate objective of bringing healthcare giving us a distinct advantage over those close to home – where it should be. large urban providers who must address intense competition. This has also made us a highly successful company by financial measures. In 2007, Our operating strategy has always been our total net operating revenues reached built around developing standardized over $7.1 billion, and we reported net and centralized business practices across W A Y N E T. S M I T H income of $30.3 million, or $0.32 per most aspects of our business. As a result, Chairman of the Board, share (diluted). Our consolidated we have a business model in place that President and Chief Executive Officer financial results for the year reflect a has proven, over time, to be an important 50.4 percent increase in total admissions driver in improving revenue and Since becoming a public company in compared with the prior year, primarily operating performance at both our 2000, Community Health Systems, Inc. due to the hospitals we acquired during existing and acquired facilities. As we has continued to build momentum with 2007, including the Triad acquisition. continue to integrate the Triad hospitals, an impressive record of profitable growth. On a same-store basis, net operating we will focus our expertise on the In 2007, this momentum increased at revenues increased 4.2 percent, compared further expansion of this model to drive an unprecedented pace, driven by our with the prior year. On a same-store improved returns on these additional acquisition of Triad Hospitals, Inc., as basis, admissions decreased 1.1 percent, assets. Since the completion of the we substantially increased our overall scale compared with 2006, reflecting a more acquisition, we have been able to identify and market reach. Today, we are proud of challenging industry environment. operating synergies including improved our distinction as the largest operator of supply costs, more centralized and general acute care hospitals in non-urban The Triad acquisition marks a significant targeted physician recruiting and a and mid-size markets in the United milestone for our organization and more efficient allocation of capital. States. We believe we have created an establishes us as the largest publicly traded As we continue to identify areas of opportunity to build on our past success hospital management company in the improvement, we are also mindful of and leverage these acquired assets to United States. This acquisition the need to effect these changes while deliver greater value to our shareholders. complements our focus on non-urban maintaining strong physician and hospital facilities by adding mid-size community relationships. We believe the true measure of our markets to our national footprint. success is reflected in the manner in Our hospitals have strong positions in Physician recruitment has always been an which we have built our business, and the each of their respective markets and are important area of focus for our company favorable reputation we have developed geographically diversified, which ensuring the long-term success of our in the marketplace. Community Health minimizes our operating risk as no hospitals. Perhaps more than any other Systems, Inc. is a company built on trust one state represents a disproportionate single factor, the strength of the medical – a trust we have created as the result of percentage of our revenues or earnings. staff and its member’s ability to make the our relationships with the communities We strongly believe that the non-urban critical daily decisions for patient care are we serve and our unwavering and the mid-size markets represent the vital to the performance of the local
  6. 6. community hospital. The addition Since inception, Community Health Ultimately, Community Health System of qualified physicians creates the Systems, Inc. has been highly successful Inc.’s prospects for long-term growth and opportunity for increased admissions in executing an aggressive acquisition increased shareholder value rest on the in our hospitals and, in particular, the strategy with a proven track record of collective strength of our individual availability of physicians in various improving operations at acquired hospitals and the many dedicated specialties allows more patients to obtain facilities. Now, with that same execution, physicians, nurses and hospital healthcare services at the local level we are working diligently to ensure that administrators who work and live in the instead of traveling to an urban facility. the Triad hospitals we acquired continue communities we serve. We are very Additionally, access to more specialty to advance toward reaching their full proud of the team that represents our services further drives the necessary potential. While this represents a facilities in the market every day with our revenues that sustain the hospitals’ challenge, it is an even more significant shared vision to enhance the level of operations. With respect to physician opportunity. Our track record healthcare in more communities. The recruitment, we employ the same demonstrates that we are well positioned clearest reflection of the caliber of this centralized process that has proven to make the most of that opportunity team is our long-term record of success successful in other aspects of our with favorable results. Our proven ability and the commitment demonstrated by operations. In 2007, we had another to deliver on our promise and foster everyone associated with Community outstanding recruiting effort as we positive community relations has been, Health Systems in 2007 by delivering an added a total of 769 new practitioners, and will continue to be, a distinct outstanding performance in what proved representing a variety of clinical competitive advantage for Community to be a pivotal year for the Company. We specialties, to our hospitals. Additionally, Health Systems. intend to build on this success in 2008 we are pleased with the enthusiastic and look forward to the opportunities reception we have received by the medical In addition to the acquisition of the ahead as we continue to build shareholder staffs at the former Triad facilities and we Triad hospitals, we acquired two other value. We close by thanking you, our look forward to working together in our hospitals in 2007. While we expect to be fellow shareholders, for the support your common mission to enhance the level of disciplined acquirers again in the future, investment provides. healthcare in their respective markets. our strategic focus for 2008 will be on Approximately 20 percent of the pursuing growth opportunities within our physicians recruited in 2007 were placed existing markets through disciplined Sincerely, in former Triad facilities. We believe our capital spending programs focused on physician recruitment initiatives and achieving both a favorable level of appropriate strategic investments in the financial and operating performance and type of physical plant and equipment and higher patient satisfaction. Toward that clinical services that attract and retain end, along with bringing new physicians Wayne T. Smith physicians, will continue to serve us well to our communities, we will continue to Chairman of the Board, as we integrate the Triad facilities. As make appropriate investments in new President and Chief Executive Officer always, our goal is to seek out the best equipment, technologies and clinical practitioners in their respective fields services for our hospitals. Our definitive who not only raise the level of care in goal for all of these initiatives is the our hospitals, but also become an integral same - to provide a hospital that more part of the community. effectively and conveniently meets the unique needs of its market.
