FORM 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-Q

 

 

(Mark One)

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

Or

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission file number 1-11239

 

 

HCA Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   27-3865930

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

One Park Plaza   37203

Nashville, Tennessee

(Address of principal executive offices)

  (Zip Code)

(615) 344-9551

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

¨

  

Accelerated filer

 

¨

Non-accelerated filer

 

x  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

 

Class of Common Stock

  

Outstanding at October 31, 2011

Voting common stock, $.01 par value

   436,557,300 shares

 

 

 


Table of Contents

HCA HOLDINGS, INC.

Form 10-Q

September 30, 2011

 

          Page of
Form  10-Q
 

Part I.

  

Financial Information

  

Item 1.

  

Financial Statements (Unaudited):

  
  

Condensed Consolidated Income Statements  — for the quarters and nine months ended September 30, 2011 and 2010

     1   
  

Condensed Consolidated Balance Sheets — September 30, 2011 and December 31, 2010

     2   
  

Condensed Consolidated Statements of Cash Flows — for the nine months ended September  30, 2011 and 2010

     3   
  

Notes to Condensed Consolidated Financial Statements

     4   

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     28   

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

     47   

Item 4.

  

Controls and Procedures

     47   

Part II.

   Other Information   

Item 1.

  

Legal Proceedings

     47   

Item 1A.

  

Risk Factors

     48   

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

     50   

Item 6.

  

Exhibits

     50   

Signatures

     51   

 

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Table of Contents

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS

FOR THE QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

Unaudited

(Dollars in millions, except per share amounts)

 

     Quarter     Nine Months  
     2011     2010     2011     2010  

Revenues before provision for doubtful accounts

   $ 8,050      $ 7,647      $ 24,168      $ 22,947   

Provision for doubtful accounts

     740        721        2,164        2,073   
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

     7,310        6,926        22,004        20,874   

Salaries and benefits

     3,333        3,134        9,948        9,282   

Supplies

     1,263        1,234        3,833        3,685   

Other operating expenses

     1,370        1,268        4,018        3,696   

Equity in earnings of affiliates

     (68     (67     (217     (210

Depreciation and amortization

     362        352        1,078        1,062   

Interest expense

     519        525        1,572        1,571   

Losses on sales of facilities

     2        2        3        2   

Impairments of long-lived assets

            10               119   

Losses on retirement of debt

     406               481          

Termination of management agreement

                   181          
  

 

 

   

 

 

   

 

 

   

 

 

 
     7,187        6,458        20,897        19,207   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     123        468        1,107        1,667   

Provision (benefit) for income taxes

     (23     143        307        488   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     146        325        800        1,179   

Net income attributable to noncontrolling interests

     85        82        270        255   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to HCA Holdings, Inc.

   $ 61      $ 243      $ 530      $ 924   
  

 

 

   

 

 

   

 

 

   

 

 

 

Per share data:

        

Basic earnings per share

   $ 0.12      $ 0.57      $ 1.08      $ 2.17   

Diluted earnings per share

   $ 0.11      $ 0.55      $ 1.04      $ 2.11   

Shares used in earnings per share calculations (in thousands):

        

Basic

     508,417        426,361        489,924        426,347   

Diluted

     527,515        439,032        509,583        437,272   

See accompanying notes.

 

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Table of Contents

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(Dollars in millions)

 

    September 30,
2011
    December 31,
2010
 
ASSETS   

Current assets:

   

Cash and cash equivalents

  $ 359      $ 411   

Accounts receivable, less allowance for doubtful accounts of $3,994 and $3,939

    3,925        3,832   

Inventories

    891        897   

Deferred income taxes

    643        931   

Other

    875        848   
 

 

 

   

 

 

 
    6,693        6,919   

Property and equipment, at cost

    26,647        25,641   

Accumulated depreciation

    (15,002     (14,289
 

 

 

   

 

 

 
    11,645        11,352   

Investments of insurance subsidiary

    545        642   

Investments in and advances to affiliates

    837        869   

Goodwill

    2,701        2,693   

Deferred loan costs

    297        374   

Other

    1,038        1,003   
 

 

 

   

 

 

 
  $ 23,756      $ 23,852   
 

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ DEFICIT   

Current liabilities:

   

Accounts payable

  $ 1,334      $ 1,537   

Accrued salaries

    876        895   

Other accrued expenses

    1,336        1,245   

Long-term debt due within one year

    725        592   
 

 

 

   

 

 

 
    4,271        4,269   

Long-term debt

    25,871        27,633   

Professional liability risks

    993        995   

Income taxes and other liabilities

    1,683        1,608   

Equity securities with contingent redemption rights

           141   

Stockholders’ deficit:

   

Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 436,483,900 shares in 2011 and 427,458,800 shares in 2010

    4        4   

Capital in excess of par value

    1,584        386   

Accumulated other comprehensive loss

    (424     (428

Retained deficit

    (11,358     (11,888
 

 

 

   

 

 

 

Stockholders’ deficit attributable to HCA Holdings, Inc.

