Mr. Smith: Community Health Systems was founded in 1985, went public in 1991 at $8/share and then was acquired in an LBO by Forstmann Little & Co., Ted Forstmann's company, for $52/share in the summer of 1996. I was recruited by Forstmann Little and arrived here in January 1997. We currently have 51 facilities in 20 states. In 84% of our markets, we're the sole provider in those communities. Last year, we had revenues in excess of $1 billion and EBITDA over $200 million. From 1997 to 1999, we had about 21% revenue growth, compounded annually, and a 29% EBITDA growth, and we improved our margins about 2.4% during this same period. We just released our second-quarter earnings, and net revenues for the quarter ending June 30, 2000 totaled $317.1 million, a 21.1% increase over the prior year. Adjusted EBITDA for the second quarter of 2000 was $59.8 million, a 19.6% increase over the prior year. Net income was $0.2 million compared with $1.8 million loss for the second quarter last year. Same hospital net revenues increased by 10.5% with admissions up 7.8% versus second quarter of last year. We also improved our same hospital adjusted EBITDA margin to 19.9% from 19.1% in the second quarter of last year.
TWST: The hospital market has been in trouble lately. How have you guys
done so well?
Mr. Smith: We're in the non-urban markets, which we believe to be the
most attractive sector in healthcare. We think the non-urban markets
obviously offer great opportunities for us because there's little or no
competition; the markets represent about 25% of the US population and
have underserved healthcare needs. As I said earlier, in about 84% of
our markets, we're the sole provider. We have very limited managed care.
The demographics are really good in the smaller markets in that there's
a growing population of Medicare in those markets. The economy is
generally good in the communities where we operate because of diverse
industry. So we've focused on non-urban markets that meet our criteria,
and we have implemented a standardized and centralized operating model,
which works well for us.
Tickers included in this excerpt: CYH
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