2018 Guide to Effective Proxies

2.4 Proxy summary | 79 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES COMMUNITY HEALTH SYSTEMS, INC. BOARD OF DIRECTORS NOMINEES UpontherecommendationofourGovernanceandNominatingCommittee,ourBoardofDirectorshasnominated ten(10)peopleforelectionatthisAnnualMeetingtoholdofficeuntilthenextannualmeetingandtheelectionof theirsuccessors.Amoredetailedbiographyofeachdirectorcanbefoundonpages18to23oftheProxyStatement. Name/Experience/Occupation Director Since Committee Memberships JohnA.Clerico Mr.ClericobringsexecutiveleadershipexperiencetotheBoard.Hehasheld positionsofchairmanoftheboard,chiefexecutiveofficer,co-chiefoperating officer,chieffinancialofficerandtreasurerduringvariouspointsinhiscareer workingforsuchnotablecompaniesasPraxairandUnionCarbide.Heis currentlychairmanandregisteredfinancialadvisorofChartMarkInvestments. 2003 Compensation*, Audit& Compliance MichaelDinkins Mr.Dinkinsbringsextensiveexperienceasaboardmemberandchieffinancial officerofIntegerHoldingsCorp.,apublicly-tradedcompanytotheBoard,as wellasknowledgeofcomplexfinancialandoperationalissuesfacinglarge organizationsandanunderstandingofoperationsandfinancialstrategyin challengingenvironments. 2017 Audit& Compliance JamesS.ElyIII Mr.ElyfoundedPriCapAdvisorsLLCin2009andhasservedasitschief executiveofficersinceinception.Hehasextensivebankingexperiencehaving workedasseniorbankerandmanagingdirectorinJPMorgan’ssyndicatedand leveragedfinancegroup. 2009 Audit& Compliance* JohnA.Fry Mr.FrycurrentlyservesaspresidentofDrexelUniversityinPhiladelphia, Pennsylvania.Priortothat,heservedaspresidentofFranklin&Marshall CollegeinLancaster,Pennsylvania.Mr.Fryhasuniqueexperienceasthe presidentofanacademicinstitutionalongwithpriorexperiencewiththe UniversityofPennsylvaniahealthsystem. 2004 Compensation, Governance& Nominating TimL.Hingtgen Mr.HingtgenisourPresidentandChiefOperatingOfficerandjoinedthe companyin2008.Mr.Hingtgenhasover20yearsofhealthcaremanagement experienceandisahighlyaccomplishedhospitaloperatorwithatrackrecordof successfullyoptimizinghospitaloperationsanddevelopingregionalhealthcare networks. 2017 WilliamNorrisJennings,M.D. Dr.Jenningsiscurrentlyretiredaftermorethan43yearsasapracticingfamily medicinephysician,mostrecentlywithKentuckyOneHealthinLouisville, Kentucky.Hebringsarecently-practicingphysician’sperspectivetotheBoard andhashandsonexperiencemanaginglargephysicianpractices. 2008 Governance& Nominating K.RangaKrishnan,MBBS Dr.Krishnan’sserviceasthedeanoftwomedicalschools,includingRushand Duke-NUS,andasanexecutiveandadministratoratalargemedicalcenter providestheBoardwithvaluableexperienceinthemanagementofphysician practicesandinmaintainingcompliancewiththecomplexregulatory requirementsofthehospitalandhealthcareindustries. 2017 Governance& Nominating JuliaB.North Ms.NorthisourLeadDirector.Sheiscurrentlyretired.Ms.Northhasservedin manyseniorexecutivepositionsincludingpresidentofconsumerservicesfor BellsouthTelecommunications.Shecurrentlyservesontheboardofdirectorsof AcuityBrands,Inc. 2004 Governance& Nominating*, Compensation WayneT.Smith Mr.SmithisourChairmanandChiefExecutiveOfficer.Mr.Smithjoinedthe companyin1997andwassubsequentlyelectedtotheBoard.Hehasover30 yearsofexperienceinthehospitalandmanagedcareindustry.Healsoserveson theboardofPraxairandontheboardoftrusteesofAuburnUniversityandis thechairoftheboardoftheFederationofAmericanHospitals. 1997 Chairmanofthe Board H.JamesWilliams,Ph.D. Dr.WilliamscurrentlyservesatthepresidentofMountSt.JosephUniversityin Cincinnati,Ohio.Priortothat,heservedaspresidentofFiskUniversityin Nashville,Tennessee.Hebringsdiverseexperienceinfinance,lawandhigher educationtotheBoard. 