0001564590-18-027517.txt : 20181106 0001564590-18-027517.hdr.sgml : 20181106 20181106171427 ACCESSION NUMBER: 0001564590-18-027517 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 109 CONFORMED PERIOD OF REPORT: 20180930 FILED AS OF DATE: 20181106 DATE AS OF CHANGE: 20181106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Quorum Health Corp CENTRAL INDEX KEY: 0001650445 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-GENERAL MEDICAL & SURGICAL HOSPITALS, NEC [8062] IRS NUMBER: 474725208 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-37550 FILM NUMBER: 181163929 BUSINESS ADDRESS: STREET 1: 1573 MALLORY LANE CITY: BRENTWOOD STATE: TN ZIP: 37027 BUSINESS PHONE: 615-221-1400 MAIL ADDRESS: STREET 1: 1573 MALLORY LANE CITY: BRENTWOOD STATE: TN ZIP: 37027 10-Q 1 qhc-10q_20180930.htm 10-Q qhc-10q_20180930.htm

 

 

fSep2

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended September 30, 2018

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    001-37550

QUORUM HEALTH CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

 

47-4725208

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

1573 Mallory Lane Brentwood, Tennessee

 

37027

(Address of principal executive offices)

 

(Zip code)

(615) 221-1400
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

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 

Non-accelerated filer ☐ 

Smaller reporting company ☐

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 November 2, 2018, there were 31,527,641 shares outstanding of the registrant’s Common Stock.

 

 

 


 

QUORUM HEALTH CORPORATION

Quarterly Report on Form 10-Q

Table of Contents

 

 

 

 

 

 

 

Page

PART I – FINANCIAL INFORMATION

 

 

 

 

Item 1.

 

Financial Statements

 

1

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

50

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

79

 

 

Item 4.

 

Controls and Procedures

 

79

PART II – OTHER INFORMATION

 

 

 

 

Item 1.

 

Legal Proceedings

 

81

 

 

Item 1A.

 

Risk Factors

 

84

 

 

Item 6.

 

Exhibits

 

85

Signatures

 

86

 

 

 

 


 

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements

 

QUORUM HEALTH CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In Thousands, Except Earnings per Share and Shares)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

 

 

 

 

$

557,847

 

 

 

 

 

 

$

1,731,007

 

Provision for bad debts

 

 

 

 

 

 

58,545

 

 

 

 

 

 

 

173,919

 

Net operating revenues

 

$

460,507

 

 

 

499,302

 

 

$

1,419,959

 

 

 

1,557,088

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

226,237

 

 

 

251,780

 

 

 

705,868

 

 

 

781,691

 

Supplies

 

 

48,949

 

 

 

58,657

 

 

 

160,732

 

 

 

186,591

 

Other operating expenses

 

 

143,716

 

 

 

145,357

 

 

 

440,910

 

 

 

466,394

 

Depreciation and amortization

 

 

16,612

 

 

 

20,735

 

 

 

52,015

 

 

 

63,441

 

Rent

 

 

11,661

 

 

 

12,377

 

 

 

35,551

 

 

 

36,631

 

Electronic health records incentives earned

 

 

(31

)

 

 

(287

)

 

 

(617

)

 

 

(4,516

)

Legal, professional and settlement costs

 

 

1,519

 

 

 

2,050

 

 

 

10,349

 

 

 

6,519

 

Impairment of long-lived assets and goodwill

 

 

32,438

 

 

 

5,261

 

 

 

72,198

 

 

 

21,461

 

Loss (gain) on sale of hospitals, net

 

 

805

 

 

 

79

 

 

 

8,927

 

 

 

(5,112

)

Loss on closure of hospitals, net

 

 

1,111

 

 

 

 

 

 

18,195

 

 

 

 

Transaction costs related to the Spin-off

 

 

 

 

 

173

 

 

 

 

 

 

204

 

Total operating costs and expenses

 

 

483,017

 

 

 

496,182

 

 

 

1,504,128

 

 

 

1,553,304

 

Income (loss) from operations

 

 

(22,510

)

 

 

3,120

 

 

 

