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EX-32.2 - EX-32.2 - Quorum Health Corpqhc-ex322_6.htm
EX-32.1 - EX-32.1 - Quorum Health Corpqhc-ex321_9.htm
EX-31.2 - EX-31.2 - Quorum Health Corpqhc-ex312_8.htm
EX-31.1 - EX-31.1 - Quorum Health Corpqhc-ex311_10.htm
EX-2.1 - EX-2.1 - Quorum Health Corpqhc-ex21_218.htm

Sep2

 

 

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, 2016



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 Number)

 

 

 

1573 Mallory Lane

Brentwood, Tennessee

 

37027

(Address of Principal Executive Offices)

 

(Zip Code)

615-221-1400

(Registrant’s Telephone Number)

 

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 and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes       No  

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

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

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 7, 2016, there were 29,485,075 shares outstanding of the registrant’s Common Stock, $0.0001 par value per share.

 

 


QUORUM HEALTH CORPORATION

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

 

39

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

67

 

 

Item 4.

 

Controls and Procedures

 

67

PART II – OTHER INFORMATION

 

 

 

 

Item 1.

 

Legal Proceedings

 

69

 

 

Item 1A.

 

Risk Factors

 

71

 

 

Item 6.

 

Exhibits

 

71

Signatures

 

72

Index to Exhibits

 

73

 

 

 

 


PART I – FINANCIAL INFORMATION

Item 1.Financial Statements

 

QUORUM HEALTH CORPORATION

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME (LOSS)

(Unaudited)

(In Thousands, Except Per Share Amounts and Shares)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues, net of contractual allowances and discounts

 

$

612,551

 

 

$

605,886

 

 

$

1,825,198

 

 

$

1,820,994

 

Provision for bad debts

 

 

68,612

 

 

 

62,743

 

 

 

201,971

 

 

 

191,882

 

Net operating revenues

 

 

543,939

 

 

 

543,143

 

 

 

1,623,227

 

 

 

1,629,112

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

266,812

 

 

 

252,168

 

 

 

788,560

 

 

 

766,046

 

Supplies

 

 

64,013

 

 

 

63,277

 

 

 

191,810

 

 

 

189,492

 

Other operating expenses

 

 

154,878

 

 

 

161,186

 

 

 

482,526

 

 

 

472,237

 

Depreciation and amortization

 

 

28,234

 

 

 

31,488

 

 

 

90,854

 

 

 

95,327

 

Rent

 

 

12,823

 

 

 

12,338

 

 

 

37,917

 

 

 

36,840

 

Electronic health records incentives earned

 

 

(1,336

)

 

 

(6,121

)

 

 

(9,791

)

 

 

(21,452

)

Legal and settlement costs

 

 

488

 

 

 

 

 

 

6,176

 

 

 

 

Impairment of long-lived assets and goodwill

 

 

 

 

 

 

 

 

250,400

 

 

 

 

Transaction costs related to the spin-off

 

 

532

 

 

 

9,054

 

 

 

5,444

 

 

 

9,054

 

Total operating costs and expenses

 

 

526,444

 

 

 

523,390

 

 

 

1,843,896

 

 

 

1,547,544

 

Income (loss) from operations

 

 

17,495

 

 

 

19,753

 

 

 

(220,669

)

 

 

81,568

 

Interest expense, net

 

 

28,028

 

 

 

24,549

 

 

 

84,756

 

 

 

74,179

 

Income (loss) before income taxes

 

 

(10,533

)

 

 

(4,796

)

 

 

(305,425

)

 

 

7,389

 

Provision for (benefit from) income taxes

 

 

(4,081

)

 

 

(721

)

 

 

(50,320

)

 

 

3,435

 

Net income (loss)

 

 

(6,452

)

 

 

(4,075

)

 

 

(255,105

)

 

 

3,954

 

Less: Net income attributable to noncontrolling interests

 

 

507

 

 

 

1,638

 

 

 

1,917

 

 

 

2,038

 

Net income (loss) attributable to Quorum Health Corporation

 

$

(6,959

)

 

$

(5,713

)

 

$

(257,022

)

 

$

1,916

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.24

)

 

$

(0.20

)

 

$

(9.05

)

 

$

0.07

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

28,413,532

 

 

 

28,412,054

 

 

 

28,412,552

 

 

 

28,412,054

 

 

See accompanying notes

1


QUORUM HEALTH CORPORATION

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In Thousands)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(6,452

)

 

$

(4,075

)

 

$

(255,105

)

 

$

3,954

 

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

 

 

100

 

 

 

 

 

 

(3,710

)

 

 

 

Comprehensive income (loss)

 

 

(6,352

)

 

 

(4,075

)

 

 

(258,815

)

 

 

3,954

 

Less:  Comprehensive income attributable to noncontrolling interests

 

 

507

 

 

 

1,638

 

 

 

1,917

 

