Form 8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
February 27, 2009 (February 25, 2009)
Date of Report (date of earliest event reported)
COMMUNITY HEALTH SYSTEMS, INC.
(Exact name of Registrant as specified in charter)
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| Delaware
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001-15925
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13-3893191 |
| (State or other jurisdiction
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(Commission File Number)
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(I.R.S. Employer |
| of incorporation)
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Identification No.) |
4000 Meridian Boulevard
Franklin, Tennessee 37067
(Address of principal executive offices)
Registrant’s telephone number, including area code: (615) 465-7000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(l7 CFR 240.13e-4(c))
Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of
Principal Officers; Compensatory Arrangements of Certain Officers.
On February 25, 2009, the Board of Directors of Community Health Systems, Inc. (the “Company”),
upon recommendation of the Compensation Committee of the Board of Directors (the “Compensation
Committee”), met and approved certain compensation arrangements for the Company’s Named Executive
Officers. The Company’s Named Executive Officers are each employees of the Company’s wholly-owned
subsidiary, Community Health Systems Professional Services Corporation, and receive no compensation
for their services as an officer of the Company. One of our Named Executive Officers departed
during calendar year 2008. We have included an additional executive officer, Thomas D. Miller, in
this report; Mr. T. Miller is expected to be included as a Named
Executive Officer in our
definitive proxy statement for our 2009 annual meeting of stockholders. The following arrangements were
approved:
Incentive Compensation Payments for 2008 under the 2004 Employee Performance Incentive Plan
The following payments in respect of fiscal year 2008 incentive compensation targets, under the
Company’s 2004 Employee Performance Incentive Plan (the “Cash Incentive Plan”) were approved, the
Named Executive Officers having been found to have met the levels of their performance goals
indicated below:
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Name and Position |
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Percentage of Total |
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2008 Incentive |
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Target Opportunity |
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Compensation Payment |
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Attained |
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Wayne T. Smith,
Chairman, President
and Chief Executive
Officer
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95.4% of target
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$ |
1,855,440 |
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W. Larry Cash,
Director, Executive
Vice President and
Chief Financial
Officer
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95.6% of target
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825,352 |
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William S. Hussey,
Division President,
Division Operations
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96.8% of target
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$ |
435,600 |
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Michael T. Portacci,
Division President,
Division Operations
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69.1% of target
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$ |
310,950 |
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Thomas D. Miller,
Division President,
Division Operations
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104.8% of target
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$ |
471,600 |
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Extraordinary Bonus Payments for 2008
The Compensation Committee determined that in light of the global economic conditions, the Named
Executive Officers’ performance in the past year had been extraordinary under the circumstances.
Notwithstanding the global economic upheaval, the Named Executive Officers kept the Company’s
performance in line with its expectations and consequently the Compensation Committee decided to
award the Named Executive Officers an extraordinary bonus to recognize their accomplishment and to
further incentivize the Named Executive Officers to effectively guide the Company through difficult
economic times. The extraordinary bonus was based on a percentage of the Named Executive Officers’
base salary in the amounts indicated below:
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Name and Position |
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Percentage of Salary |
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Extraordinary Bonus |
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Payment |
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Wayne T. Smith,
Chairman, President and
Chief Executive Officer
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20 |
% |
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$ |
216,000 |
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W. Larry Cash,
Director, Executive
Vice President and
Chief Financial Officer
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20 |
% |
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$ |
132,800 |
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William S. Hussey,
Division President,
Division Operations
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10 |
% |
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$ |
45,000 |
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Michael T. Portacci,
Division President,
Division Operations
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3 |
% |
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$ |
15,000 |
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Thomas D. Miller,
Division President,
Division Operations
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10 |
% |
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$ |
45,000 |
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2009 Modifications to the Incentive Compensation Targets
The Compensation Committee has also established performance goals for each of the Named Executive
Officers for fiscal year 2009 under the Cash Incentive Plan and modified the opportunities to
attain the 2009 cash incentive bonuses. For fiscal year 2009, the incentive compensation plans
adopted under the Cash Incentive Plan were accordingly modified in three ways:
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the total maximum incentive bonus attainable was increased as follows (expressed as a
percentage of base salary): |
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Position |
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2008 Plan Maximum |
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2009 Plan Maximum |
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CEO
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200%
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300% |
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CFO
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150%
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200% |
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Division Presidents
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110%
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150% |
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of the total maximum bonus attainable, the incentive compensation to be awarded for the
attainment of financial objective targets was increased to 265%, 165%, and 130% for the
CEO, CFO and each Division President, respectively, representing increases of 85%, 35%, and
30%, respectively (in each case expressed as a percentage of base
salary); and |
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of the total maximum bonus attainable, the incentive compensation to be awarded for the
attainment of non-financial performance improvements has been set at 25%, 25% and 10% for
the CEO, CFO and each Division President, respectively (in each case
expressed as a percentage of base salary), which will be reduced if the
performance improvements are not attained. Any such reduction will be determined in the
discretion of the Compensation Committee. The 2009 non-financial performance criteria
shall include such items as: meeting physician recruitment targets; maintaining
expenditures within the established capital budget; maintaining/improving the 2008 overall
clinical compliance; and exceeding the industry average performance in volume, revenue and
earnings growth. |
The
remaining component of the incentive compensation plan formula, up to
10% of base salary for overachievement
of financial targets, represents a decrease for the CEO and CFO (from
20%), and remains unchanged for the Division Presidents.
