Investor Contact:  

Michael J. Culotta

Executive Vice President

and Chief Financial Officer

(615) 221-3502

Three Months Ended June 30,

Six Months Ended June 30,

2016

2015

2016

2015

Net operating revenues

$

529,737

$

538,352

$

1,079,288

$

1,085,969

Income (loss) from operations

(259,255

)

27,484

(238,164

)

61,815

Net income (loss) attributable to Quorum Health Corporation

(245,061

)

1,430

(250,063

)

7,629

Basic and diluted earnings (loss) per common share attributable to Quorum Health Corporation stockholders

$

(8.63

)

$

0.05

$

(8.80

)

$

0.27

Basic and diluted weighted-average number of common shares outstanding ^(a)

28,412,720

28,412,054

28,412,389

28,412,054

Net cash provided by operating activities

$

36,796

$

56,346

$

61,193

$

22,696

Adjusted EBITDA ^(b)

29,232

59,625

85,456

125,654

Three Months Ended June 30,

2016

2015

% of

% of

Amount

Revenues

Amount

Revenues

Operating revenues, net of contractual allowances and discounts

$

598,163

$

608,636

Provision for bad debts

68,426

70,284

Net operating revenues

529,737

100.0

%

538,352

100.0

%

Operating costs and expenses:

Salaries and benefits

264,886

50.0

%

253,812

47.1

%

Supplies

64,136

12.1

%

61,663

11.5

%

Other operating expenses

163,185

30.8

%

158,811

29.5

%

Depreciation and amortization

31,463

5.9

%

32,141

6.0

%

Rent

12,545

2.4

%

12,065

2.2

%

Electronic health records incentives earned

(4,247

)

-0.8

%

(7,624

)

-1.4

%

Legal and settlement costs

5,447

1.0

%

-

0.0

%

Impairment of long-lived assets and goodwill

250,400

47.3

%

-

0.0

%

Transaction costs related to the spin-off

1,177

0.2

%

-

0.0

%

Total operating costs and expenses

788,992

148.9

%

510,868

94.9

%

Income (loss) from operations

(259,255

)

-48.9

%

27,484

5.1

%

Interest expense, net

29,276

5.6

%

23,828

4.4

%

Income (loss) before income taxes

(288,531

)

-54.5

%

3,656

0.7

%

Provision for (benefit from) income taxes

(44,565

)

-8.4

%

1,451

0.3

%

Net income (loss)

(243,966

)

-46.1

%

2,205

0.4

%

Less: Net income attributable to noncontrolling interests

1,095

0.2

%

775

0.1

%

Net income (loss) attributable to Quorum Health Corporation

$

(245,061

)

-46.3

%

$

1,430

0.3

%

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

Basic and diluted

$

(8.63

)

$

0.05

Weighted-average common shares outstanding:

Basic and diluted

28,412,720

28,412,054

Six Months Ended June 30,

2016

2015

% of

% of

Amount

Revenues

Amount

Revenues

Operating revenues, net of contractual allowances and discounts

$

1,212,647

$

1,215,108

Provision for bad debts

133,359

129,139

Net operating revenues

1,079,288

100.0

%

1,085,969

100.0

%

Operating costs and expenses:

Salaries and benefits

521,748

48.3

%

513,878

47.3

%

Supplies

127,797

11.8

%

126,215

11.6

%

Other operating expenses

327,648

30.5

%

311,051

28.6

%

Depreciation and amortization

62,620

5.8

%

63,839

5.9

%

Rent

25,094

2.3

%

24,502

2.3

%

Electronic health records incentives earned

(8,455

)

-0.8

%

(15,331

)

-1.4

%

Legal and settlement costs

5,688

0.5

%

-

0.0

%

Impairment of long-lived assets and goodwill

250,400

23.2

%

-

0.0

%

Transaction costs related to the spin-off

4,912

0.5

%

-

0.0

%

Total operating costs and expenses

1,317,452

122.1

%

1,024,154

94.3

%

Income (loss) from operations

(238,164

)

