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Health Management Announces Second Quarter 2013 Results

  Health Management Announces Second Quarter 2013 Results

Business Wire

NAPLES, Fla. -- August 9, 2013

Health Management Associates, Inc. (NYSE: HMA) today announced its
consolidated financial results for the second quarter ended June 30, 2013.

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

  *As shown in the tables accompanying this press release, diluted earnings
    per share (“EPS”) from continuing operations was $0.03. Excluding the
    impact of approximately $19.3 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 $0.07 per
    diluted share, as compared to $0.21 per diluted share in the prior year;
  *Net revenue was $1.464 billion;
  *Adjusted EBITDA was $181.2 million, which includes $23.2 million of
    Medicare and Medicaid Healthcare Information Technology (“HCIT”) incentive
    payment as well as approximately $9.1 million, or $0.02 per diluted share,
    of severance accruals for certain employment arrangements;
  *Same hospital net revenue was $1.398 billion;
  *Same hospital net revenue per adjusted admission decreased 2.7%;
  *As shown in the accompanying table, same hospital Adjusted EBITDA was
    $247.8 million, or an EBITDA margin of 17.7%; and
  *Same hospital surgeries decreased 2.2% and emergency room visits decreased
    3.1%.

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.

For the second quarter, Health Management’s provision for doubtful accounts
was $240.9 million, or 14.1% of net revenue before the provision for doubtful
accounts, compared to $214.6 million, or 12.7% of net revenue before the
provision of doubtful accounts, for the same quarter a year ago.

Uninsured self-pay patient discounts for the second quarter were $369.0
million, compared to $311.9 million for the same quarter a year ago.
Charity/indigent care write-offs were $28.2 million for the second quarter,
compared to $24.3 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 30.3% for the second quarter, compared to 27.2% for the
second quarter a year ago, and 28.6% for the quarter ended March 31, 2013.
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 second quarter was
$108.3 million, after cash interest and cash tax payments aggregating $61.7
million. At June 30, 2013, Health Management’s total leverage ratio and
interest coverage ratio were 4.1, both being well within its debt covenant
requirements.

Health Management hospitals recognized $23.2 million and $2.9 million of
incentive payments in the three months ended June 30, 2013 and 2012,
respectively.

For the six months ended June 30, 2013, Health Management reported net revenue
of $2.947 billion and Adjusted EBITDA of $380.1 million. As shown in the
tables accompanying this press release, excluding the impact of approximately
$37.0 million, or $0.09 per diluted share, for interest rate swap accounting
as well as mark-to-market adjustments on the swap due to interest rate
conditions, for the six months ended June 30, 2013, diluted earnings per share
from continuing operations were $0.21. Consolidated diluted earnings per share
from continuing operations were $0.12 for the six months ended June 30, 2013.

As previously announced, Community Health Systems, Inc. (NYSE: CYH) (“CHS”)
and Health Management Associates have entered into a definitive merger
agreement pursuant to which CHS will acquire HMA for approximately $7.6
billion, including the assumption of approximately $3.7 billion of
indebtedness. The transaction is expected to close by the end of the first
quarter of 2014 and is subject to approval by a 70 percent vote of Health
Management’s stockholders, antitrust clearance, receipt of other regulatory
approvals, the absence of certain adverse developments, and customary closing
conditions.

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 that Health 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 of Health 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              Six Months Ended
                 June 30,                        June 30,
                 2013           2012            2013           2012
                                                                 
Net revenue
before the
provision for    $ 1,705,267     $ 1,686,541     $ 3,429,108     $ 3,373,059
doubtful
accounts
Provision for
doubtful          (240,926  )    (214,563  )    (481,805  )    (415,824  )
accounts
                                                                 
