e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
June 30,
2011
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number 1-11239
HCA Holdings, Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
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27-3865930
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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One Park Plaza
Nashville, Tennessee
(Address of principal
executive offices)
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37203
(Zip
Code)
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(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 þ No o
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 þ No o
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. (Check one):
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Large
accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer þ
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Smaller
reporting
company o
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(Do not check if a 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 o No þ
Indicate the number of shares outstanding of each of the
issuers classes of common stock as of the latest
practicable date.
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Class of Common Stock
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Outstanding at July 31, 2011
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Voting common stock, $.01 par value
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517,179,600 shares
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HCA
HOLDINGS, INC.
Form 10-Q
June 30, 2011
2
(Dollars
in millions, except per share amounts)
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Quarter
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Six Months
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2011
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2010
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2011
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2010
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Revenues
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$
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8,063
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$
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7,756
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$
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16,118
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$
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15,300
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Salaries and benefits
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3,320
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3,076
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6,615
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6,148
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Supplies
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1,295
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1,251
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2,570
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2,451
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Other operating expenses
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1,326
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1,226
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2,648
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2,428
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Provision for doubtful accounts
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775
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788
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1,424
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1,352
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Equity in earnings of affiliates
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(73
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(75
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(149
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(143
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Depreciation and amortization
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358
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355
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716
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710
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Interest expense
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520
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530
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1,053
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1,046
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Losses on sales of facilities
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1
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Impairments of long-lived assets
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91
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109
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Loss on retirement of debt
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75
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75
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Termination of management agreement
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181
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7,596
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7,242
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15,134
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14,101
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Income before income taxes
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467
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514
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984
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1,199
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Provision for income taxes
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147
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136
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330
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345
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Net income
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320
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378
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654
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854
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Net income attributable to noncontrolling interests
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91
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85
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185
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173
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Net income attributable to HCA Holdings, Inc.
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$
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229
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$
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293
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$
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469
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$
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681
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Per share data:
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Basic earnings per share
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$
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0.44
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$
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0.69
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$
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0.98
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$
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1.60
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Diluted earnings per share
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$
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0.43
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$
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0.67
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$
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0.94
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$
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1.56
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Shares used in earnings per share calculations (in thousands):
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Basic
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516,448
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426,329
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480,525
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426,340
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Diluted
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538,557
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437,104
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500,463
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436,392
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See accompanying notes.
3
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June 30,
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December 31,
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2011
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2010
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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539
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$
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411
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Accounts receivable, less allowance for doubtful accounts of
$3,955 and $3,939
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3,946
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3,832
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Inventories
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887
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897
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Deferred income taxes
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894
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931
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Other
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625
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848
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6,891
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6,919
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Property and equipment, at cost
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26,338
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25,641
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Accumulated depreciation
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(14,754
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(14,289
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11,584
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11,352
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Investments of insurance subsidiary
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515
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642
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Investments in and advances to affiliates
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843
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869
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Goodwill
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2,719
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2,693
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Deferred loan costs
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332
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374
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Other
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993
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1,003
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$
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23,877
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$
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23,852
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LIABILITIES AND STOCKHOLDERS DEFICIT
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Current liabilities:
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Accounts payable
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$
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1,297
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$
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1,537
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Accrued salaries
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1,009
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895
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Other accrued expenses
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1,283
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1,245
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Long-term debt due within one year
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689
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592
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4,278
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4,269
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Long-term debt
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24,631
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27,633
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Professional liability risks
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987
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995
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Income taxes and other liabilities
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1,515
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1,608
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Equity securities with contingent redemption rights
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141
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Stockholders deficit:
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Common stock $0.01 par; authorized
1,800,000,000 shares; outstanding 517,094,100 shares
in 2011 and 427,458,800 shares in 2010
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5
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4
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Capital in excess of par value
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3,072
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386
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Accumulated other comprehensive loss
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(339
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)
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(428
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)
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Retained deficit
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(11,419
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)
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(11,888
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)
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Stockholders deficit attributable to HCA Holdings,
Inc.
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(8,681
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(11,926
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)
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Noncontrolling interests
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1,147
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1,132
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(7,534
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)
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(10,794
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)
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$
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23,877
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$
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23,852
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See accompanying notes.
4
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2011
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2010
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Cash flows from operating activities:
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Net income
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$
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654
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$
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854
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Adjustments to reconcile net income to net cash provided by
operating activities:
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Changes in operating assets and liabilities
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(1,576
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)
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(1,698
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)
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Provision for doubtful accounts
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1,424
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|
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1,352
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Depreciation and amortization
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|
716
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|
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710
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Income taxes
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|
|
317
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|
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(111
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)
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Losses on sales of facilities
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1
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|
|
|
|
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Impairments of long-lived assets
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|
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|
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109
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Loss on retirement of debt
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75
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|
|
|
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Amortization of deferred loan costs
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39
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|
|
|
40
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Share-based compensation
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16
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16
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Other
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23
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Net cash provided by operating activities
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1,666
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1,295
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Cash flows from investing activities:
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Purchase of property and equipment
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(776
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)
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(536
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)
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Acquisition of hospitals and health care entities
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(168
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)
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(31
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)
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Disposition of hospitals and health care entities
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54
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25
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Change in investments
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76
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|
502
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Other
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2
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(11
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)
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Net cash used in investing activities
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(812
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)
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(51
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)
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Cash flows from financing activities:
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Issuance of long-term debt
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1,387
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Net change in revolving credit facilities
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(1,524
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)
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1,329
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Repayment of long-term debt
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(1,508
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)
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(1,529
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)
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Distributions to noncontrolling interests
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(185
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)
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|
(176
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)
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Distributions to stockholders
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(30
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)
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(2,251
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)
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Payment of debt issuance costs
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|
|
(12
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)
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|
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(25
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)
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Issuance of common stock
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|
2,506
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|
|
|
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Income tax benefits
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|
49
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|
|
|
56
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|
Other
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(22
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)
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|
3
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|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
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|
|
(726
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)
|
|
|
(1,206
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)
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
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|
|
128
|
|
|
|
38
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|
Cash and cash equivalents at beginning of period
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|
|
411
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|
|
|
312
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|
|
|
|
|
|
|
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Cash and cash equivalents at end of period
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$
|
539
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|
|
$
|
350
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|
|
|
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|
|
|
|
|
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Interest payments
|
|
$
|
1,043
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|
|
$
|
973
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|
Income tax (refunds) payments, net
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|
$
|
(36
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)
|
|
$
|
400
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|
See accompanying notes.
5
HCA
HOLDINGS, INC.
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|
NOTE 1
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INTERIM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
Reporting
Entity
On November 17, 2006, HCA Inc. completed its merger with
Hercules Acquisition Corporation, pursuant to which the Company
was acquired by Hercules Holding II, LLC, a Delaware limited
liability company owned by a private investor group comprised of
affiliates of Bain Capital Partners, Kohlberg Kravis
Roberts & Co., BAML Capital Partners (formerly Merrill
Lynch Global Private Equity) (each a Sponsor),
affiliates of Citigroup Inc. and Bank of America Corporation
(the Sponsor Assignees) and affiliates of HCA
founder, Dr. Thomas F. Frist Jr., (the Frist
Entities, and together with the Sponsors and the Sponsor
Assignees, the Investors) and by members of
management and certain other investors.
On November 22, 2010, HCA Inc. reorganized by creating a
new holding company structure (the Corporate
Reorganization). HCA Holdings, Inc. became the new parent
company, and HCA Inc. is a wholly-owned direct subsidiary of HCA
Holdings, Inc. As part of the Corporate Reorganization, HCA
Inc.s outstanding shares of capital stock were
automatically converted, on a share for share basis, into
identical shares of our common stock. Immediately following the
Corporate Reorganization, our amended and restated certificate
of incorporation, amended and restated bylaws, executive
officers and board of directors were the same as HCA Inc.s
in effect immediately prior to the Corporate Reorganization, and
the rights, privileges and interests of HCA Inc.s
stockholders remained the same with respect to us as the new
holding company.
During February 2011, our Board of Directors approved an
increase in the number of our authorized shares to
1,800,000,000 shares of common stock and a 4.505-to-one
split of our issued and outstanding common shares. All common
share and per common share amounts in these condensed
consolidated financial statements and notes to condensed
consolidated financial statements reflect the 4.505-to-one
split. During March 2011, we completed the initial public
offering of 87,719,300 shares of our common stock at a
price of $30.00 per share (before deducting underwriter
discounts, commissions and other related offering expenses).
Certain of our stockholders also sold 57,410,700 shares of
our common stock in this offering. We did not receive any
proceeds from the shares sold by the selling stockholders. Our
common stock is now traded on the New York Stock Exchange
(symbol HCA).
The Investors have provided management and advisory services to
the Company pursuant to a management agreement among HCA Inc.
and the Investors executed in connection with the
Investors acquisition of HCA Inc. in November 2006. The
management agreement was terminated pursuant to its terms upon
completion of the initial public offering of our common stock,
and the Company paid the Investors a final fee of
$181 million. The management agreement also provided that
the Company pay a 1% fee in connection with certain financing,
acquisition, divestiture and change of control transactions. The
Company paid the Investors a fee of $26 million related to
the initial public offering of our common stock, and this fee
was recorded as a cost of the stock offering.
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 June 30, 2011,
these affiliates owned and operated 157 hospitals, 98
freestanding surgery centers and facilities which provided
extensive outpatient and ancillary services. Affiliates of HCA
Holdings, Inc. are also partners in joint ventures that own and
operate seven hospitals and 13 freestanding surgery centers,
which are accounted for using the equity method. 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 Inc. and its affiliates prior to the Corporate
Reorganization and to HCA Holdings, Inc. and its affiliates
after the Corporate Reorganization. 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.
6
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 1
|
INTERIM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
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 cost of revenue
items. Costs that could be classified as general and
administrative would include our corporate office costs, which
were $55 million and $44 million for the quarters
ended June 30, 2011 and 2010, respectively, and
$109 million and $84 million for the six months ended
June 30, 2011 and 2010, respectively. Operating results for
the quarter and six months ended June 30, 2011 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 2011. 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, 2010.
Certain prior year amounts have been reclassified to conform to
the current year presentation.
At June 30, 2011, we were contesting, before the Internal
Revenue Service (IRS) Appeals Division, certain
claimed deficiencies and adjustments proposed by the IRS
Examination Division in connection with its audit of HCA
Inc.s 2005 and 2006 federal income tax returns. The
disputed items include the timing of recognition of certain
patient service revenues, the deductibility of certain debt
retirement costs and our method for calculating the tax
allowance for doubtful accounts. In addition, eight taxable
periods of HCA Inc. and its predecessors ended in 1997 through
2004, for which the primary remaining issue is the computation
of the tax allowance for doubtful accounts, were pending before
the IRS Examination Division as of June 30, 2011. The IRS
Examination Division began an audit of HCA Inc.s 2007,
2008 and 2009 federal income tax returns in 2010.
Our liability for unrecognized tax benefits was
$399 million, including accrued interest of
$91 million, as of June 30, 2011 ($413 million
and $115 million, respectively, as of December 31,
2010). Unrecognized tax benefits of $198 million
($190 million as of December 31, 2010) would
affect the effective rate, if recognized. The liability for
unrecognized tax benefits does not reflect deferred tax assets
of $55 million ($63 million as of December 31,
2010) related to deductible interest and state income taxes
or a refundable deposit of $82 million ($82 million as
of December 31, 2010), which is recorded in noncurrent
assets. The provision for income taxes reflects $2 million
and $59 million ($1 million and $37 million, net
of tax) in reductions in interest expense related to taxing
authority examinations for the quarters ended June 30, 2011
and 2010, respectively, and $26 million and
$74 million ($16 million and $47 million,
respectively, net of tax) reductions in interest expense related
to taxing authority examinations for the six months ended
June 30, 2011 and 2010, respectively.
Depending on the resolution of the IRS disputes, the completion
of examinations by federal, state or international taxing
authorities, or the expiration of statutes of limitation for
specific taxing jurisdictions, we believe it is reasonably
possible our liability for unrecognized tax benefits may
significantly increase or decline within the next
12 months. However, we are currently unable to estimate the
range of any possible change.
7
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 3
|
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 stock
options and restricted share units, computed using the treasury
stock method.
The following table sets forth the computation of basic and
diluted earnings per share for the quarters and six months ended
June 30, 2011 and 2010 (dollars in millions, except per
share amounts, and shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Six Months
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Net income attributable to HCA Holdings, Inc.
|
|
$
|
229
|
|
|
$
|
293
|
|
|
$
|
469
|
|
|
$
|
681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
516,448
|
|
|
|
426,329
|
|
|
|
480,525
|
|
|
|
426,340
|
|
Effect of dilutive securities
|
|
|
22,109
|
|
|
|
10,775
|
|
|
|
19,938
|
|
|
|
10,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used for diluted earnings per share
|
|
|
538,557
|
|
|
|
437,104
|
|
|
|
500,463
|
|
|
|
436,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.44
|
|
|
$
|
0.69
|
|
|
$
|
0.98
|
|
|
$
|
1.60
|
|
Diluted earnings per share
|
|
$
|
0.43
|
|
|
$
|
0.67
|
|
|
$
|
0.94
|
|
|
$
|
1.56
|
|
|
|
NOTE 4
|
INVESTMENTS
OF INSURANCE SUBSIDIARY
|
A summary of our insurance subsidiarys investments at
June 30, 2011 and December 31, 2010 follows
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
Amortized
|
|
|
Amounts
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
305
|
|
|
$
|
12
|
|
|
$
|
(1
|
)
|
|
$
|
316
|
|
Auction rate securities
|
|
|
152
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
149
|
|
Asset-backed securities
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
Money market funds
|
|
|
229
|
|
|
|
|
|
|
|
|
|
|
|
229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
709
|
|
|
|
12
|
|
|
|
(4
|
)
|
|
|
717
|
|
Equity securities
|
|
|
8
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
717
|
|
|
$
|
13
|
|
|
$
|
(5
|
)
|
|
|
725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts classified as current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment carrying value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 4
|
INVESTMENTS
OF INSURANCE SUBSIDIARY (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
Amortized
|
|
|
Amounts
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
312
|
|
|
$
|
12
|
|
|
$
|
(1
|
)
|
|
$
|
323
|
|
Auction rate securities
|
|
|
251
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
250
|
|
Asset-backed securities
|
|
|
26
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
26
|
|
Money market funds
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
724
|
|
|
|
13
|
|
|
|
(3
|
)
|
|
|
734
|
|
Equity securities
|
|
|
8
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
732
|
|
|
$
|
14
|
|
|
$
|
(4
|
)
|
|
|
742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts classified as current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment carrying value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2011 and December 31, 2010, the
investments of our insurance subsidiary were classified as
available-for-sale.
Changes in temporary unrealized gains and losses are recorded as
adjustments to other comprehensive income. At June 30, 2011
and December 31, 2010, $19 million and
$92 million, respectively, of our investments were subject
to restrictions included in insurance bond collateralization and
assumed reinsurance contracts.