  7. 7. Board of Directors and Officers / Community Health Systems, Inc. Board of Directors Officers Seated from left to right: William S. Hussey Wayne T. Smith Wayne T. Smith David L. Miller Chairman of the Board Chairman of the Board Thomas D. Miller President and President and Chief Executive Officer Chief Executive Officer Standing from left to right: W. Larry Cash W. Larry Cash Michael T. Portacci Executive Vice President Executive Vice President W. Larry Cash and Chief Financial Officer and Chief Financial Officer Gary D. Newsome John A. Clerico (1) William S. Hussey Co-founder and Chairman President – Division IV ChartMark Investments, Inc. Operations Martin G. Schweinhart Robert O. Horrar Dale F. Frey (2) (3) David L. Miller Senior Vice President – Vice President – Business Former Chairman and President – Division I Operations Development President Operations General Electric Investment J. Gary Seay Tim G. Marlette Corp. Thomas D. Miller Senior Vice President and Chief Vice President – Materials President – Division V Information Officer Management John A. Fry (1) (3) Operations President Rachel A. Seifert Linda K. Parsons Franklin & Marshall College Gary D. Newsome Senior Vice President, Secretary Vice President – Human President – Division III and General Counsel Resources Harvey Klein, M.D. (3) Operations Professor of Clinical Medicine T. Mark Buford Kathie G. Thomas Cornell University Medical Michael T. Portacci Vice President and Corporate Vice President – Home Health College President – Division II Controller Services Operations Julia B. North (2) (3) Larry M. Carlton Gerald A. Weissman Former President – Kenneth D. Hawkins Vice President – Revenue Vice President – Medical Staff Consumer Services Senior Vice President – Management Development BellSouth Telecommunications Acquisitions and Development James W. Doucette Member of the Audit and H. Mitchell Watson, Jr. (1) (2) Barbara R. Paul, M.D. (1) Vice President and Treasurer Compliance Committee Former President Senior Vice President and Chief Member of the Compensation Sigma Group of America Medical Officer (2) Robert A. Horrar Committee Vice President – Administration Member of the Governance Carolyn S. Lipp (3) and Nominating Committee Senior Vice President – Quality and Resource Management Performance Graph The following graph sets forth the cumulative return of the Company’s common stock during the five year period ended December 31, 2007, as compared to the cumulative return of the Standard & Poor’s 500 Stock Index (S&P 500) and the cumulative return of the Dow Jones Healthcare Index. The graph assumes an initial investment of $100 in our common stock and in each of the foregoing indices and the reinvestment of dividends where applicable. $200 $186.21 $182.87 $177.37 $180 $179.02 $173.34 $160 $149.70 $156.65 $142.69 $140 $129.09 $144.57 $135.41 $135.26 $128.68 $120 $124.86 $100.00 $119.43 $100 $80 $60 $40 $20 $0 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 This Annual Report contains forward looking statements made pursuant to the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. Important factors that could cause our actual results to differ materially from the results contemplated by the forward looking statements are contained in our Annual Report on Form 10- K filed with the Securities and Exchange Commission(the “SEC”) and included with this Annual Report and in subsequent filings with the SEC.
  8. 8. Corporate Information/Community Health Systems, Inc. Corporate Office Registrar and Transfer Agent Common Stock Information The following table sets forth Community Health Systems, Inc. BNY Mellon Shareowner Services The Company’s common stock the high and low sales price 4000 Meridian Boulevard 480 Washington Boulevard trades on the New York Stock information as reported by the Franklin, Tennessee 37067 29th Floor Exchange under the symbol New York Stock Exchange during (615) 465-7000 Jersey City, New Jersey 07310 CYH. As of March 30, 2008, the period indicated. (201) 680-5287 Community Health Systems had approximately 39,900 beneficial Stock Price Form 10-K/Investor Contact Independent Auditors holders of its common stock. Of A copy of the Company’s Annual Deloitte & Touche LLP that total, 49 were stockholders of 2007 High Low Report on Form 10-K, filed with Nashville, Tennessee record. To date, the Company First Quarter $39.05 $33.28 the Securities and Exchange has not paid cash dividends on its Second Quarter $41.72 $34.86 Commission, may be obtained Annual Shareholders’ Meeting common stock. Third Quarter $44.50 $30.39 from the Company at no charge. The annual meeting of Fourth Quarter $37.50 $27.70 Requests for the Annual Report shareholders will be held on on Form 10-K and other investor Tuesday, May 20, 2008, at 2006 High Low information should be directed 8:00 a.m. local time at The First Quarter $39.96 $35.33 to Investor Relations at the St. Regis Hotel, La Maisonette I, Second Quarter $38.39 $34.94 Company’s corporate office or at 2 East 55th Street, New York, Third Quarter $39.18 $35.70 New York. Fourth Quarter $37.26 $31.00
  9. 9. COMMUNITY HEALTH SYSTEMS, INC. 4000 Meridian Boulevard Franklin, Tennessee 37067 (615) 465-7000