2015 Audit& Compliance *ChairmanofCommittee S-3 Total of 08 pages in section $12,819 $18,639 $19,437 (1) $15,353 (2) $18,438 $20,000 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 2013 2014 2015 2016 2017 NetOperatingRevenues $2.62 $2.29 (1) $3.29 $0.46 $10.00 $6.00 $2.00 -$2.00 -$6.00 -$10.00 -$14.00 -$22.00 -$18.00 2013 2014 2015 Income(Loss)perDilutedShare FromContinuingOperations, AsReportedandAdjusted (3) AsAdjusted AsReported $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 $1,860 $2,777 $2,670 (1) $1,703 $2,225 2013 2014 2015 2016 2017 AdjustedEBITDA (3) $50.00 $45.00 $35.00 $25.00 $15.00 $40.00 $30.00 $20.00 $10.00 $5.00 $0.00 $32.32 $44.38 $21.84 $4.26 $5.59 2013 2014 2015 2016 2017 StockPrice (asofDecember31) $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 2013 2014 2015 2016 2017 $1,089 $1,615 $921 $773 $1,137 CashFlowsfromOperations CapitalExpenditures $1,200 $1,000 $800 $600 $400 $200 $0 2013 2014 2015 2016 2017 $614 $853 $953 $564 $744 ($2 1.89) ($ 15.41) 2017 2016 ($1.20) (2) $1.77 $1.68 $1.32 (1)Includesa$169millionincreaseintheCompany’sallowancefordoubtfulaccountsontheDecember31,2015consolidatedbalancesheet andacorresponding$169millionincreasetotheprovisionforbaddebtsrelatedtoachangeinestimaterecordedduringthethreemonths endedDecember31,2015.ThisadjustmentreducednetoperatingrevenuesandadjustedEBITDAby$169millionandincomefrom continuingoperationsby$108million,or$0.94pershare(diluted)fortheyearendedDecember31,2015. (2)Includesa$591millionadjustmentfortheadverseimpactofthechangeinestimateforcontractualallowancesandprovisionforbad debtsrecordedduringthethreemonthsendedDecember31,2017.Thisadjustmentreducednetoperatingrevenuesby$591millionand incomefromcontinuingoperationsby$378million,or$3.38pershare(diluted),fortheyearendedDecember31,2017. (3)Income(Loss)perDilutedSharefromContinuingOperations,asadjusted,reflectsourreportedIncome(Loss)perDilutedSharefrom ContinuingOperationsfortheperiodspresentedadjustedforcertainitemsasreflectedonAnnexA.Foradefinitionandreconciliationof AdjustedEBITDAandIncomeperDilutedSharefromContinuingOperationsexcludingadjustments,tothemostcomparableGAAP measures,andwhywebelievethesenon-GAAPfinancialmeasurespresentusefulinformationtoinvestors,seeAnnexA. S-2 SUMMARY ThissummaryhighlightsinformationaboutCommunityHealthSystems,Inc.(the“Company”,“we”,“our”,or“us”) andcertaininformationcontainedelsewhereinthisProxyStatement.Ourstockholderswillbeaskedtoconsiderand voteonthematterslistedbelowatour2018AnnualMeetingofStockholders.Thissummarydoesnotcontainallof theinformationthatyoushouldconsider,andyoushouldreadtheentireProxyStatementbeforevoting.Inaddition, formorecompleteinformationabouttheCompany’sbusinessanddetailsabouttheCompany’s2017performance highlightsandthefinancialmeasuresmentionedinthisProxyStatement,pleasereviewtheCompany’sAnnual ReportonForm10-KfiledwiththeSecuritiesandExchangeCommissiononFebruary28,2018. 2017 FINANCIAL PERFORMANCE HIGHLIGHTS During2017,weexecutedonanumberofchangestoourbusiness,withafocusonimprovingouroverallperformance andefficiency.Tothatend,theCompanymadeprogressacrossstrategicinitiatives,suchasimprovingourpatientsafety andquality,reinforcingourcompetitivepositionincoremarkets,enhancingourpatientconnectedness,andinvestingin ouroperationalefficiency.AfewexamplesofprogressintheseareasincludeourcontinuedreductioninourSeriousSafety EventRate(SSER),investmentinnewpatientaccesspoints,growthofourpatienttransferandaccessprogram,and streamliningourcorporatedivisionalstructure.WebelievethisfocusandinvestmenthasstrengthenedtheCompanyand