Scheduled maturities of investments in debt securities at
June 30, 2011 were as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
Due in one year or less
|
|
$
|
249
|
|
|
$
|
250
|
|
Due after one year through five years
|
|
|
139
|
|
|
|
147
|
|
Due after five years through ten years
|
|
|
122
|
|
|
|
124
|
|
Due after ten years
|
|
|
24
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
534
|
|
|
|
545
|
|
Auction rate securities
|
|
|
152
|
|
|
|
149
|
|
Asset-backed securities
|
|
|
23
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
709
|
|
|
$
|
717
|
|
|
|
|
|
|
|
|
|
|
The average expected maturity of the investments in debt
securities at June 30, 2011 was 2.6 years, compared to
the average scheduled maturity of 8.6 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 the scheduled maturity date. The
average expected maturities for our auction rate and
asset-backed securities were derived from valuation models of
expected cash flows and involved managements judgment. At
June 30, 2011, the average expected maturities for our
auction rate and asset-backed securities were 4.4 years and
5.1 years, respectively, compared to average scheduled
maturities of 25.2 years and 25.1 years, respectively.
9
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of long-term debt at June 30, 2011 and
December 31, 2010, including related interest rates at
June 30, 2011, follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
Senior secured asset-based revolving credit facility (effective
interest rate of 1.4%)
|
|
$
|
1,080
|
|
|
$
|
1,875
|
|
Senior secured revolving credit facility
|
|
|
|
|
|
|
729
|
|
Senior secured term loan facilities (effective interest rate of
7.4%)
|
|
|
7,541
|
|
|
|
7,530
|
|
Senior secured first lien notes (effective interest rate of 8.4%)
|
|
|
4,078
|
|
|
|
4,075
|
|
Other senior secured debt (effective interest rate of 7.1%)
|
|
|
304
|
|
|
|
322
|
|
|
|
|
|
|
|
|
|
|
First lien debt
|
|
|
13,003
|
|
|
|
14,531
|
|
|
|
|
|
|
|
|
|
|
Senior secured cash-pay notes (effective interest rate of 9.7%)
|
|
|
3,396
|
|
|
|
4,501
|
|
Senior secured toggle notes (effective interest rate of 10.0%)
|
|
|
1,578
|
|
|
|
1,578
|
|
|
|
|
|
|
|
|
|
|
Second lien debt
|
|
|
4,974
|
|
|
|
6,079
|
|
|
|
|
|
|
|
|
|
|
Senior unsecured notes (effective interest rate of 7.1%)
|
|
|
7,343
|
|
|
|
7,615
|
|
|
|
|
|
|
|
|
|
|
Total debt (average life of 6.5 years, rates averaging 7.7%)
|
|
|
25,320
|
|
|
|
28,225
|
|
Less amounts due within one year
|
|
|
689
|
|
|
|
592
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,631
|
|
|
$
|
27,633
|
|
|
|
|
|
|
|
|
|
|
During March 2011, pending permanent application, we used the
net proceeds of $2.506 billion from the initial public
offering of our common stock to reduce amounts outstanding under
our revolving credit facilities.
On May 4, 2011, we completed amendments to our senior
secured credit agreement and senior secured asset-based
revolving credit agreement, as well as extensions of certain of
our term loans. The amendments extend approximately
$594 million of our term loan
A-1 facility
with a final maturity of November 2012 to a final maturity of
May 2016 and approximately $2.373 billion of our term loan
A-1 and term
loan B-1 facilities with final maturities of November 2012 and
November 2013, respectively, to a final maturity of May 2018.
On June 2, 2011, we redeemed all $1.000 billion
aggregate principal amount of our
91/8% Senior
Secured Notes due 2014, at a redemption price of 104.563% of the
principal amount, and $108 million aggregate principal
amount of our
97/8% Senior
Secured Notes due 2017, at a redemption price of 109.875% of the
principal amount. The pretax loss on retirement of debt related
to these redemptions was $75 million.
|
|
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. Pay-variable
interest rate swaps effectively convert fixed interest rate
obligations to LIBOR indexed variable 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
10
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 6
|
FINANCIAL
INSTRUMENTS (continued)
|
Interest
Rate Swap Agreements (continued)
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
June 30, 2011 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Maturity Date
|
|
|
Value
|
|
|
Pay-fixed interest rate swaps
|
|
$
|
7,100
|
|
|
|
November 2011
|
|
|
$
|
(125
|
)
|
Pay-fixed interest rate swaps (starting November 2011)
|
|
|
500
|
|
|
|
December 2014
|
|
|
|
2
|
|
Pay-fixed interest rate swaps (starting November 2011)
|
|
|
3,000
|
|
|
|
December 2016
|
|
|
|
(195
|
)
|
Pay-fixed interest rate swaps (starting November 2011)
|
|
|
1,000
|
|
|
|
December 2017
|
|
|
|
11
|
|
Certain of our interest rate swaps are not designated as hedges,
and changes in fair value are recognized in results of
operations. The following table sets forth our interest rate
swap agreements, which were not designated as hedges, at
June 30, 2011 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
Fair
|
|
|
Amount
|
|
Maturity Date
|
|
Value
|
|
Pay-fixed interest rate swap
|
|
$
|
900
|
|
|
|
November 2011
|
|
|
$
|
(15
|
)
|
Pay-variable interest rate swap
|
|
|
900
|
|
|
|
November 2011
|
|
|
|
2
|
|
During the next 12 months, we estimate $214 million
will be reclassified from other comprehensive income
(OCI) to interest expense.
Cross
Currency Swaps
The Company and certain subsidiaries have incurred obligations
and entered into various intercompany transactions where such
obligations are denominated in currencies, other than the
functional currencies of the parties executing the trade. In
order to mitigate the currency exposure risks and better match
the cash flows of our obligations and intercompany transactions
with cash flows from operations, we entered into various cross
currency swaps. Our credit risk related to these agreements is
considered low because the swap agreements are with creditworthy
financial institutions.
Certain of our cross currency swaps are not designated as
hedges, and changes in fair value are recognized in results of
operations. The following table sets forth our cross currency
swap agreement, which was not designated as a hedge, at
June 30, 2011 (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
Fair
|
|
|
Amount
|
|
Maturity Date
|
|
Value
|
|
Euro United States Dollar currency swap
|
|
|
351 Euro
|
|
|
|
December 2011
|
|
|
$
|
78
|
|
Derivatives
Results of Operations
The following tables present the effect on our results of
operations of our interest rate and cross currency swaps for the
quarter ended June 30, 2011 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Loss
|
|
Amount of Loss
|
|
|
Amount of Loss
|
|
Reclassified from
|
|
Reclassified from
|
|
|
Recognized in OCI on
|
|
Accumulated OCI
|
|
Accumulated OCI
|
Derivatives in Cash Flow Hedging Relationships
|
|
Derivatives, Net of Tax
|
|
into Operations
|
|
into Operations
|
|
Interest rate swaps
|
|
$
|
49
|
|
|
|
Interest expense
|
|
|
$
|
186
|
|
11
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 6
|
FINANCIAL
INSTRUMENTS (continued)
|
Derivatives
Results of Operations (continued)
|
|
|
|
|
|
|
|
|
|
|
Location of Gain
|
|
Amount of Gain
|
|
|
Recognized in
|
|
Recognized in
|
|
|
Operations on
|
|
Operations on
|
Derivatives Not Designated as Hedging Instruments
|
|
Derivatives
|
|
Derivatives
|
|
Cross currency swap
|
|
|
Other operating expenses
|
|
|
$
|
39
|
|
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 June 30, 2011, we have not been
required to post any collateral related to these agreements. If
we had breached these provisions at June 30, 2011, we would
have been required to settle our obligations under the
agreements at their aggregate, estimated termination value of
$263 million.
|
|
NOTE 7
|
ASSETS
AND LIABILITIES MEASURED AT FAIR VALUE
|
Accounting Standards Codification (ASC) 820, Fair
Value Measurements and Disclosures (ASC 820)
defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements.
ASC 820 applies to reported balances that are required or
permitted to be measured at fair value under existing accounting
pronouncements.
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. Such instruments include
auction rate securities (ARS) and limited
partnership investments. The transaction price is initially used
as the best estimate of fair value.
12
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 7
|
ASSETS
AND LIABILITIES MEASURED AT FAIR VALUE (continued)
|
Cash
Traded Investments (continued)
Our wholly-owned insurance subsidiary had investments in
tax-exempt ARS, which are backed by student loans substantially
guaranteed by the federal government, of $149 million
($152 million par value) at June 30, 2011. We do not
currently intend to attempt to sell the ARS as the liquidity
needs of our insurance subsidiary are expected to be met by
other investments in its investment portfolio. During 2010 and
the first six months of 2011, certain issuers and their
broker/dealers redeemed or repurchased $150 million and
$99 million, respectively, of our ARS at par value. The
valuation of these securities involved managements
judgment, after consideration of market factors and the absence
of market transparency, market liquidity and observable inputs.
Our valuation models derived a fair market value compared to
tax-equivalent yields of other student loan backed variable rate
securities of similar credit worthiness and similar effective
maturities.
Derivative
Financial Instruments
We have entered into interest rate and cross currency swap
agreements to manage our exposure to fluctuations in interest
rates and foreign currency risks. 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, foreign exchange rates and implied
volatilities. To comply with the provisions of ASC 820, 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 June 30, 2011
and December 31, 2010, we determined the credit valuation
adjustments were not significant to the overall valuation of our
derivatives.
13
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 7
|
ASSETS
AND LIABILITIES MEASURED AT FAIR VALUE (continued)
|
Fair
Value Summary
The following table summarizes our assets and liabilities
measured at fair value on a recurring basis as of June 30,
2011 and December 31, 2010, aggregated by the level in the
fair value hierarchy within which those measurements fall
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
|
|
|
|
|
|
|
|
|
|
Identical Assets
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
and Liabilities
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
|
Fair Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments of insurance subsidiary:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
316
|
|
|
$
|
|
|
|
$
|
316
|
|
|
$
|
|
|
Auction rate securities
|
|
|
149
|
|
|
|
|
|
|
|
|
|
|
|
149
|
|
Asset-backed securities
|
|
|
23
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
Money market funds
|
|
|
229
|
|
|
|
229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
717
|
|
|
|
229
|
|
|
|
339
|
|
|
|
149
|
|
Equity securities
|
|
|
8
|
|
|
|
2
|
|
|
|
4
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments of insurance subsidiary
|
|
|
725
|
|
|
|
231
|
|
|
|
343
|
|
|
|
151
|
|
Less amounts classified as current assets
|
|
|
(210
|
)
|
|
|
(210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
515
|
|
|
$
|
21
|
|
|
$
|
343
|
|
|
$
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swap (Other assets)
|
|
$
|
78
|
|
|
$
|
|
|
|
$
|
78
|
|
|
$
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps (Income taxes and other liabilities)
|
|
$
|
320
|
|
|
$
|
|
|
|
$
|
320
|
|
|
$
|
|
|
14
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 7
|
ASSETS
AND LIABILITIES MEASURED AT FAIR VALUE (continued)
|
Fair
Value Summary (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
|
|
|
|
|
|
|
|
|
|
Identical Assets
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
and Liabilities
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
|
Fair Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments of insurance subsidiary:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
323
|
|
|
$
|
|
|
|
$
|
323
|
|
|
$
|
|
|
Auction rate securities
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
250
|
|
Asset-backed securities
|
|
|
26
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
Money market funds
|
|
|
135
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
734
|
|
|
|
135
|
|
|
|
349
|
|
|
|
250
|
|
Equity securities
|
|
|
8
|
|
|
|
2
|
|
|
|
5
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments of insurance subsidiary
|
|
|
742
|
|
|
|
137
|
|
|
|
354
|
|
|
|
251
|
|
Less amounts classified as current assets
|
|
|
(100
|
)
|
|
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
642
|
|
|
$
|
37
|
|
|
$
|
354
|
|
|
$
|
251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swap (Other assets)
|
|
$
|
39
|
|
|
$
|
|
|
|
$
|
39
|
|
|
$
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps (Income taxes and other liabilities)
|
|
$
|
426
|
|
|
$
|
|
|
|
$
|
426
|
|
|
$
|
|
|
The following table summarizes the activity related to the
auction rate and equity securities investments of our insurance
subsidiary, which have fair value measurements based on
significant unobservable inputs (Level 3), during the six
months ended June 30, 2011 (dollars in millions):
|
|
|
|
|
Asset balances at December 31, 2010
|
|
$
|
251
|
|
Unrealized losses included in other comprehensive income
|
|
|
(1
|
)
|
Settlements
|
|
|
(99
|
)
|
|
|
|
|
|
Asset balances at June 30, 2011
|
|
$
|
151
|
|
|
|
|
|
|
The estimated fair value of our long-term debt was
$26.060 billion and $28.738 billion at June 30,
2011 and December 31, 2010, respectively, compared to
carrying amounts aggregating $25.320 billion and
$28.225 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.
15
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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. The resolution of any such lawsuits, claims
or legal and regulatory proceedings could have a material,
adverse effect on our results of operations or financial
position in a given period.
Health care companies are subject to numerous investigations by
various governmental agencies. Under the federal False Claims
Act 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 government inquiries from
federal and state agencies and our facilities may receive such
inquiries in future periods. 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 or financial
position.
We are 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. It is managements opinion that the ultimate
resolution of these pending claims and legal proceedings will
not have a material, adverse effect on our results of operations
or financial position.
