Health Management Announces First Quarter 2013 Results

  Health Management Announces First Quarter 2013 Results

Business Wire

NAPLES, Fla. -- May 2, 2013

Health Management Associates, Inc. (NYSE: HMA) today announced its
consolidated financial results for the first quarter ended March 31, 2013.

Key metrics from continuing operations for the first quarter (all percentage
changes in the bullet points below compare the first quarter of 2013 to the
first quarter of 2012) include:

  *As shown in the tables accompanying this press release, diluted earnings
    per share (“EPS”) from continuing operations was $0.09. Excluding the
    impact of approximately $17.7 million, or $0.04 per diluted share, of
    interest rate swap accounting and mark-to-market adjustments on the swap,
    diluted earnings per share from continuing operations was $0.13 per
    diluted share, as compared to $0.24 per diluted share in the prior year.
  *Net revenue was $1.483 billion;
  *Adjusted EBITDA was $198.9 million;
  *Same hospital net revenue was $1.470 billion;
  *Same hospital net revenue per adjusted admission increased 5.0%;
  *As shown in the accompanying table, same hospital Adjusted EBITDA was
    $278.4 million, or an EBITDA margin of 18.9%; and
  *Same hospital surgeries decreased 5.6% and emergency room visits increased
    1.0%.

The tables accompanying this press release include reconciliations of
consolidated net income to all presentations of Adjusted EBITDA (which is not
a GAAP measure) contained in this press release. Those tables also reconcile
earnings per share on a GAAP basis to those amounts presented in this press
release and contain disclaimers and other important information regarding how
Health Management defines and uses Adjusted EBITDA.

The continuing effects of declines in uninsured admissions and significant
increases in observation stays contributed to 8.8% and 5.8% declines in first
quarter same hospital admissions and same hospital adjusted admissions,
respectively.

“Our first quarter results did not meet our expectations and reflect a
difficult operating environment. I believe, however, that we have taken the
necessary steps to adjust our cost structure going forward to achieve our
previously updated 2013 annual guidance,” said Gary D. Newsome, Health
Management’s President and Chief Executive Officer. “As we transition into
this new era of health care reform, we intend to continue our patient-centered
approach to health care delivery while increasing efficiency and ultimately
quality as we enable America’s best local health care.”

For the first quarter, Health Management’s provision for doubtful accounts was
$240.9 million, or 14.0% of net revenue before the provision for doubtful
accounts, compared to $201.3 million, or 11.9% of net revenue before the
provision of doubtful accounts, for the same quarter a year ago.

Uninsured self-pay patient discounts for the first quarter were $327.2
million, compared to $299.7 million for the same quarter a year ago.
Charity/indigent care write-offs were $26.3 million for the first quarter,
compared to $22.7 million for the same quarter a year ago.

The sum of uninsured discounts, charity/indigent write-offs and the provision
for doubtful accounts, as a percent of the sum of net revenue before the
provision for doubtful accounts, uninsured discounts and charity/indigent
write-offs (which Health Management refers to as its Uncompensated Patient
Care Percentage) was 28.6% for the first quarter, compared to 26.1% for the
first quarter a year ago, and 28.7% for the quarter ended December 31, 2012.
Health Management believes that its Uncompensated Patient Care Percentage
provides key information regarding the aggregate level of patient care for
which it does not receive payment.

Cash flow from continuing operating activities for the first quarter was $19.3
million, after cash interest and cash tax payments aggregating $81.2 million.
Days sales outstanding, or DSO, saw a two day improvement to 50 days as of
March 31, 2013 compared to 52 days as of March 31, 2012. At March 31, 2013,
Health Management’s total leverage ratio was 3.71 and interest coverage ratio
was 4.23, both ratios being well within its debt covenant requirements.

Health Management hospitals recognized $3.8 million and $4.6 million of
Medicare and Medicaid Healthcare Information Technology (“HCIT”) incentive
payments in the three months ended March 31, 2013 and 2012, respectively.
Health Management expects to recognize approximately $75.0 to $85.0 million of
HCIT incentive payments during the year ending December 31, 2013.