Net revenue       1,464,341     1,471,978     2,947,303     2,957,235 
                                                                 
                                                                 
Salaries and       681,138         645,933         1,365,329       1,305,017
benefits
Supplies           232,744         226,154         468,512         460,597
Rent expense       43,207          43,839          85,363          88,864
Other
operating          349,238         325,635         675,013         637,415
expenses
Medicare and
Medicaid HCIT      (23,228   )     (2,871    )     (27,054   )     (7,461    )
incentive
payments
Depreciation
and                96,464          85,712          190,339         164,106
amortization
Interest           69,934          75,166          139,363         163,929
expense
Other             (1,841    )    (1,022    )    (3,732    )    618       
                                                                 
                  1,447,656     1,398,546     2,893,133     2,813,085 
                                                                 
Income from
continuing
operations         16,685          73,432          54,170          144,150
before income
taxes
Provision for     (4,662    )    (25,291   )    (14,380   )    (50,018   )
income taxes
                                                                 
Income from
continuing         12,023          48,141          39,790          94,132
operations
Loss from
discontinued
operations,       -             (3,021    )    -             (4,416    )
net of income
taxes
                                                                 
Consolidated       12,023          45,120          39,790          89,716
net income
Net income
attributable
to                (4,654    )    (8,166    )    (9,319    )    (15,072   )
noncontrolling
interests
                                                                 
Net income
attributable
to Health        $ 7,369        $ 36,954       $ 30,471       $ 74,644    
Management
Associates,
Inc.
                                                                 
Earnings per
share
attributable
to Heath
Management
Associates,
Inc. common
stockholders:
Basic and
Diluted:
Continuing       $ 0.03          $ 0.16          $ 0.12          $ 0.31
operations
Discontinued      -             (0.02     )    -             (0.02     )
operations
                                                                 
Net income       $ 0.03         $ 0.14         $ 0.12         $ 0.29      
                                                                 
Weighted
average number
of shares
outstanding:
Basic             258,522       254,496       257,381       253,906   
                                                                 
Diluted           262,620       256,030       261,629       255,864   
                                                                 
Net income
attributable
to Health
Management
Associates,
Inc.
Income from
continuing
operations,      $ 7,369         $ 39,975        $ 30,471        $ 79,060
net of income
taxes
Loss from
discontinued
operations,       -             (3,021    )    -             (4,416    )
net of income
taxes
                                                                 
Net income
attributable
to Health        $ 7,369        $ 36,954       $ 30,471       $ 74,644    
Management
Associates,
Inc.
                                                                             

                                                
HEALTH MANAGEMENT ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)
                                                                  
                                                    Six Months Ended
                                                    June 30,
                                                    2013          2012
Cash flows from operating activities:
  Consolidated net income                           $ 39,790      $ 89,716
  Adjustments to reconcile consolidated net
  income to net cash
    provided by continuing operating activities:
      Depreciation and amortization                   196,385       169,612
      Amortization related to interest rate swap      36,307        40,533
      contract
      Fair value adjustment related to interest       665           18,448
      rate swap contract
      Provision for doubtful accounts                 481,805       415,824
      Stock-based compensation expense                14,441        13,204
      (Gains) losses on sales of assets, net          (1,259   )    2,191
      Gains on sales of available-for-sale            (2,354   )    (583     )
      securities, net
      Write-offs of deferred debt issuance costs      584           -
      Deferred income tax (benefit) expense           24,164        (22,092  )
  Changes in assets and liabilities of continuing
  operations,
    net of the effects of acquisitions:
      Accounts receivable                             (506,697 )    (446,976 )
      Supplies, prepaid expenses and other            168           (2,673   )
      current assets
      Prepaid and recoverable income taxes            (15,976  )    53,931
      Deferred charges and other long-term assets     (5,216   )    18
      Accounts payable, accrued expenses and          (130,736 )    (43,161  )
      other liabilities
  Equity compensation excess income tax benefits      (4,402   )    (1,407   )
  Loss from discontinued operations, net of          -           4,416    
  income taxes
                                                                  
