UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ________

Commission file number 001-15925

COMMUNITY HEALTH SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware	13-3893191
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
4000 Meridian Boulevard Franklin, Tennessee	37067 (Zip Code)
(Address of principal executive offices)

615-465-7000

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	CYH	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☑     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☑     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☑	Smaller reporting company ☐
Non-accelerated filer ☐		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐    No ☑ 

As of October 22, 2021, there were outstanding 132,107,916 shares of the Registrant’s Common Stock, $0.01 par value.

Community Health Systems, Inc.

Form 10-Q

For the Three and Nine Months Ended September 30, 2021

Part I.	Financial Information		Page
	Item 1.	Financial Statements:
		Condensed Consolidated Statements of  Income – Three and Nine Months Ended September 30, 2021 and September 30, 2020 (Unaudited)	2
		Condensed Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2021 and September 30, 2020 (Unaudited)	3
		Condensed Consolidated Balance Sheets – September 30, 2021 and December 31, 2020 (Unaudited)	4
		Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2021 and September 30, 2020 (Unaudited)	5
		Notes to Condensed Consolidated Financial Statements (Unaudited)	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49
	Item 4.	Controls and Procedures	49
Part II.	Other Information
	Item 1.	Legal Proceedings	50
	Item 1A.	Risk Factors	52
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
	Item 3.	Defaults Upon Senior Securities	53
	Item 4.	Mine Safety Disclosures	53
	Item 5.	Other Information	53
	Item 6.	Exhibits	53
Signatures			54

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except share and per share data)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Net operating revenues	$	3,115		$	3,126		$	9,135		$	8,670
Operating costs and expenses:
Salaries and benefits		1,336			1,365			3,905			4,054
Supplies		529			523			1,521			1,439
Other operating expenses		716			736			2,170			2,211
Government and other legal settlements and related costs		—			—			—			4
Lease cost and rent		75			85			231			248
Pandemic relief funds		(19	)		—			(102	)		(448	)
Depreciation and amortization		137			139			408			424
Impairment and (gain) loss on sale of businesses, net		1			(7	)		24			48
Total operating costs and expenses		2,775			2,841			8,157			7,980
Income from operations		340			285			978			690
Interest expense, net		216			257			666			779
Loss (gain) from early extinguishment of debt		—			(115	)		79			(111	)
Gain on sale of investments in unconsolidated affiliates		(26	)		—			(26	)		—
Equity in earnings of unconsolidated affiliates		(4	)		(5	)		(19	)		(11	)
Income before income taxes		154			148			278			33
Provision for (benefit from) income taxes		10			20			132			(221	)
Net income		144			128			146			254
Less: Net income attributable to noncontrolling interests		33			16			94			54
Net income attributable to Community Health Systems,    Inc. stockholders	$	111		$	112		$	52		$	200
Earnings per share attributable to Community Health    Systems, Inc. common stockholders:
Basic	$	0.87		$	0.98		$	0.41		$	1.74
Diluted	$	0.85		$	0.97		$	0.40		$	1.74
Weighted-average number of shares outstanding:
Basic		127,077,786			115,015,460			126,638,291			114,764,050
Diluted		130,885,139			115,640,852			129,885,951			115,012,202

See accompanying notes to the condensed consolidated financial statements.

2

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2021			2020		2021			2020
Net income	$	144		$	128	$	146		$	254
Other comprehensive income (loss), net of income taxes:
Net change in fair value of available-for-sale debt securities,    net of tax		(1	)		—		(4	)		3
Amortization and recognition of unrecognized pension cost   components, net of tax		2			—		3			1
Other comprehensive income (loss)		1			—		(1	)		4
Comprehensive income		145			128		145			258
Less: Comprehensive income attributable to noncontrolling    interests		33			16		94			54
Comprehensive income attributable to Community Health    Systems, Inc. stockholders	$	112		$	112	$	51		$	204

See accompanying notes to the condensed consolidated financial statements.