(84,169

)

 

 

3,784

 

Interest expense, net

 

 

32,450

 

 

 

32,216

 

 

 

95,307

 

 

 

90,204

 

Income (loss) before income taxes

 

 

(54,960

)

 

 

(29,096

)

 

 

(179,476

)

 

 

(86,420

)

Provision for (benefit from) income taxes

 

 

(1,074

)

 

 

(542

)

 

 

(1,162

)

 

 

(86

)

Net income (loss)

 

 

(53,886

)

 

 

(28,554

)

 

 

(178,314

)

 

 

(86,334

)

Less: Net income (loss) attributable to noncontrolling interests

 

 

54

 

 

 

637

 

 

 

1,200

 

 

 

1,048

 

Net income (loss) attributable to Quorum Health Corporation

 

$

(53,940

)

 

$

(29,191

)

 

$

(179,514

)

 

$

(87,382

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to Quorum Health Corporation stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(1.85

)

 

$

(1.03

)

 

$

(6.21

)

 

$

(3.11

)

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

29,215,823

 

 

 

28,245,833

 

 

 

28,891,363

 

 

 

28,068,085

 

See accompanying notes

1


 

QUORUM HEALTH CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS)

(In Thousands)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(53,886

)

 

$

(28,554

)

 

$

(178,314

)

 

$

(86,334

)

Amortization and recognition of unrecognized pension cost components, net of income taxes

 

 

114

 

 

 

123

 

 

 

39

 

 

 

365

 

Comprehensive income (loss)

 

 

(53,772

)

 

 

(28,431

)

 

 

(178,275

)

 

 

(85,969

)

Less:  Comprehensive income (loss) attributable to noncontrolling interests

 

 

54

 

 

 

637

 

 

 

1,200

 

 

 

1,048

 

Comprehensive income (loss) attributable to Quorum Health Corporation

 

$

(53,826

)

 

$

(29,068

)

 

$

(179,475

)

 

$

(87,017

)

See accompanying notes

2


 

QUORUM HEALTH CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Par Value per Share and Shares)

 

 

 

September 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,066

 

 

$

5,617

 

Patient accounts receivable, net of allowance for doubtful accounts of $352,509 at December 31, 2017

 

 

318,284

 

 

 

343,145

 

Inventories

 

 

46,964

 

 

 

53,459

 

Prepaid expenses

 

 

21,225

 

 

 

21,167

 

Due from third-party payors

 

 

64,109

 

 

 

97,202

 

Current assets of hospitals held for sale

 

 

 

 

 

8,112

 

Other current assets

 

 

58,162

 

 

 

47,440

 

Total current assets

 

 

514,810

 

 

 

576,142

 

Property and equipment, at cost

 

 

1,284,695

 

 

 

1,405,184

 

Less:  Accumulated depreciation and amortization

 

 

(718,309

)

 

 

(729,905

)

Total property and equipment, net

 

 

566,386

 

 

 

675,279

 

Goodwill

 

 

401,073

 

 

 

409,229

 

Intangible assets, net

 

 

49,866

 

 

 

64,850

 

Long-term assets of hospitals held for sale

 

 

 

 

 

7,734

 

Other long-term assets

 

 

80,994

 

 

 

95,607

 

Total assets

 

$

1,613,129

 

 

$

1,828,841

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

1,544

 

 

$

1,855

 

Accounts payable

 

 

146,403

 

 

 

171,250

 

Accrued liabilities:

 

 

 

 

 

 

 

 

Accrued salaries and benefits

 

 

87,287

 

 

 

77,803

 

Accrued interest

 

 

22,046

 

 

 

10,466

 

Due to third-party payors

 

 

43,934

 

 

 

47,705

 

Current liabilities of hospitals held for sale

 

 

 

 

 

2,577

 

Other current liabilities

 

 

47,750

 

 

 

43,687

 

Total current liabilities

 

 

348,964

 

 

 

355,343

 

Long-term debt

 

 

1,185,684

 

 

 

1,212,035

 

Deferred income tax liabilities, net

 

 

6,670

 

 

 

7,774

 