    (10,194     (11,926

Noncontrolling interests

    1,132        1,132   
 

 

 

   

 

 

 
    (9,062     (10,794
 

 

 

   

 

 

 
  $ 23,756      $ 23,852   
 

 

 

   

 

 

 

See accompanying notes.

 

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HCA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

Unaudited

(Dollars in millions)

 

     2011     2010  

Cash flows from operating activities:

    

Net income

   $ 800      $ 1,179   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Changes in operating assets and liabilities

     (2,336     (1,927

Provision for doubtful accounts

     2,164        2,073   

Depreciation and amortization

     1,078        1,062   

Income taxes

     348        (70

Losses on sales of facilities

     3        2   

Impairments of long-lived assets

            119   

Losses on retirement of debt

     481          

Amortization of deferred loan costs

     56        60   

Share-based compensation

     24        24   

Pay-in-kind interest

     (78       

Other

     6        29   
  

 

 

   

 

 

 

Net cash provided by operating activities

     2,546        2,551   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchase of property and equipment

     (1,170     (860

Acquisition of hospitals and health care entities

     (209     (35

Disposition of hospitals and health care entities

     55        26   

Change in investments

     80        473   

Other

     4        (2
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,240     (398
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Issuance of long-term debt

     5,000        1,387   

Net change in revolving credit facilities

     (414     1,035   

Repayment of long-term debt

     (6,583     (2,020

Distributions to noncontrolling interests

     (281     (282

Distributions to stockholders

     (31     (2,251

Payment of debt issuance costs

     (84     (25

Issuance of common stock

     2,506          

Repurchase of common stock

     (1,503       

Income tax benefits

     54        60   

Other

     (22     8   
  

 

 

   

 

 

 

Net cash used in financing activities

     (1,358     (2,088
  

 

 

   

 

 

 

Change in cash and cash equivalents

     (52     65   

Cash and cash equivalents at beginning of period

     411        312   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 359      $ 377   
  

 

 

   

 

 

 

Interest payments

   $ 1,635      $ 1,399   

Income tax (refunds) payments, net

   $ (95   $ 498   

See accompanying notes.

 

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Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — 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 September 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 14 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.

 

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Table of Contents

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 $53 million and $46 million for the quarters ended September 30, 2011 and 2010, respectively, and $162 million and $130 million for the nine months ended September 30, 2011 and 2010, respectively. Operating results for the quarter and nine months ended September 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.

We adopted the provisions of Accounting Standards Update No. 2011-07, Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities (“ASU 2011-07”), during the periods ended September 30, 2011. ASU 2011-07 requires health care entities to change the presentation of the statement of operations by reclassifying the provision for doubtful accounts from an operating expense to a deduction from patient service revenues. All periods presented in this Form 10-Q have been reclassified in accordance with ASU 2011-07.

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, Medicaid and other 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, the uninsured and other revenues for quarters and nine months ended September 30, 2011 and 2010 are summarized in the following tables (dollars in millions):

 

     Quarter  
     2011     Ratio     2010     Ratio  

Medicare

   $ 1,844        25.2   $ 1,745        25.2

Managed Medicare

     610        8.3        531        7.7   

Medicaid

     453        6.2        472        6.8   

Managed Medicaid

     311        4.3        296        4.3   

Managed care and other insurers

     3,855        52.7        3,669        53.0   

International (managed care and other insurers)

     232        3.2        195        2.8   
  

 

 

   

 

 

   

 

 

   

 

 

 
     7,305        99.9        6,908        99.8   

Uninsured

     508        6.9        518        7.5   

Other

     237        3.2        221        3.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues before provision for doubtful accounts

     8,050        110.0        7,647        110.5   

Provision for doubtful accounts

     (740     (10.0     (721     (10.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

   $ 7,310        100.0   $ 6,926        100.0
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 1 — INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Basis of Presentation (continued)

 

 

     Nine Months  
     2011     Ratio     2010     Ratio  

Medicare

   $ 5,715        26.0   $ 5,420        26.0

Managed Medicare

     1,806        8.2        1,630        7.8   

Medicaid

     1,440        6.5        1,461        7.0   

Managed Medicaid

     946        4.3        874        4.2   

Managed care and other insurers

     11,486        52.2        10,906        52.2   

International (managed care and other insurers)

     698        3.2        577        2.8   
  

 

 

   

 

 

   

 

 

   

 

 

 
     22,091        100.4        20,868        100.0   

Uninsured

     1,390        6.3        1,388        6.7   

Other

     687        3.1        691        3.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues before provision for doubtful accounts

     24,168        109.8        22,947        110.0   

Provision for doubtful accounts

     (2,164     (9.8     (2,073     (10.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

   $ 22,004        100.0   $ 20,874        100.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Certain prior year amounts have been reclassified to conform to the current year presentation.

