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Quorum Health Corporation Announces Second Quarter 2018 Financial and Operating Results

August 8, 2018

BRENTWOOD, Tenn.--(BUSINESS WIRE)--Aug 8, 2018--Quorum Health Corporation (NYSE: QHC) (the “Company”) today announced its financial and operating results for the three and six months ended June 30, 2018.

Second Quarter 2018 Financial and Operating Results

The Company’s financial and operating results for the three months ended June 30, 2018 reflect the following:

Net operating revenues decreased $57.5 million to $472.6 million, compared to $530.1 million for the same period in 2017. The $57.5 million decline in the net operating revenues for the quarter was primarily attributable to a $73.1 million decrease from the hospitals sold or closed subsequent to the prior period, partially offset by a $7.9 million increase related to revenues from the California Hospital Quality Assurance Fee (“HQAF”) program, of which there were no comparable revenues in the same 2017 period. Excluding the divested hospitals of $73.1 million and the California HQAF revenues of $7.9 million, net operating revenues increased $7.7 million in the three months ended June 30, 2018 compared to the same period in 2017, primarily due to an improved payor mix and an increase in rate and acuity. Net income (loss) was $(25.9) million compared to $(30.6) million for the same period in 2017. The net loss for the three months ended June 30, 2018 was impacted by $3.3 million of costs related to the closure of one hospital and $4.1 million in severance related to headcount reductions. Net loss attributable to Quorum Health Corporation was $(26.6) million, or $(0.92) per share, compared to $(30.6) million, or $(1.09) per share, for the same period in 2017. On a same-facility basis, as defined in footnote (k), admissions decreased 3.0%, adjusted admissions decreased 1.8% and net operating revenues per adjusted admission increased 5.3% compared to the same period in 2017. Adjusted EBITDA was $36.3 million compared to $34.4 million for the same period in 2017. Adjusted EBITDA, Adjusted for Divestitures, which is further adjusted to exclude the effect of EBITDA of hospitals either sold or closed as of June 30, 2018, was $39.6 million compared to $43.4 million for the same period in 2017.

The Company’s financial and operating results for the six months ended June 30, 2018 reflect the following:

Net operating revenues decreased $98.3 million to $959.5 million, compared to $1,057.8 million for the same period in 2017. The $98.3 million decline in the net operating revenues for the six months was primarily attributable to a $133.7 million decrease from the divested hospitals, partially offset by a $15.8 million increase related to revenues from the HQAF program as discussed above. Excluding the divested hospitals of $133.7 million and the California HQAF revenues of $15.8 million, net operating revenues increased $19.6 million in the six months ended June 30, 2018 compared to the same period in 2017, primarily due to favorable payor mix and an increase in rate and acuity. Net income (loss) was $(124.4) million compared to $(57.8) million for the same period in 2017. The net loss for the six months ended June 30, 2018 was impacted by $39.8 million of impairment of long-lived assets, $17.1 million of costs related to the closure of one hospital, $8.1 million of net losses on the sale of two hospitals and $6.0 million in severance related to headcount reductions. Net loss attributable to Quorum Health Corporation was $(125.6) million, or $(4.37) per share, compared to $(58.2) million, or $(2.08) per share, for the same period in 2017. On a same-facility basis, admissions decreased 1.3%, adjusted admissions decreased 0.4% and net operating revenues per adjusted admission increased 4.3% compared to the same period in 2017. Adjusted EBITDA was $54.7 million compared to $60.6 million for the same period in 2017. Adjusted EBITDA, Adjusted for Divestitures, which is further adjusted to exclude the effect of EBITDA of hospitals either sold or closed as of June 30, 2018, was $66.4 million compared to $74.3 million for the same period in 2017.

Divestiture Program

The Company also provided an update on its divestiture program. To date, the Company has received $84.8 million in total net proceeds from divestitures, which includes $8.0 million of proceeds held in escrow, and used $74.9 million to pay down the Company’s term loan under its Senior Credit Facility. The Company remains focused on completing divestitures with additional proceeds of $165 million to $215 million by the end of 2019. As of August 8, 2018, the Company has signed a definitive agreement to divest one facility and has signed letters of intent (“LOIs”) to divest six facilities. Although the definitive agreement is subject to customary approvals and closing conditions and the LOIs are not definitive, and no assurance can be provided as to the likelihood or timing of these turning into completed transactions, the signed definitive agreement and signed LOIs represent potential net proceeds to the Company of approximately $115 million.

Financial Outlook

The Company’s guidance for Adjusted EBITDA, Adjusted for Divestitures for the year ending December 31, 2018 remains unchanged from the Company’s first quarter release at a range of $145 million to $165 million. The Company has updated its financial outlook by reducing its guidance for net operating revenues for the year ending December 31, 2018 from a range of $1.925 billion to $1.975 billion to a range of $1.875 billion to $1.925 billion. This reduction is primarily a result of the Company’s continued efforts to execute on its divestiture strategy as well as efforts to improve its operating margins by discontinuing underperforming service lines, managed Medicaid contracts and provider relationships.

These projections are based on the Company’s historical operating performance, current economic, demographic and regulatory trends and other assumptions that the Company believes are reasonable at this time. The 2018 guidance should be considered in conjunction with the assumptions included herein and in the Company’s first quarter press release. The Company will update its guidance for any divestitures that are completed during the remainder of 2018. See “Forward-Looking Statements” below for a list of factors that could affect the future results of the Company or the healthcare industry generally.

A reconciliation of the Company’s projected 2018 Adjusted EBITDA, Adjusted for Divestitures, a forward-looking non-GAAP financial measure, to net income (loss), the most directly comparable U.S. GAAP financial measure, is omitted from this press release because the Company is unable to provide such reconciliation without unreasonable effort. This inability results from the inherent difficulty in forecasting generally and in quantifying certain projected amounts that are necessary for such reconciliation. In particular, sufficient information is not available to calculate certain items required for such reconciliation without unreasonable effort, including interest expense, provision for (benefit from) income taxes and other adjustments that would be necessary to prepare a forward-looking statement of net income (loss) in accordance with U.S. GAAP. For the same reasons, the Company is unable to address the probable significance of the unavailable information.

About Quorum Health Corporation

The principal business of Quorum Health Corporation is to provide hospital and outpatient healthcare services in its markets across the United States. As of June 30, 2018, the Company owned or leased 28 hospitals in rural and mid-sized markets located across 14 states and licensed for 2,649 beds. Through Quorum Health Resources LLC, a wholly-owned subsidiary, the Company provides hospital management advisory and healthcare consulting services to non-affiliated hospitals across the country. Over 95% of the Company’s net operating revenues are attributable to its hospital operations business.

The Company’s headquarters are located in Brentwood, Tennessee, a suburb south of Nashville. Shares in Quorum Health Corporation are traded on the NYSE under the symbol “QHC.” More information about the Company can be found on its website at www.quorumhealth.com.

Quorum Health Corporation will hold a conference call on Thursday, August 9, 2018, at 10:00 a.m. Central time, 11:00 a.m. Eastern, to review operating and financial results for the three and six months ended June 30, 2018. Investors will have the opportunity to listen to a live internet broadcast of the conference call by clicking on the Investor Relations link of the Company’s website at www.quorumhealth.com. To listen to the live call, please go to the website at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call and will continue to be available for approximately 30 days. Copies of this press release and the Company’s Current Report on Form 8-K (including this press release) are available on the Company’s website at www.quorumhealth.com.

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