-22.1

%

61,815

5.7

%

Interest expense, net

56,728

5.2

%

49,630

-4.6

%

Income (loss) before income taxes

(294,892

)

-27.3

%

12,185

1.1

%

Provision for (benefit from) income taxes

(46,239

)

-4.3

%

4,156

0.4

%

Net income (loss)

(248,653

)

-23.0

%

8,029

0.7

%

Less: Net income attributable to noncontrolling interests

1,410

0.2

%

400

0.0

%

Net income (loss) attributable to Quorum Health Corporation

$

(250,063

)

-23.2

%

$

7,629

0.7

%

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

Basic and diluted

$

(8.80

)

$

0.27

Weighted-average common shares outstanding:

Basic and diluted

28,412,389

28,412,054

Three Months Ended June 30,

2016

2015

Variance

% Variance

Number of licensed beds at end of period ^(c)

3,579

3,592

(13

)

-0.4

%

Admissions ^(d)

23,618

24,442

(824

)

-3.4

%

Adjusted Admissions ^(e)

58,942

60,444

(1,502

)

-2.5

%

Patient days during period ^(f)

94,899

96,847

(1,948

)

-2.0

%

Average length of stay (days) ^(g)

4.0

4.0

Medicare case mix index ^(h)

1.38

1.35

0.03

2.2

%

Six Months Ended June 30,

2016

2015

Variance

% Variance

Number of licensed beds at end of period ^(c)

3,579

3,592

(13

)

-0.4

%

Admissions ^(d)

48,610

49,990

(1,380

)

-2.8

%

Adjusted Admissions ^(e)

118,746

119,760

(1,014

)

-0.8

%

Patient days during period ^(f)

195,600

201,357

(5,757

)

-2.9

%

Average length of stay (days) ^(g)

4.0

4.0

Medicare case mix index ^(h)

1.37

1.35

0.02

1.5

%

June 30,

December 31,

2016

2015

ASSETS

Current assets:

Cash and cash equivalents

$

55,145

$

1,106

Patient accounts receivable, net of allowance for doubtful accounts of $337,253 and $346,507 at June 30, 2016 and December 31, 2015, respectively

394,120

390,890

Inventories

57,059

60,542

Prepaid expenses

23,306

16,030

Due from third-party payors

116,765

110,806

Current assets of hospitals held for sale

7,918

—

Other current assets

49,506

59,011

Total current assets

703,819

638,385

Property and equipment, at cost

1,549,751

1,603,653

Less:  Accumulated depreciation and amortization

(732,719

)

(723,404

)

Total property and equipment, net

817,032

880,249

Goodwill

336,790

541,704

Intangible assets, net

109,444

129,250

Long-term assets of hospitals held for sale

21,225

—

Other long-term assets

114,049

105,268

Total assets

$

2,102,359

$

2,294,856

LIABILITIES AND EQUITY

Current liabilities:

Current maturities of long-term debt

$

16,271

$

7,915

Accounts payable

148,627

138,483

Accrued liabilities:

Accrued salaries and benefits

105,737

82,620

Accrued interest

19,283

—

Due to third-party payors

41,214

30,103

Current liabilities of hospitals held for sale

2,256

—

Other current liabilities

48,129

45,255

Total current liabilities

381,517

304,376

Long-term debt

1,236,659

15,500

Due to Parent, net

—

1,800,908

Deferred income tax liabilities, net

55,297

41,030

Other long-term liabilities

126,875

108,141

Total liabilities

1,800,348

2,269,955

Redeemable noncontrolling interests

8,360

8,958

Equity:

Quorum Health Corporation stockholders' equity:

Preferred stock, $0.0001 par value per share, 100,000,000 shares authorized, none issued at June 30, 2016

—

—

Common stock, $0.0001 par value per share, 300,000,000 shares authorized, 29,489,247 shares issued and outstanding at June 30, 2016

3

—

Additional paid-in capital

520,336

—

Accumulated other comprehensive loss

(3,810

)

