HCA Reports Third Quarter 2012 Results Business Wire NASHVILLE, Tenn. -- November 01, 2012 HCA Holdings, Inc. (NYSE: HCA) today announced financial and operating results for the third quarter ended September 30, 2012. Key third quarter metrics (all percentage changes compare 3Q 2012 to 3Q 2011 unless noted): *Revenues increased 11.1 percent to $8.062 billion *Net income attributable to HCA Holdings, Inc. totaled $360 million, or $0.78 per diluted share *Adjusted EBITDA increased 8.6 percent to $1.533 billion *Cash flows from operations declined to $655 million due primarily to changes in working capital items and higher tax payments *Same facility equivalent admissions increased 2.6 percent while same facility admissions increased 2.1 percent *Same facility revenue per equivalent admission increased 0.7 percent HCA Chairman and Chief Executive Officer, Richard M. Bracken, said, “We are pleased with the results of the third quarter. Although we remain in a challenging economic environment, we remain focused on clinical and operational initiatives that position the Company for future changes in the healthcare industry.” Revenues in the third quarter totaled $8.062 billion, compared to $7.258 billion in the third quarter of 2011. Third quarter revenue growth was primarily driven by increased volume and the consolidation of our HealthONE venture, which was accounted for under the equity method for periods prior to November 2011. Equivalent admissions increased 8.3 percent, while admissions increased 7.0 percent. Same facility equivalent admissions increased 2.6 percent in the third quarter of 2012 compared to the prior year period, while same facility admissions increased 2.1 percent. Same facility emergency room visits increased 7.4 percent in the third quarter of 2012 compared to the prior year period. Revenue per equivalent admission increased 2.5 percent in the third quarter of 2012, primarily reflecting a continuing shift in service and payer mix. The Company’s operating expense per equivalent admission increased 3.1 percent from the prior year’s third quarter (2.0 percent on a same facility basis). During the third quarter of 2012, salaries and benefits, supplies and other operating expenses totaled $6.666 billion, or 82.7 percent of revenues, compared to $5.965 billion, or 82.1 percent of revenues, in the third quarter of 2011. Adjusted EBITDA for the third quarter of 2012 increased 8.6 percent to $1.533 billion compared to $1.412 billion in the prior year period. Adjusted EBITDA is a non-GAAP financial measure. A table providing supplemental information on Adjusted EBITDA and reconciling net income attributable to HCA Holdings, Inc. to Adjusted EBITDA is included in this release. Net income attributable to HCA Holdings, Inc. totaled $360 million, or $0.78 per diluted share, compared to $61 million, or $0.11 per diluted share, in the third quarter of 2011. Results for the third quarter of 2011 include pretax losses on retirement of debt of $406 million, or $0.49 per diluted share. The effective tax rate for the third quarter of 2011 was favorably impacted by the finalization of settlements for the 1997 through 2001 tax years. These settlements resulted in a reduction to interest expense related to taxing authority examinations of $66 million pretax, or $0.08 per diluted share. (All “per diluted share” disclosures are based upon amounts net of the applicable income taxes.) Nine Months Ended September 30, 2012 Revenues for the nine months ended September 30, 2012 totaled $24.579 billion compared to $21.913 billion in the same period of 2011. Net income attributable to HCA Holdings, Inc. was $1.291 billion, or $2.81 per diluted share, compared to $530 million, or $1.04 per diluted share, for the first nine months of 2011. Results for the nine months ended September 30, 2011 include pretax losses on retirement of debt of $481 million, or $0.60 per diluted share, and a pretax charge for the termination of a management agreement of $181 million, or $0.29 per diluted share. Balance Sheet and Cash Flow As of September 30, 2012, HCA Holdings, Inc.’s balance sheet reflected cash and