 

 

2,038

 

Comprehensive income (loss) attributable to Quorum Health Corporation

 

$

(6,859

)

 

$

(5,713

)

 

$

(260,732

)

 

$

1,916

 

 

See accompanying notes

2


QUORUM HEALTH CORPORATION

CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS

(Unaudited)

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

 

 

 

September 30,

 

 

December 31,

 

 

 

2016

 

 

2015

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

25,078

 

 

$

1,106

 

Patient accounts receivable, net of allowance for doubtful accounts of $342,263 and $346,507 at September 30, 2016 and December 31, 2015, respectively

 

 

407,687

 

 

 

390,890

 

Inventories

 

 

58,045

 

 

 

60,542

 

Prepaid expenses

 

 

25,261

 

 

 

16,030

 

Due from third-party payors

 

 

127,073

 

 

 

110,806

 

Current assets of hospitals held for sale

 

 

4,090

 

 

 

 

Other current assets

 

 

65,647

 

 

 

59,011

 

Total current assets

 

 

712,881

 

 

 

638,385

 

Property and equipment, at cost

 

 

1,571,275

 

 

 

1,603,653

 

Less:  Accumulated depreciation and amortization

 

 

(750,932

)

 

 

(723,404

)

Total property and equipment, net

 

 

820,343

 

 

 

880,249

 

Goodwill

 

 

336,812

 

 

 

541,704

 

Intangible assets, net

 

 

106,306

 

 

 

129,250

 

Long-term assets of hospitals held for sale

 

 

22,230

 

 

 

 

Other long-term assets

 

 

100,628

 

 

 

105,268

 

Total assets

 

$

2,099,200

 

 

$

2,294,856

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

10,493

 

 

$

7,915

 

Accounts payable

 

 

147,126

 

 

 

138,483

 

Accrued liabilities:

 

 

 

 

 

 

 

 

Accrued salaries and benefits

 

 

100,806

 

 

 

82,620

 

Accrued interest

 

 

31,046

 

 

 

 

Due to third-party payors

 

 

45,102

 

 

 

30,103

 

Current liabilities of hospitals held for sale

 

 

558

 

 

 

 

Other current liabilities

 

 

54,694

 

 

 

45,255

 

Total current liabilities

 

 

389,825

 

 

 

304,376

 

Long-term debt

 

 

1,241,301

 

 

 

15,500

 

Due to Parent, net

 

 

 

 

 

1,800,908

 

Deferred income tax liabilities, net

 

 

51,216

 

 

 

41,030

 

Other long-term liabilities

 

 

118,671

 

 

 

108,141

 

Total liabilities

 

 

1,801,013

 

 

 

2,269,955

 

Redeemable noncontrolling interests

 

 

7,754

 

 

 

8,958

 

Equity:

 

 

 

 

 

 

 

 

Quorum Health Corporation stockholders' equity:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Common stock, $0.0001 par value per share, 300,000,000 shares authorized; 29,486,215 shares issued and outstanding at September 30, 2016

 

 

3

 

 

 

 

Additional paid-in capital

 

 

523,168

 

 

 

 

Accumulated other comprehensive loss

 

 

(3,710

)

 

 

 

Accumulated deficit

 

 

(241,910

)

 

 

 

Total Quorum Health Corporation stockholders' equity

 

 

277,551

 

 

 

 

Parent's equity

 

 

 

 

 

3,184

 

Nonredeemable noncontrolling interests

 

 

12,882

 

 

 

12,759

 

Total equity

 

 

290,433

 

 

 

15,943

 

Total liabilities and equity

 

$

2,099,200

 

 

$

2,294,856

 

See accompanying notes

3


QUORUM HEALTH CORPORATION

CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF EQUITY

(Unaudited)

(In Thousands, Except Shares)

 

 

 

 

 

 

 

 

Quorum Health Corporation

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

Nonredeemable

 

 

 

 

 

 

 

Noncontrolling

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Parent's

 

 

Noncontrolling

 

 

Total

 

 

 

Interests

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

 

Interests

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2015

 

$

8,958

 

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

3,184

 

 

$

12,759

 

 

$

15,943

 

Comprehensive income (loss)

 

 

(729

)

 

 

 

 

 

 

 

 

 

 

 

 

(3,710

)

 

 

(241,910

)

 

 

(15,112

)

 

 

2,646

 

 

 

(258,086

)

Transfers to Parent (prior to Spin-off Transaction)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,112

 

 

 

 

 

 

15,112

 

Changes in equity on Spin-off Transaction date

 

 

 

 

 

 

28,412,054

 

 

 

3

 

 

 

518,518

 

 

 

 

 

 

 

 

 

(3,137

)

 

 

 

 

 

515,384

 

Stock-based compensation expense

 

 

 

 

 

 

1,075,737

 

 

 

 

 

 

4,678

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,678

 

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

 

 