Net cash provided by continuing operating            127,669     291,001  
activities
                                                                  
Cash flows from investing activities:
  Additions to property, plant and equipment          (142,988 )    (194,175 )
  Acquisitions of hospitals and other                 (172,900 )    (66,673  )
  Proceeds from sales of assets and insurance         3,403         1,367
  recoveries
  Proceeds from sales of discontinued operations      -             1,392
  Purchases of available-for-sale securities          (454,468 )    (901,735 )
  Proceeds from sales of available-for-sale           519,135       906,117
  securities
  Decrease (increase) in restricted funds            11,663      (1,783   )
                                                                  
Net cash used in continuing investing activities     (236,155 )   (255,490 )
                                                                  
Cash flows from financing activities:
  Principal payments on debt and capital lease        (248,020 )    (61,072  )
  obligations
  Proceeds from long-term borrowings                  318,400       17,000
  Proceeds from exercise of stock options             25,026        -
  Cash payments to noncontrolling shareholders        (19,715  )    (23,281  )
  Payments for debt issuance costs                    (1,588   )    -
  Cash received from noncontrolling shareholders      -             3,591
  Equity compensation excess income tax benefits     4,402       1,407    
                                                                  
Net cash provided by (used in) continuing            78,505      (62,355  )
financing activities
                                                                  
Net decrease in cash and cash equivalents before
  discontinued operations                             (29,981  )    (26,844  )
Net decreases in cash and cash equivalents from
  discontinued operations:
    Operating activities                              -             (864     )
    Investing activities                             -           (135     )
                                                                  
Net decrease in cash and cash equivalents             (29,981  )    (27,843  )
Cash and cash equivalents at the beginning of the    59,173      64,143   
period
                                                                  
Cash and cash equivalents at the end of the         $ 29,192     $ 36,300   
period
                                                                             

                                                        
HEALTH MANAGEMENT ASSOCIATES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS AND STATISTICS
                                                           
                                             June 30,      December 31,
(unaudited, dollars in thousands)            2013          2012
                                                           
Assets
Current assets:
Cash and cash equivalents                    $ 29,192      $  59,173
Available-for-sale securities                  56,722         121,106
Accounts receivable, net                       990,458        976,872
Other current assets                           330,005        307,847
Assets of discontinued operations              6,250          6,250
Property, plant and equipment, net             3,594,290      3,463,052
Restricted funds                               112,607        125,532
Other assets                                  1,440,392     1,340,957
                                                           
Total assets                                 $ 6,559,916   $  6,400,789
                                                           
                                                           
Liabilities and Stockholders' Equity
Current liabilities                          $ 821,904     $  972,423
Deferred income taxes                          336,912        301,237
Other long-term liabilities                    728,319        673,344
Long-term debt                                 3,578,288      3,433,260
Stockholders' equity                          1,094,493     1,020,525
                                                           
Total liabilities and stockholders' equity   $ 6,559,916   $  6,400,789
                                                              

                                                   
             Three Months Ended June 30,              Six Months Ended June 30,
             2013           2012           %        2013           2012           %
                                             Change                                   Change
Continuing
Operations
Occupancy      37.4      %     39.4      %              39.4      %     41.6      %
Patient        361,464         361,924       -0.1 %     740,830         763,029       -2.9 %
days
                                                                                      
Admissions     84,462          86,467        -2.3 %     170,741         179,845       -5.1 %
Adjusted       172,911         172,194       0.4  %     343,194         350,148       -2.0 %
admissions
                                                                                      
Average
length of      4.3             4.2                      4.3             4.2
stay
Surgeries      99,996          99,808        0.2  %     195,996         199,924       -2.0 %
Emergency
room           452,201         453,964       -0.4 %     908,313         897,079       1.3  %
visits
                                                                                      
