UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2016
Or
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-11239
HCA Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 27-3865930 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
One Park Plaza Nashville, Tennessee |
37203 | |
(Address of principal executive offices) | (Zip Code) |
(615) 344-9551
(Registrants telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
x |
Accelerated filer |
¨ | |||
Non-accelerated filer |
¨ (Do not check if a smaller reporting company) |
Smaller reporting company |
¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuers classes of common stock as of the latest practicable date.
Class of Common Stock |
Outstanding at October 31, 2016 | |
Voting common stock, $.01 par value | 374,685,700 shares |
HCA HOLDINGS, INC.
Form 10-Q
Page of Form 10-Q |
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Part I. |
Financial Information | |||||
Item 1. |
Financial Statements (Unaudited): | |||||
2 | ||||||
3 | ||||||
Condensed Consolidated Balance Sheets September 30, 2016 and December 31, 2015 |
4 | |||||
5 | ||||||
6 | ||||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
29 | ||||
Item 3. |
48 | |||||
Item 4. |
48 | |||||
Part II. |
Other Information | |||||
Item 1. |
48 | |||||
Item 1A. |
49 | |||||
Item 2. |
50 | |||||
Item 6. |
51 | |||||
52 |
1
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
Unaudited
(Dollars in millions, except per share amounts)
Quarter | Nine Months | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues before provision for doubtful accounts |
$ | 11,110 | $ | 11,014 | $ | 33,241 | $ | 32,268 | ||||||||
Provision for doubtful accounts |
840 | 1,158 | 2,392 | 2,839 | ||||||||||||
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Revenues |
10,270 | 9,856 | 30,849 | 29,429 | ||||||||||||
Salaries and benefits |
4,740 | 4,619 | 14,133 | 13,509 | ||||||||||||
Supplies |
1,699 | 1,644 | 5,131 | 4,952 | ||||||||||||
Other operating expenses |
1,897 | 1,796 | 5,627 | 5,268 | ||||||||||||
Electronic health record incentive income |
(1 | ) | (9 | ) | (10 | ) | (46 | ) | ||||||||
Equity in earnings of affiliates |
(22 | ) | (9 | ) | (44 | ) | (38 | ) | ||||||||
Depreciation and amortization |
495 | 482 | 1,463 | 1,424 | ||||||||||||
Interest expense |
432 | 411 | 1,275 | 1,255 | ||||||||||||
Losses (gains) on sales of facilities |
(3 | ) | 2 | (8 | ) | (2 | ) | |||||||||
Losses on retirement of debt |
4 | | 4 | 125 | ||||||||||||
Legal claim costs |
11 | 77 | 33 | 77 | ||||||||||||
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9,252 | 9,013 | 27,604 | 26,524 | |||||||||||||
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Income before income taxes |
1,018 | 843 | 3,245 | 2,905 | ||||||||||||
Provision for income taxes |
273 | 270 | 898 | 947 | ||||||||||||
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Net income |
745 | 573 | 2,347 | 1,958 | ||||||||||||
Net income attributable to noncontrolling interests |
127 | 124 | 377 | 411 | ||||||||||||
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Net income attributable to HCA Holdings, Inc. |
$ | 618 | $ | 449 | $ | 1,970 | $ | 1,547 | ||||||||
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Per share data: |
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Basic earnings per share |
$ | 1.63 | $ | 1.08 | $ | 5.09 | $ | 3.71 | ||||||||
Diluted earnings per share |
$ | 1.59 | $ | 1.05 | $ | 4.93 | $ | 3.60 | ||||||||
Shares used in earnings per share calculations (in millions): |
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Basic |
378.199 | 414.939 | 386.968 | 417.146 | ||||||||||||
Diluted |
389.592 | 426.441 | 399.577 | 430.354 |
See accompanying notes.
2
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS
FOR THE QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
Unaudited
(Dollars in millions)
Quarter | Nine Months | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income |
$ | 745 | $ | 573 | $ | 2,347 | $ | 1,958 | ||||||||
Other comprehensive income (loss) before taxes: |
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Foreign currency translation |
(40 | ) | (54 | ) | (169 | ) | (41 | ) | ||||||||
Unrealized gains (losses) on available-for-sale securities |
(2 | ) | 2 | 3 | (2 | ) | ||||||||||
Defined benefit plans |
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Pension costs included in salaries and benefits |
4 | 6 | 13 | 17 | ||||||||||||
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4 | 6 | 13 | 17 | |||||||||||||
Change in fair value of derivative financial instruments |
13 | (17 | ) | (57 | ) | (47 | ) | |||||||||
Interest costs included in interest expense |
28 | 31 | 84 | 93 | ||||||||||||
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41 | 14 | 27 | 46 | |||||||||||||
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Other comprehensive income (loss) before taxes |
3 | (32 | ) | (126 | ) | 20 | ||||||||||
Income taxes (benefits) related to other comprehensive income items |
| (13 | ) | (50 | ) | 6 | ||||||||||
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Other comprehensive income (loss) |
3 | (19 | ) | (76 | ) | 14 | ||||||||||
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Comprehensive income |
748 | 554 | 2,271 | 1,972 | ||||||||||||
Comprehensive income attributable to noncontrolling interests |
127 | 124 | 377 | 411 | ||||||||||||
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Comprehensive income attributable to HCA Holdings, Inc. |
$ | 621 | $ | 430 | $ | 1,894 | $ | 1,561 | ||||||||
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See accompanying notes.
3
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(Dollars in millions)
September 30, 2016 |
December 31, 2015 |
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ASSETS | ||||||||
Current assets: |
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Cash and cash equivalents |
$ | 677 | $ | 741 | ||||
Accounts receivable, less allowance for doubtful accounts of $5,011 and $5,326 |
5,503 | 5,889 | ||||||
Inventories |
1,503 | 1,439 | ||||||
Other |
1,160 | 1,163 | ||||||
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8,843 | 9,232 | |||||||
Property and equipment, at cost |
36,449 | 34,614 | ||||||
Accumulated depreciation |
(20,574 | ) | (19,600 | ) | ||||
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15,875 | 15,014 | |||||||
Investments of insurance subsidiaries |
354 | 432 | ||||||
Investments in and advances to affiliates |
216 | 178 | ||||||
Goodwill and other intangible assets |
6,691 | 6,731 | ||||||
Other |
1,148 | 1,157 | ||||||
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$ | 33,127 | $ | 32,744 | |||||
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LIABILITIES AND STOCKHOLDERS DEFICIT | ||||||||
Current liabilities: |
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Accounts payable |
$ | 1,950 | $ | 2,170 | ||||
Accrued salaries |
1,241 | 1,233 | ||||||
Other accrued expenses |
1,748 | 1,880 | ||||||
Long-term debt due within one year |
216 | 233 | ||||||
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5,155 | 5,516 | |||||||
Long-term debt, less net debt issuance costs of $178 and $167 |
31,225 | 30,255 | ||||||
Professional liability risks |
1,164 | 1,115 | ||||||
Income taxes and other liabilities |
1,746 | 1,904 | ||||||
Stockholders deficit: |
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Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 376,140,800 shares in 2016 and 398,738,700 shares in 2015 |
4 | 4 | ||||||
Accumulated other comprehensive loss |
(341 | ) | (265 | ) | ||||
Retained deficit |
(7,426 | ) | (7,338 | ) | ||||
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Stockholders deficit attributable to HCA Holdings, Inc. |
(7,763 | ) | (7,599 | ) | ||||
Noncontrolling interests |
1,600 | 1,553 | ||||||
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(6,163 | ) | (6,046 | ) | |||||
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$ | 33,127 | $ | 32,744 | |||||
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See accompanying notes.