Other long-term liabilities

 

 

129,825

 

 

 

137,954

 

Total liabilities

 

 

1,671,143

 

 

 

1,713,106

 

Redeemable noncontrolling interests

 

 

2,279

 

 

 

2,325

 

Equity:

 

 

 

 

 

 

 

 

Quorum Health Corporation stockholders' equity (deficit):

 

 

 

 

 

 

 

 

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; 31,527,885 shares issued and outstanding at September 30, 2018, and 30,294,895 shares issued and outstanding at December 31, 2017

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

554,847

 

 

 

549,610

 

Accumulated other comprehensive income (loss)

 

 

(1,917

)

 

 

(1,956

)

Accumulated deficit

 

 

(627,730

)

 

 

(448,216

)

Total Quorum Health Corporation stockholders' equity (deficit)

 

 

(74,797

)

 

 

99,441

 

Nonredeemable noncontrolling interests

 

 

14,504

 

 

 

13,969

 

Total equity (deficit)

 

 

(60,293

)

 

 

113,410

 

Total liabilities and equity

 

$

1,613,129

 

 

$

1,828,841

 

See accompanying notes

3


 

QUORUM HEALTH CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EQUITY (DEFICIT)

For the Nine Months Ended September 30, 2018

(In Thousands, Except Shares)

 

 

 

 

 

 

 

 

Quorum Health Corporation

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Nonredeemable

 

 

Total

 

 

 

Noncontrolling

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Noncontrolling

 

 

Equity

 

 

 

Interests

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Interests

 

 

(Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2017

 

$

2,325

 

 

 

 

30,294,895

 

 

$

3

 

 

$

549,610

 

 

$

(1,956

)

 

$

(448,216

)

 

$

13,969

 

 

$

113,410

 

Comprehensive income (loss)

 

 

(715

)

 

 

 

 

 

 

 

 

 

 

 

 

39

 

 

 

(179,514

)

 

 

1,915

 

 

 

(177,560

)

Stock-based compensation expense

 

 

 

 

 

 

1,565,656

 

 

 

 

 

 

7,986

 

 

 

 

 

 

 

 

 

 

 

 

7,986

 

Cancellation of restricted stock awards for payroll tax withholdings on vested shares

 

 

 

 

 

 

(332,666

)

 

 

 

 

 

(1,979

)

 

 

 

 

 

 

 

 

 

 

 

(1,979

)

Cash distributions to noncontrolling investors

 

 

(101

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,380

)

 

 

(1,380

)

Adjustments to redemption values of redeemable noncontrolling interests

 

 

770

 

 

 

 

 

 

 

 

 

 

(770

)

 

 

 

 

 

 

 

 

 

 

 

(770

)

Balance at September 30, 2018

 

$

2,279

 

 

 

 

31,527,885

 

 

$

3

 

 

$

554,847

 

 

$

(1,917

)

 

$

(627,730

)

 

$

14,504

 

 

$

(60,293

)

 

 

QUORUM HEALTH CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EQUITY

For the Nine Months Ended September 30, 2017

(In Thousands, Except Shares)

 

 

 

 

 

 

 

 

Quorum Health Corporation

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Nonredeemable

 

 

 

 

 

 

 

Noncontrolling

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Noncontrolling

 

 

Total

 

 

 

Interests

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Interests

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2016

 

$

6,807

 

 

 

 

29,482,050

 

 

$

3

 

 

$

537,911

 

 

$

(2,760

)

 

$

(334,026

)

 

$

14,441

 

 

$

215,569

 

Comprehensive income (loss)

 

 

(1,158

)

 

 

 

 

 

 

 

 

 

 

 

 

365

 

 

 

(87,382

)

 

 

2,206

 

 

 

(84,811

)

Stock-based compensation expense

 

 

 

 

 

 

985,302

 

 

 

 

 

 

7,702

 

 

 

 

 

 

 

 

 

 

 

 

7,702

 

Cancellation of restricted stock awards for payroll tax withholdings on vested shares

 

 

 

 

 

 

(217,850

)

 

 

 

 

 

(1,503

)

 

 

 