NOTE 2 — INCOME TAXES

During the quarter ended September 30, 2011, we finalized a settlement with the Internal Revenue Service (“IRS”) Examination Division resolving all outstanding issues for our 1997 through 2001 tax years.

At September 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, 2002, 2003 and 2004 taxable periods of HCA Inc., 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 September 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 $462 million, including accrued interest of $49 million, as of September 30, 2011 ($413 million and $115 million, respectively, as of December 31, 2010). Unrecognized tax benefits of $153 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 $38 million ($63 million as of December 31, 2010) related to deductible interest and state income taxes or a refundable deposit of $39 million ($82 million as of December 31, 2010), which is recorded in noncurrent assets. The provision for income taxes reflects $66 million and $5 million ($42 million and $3 million, net of tax) in reductions in interest expense related to taxing authority examinations for the quarters ended September 30, 2011 and 2010, respectively, and $92 million and $79 million ($58 million and $50 million, respectively, net of tax) reductions in interest expense related to taxing authority examinations for the nine months ended September 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.

 

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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 nine months ended September 30, 2011 and 2010 (dollars in millions, except per share amounts, and shares in thousands):

 

     Quarter      Nine Months  
     2011      2010      2011      2010  

Net income attributable to HCA Holdings, Inc.

   $ 61       $ 243       $ 530       $ 924   

Weighted average common shares outstanding

     508,417         426,361         489,924         426,347   

Effect of dilutive securities

     19,098         12,671         19,659         10,925   
  

 

 

    

 

 

    

 

 

    

 

 

 

Shares used for diluted earnings per share

     527,515         439,032         509,583         437,272   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share:

           

Basic earnings per share

   $ 0.12       $ 0.57       $ 1.08       $ 2.17   

Diluted earnings per share

   $ 0.11       $ 0.55       $ 1.04       $ 2.11   

NOTE 4 — INVESTMENTS OF INSURANCE SUBSIDIARY

A summary of our insurance subsidiary’s investments at September 30, 2011 and December 31, 2010 follows (dollars in millions):

 

     September 30, 2011  
     Amortized
Cost
     Unrealized
Amounts
    Fair
  Value   
 
          Gains          Losses      

Debt securities:

          

States and municipalities

   $ 354       $ 15       $ (1   $ 368   

Auction rate securities

     149                 (4     145   

Asset-backed securities

     21                        21   

Money market funds

     88                        88   
  

 

 

    

 

 

    

 

 

   

 

 

 
     612         15         (5     622   

Equity securities

     8         1         (1     8   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 620       $ 16       $ (6     630   
  

 

 

    

 

 

    

 

 

   

Amounts classified as current assets

             (85
          

 

 

 

Investment carrying value

           $ 545   
          

 

 

 

 

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Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 4 — INVESTMENTS OF INSURANCE SUBSIDIARY (continued)

 

     December 31, 2010  
     Amortized
Cost
     Unrealized
Amounts
    Fair
  Value   
 
          Gains          Losses      

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 September 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 September 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 September 30, 2011 were as follows (dollars in millions):

 

     Amortized
Cost
     Fair
    Value     
 

Due in one year or less

   $ 136       $ 137   

Due after one year through five years

     113         120   

Due after five years through ten years

     130         135   

Due after ten years

     63         64   
  

 

 

    

 

 

 
     442         456   

Auction rate securities

     149         145   

Asset-backed securities

     21         21   
  

 

 

    

 

 

 
   $ 612       $ 622   
  

 

 

    

 

 

 

The average expected maturity of the investments in debt securities at September 30, 2011 was 3.8 years, compared to the average scheduled maturity of 10.7 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 management’s judgment. At September 30, 2011, the average expected maturities for our auction rate and asset-backed securities were 4.5 years and 4.9 years, respectively, compared to average scheduled maturities of 25.2 years and 25.0 years, respectively.