4
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
Unaudited
(Dollars in millions)
2016 | 2015 | |||||||
Cash flows from operating activities: |
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Net income |
$ | 2,347 | $ | 1,958 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Increase (decrease) in cash from operating assets and liabilities: |
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Accounts receivable |
(2,044 | ) | (2,976 | ) | ||||
Provision for doubtful accounts |
2,392 | 2,839 | ||||||
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Accounts receivable, net |
348 | (137 | ) | |||||
Inventories and other assets |
(161 | ) | (205 | ) | ||||
Accounts payable and accrued expenses |
(341 | ) | (152 | ) | ||||
Depreciation and amortization |
1,463 | 1,424 | ||||||
Income taxes |
8 | (148 | ) | |||||
Gains on sales of facilities |
(8 | ) | (2 | ) | ||||
Losses on retirement of debt |
4 | 125 | ||||||
Legal claim costs |
33 | 77 | ||||||
Amortization of debt issuance costs |
26 | 27 | ||||||
Share-based compensation |
196 | 171 | ||||||
Other |
39 | 38 | ||||||
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Net cash provided by operating activities |
3,954 | 3,176 | ||||||
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Cash flows from investing activities: |
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Purchase of property and equipment |
(1,884 | ) | (1,571 | ) | ||||
Acquisition of hospitals and health care entities |
(468 | ) | (184 | ) | ||||
Disposal of hospitals and health care entities |
23 | 27 | ||||||
Change in investments |
78 | 94 | ||||||
Other |
17 | 3 | ||||||
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Net cash used in investing activities |
(2,234 | ) | (1,631 | ) | ||||
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Cash flows from financing activities: |
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Issuances of long-term debt |
5,400 | 4,048 | ||||||
Net change in revolving bank credit facilities |
(70 | ) | (270 | ) | ||||
Repayment of long-term debt |
(4,424 | ) | (3,702 | ) | ||||
Distributions to noncontrolling interests |
(342 | ) | (367 | ) | ||||
Payment of debt issuance costs |
(40 | ) | (34 | ) | ||||
Repurchases of common stock |
(2,213 | ) | (1,386 | ) | ||||
Other |
(95 | ) | 188 | |||||
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Net cash used in financing activities |
(1,784 | ) | (1,523 | ) | ||||
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Change in cash and cash equivalents |
(64 | ) | 22 | |||||
Cash and cash equivalents at beginning of period |
741 | 566 | ||||||
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Cash and cash equivalents at end of period |
$ | 677 | $ | 588 | ||||
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Interest payments |
$ | 1,339 | $ | 1,349 | ||||
Income tax payments, net |
$ | 890 | $ | 864 |
See accompanying notes.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Reporting Entity
HCA Holdings, Inc. is a holding company whose affiliates own and operate hospitals and related health care entities. The term affiliates includes direct and indirect subsidiaries of HCA Holdings, Inc. and partnerships and joint ventures in which such subsidiaries are partners. At September 30, 2016, these affiliates owned and operated 169 hospitals, 117 freestanding surgery centers and provided extensive outpatient and ancillary services. HCA Holdings, Inc.s facilities are located in 20 states and England. The terms Company, HCA, we, our or us, as used herein and unless otherwise stated or indicated by context, refer to HCA Holdings, Inc. and its affiliates. The terms facilities or hospitals refer to entities owned and operated by affiliates of HCA and the term employees refers to employees of affiliates of HCA.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal and recurring nature.
The majority of our expenses are costs of revenues items. Costs that could be classified as general and administrative would include our corporate office costs, which were $94 million and $79 million for the quarters ended September 30, 2016 and 2015, respectively, and $272 million and $237 million for the nine months ended September 30, 2016 and 2015, respectively. Operating results for the quarter and the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. For further information, refer to the consolidated financial statements and footnotes thereto included in our annual report on Form 10-K for the year ended December 31, 2015.
6
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenues
Revenues are recorded during the period the health care services are provided, based upon the estimated amounts due from the patients and third-party payers. Third-party payers include federal and state agencies (under Medicare, Medicaid and other programs), managed care health plans (including the health insurance exchanges), commercial insurance companies and employers. Estimates of contractual allowances under managed care health plans are based upon the payment terms specified in the related contractual agreements. Revenues related to uninsured patients and copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts). We also record a provision for doubtful accounts related to uninsured accounts to record the net self-pay revenues at the estimated amounts we expect to collect. Our revenues from third-party payers, the uninsured and other payers for the quarters and nine months ended September 30, 2016 and 2015 are summarized in the following table (dollars in millions):
Quarter | ||||||||||||||||
2016 | Ratio | 2015 | Ratio | |||||||||||||
Medicare |
$ | 2,158 | 21.0 | % | $ | 2,122 | 21.5 | % | ||||||||
Managed Medicare |
1,068 | 10.4 | 1,031 | 10.5 | ||||||||||||
Medicaid |
405 | 3.9 | 402 | 4.1 | ||||||||||||
Managed Medicaid |
611 | 6.0 | 553 | 5.6 | ||||||||||||
Managed care and other insurers |
5,863 | 57.1 | 5,457 | 55.4 | ||||||||||||
International (managed care and other insurers) |
285 | 2.8 | 316 | 3.2 | ||||||||||||
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10,390 | 101.2 | 9,881 | 100.3 | |||||||||||||
Uninsured |
336 | 3.3 | 695 | 7.0 | ||||||||||||
Other |
384 | 3.7 | 438 | 4.4 | ||||||||||||
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Revenues before provision for doubtful accounts |
11,110 | 108.2 | 11,014 | 111.7 | ||||||||||||
Provision for doubtful accounts |
(840 | ) | (8.2 | ) | (1,158 | ) | (11.7 | ) | ||||||||
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Revenues |
$ | 10,270 | 100.0 | % | $ | 9,856 | 100.0 | % | ||||||||
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2016 | Ratio | 2015 | Ratio | |||||||||||||
Medicare |
$ | 6,641 | 21.5 | % | $ | 6,500 | 22.1 | % | ||||||||
Managed Medicare |
3,250 | 10.5 | 3,099 | 10.5 | ||||||||||||
Medicaid |
1,248 | 4.0 | 1,262 | 4.3 | ||||||||||||
Managed Medicaid |
1,816 | 5.9 | 1,673 | 5.7 | ||||||||||||
Managed care and other insurers |
17,324 | 56.2 | 16,134 | 54.8 | ||||||||||||
International (managed care and other insurers) |
926 | 3.0 | 964 | 3.3 | ||||||||||||
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31,205 | 101.1 | 29,632 | 100.7 | |||||||||||||
Uninsured |
750 | 2.4 | 1,321 | 4.5 | ||||||||||||
Other |
1,286 | 4.2 | 1,315 | 4.5 | ||||||||||||
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Revenues before provision for doubtful accounts |
33,241 | 107.7 | 32,268 | 109.7 | ||||||||||||
Provision for doubtful accounts |
(2,392 | ) | (7.7 | ) | (2,839 | ) | (9.7 | ) | ||||||||
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Revenues |
$ | 30,849 | 100.0 | % | $ | 29,429 | 100.0 | % | ||||||||
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Recent Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board issued a final, converged, principles-based standard on revenue recognition. Companies across
7
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Pronouncements (continued)
all industries will use a five-step model to recognize revenue from customer contracts. The new standard, which replaces nearly all existing United States Generally Accepted Accounting Principles (US GAAP) and International Financial Reporting Standards revenue recognition guidance, will require significant management judgment in addition to changing the way many companies recognize revenue in their financial statements. The standard was originally scheduled to become effective for public entities for annual and interim periods beginning after December 15, 2016. Early adoption was originally not to be permitted under US GAAP. In July 2015, the FASB decided to defer the effective date of the new revenue standard by one year, but will permit entities to adopt one year earlier if they choose (i.e., the original effective date). The FASB decided, based on its outreach to various stakeholders and continuing amendments to the new revenue standard, that a deferral was necessary to provide adequate time to effectively implement the new standard. We are continuing to evaluate the effects the adoption of this standard will have on our financial statements and financial disclosures, and we do not believe the adoption will have a significant impact on our recognition of net revenues.
In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (ASU 2016-02), which requires lessees to recognize assets and liabilities for most leases. ASU 2016-02 is effective for public business entities for annual and interim periods beginning after December 15, 2018 (calendar year 2019). Early adoption is permitted. ASU 2016-02s transition provisions will be applied using a modified retrospective approach at the beginning of the earliest comparative period presented in the financial statements. We are currently evaluating the provisions of ASU 2016-02 to determine how our financial statements will be affected, and we believe the primary effect of adopting the new standard will be to record assets and obligations for current operating leases.
In March 2016, the FASB issued Accounting Standards Update 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (ASU 2016-05), which clarified that a novation of a derivative contract in a hedge accounting relationship does not, in and of itself, represent a termination of the original derivative instrument or a change in the critical terms of the hedge relationship. We elected to adopt ASU 2016-05 prospectively effective January 1, 2016.
In March 2016, the FASB issued Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting (ASU 2016-09), which requires changes to how companies account for certain aspects of share-based payments to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. We elected to adopt ASU 2016-09 prospectively effective January 1, 2016.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
NOTE 2 ACQUISITIONS AND DISPOSITIONS
During the nine months ended September 30, 2016, we paid $343 million to acquire three hospital facilities and $125 million to acquire other nonhospital health care entities. During the nine months ended September 30, 2015, we paid $15 million to acquire a hospital and $169 million to acquire other nonhospital health care entities.