3

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)

	September 30, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,294		$	1,676
Patient accounts receivable		2,024			1,927
Supplies		341			335
Prepaid income taxes		44			50
Prepaid expenses and taxes		189			184
Other current assets		285			338
Total current assets		4,177			4,510
Property and equipment		9,536			9,352
Less accumulated depreciation and amortization		(4,168	)		(4,030	)
Property and equipment, net		5,368			5,322
Goodwill		4,219			4,219
Deferred income taxes		59			59
Other assets, net		1,847			1,896
Total assets	$	15,670		$	16,006
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current maturities of long-term debt	$	35		$	123
Current operating lease liabilities		142			142
Accounts payable		763			783
Accrued liabilities:
Employee compensation		687			637
Accrued interest		198			150
Other		1,265			980
Total current liabilities		3,090			2,815
Long-term debt		11,976			12,093
Deferred income taxes		152			29
Long-term operating lease liabilities		538			524
Other long-term liabilities		914			1,599
Total liabilities		16,670			17,060
Redeemable noncontrolling interests in equity of consolidated subsidiaries		493			484
STOCKHOLDERS’ DEFICIT
Community Health Systems, Inc. stockholders’ deficit:
Preferred stock, $.01 par value per share, 100,000,000 shares authorized; none issued		—			—
Common stock, $.01 par value per share, 300,000,000 shares authorized; 132,041,102    shares issued and outstanding at September 30, 2021, and 129,612,117 shares issued    and outstanding at December 31, 2020		1			1
Additional paid-in capital		2,092			2,094
Accumulated other comprehensive loss		(14	)		(13	)
Accumulated deficit		(3,655	)		(3,707	)
Total Community Health Systems, Inc. stockholders’ deficit		(1,576	)		(1,625	)
Noncontrolling interests in equity of consolidated subsidiaries		83			87
Total stockholders’ deficit		(1,493	)		(1,538	)
Total liabilities and stockholders’ deficit	$	15,670		$	16,006

See accompanying notes to the condensed consolidated financial statements.

4

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Nine Months Ended
	September 30,
	2021			2020
Cash flows from operating activities:
Net income	$	146		$	254
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		408			424
Deferred income taxes		123			(223	)
Government and other legal settlements and related costs		—			4
Stock-based compensation expense		18			8
Impairment and (gain) loss on sale of businesses, net		24			48
Loss (gain) from early extinguishment of debt		79			(111	)
Gain on sale of investments in unconsolidated affiliates		(26	)		—
Other non-cash expenses, net		22			99
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
Patient accounts receivable		(99	)		281
Supplies, prepaid expenses and other current assets		14			16
Medicare accelerated payments		—			1,159
Repayment/derecognition of Medicare accelerated payments		(267	)		(22	)
Pandemic relief funds		—			271
Accounts payable, accrued liabilities and income taxes		85			(81	)
Other		(127	)		(25	)
Net cash provided by operating activities		400			2,102
Cash flows from investing activities:
Acquisitions of facilities and other related businesses		(3	)		(1	)
Purchases of property and equipment		(334	)		(317	)
Proceeds from disposition of hospitals and other ancillary operations		17			347
Proceeds from sale of property and equipment		7			4
Purchases of available-for-sale debt securities and equity securities		(135	)		(68	)
Proceeds from sales of available-for-sale debt securities and equity securities		86			80
Proceeds from sale of investments in unconsolidated affiliates		110			—
Increase in other investments		(61	)		(36	)
Net cash (used in) provided by investing activities		(313	)		9
Cash flows from financing activities:
Repurchase of restricted stock shares for payroll tax withholding requirements		(5	)		(1	)
Deferred financing costs and other debt-related costs		(310	)		(32	)
Proceeds from noncontrolling investors in joint ventures		1			—
Redemption of noncontrolling investments in joint ventures		(5	)		(4	)
Distributions to noncontrolling investors in joint ventures		(95	)		(84	)
Proceeds from sale-lease back		—			2
Other borrowings		50			31
Issuance of long-term debt		4,310			1,462
Proceeds from ABL Facility		—			540
Repayments of long-term indebtedness		(4,415	)		(2,418	)
Net cash used in financing activities		(469	)		(504	)
Net change in cash and cash equivalents		(382	)		1,607
Cash and cash equivalents at beginning of period		1,676			216
Cash and cash equivalents at end of period	$	1,294		$	1,823
Supplemental disclosure of cash flow information:
Interest payments	$	(572	)	$	(765	)
Income tax payments, net	$	(3	)	$	(2