10-Q 1 d366482d10q.htm FORM 10-Q 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 June 30, 2012

Or

 

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

For the transition period from             to            

Commission file number 1-11239

 

 

HCA Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   27-3865930

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

One Park Plaza

Nashville, Tennessee

  37203
(Address of principal executive offices)   (Zip Code)

(615) 344-9551

(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   x    Accelerated filer   ¨
Non-accelerated filer   ¨ (Do not check if a smaller reporting company)    Smaller reporting company   ¨

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

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

 

Class of Common Stock

  

Outstanding at July 31, 2012

Voting common stock, $.01 par value    440,652,700 shares

 

 

 


Table of Contents

HCA HOLDINGS, INC.

Form 10-Q

June 30, 2012

 

          Page of
Form  10-Q
 

Part I.

   Financial Information   

Item 1.

  

Financial Statements (Unaudited):

  
  

Condensed Consolidated Comprehensive Income Statements  — for the quarters and six months ended June 30, 2012 and 2011

     2   
  

Condensed Consolidated Balance Sheets — June 30, 2012 and December 31, 2011

     3   
  

Condensed Consolidated Statements of Cash Flows — for the six months ended June  30, 2012 and 2011

     4   
  

Notes to Condensed Consolidated Financial Statements

     5   

Item 2.

  

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

     29   

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

     49   

Item 4.

  

Controls and Procedures

     49   

Part II.

   Other Information   

Item 1.

  

Legal Proceedings

     49   

Item 1A.

  

Risk Factors

     51   

Item 6.

  

Exhibits

     55   

Signatures

     56   

 

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HCA HOLDINGS, INC.

CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS

FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2012 AND 2011

Unaudited

(Dollars in millions, except per share amounts)

 

     Quarter     Six Months  
     2012     2011     2012     2011  

Revenues before provision for doubtful accounts

   $ 9,153      $ 8,024      $ 18,352      $ 16,079   

Provision for doubtful accounts

     1,041        775        1,835        1,424   
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

     8,112        7,249        16,517        14,655   

Salaries and benefits

     3,707        3,320        7,443        6,615   

Supplies

     1,422        1,295        2,841        2,570   

Other operating expenses

     1,493        1,326        2,986        2,648   

Electronic health record incentive income

     (70     (39     (125     (39

Equity in earnings of affiliates

     (9     (73     (20     (149

Depreciation and amortization

     420        358        837        716   

Interest expense

     448        520        890        1,053   

Losses on sales of facilities

     2               3        1   

Losses on retirement of debt

            75               75   

Termination of management agreement

                          181   
  

 

 

   

 

 

   

 

 

   

 

 

 
     7,413        6,782        14,855        13,671   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     699        467        1,662        984   

Provision for income taxes

     214        147        538        330   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     485        320        1,124        654   

Net income attributable to noncontrolling interests

     94        91        193        185   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to HCA Holdings, Inc.

   $ 391      $ 229      $ 931      $ 469   
  

 

 

   

 

 

   

 

 

   

 

 

 

Per share data:

        

Basic earnings per share

   $ 0.89      $ 0.44      $ 2.12      $ 0.98   

Diluted earnings per share

   $ 0.85      $ 0.43      $ 2.03      $ 0.94   

Cash dividends declared per share

   $      $      $ 2.00      $   

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

        

Basic

     439,473        516,448        438,705        480,525   

Diluted

     458,621        538,557        458,467        500,463   

Comprehensive income attributable to HCA Holdings, Inc.

   $ 353      $ 234      $ 922      $ 558   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes.

 

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HCA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(Dollars in millions)

 

     June 30,
2012
    December 31,
2011
 
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 518      $ 373   

Accounts receivable, less allowance for doubtful accounts of $4,416 and $4,106

     4,485        4,533   

Inventories

     1,055        1,054   

Deferred income taxes

     323        594   

Other

     756        679   
  

 

 

   

 

 

 
     7,137        7,233   

Property and equipment, at cost

     28,742        28,075   

Accumulated depreciation

     (15,896     (15,241
  

 

 

   

 

 