During the nine months ended September 30, 2016, we received proceeds of $23 million and recognized a net pretax gain of $8 million related to sales of real estate and other investments. During the nine months ended September 30, 2015, we received proceeds of $27 million and recognized a net pretax gain of $2 million related to sales of real estate and other investments.
8
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3 INCOME TAXES
Our liability for unrecognized tax benefits was $414 million, including accrued interest of $41 million, as of September 30, 2016 ($554 million and $73 million, respectively, as of December 31, 2015). Unrecognized tax benefits of $136 million ($233 million as of December 31, 2015) would affect the effective rate, if recognized.
Our provision for income taxes for the quarter and nine months ended September 30, 2016 included tax benefits of $11 million and $129 million, respectively, related to the adoption of ASU 2016-09, which changes how companies account for certain aspects of share-based payments to employees. Under ASU 2016-09, we no longer record excess tax benefits (when the deductible amount related to the settlement of employee equity awards for tax purposes exceeds the cumulative compensation cost recognized for financial reporting purposes) in equity. Instead, we recognize these tax benefits (and deficiencies, if applicable) as a component of our tax provision. This reporting change is applied prospectively and prior period amounts are not restated (the excess tax benefits for the quarter and nine months ending September 30, 2015, related to the settlement of employee equity awards, were $34 million and $219 million, respectively, and were recorded in equity). ASU 2016-09 requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity, as previously required. We have elected to apply the change to the statement of cash flows presentation prospectively.
During the quarter ended September 30, 2016, the IRS completed its examination, resolving all outstanding federal tax issues for our 2011 and 2012 tax years. We reduced our provision for income taxes for the quarter and the nine months ended September 30, 2016 by $51 million, including interest of $27 million ($17 million, net of tax) primarily as a result of this resolution. We are also subject to examination by state and foreign taxing authorities. Depending on the resolution of any federal, state and foreign tax disputes, the completion of examinations by federal, state or foreign taxing authorities, or the expiration of statutes of limitation for specific taxing jurisdictions, we believe it is reasonably possible that our liability for unrecognized tax benefits may significantly increase or decrease within the next 12 months. However, we are currently unable to estimate the range of any possible change.
NOTE 4 EARNINGS PER SHARE
We compute basic earnings per share using the weighted average number of common shares outstanding. We compute diluted earnings per share using the weighted average number of common shares outstanding, plus the dilutive effect of outstanding equity awards and potential shares, computed using the treasury stock method.
The following table sets forth the computation of basic and diluted earnings per share for the quarters and nine months ended September 30, 2016 and 2015 (dollars and shares in millions, except per share amounts):
Quarter | Nine Months | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income attributable to HCA Holdings, Inc. |
$ | 618 | $ | 449 | $ | 1,970 | $ | 1,547 | ||||||||
Weighted average common shares outstanding |
378.199 | 414.939 | 386.968 | 417.146 | ||||||||||||
Effect of dilutive incremental shares |
11.393 | 11.502 | 12.609 | 13.208 | ||||||||||||
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Shares used for diluted earnings per share |
389.592 | 426.441 | 399.577 | 430.354 | ||||||||||||
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|
|
|||||||||
Earnings per share: |
||||||||||||||||
Basic earnings per share |
$ | 1.63 | $ | 1.08 | $ | 5.09 | $ | 3.71 | ||||||||
Diluted earnings per share |
$ | 1.59 | $ | 1.05 | $ | 4.93 | $ | 3.60 |
9
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5 INVESTMENTS OF INSURANCE SUBSIDIARIES
A summary of our insurance subsidiaries investments at September 30, 2016 and December 31, 2015 follows (dollars in millions):
September 30, 2016 | ||||||||||||||||
Amortized Cost |
Unrealized Amounts |
Fair Value |
||||||||||||||
Gains | Losses | |||||||||||||||
Debt securities: |
||||||||||||||||
States and municipalities |
$ | 368 | $20 | $ | $ | 388 | ||||||||||
Money market funds |
11 | | | 11 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
379 | 20 | | 399 | |||||||||||||
Equity securities |
1 | 3 | | 4 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 380 | $23 | $ | 403 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Amounts classified as current assets |
(49 | ) | ||||||||||||||
|
|
|||||||||||||||
Investment carrying value |
$ | 354 | ||||||||||||||
|
|
|||||||||||||||
December 31, 2015 | ||||||||||||||||
Amortized Cost |
Unrealized Amounts |
Fair Value |
||||||||||||||
Gains | Losses | |||||||||||||||
Debt securities: |
||||||||||||||||
States and municipalities |
$ | 428 | $17 | $(1 | ) | $ | 444 | |||||||||
Money market funds |
34 | | | 34 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
462 | 17 | (1 | ) | 478 | ||||||||||||
Equity securities |
| 4 | | 4 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 462 | $21 | $(1 | ) | 482 | |||||||||||
|
|
|
|
|
|
|||||||||||
Amounts classified as current assets |
(50 | ) | ||||||||||||||
|
|
|||||||||||||||
Investment carrying value |
$ | 432 | ||||||||||||||
|
|
At September 30, 2016 and December 31, 2015, the investments of our insurance subsidiaries were classified as available-for-sale. Changes in temporary unrealized gains and losses are recorded as adjustments to other comprehensive income (loss).
Scheduled maturities of investments in debt securities at September 30, 2016 were as follows (dollars in millions):
Amortized Cost |
Fair Value |
|||||||
Due in one year or less |
$ | 66 | $ | 66 | ||||
Due after one year through five years |
123 | 127 | ||||||
Due after five years through ten years |
140 | 152 | ||||||
Due after ten years |
50 | 54 | ||||||
|
|
|
|
|||||
$ | 379 | $ | 399 | |||||
|
|
|
|
10
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5 INVESTMENTS OF INSURANCE SUBSIDIARIES (continued)
The average expected maturity of the investments in debt securities at September 30, 2016 was 3.9 years, compared to the average scheduled maturity of 5.6 years. Expected and scheduled maturities may differ because the issuers of certain securities have the right to call, prepay or otherwise redeem such obligations prior to their scheduled maturity date.
NOTE 6 FINANCIAL INSTRUMENTS
Interest Rate Swap Agreements
We have entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates. These swap agreements involve the exchange of fixed and variable rate interest payments between two parties based on common notional principal amounts and maturity dates. Pay-fixed interest rate swaps effectively convert LIBOR indexed variable rate obligations to fixed interest rate obligations. The interest payments under these agreements are settled on a net basis. The net interest payments, based on the notional amounts in these agreements, generally match the timing of the related liabilities for the interest rate swap agreements which have been designated as cash flow hedges. The notional amounts of the swap agreements represent amounts used to calculate the exchange of cash flows and are not our assets or liabilities. Our credit risk related to these agreements is considered low because the swap agreements are with creditworthy financial institutions.
The following table sets forth our interest rate swap agreements, which have been designated as cash flow hedges, at September 30, 2016 (dollars in millions):
Notional Amount |
Maturity Date | Fair Value |
||||||||||
Pay-fixed interest rate swaps |
$ | 3,000 | December 2016 | $ | (22 | ) | ||||||
Pay-fixed interest rate swaps |
1,000 | December 2017 | (18 | ) | ||||||||
Pay-fixed interest rate swaps (starting in December 2016) |
2,000 | December 2021 | (43 | ) |
During the next 12 months, we estimate $48 million will be reclassified from other comprehensive income (OCI) to interest expense.
Derivatives Results of Operations
The following table presents the effect of our interest rate swaps on our results of operations for the nine months ended September 30, 2016 (dollars in millions):
Derivatives in Cash Flow Hedging Relationships |
Amount of Loss Recognized in OCI on Derivatives, Net of Tax |
Location of
Loss Reclassified from Accumulated OCI into Operations |
Amount of
Loss Reclassified from Accumulated OCI into Operations |
|||||||||
Interest rate swaps |
$ | 36 | Interest expense | $ | 84 |
Credit-risk-related Contingent Features
We have agreements with each of our derivative counterparties that contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of September 30, 2016, we have not been required to post any collateral related to these agreements. If we had breached these provisions at September 30, 2016, we would have been required to settle our obligations under the agreements at their aggregate, estimated termination value of $85 million.
