LIFEPOINT HOSPITALS, INC.

Additionally, in August 2018, the Company entered into a proposed settlement agreement with The Hospital Service District No. 2 of the Parish of St. Mary (“HSD”), a political subdivision of the state of Louisiana, outlining the terms of a definitive settlement agreement to terminate the Company’s lease of Teche Regional Medical Center (“Teche”) located in Morgan City, Louisiana.  The proposed settlement agreement provides, among other things, that the Company will convey to HSD, or its designee, all assets of Teche in accordance with the existing lease agreement, with the exception of net working capital, and the Company will no longer operate Teche upon completion of the transaction.  The Company anticipates this transaction to be completed during the fourth quarter of 2018 subject to the terms and conditions of a definitive settlement agreement.

Effective October 1, 2017, the Company sold substantially all of the assets of Rockdale Medical Center (“Rockdale”) located in Conyers, Georgia for $79.3 million, net of certain working capital adjustments.  In connection with the Company’s entry into a definitive agreement to sell substantially all of the assets of Rockdale, the Company recognized a net impairment loss of $12.7 million, $13.4 million when adjusted for the impact of income taxes, or $0.33 loss per diluted share, during the three months ended September 30, 2017.  The net impairment loss is comprised of a $25.1 million loss for the write-off of allocated goodwill, partially offset by a $12.4 million gain on the sale of property, equipment and certain other assets.  The loss for the write-off of allocated goodwill was not fully deductible for income tax purposes.  As a result, the nondeductible portion of the goodwill write-off contributed to an increase in the Company’s consolidated effective tax rate for the three and nine months ended September 30, 2017.

On September 7, 2018, a purported stockholder of the Company filed a putative class action complaint in the United States District Court for the District of Delaware challenging the Merger. The case, captioned Wolf v. LifePoint Health, Inc., et al., Case No. 18-cv-01397-UNA, names the Company and the members of the Company’s Board of Directors as the defendants. The complaint, among other things, alleges that the Company omitted from its proxy statement certain material information in violation of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14a-9 promulgated thereunder. The complaint seeks, among other things, class action certification, injunctive relief prohibiting the consummation of the Merger, a declaration that the defendants have violated the Exchange Act and Rule 14a-9, an order directing the filing of a non-deficient proxy statement and an award of attorneys’ fees. The Company believes that the action lacks merit and intends to defend vigorously against this action.

During the three months ended September 30, 2018, we recorded a net benefit for income taxes of $19.4 million, compared to a provision for income taxes of $25.3 million for the same period last year.  During the three months ended September 30, 2018, certain of our affiliates changed the method of recognizing the tax deductibility of certain self-pay revenues. Since the method change applies to the tax year ended December 31, 2017, we remeasured our deferred tax assets by applying the Federal corporate income tax rate of 35%, prior to the enactment of the Tax Cuts and Jobs Act (the “Tax Act”), which reduced the Federal corporate income tax rate from 35% to 21%.  Accordingly, as a result of the difference in the Federal corporate income tax rate, we recognized a deferred tax benefit of $23.6 million, or $0.59 earnings per diluted share, during the three months ended September 30, 2018.  Refer to Note 6 to our accompanying unaudited condensed consolidated financial statements included elsewhere in this report for further discussion of our (benefit) provision for income taxes for the three months ended September 30, 2018 and 2017.

On September 7, 2018, a purported stockholder of LifePoint filed a putative class action complaint in the United States District Court for the District of Delaware challenging the Merger. The case, captioned Wolf v. LifePoint Health, Inc., et al., Case No. 18-cv-01397-UNA, names us and the members of our Board of Directors as the defendants. The complaint, among other things, alleges that we omitted from our proxy statement certain material information in violation of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14a-9 promulgated thereunder. The complaint seeks, among other things, class action certification, injunctive relief prohibiting the consummation of the Merger, a declaration that the defendants have violated the Exchange Act and Rule 14a-9, an order directing the filing of a non-deficient proxy statement and an award of attorneys’ fees. We believe that the action lacks merit and intend to defend vigorously against this action.