The Civil Division of the Department of Justice
(DOJ) has contacted the Company in connection with
its nationwide review of whether, in certain cases, hospital
charges to the federal government relating to implantable
cardio-defibrillators (ICDs) met the Centers for
Medicare & Medicaid Services criteria. In connection
with this nationwide review, the DOJ has indicated that it will
be reviewing certain ICD billing and medical records at 95 HCA
hospitals; the review covers the period from October 2003 to the
present. The review could potentially give rise to claims
against the Company under the federal False Claims Act or other
statutes, regulations or laws. At this time, we cannot predict
what effect, if any, this review or any resulting claims could
have on the Company.
|
|
NOTE 9
|
COMPREHENSIVE
INCOME AND CAPITAL STRUCTURE
|
The components of comprehensive income, net of related taxes,
for the quarters and six months ended June 30, 2011 and
2010 are only attributable to HCA Holdings, Inc. and are as
follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Six Months
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Net income attributable to HCA Holdings, Inc.
|
|
$
|
229
|
|
|
$
|
293
|
|
|
$
|
469
|
|
|
$
|
681
|
|
Change in fair value of derivative instruments
|
|
|
2
|
|
|
|
(14
|
)
|
|
|
69
|
|
|
|
(26
|
)
|
Change in fair value of
available-for-sale
securities
|
|
|
|
|
|
|
(8
|
)
|
|
|
(1
|
)
|
|
|
(7
|
)
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
(6
|
)
|
|
|
14
|
|
|
|
(27
|
)
|
Defined benefit plans
|
|
|
3
|
|
|
|
2
|
|
|
|
7
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
234
|
|
|
$
|
267
|
|
|
$
|
558
|
|
|
$
|
626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 9
|
COMPREHENSIVE
INCOME AND CAPITAL STRUCTURE (continued)
|
The components of accumulated other comprehensive loss, net of
related taxes, are as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
Change in fair value of derivative instruments
|
|
$
|
(203
|
)
|
|
$
|
(272
|
)
|
Change in fair value of
available-for-sale
securities
|
|
|
5
|
|
|
|
6
|
|
Foreign currency translation adjustments
|
|
|
(5
|
)
|
|
|
(19
|
)
|
Defined benefit plans
|
|
|
(136
|
)
|
|
|
(143
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
$
|
(339
|
)
|
|
$
|
(428
|
)
|
|
|
|
|
|
|
|
|
|
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 in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity (Deficit) Attributable to HCA Holdings, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital in
|
|
|
Accumulated
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Common Stock
|
|
|
Excess of
|
|
|
Other
|
|
|
|
|
|
Attributable to
|
|
|
|
|
|
|
Shares
|
|
|
Par
|
|
|
Par
|
|
|
Comprehensive
|
|
|
Retained
|
|
|
Noncontrolling
|
|
|
|
|
|
|
(000)
|
|
|
Value
|
|
|
Value
|
|
|
Loss
|
|
|
Deficit
|
|
|
Interests
|
|
|
Total
|
|
|
Balances, December 31, 2010
|
|
|
427,459
|
|
|
$
|
4
|
|
|
$
|
386
|
|
|
$
|
(428
|
)
|
|
$
|
(11,888
|
)
|
|
$
|
1,132
|
|
|
$
|
(10,794
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
469
|
|
|
|
185
|
|
|
|
654
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
|
89
|
|
Issuance of common stock
|
|
|
87,719
|
|
|
|
1
|
|
|
|
2,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,506
|
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(185
|
)
|
|
|
(185
|
)
|
Share-based benefit plans
|
|
|
1,916
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
Reclassification of certain equity securities with contingent
redemption rights
|
|
|
|
|
|
|
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2011
|
|
|
517,094
|
|
|
$
|
5
|
|
|
$
|
3,072
|
|
|
$
|
(339
|
)
|
|
$
|
(11,419
|
)
|
|
$
|
1,147
|
|
|
$
|
(7,534
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During February 2011, our Board of Directors approved an
increase in the number of our authorized shares to
1,800,000,000 shares of common stock and a 4.505-to-one
split of our issued and outstanding commons shares. During March
2011, we completed the initial public offering of
87,719,300 shares of our common stock at a price of $30.00
per share and realized net proceeds (after costs of the
offering) of $2.506 billion.
Prior to the consummation of the initial public offering of our
common stock, certain employees could elect to have the Company
redeem their common stock and vested options in the event of
death or permanent disability, pursuant to the terms of their
management stockholder agreements. The consummation of the
initial public offering of our common stock effectively
terminated the contingent redemption rights and the applicable
amounts have been reclassified to stockholders equity.
|
|
NOTE 10
|
SEGMENT
AND GEOGRAPHIC INFORMATION
|
We operate in one line of business, which is operating hospitals
and related health care entities. During the quarters ended
June 30, 2011 and 2010, 23.2% and 23.5%, respectively, of
our revenues related to patients participating in the
fee-for-service
Medicare program. During each of the six months ended
June 30, 2011 and 2010, 24.0% of our revenues related to
patients participating in the
fee-for-service
Medicare program.
17
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 10
|
SEGMENT
AND GEOGRAPHIC INFORMATION (continued)
|
Our operations are structured into three geographically
organized groups: the National, Southwest and Central Groups.
During February 2011, we reorganized our operational groups and
have restated the prior period amounts to reflect this
reorganization. The National Group includes 65 consolidating
hospitals located in Florida, South Carolina, southern Georgia,
Alaska, California, Nevada, Utah and Idaho, The Southwest Group
includes 39 consolidating hospitals located in Texas, Oklahoma
and the Wichita, Kansas market, and the Central Group includes
47 consolidating hospitals located in Louisiana, Indiana,
Kentucky, Tennessee, Virginia, New Hampshire, northern Georgia
and the Kansas City market. We also operate six consolidating
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 on sales of
facilities, impairments of long-lived assets, loss on retirement
of debt, termination of management agreement, 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 six months
ended June 30, 2011 and 2010 are summarized in the
following table (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Six Months
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National Group
|
|
$
|
3,448
|
|
|
$
|
3,292
|
|
|
$
|
6,903
|
|
|
$
|
6,495
|
|
Southwest Group
|
|
|
2,445
|
|
|
|
2,384
|
|
|
|
4,880
|
|
|
|
4,722
|
|
Central Group
|
|
|
1,885
|
|
|
|
1,836
|
|
|
|
3,764
|
|
|
|
3,600
|
|
Corporate and other
|
|
|
285
|
|
|
|
244
|
|
|
|
571
|
|
|
|
483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,063
|
|
|
$
|
7,756
|
|
|
$
|
16,118
|
|
|
$
|
15,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of affiliates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National Group
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
|
$
|
(2
|
)
|
|
$
|
(2
|
)
|
Southwest Group
|
|
|
(73
|
)
|
|
|
(74
|
)
|
|
|
(148
|
)
|
|
|
(140
|
)
|
Central Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Corporate and other
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(73
|
)
|
|
$
|
(75
|
)
|
|
$
|
(149
|
)
|
|
$
|
(143
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted segment EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National Group
|
|
$
|
576
|
|
|
$
|
602
|
|
|
$
|
1,248
|
|
|
$
|
1,264
|
|
Southwest Group
|
|
|
567
|
|
|
|
568
|
|
|
|
1,162
|
|
|
|
1,135
|
|
Central Group
|
|
|
318
|
|
|
|
324
|
|
|
|
651
|
|
|
|
667
|
|
Corporate and other
|
|
|
(41
|
)
|
|
|
(4
|
)
|
|
|
(51
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,420
|
|
|
$
|
1,490
|
|
|
$
|
3,010
|
|
|
$
|
3,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 10
|
SEGMENT
AND GEOGRAPHIC INFORMATION (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Six Months
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National Group
|
|
$
|
127
|
|
|
$
|
128
|
|
|
$
|
252
|
|
|
$
|
256
|
|
Southwest Group
|
|
|
110
|
|
|
|
106
|
|
|
|
221
|
|
|
|
213
|
|
Central Group
|
|
|
89
|
|
|
|
90
|
|
|
|
177
|
|
|
|
178
|
|
Corporate and other
|
|
|
32
|
|
|
|
31
|
|
|
|
66
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
358
|
|
|
$
|
355
|
|
|
$
|
716
|
|
|
$
|
710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted segment EBITDA
|
|
$
|
1,420
|
|
|
$
|
1,490
|
|
|
$
|
3,010
|
|
|
$
|
3,064
|
|
Depreciation and amortization
|
|
|
358
|
|
|
|
355
|
|
|
|
716
|
|
|
|
710
|
|
Interest expense
|
|
|
520
|
|
|
|
530
|
|
|
|
1,053
|
|
|
|
1,046
|
|
Losses on sales of facilities
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
109
|
|
Loss on retirement of debt
|
|
|
75
|
|
|
|
|
|
|
|
75
|
|
|
|
|
|
Termination of management agreement
|
|
|
|
|
|
|
|
|
|
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
467
|
|
|
$
|
514
|
|
|
$
|
984
|
|
|
$
|
1,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 11
|
ACQUISITIONS,
DISPOSITIONS AND IMPAIRMENTS OF LONG-LIVED ASSETS
|
During the six months ended June 30, 2011, we paid
$136 million to acquire a hospital in the National Group
and $32 million to acquire other nonhospital health care
entities. During the six months ended June 30, 2010, we
paid $31 million to acquire nonhospital health care
entities.
During the six months ended June 30, 2011, we received
proceeds of $54 million and recognized a net pretax loss of
$1 million related to the sales of a hospital facility and
our investment in a hospital joint venture. During the six
months ended June 30, 2010, we received proceeds of
$25 million related to sales of real estate investments,
and the proceeds were equal to the carrying amounts.
During the quarter ended June 30, 2010, we recorded
impairments of long-lived assets of $91 million, comprised
of impairment charges of $56 million related to revised,
reduced projections of future expected cash flows for a hospital
facility in our Central Group and $35 million for
capitalized engineering and design costs in our Corporate and
other Group related to certain building safety requirements
(California earthquake standards) that have been revised, to
adjust the carrying values to estimated fair value. During the
six months ended June 30, 2010, we recorded impairments of
long-lived assets of $109 million, including the second
quarter 2010 charges of $91 million and the first quarter
2010 impairment charges of $18 million to adjust the
carrying values of real estate and other investments in our
National, Southwest and Corporate and other Groups to estimated
fair value. There were no impairments of long-lived assets for
the quarter or six months ended June 30, 2011.
|
|
NOTE 12
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
|
On November 22, 2010, HCA Inc. reorganized by creating a
new holding company structure. HCA Holdings, Inc. became the new
parent company, and HCA Inc. is now HCA Holdings, Inc.s
wholly-owned direct subsidiary. On November 23, 2010, HCA
Holdings, Inc. issued $1.525 billion aggregate principal
amount of
73/4% senior
unsecured notes due 2021. These notes are senior unsecured
obligations and are not guaranteed by any of our subsidiaries.
Our senior secured credit facilities and senior secured notes
are fully and unconditionally guaranteed by substantially all
existing and future, direct and indirect, wholly-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 balance sheets at
June 30, 2011 and December 31, 2010, condensed
consolidating statements of income for the quarters and six
months ended June 30, 2011 and 2010 and condensed
consolidating statements of cash flows for the six months ended
June 30, 2011 and 2010, segregating HCA Holdings, Inc.
issuer, HCA Inc. issuer, the subsidiary guarantors, the
subsidiary non-guarantors and eliminations, follow:
HCA
HOLDINGS, INC.
CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE QUARTER ENDED JUNE 30, 2011
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HCA
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Holdings, Inc.
|
|
|
HCA Inc.
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,515
|
|
|
$
|
3,548
|
|
|
$
|
|
|
|
$
|
8,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
|
|
|
|
1,872
|
|
|
|
1,448
|
|
|
|
|
|
|
|
3,320
|
|
Supplies
|
|
|
|
|
|
|
|
|
|
|
720
|
|
|
|
575
|
|
|
|
|
|
|
|
1,295
|
|
Other operating expenses
|
|
|
|
|
|
|
2
|
|
|
|
686
|
|
|
|
638
|
|
|
|
|
|
|
|
1,326
|
|
Provision for doubtful accounts
|
|
|
|
|
|
|
|
|
|
|
457
|
|
|
|
318
|
|
|
|
|
|
|
|
775
|
|
Equity in earnings of affiliates
|
|
|
(246
|
)
|
|
|
|
|
|
|
(30
|
)
|
|
|
(43
|
)
|
|
|
246
|
|
|
|
(73
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
194
|
|
|
|
164
|
|
|
|
|
|
|
|
358
|
|
Interest expense
|
|
|
30
|
|
|
|
741
|
|
|
|
(153
|
)
|
|
|
(98
|
)
|
|
|
|
|
|
|
520
|
|
Loss on retirement of debt
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
|
|
Management fees
|
|
|
|
|
|
|
|
|
|
|
(129
|
)
|
|
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(216
|
)
|
|
|
818
|
|
|
|
3,617
|
|
|
|
3,131
|
|
|
|
246
|
|
|
|
7,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
216
|
|
|
|
(818
|
)
|
|
|
898
|
|
|
|
417
|
|
|
|
(246
|
)
|
|
|
467
|
|
Provision for income taxes
|
|
|
(13
|
)
|
|
|
(323
|
)
|
|
|
347
|
|
|
|
136
|
|
|
|
|
|
|
|
147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
229
|
|
|
|
(495
|
)
|
|
|
551
|
|
|
|
281
|
|
|
|
(246
|
)
|
|
|
320
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
73
|
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to HCA Holdings, Inc.
|
|
$
|
229
|
|
|
$
|
(495
|
)
|
|
$
|
533
|
|
|
$
|
208
|
|
|
$
|
(246
|
)
|
|
$
|
229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 12
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
(continued)
|
HCA
HOLDINGS, INC.
CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE QUARTER ENDED JUNE 30, 2010
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
HCA Inc.
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
4,479
|
|
|
$
|
3,277
|
|
|
$
|
|
|
|
$
|
7,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
1,809
|
|
|
|
1,267
|
|
|
|
|
|
|
|
3,076
|
|
Supplies
|
|
|
|
|
|
|
724
|
|
|
|
527
|
|
|
|
|
|
|
|
1,251
|
|
Other operating expenses
|
|
|
1
|
|
|
|
665
|
|
|
|
560
|
|
|
|
|
|
|
|
1,226
|
|
Provision for doubtful accounts
|
|
|
|
|
|
|
499
|
|
|
|
289
|
|
|
|
|
|
|
|
788
|
|
Equity in earnings of affiliates
|
|
|
(745
|
)
|
|
|
(28
|
)
|
|
|
(47
|
)
|
|
|
745
|
|
|
|
(75
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
197
|
|
|
|
158
|
|
|
|
|
|
|
|
355
|
|
Interest expense
|
|
|
668
|
|
|
|
(122
|
)
|
|
|
(16
|
)
|
|
|
|
|
|
|
530
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
38
|
|
|
|
53
|
|
|
|
|
|
|
|
91
|
|
Management fees
|
|
|
|
|
|
|
(120
|
)
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(76
|
)
|
|
|
3,662
|
|
|
|
2,911
|
|
|
|
745
|
|
|
|
7,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
76
|
|
|
|
817
|
|
|
|
366
|
|
|
|
(745
|
)
|
|
|
514
|
|
Provision for income taxes
|
|
|
(217
|
)
|
|
|
259
|
|
|
|
94
|
|
|
|
|
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
293
|
|
|
|
558
|
|
|
|
272
|
|
|
|
(745
|
)
|
|
|
378
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
14
|
|
|
|
71
|
|
|
|
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Holdings, Inc.
|
|
$
|
293
|
|
|
$
|
544
|
|
|
$
|
201
|
|
|
$
|
(745
|
)
|
|
$
|
293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 12
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
(continued)
|
HCA
HOLDINGS, INC.
CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 2011
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HCA
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Holdings, Inc.
|
|
|
HCA Inc.
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,093
|
|
|
$
|
7,025
|
|
|
$
|
|
|
|
$
|
16,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
|
|
|
|
3,768
|
|
|
|
2,847
|
|
|
|
|
|
|
|
6,615
|
|
Supplies
|
|
|
|
|
|
|
|
|
|
|
1,431
|
|
|
|
1,139
|
|
|
|
|
|
|
|
2,570
|
|
Other operating expenses
|
|
|
|
|
|
|
4
|
|
|
|
1,367
|
|
|
|
1,277
|
|
|
|
|
|
|
|
2,648
|
|
Provision for doubtful accounts
|
|
|
|
|
|
|
|
|
|
|
874
|
|
|
|
550
|
|
|
|
|
|
|
|
1,424
|
|
Equity in earnings of affiliates
|
|
|
(504
|
)
|
|
|
|
|
|
|
(60
|
)
|
|
|
(89
|
)
|
|
|
504
|
|
|
|
(149
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
389
|
|
|
|
327
|
|
|
|
|
|
|
|
716
|
|
Interest expense
|
|
|
60
|
|
|
|
1,432
|
|
|
|
(316
|
)
|
|
|
(123
|
)
|
|
|
|
|
|
|
1,053
|
|
Losses (gains) on sales of facilities
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
1
|
|
Loss on retirement of debt
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
|
|
Termination of management agreement
|
|
|
|
|
|
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181
|
|
Management fees
|
|
|
|
|
|
|
|
|
|
|
(253
|
)
|
|
|
253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(444
|
)
|
|
|
1,692
|
|
|
|
7,216
|
|
|
|
6,166
|
|
|
|
504
|
|
|
|
15,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
444
|
|
|
|
(1,692
|
)
|
|
|
1,877
|
|
|
|
859
|
|
|
|
(504
|
)
|
|
|
984
|
|
Provision for income taxes
|
|
|
(25
|
)
|
|
|
(698
|
)
|
|
|
762
|
|
|
|
291
|
|
|
|
|
|
|
|
330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
469
|
|
|
|
(994
|
)
|
|
|
1,115
|
|
|
|
568
|
|
|
|
(504
|
)
|
|
|
654
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
154
|
|
|
|
|
|
|
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to HCA Holdings, Inc.
|
|
$
|
469
|
|
|
$
|
(994
|
)
|
|
$
|
1,084
|
|
|
$
|
414
|
|
|
$
|
(504
|
)
|
|
$
|
469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 12
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
(continued)
|
HCA
HOLDINGS, INC.
CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 2010
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
HCA Inc.
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
8,853
|
|
|
$
|
6,447
|
|
|
$
|
|
|
|
$
|
15,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
3,635
|
|
|
|
2,513
|
|
|
|
|
|
|
|
6,148
|
|
Supplies
|
|
|
|
|
|
|
1,414
|
|
|
|
1,037
|
|
|
|
|
|
|
|
2,451
|
|
Other operating expenses
|
|
|
3
|
|
|
|
1,303
|
|
|
|
1,122
|
|
|
|
|
|
|
|
2,428
|
|
Provision for doubtful accounts
|
|
|
|
|
|
|
857
|
|
|
|
495
|
|
|
|
|
|
|
|
1,352
|
|
Equity in earnings of affiliates
|
|
|
(1,556
|
)
|
|
|
(55
|
)
|
|
|
(88
|
)
|
|
|
1,556
|
|
|
|
(143
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
392
|
|
|
|
318
|
|
|
|
|
|
|
|
710
|
|
Interest expense
|
|
|
1,316
|
|
|
|
(237
|
)
|
|
|
(33
|
)
|
|
|
|
|
|
|
1,046
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
53
|
|
|
|
56
|
|
|
|
|
|
|
|
109
|
|
Management fees
|
|
|
|
|
|
|
(238
|
)
|
|
|
238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(237
|
)
|
|
|
7,124
|
|
|
|
5,658
|
|
|
|
1,556
|
|
|
|
14,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
237
|
|
|
|
1,729
|
|
|
|
789
|
|
|
|
(1,556
|
)
|
|
|
1,199
|
|
Provision for income taxes
|
|
|
(444
|
)
|
|
|
572
|
|
|
|
217
|
|
|
|
|
|
|
|
345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
681
|
|
|
|
1,157
|
|
|
|
572
|
|
|
|
(1,556
|
)
|
|
|
854
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
29
|
|
|
|
144
|
|
|
|
|
|
|
|
173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Holdings, Inc.
|
|
$
|
681
|
|
|
$
|
1,128
|
|
|
$
|
428
|
|
|
$
|
(1,556
|
)
|
|
$
|
681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
JUNE 30, 2011
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HCA
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Holdings, Inc.
|
|
|
HCA Inc.
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
|
|
|
$
|
131
|
|
|
$
|
408
|
|
|
$
|
|
|
|
$
|
539
|
|
Accounts receivable, net
|
|
|
|
|
|
|
|
|
|
|
2,235
|
|
|
|
1,711
|
|
|
|
|
|
|
|
3,946
|
|
Inventories
|
|
|
|
|
|
|
|
|
|
|
545
|
|
|
|
342
|
|
|
|
|
|
|
|
887
|
|
Deferred income taxes
|
|
|
894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
894
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
182
|
|
|
|
443
|
|
|
|
|
|
|
|
625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
894
|
|
|
|
|
|
|
|
3,093
|
|
|
|
2,904
|
|
|
|
|
|
|
|
6,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
|
|
6,953
|
|
|
|
4,631
|
|
|
|
|
|
|
|
11,584
|
|
Investments of insurance subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
515
|
|
|
|
|
|
|
|
515
|
|
Investments in and advances to affiliates
|
|
|
|
|
|
|
|
|
|
|
222
|
|
|
|
621
|
|
|
|
|
|
|
|
843
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
1,609
|
|
|
|
1,110
|
|
|
|
|
|
|
|
2,719
|
|
Deferred loan costs
|
|
|
23
|
|
|
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
332
|
|
Investments in and advances to subsidiaries
|
|
|
14,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,786
|
)
|
|
|
|
|
Other
|
|
|
668
|
|
|
|
92
|
|
|
|
29
|
|
|
|
204
|
|
|
|
|
|
|
|
993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,371
|
|
|
$
|
401
|
|
|
$
|
11,906
|
|
|
$
|
9,985
|
|
|
$
|
(14,786
|
)
|
|
$
|
23,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
|
|
|
$
|
|
|
|
$
|
751
|
|
|
$
|
546
|
|
|
$
|
|
|
|
$
|
1,297
|
|
Accrued salaries
|
|
|
|
|
|
|
|
|
|
|
628
|
|
|
|
381
|
|
|
|
|
|
|
|
1,009
|
|
Other accrued expenses
|
|
|
50
|
|
|
|
271
|
|
|
|
318
|
|
|
|
644
|
|
|
|
|
|
|
|
1,283
|
|
Long-term debt due within one year
|
|
|
|
|
|
|
651
|
|
|
|
14
|
|
|
|
24
|
|
|
|
|
|
|
|
689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
|
922
|
|
|
|
1,711
|
|
|
|
1,595
|
|
|
|
|
|
|
|
4,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
1,525
|
|
|
|
22,437
|
|
|
|
82
|
|
|
|
587
|
|
|
|
|
|
|
|
24,631
|
|
Intercompany balances
|
|
|
23,040
|
|
|
|
(11,785
|
)
|
|
|
(13,775
|
)
|
|
|
2,520
|
|
|
|
|
|
|
|
|
|
Professional liability risks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
987
|
|
|
|
|
|
|
|
987
|
|
Income taxes and other liabilities
|
|
|
437
|
|
|
|
334
|
|
|
|
535
|
|
|
|
209
|
|
|
|
|
|
|
|
1,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,052
|
|
|
|
11,908
|
|
|
|
(11,447
|
)
|
|
|
5,898
|
|
|
|
|
|
|
|
31,411
|
|
Stockholders (deficit) equity attributable to HCA
Holdings, Inc.
|
|
|
(8,681
|
)
|
|
|
(11,507
|
)
|
|
|
23,251
|
|
|
|
3,042
|
|
|
|
(14,786
|
)
|
|
|
(8,681
|
)
|
Noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
102
|
|
|
|
1,045
|
|
|
|
|
|
|
|
1,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,681
|
)
|
|
|
(11,507
|
)
|
|
|
23,353
|
|
|
|
4,087
|
|
|
|
(14,786
|
)
|
|
|
(7,534
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,371
|
|
|
$
|
401
|
|
|
$
|
11,906
|
|
|
$
|
9,985
|
|
|
$
|
(14,786
|
)
|
|
$
|
23,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2010
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HCA
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Holdings, Inc.
|
|
|
HCA Inc.
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6
|
|
|
$
|
|
|
|
$
|
156
|
|
|
$
|
249
|
|
|
$
|
|
|
|
$
|
411
|
|
Accounts receivable, net
|
|
|
|
|
|
|
|
|
|
|
2,214
|
|
|
|
1,618
|
|
|
|
|
|
|
|
3,832
|
|
Inventories
|
|
|
|
|
|
|
|
|
|
|
547
|
|
|
|
350
|
|
|
|
|
|
|
|
897
|
|
Deferred income taxes
|
|
|
931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
931
|
|
Other
|
|
|
202
|
|
|
|
|
|
|
|
223
|
|
|
|
423
|
|
|
|
|
|
|
|
848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,139
|
|
|
|
|
|
|
|
3,140
|
|
|
|
2,640
|
|
|
|
|
|
|
|
6,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
|
|
6,817
|
|
|
|
4,535
|
|
|
|
|
|
|
|
11,352
|
|
Investments of insurance subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
642
|
|
|
|
|
|
|
|
642
|
|
Investments in and advances to affiliates
|
|
|
|
|
|
|
|
|
|
|
248
|
|
|
|
621
|
|
|
|
|
|
|
|
869
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
1,635
|
|
|
|
1,058
|
|
|
|
|
|
|
|
2,693
|
|
Deferred loan costs
|
|
|
23
|
|
|
|
351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
374
|
|
Investments in and advances to subsidiaries
|
|
|
14,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,282
|
)
|
|
|
|
|
Other
|
|
|
776
|
|
|
|
39
|
|
|
|
21
|
|
|
|
167
|
|
|
|
|
|
|
|
1,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,220
|
|
|
$
|
390
|
|
|
$
|
11,861
|
|
|
$
|
9,663
|
|
|
$
|
(14,282
|
)
|
|
$
|
23,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
|
|
|
$
|
|
|
|
$
|
919
|
|
|
$
|
618
|
|
|
$
|
|
|
|
$
|
1,537
|
|
Accrued salaries
|
|
|
|
|
|
|
|
|
|
|
556
|
|
|
|
339
|
|
|
|
|
|
|
|
895
|
|
Other accrued expenses
|
|
|
12
|
|
|
|
296
|
|
|
|
328
|
|
|
|
609
|
|
|
|
|
|
|
|
1,245
|
|
Long-term debt due within one year
|
|
|
|
|
|
|
554
|
|
|
|
12
|
|
|
|
26
|
|
|
|
|
|
|
|
592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
850
|
|
|
|
1,815
|
|
|
|
1,592
|
|
|
|
|
|
|
|
4,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
1,525
|
|
|
|
25,758
|
|
|
|
95
|
|
|
|
255
|
|
|
|
|
|
|
|
27,633
|
|
Intercompany balances
|
|
|
25,985
|
|
|
|
(16,130
|
)
|
|
|
(12,833
|
)
|
|
|
2,978
|
|
|
|
|
|
|
|
|
|
Professional liability risks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
995
|
|
|
|
|
|
|
|
995
|
|
Income taxes and other liabilities
|
|
|
483
|
|
|
|
425
|
|
|
|
505
|
|
|
|
195
|
|
|
|
|
|
|
|
1,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,005
|
|
|
|
10,903
|
|
|
|
(10,418
|
)
|
|
|
6,015
|
|
|
|
|
|
|
|
34,505
|
|
Equity securities with contingent redemption rights
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141
|
|
Stockholders (deficit) equity attributable to HCA
Holdings, Inc.
|
|
|
(11,926
|
)
|
|
|
(10,513
|
)
|
|
|
22,167
|
|
|
|
2,628
|
|
|
|
(14,282
|
)
|
|
|
(11,926
|
)
|
Noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
112
|
|
|
|
1,020
|
|
|
|
|
|
|
|
1,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,926
|
)
|
|
|
(10,513
|
)
|
|
|
22,279
|
|
|
|
3,648
|
|
|
|
(14,282
|
)
|
|
|
(10,794
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,220
|
|
|
$
|
390
|
|
|
$
|
11,861
|
|
|
$
|
9,663
|
|
|
$
|
(14,282
|
)
|
|
$
|
23,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 SIX MONTHS ENDED JUNE 30, 2011
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HCA
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Holdings, Inc.
|
|
|
HCA Inc.
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
469
|
|
|
$
|
(994
|
)
|
|
$
|
1,115
|
|
|
$
|
568
|
|
|
$
|
(504
|
)
|
|
$
|
654
|
|
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities
|
|
|
4
|
|
|
|
(24
|
)
|
|
|
(916
|
)
|
|
|
(640
|
)
|
|
|
|
|
|
|
(1,576
|
)
|
Provision for doubtful accounts
|
|
|
|
|
|
|
|
|
|
|
874
|
|
|
|
550
|
|
|
|
|
|
|
|
1,424
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
389
|
|
|
|
327
|
|
|
|
|
|
|
|
716
|
|
Income taxes
|
|
|
317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
317
|
|
Losses (gains) on sales of facilities
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
1
|
|
Loss on retirement of debt
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
|
|
Amortization of deferred loan costs
|
|
|
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
Share-based compensation
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
Equity in earnings of affiliates
|
|
|
(504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
504
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
302
|
|
|
|
(898
|
)
|
|
|
1,477
|
|
|
|
785
|
|
|
|
|
|
|
|
1,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
|
|
|
|
|
|
(389
|
)
|
|
|
(387
|
)
|
|
|
|
|
|
|
(776
|
)
|
Acquisition of hospitals and health care entities
|
|
|
|
|
|
|
|
|
|
|
(136
|
)
|
|
|
(32
|
)
|
|
|
|
|
|
|
(168
|
)
|
Disposition of hospitals and health care entities
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
53
|
|
|
|
|
|
|
|
54
|
|
Change in investments
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
52
|
|
|
|
|
|
|
|
76
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
|
|
|
|
(500
|
)
|
|
|
(312
|
)
|
|
|
|
|
|
|
(812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in revolving bank credit facilities
|
|
|
|
|
|
|
(1,524
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,524
|
)
|
Repayment of long-term debt
|
|
|
|
|
|
|
(1,456
|
)
|
|
|
(6
|
)
|
|
|
(46
|
)
|
|
|
|
|
|
|
(1,508
|
)
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(41
|
)
|
|
|
(144
|
)
|
|
|
|
|
|
|
(185
|
)
|
Distributions to stockholders
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
Changes in intercompany balances with affiliates, net
|
|
|
(2,805
|
)
|
|
|
3,890
|
|
|
|
(955
|
)
|
|
|
(130
|
)
|
|
|
|
|
|
|
|
|
Payment of debt issuance costs
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12
|
)
|
Issuances of common stock
|
|
|
2,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,506
|
|
Income tax benefits
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49
|
|
Other
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(308
|
)
|
|
|
898
|
|
|
|
(1,002
|
)
|
|
|
(314
|
)
|
|
|
|
|
|
|
(726
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
(6
|
)
|
|
|
|
|
|
|
(25
|
)
|
|
|
159
|
|
|
|
|
|
|
|
128
|
|
Cash and cash equivalents at beginning of period
|
|
|
6
|
|
|
|
|
|
|
|
156
|
|
|
|
249
|
|
|
|
|
|
|
|
411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
|
|
|
$
|
|
|
|
$
|
131
|
|
|
$
|
408
|
|
|
$
|
|
|
|
$
|
539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 SIX MONTHS ENDED JUNE 30, 2010
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
HCA Inc.