Net
revenue      $ 1,464,341     $ 1,471,978     -0.5 %   $ 2,947,303     $ 2,957,235     -0.3 %
(in
thousands)
Net
revenue
per          $ 8,469         $ 8,548         -0.9 %   $ 8,588         $ 8,446         1.7  %
adjusted
admission
Total
inpatient      42.7      %     45.1      %              43.5      %     46.1      %
revenue
percentage
Total
outpatient     57.3      %     54.9      %              56.5      %     53.9      %
revenue
percentage
                                                                                      
Same
Hospitals
Occupancy      37.0      %     39.4      %              39.5      %     41.6      %
Patient        342,085         361,924       -5.5 %     718,002         763,029       -5.9 %
days
                                                                                      
Admissions     80,658          86,467        -6.7 %     165,840         179,845       -7.8 %
Adjusted       168,009         172,194       -2.4 %     335,580         350,148       -4.2 %
admissions
                                                                                      
Average
length of      4.2             4.2                      4.3             4.2
stay
Surgeries      97,605          99,808        -2.2 %     192,580         199,924       -3.7 %
Emergency
room           439,704         453,964       -3.1 %     883,207         897,079       -1.5 %
visits
                                                                                      
Net
revenue      $ 1,398,084     $ 1,471,978     -5.0 %   $ 2,868,116     $ 2,957,235     -3.0 %
(in
thousands)
Net
revenue
per          $ 8,321         $ 8,548         -2.7 %   $ 8,547         $ 8,446         1.2  %
adjusted
admission
Total
inpatient      42.2      %     45.1      %              43.3      %     46.1      %
revenue
percentage
Total
outpatient     57.8      %     54.9      %              56.7      %     53.9      %
revenue
percentage
                                                                                      

                                                            
HEALTH MANAGEMENT ASSOCIATES, INC.

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME INFORMATION

(unaudited, dollars in thousands)
                                                                 
                 Three Months Ended              Six Months Ended
                 June 30,                        June 30,
                 2013            2012            2013            2012
                                                                 
Net revenue      $ 1,464,341     $ 1,471,978     $ 2,947,303     $ 2,957,235
Less              66,257        -             79,187        -         
acquisitions
                                                                 
Same hospital    $ 1,398,084    $ 1,471,978    $ 2,868,116    $ 2,957,235 
net revenue
                                                                 
                                                                 
Consolidated     $ 12,023        $ 45,120        $ 39,790        $ 89,716
net income
                                                                 
Adjustments:
Loss from
discontinued
operations,        -               3,021           -               4,416
net of income
taxes
Provision for      4,662           25,291          14,380          50,018
income taxes
(Gains) losses
on sales of        (1,169    )     (146      )     (1,259    )     2,191
assets, net
Interest and
other income,      (672      )     (876      )     (2,473    )     (1,573    )
net
Interest           69,934          75,166          139,363         163,929
expense
Depreciation
and               96,464        85,712        190,339       164,106   
amortization
                                                                 
Adjusted           181,242         233,288         380,140         472,803
EBITDA (a)
                                                                 
Adjustment for
acquisitions,     66,554        53,977        146,048       109,139   
corporate and
other
                                                                 
Same hospital
operating        $ 247,796      $ 287,265      $ 526,188      $ 581,942   
Adjusted
EBITDA (a)
                                                                 
Same hospital
operating
Adjusted
EBITDA margins
=
Same hospital
operating
Adjusted          17.7      %    19.5      %    18.3      %    19.7      %
EBITDA / Same
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 tables provide information regarding income from continuing
operations attributable to Health Management,
excluding the impact of the interest rate swap amortization and mark-to-market
adjustments. These tables are 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 June 30, 2013
                                              Interest Rate Swap
                                              Amortization and
                                Continuing    Mark-To-Market       Total, As
                                Operations    Adjustments          Reported
                                                                   
Income from continuing
operations before income        $ 36,001      $    (19,316   )     $ 16,685
taxes
Net income from continuing
operations attributable to       (4,654  )       -               (4,654  )
noncontrolling interests
                                                                   