11
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 7 ASSETS AND LIABILITIES MEASURED AT FAIR VALUE
Accounting Standards Codification 820, Fair Value Measurements and Disclosures (ASC 820) emphasizes fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs classified within Levels 1 and 2 of the hierarchy) and the reporting entitys own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates and yield curves observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entitys own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
Cash Traded Investments
Our cash traded investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Certain types of cash traded instruments are classified within Level 3 of the fair value hierarchy because they trade infrequently and therefore have little or no price transparency. The valuation of these securities involves managements judgment, after consideration of market factors and the absence of market transparency, market liquidity and observable inputs. Our valuation models derived fair market values compared to tax-equivalent yields of other securities of similar credit worthiness and similar effective maturities.
Derivative Financial Instruments
We have entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. We incorporate credit valuation adjustments to reflect both our own nonperformance risk and the respective counterpartys nonperformance risk in the fair value measurements.
Although we determined the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. We assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions, and at September 30, 2016 and December 31, 2015, we determined the credit valuation adjustments were not significant to the overall valuation of our derivatives.
12
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 7 ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)
The following tables summarize our assets and liabilities measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2015, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):
September 30, 2016 | ||||||||||||||||
Fair Value | Fair Value Measurements Using | |||||||||||||||
Quoted Prices
in Active Markets for Identical Assets and Liabilities (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||||
Assets: |
||||||||||||||||
Investments of insurance subsidiaries: |
||||||||||||||||
Debt securities: |
||||||||||||||||
States and municipalities |
$ | 388 | $ | | $ | 382 | $ | 6 | ||||||||
Money market funds |
11 | 11 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
399 | 11 | 382 | 6 | |||||||||||||
Equity securities |
4 | 4 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Investments of insurance subsidiaries |
403 | 15 | 382 | 6 | ||||||||||||
Less amounts classified as current assets |
(49 | ) | (11 | ) | (38 | ) | | |||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 354 | $ | 4 | $ | 344 | $ | 6 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Interest rate swaps (Income taxes and other liabilities) |
$ | 83 | $ | | $ | 83 | $ | | ||||||||
December 31, 2015 | ||||||||||||||||
Fair Value Measurements Using | ||||||||||||||||
Fair Value | Quoted Prices
in Active Markets for Identical Assets and Liabilities (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||||||
Assets: |
||||||||||||||||
Investments of insurance subsidiaries: |
||||||||||||||||
Debt securities: |
||||||||||||||||
States and municipalities |
$ | 444 | $ | | $ | 438 | $ | 6 | ||||||||
Money market funds |
34 | 34 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
478 | 34 | 438 | 6 | |||||||||||||
Equity securities |
4 | 4 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Investments of insurance subsidiaries |
482 | 38 | 438 | 6 | ||||||||||||
Less amounts classified as current assets |
(50 | ) | (34 | ) | (16 | ) | | |||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 432 | $ | 4 | $ | 422 | $ | 6 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Interest rate swaps (Income taxes and other liabilities) |
$ | 110 | $ | | $ | 110 | $ | |
13
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 7 ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)
The estimated fair value of our long-term debt was $33.343 billion and $31.411 billion at September 30, 2016 and December 31, 2015, respectively, compared to carrying amounts, excluding net debt issuance costs, aggregating $31.619 billion and $30.655 billion, respectively. The estimates of fair value are generally based upon the quoted market prices or quoted market prices for similar issues of long-term debt with the same maturities.
NOTE 8 LONG-TERM DEBT
A summary of long-term debt at September 30, 2016 and December 31, 2015, including related interest rates at September 30, 2016, follows (dollars in millions):
September 30, 2016 |
December 31, 2015 |
|||||||
Senior secured asset-based revolving credit facility (effective interest rate |
$ | 2,960 | $ | 3,030 | ||||
Senior secured revolving credit facility |
| | ||||||
Senior secured term loan facilities (effective interest rate of 5.1%) |
4,005 | 5,639 | ||||||
Senior secured first lien notes (effective interest rate of 5.4%) |
13,800 | 11,100 | ||||||
Other senior secured debt (effective interest rate of 5.7%) |
602 | 634 | ||||||
|
|
|
|
|||||
First lien debt |
21,367 | 20,403 | ||||||
Senior unsecured notes (effective interest rate of 6.5%) |
10,252 | 10,252 | ||||||
Net debt issuance costs |
(178 | ) | (167 | ) | ||||
|
|
|
|
|||||
Total debt (average life of 6.6 years, rates averaging 5.5%) |
31,441 | 30,488 | ||||||
Less amounts due within one year |
216 | 233 | ||||||
|
|
|
|
|||||
$ | 31,225 | $ | 30,255 | |||||
|
|
|
|
2016 Activity
During August 2016, we issued $1.200 billion aggregate principal amount of 4.500% senior secured notes due 2027. We used the net proceeds for general corporate purposes and to retire a portion of one of our senior secured term loans. We also entered into a joinder agreement to retire the remaining portion of this senior secured term loan using proceeds from a new $1.200 billion senior secured term loan facility maturing in February 2024. The pretax loss on retirement of debt was $4 million.
During March 2016, we issued $1.500 billion aggregate principal amount of 5.250% senior secured notes due 2026. We used the net proceeds for general corporate purposes and to retire a portion of one of our senior secured term loans. We also entered into a joinder agreement to retire the remaining portion of this senior secured term loan using proceeds from a new $1.500 billion senior secured term loan facility maturing in March 2023.
2015 Activity
During December 2015, we issued $500 million aggregate principal amount of 5.875% senior notes due 2026. We used the net proceeds for general corporate purposes.
14
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8 LONG-TERM DEBT (continued)
2015 Activity (continued)
During November 2015, we issued $1.000 billion aggregate principal amount of 5.875% senior notes due 2026. We used the net proceeds to redeem all $1.000 billion aggregate principal amount of our outstanding 6.500% senior notes due 2016.
During June 2015, we entered into a joinder agreement to retire certain of our existing senior secured term loans using proceeds from a new $1.400 billion senior secured term loan credit facility maturing in June 2020. The pretax loss on retirement of debt was $3 million.
During May 2015, we issued $1.600 billion aggregate principal amount of 5.375% senior notes due 2025. We used the net proceeds to redeem all $1.525 billion aggregate principal amount of our outstanding 7 3/4% senior notes due 2021. The pretax loss on retirement of debt related to this redemption was $122 million.
During January 2015, we issued $1.000 billion aggregate principal amount of 5.375% senior notes due 2025. We used a portion of the net proceeds to repay at maturity our $750 million aggregate principal amount of 6.375% senior notes due 2015.
NOTE 9 CONTINGENCIES AND LEGAL CLAIM COSTS
We operate in a highly regulated and litigious industry. As a result, various lawsuits, claims and legal and regulatory proceedings have been and can be expected to be instituted or asserted against us. We are also subject to claims and suits arising in the ordinary course of business, including claims for personal injuries or wrongful restriction of, or interference with, physicians staff privileges. In certain of these actions the claimants may seek punitive damages against us which may not be covered by insurance. We are subject to claims for additional taxes and related interest and penalties. The resolution of any such lawsuits, claims or legal and regulatory proceedings could have a material, adverse effect on our results of operations, financial position or liquidity.
Government Investigations, Claims and Litigation
Health care companies are subject to numerous investigations by various governmental agencies. Further, under the federal False Claims Act (FCA), private parties have the right to bring qui tam, or whistleblower, suits against companies that submit false claims for payments to, or improperly retain overpayments from, the government. Some states have adopted similar state whistleblower and false claims provisions. Certain of our individual facilities have received, and from time to time, other facilities may receive, government inquiries from, and may be subject to investigation by, federal and state agencies. Depending on whether the underlying conduct in these or future inquiries or investigations could be considered systemic, their resolution could have a material, adverse effect on our results of operations, financial position or liquidity.
On April 2, 2014, the UK Competition and Markets Authority (Authority) issued a final report on its investigation of the private health care market in London. It concluded, among other things, that many private hospitals face little competition in central London, and that there are high barriers to entry. As part of its remedies package, the Authority ordered HCA to sell either: (a) its London Bridge and Princess Grace hospitals; or (b) its Wellington Hospital, including the Platinum Medical Centre. It also imposed other remedial conditions on HCA and other private health care providers, including: regulation of incentives to referring physicians; increased access to information about fees and performance; and restrictions on future arrangements between private providers and National Health Service private patient units. HCA disagrees with the Authoritys
15
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9 CONTINGENCIES AND LEGAL CLAIM COSTS (continued)
Government Investigations, Claims and Litigation (continued)
assessment of the competitive conditions for hospitals in London, as well as its proposed divestiture remedy, and appealed the decision to the Competition Appeal Tribunal. The Competition Appeal Tribunal overturned certain of the Authoritys findings and sent the matter back to the Authority for further proceedings. In November 2015, following consideration of additional evidence, the Authority issued a provisional decision that again found there were adverse effects on competition in the private hospital market in central London. The November 2015 provisional decision modified some of the Authoritys earlier factual conclusions and acknowledged certain mitigating factors for some of the effects noted in the prior decision. The November 2015 provisional decision also offered additional potential remedies, which continued to include divestment of one or more of HCAs London hospitals. Following a period of consultation on the potential additional remedies, the Authority concluded, in a provisional decision issued March 22, 2016, that none of the additional remedies, including divestiture, would be both effective and proportionate. A final decision was issued on September 5, 2016 confirming the terms of the provisional decision. No appeal has been notified by the Competition Appeal Tribunal as of yet. Third parties have until November 4, 2016 to challenge the decision (subject to any extensions).