As previously announced on April 1, 2013, a Health Management subsidiary
launched a new joint venture to partner with the 480-bed Bayfront Health
System, located in St. Petersburg, Florida. As part of the joint venture,
Health Management acquired an 80% interest in Bayfront Health System, and
introduced an affiliation with ShandsHealthCare, part of UF&Shands, the
University of Florida Academic Health Center. The total purchase price for our
80% interest was approximately $162.0 million, plus a working capital
adjustment.

On April 25, 2013, Health Management received a subpoena from the Securities
and Exchange Commission (the “SEC”), issued pursuant to an investigation,
requesting documents related to accounts receivable, billing write-downs,
contractual adjustments, reserves for doubtful accounts, accounts receivable
aging, and revenue from Medicare, Medicaid and from privately insured or
uninsured patients. Management is cooperating with the SEC’s investigation.
Health Management is unable to determine the potential impact, if any, of this
investigation.

Health Management’s executive team will hold a conference call and webcast to
discuss the contents of this press release and Health Management’s
consolidated financial results for the three months ended March 31, 2013 on
Friday, May 3, 2013 at 11:00 a.m. ET. Investors are invited to access the
webcast via Health Management’s website at www.HMA.com or via
www.streetevents.com. Alternatively, investors may join the conference call by
dialing 877-476-3476.

Health Management will archive a copy of the audio webcast of the conference
call, along with any related information that Health Management may be
required to provide pursuant to Securities and Exchange Commission rules, on
its website under the heading “Investor Relations” for a period of 60 days
following the conference call and webcast.

Health Management enables America's best local health care by providing the
people, processes, capital and expertise necessary for its hospital and
physician partners to fulfill their local missions of delivering superior
health care services. Health Management, through its subsidiaries, operates 71
hospitals with approximately 11,100 licensed beds in non-urban communities
located throughout the United States.

All references to “Health Management,” “HMA” or the “Company” used in this
release refer to Health Management Associates, Inc. and its affiliates.

                          Forward-Looking Statements

This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements are
subject to risks, uncertainties and assumptions and are identified by words
such as “expects,” “estimates,” “projects,” “anticipates,” “believes,”
“intends,” “plans,” “may,” “pending,” “continues,” “should,” “could” and other
similar words. All statements addressing operating performance, events or
developments thatHealth Management Associates, Inc. expects or anticipates
will occur in the future, including but not limited to projections of revenue,
provisions for doubtful accounts, income or loss, capital expenditures, debt
structure, principal payments on debt, capital structure, the amount and
timing of funds under the meaningful use measurement standard of various
Healthcare Information Technology incentive programs, other financial items
and operating statistics, statements regarding our plans and objectives for
future operations, the impact of changes in observation stays, our ability to
achieve process efficiencies, factors we believe may have an impact on our
deductibles and co-pays, acquisitions, acquisition financing, divestitures,
joint ventures, market service development and other transactions, statements
of future economic performance, statements regarding our legal proceedings and
other loss contingencies (including, but not limited to, the timing and
estimated costs of such matters), statements regarding market risk exposures,
statements regarding our ability to achieve cost efficiencies and/or
reductions, statements regarding the effects and/or interpretations of
recently enacted or future health care laws and regulations, statements
regarding the potential impact of health care exchanges, statements of the
beliefs or assumptions underlying or relating to any of the foregoing
statements, and statements that are other than statements of historical fact,
are considered to be “forward-looking statements.”

Because they are forward-looking, such statements should be evaluated in light
of important risk factors and uncertainties. These risk factors and
uncertainties are more fully described in Health Management Associates, Inc.’s
most recent Annual Report on Form 10-K, including under the heading entitled
“Risk Factors.” Should one or more of these risks or uncertainties
materialize, or should any ofHealth Management Associates, Inc.’s underlying
beliefs or assumptions prove incorrect, actual results could vary materially
from those currently anticipated. In addition, undue reliance should not be
placed on Health Management Associates, Inc.’s forward-looking statements.
Except as required by law, Health Management Associates, Inc. disclaims any
obligation to update its risk factors or to publicly announce updates to the
forward-looking statements contained in this press release to reflect new
information, future events or other developments.