Income from continuing
operations before income
taxes attributable to
Health Management Associates,     31,347           (19,316   )       12,031
Inc.
Provision for income taxes       (12,147 )       7,485           (4,662  )
                                                                   
Income from continuing
operations attributable to
Health Management
Associates, Inc. common         $ 19,200     $    (11,831   )     $ 7,369   
stockholders
                                                                   
                                                                   
Earnings per share from
continuing operations
attributable to
Health Management Associates,
Inc. common stockholders:
                                                                   
Basic and Diluted               $ 0.07       $    (0.04     )     $ 0.03    
                                                                   
                                                                   
Three Months Ended June 30, 2012
                                                                   
                                              Interest Rate Swap
                                              Amortization and
                                Continuing    Mark-To-Market       Total, As
                                Operations    Adjustments          Reported
                                                                   
Income from continuing
operations before income        $ 95,692      $    (22,260   )     $ 73,432
taxes
Net income from continuing
operations attributable to       (8,166  )       -               (8,166  )
noncontrolling interests
                                                                   
Income from continuing
operations before income
taxes attributable to
Health Management Associates,     87,526           (22,260   )       65,266
Inc.
Provision for income taxes       (33,917 )       8,626           (25,291 )
                                                                   
Income from continuing
operations attributable to
Health Management
Associates, Inc. common         $ 53,609     $    (13,634   )     $ 39,975  
stockholders
                                                                   
                                                                   
Earnings per share from
continuing operations
attributable to
Health Management Associates,
Inc. common stockholders:
                                                                   
Basic and Diluted               $ 0.21       $    (0.05     )     $ 0.16    

                                                               
HEALTH MANAGEMENT ASSOCIATES, INC.

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME INFORMATION

(unaudited, in thousands, except per share amounts)
                                                                   
Six Months Ended June 30, 2013
                                                                   
                                              Interest Rate Swap
                                              Amortization and
                                Continuing    Mark-To-Market       Total, As
                                Operations    Adjustments          Reported
                                                                   
Income from continuing
operations before income        $ 91,142      $    (36,972   )     $ 54,170
taxes
Net income from continuing
operations attributable to       (9,319  )       -               (9,319  )
noncontrolling interests
                                                                   
Income from continuing
operations before income
taxes attributable to
Health Management Associates,     81,823           (36,972   )       44,851
Inc.
Provision for income taxes       (28,707 )       14,327          (14,380 )
                                                                   
Income from continuing
operations attributable to
Health Management
Associates, Inc. common         $ 53,116     $    (22,645   )     $ 30,471  
stockholders
                                                                   
                                                                   
Earnings per share from
continuing operations
attributable to
Health Management Associates,
Inc. common stockholders:
                                                                   
Basic and Diluted               $ 0.21       $    (0.09     )     $ 0.12    
                                                                   
                                                                   
                                                                   
Six Months Ended June 30, 2012
                                                                   
                                              Interest Rate Swap
                                              Amortization and
                                Continuing    Mark-To-Market       Total, As
                                Operations    Adjustments          Reported
                                                                   
Income from continuing
operations before income        $ 203,131     $    (58,981   )     $ 144,150
taxes
Net income from continuing
operations attributable to       (15,072 )       -               (15,072 )
noncontrolling interests
                                                                   
Income from continuing
operations before income
taxes attributable to
Health Management Associates,     188,059          (58,981   )       129,078
Inc.
Provision for income taxes       (72,873 )       22,855          (50,018 )
                                                                   
Income from continuing
operations attributable to
Health Management
Associates, Inc. common         $ 115,186    $    (36,126   )     $ 79,060  
stockholders
                                                                   
                                                                   
Earnings per share from
continuing operations
attributable to
Health Management Associates,
Inc. common stockholders:
                                                                   
Basic and Diluted               $ 0.45       $    (0.14     )     $ 0.31    

Contact:

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