Health Midwest Litigation
In October 2009, the Health Care Foundation of Greater Kansas City, a nonprofit health foundation, filed suit against HCA Inc. in the Circuit Court of Jackson County, Missouri and alleged that HCA did not fund the level of capital expenditures and uncompensated care agreed to in connection with HCAs purchase of hospitals from Health Midwest in 2003. The central issue in the case was whether HCAs construction of new hospitals counted towards its $450 million five-year capital commitment. In addition, the plaintiff alleged that HCA did not make its required capital expenditures in a timely fashion. On January 24, 2013, the court ruled in favor of the plaintiff and awarded at least $162 million. The court also ordered a court-supervised accounting of HCAs capital expenditures, as well as of expenditures on charity and uncompensated care during the ten years following the purchase. The court also indicated it would award plaintiff attorneys fees, which the parties have stipulated are approximately $12 million for the trial phase. HCA recorded $175 million of legal claim costs in the fourth quarter of 2012 related to this ruling, and, consistent with the judges order, began accruing interest on that sum at 9% per annum. On April 25, 2014, the parties stipulated to an additional $78 million shortfall relating to the capital expenditures issue. HCA recorded $78 million of legal claims costs in the first quarter of 2014 as a result of the stipulation, and accrued interest on that amount at 9% per annum. Pursuant to the terms of the stipulation, the parties preserved their respective rights to contest the judges underlying ruling, whether through motions in the trial court or on appeal. On February 9, 2015, the parties reached an agreement to settle the part of their dispute relating to charity and uncompensated care for $15 million. The foundation is required to use that amount, net of attorneys fees, for charitable activities in the Kansas City area. The parties also agreed on an additional amount for attorneys fees for the plaintiff for the accounting phase of the case. The parties filed post-trial motions, on which the court ruled on October 21, 2015. The court denied defendants motion to have the court change its rulings on liability and damages related to the capital expenditures issue. The court granted the plaintiffs motion for an award of additional pre-judgment interest, but did not specify whether the interest awarded was simple interest or would be compounded. The court subsequently concluded that interest was to be compounded, and on December 9, 2015, the court entered judgment in the case in the total sum of $434 million, with interest continuing to accrue at 9% per annum, compounded annually, from and after November 19, 2015, until the matter is resolved. At September 30, 2016, the Company had accrued liabilities of $468 million for the damages, costs and interest related to this litigation. On January 15, 2016, the Company filed a Notice of Appeal in the Missouri Court of Appeals for the Western District. The Court of Appeals has scheduled December 20, 2016 for oral arguments.
16
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 10 CAPITAL STRUCTURE
The changes in stockholders deficit, including changes in stockholders deficit attributable to HCA Holdings, Inc. and changes in equity attributable to noncontrolling interests, are as follows (dollars and shares in millions):
Equity (Deficit) Attributable to HCA Holdings, Inc. | Equity Attributable to Noncontrolling Interests |
Total | ||||||||||||||||||||||||||
Common Stock | Capital in Excess of Par Value |
Accumulated Other Comprehensive Loss |
Retained Deficit |
|||||||||||||||||||||||||
Shares | Par Value | |||||||||||||||||||||||||||
Balances at December 31, 2015 |
398.739 | $ | 4 | $ | | $ | (265 | ) | $ | (7,338 | ) | $ | 1,553 | $ | (6,046 | ) | ||||||||||||
Comprehensive income |
| | | (76 | ) | 1,970 | 377 | 2,271 | ||||||||||||||||||||
Repurchase of common stock |
(29.064 | ) | | (155 | ) | | (2,058 | ) | | (2,213 | ) | |||||||||||||||||
Distributions |
| | | | | (342 | ) | (342 | ) | |||||||||||||||||||
Share-based benefit plans |
6.466 | | 157 | | | | 157 | |||||||||||||||||||||
Other |
| | (2 | ) | | | 12 | 10 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balances at September 30, 2016 |
376.141 | $ | 4 | $ | | $ | (341 | ) | $ | (7,426 | ) | $ | 1,600 | $ | (6,163 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On October 26, 2015, our board of directors authorized a share repurchase program for up to $3 billion of our outstanding common stock. During May 2016, the Company repurchased 9.361 million shares of its common stock beneficially owned by affiliates of Kohlberg Kravis Roberts & Co. at a purchase price of $80.12 per share, the closing price of the Companys common stock on the New York Stock Exchange on May 10, 2016, less a discount of 1%. During the nine months ended September 30, 2016, we also repurchased 19.703 million shares of our common stock at an average price of $74.28 per share through market purchases, resulting in total repurchases of 29.064 million shares of our common stock at an average price of $76.16 per share for the nine months ended September 30, 2016 pursuant to the $3.0 billion share repurchase program authorized during October 2015. At September 30, 2016, we had $390 million of repurchase authorization available under the October 2015 authorization.
The components of accumulated other comprehensive loss are as follows (dollars in millions):
Unrealized Gains on Available- for-Sale Securities |
Foreign Currency Translation Adjustments |
Defined Benefit Plans |
Change in Fair Value of Derivative Instruments |
Total | ||||||||||||||||
Balances at December 31, 2015 |
$ | 13 | $ | (74 | ) | $ | (135 | ) | $ | (69 | ) | $ | (265 | ) | ||||||
Unrealized gains on available-for-sale securities, net of $1 of income taxes |
2 | | | | 2 | |||||||||||||||
Foreign currency translation adjustments, net of $66 income tax benefit |
| (103 | ) | | | (103 | ) | |||||||||||||
Change in fair value of derivative instruments, net of $21 income tax benefit |
| | | (36 | ) | (36 | ) | |||||||||||||
Expense reclassified into operations from other comprehensive income, net of $5 and $31, respectively, income tax benefits |
| | 8 | 53 | 61 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balances at September 30, 2016 |
$ | 15 | $ | (177 | ) | $ | (127 | ) | $ | (52 | ) | $ | (341 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
17
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 11 SEGMENT AND GEOGRAPHIC INFORMATION
We operate in one line of business, which is operating hospitals and related health care entities. We operate in two geographically organized groups: the National and American Groups. The National Group includes 84 hospitals located in Alaska, California, Florida, southern Georgia, Idaho, Indiana, northern Kentucky, Nevada, New Hampshire, South Carolina, Utah and Virginia, and the American Group includes 79 hospitals located in Colorado, northern Georgia, Kansas, southern Kentucky, Louisiana, Mississippi, Missouri, Oklahoma, Tennessee and Texas. We also operate six hospitals in England, and these facilities are included in the Corporate and other group.