—

Accumulated deficit

(234,951

)

—

Total Quorum Health Corporation stockholders' equity

281,578

—

Parent's equity

—

3,184

Nonredeemable noncontrolling interests

12,073

12,759

Total equity

293,651

15,943

Total liabilities and equity

$

2,102,359

$

2,294,856

Three Months Ended June 30,

Six Months Ended June 30,

2016

2015

2016

2015

Cash flows from operating activities:

Net income (loss)

$

(243,966

)

$

2,205

$

(248,653

)

$

8,029

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

Depreciation and amortization

31,463

32,141

62,620

63,839

Non-cash interest expense

729

-

729

-

Benefit from deferred income taxes

(47,451

)

-

(47,451

)

-

Stock-based compensation expense

1,897

-

1,897

-

Impairment of long-lived assets and goodwill

250,400

-

250,400

-

Non-cash changes in self-insurance reserves

5,418

-

5,418

-

Other non-cash income, net

(33

)

(1,137

)

(587

)

(1,508

)

Changes in operating assets and liabilities, net of acquisitions:

Patient accounts receivable, net

4,911

17,642

(7,211

)

16,830

Due to and due from third-party payors, net

(4,745

)

17,218

5,355

1,748

Inventories, prepaid expenses and other current assets

5,103

4,127

2,277

7,585

Accounts payable and accrued liabilities

33,234

(16,073

)

36,074

(73,902

)

Long-term assets and liabilities, net

(164

)

223

325

75

Net cash provided by operating activities

36,796

56,346

61,193

22,696

Cash flows from investing activities:

Capital expenditures for property and equipment

(20,367

)

(10,471

)

(33,207

)

(20,410

)

Capital expenditures for software

(1,278

)

(1,664

)

(3,804

)

(2,661

)

Acquisitions, net of cash acquired

-

(2,012

)

-

(2,012

)

Proceeds from sales of property and equipment

-

2,917

858

3,017

Other investing activities

492

(1,867

)

544

(3,292

)

Net cash used in investing activities

(21,153

)

(13,097

)

(35,609

)

(25,358

)

Cash flows from financing activities:

Borrowings of long-term debt

1,255,500

75

1,255,520

135

Repayments of long-term debt

(3,188

)

(340

)

(4,277

)

(736

)

Increase (decrease) in Due to Parent, net

31,669

(42,939

)

25,183

9,261

Increase (decrease) in receivables facility, net

-

(2,854

)

-

(5,187

)

Payments of debt issuance costs

(28,003

)

-

(28,003

)

-

Cash paid to Parent in spin-off transaction

(1,217,336

)

-

(1,217,336

)

-

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

27

-

27

-

Cash distributions to noncontrolling investors

(163

)

(1,292

)

(2,647

)

(1,422

)

Purchases of shares from noncontrolling investors

-

(722

)

(12

)

(722

)

Net cash provided by (used in) financing activities

38,506

(48,072

)

28,455

1,329

Net change in cash and cash equivalents

54,149

(4,823

)

54,039

(1,333

)

Cash and cash equivalents at beginning of period

996

6,049

1,106

2,559

Cash and cash equivalents at end of period

$

55,145

$

1,226

$

55,145

$

1,226

Supplemental cash flow information:

Interest payments, net

$

8,894

$

23,828

$

36,347

$

49,630

Income tax payments, net of refunds (after spin-off transaction)

34

-

34

-

^(a)

For comparative purposes, the Company used 28,412,054 shares as the weighted-average shares to calculate basic and diluted EPS for periods prior to the Spin-off Transaction. This number of shares represents the number of shares issued on the Spin-off Transaction date.  Due to the net loss attributable to Quorum Health Corporation in the three and six months ended June 30, 2016, no incremental shares are included in diluted earnings per share for these periods because the effect of the 460,661 dilutive shares would be anti-dilutive. 