2009 Base Salaries
The following base salary amounts for the Company’s Named Executive Officers were approved on
February 25, 2009, to be effective retroactive to January 1, 2009. None of our executive officers
has a written employment agreement.
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Name and Position |
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2009 Base Salary |
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Wayne T. Smith, Chairman, President and Chief Executive
Officer
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$ |
1,300,000 |
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W. Larry Cash, Director, Executive Vice President and
Chief Financial Officer
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$ |
700,000 |
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William S. Hussey, Division President, Division Operations
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$ |
550,000 |
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Michael T. Portacci, Division President, Group Operations
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$ |
500,000 |
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Thomas D. Miller, Division President, Division Operations
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$ |
550,000 |
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Option Grants and Restricted Stock Awards
Pursuant to the Company’s Amended and Restated 2000 Stock Option and Award Plan, the Compensation
Committee approved the following equity grants to its Named Executive Officers:
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Name and Position |
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Non-Qualified |
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Performance-Based |
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Stock Options |
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Restricted Shares |
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Wayne T. Smith,
Chairman, President
and Chief Executive
Officer
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50,000 |
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250,000 |
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W. Larry Cash,
Director, Executive
Vice President and
Chief Financial
Officer
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20,000 |
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100,000 |
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William S. Hussey,
Division President,
Division Operations
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10,000 |
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50,000 |
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Michael T. Portacci,
Division President,
Group Operations
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10,000 |
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40,000 |
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Thomas D. Miller,
Division President,
Division Operations
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10,000 |
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50,000 |
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All other executive
officers as a group
(100,000 of the
restricted shares
awarded were
performance-based,
the balance, 65,000
shares, were granted
with 3-year time
vesting restrictions
only)
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32,500 |
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165,000 |
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The grants of nonqualified stock options will vest in equal one-third (1/3) increments on the first
three anniversaries of the grant date. The performance-based restricted stock awards have both
performance and time vesting components. Generally, the performance objective that must be met is
the Company’s attainment for calendar year 2009 of either (i) seventy-five percent (75%) or more of
the low end of the range of projected earnings per share from continuing operations, or (ii) ninety
percent (90%) or more of the low end of the range of net operating revenues, each as stated in the
Company’s earnings release filed with the Securities and Exchange Commission on Form 8-K on
February 19, 2009. Once the performance objective has been attained, restrictions will lapse in
equal one-third (1/3) increments on each of the first three anniversaries of the award date. If
the performance objective is not attained, the awards will be forfeited in their entirety.
Notwithstanding the performance objectives and the vesting requirements described above, the
restrictions will lapse earlier in the event of the death or disability of the grantee, or in the
event of a change in control of the Company. In the event of a grantee’s termination of employment
without cause, the award will not be terminated; rather when it is determined that the performance
objective has been met (or if it has already been met), the award will accelerate in its entirety
on such date. The form of performance-based restricted stock award agreement has been modified in
accordance with the immediately preceding sentence (but is otherwise substantially the same as
award agreements used for the awards made on February 27, 2008). The form of restricted stock
award agreement used for awards made to executive (and other) officers other than the named
executive officers and the other Division Presidents has also been modified to provide that in the event of a termination of
employment without cause, the restrictions on the entire award will lapse on the later of the first
anniversary of the date of grant or the date of termination. The revised forms of award agreements
described in this paragraph will be filed with the Securities and Exchange Commission as exhibits
to the Company’s Form 10-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this Report to be signed on its behalf by the undersigned thereunto duly authorized.
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Date: February 27, 2009
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COMMUNITY HEALTH SYSTEMS, INC.
(Registrant) |
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By:
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/s/ Wayne T. Smith |
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Wayne T. Smith
Chairman of the Board,
President and Chief Executive Officer
(principal executive officer) |
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By:
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/s/ W. Larry Cash |
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W. Larry Cash
Executive Vice President, Chief Financial Officer
and Director
(principal financial officer) |