cash equivalents of $472 million, total debt of $26.933 billion, and total assets of $27.302 billion. During the third quarter of 2012, capital expenditures totaled $484 million, excluding acquisitions. Net cash provided by operating activities in the third quarter of 2012 totaled $655 million compared to $880 million in the prior year’s third quarter. The reduction in cash flows from operating activities was primarily due to reductions of $145 million from changes in working capital items and $107 million from higher income taxes. Special Cash Dividend On October 23, 2012, the Board of Directors approved a special cash dividend of $2.50 per share to be paid to stockholders of record as of November 2, 2012 with a payment date of November 16, 2012. The dividend is expected to be funded through borrowings under the Company’s credit facilities. As of September 30, 2012, HCA operated 162 hospitals and 112 freestanding surgery centers. Earnings Conference Call HCA will host a conference call for investors at 9:00 a.m. Central Daylight Time today. All interested investors are invited to access a live audio broadcast of the call via webcast. The broadcast also will be available on a replay basis beginning this afternoon. The webcast can be accessed at: https://event.webcasts.com/starthere.jsp?ei=1009838 or through the Company’s Investor Relations web page at www.hcahealthcare.com. Cautionary Statement about Preliminary Results and Other Forward-Looking Information This press release contains forward-looking statements based on current management expectations. Those forward-looking statements include all statements other than those made solely with respect to historical fact. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those expressed in any forward-looking statements. These factors include, but are not limited to, (1) the impact of our substantial indebtedness and the ability to refinance such indebtedness on acceptable terms, (2) the effects related to the enactment and implementation of the Budget Control Act of 2011 and the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “Health Reform Law”), the possible enactment of additional federal or state health care reforms and possible changes to the Health Reform Law and other federal, state or local laws or regulations affecting the health care industry, (3) increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts, (4) the ability to achieve operating and financial targets, and attain expected levels of patient volumes and control the costs of providing services, (5) possible changes in the Medicare, Medicaid and other state programs, including Medicaid upper payment limit programs or Waiver Programs, that may impact reimbursements to health care providers and insurers, (6) the highly competitive nature of the health care business, (7) changes in service mix, revenue mix and surgical volumes, including potential declines in the population covered under managed care agreements, the ability to enter into and renew managed care provider agreements on acceptable terms and the impact of consumer driven health plans and physician utilization trends and practices, (8) the efforts of insurers, health care providers and others to contain health care costs, (9) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures, (10) increases in wages and the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical and technical support personnel, (11) the availability and terms of capital to fund the expansion of our business and improvements to our existing facilities, (12) changes in accounting practices, (13) changes in general economic conditions nationally and regionally in our markets, (14) future divestitures which may result in charges and possible impairments of long-lived assets, (15) changes in business strategy or development plans, (16) delays in receiving payments for services provided, (17) the outcome of pending and any future tax audits, appeals and litigation associated with our tax positions, (18) potential adverse impact of known and unknown government investigations, litigation and other claims that may be made against