Community Health to focus on improving Triad's operating margins as part of deleveraging strategy

By Jennifer Lanning Drey

Portland, Ore., Sept. 10 - Community Health Systems, Inc. plans to stay out of the acquisition market for the next few years and instead focus on improving operating margins for Triad Hospitals, Inc., which Community Health acquired on July 25, Larry Cash, Community Health's chief financial officer, said Monday during a presentation at the Bear Stearns 20th Annual Healthcare Conference in New York.

The planned Triad improvement is part of Community Health's strategy for deleveraging the company, according to Cash.

"The best way to delever is just to continue to grow the company and improve the margins, which we've done historically," he said.

The company expects EBITDA to benefit by $84 million in the first post-acquisition year through corporate overhead and supply synergies.

In the following two to three years, Community Health expects to further achieve $275 million in incremental built-in EBITDA opportunity through margin improvements at hospitals acquired over the last five years, Triad's EBITDA margin improvements and returns on capital investments, Cash said.

Community Health's chief financial officer called the company's cash flow from operating activities "reasonably strong" at $216 million for the year to date. The figure compares with $207 million at the same point in 2006.

As previously reported, Community Health funded its acquisition of Triad with proceeds from a new $7.215 senior secured credit facility, along with bonds. The transaction was valued at $6.8 billion and included $1.7 billion of existing debt.

Community Health is a Nashville operator of general acute care hospitals in non-urban and mid-sized markets in 28 states and Ireland.

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