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
681
|
|
|
$
|
1,157
|
|
|
$
|
572
|
|
|
$
|
(1,556
|
)
|
|
$
|
854
|
|
|
|
|
|
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities
|
|
|
31
|
|
|
|
(1,057
|
)
|
|
|
(672
|
)
|
|
|
|
|
|
|
(1,698
|
)
|
|
|
|
|
Provision for doubtful accounts
|
|
|
|
|
|
|
857
|
|
|
|
495
|
|
|
|
|
|
|
|
1,352
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
392
|
|
|
|
318
|
|
|
|
|
|
|
|
710
|
|
|
|
|
|
Income taxes
|
|
|
(111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(111
|
)
|
|
|
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
48
|
|
|
|
61
|
|
|
|
|
|
|
|
109
|
|
|
|
|
|
Amortization of deferred loan costs
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
|
|
|
|
|
|
Share-based compensation
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
Equity in earnings of affiliates
|
|
|
(1,556
|
)
|
|
|
|
|
|
|
|
|
|
|
1,556
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(876
|
)
|
|
|
1,397
|
|
|
|
774
|
|
|
|
|
|
|
|
1,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
|
|
(225
|
)
|
|
|
(311
|
)
|
|
|
|
|
|
|
(536
|
)
|
|
|
|
|
Acquisition of hospitals and health care entities
|
|
|
|
|
|
|
(21
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
(31
|
)
|
|
|
|
|
Disposition of hospitals and health care entities
|
|
|
|
|
|
|
24
|
|
|
|
1
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
Change in investments
|
|
|
|
|
|
|
10
|
|
|
|
492
|
|
|
|
|
|
|
|
502
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
(1
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
|
|
|
|
(213
|
)
|
|
|
162
|
|
|
|
|
|
|
|
(51
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of long-term debt
|
|
|
1,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,387
|
|
|
|
|
|
Net change in revolving credit facilities
|
|
|
1,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,329
|
|
|
|
|
|
Repayment of long-term debt
|
|
|
(1,508
|
)
|
|
|
(11
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
(1,529
|
)
|
|
|
|
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
(41
|
)
|
|
|
(135
|
)
|
|
|
|
|
|
|
(176
|
)
|
|
|
|
|
Distributions to stockholders
|
|
|
(2,251
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,251
|
)
|
|
|
|
|
Changes in intercompany balances with affiliates, net
|
|
|
1,893
|
|
|
|
(1,119
|
)
|
|
|
(774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of debt issuance costs
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
Income tax benefits
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
|
|
|
|
Other
|
|
|
(5
|
)
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
876
|
|
|
|
(1,171
|
)
|
|
|
(911
|
)
|
|
|
|
|
|
|
(1,206
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
|
|
|
|
13
|
|
|
|
25
|
|
|
|
|
|
|
|
38
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
|
|
95
|
|
|
|
217
|
|
|
|
|
|
|
|
312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
|
|
|
$
|
108
|
|
|
$
|
242
|
|
|
$
|
|
|
|
$
|
350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
HCA
HOLDINGS, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 13
|
SUBSEQUENT
EVENTS
|
On August 1, 2011, we issued $5.000 billion aggregate
principal amount of notes, comprised of $3.000 billion of
61/2% senior
secured first lien notes due 2020 and $2.000 billion of
71/2% senior
unsecured notes due 2022. After the payment of related fees and
expenses, we intend to use the net proceeds from these debt
issuances to redeem all of our outstanding $1.578 billion
95/8%/103/8%
second lien toggle notes due 2016 and all of our outstanding
$3.200 billion
91/4%
second lien notes due 2016. The pretax debt retirement charge
related to these redemptions is expected to be approximately
$396 million.
On August 2, 2011, we entered into a definitive Membership
Interest Purchase Agreement with The Colorado Health Foundation
for the purchase (or redemption) of the Foundations
remaining ownership interest in HCA-HealthONE LLC for
$1.45 billion. Subject to regulatory review, the
transaction is expected to close in the third quarter of 2011.
We intend to fund the purchase price at the closing of the
acquisition through amounts available under our revolving credit
facility.
28
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking
Statements
This quarterly report on
Form 10-Q
includes certain disclosures which contain forward-looking
statements. Forward-looking statements include all
statements that do not relate solely to historical or current
facts, and can be identified by the use of words like
may, believe, will,
expect, project, estimate,
anticipate, plan, initiative
or continue. These forward-looking statements are
based on our current plans and expectations and are subject to a
number of known and unknown uncertainties and risks, many of
which are beyond our control, which could significantly affect
current plans and expectations and our future financial position
and results of operations. These factors include, but are not
limited to, (1) the impact of our substantial indebtedness
and the ability to refinance such indebtedness on acceptable
terms, (2) the effects related to the enactment and
implementation of the Budget Control Act of 2011
(BCA) and the Patient Protection and Affordable Care
Act, as amended by the Health Care and Education Reconciliation
Act (collectively, the Health Reform Law), the
possible enactment of additional federal or state health care
reforms and possible changes to the Health Reform Law and other
federal, state or local laws or regulations affecting the health
care industry, (3) increases in the amount and risk of
collectibility of uninsured accounts and deductibles and
copayment amounts for insured accounts, (4) the ability to
achieve operating and financial targets, and attain expected
levels of patient volumes and control the costs of providing
services, (5) possible changes in the Medicare, Medicaid
and other state programs, including Medicaid supplemental
payments pursuant to upper payment limit (UPL)
programs, that may impact reimbursements to health care
providers and insurers, (6) the highly competitive nature
of the health care business, (7) changes in revenue mix,
including potential declines in the population covered under
managed care agreements and the ability to enter into and renew
managed care provider agreements on acceptable terms,
(8) the efforts of insurers, health care providers and
others to contain health care costs, (9) the outcome of our
continuing efforts to monitor, maintain and comply with
appropriate laws, regulations, policies and procedures,
(10) increases in wages and the ability to attract and
retain qualified management and personnel, including affiliated
physicians, nurses and medical and technical support personnel,
(11) the availability and terms of capital to fund the
expansion of our business and improvements to our existing
facilities, (12) changes in accounting practices,
(13) changes in general economic conditions nationally and
regionally in our markets, (14) future divestitures which
may result in charges and possible impairments of long-lived
assets, (15) changes in business strategy or development
plans, (16) delays in receiving payments for services
provided, (17) the outcome of pending and any future tax
audits, appeals and litigation associated with our tax
positions, (18) potential adverse impact of known and
unknown government investigations, litigation and other claims
that may be made against us, (19) our ability to
demonstrate meaningful use of certified electronic health record
technology and recognize revenues for the related Medicare or
Medicaid incentive payments, and (20) other risk factors
described in our annual report on
Form 10-K
for the year ended December 31, 2010 and our other filings
with the Securities and Exchange Commission. As a consequence,
current plans, anticipated actions and future financial position
and results of operations may differ from those expressed in any
forward-looking statements made by or on behalf of HCA. You are
cautioned not to unduly rely on such forward-looking statements
when evaluating the information presented in this report, which
forward-looking statements reflect managements views only
as of the date of this report. We undertake no obligation to
revise or update any forward-looking statements, whether as a
result of new information, future events or otherwise.
Health
Care Reform
As enacted, the Health Reform Law will change how health care
services are covered, delivered and reimbursed through expanded
coverage of uninsured individuals, reduced growth in Medicare
program spending, reductions in Medicare and Medicaid
Disproportionate Share Hospital payments, and the establishment
of programs in which reimbursement is tied to quality and
integration. In addition, the Health Reform Law reforms certain
aspects of health insurance, expands existing efforts to tie
Medicare and Medicaid payments to performance and quality, and
contains provisions intended to strengthen fraud and abuse
enforcement.
29
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Second
Quarter 2011 Operations Summary
Net income attributable to HCA Holdings, Inc. totaled
$229 million, or $0.43 per diluted share, for the quarter
ended June 30, 2011, compared to $293 million, or
$0.67 per diluted share, for the quarter ended June 30,
2010. Revenues increased to $8.063 billion in the second
quarter of 2011 from $7.756 billion in the second quarter
of 2010. Second quarter 2011 results include a loss on
retirement of debt of $75 million, or $0.08 per diluted
share. Second quarter 2010 results include impairments of
long-lived assets of $91 million, or $0.13 per diluted
share. All per diluted share disclosures are based
upon amounts net of the applicable income taxes. Shares used for
diluted earnings per share were 538.6 million shares for
the quarter ended June 30, 2011 and 437.1 million
shares for the quarter ended June 30, 2010. During
March 2011, we completed the initial public offering of
87,719,300 shares of our common stock.
Revenues increased 4.0% on a consolidated basis and increased
2.4% on a same facility basis for the quarter ended
June 30, 2011, compared to the quarter ended June 30,
2010. The increase in consolidated revenues can be attributed
primarily to the combined impact of a 0.5% increase in revenue
per equivalent admission and a 3.4% increase in equivalent
admissions. The same facility revenues increase resulted
primarily from the combined impact of a 0.5% increase in same
facility revenue per equivalent admission and a 1.9% increase in
same facility equivalent admissions. We experienced a shift in
service mix from more complex surgical cases to less acute
medical cases, resulting in lower than anticipated revenue
growth for the quarter ended June 30, 2011. Revenues for
the second quarter of 2011 included $39 million of Medicaid
incentive revenues related to certain of our hospitals
completing attestations to their adoption or implementation of
certified electronic health record technology.
During the quarter ended June 30, 2011, consolidated
admissions and same facility admissions increased 3.2% and 1.8%,
respectively, compared to the quarter ended June 30, 2010.
Inpatient surgeries declined 1.3% on a consolidated basis and
1.5% on a same facility basis during the quarter ended
June 30, 2011, compared to the quarter ended June 30,
2010. Outpatient surgeries increased 0.3% on a consolidated
basis and declined 0.6% on a same facility basis during the
quarter ended June 30, 2011, compared to the quarter ended
June 30, 2010. Emergency department visits increased 5.3%
on a consolidated basis and 4.5% on a same facility basis during
the quarter ended June 30, 2011, compared to the quarter
ended June 30, 2010.
For the quarter ended June 30, 2011, the provision for
doubtful accounts declined $13 million to 9.6% of revenues
from 10.2% of revenues for the quarter ended June 30, 2010.
The self-pay revenue deductions for charity care and uninsured
discounts increased $58 million and $270 million,
respectively, during the second quarter of 2011, compared to the
second quarter of 2010. The sum of the provision for doubtful
accounts, uninsured discounts and charity care, as a percentage
of the sum of revenues, uninsured discounts and charity care,
was 27.6% for the second quarter of 2011, compared to 26.1% for
the second quarter of 2010. Same facility uninsured admissions
increased 10.6% and same facility uninsured emergency room
visits increased 3.7% for the quarter ended June 30, 2011,
compared to the quarter ended June 30, 2010.
Interest expense declined $10 million to $520 million
for the quarter ended June 30, 2011 from $530 million
for the quarter ended June 30, 2010. The decline in
interest expense was due to a decline in the average debt
balance.
Cash flows from operating activities increased $312 million
from $436 million for the second quarter of 2010 to
$748 million for the second quarter of 2011. The increase
related primarily to lower income tax payments during the second
quarter of 2011.
Results
of Operations
Revenue/Volume
Trends
Our revenues depend upon inpatient occupancy levels, the
ancillary services and therapy programs ordered by physicians
and provided to patients, the volume of outpatient procedures
and the charge and negotiated payment rates for such services.
Gross charges typically do not reflect what our facilities are
actually paid. Our facilities have entered into agreements with
third-party payers, including government programs and managed
care health plans, under which the facilities are paid based
upon the cost of providing services, predetermined rates per
diagnosis,
30
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Revenue/Volume
Trends (continued)
fixed per diem rates or discounts from gross charges. We do not
pursue collection of amounts related to patients who meet our
guidelines to qualify for charity care; therefore, they are not
reported in revenues. We provide discounts to uninsured patients
who do not qualify for Medicaid or charity care. These discounts
are similar to those provided to many local managed care plans.
After the discounts are applied, we are still unable to collect
a significant portion of uninsured patients accounts, and
we record significant provisions for doubtful accounts (based
upon our a historical collection experience) related to
uninsured patients in the period the services are provided.
Revenues increased 4.0% from $7.756 billion in the second
quarter of 2010 to $8.063 billion in the second quarter of
2011. 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 the Medicare and Medicaid
programs), managed care health plans, 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
accounts receivable at the estimated amounts we expect to
collect. Our revenues from our third party payers and the
uninsured for quarters and six months ended June 30, 2011
and 2010 are summarized in the following tables (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
2011
|
|
|
Ratio
|
|
|
2010
|
|
|
Ratio
|
|
|
Medicare
|
|
$
|
1,871
|
|
|
|
23.2
|
%
|
|
$
|
1,824
|
|
|
|
23.5
|
%
|
Managed Medicare
|
|
|
584
|
|
|
|
7.3
|
|
|
|
549
|
|
|
|
7.1
|
|
Medicaid
|
|
|
479
|
|
|
|
5.9
|
|
|
|
511
|
|
|
|
6.6
|
|
Managed Medicaid
|
|
|
316
|
|
|
|
3.9
|
|
|
|
281
|
|
|
|
3.6
|
|
Managed care and other insurers
|
|
|
3,916
|
|
|
|
48.6
|
|
|
|
3,733
|
|
|
|
48.2
|
|
International (managed care and other insurers)
|
|
|
233
|
|
|
|
2.9
|
|
|
|
193
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,399
|
|
|
|
91.8
|
|
|
|
7,091
|
|
|
|
91.5
|
|
Uninsured
|
|
|
492
|
|
|
|
6.1
|
|
|
|
523
|
|
|
|
6.7
|
|
Other
|
|
|
172
|
|
|
|
2.1
|
|
|
|
142
|
|
|
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
8,063
|
|
|
|
100.0
|
%
|
|
$
|
7,756
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
2011
|
|
|
Ratio
|
|
|
2010
|
|
|
Ratio
|
|
|
Medicare
|
|
$
|
3,871
|
|
|
|
24.0
|
%
|
|
$
|
3,675
|
|
|
|
24.0
|
%
|
Managed Medicare
|
|
|
1,196
|
|
|
|
7.4
|
|
|
|
1,099
|
|
|
|
7.2
|
|
Medicaid
|
|
|
987
|
|
|
|
6.1
|
|
|
|
989
|
|
|
|
6.5
|
|
Managed Medicaid
|
|
|
635
|
|
|
|
3.9
|
|
|
|
578
|
|
|
|
3.8
|
|
Managed care and other insurers
|
|
|
7,772
|
|
|
|
48.2
|
|
|
|
7,445
|
|
|
|
48.7
|
|
International (managed care and other insurers)
|
|
|
466
|
|
|
|
2.9
|
|
|
|
382
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,927
|
|
|
|
92.5
|
|
|
|
14,168
|
|
|
|
92.7
|
|
Uninsured
|
|
|
882
|
|
|
|
5.5
|
|
|
|
870
|
|
|
|
5.7
|
|
Other
|
|
|
309
|
|
|
|
2.0
|
|
|
|
262
|
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
16,118
|
|
|
|
100.0
|
%
|
|
$
|
15,300
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated and same facility revenue per equivalent admission
each increased 0.5% in the second quarter of 2011, compared to
the second quarter of 2010. Consolidated and same facility
equivalent admissions increased 3.4% and 1.9%, respectively, in
the second quarter of 2011, compared to the second quarter of
2010. Consolidated and same facility admissions increased 3.2%
and 1.8%, respectively, in the second quarter of 2011, compared
to the
31
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Revenue/Volume
Trends (continued)
second quarter of 2010. Consolidated and same facility
outpatient surgeries increased 0.3% and declined 0.6%,
respectively, in the second quarter of 2011, compared to the
second quarter of 2010. Consolidated and same facility inpatient
surgeries declined 1.3% and 1.5%, respectively, in the second
quarter of 2011, compared to the second quarter of 2010.