us, (19) our ongoing ability to demonstrate meaningful use of certified electronic health record technology and recognize income for the related Medicare or Medicaid incentive payments, and (20) other risk factors described in our annual report on Form 10-K for the year ended December 31, 2011 and our other filings with the Securities and Exchange Commission. Many of the factors that will determine our future results are beyond our ability to control or predict. In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. All references to “Company” and “HCA” as used throughout this release refer to HCA Holdings, Inc. and its affiliates. HCA Holdings, Inc. Condensed Consolidated Comprehensive Income Statements Third Quarter (Dollars in millions, except per share amounts) 2012 2011 Amount Ratio Amount Ratio Revenues before provision for doubtful $8,893 $7,998 accounts Provision for doubtful accounts 831 740 Revenues 8,062 100.0 % 7,258 100.0 % Salaries and benefits 3,781 46.9 3,333 45.9 Supplies 1,375 17.1 1,263 17.4 Other operating expenses 1,510 18.7 1,369 18.8 Electronic health record incentive income (131) (1.6) (51) (0.7) Equity in earnings of affiliates (6) (0.1) (68) (0.9) Depreciation and amortization 417 5.2 362 5.0 Interest expense 446 5.5 519 7.2 Losses (gains) on sales of facilities (7) (0.1) 2 - Losses on retirement of debt - - 406 5.6 7,385 91.6 7,135 98.3 Income before income taxes 677 8.4 123 1.7 Provision (benefit) for income taxes 222 2.8 (23) (0.3) Net income 455 5.6 146 2.0 Net income attributable to noncontrolling 95 1.1 85 1.2 interests Net income attributable to HCA Holdings, $360 4.5 $61 0.8 Inc. Diluted earnings per share $0.78 $0.11 Shares used in computing diluted earnings 459,515 527,515 per share (000) Comprehensive income (loss) attributable $369 ($24) to HCA Holdings, Inc. HCA Holdings, Inc. Condensed Consolidated Comprehensive Income Statements For the Nine Months Ended September 30, 2012 and 2011 (Dollars in millions, except per share amounts) 2012 2011 Amount Ratio Amount Ratio Revenues before provision for $ 27,245 $ 24,077 doubtful accounts Provision for doubtful accounts 2,666 2,164 Revenues 24,579 100.0 % 21,913 100.0 % Salaries and benefits 11,224 45.7 9,948 45.4 Supplies 4,216 17.2 3,833 17.5 Other operating expenses 4,496 18.2 4,017 18.3 Electronic health record (256 ) (1.0 ) (90 ) (0.4 ) incentive income Equity in earnings of affiliates (26 ) (0.1 ) (217 ) (1.0 ) Depreciation and amortization 1,254 5.1 1,078 4.9 Interest expense 1,336 5.4 1,572 7.2 Losses (gains) on sales of (4 ) - 3 - facilities Losses on retirement of debt - - 481 2.2 Termination of management - - 181 0.8 agreement 22,240 90.5 20,806 94.9 Income before income taxes 2,339 9.5 1,107 5.1 Provision for income taxes 760 3.1 307 1.5 Net income 1,579 6.4 800 3.6 Net income attributable to 288 1.1 270 1.2 noncontrolling interests Net income attributable to HCA $ 1,291 5.3 $ 530 2.4 Holdings, Inc. Diluted earnings per share $ 2.81 $ 1.04 Shares used in computing diluted 458,822 509,583 earnings per share (000) Comprehensive income attributable to HCA Holdings, $ 1,291 $ 534 Inc. HCA Holdings, Inc. Supplemental Non-GAAP Disclosures Operating Results Summary (Dollars in millions, except per share amounts) For the Nine Months Third Quarter Ended September 30, 2012 2011 2012 2011 Revenues $ 8,062 $ 7,258 24,579 $ 21,913 Net income attributable to $ 360 $ 61 $ 1,291 $ 530 HCA Holdings, Inc. Losses (gains) on sales of (5 ) 1 (3 ) 4 facilities (net of tax) Losses on retirement of - 256 - 303 debt (net of tax) Termination of management - - - 149 agreement (net of tax) Net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, 355 318 1,288 986 losses on retirement of debt and termination of management agreement (a) Depreciation and 417 362 1,254 1,078 amortization Interest expense 446 519 1,336 1,572 Provision for 220 128 759 516 income taxes Net income attributable to 95 85 288 270 noncontrolling interests Adjusted EBITDA $ 1,533 $ 1,412 $ 4,925 $ 4,422 (a) Diluted earnings per share: Net income attributable to $ 0.78 $ 0.11 $ 2.81 $ 1.04 HCA Holdings, Inc. Losses (gains) on sales of (0.01 ) - - 0.01 facilities Losses on retirement of - 0.49 - 0.60 debt Termination of management - - - 0.29 agreement Net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, $ 0.77 $ 0.60 $ 2.81 $ 1.94 losses on retirement of debt and termination of management agreement (a) Shares used in computing 459,515 527,515 458,822 509,583 diluted earnings per share (000) (a)Net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, losses on retirement of debt and termination of management agreement and Adjusted EBITDA should not be considered as measures of financial performance under generally accepted accounting principles ("GAAP"). We believe net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, losses on retirement of debt and termination of management agreement and Adjusted EBITDA are important measures that supplement discussions and analysis of our results of operations. We believe it is useful to investors to provide disclosures of our results of operations on the same basis used by management. Management relies upon net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, losses on retirement of debt and termination of management agreement and Adjusted EBITDA as the primary measures to review and assess operating performance of its hospital facilities and their management teams. Management and investors review both the overall performance (including; net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, losses on retirement of debt and termination of management agreement and GAAP net income attributable to HCA Holdings, Inc.) and operating performance (Adjusted EBITDA) of our health care facilities. Adjusted EBITDA and the Adjusted EBITDA margin (Adjusted EBITDA divided by revenues) are utilized by management and investors to compare our current operating results with the corresponding periods during the previous year and to compare our operating results with other companies in the health care industry. It is reasonable to expect that losses (gains) on sales of facilities and losses on retirement of debt will occur in future periods, but the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our health care facilities and complicate period comparisons of our results of operations and operations comparisons with other health care companies. Net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, losses on retirement of debt and termination of management agreement and Adjusted EBITDA are not measures of financial performance under GAAP, and should not be considered as alternatives to net income attributable to HCA Holdings, Inc. as a measure of operating performance or cash flows from operating, investing and financing activities as a measure of liquidity. Because net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, losses on retirement of debt and termination of management agreement and Adjusted EBITDA are not measurements determined in accordance with GAAP and are susceptible to varying calculations, net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, losses on retirement of debt and termination of management agreement and Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures presented by other companies. HCA Holdings, Inc. Condensed Consolidated Balance Sheets (Dollars in millions) September June 30, December 30, 31, 2012 2012 2011 ASSETS Current assets: Cash and cash equivalents $ 472 $ 518 $ 373 Accounts receivable, net 4,598 4,485 4,533 Inventories 1,052 1,055 1,054 Deferred income taxes 322 323 594 Other 828 756 679 Total current assets 7,272 7,137 7,233 Property and equipment, at 29,145 28,742 28,075 cost Accumulated depreciation (16,185 ) (15,896 ) (15,241 ) 12,960 12,846 12,834 Investments of insurance 473 495 548 subsidiaries Investments in and advances 103 102 101 to affiliates Goodwill and other intangible 5,460 5,431 5,251 assets Deferred loan costs 266 281 290 Other 768 840 641 $ 27,302 $ 27,132 $ 26,898 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $ 1,585 $ 1,517 $ 1,597 Accrued salaries 1,027 970 965 Other accrued expenses 1,498 1,651 1,585 Long-term debt due within one 1,751 1,309 1,407 year Total current liabilities 5,861 5,447 