^(b)

EBITDA is a non-GAAP financial measure which consists of net income attributable to Quorum Health Corporation before interest, income taxes, depreciation and amortization.  Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to exclude the impact of net income (loss) attributable to noncontrolling interests, expenses related to certain legal settlements and related costs, impairment of long-lived assets and goodwill, and transaction costs related to the spin-off. The Company uses Adjusted EBITDA as a measure of liquidity. The Company has also presented Adjusted EBITDA in this press release because it believes it provides investors with additional information about the Company’s ability to incur and service debt and make capital expenditures.

Three Months Ended June 30,

Six Months Ended June 30,

2016

2015

2016

2015

Net income (loss)

(243,966

)

2,205

(248,653

)

8,029

Interest expense, net

29,276

23,828

56,728

49,630

Provision (benefit) for income taxes

(44,565

)

1,451

(46,239

)

4,156

Depreciation and amortization

31,463

32,141

62,620

63,839

EBITDA

(227,792

)

59,625

(175,544

)

125,654

Legal and settlement costs

5,447

-

5,688

-

Impairment of long-lived assets and goodwill

250,400

-

250,400

-

Transaction costs related to spin-off

1,177

-

4,912

-

Adjusted EBITDA

$

29,232

$

59,625

$

85,456

$

125,654

Adjusted EBITDA:

$

29,232

$

59,625

$

85,456

$

125,654

Stock-based compensation expense ⁽ⁱ⁾

1,897

-

1,897

-

Non-cash changes in insurance reserves for claims ^(j)

5,418

-

5,418

-

Other non-cash income, net

(33

)

(1,137

)

(587

)

(1,508

)

Interest settled in Due to Parent, net

(9,264

)

(23,828

)

(36,716

)

(49,630

)

Income taxes settled in Due to Parent, net

(2,886

)

(1,451

)

(1,212

)

(4,156

)

Accrued interest expense on term loan facility and senior notes

(19,283

)

-

(19,283

)

-

Legal and settlement costs

(5,447

)

-

(5,688

)

-

Transaction costs related to the spin-off

(1,177

)

-

(4,912

)

-

Changes in operating assets and liabilities, net of acquisitions

38,339

23,137

36,820

(47,664

)

Net cash provided by operating activities

$

36,796

$

56,346

$

61,193

$

22,696

^(c)

Licensed beds are the number of beds for which the appropriate state agency licenses a facility, regardless of whether the beds are actually available for patient use.

^(d)

Admissions represent the number of patients admitted for inpatient services.

^(e)

Adjusted Admissions is computed by multiplying admissions by gross patient revenues and then dividing that number by gross inpatient revenues.

^(f)

A patient day represents the total count of admitted inpatients as of midnight.

^(g)

Average length of stay in days is calculated by dividing the number of patient days, as defined above, by the number of Admissions in the period.

^(h)

Medicare case mix index is a relative value assigned to a diagnosis-related group of inpatients 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.

⁽ⁱ⁾

Following the Spin-off Transaction, the Company began recording stock-based compensation expense related to the vesting of QHC restricted stock awards issued to QHC employees on the Spin-off Transaction date, CHS restricted stock awards held by QHC employees and QHC restricted stock awards granted by the Company on May 3, 2016.  Prior to the Spin-off Transaction, an estimated portion of CHS’ stock compensation expense was allocated to QHC through the corporate management fee from CHS, and was not included as a non-cash add-back to net cash provided by operating activities.  The estimated costs included in corporate management fees charged by CHS were $0.6 million and $1.9 million for the three months ended June 30, 2016 and 2015, respectively, and $2.3 million and $3.8 million for the six months ended June 30, 2016 and 2015, respectively.  

^(j)

Prior to the Spin-off Transaction, CHS provided professional and general liability insurance and workers’ compensation insurance to QHC and indemnified QHC from losses under these insurance arrangements related to its hospital operations business. The liabilities for claims related to QHC’s hospital operations business were determined based on an actuarial study of QHC’s operations and historical claims experience at its hospitals.  Corresponding receivables from CHS were established to reflect the indemnification by CHS for each of these liabilities for claims that related to events and circumstances that occurred prior to the Spin-off Transaction date.  