Consolidated and same facility emergency department visits
increased 5.3% and 4.5%, respectively, in the second quarter of
2011, compared to the second quarter of 2010.
To quantify the total impact of and trends related to uninsured
accounts, we believe it is beneficial to view the uninsured
revenue deductions and provision for doubtful accounts in
combination, rather than each separately. A summary of these
amounts for the quarters and six months ended June 30, 2011
and 2010 follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Six Months
|
|
|
|
2011
|
|
|
Ratio
|
|
|
2010
|
|
|
Ratio
|
|
|
2011
|
|
|
Ratio
|
|
|
2010
|
|
|
Ratio
|
|
|
Provision for doubtful accounts
|
|
$
|
775
|
|
|
|
28
|
%
|
|
$
|
788
|
|
|
|
32
|
%
|
|
$
|
1,424
|
|
|
|
27
|
%
|
|
$
|
1,352
|
|
|
|
29
|
%
|
Uninsured discounts
|
|
|
1,342
|
|
|
|
48
|
|
|
|
1,072
|
|
|
|
44
|
|
|
|
2,615
|
|
|
|
49
|
|
|
|
2,107
|
|
|
|
46
|
|
Charity care
|
|
|
657
|
|
|
|
24
|
|
|
|
599
|
|
|
|
24
|
|
|
|
1,292
|
|
|
|
24
|
|
|
|
1,144
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
2,774
|
|
|
|
100
|
%
|
|
$
|
2,459
|
|
|
|
100
|
%
|
|
$
|
5,331
|
|
|
|
100
|
%
|
|
$
|
4,603
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same facility uninsured admissions increased by 2,756
admissions, or 10.6%, in the second quarter of 2011, compared to
the second quarter of 2010. Same facility uninsured admissions
increased by 4.7% in the first quarter of 2011, compared to the
first quarter of 2010. Same facility uninsured admissions in
2010, compared to 2009, increased 8.9% in the fourth quarter of
2010, increased 3.9% in the third quarter of 2010, increased
2.1% in the second quarter of 2010 and increased 6.8% in the
first quarter of 2010.
The approximate percentages of our admissions related to
Medicare, managed Medicare, Medicaid, managed Medicaid, managed
care and other insurers and the uninsured for the quarters and
six months ended June 30, 2011 and 2010 are set forth in
the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Six Months
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Medicare
|
|
|
35
|
%
|
|
|
34
|
%
|
|
|
35
|
%
|
|
|
35
|
%
|
Managed Medicare
|
|
|
11
|
|
|
|
10
|
|
|
|
11
|
|
|
|
10
|
|
Medicaid
|
|
|
9
|
|
|
|
9
|
|
|
|
9
|
|
|
|
9
|
|
Managed Medicaid
|
|
|
7
|
|
|
|
7
|
|
|
|
7
|
|
|
|
7
|
|
Managed care and other insurers
|
|
|
31
|
|
|
|
33
|
|
|
|
31
|
|
|
|
32
|
|
Uninsured
|
|
|
7
|
|
|
|
7
|
|
|
|
7
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Revenue/Volume
Trends (continued)
The approximate percentages of our inpatient revenues related to
Medicare, managed Medicare, Medicaid, managed Medicaid, managed
care and other insurers and the uninsured for the quarters and
six months ended June 30, 2011 and 2010 are set forth in
the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Six Months
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Medicare
|
|
|
31
|
%
|
|
|
31
|
%
|
|
|
32
|
%
|
|
|
32
|
%
|
Managed Medicare
|
|
|
9
|
|
|
|
9
|
|
|
|
9
|
|
|
|
9
|
|
Medicaid
|
|
|
9
|
|
|
|
9
|
|
|
|
9
|
|
|
|
9
|
|
Managed Medicaid
|
|
|
4
|
|
|
|
4
|
|
|
|
4
|
|
|
|
4
|
|
Managed care and other insurers
|
|
|
44
|
|
|
|
43
|
|
|
|
44
|
|
|
|
43
|
|
Uninsured
|
|
|
3
|
|
|
|
4
|
|
|
|
2
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2011, we had 75 hospitals in the states of
Texas and Florida. During the second quarter of 2011, 57% of our
admissions and 51% of our revenues were generated by these
hospitals. Uninsured admissions in Texas and Florida represented
64% of our uninsured admissions during the second quarter of
2011.
We receive a significant portion of our revenues from government
health programs, principally Medicare and Medicaid, which are
highly regulated and subject to frequent and substantial
changes. We provide indigent care services in several
communities in the state of Texas, in affiliation with other
hospitals. The state of Texas has been involved in efforts to
increase the indigent care provided by private hospitals.
Additional indigent care provided by private hospitals allows
public hospital districts or counties in Texas to have funds
available that were previously devoted to indigent care. The
public hospital districts or counties are under no contractual
or legal obligation to provide such indigent care. The public
hospital districts or counties have elected to transfer some
portion of these available funds to the states Medicaid
program. Such action is at the sole discretion of the public
hospital districts or counties. It is anticipated that these
contributions to the state will be matched with federal Medicaid
funds. The state then may make supplemental payments to
hospitals in the state for Medicaid services rendered. Hospitals
receiving Medicaid supplemental payments may include those that
are providing additional indigent care services. Such payments
must be within the federal UPL established by federal
regulation. Our Texas Medicaid revenues included
$134 million and $167 million during the second
quarters of 2011 and 2010, respectively, and $301 million
and $336 million during the first six months of 2011 and
2010, respectively, of Medicaid supplemental payments pursuant
to UPL programs. In addition, we receive supplemental payments
in several other states. We are aware these supplemental
payment programs are currently being reviewed by certain state
agencies and some states have made waiver requests to the
Centers for Medicare & Medicaid Services
(CMS) to replace their existing supplemental payment
programs. It is possible these reviews and waiver requests will
result in the restructuring of such supplemental payment
programs and could result in the payment programs being reduced
or eliminated. Because deliberations about these programs are
ongoing, we are unable to estimate the financial impact the
program structure modifications, if any, may have on our results
of operations.
The American Recovery and Reinvestment Act of 2009 provides for
Medicare and Medicaid incentive payments beginning in 2011 for
eligible hospitals and professionals that adopt and meaningfully
use certified electronic health record (EHR)
technology. We will recognize revenues related to the Medicare
or Medicaid incentive payments as we are able to complete
attestations as to our eligible hospitals adopting, implementing
or demonstrating meaningful use of certified EHR technology. We
recognized $39 million of revenues related to Medicaid
incentive programs in certain states during the second quarter
of 2011 and expect to recognize revenues for additional state
programs during the third and fourth quarters of 2011. We
estimate that during 2011 the amount
33
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Revenue/Volume
Trends (continued)
of Medicare and Medicaid incentive payments realizable (and
revenues recognized) will be in the range of $290 million
to $340 million. We estimate that approximately 80% of our
total expected incentive payments for 2011 relate to Medicare
incentives, and we expect to recognize the applicable revenues
primarily during the fourth quarter of 2011. Actual incentive
payments could vary from these estimates due to certain factors
such as availability of federal funding for both Medicare and
Medicaid incentive payments, timing of the approval of state
Medicaid incentive payment plans by CMS and our ability to
implement and demonstrate meaningful use of certified EHR
technology. We have incurred and will continue to incur both
capital costs and operating expenses in order to implement our
certified EHR technology and meet meaningful use requirements.
These expenses are ongoing and are projected to continue over
all stages of implementation of meaningful use. The timing of
recognizing the expenses will not correlate with the receipt of
the incentive payments and the recognition of revenues. We
estimate that operating expenses to implement our certified EHR
technology and meet meaningful use will be in the range of
$100 million to $125 million for 2011. Actual
operating expenses could vary from these estimates. For the
second quarter and first six months of 2011, we incurred
$24 million and $44 million, respectively, of
operating expenses to implement our certified EHR technology and
meet meaningful use. There can be no assurance that we will be
able to demonstrate meaningful use of certified EHR technology,
and the failure to do so could have a material, adverse effect
on our results of operations.
34
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Operating
Results Summary
The following are comparative summaries of results from
operations for the quarters and six months ended June 30,
2011 and 2010 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
2011
|
|
|
2010
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Revenues
|
|
$
|
8,063
|
|
|
|
100.0
|
|
|
$
|
7,756
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
3,320
|
|
|
|
41.2
|
|
|
|
3,076
|
|
|
|
39.6
|
|
Supplies
|
|
|
1,295
|
|
|
|
16.1
|
|
|
|
1,251
|
|
|
|
16.1
|
|
Other operating expenses
|
|
|
1,326
|
|
|
|
16.4
|
|
|
|
1,226
|
|
|
|
15.9
|
|
Provision for doubtful accounts
|
|
|
775
|
|
|
|
9.6
|
|
|
|
788
|
|
|
|
10.2
|
|
Equity in earnings of affiliates
|
|
|
(73
|
)
|
|
|
(0.9
|
)
|
|
|
(75
|
)
|
|
|
(1.0
|
)
|
Depreciation and amortization
|
|
|
358
|
|
|
|
4.5
|
|
|
|
355
|
|
|
|
4.6
|
|
Interest expense
|
|
|
520
|
|
|
|
6.4
|
|
|
|
530
|
|
|
|
6.8
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
1.2
|
|
Loss on retirement of debt
|
|
|
75
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,596
|
|
|
|
94.2
|
|
|
|
7,242
|
|
|
|
93.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
467
|
|
|
|
5.8
|
|
|
|
514
|
|
|
|
6.6
|
|
Provision for income taxes
|
|
|
147
|
|
|
|
1.8
|
|
|
|
136
|
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
320
|
|
|
|
4.0
|
|
|
|
378
|
|
|
|
4.9
|
|
Net income attributable to noncontrolling interests
|
|
|
91
|
|
|
|
1.2
|
|
|
|
85
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Holdings, Inc.
|
|
$
|
229
|
|
|
|
2.8
|
|
|
$
|
293
|
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% changes from prior year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
4.0
|
%
|
|
|
|
|
|
|
3.7
|
%
|
|
|
|
|
Income before income taxes
|
|
|
(9.2
|
)
|
|
|
|
|
|
|
(2.2
|
)
|
|
|
|
|
Net income attributable to HCA Holdings, Inc.
|
|
|
(21.5
|
)
|
|
|
|
|
|
|
3.4
|
|
|
|
|
|
Admissions(a)
|
|
|
3.2
|
|
|
|
|
|
|
|
(0.6
|
)
|
|
|
|
|
Equivalent admissions(b)
|
|
|
3.4
|
|
|
|
|
|
|
|
1.3
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
0.5
|
|
|
|
|
|
|
|
2.3
|
|
|
|
|
|
Same facility % changes from prior year(c):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
2.4
|
|
|
|
|
|
|
|
3.8
|
|
|
|
|
|
Admissions(a)
|
|
|
1.8
|
|
|
|
|
|
|
|
(0.3
|
)
|
|
|
|
|
Equivalent admissions(b)
|
|
|
1.9
|
|
|
|
|
|
|
|
1.6
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
0.5
|
|
|
|
|
|
|
|
2.2
|
|
|
|
|
|
35
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Operating
Results Summary (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
2011
|
|
|
2010
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Revenues
|
|
$
|
16,118
|
|
|
|
100.0
|
|
|
$
|
15,300
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
6,615
|
|
|
|
41.0
|
|
|
|
6,148
|
|
|
|
40.2
|
|
Supplies
|
|
|
2,570
|
|
|
|
15.9
|
|
|
|
2,451
|
|
|
|
16.0
|
|
Other operating expenses
|
|
|
2,648
|
|
|
|
16.5
|
|
|
|
2,428
|
|
|
|
15.9
|
|
Provision for doubtful accounts
|
|
|
1,424
|
|
|
|
8.8
|
|
|
|
1,352
|
|
|
|
8.8
|
|
Equity in earnings of affiliates
|
|
|
(149
|
)
|
|
|
(0.9
|
)
|
|
|
(143
|
)
|
|
|
(0.9
|
)
|
Depreciation and amortization
|
|
|
716
|
|
|
|
4.5
|
|
|
|
710
|
|
|
|
4.7
|
|
Interest expense
|
|
|
1,053
|
|
|
|
6.5
|
|
|
|
1,046
|
|
|
|
6.8
|
|
Losses on sales of facilities
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
|
|
|
|
109
|
|
|
|
0.7
|
|
Loss on retirement of debt
|
|
|
75
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
Termination of management agreement
|
|
|
181
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,134
|
|
|
|
93.9
|
|
|
|
14,101
|
|
|
|
92.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
984
|
|
|
|
6.1
|
|
|
|
1,199
|
|
|
|
7.8
|
|
Provision for income taxes
|
|
|
330
|
|
|
|
2.0
|
|
|
|
345
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
654
|
|
|
|
4.1
|
|
|
|
854
|
|
|
|
5.6
|
|
Net income attributable to noncontrolling interests
|
|
|
185
|
|
|
|
1.2
|
|
|
|
173
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Holdings, Inc.
|
|
$
|
469
|
|
|
|
2.9
|
|
|
$
|
681
|
|
|
|
4.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% changes from prior year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
5.3
|
%
|
|
|
|
|
|
|
2.6
|
%
|
|
|
|
|
Income before income taxes
|
|
|
(18.0
|
)
|
|
|
|
|
|
|
4.7
|
|
|
|
|
|
Net income attributable to HCA Holdings, Inc.