5,554 Long-term debt 25,182 25,732 25,645 Professional liability risks 962 1,039 993 Income taxes and other 1,860 1,857 1,720 liabilities EQUITY (DEFICIT) Stockholders' deficit attributable to HCA Holdings, (7,859 ) (8,243 ) (8,258 ) Inc. Noncontrolling interests 1,296 1,300 1,244 Total deficit (6,563 ) (6,943 ) (7,014 ) $ 27,302 $ 27,132 $ 26,898 HCA Holdings, Inc. Condensed Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2012 and 2011 (Dollars in millions) 2012 2011 Cash flows from operating activities: Net income $ 1,579 $ 800 Adjustments to reconcile net income to net cash provided by operating activities: Changes in operating assets and liabilities (2,923 ) (2,336 ) Provision for doubtful accounts 2,666 2,164 Depreciation and amortization 1,254 1,078 Income taxes 250 348 Losses (gains) sales of facilities (4 ) 3 Losses on retirement of debt - 481 Amortization of deferred loan costs 44 56 Share-based compensation 39 24 Pay-in-kind interest - (78 ) Other 7 6 Net cash provided by operating activities 2,912 2,546 Cash flows from investing activities: Purchase of property and equipment (1,268 ) (1,170 ) Acquisition of hospitals and health care entities (167 ) (209 ) Disposition of hospitals and health care entities 17 55 Change in investments 73 80 Other 5 4 Net cash used in investing activities (1,340 ) (1,240 ) Cash flows from financing activities: Issuance of long-term debt 1,350 5,000 Net change in revolving credit facilities (875 ) (414 ) Repayment of long-term debt (689 ) (6,583 ) Distributions to noncontrolling interests (303 ) (281 ) Payment of debt issuance costs (20 ) (84 ) Issuance of common stock - 2,506 Distributions to stockholders (983 ) (31 ) Repurchase of common stock - (1,503 ) Income tax benefits 82 54 Other (35 ) (22 ) Net cash used in financing activities (1,473 ) (1,358 ) Change in cash and cash equivalents 99 (52 ) Cash and cash equivalents at beginning of period 373 411 Cash and cash equivalents at end of period $ 472 $ 359 Interest payments $ 1,404 $ 1,635 Income tax payments (refunds), net $ 428 $ (95 ) HCA Holdings, Inc. Operating Statistics For the Nine Months Third Quarter Ended September 30, 2012 2011 2012 2011 Operations: Number of 162 157 162 157 Hospitals Number of Freestanding Outpatient 112 98 112 98 Surgery Centers Licensed Beds at End of 41,884 39,526 41,884 39,526 Period Weighted Average 41,873 39,509 41,801 39,310 Licensed Beds Reported: Admissions 430,500 402,300 1,302,000 1,206,700 % 7.0 % 7.9 % Change Equivalent 705,200 650,900 2,117,100 1,928,200 Admissions % 8.3 % 9.8 % Change Revenue per Equivalent $ 11,432 $ 11,151 $ 11,610 $ 11,364 Admission % 2.5 % 2.2 % Change Inpatient Revenue per $ 11,296 $ 11,085 $ 11,477 $ 11,268 Admission % 1.9 % 1.9 % Change Patient Days 2,035,200 1,888,500 6,166,400 5,758,300 % 7.8 % 7.1 % Change Equivalent 3,334,000 3,056,600 10,026,500 9,201,800 Patient Days % 9.1 % 9.0 % Change Inpatient 124,700 121,100 379,700 361,000 Surgery Cases % 3.0 % 5.2 % Change Outpatient 212,300 194,300 649,600 586,400 Surgery Cases % 9.3 % 10.8 % Change Emergency 1,724,000 1,539,500 5,126,600 4,579,100 Room Visits % 12.0 % 12.0 % Change Outpatient Revenues as a Percentage of 38.4 % 37.4 % 38.0 % 36.8 % Patient Revenues Average Length of 4.7 4.7 4.7 4.8 Stay Occupancy 52.8 % 52.0 % 53.8 % 53.7 % Equivalent 86.4 % 84.1 % 87.5 % 85.8 % Occupancy Same Facility: Admissions 405,800 397,300 1,228,400 1,197,100 % 2.1 % 2.6 % Change Equivalent 658,600 642,100 1,981,400 1,909,300 Admissions % 2.6 % 3.8 % Change Revenue per Equivalent $ 11,210 $ 11,130 $ 11,385 $ 11,351 Admission % 0.7 % 0.3 % Change Inpatient Revenue per $ 11,148 $ 11,106 $ 11,325 $ 11,278 Admission % 0.4 % 0.4 % Change Inpatient 117,000 119,600 355,100 356,400 Surgery Cases % -2.1 % -0.4 % Change Outpatient 189,600 191,100 581,100 577,600 Surgery Cases % -0.8 % 0.6 % Change Emergency 1,626,100 1,514,500 4,841,800 4,517,500 Room Visits % 7.4 % 7.2 % Change Contact: HCA Holdings, Inc. Investor Contact: Mark Kimbrough, 615-344-2688 or Media Contact: Ed Fishbough, 615-344-2810
HCA Reports Third Quarter 2012 Results
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