HEALTH MANAGEMENT ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in thousands, except per share amounts)
                                               
                                                 Three Months Ended
                                                 March 31,
                                                 2013           2012
                                                                 
Net revenue before the provision for doubtful    $ 1,723,841     $ 1,686,518
accounts
Provision for doubtful accounts                   (240,879  )    (201,261  )
                                                                 
Net revenue                                       1,482,962     1,485,257 
                                                                 
                                                                 
Salaries and benefits                              684,191         659,084
Supplies                                           235,768         234,443
Rent expense                                       42,156          45,025
Other operating expenses                           325,775         311,780
Medicare and Medicaid HCIT incentive payments      (3,826    )     (4,590    )
Depreciation and amortization                      93,875          78,394
Interest expense                                   69,429          88,763
Other                                             (1,891    )    1,640     
                                                                 
                                                  1,445,477     1,414,539 
                                                                 
Income from continuing operations before           37,485          70,718
income taxes
Provision for income taxes                        (9,718    )    (24,727   )
                                                                 
Income from continuing operations                  27,767          45,991
Loss from discontinued operations, net of         -             (1,395    )
income taxes
                                                                 
Consolidated net income                            27,767          44,596
Net income attributable to noncontrolling         (4,665    )    (6,906    )
interests
                                                                 
Net income attributable to Health Management     $ 23,102       $ 37,690    
Associates, Inc.
                                                                 
Earnings per share attributable to Heath
Management
Associates, Inc. common stockholders:
Basic and Diluted:
Continuing operations                            $ 0.09          $ 0.15
Discontinued operations                           -             -         
                                                                 
Net income                                       $ 0.09         $ 0.15      
                                                                 
Weighted average number of shares outstanding:
Basic                                             256,152       253,316   
                                                                 
Diluted                                           260,550       255,699   
                                                                 
Net income attributable to Health Management
Associates, Inc.
Income from continuing operations, net of        $ 23,102        $ 39,085
income taxes
Loss from discontinued operations, net of         -             (1,395    )
income taxes
                                                                 
Net income attributable to Health Management     $ 23,102       $ 37,690    
Associates, Inc.
                                                                             

  
HEALTH MANAGEMENT ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)
                                                 
                                                   Three Months Ended
                                                   March 31,
                                                   2013          2012
Cash flows from operating activities:
  Consolidated net income                          $ 27,767       $ 44,596
  Adjustments to reconcile consolidated net
  income to net cash
    provided by continuing operating activities:
      Depreciation and amortization                  97,172         81,156
      Amortization related to interest rate swap     18,356         20,453
      contract
      Fair value adjustment related to interest      (700     )     16,268
      rate swap contract
      Provision for doubtful accounts                240,879        201,261
      Stock-based compensation expense               6,989          6,887
      (Gains) losses on sales of assets, net         (90      )     2,337
      Gains on sales of available-for-sale           (2,145   )     (317     )
      securities, net
      Write-offs of deferred debt issuance costs     584            -
      Deferred income tax (benefit) expense          12,148         (9,451   )
  Changes in assets and liabilities of
  continuing operations,
    net of the effects of acquisitions:
      Accounts receivable                            (278,438 )     (297,782 )
      Supplies, prepaid expenses and other           (621     )     (5,516   )
      current assets
      Prepaid and recoverable income taxes           (3,102   )     31,380
      Deferred charges and other long-term           (5,248   )     (6,425   )
      assets
      Accounts payable, accrued expenses and         (89,820  )     (22,755  )
      other liabilities
  Equity compensation excess income tax benefits     (4,388   )     (1,400   )
  Loss from discontinued operations, net of         -            1,395    
  income taxes
                                                                  
Net cash provided by continuing operating           19,343       62,087   
activities
                                                                  
Cash flows from investing activities:
  Additions to property, plant and equipment         (61,142  )     (80,817  )
  Acquisitions of hospitals and other                (1,525   )     (81,617  )
  Proceeds from sales of assets and insurance        572            808
  recoveries
  Purchases of available-for-sale securities         (416,776 )     (439,701 )
  Proceeds from sales of available-for-sale          487,627        521,186
  securities
  Decrease in restricted funds                      3,253        782      
                                                                  
Net cash provided by (used in) continuing           12,009       (79,359  )
investing activities
                                                                  