Adjusted segment EBITDA is defined as income before depreciation and amortization, interest expense, losses (gains) on sales of facilities, losses on retirement of debt, legal claim costs, income taxes and net income attributable to noncontrolling interests. We use adjusted segment EBITDA as an analytical indicator for purposes of allocating resources to geographic areas and assessing their performance. Adjusted segment EBITDA is commonly used as an analytical indicator within the health care industry, and also serves as a measure of leverage capacity and debt service ability. Adjusted segment EBITDA should not be considered as a measure of financial performance under generally accepted accounting principles, and the items excluded from adjusted segment EBITDA are significant components in understanding and assessing financial performance. Because adjusted segment EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, adjusted segment EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. The geographic distributions of our revenues, equity in earnings of affiliates, adjusted segment EBITDA and depreciation and amortization for the quarters and nine months ended September 30, 2016 and 2015 are summarized in the following table (dollars in millions):
Quarter | Nine Months | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues: |
||||||||||||||||
National Group |
$ | 4,882 | $ | 4,580 | $ | 14,780 | $ | 13,928 | ||||||||
American Group |
4,904 | 4,772 | 14,539 | 13,972 | ||||||||||||
Corporate and other |
484 | 504 | 1,530 | 1,529 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 10,270 | $ | 9,856 | $ | 30,849 | $ | 29,429 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Equity in earnings of affiliates: |
||||||||||||||||
National Group |
$ | (13 | ) | $ | (1 | ) | $ | (17 | ) | $ | (8 | ) | ||||
American Group |
(9 | ) | (9 | ) | (26 | ) | (25 | ) | ||||||||
Corporate and other |
| 1 | (1 | ) | (5 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | (22 | ) | $ | (9 | ) | $ | (44 | ) | $ | (38 | ) | |||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted segment EBITDA: |
||||||||||||||||
National Group |
$ | 1,073 | $ | 920 | $ | 3,342 | $ | 3,089 | ||||||||
American Group |
1,018 | 1,036 | 3,005 | 3,029 | ||||||||||||
Corporate and other |
(134 | ) | (141 | ) | (335 | ) | (334 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 1,957 | $ | 1,815 | $ | 6,012 | $ | 5,784 | |||||||||
|
|
|
|
|
|
|
|
18
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 11 SEGMENT AND GEOGRAPHIC INFORMATION (continued)
Quarter | Nine Months | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Depreciation and amortization: |
||||||||||||||||
National Group |
$ | 204 | $ | 195 | $ | 602 | $ | 572 | ||||||||
American Group |
230 | 219 | 673 | 662 | ||||||||||||
Corporate and other |
61 | 68 | 188 | 190 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 495 | $ | 482 | $ | 1,463 | $ | 1,424 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted segment EBITDA |
$ | 1,957 | $ | 1,815 | $ | 6,012 | $ | 5,784 | ||||||||
Depreciation and amortization |
495 | 482 | 1,463 | 1,424 | ||||||||||||
Interest expense |
432 | 411 | 1,275 | 1,255 | ||||||||||||
Losses (gains) on sales of facilities |
(3 | ) | 2 | (8 | ) | (2 | ) | |||||||||
Losses on retirement of debt |
4 | | 4 | 125 | ||||||||||||
Legal claim costs |
11 | 77 | 33 | 77 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes |
$ | 1,018 | $ | 843 | $ | 3,245 | $ | 2,905 | ||||||||
|
|
|
|
|
|
|
|
NOTE 12 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
During November 2010, HCA Holdings, Inc. issued $1.525 billion aggregate principal amount of 7 3/4% senior unsecured notes due 2021, which were redeemed in full during May 2015. During December 2012, HCA Holdings, Inc. issued $1.000 billion aggregate principal amount of 6.250% senior unsecured notes due 2021. These notes are senior unsecured obligations and are not guaranteed by any of our subsidiaries.
HCA Inc., a direct wholly-owned subsidiary of HCA Holdings, Inc., is the obligor under a significant portion of our other indebtedness, including our senior secured credit facilities, senior secured notes and senior unsecured notes (other than the senior unsecured notes issued by HCA Holdings, Inc.). The senior secured notes and senior unsecured notes issued by HCA Inc. are fully and unconditionally guaranteed by HCA Holdings, Inc. The senior secured credit facilities and senior secured notes are fully and unconditionally guaranteed by substantially all existing and future, direct and indirect, 100% owned material domestic subsidiaries that are Unrestricted Subsidiaries under our Indenture dated December 16, 1993 (except for certain special purpose subsidiaries that only guarantee and pledge their assets under our senior secured asset-based revolving credit facility).
19
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
Our summarized condensed consolidating comprehensive income statements for the quarters and nine months ended September 30, 2016 and 2015, condensed consolidating balance sheets at September 30, 2016 and December 31, 2015 and condensed consolidating statements of cash flows for the nine months ended September 30, 2016 and 2015, segregating HCA Holdings, Inc. issuer, HCA Inc. issuer, the subsidiary guarantors, the subsidiary non-guarantors and eliminations, follow:
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT
FOR THE QUARTER ENDED SEPTEMBER 30, 2016
(Dollars in millions)
HCA Holdings, Inc. Issuer |
HCA Inc. Issuer |
Subsidiary Guarantors |
Subsidiary Non- Guarantors |
Eliminations | Condensed Consolidated |
|||||||||||||||||||
Revenues before provision for doubtful accounts |
$ | | $ | | $ | 5,591 | $ | 5,519 | $ | | $ | 11,110 | ||||||||||||
Provision for doubtful accounts |
| | 391 | 449 | | 840 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Revenues |
| | 5,200 | 5,070 | | 10,270 | ||||||||||||||||||
Salaries and benefits |
| | 2,373 | 2,367 | | 4,740 | ||||||||||||||||||
Supplies |
| | 888 | 811 | | 1,699 | ||||||||||||||||||
Other operating expenses |
1 | | 905 | 991 | | 1,897 | ||||||||||||||||||
Electronic health record incentive income |
| | (1 | ) | | | (1 | ) | ||||||||||||||||
Equity in earnings of affiliates |
(573 | ) | | (1 | ) | (21 | ) | 573 | (22 | ) | ||||||||||||||
Depreciation and amortization |
| | 242 | 253 | | 495 | ||||||||||||||||||
Interest expense |
16 | 711 | (235 | ) | (60 | ) | | 432 | ||||||||||||||||
Gains on sales of facilities |
| | | (3 | ) | | (3 | ) | ||||||||||||||||
Losses on retirement of debt |
| 4 | | | | 4 | ||||||||||||||||||
Legal claim costs |
| 11 | | | | 11 | ||||||||||||||||||
Management fees |
| | (206 | ) | 206 | | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(556 | ) | 726 | 3,965 | 4,544 | 573 | 9,252 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
556 | (726 | ) | 1,235 | 526 | (573 | ) | 1,018 | ||||||||||||||||
Provision (benefit) for income taxes |
(62 | ) | (268 | ) | 447 | 156 | | 273 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
618 | (458 | ) | 788 | 370 | (573 | ) | 745 | ||||||||||||||||
Net income attributable to noncontrolling interests |
| | 24 | 103 | | 127 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) attributable to HCA Holdings, Inc. |
$ | 618 | $ | (458 | ) | $ | 764 | $ | 267 | $ | (573 | ) | $ | 618 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income (loss) attributable to HCA Holdings, Inc. |
$ | 621 | $ | (432 | ) | $ | 766 | $ | 242 | $ | (576 | ) | $ | 621 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
20
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT
FOR THE QUARTER ENDED SEPTEMBER 30, 2015
(Dollars in millions)
HCA Holdings, Inc. Issuer |
HCA Inc. Issuer |
Subsidiary Guarantors |
Subsidiary Non- Guarantors |
Eliminations | Condensed Consolidated |
|||||||||||||||||||
Revenues before provision for doubtful accounts |
$ | | $ | | $ | 5,721 | $ | 5,293 | $ | | $ | 11,014 | ||||||||||||
Provision for doubtful accounts |
| | 689 | 469 | | 1,158 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Revenues |
| | 5,032 | 4,824 | | 9,856 | ||||||||||||||||||
Salaries and benefits |
| | 2,357 | 2,262 | | 4,619 | ||||||||||||||||||
Supplies |
| | 853 | 791 | | 1,644 | ||||||||||||||||||
Other operating expenses |
7 | | 865 | 924 | | 1,796 | ||||||||||||||||||
