Community Health Systems, Inc. · NYSE:CYH
Community Health Systems — Merger or Acquisition (July 2013)
28 slides from Community Health Systems's merger presentation, Jul 30, 2013
Slide 1: Acquisition of Health Management Associates: A Compelling Opportunity for Value Creation
Acquisition of Health Management Associates: A Compelling Opportunity for Value Creation July 30, 2013 Exhibit 99.2 Acquisition of Health Management Associates: A Compelling Opportunity for Value Creation July 30, 2013
Slide 2: Forward-Looking Statements
1 Forward-Looking Statements Certain statements contained in this communication may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements regarding the expected timing of the co
Slide 3: Important Information and Where to Find It
2 Important Information and Where to Find It Community Health Systems, Inc. (“CHS”) intends to file with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 that will include a proxy statement of Health Management Associates, Inc. (“HMA”) and a prospectus of CHS r
Slide 4: Transaction Summary
3 Transaction Summary CHS is acquiring HMA for an aggregate purchase price of $7.6bn plus a contingent value right (“CVR”) of up to ~$270mm Total consideration: $13.78 per share before CVR Consideration mix: Cash: $10.50 per share Stock: 0.06942 shares of CHS stock per HMA share, or $3.28 based on C
Slide 5: Slide 5
Slide 6: HMA Revenue and EBITDA Performance
5 ($MM) Revenues EBITDA ($MM) HMA Revenue and EBITDA Performance Note: Revenues before adjustments for bad debt and do not reflect the accounting change. 0 1,500 3,000 4,500 6,000 7,500 2008 2009 2010 2011 2012 $4,302 $4,536 $5,092 $5,804 $6,753 0 250 500 750 1,000 2008 2009 2010 2011 2012 $623 $678
Slide 7: CHS Has Successfully Grown the Company
6 Revenues EBITDA ** ($MM) CHS Has Successfully Grown the Company ** See the Unaudited Supplemental Information contained in this presentation for a definition of EBITDA and a reconciliation of Adjusted EBITDA, as defined, to our net cash provided by operating activities as derived directly from our
Slide 8: Combined Company
7 Combined Company Note: Revenues based on twelve months ended 6/30/13. ($ in millions) CHS Pro Forma HMA Revenues $13,037 $18,905 Hospitals 135 206 States 29 29 Licensed Beds 20,176 31,241 11,065 71 15 $5,868 Combined Company
Slide 9: HMA has an Attractive Portfolio of Hospitals
8 HMA has an Attractive Portfolio of Hospitals Cardiology / Respiratory General Practices Oncology Orthopedic Renal Surgery Women's Health Hospitals = 71 Clinics = 472 Behavioral Health Neurology Neurosurgery Others Pediatrics Urgent Care 71 facilities with over 11,000 beds in 15 states Non-urban fo
Slide 10: Complementary Geographic Fit
9 Complementary Geographic Fit CHS HMA Overlapping States 2 8 9 2 3 2 2 1 3 6 11 17 2 3 1 3 1 1 1 4 6 3 9 9 1 3 1 17 4 IN 206 hospitals with over 31,000 beds across 29 states Note: Pro forma for recent HMA acquisition of Bayfront. Top 5 states Pro forma 2012 revenue Florida 12% Pennsylvania 11% Texa
Slide 11: Strong Market Presence and Diversification
10 Strong Market Presence and Diversification 13 states with revenue greater than $500 million Over 75% of CHS’ and 85% of HMA’s hospital revenues from these markets Florida 2 23 25 $2,320 12% Pennsylvania 17 3 20 2,095 11% Texas 17 1 18 1,780 9% Tennessee 11 9 20 1,475 8% Indiana 9 – 9 1,460 8% Ala
Slide 12: CHS Commitment to Quality
11 CHS Commitment to Quality Consistent improvement in inpatient core measures Significant reductions in readmissions and hospital acquired conditions 4Q 2008 4Q 2009 4Q 2010 4Q 2011 4Q 2012 Readmission Rates AMI down 23.0% HF down 20.1% Pneumonia down 17.8% Hospital Acquired Conditions Selected Mea
Slide 13: CHS Physicians – Trusted Partners in Care
12 CHS Physicians – Trusted Partners in Care employed physicians physician satisfaction rate employed physician practice locations • Physician Leadership Groups in affiliated hospitals • Annual Chiefs of Staff Meeting • Physician Advisory Boards in Selected Specialties physicians serving on affiliat
Slide 14: Cleveland Clinic National Strategic Alliance
13 Cleveland Clinic National Strategic Alliance • Vast National Hospital Network • Growing Physician Base • Recognized for Operational Excellence • Financial Strength and Success • Nationally Acclaimed Academic Medical Center • Aligned Physician Strategy • Sophisticated Clinical Expertise • Innovati
Slide 15: HMA Regional Clinical Affiliations and Strategic Partners
14 HMA Regional Clinical Affiliations and Strategic Partners Hospital Clinical Affiliations Selected Strategic Partners (Oklahoma) HMA Regional Clinical Affiliations and Strategic Partners