Cash flows from financing activities:
  Principal payments on debt and capital lease       (126,328 )     (20,799  )
  obligations
  Payments for debt issuance costs                   (1,588   )     -
  Proceeds from long-term borrowings                 71,400         -
  Proceeds from exercise of stock options            13,197         -
  Cash payments to noncontrolling shareholders       (14,236  )     (17,886  )
  Cash received from noncontrolling shareholders     -              1,786
  Equity compensation excess income tax benefits    4,388        1,400    
                                                                  
Net cash used in continuing financing activities    (53,167  )    (35,499  )
                                                                  
Net decrease in cash and cash equivalents before
  discontinued operations                            (21,815  )     (52,771  )
Net decreases in cash and cash equivalents from
  discontinued operations:
    Operating activities                             -              (2,960   )
    Investing activities                            -            (16      )
                                                                  
Net decrease in cash and cash equivalents            (21,815  )     (55,747  )
Cash and cash equivalents at the beginning of       59,173       64,143   
the period
                                                                  
Cash and cash equivalents at the end of the        $ 37,358      $ 8,396    
period
                                                                             


HEALTH MANAGEMENT ASSOCIATES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS AND STATISTICS

                                   March 31,      December 31,
(unaudited, dollars in                 2013            2012
thousands)
Assets
Current assets:
Cash and cash equivalents              $ 37,358        $ 59,173
Available-for-sale securities            52,207          121,106
Accounts receivable, net                 1,003,128       976,872
Other current assets                     311,363         307,847
Assets of discontinued                   6,250           6,250
operations
Property, plant and equipment,           3,454,132       3,463,052
net
Restricted funds                         126,581         125,532
Other assets                            1,326,365     1,340,957 
Total assets                           $ 6,317,384    $ 6,400,789 
                                                                      
                                                                      
Liabilities and Stockholders'
Equity
Current liabilities                    $ 842,858       $ 972,423
Deferred income taxes                    324,015         301,237
Other long-term liabilities              680,066         673,344
Long-term debt                           3,411,004       3,433,260
Stockholders' equity                    1,059,441     1,020,525 
Total liabilities and                  $ 6,317,384    $ 6,400,789 
stockholders' equity


                                       Three Months Ended March 31,
                                       2013            2012           % Change
Continuing Operations
Occupancy                                41.5      %     44.7      %
Patient days                             379,366         401,105      -5.4  %
Admissions                               86,279          93,378       -7.6  %
Adjusted admissions                      170,209         177,815      -4.3  %
Average length of stay                   4.4             4.3
Surgeries                                95,596          100,206      -4.6  %
Emergency room visits                    444,873         428,184      3.9   %
Net revenue (in thousands)             $ 1,482,962     $ 1,485,257    -0.2  %
Net revenue per adjusted               $ 8,713         $ 8,353        4.3   %
admission
Total inpatient revenue                  44.3      %     46.9      %
percentage
Total outpatient revenue                 55.7      %     53.1      %
percentage
                                                                      
Same Hospitals
Occupancy                                42.1      %     44.7      %
Patient days                             375,917         401,105      -6.3  %
Admissions                               85,182          93,378       -8.8  %
Adjusted admissions                      167,575         177,815      -5.8  %
Average length of stay                   4.4             4.3
Surgeries                                94,571          100,206      -5.6  %
Emergency room visits                    432,264         428,184      1.0   %
Net revenue (in thousands)             $ 1,470,032     $ 1,485,257    -1.0  %
Net revenue per adjusted               $ 8,772         $ 8,353        5.0   %
admission
Total inpatient revenue                  44.4      %     46.9      %
percentage
Total outpatient revenue                 55.6      %     53.1      %
percentage
                                                                      


HEALTH MANAGEMENT ASSOCIATES, INC.