|
|
|
(31.1
|
)
|
|
|
|
|
|
|
6.0
|
|
|
|
|
|
Admissions(a)
|
|
|
2.6
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
Equivalent admissions(b)
|
|
|
3.6
|
|
|
|
|
|
|
|
1.1
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
1.7
|
|
|
|
|
|
|
|
1.5
|
|
|
|
|
|
Same facility % changes from prior year(c):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
4.1
|
|
|
|
|
|
|
|
2.7
|
|
|
|
|
|
Admissions(a)
|
|
|
1.7
|
|
|
|
|
|
|
|
0.3
|
|
|
|
|
|
Equivalent admissions(b)
|
|
|
2.6
|
|
|
|
|
|
|
|
1.3
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
1.5
|
|
|
|
|
|
|
|
1.3
|
|
|
|
|
|
|
|
|
(a) |
|
Represents the total number of patients admitted to our
hospitals and is used by management and certain investors as a
general measure of inpatient volume. |
|
(b) |
|
Equivalent admissions are used by management and certain
investors as a general measure of combined inpatient and
outpatient volume. Equivalent admissions are computed by
multiplying admissions (inpatient volume) by the sum of gross
inpatient revenues and gross outpatient revenues and then
dividing the resulting amount by gross inpatient revenues. The
equivalent admissions computation equates outpatient
revenues to the volume measure (admissions) used to measure
inpatient volume, resulting in a general measure of combined
inpatient and outpatient volume. |
|
(c) |
|
Same facility information excludes the operations of hospitals
and their related facilities which were either acquired or
divested during the current and prior period. |
36
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Operating
Results Summary (continued)
Supplemental
Non-GAAP Disclosures
Operating Measures on a Cash Revenues Basis
(Dollars in millions)
The results from operations presented on a cash revenues basis
for the quarters and six months ended June 30, 2011 and
2010 follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
Non-GAAP % of
|
|
|
GAAP % of
|
|
|
|
|
|
Non-GAAP % of
|
|
|
GAAP % of
|
|
|
|
|
|
|
Cash Revenues
|
|
|
Revenues
|
|
|
|
|
|
Cash Revenues
|
|
|
Revenues
|
|
|
|
Amount
|
|
|
Ratios(b)
|
|
|
Ratios(b)
|
|
|
Amount
|
|
|
Ratios(b)
|
|
|
Ratios(b)
|
|
|
Revenues
|
|
$
|
8,063
|
|
|
|
|
|
|
|
100.0
|
|
|
$
|
7,756
|
|
|
|
|
|
|
|
100.0
|
|
Provision for doubtful accounts
|
|
|
775
|
|
|
|
|
|
|
|
|
|
|
|
788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash revenues(a)
|
|
|
7,288
|
|
|
|
100.0
|
|
|
|
|
|
|
|
6,968
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
3,320
|
|
|
|
45.5
|
|
|
|
41.2
|
|
|
|
3,076
|
|
|
|
44.1
|
|
|
|
39.6
|
|
Supplies
|
|
|
1,295
|
|
|
|
17.8
|
|
|
|
16.1
|
|
|
|
1,251
|
|
|
|
17.9
|
|
|
|
16.1
|
|
Other operating expenses
|
|
|
1,326
|
|
|
|
18.2
|
|
|
|
16.4
|
|
|
|
1,226
|
|
|
|
17.7
|
|
|
|
15.9
|
|
% changes from prior year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
4.0
|
%
|
|
|
|
|
|
|
|
|
|
|
3.7
|
%
|
|
|
|
|
|
|
|
|
Cash revenues
|
|
|
4.6
|
|
|
|
|
|
|
|
|
|
|
|
5.3
|
|
|
|
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
2.3
|
|
|
|
|
|
|
|
|
|
Cash revenue per equivalent admission
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
Non-GAAP % of
|
|
|
GAAP % of
|
|
|
|
|
|
Non-GAAP % of
|
|
|
GAAP % of
|
|
|
|
|
|
|
Cash Revenues
|
|
|
Revenues
|
|
|
|
|
|
Cash Revenues
|
|
|
Revenues
|
|
|
|
Amount
|
|
|
Ratios(b)
|
|
|
Ratios(b)
|
|
|
Amount
|
|
|
Ratios(b)
|
|
|
Ratios(b)
|
|
|
Revenues
|
|
$
|
16,118
|
|
|
|
|
|
|
|
100.0
|
|
|
$
|
15,300
|
|
|
|
|
|
|
|
100.0
|
|
Provision for doubtful accounts
|
|
|
1,424
|
|
|
|
|
|
|
|
|
|
|
|
1,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash revenues(a)
|
|
|
14,694
|
|
|
|
100.0
|
|
|
|
|
|
|
|
13,948
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
6,615
|
|
|
|
45.0
|
|
|
|
41.0
|
|
|
|
6,148
|
|
|
|
44.1
|
|
|
|
40.2
|
|
Supplies
|
|
|
2,570
|
|
|
|
17.5
|
|
|
|
15.9
|
|
|
|
2,451
|
|
|
|
17.6
|
|
|
|
16.0
|
|
Other operating expenses
|
|
|
2,648
|
|
|
|
18.0
|
|
|
|
16.5
|
|
|
|
2,428
|
|
|
|
17.3
|
|
|
|
15.9
|
|
% changes from prior year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
Cash revenues
|
|
|
5.3
|
|
|
|
|
|
|
|
|
|
|
|
5.3
|
|
|
|
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
Cash revenue per equivalent admission
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Cash revenues is defined as
reported revenues less the provision for doubtful accounts. We
use cash revenues as an analytical indicator for purposes of
assessing the effect of uninsured patient volumes, adjusted for
the effect of both the revenue deductions related to uninsured
accounts (charity care and uninsured discounts) and the
provision for doubtful accounts (which relates primarily to
uninsured accounts), on our revenues and certain operating
expenses, as a percentage of cash revenues. During the second
quarter and first six months of 2011, uninsured discounts
increased $270 million and $508 million, respectively,
charity care increased $58 million and $148 million,
respectively, and the provision for doubtful accounts declined
$13 million and increased $72 million, respectively,
compared to the same periods for 2010. Cash revenues is commonly
used as an analytical indicator within the health care industry.
Cash revenues should not be considered as a measure of financial
performance under generally accepted accounting principles
(GAAP). Because cash revenues is not a measurement
determined in accordance with GAAP and is thus susceptible to
varying calculations, cash revenues, as presented, may not be
comparable to other similarly titled measures of other health
care companies.
|
|
(b)
|
|
Salaries and benefits, supplies and
other operating expenses, as a percentage of cash revenues (a
non-GAAP financial measure), present the impact on these ratios
due to the adjustment of deducting the provision for doubtful
accounts from reported revenues and results in these ratios
being non-GAAP financial measures. We believe these non-GAAP
financial measures are useful to investors to provide
disclosures of our results of operations on the same basis as
that used by management. Management uses this information to
compare certain operating expense categories as a percentage of
cash revenues. Management finds this information useful to
evaluate certain expense category trends without the influence
of whether adjustments related to revenues for uninsured
accounts are recorded as revenue adjustments (charity care and
uninsured discounts) or operating expenses (provision for
doubtful accounts), and thus the expense category trends are
generally analyzed as a percentage of cash revenues. These
non-GAAP financial measures should not be considered
alternatives to GAAP financial measures. We believe this
supplemental information provides management and the users of
our financial statements with useful information for
period-to-period
comparisons. Investors are encouraged to use GAAP measures when
evaluating our overall financial performance.
|
37
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Quarters
Ended June 30, 2011 and 2010
Net income attributable to HCA Holdings, Inc. totaled
$229 million, or $0.43 per diluted share, for the second
quarter of 2011 compared to $293 million, or $0.67 per
diluted share, for the second quarter of 2010. Second quarter
2011 results include a loss on retirement of debt of
$75 million, or $0.08 per diluted share. Second quarter
2010 results include impairments of long-lived assets of
$91 million, or $0.13 per diluted share. (All per
diluted share disclosures are based upon amounts net of
the applicable income taxes.) Shares used for diluted earnings
per share were 538.6 million shares for the quarter ended
June 30, 2011 and 437.1 million shares for the quarter
ended June 30, 2010.
Revenues increased 4.0% due to the combined impact of revenue
per equivalent admission growth of 0.5% and an increase of 3.4%
in equivalent admissions for the second quarter of 2011 compared
to the second quarter of 2010. Cash revenues (reported revenues
less the provision for doubtful accounts) increased 4.6% for the
second quarter of 2011 compared to the second quarter of 2010.
Revenues for the second quarter of 2011 included
$39 million of Medicaid incentive revenues related to
certain of our hospitals completing attestations to their
adoption or implementation of certified electronic health record
technology.
For the second quarter of 2011, consolidated and same facility
admissions increased 3.2% and 1.8%, respectively, compared to
the second quarter of 2010. Consolidated and same facility
outpatient surgical volumes increased 0.3% and declined 0.6%,
respectively, during the second quarter of 2011, compared to the
second quarter of 2010. Consolidated and same facility inpatient
surgeries declined 1.3% and 1.5%, respectively, in the second
quarter of 2011, compared to the second quarter of 2010.
Consolidated and same facility emergency department visits
increased 5.3% and 4.5%, respectively, during the quarter ended
June 30, 2011, compared to the quarter ended June 30,
2010.
Salaries and benefits, as a percentage of revenues, were 41.2%
in the second quarter of 2011 and 39.6% in the second quarter of
2010. Salaries and benefits, as a percentage of cash revenues,
were 45.5% in the second quarter of 2011 and 44.1% in the second
quarter of 2010. Salaries and benefits per equivalent admission
increased 4.4% in the second quarter of 2011 compared to the
second quarter of 2010. Same facility labor rate increases
averaged 2.7% for the second quarter of 2011 compared to the
second quarter of 2010.
Supplies, as a percentage of revenues, were 16.1% in each of the
second quarters of 2011 and 2010. Supplies, as a percentage of
cash revenues, were 17.8% in the second quarter of 2011 and
17.9% in the second quarter of 2010. Supply cost per equivalent
admission increased 0.1% in the second quarter of 2011 compared
to the second quarter of 2010. Supply costs per equivalent
admission increased 1.5% for pharmacy supplies, 3.4% for blood
products and 3.4% for general medical and surgical items and
declined 2.1% for medical devices in the second quarter of 2011
compared to the second quarter of 2010.
Other operating expenses, as a percentage of revenues, increased
to 16.4% in the second quarter of 2011 from 15.9% in the second
quarter of 2010. Other operating expenses, as a percentage of
cash revenues, increased to 18.2% in the second quarter of 2011
from 17.7% in the second quarter of 2010. Other operating
expenses is primarily comprised of contract services,
professional fees, repairs and maintenance, rents and leases,
utilities, insurance (including professional liability
insurance) and nonincome taxes. Other operating expenses include
$79 million and $91 million of indigent care costs in
certain Texas markets during the second quarters of 2011 and
2010, respectively. Provisions for losses related to
professional liability risks were $60 million and
$55 million for the second quarters of 2011 and 2010,
respectively.
Provision for doubtful accounts declined $13 million from
$788 million in the second quarter of 2010 to
$775 million in the second quarter of 2011, and as a
percentage of revenues, declined to 9.6% in the second quarter
of 2011 from 10.2% in the second quarter of 2010. The provision
for doubtful accounts and the allowance for doubtful accounts
relate primarily to uninsured amounts due directly from
patients. The combined self-pay revenue deductions for charity
care and uninsured discounts increased $58 million and
$270 million, respectively, during the
38
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Quarters
Ended June 30, 2011 and 2010 (continued)
second quarter of 2011, compared to the second quarter of 2010.
The sum of the provision for doubtful accounts, uninsured
discounts and charity care, as a percentage of the sum of
revenues, uninsured discounts and charity care, was 27.6% for
the second quarter of 2011, compared to 26.1% for the second
quarter of 2010. To quantify the total impact of and trends
related to uninsured accounts, we believe it is beneficial to
review the related revenue deductions and the provision for
doubtful accounts in combination, rather than separately. At
June 30, 2011, our allowance for doubtful accounts
represented approximately 93% of the $4.248 billion total
patient due accounts receivable balance. The patient due
accounts receivable balance represents the estimated uninsured
portion of our accounts receivable.
Equity in earnings of affiliates was $73 million and
$75 million in the second quarters of 2011 and 2010,
respectively. Equity in earnings of affiliates relates primarily
to our Denver, Colorado market joint venture.
Depreciation and amortization increased $3 million, from
$355 million in the second quarter of 2010 to
$358 million in the second quarter of 2011.
Interest expense declined from $530 million in the second
quarter of 2010 to $520 million in the second quarter of
2011 due primarily to a decline in the average debt balance. Our
average debt balance was $25.437 billion for the second
quarter of 2011 compared to $26.966 billion for the second
quarter of 2010. The average effective interest rate for our
long term debt increased from 7.9% for the quarter ended
June 30, 2010 to 8.2% for the quarter ended June 30,
2011.
During the second quarter of 2010, we recorded impairments of
long-lived assets of $91 million, comprised of impairment
charges of $56 million for a hospital facility and
$35 million for capitalized engineering and design costs
related to certain building safety requirements (California
earthquake standards) that have been revised, to adjust the
carrying values to estimated fair value. There were no
impairments of long-lived assets during the second quarter of
2011.
During the second quarter of 2011, we recorded a loss on
retirement of debt of $75 million related to the
redemptions of all $1.000 billion aggregate principal
amount of our
91/8% Senior
Secured Notes due 2014, at a redemption price of 104.563% of the
principal amount, and $108 million aggregate principal
amount of our
97/8% Senior
Secured Notes due 2017, at a redemption price of 109.875% of the
principal amount.
The effective tax rates were 39.1% and 31.8% for the second
quarters of 2011 and 2010, respectively. The effective tax rate
computations exclude net income attributable to noncontrolling
interests as it relates to consolidated partnerships. Our
provision for income taxes for the second quarter of 2010 was
reduced by $37 million related to reductions in interest
expense related to taxing authority examinations. Excluding the
effect of this adjustment, the effective tax rate for the second
quarter of 2010 would have been 40.5%.
Net income attributable to noncontrolling interests increased
from $85 million for the second quarter of 2010 to
$91 million for the second quarter of 2011.
Six
Months Ended June 30, 2011 and 2010
Net income attributable to HCA Holdings, Inc. totaled
$469 million, or $0.94 per diluted share, in the six months
ended June 30, 2011 compared to $681 million, or $1.56
per diluted share, in the six months ended June 30, 2010. A
large component of the $212 million decline in net income
attributable to HCA Holdings, Inc. in the six months ended
June 30, 2011, compared to the six months ended
June 30, 2010, relates to the termination of management
agreement charge of $181 million (pretax), or
$149 million (net of taxes) and $0.30 per diluted share, in
the six months ended June 30, 2011. Revenues increased 5.3%
due to the combined impact of revenue per equivalent admission
growth of 1.7% and an increase of 3.6% in equivalent admissions
for the first six months of
39
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Six
Months Ended June 30, 2011 and 2010 (continued)
2011 compared to the first six months of 2010. Cash revenues
(reported revenues less the provision for doubtful accounts)
increased 5.3% in the six months ended June 30, 2011
compared to the six months ended June 30, 2010.
For the first six months of 2011, consolidated and same facility
admissions increased 2.6% and 1.7%, respectively, compared to
the first six months of 2010. Consolidated and same facility
outpatient surgical volumes increased 0.7% and 0.1%,
respectively, during the first six months of 2011, compared to
the first six months of 2010. Consolidated and same facility
inpatient surgeries declined 1.8% and 2.0%, respectively, in the
first six months of 2011, compared to the first six months of
2010. Consolidated and same facility emergency department visits
increased 8.4% and 7.8%, respectively, during the six months
ended June 30, 2011, compared to the six months ended
June 30, 2010.
Salaries and benefits, as a percentage of revenues, were 41.0%
in the first six months of 2011 and 40.2% in the first six
months of 2010. Salaries and benefits, as a percentage of cash
revenues, were 45.0% in the first six months of 2011 and 44.1%
in the first six months of 2010. Salaries and benefits per
equivalent admission increased 3.9% in the first six months of
2011 compared to the first six months of 2010. Same facility
labor rate increases averaged 2.8% for the first six months of
2011 compared to the first six months of 2010.
Supplies, as a percentage of revenues, were 15.9% in the first
six months of 2011 and 16.0% in the first six months of 2010.
Supplies, as a percentage of cash revenues, were 17.5% in first
six months of 2011 and 17.6% in the first six months of 2010.
Supply cost per equivalent admission increased 1.3% in the first
six months of 2011 compared to the first six months of 2010.
Supply costs per equivalent admission increased 1.0% for
pharmacy supplies, 0.8% for blood products and 4.4% for general
medical and surgical items and declined 1.5% for medical devices
in the first six months of 2011 compared to the first six months
of 2010.