 

 

 

 

 

 

 

 

(1,503

)

Cash distributions to noncontrolling investors

 

 

(42

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,809

)

 

 

(3,809

)

Reclassification of noncontrolling interests

 

 

(363

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

363

 

 

 

363

 

Redemption of shares from noncontrolling interests

 

 

(3,402

)

 

 

 

 

 

 

 

 

 

2,235

 

 

 

 

 

 

 

 

 

(77

)

 

 

2,158

 

Adjustments to redemption values of redeemable noncontrolling interests

 

 

(264

)

 

 

 

 

 

 

 

 

 

264

 

 

 

 

 

 

 

 

 

 

 

 

264

 

Balance at September 30, 2017

 

$

1,578

 

 

 

 

30,249,502

 

 

$

3

 

 

$

546,609

 

 

$

(2,395

)

 

$

(421,408

)

 

$

13,124

 

 

$

135,933

 

See accompanying notes

4


 

QUORUM HEALTH CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(53,886

)

 

$

(28,554

)

 

$

(178,314

)

 

$

(86,334

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

16,612

 

 

 

20,735

 

 

 

52,015

 

 

 

63,441

 

Non-cash interest expense, net

 

 

1,860

 

 

 

1,793

 

 

 

6,394

 

 

 

3,223

 

Provision for (benefit from) deferred income taxes

 

 

(1,129

)

 

 

(642

)

 

 

(1,104

)

 

 

(387

)

Stock-based compensation expense

 

 

2,766

 

 

 

2,374

 

 

 

7,986

 

 

 

7,702

 

Impairment of long-lived assets and goodwill

 

 

32,438

 

 

 

5,261

 

 

 

72,198

 

 

 

21,461

 

Loss (gain) on sale of hospitals, net

 

 

805

 

 

 

79

 

 

 

8,927

 

 

 

(5,112

)

Non-cash portion of loss on hospital closures

 

 

 

 

 

 

 

 

6,394

 

 

 

 

Changes in reserves for self-insurance claims, net of payments

 

 

4,623

 

 

 

4,999

 

 

 

15,003

 

 

 

16,253

 

Changes in reserves for legal, professional and settlement costs, net of payments

 

 

 

 

 

 

 

 

 

 

 

(3,651

)

Other non-cash expense (income), net

 

 

380

 

 

 

233

 

 

 

387

 

 

 

238

 

Changes in operating assets and liabilities, net of acquisitions and divestitures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Patient accounts receivable, net

 

 

9,206

 

 

 

9,156

 

 

 

30,280

 

 

 

(21,193

)

Due from and due to third-party payors, net

 

 

8,344

 

 

 

(3,176

)

 

 

29,322

 

 

 

12,231

 

Inventories, prepaid expenses and other current assets

 

 

(7,353

)

 

 

9,756

 

 

 

(7,582

)

 

 

2,024

 

Accounts payable and accrued liabilities

 

 

12,108

 

 

 

(12,002

)

 

 

2,394

 

 

 

(10,710

)

Long-term assets and liabilities, net

 

 

1,560

 

 

 

(268

)

 

 

(1,365

)

 

 

1,603

 

Net cash provided by (used in) operating activities

 

 

28,334

 

 

 

9,744

 

 

 

42,935

 

 

 

789

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures for property and equipment

 

 

(9,576

)

 

 

(11,525

)

 

 

(34,895

)

 

 

(50,667

)

Capital expenditures for software

 

 

(483

)

 

 

(3,005

)

 

 

(1,527

)

 

 

(6,174

)

Acquisitions, net of cash acquired

 

 

(63

)

 

 

(33

)

 

 

(121

)

 

 

(1,920

)

Proceeds from the sale of hospitals

 

 

 

 

 

9,084

 

 

 

39,170

 

 

 

29,240

 

Other investing activities, net

 

 

10

 

 

 

 

 

 

259

 

 

 

 

Net cash provided by (used in) investing activities

 

 

(10,112

)

 

 

(5,479

)

 

 

2,886

 

 

 

(29,521

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings under revolving credit facilities

 

 

121,000