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME INFORMATION

(unaudited, dollars in thousands)
                                                              
                                                                 
                                                 Three Months Ended
                                                 March 31,
                                                 2013            2012
                                                                 
Net revenue                                      $ 1,482,962     $ 1,485,257
Less acquisitions                                 12,930        -         
                                                                 
Same hospital net revenue                        $ 1,470,032    $ 1,485,257 
                                                                 
                                                                 
Consolidated net income                          $ 27,767        $ 44,596
                                                                 
Adjustments:
Loss from discontinued operations, net of          -               1,395
income taxes
Provision for income taxes                         9,718           24,727
(Gains) losses on sales of assets, net             (90       )     2,337
Interest and other income, net                     (1,801    )     (697      )
Interest expense                                   69,429          88,763
Depreciation and amortization                     93,875        78,394    
                                                                 
Adjusted EBITDA (a)                                198,898         239,515
                                                                 
Adjustment for acquisitions, corporate and        79,495        55,162    
other
                                                                 
Same hospital operating Adjusted EBITDA (a)      $ 278,393      $ 294,677   
                                                                 
Same hospital operating Adjusted EBITDA
margins =
Same hospital operating Adjusted EBITDA / Same    18.9      %    19.8      %
hospital net revenue (a)
                                                                             

(a) Adjusted EBITDA is defined as consolidated net income before discontinued
operations, net (gains) losses on sales of assets, net interest and other
income, interest expense, income taxes and depreciation and amortization.
Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net revenue.
Adjusted EBITDA is not a measure determined in accordance with generally
accepted accounting principles in the United States, commonly known as GAAP.
Nevertheless, Health Management believes that providing non-GAAP information
such as Adjusted EBITDA is important for investors and other readers of Health
Management's consolidated financial statements, as it is commonly used as an
analytical indicator within the health care industry and Health Management's
debt facilities contain covenants that use Adjusted EBITDA in their
calculations. Because Adjusted EBITDA is a non-GAAP measure and is thus
susceptible to varying calculations, Adjusted EBITDA, as presented, may not be
directly comparable to other similarly titled measures used by other
companies.

                   
HEALTH MANAGEMENT ASSOCIATES, INC.

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME INFORMATION

(unaudited, in thousands, except per share amounts)
                                                             


The following table provides information regarding income from continuing
operations attributable to Health Management, excluding the impact of the
interest rate swap amortization and mark-to-market adjustments.This table is
a non-GAAP presentation; nonetheless, Health Management believes that
providing this detail is beneficial to investors and other readers of Health
Management's financial statements due to the significant impact these items
had on income from continuing operations attributable to Health Management.
                                       
Three Months Ended March 31, 2013

                                           Interest Rate
                                           Swap
                                           Amortization and
                       Continuing          Mark-To-Market       Total, As
                       Operations          Adjustments          Reported
                                                                
Income from
continuing             $   55,141          $   (17,656   )      $  37,485
operations before
income taxes
Net income from
continuing
operations                (4,665    )        -                 (4,665   )
attributable to
noncontrolling
interests
                                                                
Income from
continuing
operations before
income taxes
attributable to
Health Management          50,476              (17,656   )         32,820
Associates, Inc.
Provision for             (16,560   )        6,842             (9,718   )
income taxes
                                                                
Income from
continuing
operations
attributable to
Health Management
Associates, Inc.
common                 $   33,916         $   (10,814   )      $  23,102   
stockholders
                                                                
                                                                
Earnings per share
from continuing
operations
attributable to
Health Management
Associates, Inc.
common
stockholders:
                                                                
Basic and Diluted      $   0.13           $   (0.04     )      $  0.09     
                                                                
                                                                
Three Months Ended March 31, 2012
                                                                
                                           Interest Rate
                                           Swap
                                           Amortization and
                       Continuing          Mark-To-Market       Total, As
                       Operations          Adjustments          Reported
                                                                
Income from
continuing             $   107,439         $   (36,721   )      $  70,718
operations before
income taxes
Net income from
continuing
operations                (6,906    )        -                 (6,906   )
attributable to
noncontrolling
interests
                                                                
Income from
continuing
operations before
income taxes
attributable to
Health Management          100,533             (36,721   )         63,812
Associates, Inc.
Provision for             (38,956   )        14,229            (24,727  )
income taxes
                                                                
Income from
continuing
operations
attributable to
Health Management
Associates, Inc.
common                 $   61,577         $   (22,492   )      $  39,085   
stockholders
                                                                
                                                                
Earnings per share
from continuing
operations
attributable to
Health Management
Associates, Inc.
common
stockholders:
                                                                
Basic and Diluted      $   0.24           $   (0.09     )      $  0.15     
                                                                            

Contact:

Health Management Associates, Inc.
Robert E. Farnham, 239-598-3131
Senior Vice President, Finance
 
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