Other operating expenses, as a percentage of revenues, increased
to 16.5% in the first six months of 2011 from 15.9% in the first
six months of 2010. Other operating expenses, as a percentage of
cash revenues, increased to 18.0% in the first six months of
2011 from 17.3% in the first six months of 2010. Other operating
expenses is primarily comprised of contract services,
professional fees, repairs and maintenance, rents and leases,
utilities, insurance (including professional liability
insurance) and nonincome taxes. Other operating expenses include
$170 million and $181 million of indigent care costs
in certain Texas markets during the first six months of 2011 and
2010, respectively. Provisions for losses related to
professional liability risks were $121 million and
$111 million for the first six months of 2011 and 2010,
respectively.
Provision for doubtful accounts increased $72 million from
$1.352 billion in the first six months of 2010 to
$1.424 billion in the first six months of 2011, and as a
percentage of revenues, remained 8.8% in each of the first six
months of 2011 and 2010. The provision for doubtful accounts and
the allowance for doubtful accounts relate primarily to
uninsured amounts due directly from patients. The combined
self-pay revenue deductions for charity care and uninsured
discounts increased $148 million and $508 million,
respectively, during the first six months of 2011, compared to
the first six months of 2010. The sum of the provision for
doubtful accounts, uninsured discounts and charity care, as a
percentage of the sum of revenues, uninsured discounts and
charity care, was 26.6% for the first six months of 2011,
compared to 24.8% for the first six months of 2010. To quantify
the total impact of and trends related to uninsured accounts, we
believe it is beneficial to review the related revenue
deductions and the provision for doubtful accounts in
combination, rather than separately. At June 30, 2011, our
allowance for doubtful accounts represented approximately 93% of
the $4.248 billion total patient due accounts receivable
balance. The patient due accounts receivable balance represents
the estimated uninsured portion of our accounts receivable.
Equity in earnings of affiliates was $149 million and
$143 million in the first six months of 2011 and 2010,
respectively. Equity in earnings of affiliates relates primarily
to our Denver, Colorado market joint venture.
40
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Six
Months Ended June 30, 2011 and 2010 (continued)
Depreciation and amortization increased $6 million, from
$710 million in the first six months of 2010 to
$716 million in the first six months of 2011.
Interest expense increased from $1.046 billion in the first
six months of 2010 to $1.053 billion in the first six
months of 2011 due primarily to an increase in the average
effective interest rate. Our average debt balance was
$26.544 billion for the first six months of 2011 compared
to $26.609 billion for the first six months of 2010. The
average effective interest rate for our long term debt increased
from 7.9% for the first six months of 2010 to 8.0% for the first
six months of 2011.
During the first six months of 2011, we recorded net losses on
sales of facilities of $1 million. During the first six
months of 2010, no gains or losses on sales of facilities were
recognized.
During the first six months of 2010, we recorded impairments of
long-lived assets of $109 million, including impairment
charges of $56 million for a hospital facility and
$35 million for capitalized engineering and design costs
related to certain building safety requirements (California
earthquake standards) that have been revised, to adjust the
carrying values to estimated fair value. There were no
impairments of long-lived assets during the first six months of
2011.
During the first six months of 2011, we recorded a loss on
retirement of debt of $75 million related to the
redemptions of all $1.000 billion aggregate principal
amount of our
91/8% Senior
Secured Notes due 2014, at a redemption price of 104.563% of the
principal amount, and $108 million aggregate principal
amount of our
97/8% Senior
Secured Notes due 2017, at a redemption price of 109.875% of the
principal amount.
Our Investors have provided management and advisory services to
the Company, pursuant to a management agreement among HCA and
the Investors executed in connection with the Investors
acquisition of HCA in November 2006. In March 2011, the
management agreement was terminated pursuant to its terms upon
completion of the initial public offering of our common stock,
and the Investors were paid a final fee of $181 million.
The effective tax rates were 41.3% and 33.7% for the first six
months of 2011 and 2010, respectively. The effective tax rate
computations exclude net income attributable to noncontrolling
interests as it relates to consolidated partnerships. Our
provision for income taxes for the first six months of 2011 and
2010 was increased by $16 million and reduced by
$47 million, respectively, related to adjustments to our
liability for unrecognized tax benefits, including reductions in
interest expense related to taxing authority examinations. Our
provision for income taxes for the first six months of 2010
declined by $47 million related to reductions in interest
expense related to taxing authority examinations. Excluding the
effect of these adjustments, the effective tax rates for the
first six months of 2011 and 2010 would have been 39.3% and
38.2%, respectively.
Net income attributable to noncontrolling interests increased
from $173 million for the first six months of 2010 to
$185 million for the first six months of 2011.
Liquidity
and Capital Resources
Cash provided by operating activities totaled
$1.666 billion in the first six months of 2011 compared to
$1.295 billion in the first six months of 2010. The
$371 million increase in cash provided by operating
activities in the first six months of 2011 compared to the first
six months of 2010 related primarily to the combined impact of
positive cash flows from changes in working capital items and
income tax payments (refunds) exceeding the decline in net
income, which was primarily due to the termination of management
agreement charge. The combined interest payments and net tax
payments (refunds) in the first six months of 2011 and 2010 were
$1.007 billion and $1.373 billion, respectively.
Working capital totaled $2.613 billion at June 30,
2011 and $2.650 billion at December 31, 2010.
41
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Liquidity
and Capital Resources (continued)
Cash used in investing activities was $812 million in the
first six months of 2011 compared to $51 million in the
first six months of 2010. Excluding acquisitions, capital
expenditures were $776 million in the first six months of
2011 and $536 million in the first six months of 2010. We
expended $136 million for the acquisition of a hospital
facility and $32 million to acquire nonhospital health care
facilities during the first six months of 2011. We paid
$31 million for acquisitions of nonhospital health care
facilities during the first six months of 2010. Capital
expenditures are expected to approximate $1.6 billion in
2011. At June 30, 2011, there were projects under
construction which had estimated additional costs to complete
and equip over the next five years of approximately
$1.710 billion. We expect to finance capital expenditures
with internally generated and borrowed funds. We received
$54 million and $25 million from sales of hospitals
and health care entities during the first six months of 2011 and
2010, respectively. We received net cash flows from our
investments of $76 million and $502 million in the
first six months of 2011 and 2010, respectively. During the
first six months of 2010, we liquidated certain investments of
the insurance subsidiary in order to distribute
$500 million of excess capital to the Company.
Cash used in financing activities totaled $726 million
during the first six months of 2011 compared to
$1.206 billion during the first six months of 2010. During
the first six months of 2011, net cash flows used in financing
activities included reductions in net borrowings of
$3.032 billion, net proceeds of $2.506 billion related
to the issuance of common stock in conjunction with our initial
public offering, distributions to noncontrolling interests of
$185 million, distributions to stockholders of
$30 million, payments of debt issuance costs of
$12 million and receipts of $49 million of income tax
benefits for certain items (primarily related to our stock
options). During the first six months of 2010, cash flows used
in financing activities included payment of cash distributions
to stockholders of $2.251 billion ($4.99 per common share),
increases in net borrowings of $1.187 billion, payments of
debt issuance costs of $25 million, distributions to
noncontrolling interests of $176 million and receipts of
$56 million of income tax benefits million for certain
items (primarily distributions to holders of our stock options).
We are a highly leveraged company with significant debt service
requirements. Our debt totaled $25.320 billion at
June 30, 2011. Our interest expense was $1.053 billion
for the first six months of 2011 and $1.046 billion for the
first six months of 2010. The increase in interest expense is
due primarily to an increase in the average effective interest
rate.
In addition to cash flows from operations, available sources of
capital include amounts available under our senior secured
credit facilities ($2.854 billion and $3.024 billion
available as of June 30, 2011 and July 31, 2011,
respectively) and anticipated access to public and private debt
markets.
On May 4, 2011, we completed amendments to our senior
secured credit agreement and senior secured asset-based
revolving credit agreement, as well as extensions of certain of
our term loans. The amendments extend approximately
$594 million of our term loan A facility with a final
maturity of November 2012 to a final maturity of May 2016 and
approximately $2.373 billion of our term loan A and term
loan B-1 facilities with final maturities of November 2012 and
November 2013, respectively, to a final maturity of May 2018.
On June 2, 2011, we redeemed all $1.000 billion
aggregate principal amount of our
91/8% Senior
Secured Notes due 2014, at a redemption price of 104.563% of the
principal amount, and $108 million aggregate principal
amount of our
97/8% Senior
Secured Notes due 2017, at a redemption price of 109.875% of the
principal amount. The pretax loss on retirement of debt related
to these redemptions was $75 million.
On August 1, 2011, we issued $5.000 billion aggregate
principal amount of notes, comprised of $3.000 billion of
61/2% senior
secured first lien notes due 2020 and $2.000 billion of
71/2% senior
unsecured notes due 2022. After the payment of related fees and
expenses, we intend to use the net proceeds from these debt
issuances to redeem all of our outstanding $1.578 billion
95/8%/103/8%
second lien toggle notes due 2016 and all of our outstanding
$3.200 billion
91/4%
second lien notes due 2016. The pretax debt retirement charge
related to these redemptions is expected to be approximately
$396 million.
42
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Liquidity
and Capital Resources (continued)
Investments of our professional liability insurance subsidiary,
to maintain statutory equity and pay claims, totaled
$725 million and $742 million at June 30, 2011
and December 31, 2010, respectively. The insurance
subsidiary maintained net reserves for professional liability
risks of $423 million and $452 million at
June 30, 2011 and December 31, 2010, respectively. Our
facilities are insured by our wholly-owned insurance subsidiary
for losses up to $50 million per occurrence; however, this
coverage is subject to a $5 million per occurrence
self-insured retention. Net reserves for the self-insured
professional liability risks retained were $818 million and
$796 million at June 30, 2011 and December 31,
2010, respectively. Claims payments, net of reinsurance
recoveries, during the next 12 months are expected to
approximate $275 million. We estimate that approximately
$180 million of the expected net claim payments during the
next 12 months will relate to claims in the self-insured
retention.
Management believes that cash flows from operations, amounts
available under our senior secured credit facilities and our
anticipated access to public and private debt markets will be
sufficient to meet expected liquidity needs during the next 12
months.
Market
Risk
We are exposed to market risk related to changes in market
values of securities. The investments in debt and equity
securities of our wholly-owned insurance subsidiary were
$717 million and $8 million, respectively, at
June 30, 2011. These investments are carried at fair value,
with changes in unrealized gains and losses being recorded as
adjustments to other comprehensive income. At June 30,
2011, we had a net unrealized gain of $8 million on the
insurance subsidiarys investment securities.
We are exposed to market risk related to market illiquidity.
Liquidity of the investments in debt and equity securities of
our wholly-owned insurance subsidiary could be impaired by the
inability to access the capital markets. Should the wholly-owned
insurance subsidiary require significant amounts of cash in
excess of normal cash requirements to pay claims and other
expenses on short notice, we may have difficulty selling these
investments in a timely manner or be forced to sell them at a
price less than what we might otherwise have been able to in a
normal market environment. At June 30, 2011, our
wholly-owned insurance subsidiary had invested $149 million
($152 million par value) in tax-exempt student loan auction
rate securities that continue to experience market illiquidity.
It is uncertain if auction-related market liquidity will resume
for these securities. We may be required to recognize
other-than-temporary
impairments on these long-term investments in future periods
should issuers default on interest payments or should the fair
market valuations of the securities deteriorate due to ratings
downgrades or other issue specific factors.
We are also exposed to market risk related to changes in
interest rates, and we periodically enter into interest rate
swap agreements to manage our exposure to these fluctuations.
Our interest rate swap agreements involve the exchange of fixed
and variable rate interest payments between two parties, based
on common notional principal amounts and maturity dates. The
notional amounts of the swap agreements represent balances 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 interest payments under these
agreements are settled on a net basis. These derivatives have
been recognized in the financial statements at their respective
fair values. Changes in the fair value of these derivatives,
which are designated as cash flow hedges, are included in other
comprehensive income, and changes in the fair value of
derivatives which have not been designated as hedges are
recorded in operations.
With respect to our interest-bearing liabilities, approximately
$1.524 billion of long-term debt at June 30, 2011 was
subject to variable rates of interest, while the remaining
balance in long-term debt of $23.796 billion at
June 30, 2011 was subject to fixed rates of interest. Both
the general level of interest rates and, for the senior secured
credit facilities, our leverage affect our variable interest
rates. Our variable debt is comprised primarily of amounts
outstanding under the senior secured credit facilities.
Borrowings under the senior secured credit facilities bear
interest at a rate equal to an applicable margin plus, at our
option, either (a) a base rate determined by reference to
43
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Liquidity
and Capital Resources (continued)
Market
Risk (continued)
the higher of (1) the federal funds rate plus 0.50% and
(2) the prime rate of Bank of America or (b) a LIBOR
rate for the currency of such borrowing for the relevant
interest period. The applicable margin for borrowings under the
senior secured credit facilities may fluctuate according to a
leverage ratio. The average effective interest rate for our
long-term debt increased from 7.9% for the six months ended
June 30, 2010 to 8.0% for the six months ended
June 30, 2011.
The estimated fair value of our total long-term debt was
$26.060 billion at June 30, 2011. The estimates of
fair value are based upon the quoted market prices for the same
or similar issues of long-term debt with the same maturities.
Based on a hypothetical 1% increase in interest rates, the
potential annualized reduction to future pretax earnings would
be approximately $15 million. To mitigate the impact of
fluctuations in interest rates, we generally target a portion of
our debt portfolio to be maintained at fixed rates.
Our international operations and foreign currency denominated
loans expose us to market risks associated with foreign
currencies. In order to mitigate the currency exposure related
to foreign currency denominated debt service obligations, we
have entered into cross currency swap agreements. A cross
currency swap is an agreement between two parties to exchange a
stream of principal and interest payments in one currency for a
stream of principal and interest payments in another currency
over a specified period. Our credit risk related to these
agreements is considered low because the swap agreements are
with creditworthy financial institutions.
Pending
IRS Disputes
At June 30, 2011, we were contesting, before the IRS
Appeals Division, certain claimed deficiencies and adjustments
proposed by the IRS Examination Division in connection with its
audit of HCA Inc.s 2005 and 2006 federal income tax
returns. The disputed items include the timing of recognition of
certain patient service revenues, the deductibility of certain
debt retirement costs and our method for calculating the tax
allowance for doubtful accounts. In addition, eight taxable
periods of HCA Inc. and its predecessors ended in 1997 through
2004, for which the primary remaining issue is the computation
of the tax allowance for doubtful accounts, were pending before
the IRS Examination Division as of June 30, 2011. The IRS
Examination Division began an audit of HCA Inc.s 2007,
2008 and 2009 federal income tax returns in 2010.
Management believes that HCA, its predecessors, subsidiaries and
affiliates properly reported taxable income and paid taxes in
accordance with applicable laws and agreements established with
the IRS and that final resolution of these disputes will not
have a material, adverse effect on our results of operations or
financial position. However, if payments due upon final
resolution of these issues exceed our recorded estimates, such
resolutions could have a material, adverse effect on our results
of operations or financial position.
44
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Operating
Data