Electronic health record incentive income |
| | (6 | ) | (3 | ) | | (9 | ) | |||||||||||||||
Equity in earnings of affiliates |
(464 | ) | | (1 | ) | (8 | ) | 464 | (9 | ) | ||||||||||||||
Depreciation and amortization |
| | 230 | 252 | | 482 | ||||||||||||||||||
Interest expense |
16 | 608 | (156 | ) | (57 | ) | | 411 | ||||||||||||||||
Losses (gains) on sales of facilities |
| | (1 | ) | 3 | | 2 | |||||||||||||||||
Legal claim costs |
| 77 | | | | 77 | ||||||||||||||||||
Management fees |
| | (178 | ) | 178 | | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(441 | ) | 685 | 3,963 | 4,342 | 464 | 9,013 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
441 | (685 | ) | 1,069 | 482 | (464 | ) | 843 | ||||||||||||||||
Provision (benefit) for income taxes |
(8 | ) | (258 | ) | 394 | 142 | | 270 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
449 | (427 | ) | 675 | 340 | (464 | ) | 573 | ||||||||||||||||
Net income attributable to noncontrolling interests |
| | 21 | 103 | | 124 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) attributable to HCA Holdings, Inc. |
$ | 449 | $ | (427 | ) | $ | 654 | $ | 237 | $ | (464 | ) | $ | 449 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income (loss) attributable to HCA Holdings, Inc. |
$ | 430 | $ | (418 | ) | $ | 657 | $ | 206 | $ | (445 | ) | $ | 430 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
21
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(Dollars in millions)
HCA Holdings, Inc. Issuer |
HCA Inc. Issuer |
Subsidiary Guarantors |
Subsidiary Non- Guarantors |
Eliminations | Condensed Consolidated |
|||||||||||||||||||
Revenues before provision for doubtful accounts |
$ | | $ | | $ | 16,957 | $ | 16,284 | $ | | $ | 33,241 | ||||||||||||
Provision for doubtful accounts |
| | 1,383 | 1,009 | | 2,392 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Revenues |
| | 15,574 | 15,275 | | 30,849 | ||||||||||||||||||
Salaries and benefits |
| | 7,074 | 7,059 | | 14,133 | ||||||||||||||||||
Supplies |
| | 2,672 | 2,459 | | 5,131 | ||||||||||||||||||
Other operating expenses |
5 | | 2,660 | 2,962 | | 5,627 | ||||||||||||||||||
Electronic health record incentive income |
| | (6 | ) | (4 | ) | | (10 | ) | |||||||||||||||
Equity in earnings of affiliates |
(1,843 | ) | | (4 | ) | (40 | ) | 1,843 | (44 | ) | ||||||||||||||
Depreciation and amortization |
| | 707 | 756 | | 1,463 | ||||||||||||||||||
Interest expense |
48 | 2,031 | (646 | ) | (158 | ) | | 1,275 | ||||||||||||||||
Gains on sales of facilities |
| | | (8 | ) | | (8 | ) | ||||||||||||||||
Losses on retirement of debt |
| 4 | | | | 4 | ||||||||||||||||||
Legal claim costs |
| 33 | | | | 33 | ||||||||||||||||||
Management fees |
| | (601 | ) | 601 | | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(1,790 | ) | 2,068 | 11,856 | 13,627 | 1,843 | 27,604 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
1,790 | (2,068 | ) | 3,718 | 1,648 | (1,843 | ) | 3,245 | ||||||||||||||||
Provision (benefit) for income taxes |
(180 | ) | (763 | ) | 1,347 | 494 | | 898 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
1,970 | (1,305 | ) | 2,371 | 1,154 | (1,843 | ) | 2,347 | ||||||||||||||||
Net income attributable to noncontrolling interests |
| | 67 | 310 | | 377 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) attributable to HCA Holdings, Inc. |
$ | 1,970 | $ | (1,305 | ) | $ | 2,304 | $ | 844 | $ | (1,843 | ) | $ | 1,970 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income (loss) attributable to HCA Holdings, Inc. |
$ | 1,894 | $ | (1,288 | ) | $ | 2,312 | $ | 743 | $ | (1,767 | ) | $ | 1,894 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
22
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(Dollars in millions)
HCA Holdings, Inc. Issuer |
HCA Inc. Issuer |
Subsidiary Guarantors |
Subsidiary Non- Guarantors |
Eliminations | Condensed Consolidated |
|||||||||||||||||||
Revenues before provision for doubtful accounts |
$ | | $ | | $ | 16,519 | $ | 15,749 | $ | | $ | 32,268 | ||||||||||||
Provision for doubtful accounts |
| | 1,535 | 1,304 | | 2,839 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Revenues |
| | 14,984 | 14,445 | | 29,429 | ||||||||||||||||||
Salaries and benefits |
| | 6,824 | 6,685 | | 13,509 | ||||||||||||||||||
Supplies |
| | 2,576 | 2,376 | | 4,952 | ||||||||||||||||||
Other operating expenses |
9 | | 2,523 | 2,736 | | 5,268 | ||||||||||||||||||
Electronic health record incentive income |
| | (31 | ) | (15 | ) | | (46 | ) | |||||||||||||||
Equity in earnings of affiliates |
(1,690 | ) | | (4 | ) | (34 | ) | 1,690 | (38 | ) | ||||||||||||||
Depreciation and amortization |
| | 683 | 741 | | 1,424 | ||||||||||||||||||
Interest expense |
100 | 1,807 | (498 | ) | (154 | ) | | 1,255 | ||||||||||||||||
Losses (gains) on sales of facilities |
| | (5 | ) | 3 | | (2 | ) | ||||||||||||||||
Losses on retirement of debt |
122 | 3 | | | | 125 | ||||||||||||||||||
Legal claim costs |
| 77 | | | | 77 | ||||||||||||||||||
Management fees |
| | (534 | ) | 534 | | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(1,459 | ) | 1,887 | 11,534 | 12,872 | 1,690 | 26,524 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
1,459 | (1,887 | ) | 3,450 | 1,573 | (1,690 | ) | 2,905 | ||||||||||||||||
Provision (benefit) for income taxes |
(88 | ) | (716 | ) | 1,284 | 467 | | 947 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
1,547 | (1,171 | ) | 2,166 | 1,106 | (1,690 | ) | 1,958 | ||||||||||||||||
Net income attributable to noncontrolling interests |
| | 68 | 343 | | 411 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) attributable to HCA Holdings, Inc. |
$ | 1,547 | $ | (1,171 | ) | $ | 2,098 | $ | 763 | $ | (1,690 | ) | $ | 1,547 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income (loss) attributable to HCA Holdings, Inc. |
$ | 1,561 | $ | (1,142 | ) | $ | 2,109 | $ | 737 | $ | (1,704 | ) | $ | 1,561 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
23
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2016
(Dollars in millions)
HCA Holdings, Inc. Issuer |
HCA
Inc. Issuer |
Subsidiary Guarantors |
Subsidiary Non- Guarantors |
Eliminations | Condensed Consolidated |
|||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 1 | $ | | $ | 138 | $ | 538 | $ | | $ | 677 | ||||||||||||
Accounts receivable, net |
| | 2,844 | 2,659 | | 5,503 | ||||||||||||||||||
Inventories |
| | 905 | 598 | | 1,503 | ||||||||||||||||||
Other |
| | 534 | 626 | | 1,160 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
1 | | 4,421 | 4,421 | | 8,843 | |||||||||||||||||||
Property and equipment, net |
| | 8,681 | 7,194 | | 15,875 | ||||||||||||||||||
Investments of insurance subsidiaries |
| | | 354 | | 354 | ||||||||||||||||||
Investments in and advances to affiliates |
26,147 | | 16 | 200 | (26,147 | ) | 216 | |||||||||||||||||
Goodwill and other intangible assets |
| | 1,710 | 4,981 | | 6,691 | ||||||||||||||||||
Other |
962 | | 21 | 165 | | 1,148 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 27,110 | $ | | $ | 14,849 | $ | 17,315 | $ | (26,147 | ) | $ | 33,127 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY |
||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Accounts payable |
$ | | $ | | $ | 1,152 | $ | 798 | $ | | $ | 1,950 | ||||||||||||
Accrued salaries |
| | 689 | 552 | | 1,241 | ||||||||||||||||||
Other accrued expenses |
15 | 294 | 541 | 898 | | 1,748 | ||||||||||||||||||
Long-term debt due within one year |
| 97 | 60 | 59 | | 216 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
15 | 391 | 2,442 | 2,307 | | 5,155 | |||||||||||||||||||
Long-term debt, net |
993 | 29,749 | 200 | 283 | | 31,225 | ||||||||||||||||||
Intercompany balances |
33,451 | (10,811 | ) | (25,144 | ) | 2,504 | | | ||||||||||||||||
Professional liability risks |
| | | 1,164 | | 1,164 | ||||||||||||||||||
Income taxes and other liabilities |
414 | 551 | 362 | 419 | | 1,746 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
34,873 | 19,880 | (22,140 | ) | 6,677 | | 39,290 | ||||||||||||||||||
Stockholders (deficit) equity attributable to HCA Holdings, Inc. |
(7,763 | ) | (19,880 | ) | 36,840 | 9,187 | (26,147 | ) | (7,763 | ) | ||||||||||||||
Noncontrolling interests |
| | 149 | 1,451 | | 1,600 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(7,763 | ) | (19,880 | ) | 36,989 | 10,638 | (26,147 | ) | (6,163 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 27,110 | $ | | $ | 14,849 | $ | 17,315 | $ | (26,147 | ) | $ | 33,127 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