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 5 — LONG-TERM DEBT

A summary of long-term debt at September 30, 2011 and December 31, 2010, including related interest rates at September 30, 2011, follows (dollars in millions):

 

     September 30,
2011
     December 31,
2010
 

Senior secured asset-based revolving credit facility (effective interest rate of 1.7%)

   $ 1,730       $ 1,875   

Senior secured revolving credit facility (effective interest rate of 1.9%)

     460         729   

Senior secured term loan facilities (effective interest rate of 7.4%)

     7,473         7,530   

Senior secured first lien notes (effective interest rate of 7.7%)

     7,079         4,075   

Other senior secured debt (effective interest rate of 7.0%)

     314         322   
  

 

 

    

 

 

 

First lien debt

     17,056         14,531   
  

 

 

    

 

 

 

Senior secured notes (effective interest rate of 11.0%)

     196         4,501   

Senior secured toggle notes

             1,578   
  

 

 

    

 

 

 

Second lien debt

     196         6,079   
  

 

 

    

 

 

 

Senior unsecured notes (effective interest rate of 7.2%)

     9,344         7,615   
  

 

 

    

 

 

 

Total debt (average life of 7.1 years, rates averaging 7.0%)

     26,596         28,225   

Less amounts due within one year

     725         592   
  

 

 

    

 

 

 
   $ 25,871       $ 27,633   
  

 

 

    

 

 

 

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 $594 million of our term loan A facility with a final maturity of November 2012 to a final maturity of May 2016 and $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 6.50% senior secured first lien notes due 2020 and $2.000 billion of 7.50% senior unsecured notes due 2022. On August 26, 2011, after the payment of related fees and expenses, we used the net proceeds from these debt issuances to redeem all of our outstanding $1.578 billion 9 5/8%/10  3/8% second lien toggle notes due 2016, at a redemption price of 106.783% of the principal amount, and all of our outstanding $3.200 billion 9 1/4% second lien notes due 2016, at a redemption price of 106.513% of the principal amount. The pretax loss on retirement of debt related to these redemptions was $406 million.

On September 30, 2011, we refinanced our $2.000 billion asset-based revolving credit facility maturing on November 16, 2012 to increase the total capacity to $2.500 billion and extend the maturity to 2016.

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

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 calculate the exchange of cash flows and are not our assets or liabilities. Our credit risk related to these agreements is considered low because the swap agreements are with creditworthy financial institutions.

The following table sets forth our interest rate swap agreements, which have been designated as cash flow hedges, at September 30, 2011 (dollars in millions):

 

     Notional
Amount
     Maturity Date    Fair
Value
 

Pay-fixed interest rate swaps

   $ 7,100       November 2011    $ (42

Pay-fixed interest rate swaps (starting November 2011)

     500       December 2014      (8

Pay-fixed interest rate swaps (starting November 2011)

     3,000       December 2016      (332

Pay-fixed interest rate swaps (starting November 2011)

     1,000       December 2017      (48

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 September 30, 2011 (dollars in millions):

 

     Notional
Amount
     Maturity Date    Fair
Value
 

Pay-fixed interest rate swap

   $ 900       November 2011    $ (5

Pay-variable interest rate swap

     900       November 2011      1   

During the next 12 months, we estimate $147 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 September 30, 2011 (amounts in millions):

 

     Notional
Amount
   Maturity Date    Fair
Value
 

Euro — United States Dollar currency swap

   351 Euro    December 2011    $ 39   

 

10


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 6 — FINANCIAL INSTRUMENTS (continued)

 

Derivatives — Results of Operations

The following table presents the effect on our results of operations of our interest rate swaps for the nine months ended September 30, 2011 (dollars in millions):

 

Derivatives in Cash Flow Hedging Relationships

   Amount of Loss
Recognized  in OCI on
Derivatives, Net of Tax
     Location of Loss
Reclassified  from
Accumulated OCI
into Operations
   Amount of  Loss
Reclassified from
Accumulated  OCI
into Operations
 

Interest rate swaps

   $ 180       Interest expense    $ 279   

Credit-risk-related Contingent Features

We have agreements with each of our derivative counterparties that contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of September 30, 2011, we have not been required to post any collateral related to these agreements. If we had breached these provisions at September 30, 2011, we would have been required to settle our obligations under the agreements at their aggregate, estimated termination value of $446 million.

NOTE 7 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

Accounting Standards Codification 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 entity’s 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 entity’s 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

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 7 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)

 

Cash Traded Investments (continued)

 

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.

Our wholly-owned insurance subsidiary had investments in tax-exempt ARS, which are backed by student loans substantially guaranteed by the federal government, of $145 million ($149 million par value) at September 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 nine months of 2011, certain issuers and their broker/dealers redeemed or repurchased $150 million and $102 million, respectively, of our ARS at par value. The valuation of these securities involved management’s 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 counterparty’s nonperformance risk in the fair value measurements.

Although we determined the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. We assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and at September 30, 2011 and December 31, 2010, we determined the credit valuation adjustments were not significant to the overall valuation of our derivatives.