 

 

 

 

(1,576

)

 

 

 

 

 

(12

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12

)

Cash distributions to noncontrolling investors

 

 

(317

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,511

)

 

 

(2,511

)

Purchases of shares from noncontrolling investors

 

 

(108

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19

 

 

 

(12

)

 

 

7

 

Adjustments to redemption value of redeemable noncontrolling interests investments

 

 

82

 

 

 

 

 

 

 

 

 

 

(16

)

 

 

 

 

 

 

 

 

(66

)

 

 

 

 

 

(82

)

Reclassifications of noncontrolling interests investments

 

 

(132

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2016

 

$

7,754

 

 

 

 

29,486,215

 

 

$

3

 

 

$

523,168

 

 

$

(3,710

)

 

$

(241,910

)

 

$

 

 

$

12,882

 

 

$

290,433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes

4


QUORUM HEALTH CORPORATION

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(Unaudited)

(In Thousands)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(6,452

)

 

$

(4,075

)

 

$

(255,105

)

 

$

3,954

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

28,234

 

 

 

31,488

 

 

 

90,854

 

 

 

95,327

 

Non-cash interest expense

 

 

1,257

 

 

 

 

 

 

1,986

 

 

 

 

Benefit from deferred income taxes

 

 

(4,081

)

 

 

 

 

 

(51,532

)

 

 

 

Stock-based compensation expense

 

 

2,781

 

 

 

 

 

 

4,678

 

 

 

 

Impairment of long-lived assets and goodwill

 

 

 

 

 

 

 

 

250,400

 

 

 

 

Other non-cash expense (income), net

 

 

54

 

 

 

705

 

 

 

(533

)

 

 

(803

)

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

 

 

11,208

 

 

 

 

 

 

28,099

 

 

 

 

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

 

 

 

 

 

 

 

 

4,642

 

 

 

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Patient accounts receivable, net

 

 

(9,586

)

 

 

(23,639

)

 

 

(16,797

)

 

 

(6,809

)

Due from and due to third-party payors, net

 

 

(7,528

)

 

 

(14,365

)

 

 

(2,173

)

 

 

(18,295

)

Inventories, prepaid expenses and other current assets

 

 

(14,689

)

 

 

12,794

 

 

 

(12,412

)

 

 

20,379

 

Accounts payable and accrued liabilities

 

 

(2,505

)

 

 

(20,540

)

 

 

26,624

 

 

 

(88,764

)

Long-term assets and liabilities, net

 

 

880

 

 

 

371

 

 

 

(7,965

)

 

 

446

 

Net cash provided by (used in) operating activities

 

 

(427

)

 

 

(17,261

)

 

 

60,766

 

 

 

5,435

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures for property and equipment

 

 

(23,241

)

 

 

(13,351

)

 

 

(56,448

)

 

 

(33,761

)

Capital expenditures for software

 

 

(1,454

)

 

 

(2,802

)

 

 

(5,258

)

 

 

(5,463

)

Acquisitions, net of cash acquired

 

 

(26

)

 

 

(4,854

)

 

 

(26

)

 

 

(6,866

)

Proceeds from sale of property and equipment

 

 

217

 

 

 

 

 

 

1,075

 

 

 

3,014

 

Other investing activities

 

 

(563

)

 

 

(70

)

 

 

(19

)

 

 

(3,359

)

Net cash used in investing activities

 

 

(25,067

)

 

 

(21,077

)

 

 

(60,676

)

 

 

(46,435

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings of long-term debt

 

 

36

 

 

 

150

 

 

 

1,255,556

 

 

 

285

 

Repayments of long-term debt

 

 

(3,165

)

 

 

(259

)

 

 

(7,442

)

 

 

(995

)

Increase in Due to Parent, net

 

 

 

 

 

37,488

 

 

 

25,183

 

 

 

46,749

 

Increase (decrease) in receivables facility, net

 

 

 

 

 

951

 

 

 

 

 

 

(4,236

)

Payments of debt issuance costs

 

 

(1,136

)

 

 

 

 

 

(29,139

)

 

 

 

Cash paid to Parent in Spin-off Transaction

 

 

 

 

 

 

 

 

(1,217,336

)

 

 

 

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

 

 

(39

)

 

 

 

 

 

(12

)

 

 

 

Cash distributions to noncontrolling investors

 

 

(181

)

 

 

(100

)

 

 

(2,828

)

 

 

(1,522

)

Purchases of shares from noncontrolling investors

 

 

(88

)

 

 

(214

)

 

 

(100

)

 

 

(936

)

Net cash provided by (used in) financing activities

 

 

(4,573

)

 

 

38,016

 

 

 

23,882

 

 

 

39,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(30,067

)

 

 

(322

)

 

 

23,972

 

 

 

(1,655

)

Cash and cash equivalents at beginning of period

 

 

55,145

 

 

 

1,226