positionedusforimprovedperformancegoingforward. Inadditiontotheinvestmentsinourcoreoperations,wehavealsocompletedanumberofdivestituresaspartofour portfoliorationalizationstrategy,allowingustoshiftmoreofourresourcestoourmostattractiveandsustainable marketsmovingforward.In2017,wecompletedthedivestitureofall30ofourpreviouslyannouncedhospital divestitures.Inaddition,in2018,wearepursuingthedivestitureofadditionalhospitalsthattogetheraccountedfor approximately$2.0billionofnetrevenueduring2017.Weexpectthatourdivestitureplanwillallowustolowerour overalldebtandshiftourfocustohospitalsandnetworkswithstrongermarketpositionwhichwebelievehavehigher growthpotentialtoenhanceshareholdervalue. Ourperformancehighlightsduring2017and2016arereflectedinthechartbelow. Performance Highlights FortheYearsEndedDecember31,2017and2016 (dollarsinmillions,exceptpershareamounts) KeyMetrics 2017 Results 2016 Results %Increase/ (Decrease) NetOperatingRevenues (1) $15,353 $18,438 (16.7)% NetlossattributabletoCommunityHealthSystemsInc.stockholders $(2,459) $(1,721) (42.9)% NetlossattributabletoCommunityHealthSystemsInc.stockholdersasa%ofnet operatingrevenues (16.0)% (9.3)% (72.0)% AdjustedEBITDA (2) $1,703 $2,225 (23.5)% AdjustedEBITDAasapercentageofnetoperatingrevenues (1)(2) 11.1% 12.1% (8.3)% CashFlowfromOperations $773 $1,137 (32.0)% LossperDilutedSharefromContinuingOperations,asreported $(21.89) $(15.41) (42.1)% (Loss)incomeperDilutedSharefromContinuingOperations,excluding Adjustments (1)(2) $(1.20) $0.46 (360.9)% StockPriceasofDecember31 $4.26 $5.59 (23.8)% (1)Includesa$591millionadjustmentfortheadverseimpactofthechangeinestimateforcontractualallowancesandprovisionfor baddebtsrecordedduringthethreemonthsendedDecember31,2017.Thisadjustmentreducednetoperatingrevenuesby$591 millionandincomefromcontinuingoperationsby$378million,or$3.38pershare(diluted),fortheyearendedDecember31,2017. (2)AdjustedEBITDAandIncomeperDilutedSharefromContinuingOperations,excludingadjustments,arenon-GAAPfinancial measures.Foradefinitionofthesenon-GAAPfinancialmeasuresandwhywebelievethesenon-GAAPfinancialmeasurespresentuseful informationtoinvestors,aswellasareconciliationofthesenon-GAAPfinancialmeasurestothemostcomparableGAAPmeasures,see AnnexA. S-1 DANAHER CORPORATION Long-TermPerformance Webelievealong-termperformanceperiodmostaccuratelycomparesrelativeperformance withinourpeergroup.Overshorterperiods,performancecomparisonsmaybeskewedbythe easierperformancebaselinesofpeercompaniesthathaveexperiencedperiodsof underperformance. Danaherhasnotexperiencedasustainedperiodofunderperformanceoverthelasttwenty-five years,andwebelievetheconsistencyofourperformanceoverthatperiodisunmatchedwithin ourpeergroup.Danaherranksnumberoneinitspeergroupoverthepasttwenty-fiveyears basedoncompoundedaverageannualshareholderreturn,andistheonlycompanyinitspeer groupwhosetotalshareholderreturn(“TSR”)outperformedtheS&P500Index: # 1 IN PEER GROUP based on compounded average annual shareholder return from and including 1993-2017 • overeveryrolling3-yearperiodfromandincluding1993-2017;and • bymorethan600basispointsovereveryrolling3-yearperiodfromandincluding2008-2017. Danaher’scompoundedaverageannualshareholderreturnhasoutperformedtheS&P500Indexovereachofthelastthree, five-,ten-,fifteen-,twenty-andtwenty-fiveyearperiods: 0% 1,000% 2,000% 3,000% 4,000% 5,000% 6,000% 7,000% 8,000% 9,000% DHR S&P500 12/31/92 12/31/97 12/31/02 12/31/07 12/31/12 12/31/17 3 years S&P 500:11.4% 13.4% 5years S&P 500:15.8% 17.6% 10years S&P 500: 8.5% 11.2% 15 years S&P 500: 9.9% 14.7% 20 years S&P500: 7.2% 15.0% 25years S&P 500: 9.7% 