·

general economic and business conditions, both nationally and in the regions in which the Company operates;

·

implementation, effect of and changes to adopted and potential federal and state healthcare reform legislation and other federal, state or local laws or regulations affecting the healthcare industry;

·

the extent to which states support increases, decreases or other changes in Medicaid programs, implement healthcare exchanges or alter the provision of healthcare to state residents through regulation or otherwise;

·

the success and long-term viability of health insurance exchanges, which may be impacted by whether a sufficient number of payors participate;

·

risks associated with our substantial indebtedness, leverage and debt service obligations;

·

demographic changes;

·

changes in, or the failure to comply with, governmental regulations;

·

potential adverse impact of known and unknown government investigations, audits, and federal and state false claims act litigation and other legal proceedings;

·

the ability, where appropriate, to enter into and maintain provider arrangements with payors and the terms of these arrangements, which may be further impacted by the increasing consolidation of health insurers and managed care companies;

·

changes in, or the failure to comply with contract terms with payors and changes in reimbursement rates paid by federal or state healthcare programs or commercial payors;

·

any potential impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets, or changes in the useful lives of other intangible assets;

·

changes in inpatient or outpatient Medicare and Medicaid payment levels;

·

the effects related to the continued implementation of the sequestration spending reductions and the potential for future deficit reduction legislation;

·

increases in the amount and risk of collectability of patient accounts receivable, including the impact of the implementation of ICD-10 and decreases in collectability which may result from, among other things, self-pay growth in states that have not expanded Medicaid and difficulties in recovering payments for which patients are responsible, including co-pays and deductibles;

·

the efforts of insurers, healthcare providers and others to contain healthcare costs, including the trend toward value-based purchasing;

·

the ongoing ability to demonstrate meaningful use of certified electronic health record technology and recognize income for the related Medicare or Medicaid incentive payments;

·

increases in wages as a result of inflation or competition for highly technical positions and rising supply and drug costs due to market pressure from pharmaceutical companies and new product releases;

·

liabilities and other claims asserted against us, including self-insured malpractice claims;

·

competition;

·

the Company’s ability to attract and retain, at reasonable employment costs, qualified personnel, key management, physicians, nurses and other healthcare workers;

·

trends toward treatment of patients in less acute or specialty healthcare settings, including surgery centers or specialty hospitals;

·

changes in medical or other technology;

·

changes in U.S. generally accepted accounting principles (“U.S. GAAP”);

·

the availability and terms of capital to fund additional acquisitions or replacement facilities or other capital expenditures;

·

the ability to successfully make acquisitions or complete divestitures and the timing thereof, the ability to complete any such acquisitions or divestitures on desired terms or at all, and the ability to realize the intended benefits from any such acquisitions or divestitures;

·

the ability to successfully integrate any acquired hospitals, or to recognize expected synergies from acquisitions;

·

the impact of seasonal severe weather conditions;

·

the ability to obtain adequate levels of general and professional liability insurance;

·

timeliness of reimbursement payments received under government programs;

·

effects related to outbreaks of infectious diseases;

·

the impact of external, criminal cyber-attacks or security breaches;

·

the anticipated and unanticipated effects that the completion of the Spin-off Transaction on April 29, 2016 had on the Company’s business and the ability to achieve the anticipated benefits of the spin-off;

·

the ability to manage effectively arrangements with third-party vendors for key non-clinical business functions and services;

·

the ability to maintain certain accreditations at the Company’s existing facilities and any future facilities that it may acquire;

·

the impact of certain outsourcing functions, and the ability of CHS, as provider of the Company’s billing and collections services pursuant to the transition services agreements, to timely and appropriately bill and collect;

·

an increase in costs associated with the increase in the number of employed physicians; and

·

the risk factors included in Part II, Item 1A of this quarterly report on Form 10-Q and those included in the Company’s other public filings with the Securities and Exchange Commission.