 

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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 September 30, 2011 and December 31, 2010, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):

 

     September 30, 2011  
           Fair Value Measurements Using  
     Fair Value     Quoted Prices  in
Active Markets for
Identical Assets
and Liabilities
(Level 1)
    Significant  Other
Observable Inputs
(Level 2)
    Significant
Unobservable  Inputs
(Level 3)
 

Assets:

        

Investments of insurance subsidiary:

        

Debt securities:

        

States and municipalities

   $ 368      $      $ 368      $   

Auction rate securities

     145                      145   

Asset-backed securities

     21               21          

Money market funds

     88        88                 
  

 

 

   

 

 

   

 

 

   

 

 

 
     622        88        389        145   

Equity securities

     8        2        5        1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Investments of insurance subsidiary

     630        90        394        146   

Less amounts classified as current assets

     (85     (85              
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 545      $ 5      $ 394      $ 146   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cross currency swap (Other assets)

   $ 39      $      $ 39      $   

Liabilities:

        

Interest rate swaps (Income taxes and other liabilities)

   $ 434      $      $ 434      $   

 

13


Table of Contents

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  
     Fair Value     Quoted Prices in
Active  Markets for
Identical Assets
and Liabilities
(Level 1)
    Significant Other
Observable  Inputs
(Level 2)
    Significant
Unobservable  Inputs
(Level 3)
 

Assets:

        

Investments of insurance 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 nine months ended September 30, 2011 (dollars in millions):

 

Asset balances at December 31, 2010

   $ 251   

Unrealized losses included in other comprehensive income

     (3

Settlements

     (102
  

 

 

 

Asset balances at September 30, 2011

   $ 146   
  

 

 

 

The estimated fair value of our long-term debt was $25.989 billion and $28.738 billion at September 30, 2011 and December 31, 2010, respectively, compared to carrying amounts aggregating $26.596 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.

NOTE 8 — CONTINGENCIES

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.

 

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Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 8 — CONTINGENCIES (continued)

 

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 management’s 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 (loss), net of related taxes, for the quarters and nine months ended September 30, 2011 and 2010 are only attributable to HCA Holdings, Inc. and are as follows (dollars in millions):

 

     Quarter     Nine Months  
     2011     2010     2011     2010  

Net income attributable to HCA Holdings, Inc.

   $ 61      $ 243      $ 530      $ 924   

Change in fair value of derivative instruments

     (72     (15     (3     (41

Change in fair value of available-for-sale securities

     1        3               (4

Foreign currency translation adjustments

     (18     20        (4     (7

Defined benefit plans

     4        3        11        8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   $ (24   $ 254      $ 534      $ 880   
  

 

 

   

 

 

   

 

 

   

 

 

 

The components of accumulated other comprehensive loss, net of related taxes, are as follows (dollars in millions):

 

     September 30,
2011
    December 31,
2010
 

Change in fair value of derivative instruments

   $ (275   $ (272

Change in fair value of available-for-sale securities

     6        6   

Foreign currency translation adjustments

     (23     (19

Defined benefit plans

     (132     (143
  

 

 

   

 

 

 

Accumulated other comprehensive loss

   $ (424   $ (428
  

 

 

   

 

 

 

 

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Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 9 — COMPREHENSIVE INCOME AND CAPITAL STRUCTURE (continued)

 

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.     Equity
Attributable to
Noncontrolling
Interests
    Total  
    Common Stock     Capital in
Excess of
Par
Value
    Accumulated
Other
Comprehensive
Loss
    Retained
Deficit
     
             
    Shares
(000)
    Par
  Value  
           

Balances, December 31, 2010

    427,459      $ 4      $ 386      $ (428   $ (11,888   $ 1,132      $ (10,794

Net income

                                530        270        800   

Other comprehensive income

                         4                      4   

Issuance of common stock

    87,719        1        2,505                             2,506   

Repurchase of common stock

    (80,771     (1     (1,502                          (1,503

Distributions

                                       (281     (281

Share-based benefit plans

    2,077               27                             27   

Reclassification of certain equity securities with contingent redemption rights

                  141                             141   

Other

                  27                      11        38   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances, September 30, 2011

    436,484      $ 4      $ 1,584      $ (424   $ (11,358   $ 1,132      $ (9,062
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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. 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.

On September 21, 2011, HCA Holdings, Inc. repurchased 80,771,143 shares of its common stock beneficially owned by affiliates of Bank of America Corporation at a purchase price of $18.61 per share, the closing price of the Company’s common stock on the New York Stock Exchange on September 14, 2011. The repurchase was financed using a combination of cash on hand and borrowings under available credit facilities. The shares repurchased represented approximately 15.6% of the Company’s total shares outstanding.