Slide 16: CHS Growth Through Acquisitions
15 CHS Growth Through Acquisitions * Excludes a small number of divestures. Select Divestitures Strategic Acquisitions Development of Integrated Networks 50+ Hospitals Added in Triad Hospitals Acquisition Larger, More Competitive Markets Significant Growth through Acquisitions IPO on the NYSE in 200
Slide 17: CHS has a History of Successfully Integrating Acquisitions
16 CHS has a History of Successfully Integrating Acquisitions ** See the Unaudited Supplemental Information contained in this presentation for a definition of EBITDA and a reconciliation of Adjusted EBITDA, as defined, to our net cash provided by operating activities as derived directly from our con
Slide 18: Recent Acquisitions Provide Opportunity to Improve Profitability and Drive Growth
17 Recent Acquisitions Provide Opportunity to Improve Profitability and Drive Growth CHS HMA Total Number of hospitals acquired 4 5 9 8 5 1 19 4 12 4 9 – 1 12 31 ~$1.4bn ~$1.3bn ~$2.7bn Recent Acquisitions Provide Opportunity to Improve Profitability and Drive Growth Revenue acquired since 2010 Tota
Slide 19: Improve Hospital Operations
18 Acquisitions Ancillary Services Pharmacy Laboratory Surgery Imaging Billing and Collections Compliance Community Cares Customer Service ER Management Executive Recruitment Facilities Management Financial Reporting and Control Group Purchasing Health Information Management Home Health Information
Slide 20: CHS Management Team
19 Name Title Years of Industry Experience Background Wayne T. Smith Chairman, President and CEO 30+ President and Chief Operating Officer at Humana W. Larry Cash Executive Vice President and CFO 30+ Vice President and Group CFO at HCA; Senior Vice President of Finance & Operations at Humana Rachel
Slide 21: CHS Management Significantly Improved Triad's Operating Results
20 CHS Management Significantly Improved Triad’s Operating Results Substantial corporate cost savings and purchasing synergies achieved First Calendar Year: $145mm Peak Synergies: Over $275mm Recruited ~2,400 physicians to Triad facilities since acquisition Focused CapEx on high ROI projects Delever
Slide 22: Attractive Financial Profile
21 Attractive Financial Profile Expect to realize $150mm – $180mm of annual synergies within 2.5 years Over 40% expected to be realized in year 1 Expect transaction to be break-even EPS in year 1; meaningfully accretive thereafter Excluding amortization of asset write-up (cash EPS), single-digit acc
Slide 23: Contingent Value Right (CVR)
22 Contingent Value Right (CVR) HMA shareholders may receive up to $1.00 per share in cash less 90% of any Losses post CHS’ deductible of $18mm Losses are defined as legal expenses, fees, fines and settlement amounts relating to HMA’s Existing Litigation with DOJ, SEC and related litigation and clai
Slide 24: Imperatives of Health Care Reform
23 Imperatives of Health Care Reform * Congressional Budget Office: July 2012 Commit to Quality Deliver Care More Efficiently Build Services and Infrastructure for Value- Based Care Clinical Integration & Collaboration 14 Million Newly Insured Patients in 2014 Imperatives of Health Care Reform *
Slide 25: Next Steps
24 Next Steps Regulatory approval process Hart-Scott-Rodino State and local approvals as required HMA shareholder vote 70% vote required HMA shareholders own ~60% of CHS’ stock today Break-up fees exist Prior integration experience will be helpful Closing expected by end of Q1 2014 Next Steps • – –
Slide 26: Transaction Enhances Shareholder Value
25 Transaction Enhances Shareholder Value Increased scale Complementary geographic fit Strong market presence and diversification Network opportunities Synergies Attractive financial profile History of successfully integrating acquisitions Transaction Enhances Shareholder Value • • • • • • •
Slide 27: Unaudited Supplemental Information
26 Unaudited Supplemental Information EBITDA consists of net income attributable to CHS before interest, income taxes, and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude discontinued operations, gain/loss from early extinguishment of debt and net income attributable to
Slide 28: Unaudited Supplemental Information Continued
27 Unaudited Supplemental Information Continued The following table reconciles ADJUSTED EBITDA, as defined, to net cash provided by operating activities as derived directly from the condensed consolidated financial statements (in thousands): 2012 2011 Adjusted EBITDA 1,977,715 $ 1,836,650 $ Interest
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