19.2% #1INPEERGROUPbasedoncompoundedaverageannualshareholderreturnfromandincluding1993-201713.4%3yearsS&P500:11.4%17.6%5yearsS&P500:15.8%11.2%10yearsS&P500:8.5%14.7%15yearsS&P500:9.9%15.0%20yearsS&P500:7.2%19.2%25yearsS&P500:9.7% DANAHER 2018PROXYSTATEMENT iii Total of 06 pages in section Business Highlights 2017Performance In2017,Danaher: • continuedtoinvestinfuturegrowth,investing$1.1billioninresearchanddevelopmentanddeployingover $385millionacross10strategicacquisitionsthatcomplementourLifeSciences,DentalandEnvironmental&Applied Solutionssegments; • continuedtheintegrationofour2015,$13.6billionacquisitionofPallCorporationandour2016,$4.0billionacq isitio ofCepheid,eliminatingmorethan$200millionofannualcostsacrossbothbusinesses; • returnedover$375milliontoshareholdersthroughcashdividends,markingthe 25 th yearinarowDanaherhaspaid adividend (Danaher’sper-sharequarterlydividendhasincreasedmorethan500%overthelastfiveyears);and • grewourbusinessonayear-over-yearbasis: DANAHER2016-2017YEAR-OVER-YEARGROWTHFROMCONTINUINGOPERATIONS Revenue Growth Earnings Growth Operating CashFlow Growth +8.5% +14.5% +12.5% 8.5%REVENUEGROWTH14.5%EARNINGSGROWTH12.5%OPERATINGCASHFLOWGROWTH ii DANAHER 2018PROXYSTATEMENT PROXY STATEMENT SUMMARY Toassistyouinreviewingtheproposalstobeacteduponatour2018AnnualMeeting,belowissummaryinformation regardingthemeeting,eachproposaltobevoteduponatthemeetingandDanaherCorporation’sbusinessperformance, corporategovernanceandexecutivecompensation.Thefollowingdescriptionisonlyasummary.Formoreinformationabout thesetopics,pleasereviewDanaher’sAnnualReportonForm10-KfortheyearendedDecember31,2017andthecomplete ProxyStatement.InthisProxyStatement,theterms“Danaher”orthe“Company”refertoDanaherCorporati ,Danaher CorporationanditsconsolidatedsubsidiariesortheconsolidatedsubsidiariesofDanaherCorporation,asthec nt xtrequires. 2018 Annual Meeting of Shareholders DATEANDTIME: May8,2018,3:00p.m.localtime PLACE: ParkHyattWashington,120124 th Street,NW,Washington,D.C. RECORDDATE: March12,2018 Voting Matters PROPOSAL DESCRIPTION BOARD RECOMMENDATION Proposal1: Electionof directors(page1) Weareaskingourshareholderstoelecteachoftheelevendirectorsidentified belowtoserveuntilthe2019AnnualMeetingofshareholders. ✔ FOR eachnominee Proposal2: Ratification oftheappointmentofthe independentregistered publicaccountingfirm (page19) WeareaskingourshareholderstoratifyourAuditCommittee’sselectionof Ernst&YoungLLP(“E&Y”)toactastheindependentregisteredpublicaccounting firmforDanaherfor2018.Althoughourshareholdersarenotrequiredtoapprove theselectionofE&Y,ourBoardbelievesthatitisadvisabletogiveour shareholdersanopportunitytoratifythisselection. ✔ FOR Proposal3: Advisoryvoteto approvenamedexecutive officercompensation (page54) Weareaskingourshareholderstocastanon-binding,advisoryvoteonthe compensationoftheexecutiveofficersnamedintheSummaryCompensation Table(the“namedexecutiveofficers”) . Inevaluatingthisyear’s“sayonpay” proposal,werecommendthatyoureviewourCompensationDiscussionand Analysis,whichexplainshowandwhytheCompensationCommitteeofourBoard arrivedatitsexecutivecompensationactionsanddecisionsfor2017. ✔ FOR Proposal4: Shareholder proposal (page55) YouarebeingaskedtoconsiderashareholderproposalrequestingthatDanaher’s BoardofDirectorsamenditsgoverningdocumentstoreducethepercentageof sharesrequiredforshareholderstocallaspecialmeetingofshareholdersfrom 25%to10%. ✗ AGAINST Pleaseseethesectionstitled“GeneralInformationAbouttheMeeting”and“OtherInformation”beginningonpage56for importantinformationabouttheproxymaterials,voting,theAnnualMeeting,Companydocuments,communicationsandthe deadlinestosubmitshareholderproposalsanddirectornominationsfornextyear’sannualmeetingofshareholders. DANAHER 2018PROXYSTATEMENT i