NOTE 10 — SEGMENT AND GEOGRAPHIC INFORMATION

We operate in one line of business, which is operating hospitals and related health care entities. 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.

 

16


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 10 — SEGMENT AND GEOGRAPHIC INFORMATION (continued)

 

Adjusted segment EBITDA is defined as income before depreciation and amortization, interest expense, losses on sales of facilities, impairments of long-lived assets, losses 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 nine months ended September 30, 2011 and 2010 are summarized in the following table (dollars in millions):

 

     Quarter     Nine Months  
     2011     2010     2011     2010  

Revenues:

        

National Group

   $ 3,033      $ 2,858      $ 9,150      $ 8,668   

Southwest Group

     2,248        2,157        6,760        6,474   

Central Group

     1,743        1,667        5,240        5,006   

Corporate and other

     286        244        854        726   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 7,310      $ 6,926      $ 22,004      $ 20,874   
  

 

 

   

 

 

   

 

 

   

 

 

 

Equity in earnings of affiliates:

        

National Group

   $ (3   $ (1   $ (5   $ (3

Southwest Group

     (64     (66     (212     (206

Central Group

            (1            (2

Corporate and other

     (1     1               1   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ (68   $ (67   $ (217   $ (210
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted segment EBITDA:

        

National Group

   $ 587      $ 557      $ 1,835      $ 1,821   

Southwest Group

     552        539        1,714        1,674   

Central Group

     298        289        949        956   

Corporate and other

     (25     (28     (76     (30
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 1,412      $ 1,357      $ 4,422      $ 4,421   
  

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization:

        

National Group

   $ 129      $ 127      $ 381      $ 383   

Southwest Group

     111        106        332        319   

Central Group

     86        88        263        266   

Corporate and other

     36        31        102        94   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 362      $ 352      $ 1,078      $ 1,062   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted segment EBITDA

   $ 1,412      $ 1,357      $ 4,422      $ 4,421   

Depreciation and amortization

     362        352        1,078        1,062   

Interest expense

     519        525        1,572        1,571   

Losses on sales of facilities

     2        2        3        2   

Impairments of long-lived assets

            10               119   

Losses on retirement of debt

     406               481          

Termination of management agreement

                   181          
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

   $ 123      $ 468      $ 1,107      $ 1,667   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

17


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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 11 — ACQUISITIONS, DISPOSITIONS AND IMPAIRMENTS OF LONG-LIVED ASSETS

During the nine months ended September 30, 2011, we paid $136 million to acquire a hospital in the National Group and $73 million to acquire other nonhospital health care entities. During the nine months ended September 30, 2010, we paid $35 million to acquire nonhospital health care entities.

During the nine months ended September 30, 2011, we received proceeds of $55 million and recognized a net pretax loss of $3 million related to the sales of a hospital facility and our investment in a hospital joint venture. During the nine months ended September 30, 2010, we received proceeds of $26 million and recognized a net pretax loss of $2 million related to sales of real estate investments.

During the quarter ended September 30, 2010, we recorded impairments of long-lived assets of $10 million, primarily related to a hospital facility in our Southwest Group, to adjust the carrying values to estimated fair value. During the nine months ended September 30, 2010, we recorded impairments of long-lived assets of $119 million, primarily comprised of the third quarter 2010 charges of $10 million and the 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. There were no impairments of long-lived assets for the quarter or nine months ended September 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 7 3/4% 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).

 

18


Table of Contents

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 September 30, 2011 and December 31, 2010, condensed consolidating statements of income for the quarters and nine months ended September 30, 2011 and 2010 and condensed consolidating statements of cash flows for the nine months ended September 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 SEPTEMBER 30, 2011

(Dollars in millions)

 

     HCA
Holdings, Inc.
Issuer
    HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
Consolidated
 

Revenues before provision for doubtful accounts

   $      $      $ 4,569      $ 3,481      $      $ 8,050   

Provision for doubtful accounts

                   424        316               740   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

                   4,145        3,165               7,310   

Salaries and benefits

                   1,901        1,432               3,333   

Supplies

                   702        561               1,263   

Other operating expenses

            1        697        672               1,370   

Equity in earnings of affiliates

     (77            (24     (44     77        (68

Depreciation and amortization

                   193        169               362   

Interest expense

     20        776        (245     (32            519   

Losses on sales of facilities

                   2                      2   

Losses on retirement of debt

            406                             406   

Management fees

                   (128     128                 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (57     1,183        3,098        2,886        77        7,187   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     57        (1,183     1,047        279        (77     123   

Provision (benefit) for income taxes

     (4     (357     293        45               (23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     61        (826     754        234        (77     146   

Net income attributable to noncontrolling interests

                   16        69               85   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to HCA Holdings, Inc.