24
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2015
(Dollars in millions)
HCA Holdings, Inc. Issuer |
HCA Inc. Issuer |
Subsidiary Guarantors |
Subsidiary Non- Guarantors |
Eliminations | Condensed Consolidated |
|||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | | $ | 155 | $ | 586 | $ | | $ | 741 | ||||||||||||
Accounts receivable, net |
| | 2,982 | 2,907 | | 5,889 | ||||||||||||||||||
Inventories |
| | 852 | 587 | | 1,439 | ||||||||||||||||||
Other |
223 | | 403 | 537 | | 1,163 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
223 | | 4,392 | 4,617 | | 9,232 | |||||||||||||||||||
Property and equipment, net |
| | 8,328 | 6,686 | | 15,014 | ||||||||||||||||||
Investments of insurance subsidiaries |
| | | 432 | | 432 | ||||||||||||||||||
Investments in and advances to affiliates |
24,380 | | 14 | 164 | (24,380 | ) | 178 | |||||||||||||||||
Goodwill and other intangible assets |
| | 1,703 | 5,028 | | 6,731 | ||||||||||||||||||
Other |
943 | | 19 | 195 | | 1,157 | ||||||||||||||||||
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$ | 25,546 | $ | | $ | 14,456 | $ | 17,122 | $ | (24,380 | ) | $ | 32,744 | ||||||||||||
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LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY |
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Current liabilities: |
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Accounts payable |
$ | 2 | $ | | $ | 1,375 | $ | 793 | $ | | $ | 2,170 | ||||||||||||
Accrued salaries |
| | 712 | 521 | | 1,233 | ||||||||||||||||||
Other accrued expenses |
172 | 340 | 458 | 910 | | 1,880 | ||||||||||||||||||
Long-term debt due within one year |
| 114 | 65 | 54 | | 233 | ||||||||||||||||||
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174 | 454 | 2,610 | 2,278 | | 5,516 | |||||||||||||||||||
Long-term debt, net |
984 | 28,756 | 226 | 289 | | 30,255 | ||||||||||||||||||
Intercompany balances |
31,432 | (11,171 | ) | (23,435 | ) | 3,174 | | | ||||||||||||||||
Professional liability risks |
| | | 1,115 | | 1,115 | ||||||||||||||||||
Income taxes and other liabilities |
555 | 548 | 417 | 384 | | 1,904 | ||||||||||||||||||
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33,145 | 18,587 | (20,182 | ) | 7,240 | | 38,790 | ||||||||||||||||||
Stockholders (deficit) equity attributable to HCA Holdings, Inc. |
(7,599 | ) | (18,587 | ) | 34,510 | 8,457 | (24,380 | ) | (7,599 | ) | ||||||||||||||
Noncontrolling interests |
| | 128 | 1,425 | | 1,553 | ||||||||||||||||||
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(7,599 | ) | (18,587 | ) | 34,638 | 9,882 | (24,380 | ) | (6,046 | ) | |||||||||||||||
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$ | 25,546 | $ | | $ | 14,456 | $ | 17,122 | $ | (24,380 | ) | $ | 32,744 | ||||||||||||
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25
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(Dollars in millions)
HCA Holdings, Inc. Issuer |
HCA Inc. Issuer |
Subsidiary Guarantors |
Subsidiary Non- Guarantors |
Eliminations | Condensed Consolidated |
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Cash flows from operating activities: |
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Net income (loss) |
$ | 1,970 | $ | (1,305 | ) | $ | 2,371 | $ | 1,154 | $ | (1,843 | ) | $ | 2,347 | ||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
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Changes in operating assets and liabilities |
(40 | ) | (49 | ) | (1,628 | ) | (829 | ) | | (2,546 | ) | |||||||||||||
Provision for doubtful accounts |
| | 1,383 | 1,009 | | 2,392 | ||||||||||||||||||
Depreciation and amortization |
| | 707 | 756 | | 1,463 | ||||||||||||||||||
Income taxes |
8 | | | | | 8 | ||||||||||||||||||
Gains on sales of facilities |
| | | (8 | ) | | (8 | ) | ||||||||||||||||
Losses on retirement of debt |
| 4 | | | | 4 | ||||||||||||||||||
Legal claim costs |
| 33 | | | | 33 | ||||||||||||||||||
Amortization of debt issuance costs |
| 26 | | | | 26 | ||||||||||||||||||
Share-based compensation |
| | 196 | | | 196 | ||||||||||||||||||
Equity in earnings of affiliates |
(1,843 | ) | | | | 1,843 | | |||||||||||||||||
Other |
53 | | (3 | ) | (11 | ) | | 39 | ||||||||||||||||
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Net cash provided by (used in) operating activities |
148 | (1,291 | ) | 3,026 | 2,071 | | 3,954 | |||||||||||||||||
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Cash flows from investing activities: |
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Purchase of property and equipment |
| | (892 | ) | (992 | ) | | (1,884 | ) | |||||||||||||||
Acquisition of hospitals and health care entities |
| | (164 | ) | (304 | ) | | (468 | ) | |||||||||||||||
Disposition of hospitals and health care entities |
| | 10 | 13 | | 23 | ||||||||||||||||||
Change in investments |
| | (2 | ) | 80 | | 78 | |||||||||||||||||
Other |
| | | 17 | | 17 | ||||||||||||||||||
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Net cash used in investing activities |
| | (1,048 | ) | (1,186 | ) | | (2,234 | ) | |||||||||||||||
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Cash flows from financing activities: |
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Issuance of long-term debt |
| 5,400 | | | | 5,400 | ||||||||||||||||||
Net change in revolving credit facilities |
| (70 | ) | | | | (70 | ) | ||||||||||||||||
Repayment of long-term debt |
| (4,334 | ) | (54 | ) | (36 | ) | | (4,424 | ) | ||||||||||||||
Distributions to noncontrolling interests |
| | (46 | ) | (296 | ) | | (342 | ) | |||||||||||||||
Payment of debt issuance costs |
| (40 | ) | | | | (40 | ) | ||||||||||||||||
Repurchases of common stock |
(2,213 | ) | | | | | (2,213 | ) | ||||||||||||||||
Changes in intercompany balances with affiliates, net |
2,171 | 335 | (1,895 | ) | (611 | ) | | | ||||||||||||||||
Other |
(105 | ) | | | 10 | | (95 | ) | ||||||||||||||||
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Net cash (used in) provided by financing activities |
(147 | ) | 1,291 | (1,995 | ) | (933 | ) | | (1,784 | ) | ||||||||||||||
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Change in cash and cash equivalents |
1 | | (17 | ) | (48 | ) | | (64 | ) | |||||||||||||||
Cash and cash equivalents at beginning of period |
| | 155 | 586 | | 741 | ||||||||||||||||||
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Cash and cash equivalents at end of period |
$ | 1 | $ | | $ | 138 | $ | 538 | $ | | $ | 677 | ||||||||||||
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26
HCA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(Dollars in millions)
HCA Holdings, Inc. Issuer |
HCA Inc. Issuer |
Subsidiary Guarantors |
Subsidiary Non- Guarantors |
Eliminations | Condensed Consolidated |
|||||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||||||||||
Net income (loss) |
$ | 1,547 | $ | (1,171 | ) | $ | 2,166 | $ | 1,106 | $ | (1,690 | ) | $ | 1,958 | ||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||||||||||||||||||
Changes in operating assets and liabilities |
(22 | ) | (56 | ) | (1,959 | ) | (1,296 | ) | | (3,333 | ) | |||||||||||||
Provision for doubtful accounts |
| | 1,535 | 1,304 | | 2,839 | ||||||||||||||||||
Depreciation and amortization |
| | 683 | 741 | | 1,424 | ||||||||||||||||||
Income taxes |
(148 | ) | | | | | (148 | ) | ||||||||||||||||
Losses (gains) on sales of facilities |
| | (5 | ) | 3 | | (2 | ) | ||||||||||||||||
Losses on retirement of debt |
122 | 3 | | | | 125 | ||||||||||||||||||
Legal claim costs |
| 77 | | | | 77 | ||||||||||||||||||
Amortization of debt issuance costs |
3 | 24 | | | | 27 | ||||||||||||||||||
Share-based compensation |
| | 171 | | | 171 | ||||||||||||||||||
Equity in earnings of affiliates |
(1,690 | ) | | | | 1,690 | | |||||||||||||||||
Other |
49 | 3 | | (14 | ) | | 38 | |||||||||||||||||
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Net cash (used in) provided by operating activities |
(139 | ) | (1,120 | ) | 2,591 | 1,844 | | 3,176 | ||||||||||||||||
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Cash flows from investing activities: |
||||||||||||||||||||||||
Purchase of property and equipment |
| | (764 | ) | (807 | ) | | (1,571 | ) | |||||||||||||||
Acquisition of hospitals and health care entities |
| | (51 | ) | (133 | ) |