   $ 61      $ (826   $ 738      $ 165      $ (77   $ 61   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

19


Table of Contents

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 SEPTEMBER 30, 2010

(Dollars in millions)

 

     HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
Consolidated
 

Revenues before provision for doubtful accounts

   $      $ 4,415      $ 3,232      $      $ 7,647   

Provision for doubtful accounts

            452        269               721   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

            3,963        2,963               6,926   

Salaries and benefits

            1,829        1,305               3,134   

Supplies

            698        536               1,234   

Other operating expenses

     1        678        589               1,268   

Equity in earnings of affiliates

     (680     (27     (40     680        (67

Depreciation and amortization

            196        156               352   

Interest expense

     685        (139     (21            525   

Losses on sales of facilities

                   2               2   

Impairments of long-lived assets

            5        5               10   

Management fees

            (118     118                 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     6        3,122        2,650        680        6,458   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (6     841        313        (680     468   

Provision (benefit) for income taxes

     (249     303        89               143   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     243        538        224        (680     325   

Net income attributable to noncontrolling interests

            4        78               82   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to HCA Holdings, Inc.

   $ 243      $ 534      $ 146      $ (680   $ 243   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

20


Table of Contents

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 NINE MONTHS ENDED SEPTEMBER 30, 2011

(Dollars in millions)

 

     HCA
Holdings, Inc.
Issuer
    HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
Consolidated
 

Revenues before provision for doubtful accounts

   $      $      $ 13,662      $ 10,506      $      $ 24,168   

Provision for doubtful accounts

                   1,298        866               2,164   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

                   12,364        9,640               22,004   

Salaries and benefits

                   5,669        4,279               9,948   

Supplies

                   2,133        1,700               3,833   

Other operating expenses

            5        2,064        1,949               4,018   

Equity in earnings of affiliates

     (581            (84     (133     581        (217

Depreciation and amortization

                   582        496               1,078   

Interest expense

     80        2,208        (561     (155            1,572   

Losses (gains) on sales of facilities

                   18        (15            3   

Losses on retirement of debt

            481                             481   

Termination of management agreement

            181                             181   

Management fees

                   (381     381                 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (501     2,875        9,440        8,502        581        20,897   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     501        (2,875     2,924        1,138        (581     1,107   

Provision (benefit) for income taxes

     (29     (1,055     1,055        336               307   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     530        (1,820     1,869        802        (581     800   

Net income attributable to noncontrolling interests

                   47        223               270   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to HCA Holdings, Inc.

   $ 530      $ (1,820   $ 1,822      $ 579      $ (581   $ 530   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

21


Table of Contents

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 NINE MONTHS ENDED SEPTEMBER 30, 2010

(Dollars in millions)

 

     HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
Consolidated
 

Revenues before provision for doubtful accounts

   $      $ 13,268      $ 9,679      $      $ 22,947   

Provision for doubtful accounts

            1,309        764               2,073   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

            11,959        8,915               20,874   

Salaries and benefits

            5,464        3,818               9,282   

Supplies

            2,112        1,573               3,685   

Other operating expenses

     4        1,981        1,711               3,696   

Equity in earnings of affiliates

     (2,236     (82     (128     2,236        (210

Depreciation and amortization

            588        474               1,062   

Interest expense

     2,001        (376     (54            1,571   

Losses on sales of facilities

                   2               2   

Impairments of long-lived assets

            58        61               119   

Management fees

            (356     356                 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (231     9,389        7,813        2,236        19,207   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     231        2,570        1,102        (2,236     1,667   

Provision (benefit) for income taxes

     (693     875        306               488   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     924        1,695        796        (2,236     1,179   

Net income attributable to noncontrolling interests

            33        222               255   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to HCA Holdings, Inc.

   $ 924      $ 1,662      $ 574      $ (2,236   $ 924   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

22


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 12 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

 

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

SEPTEMBER 30, 2011

(Dollars in millions)

 

    HCA
Holdings, Inc.
Issuer
    HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
Consolidated
 
ASSETS            

Current assets:

           

Cash and cash equivalents

  $      $      $ 95      $ 264      $      $ 359   

Accounts receivable, net

                  2,259        1,666               3,925   

Inventories

                  546        345               891   

Deferred income taxes

    643                                    643   

Other

    218               228        429               875   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    861               3,128        2,704               6,693   

Property and equipment, net

                  6,973        4,672               11,645   

Investments of insurance subsidiary

                         545               545   

Investments in and advances to affiliates

                  220        617               837   

Goodwill

                  1,608        1,093               2,701   

Deferred loan costs

    22        275                             297   

Investments in and advances to subsidiaries

    14,863                             (14,863       

Other

    763        38        26        211               1,038   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 16,509      $ 313      $ 11,955      $ 9,842      $ (14,863   $ 23,756   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND

STOCKHOLDERS’ (DEFICIT)

EQUITY

           

Current liabilities:

           

Accounts payable

  $      $      $ 769      $ 565      $      $ 1,334   

Accrued salaries

                  557        319               876   

Other accrued expenses

    44        234        350        708               1,336   

Long-term debt due within one year

           682        15        28               725   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    44        916        1,691        1,620               4,271   

Long-term debt

    1,525        23,693        87        566               25,871   

Intercompany balances

    24,619        (12,397     (14,435     2,213                 

Professional liability risks

                         993               993   

Income taxes and other liabilities

    515        434        519        215               1,683   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    26,703        12,646        (12,138     5,607               32,818   

Stockholders’ (deficit) equity attributable to HCA Holdings, Inc.

    (10,194     (12,333     23,989        3,207        (14,863     (10,194

Noncontrolling interests

                  104        1,028               1,132   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (10,194     (12,333     24,093        4,235        (14,863     (9,062
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 16,509      $ 313      $ 11,955      $ 9,842      $ (14,863   $ 23,756   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

23


Table of Contents

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
Holdings, Inc.
Issuer
    HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
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   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

24


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 12 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

 

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011

(Dollars in millions)

 

    HCA
Holdings, Inc.
Issuer
    HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
Consolidated
 

Cash flows from operating activities:

           

Net income

  $ 530      $ (1,820   $ 1,869      $ 802      $ (581   $ 800   

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

           

Changes in operating assets and liabilities

    34        (61     (1,442     (867            (2,336

Provision for doubtful accounts

                  1,298        866               2,164   

Depreciation and amortization

                  582        496               1,078   

Income taxes

    348                                    348   

Losses (gains) on sales of facilities

                  18        (15            3   

Losses on retirement of debt

           481                             481   

Amortization of deferred loan costs

           56                             56   

Share-based compensation

    24                                    24   

Pay-in-kind interest

           (78                          (78

Equity in earnings of affiliates

    (581                          581          

Other

           7               (1            6   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

    355        (1,415     2,325        1,281               2,546   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

           

Purchase of property and equipment

                  (594     (576            (1,170

Acquisition of hospitals and health care entities

                  (136     (73            (209

Disposition of hospitals and health care entities

                  1        54               55   

Change in investments

                  31        49               80   

Other

                         4               4   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

                  (698     (542            (1,240
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

           

Issuance of long-term debt

           5,000                             5,000   

Net change in revolving bank credit facilities

           (414                          (414

Repayment of long-term debt

           (6,529     (8     (46            (6,583

Distributions to noncontrolling interests

                  (55     (226            (281

Distributions to stockholders

    (31                                 (31

Changes in intercompany balances with affiliates, net

    (1,358     3,442        (1,625     (459              

Payment of debt issuance costs

           (84                          (84

Issuances of common stock

    2,506                                    2,506   

Repurchase of common stock

    (1,503                                 (1,503

Income tax benefits

    54                                    54   

Other

    (29                   7               (22
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by financing activities

    (361     1,415        (1,688     (724            (1,358
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Change in cash and cash equivalents

    (6            (61     15               (52

Cash and cash equivalents at beginning of period

    6               156        249               411   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

  $      $      $ 95      $ 264      $      $ 359   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

25


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 12 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

 

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010

(Dollars in millions)

 

    HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
Consolidated
 

Cash flows from operating activities:

         

Net income

  $ 924      $ 1,695      $ 796      $ (2,236   $ 1,179   

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

         

Changes in operating assets and liabilities

    111        (1,358     (680            (1,927

Provision for doubtful accounts

           1,309        764               2,073   

Depreciation and amortization

           588        474               1,062   

Income taxes

    (70                          (70

Losses on sales of facilities

                  2               2   

Impairments of long-lived assets

           58        61               119   

Amortization of deferred loan costs

    60                             60   

Share-based compensation

    24                             24   

Equity in earnings of affiliates

    (2,236                   2,236          

Other

    29                             29   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by operating activities

    (1,158     2,292        1,417               2,551   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

         

Purchase of property and equipment

           (338     (522            (860

Acquisition of hospitals and health care entities

           (21     (14            (35

Disposition of hospitals and health care entities

           24        2               26   

Change in investments

           1        472               473   

Other

                  (2            (2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

           (334     (64            (398
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

         

Issuance of long-term debt

    1,387                             1,387   

Net change in revolving credit facilities

    1,035                             1,035   

Repayment of long-term debt

    (1,956     (16     (48 ) </