 
     12,846        12,834   

Investments of insurance subsidiaries

     495        548   

Investments in and advances to affiliates

     102        101   

Goodwill and other intangible assets

     5,431        5,251   

Deferred loan costs

     281        290   

Other

     840        641   
  

 

 

   

 

 

 
   $ 27,132      $ 26,898   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ DEFICIT     

Current liabilities:

    

Accounts payable

   $ 1,517      $ 1,597   

Accrued salaries

     970        965   

Other accrued expenses

     1,651        1,585   

Long-term debt due within one year

     1,309        1,407   
  

 

 

   

 

 

 
     5,447        5,554   

Long-term debt

     25,732        25,645   

Professional liability risks

     1,039        993   

Income taxes and other liabilities

     1,857        1,720   

Stockholders’ deficit:

    

Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 440,483,600 shares in 2012 and 437,477,900 shares in 2011

     4        4   

Capital in excess of par value

     1,665        1,601   

Accumulated other comprehensive loss

     (449     (440

Retained deficit

     (9,463     (9,423
  

 

 

   

 

 

 

Stockholders’ deficit attributable to HCA Holdings, Inc.

     (8,243     (8,258

Noncontrolling interests

     1,300        1,244   
  

 

 

   

 

 

 
     (6,943     (7,014
  

 

 

   

 

 

 
   $ 27,132      $ 26,898   
  

 

 

   

 

 

 

See accompanying notes.

 

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HCA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

Unaudited

(Dollars in millions)

 

     2012     2011  

Cash flows from operating activities:

    

Net income

   $ 1,124      $ 654   

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

    

Changes in operating assets and liabilities

     (1,927     (1,576

Provision for doubtful accounts

     1,835        1,424   

Depreciation and amortization

     837        716   

Income taxes

     326        317   

Losses on sales of facilities

     3        1   

Losses on retirement of debt

            75   

Amortization of deferred loan costs

     29        39   

Share-based compensation

     23        16   

Other

     7          
  

 

 

   

 

 

 

Net cash provided by operating activities

     2,257        1,666   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchase of property and equipment

     (784     (776

Acquisition of hospitals and health care entities

     (139     (168

Disposition of hospitals and health care entities

     6        54   

Change in investments

     35        76   

Other

     (4     2   
  

 

 

   

 

 

 

Net cash used in investing activities

     (886     (812
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Issuance of long-term debt

     1,350          

Net change in revolving credit facilities

     (820     (1,524

Repayment of long-term debt

     (608     (1,508

Distributions to noncontrolling interests

     (191     (185

Payment of debt issuance costs

     (19     (12

Issuance of common stock

            2,506   

Distributions to stockholders

     (982     (30

Income tax benefits

     71        49   

Other

     (27     (22
  

 

 

   

 

 

 

Net cash used in financing activities

     (1,226     (726
  

 

 

   

 

 

 

Change in cash and cash equivalents

     145        128   

Cash and cash equivalents at beginning of period

     373        411   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 518      $ 539   
  

 

 

   

 

 

 

Interest payments

   $ 854      $ 1,043   

Income tax payments (refunds), net

   $ 141      $ (36

See accompanying notes.

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Reporting Entity

On November 17, 2006, HCA Inc. was acquired by a private investor group, including affiliates of, or funds sponsored by Bain Capital Partners, LLC, Kohlberg Kravis Roberts & Co., BAML Capital Partners and HCA founder, Dr. Thomas F. Frist Jr. (collectively, the “Investors”) and by members of management and certain other investors. The transaction was accounted for as a recapitalization in our financial statements, with no adjustments to the historical basis of our assets and liabilities.

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. became HCA Holdings, Inc.’s wholly-owned direct subsidiary. As part of the Corporate Reorganization, HCA Inc.’s outstanding shares of common stock were automatically converted, on a share for share basis, into identical shares of HCA Holdings, Inc.’s common stock. As a result of the Corporate Reorganization, HCA Holdings, Inc. was deemed the successor registrant to HCA Inc. under the Exchange Act.

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 traded on the New York Stock Exchange (symbol “HCA”).

The Investors 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 during March 2011, and the Company paid the Investors a final fee of $181 million.

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, 2012, these affiliates owned and operated 163 hospitals, 110 freestanding surgery centers and provided extensive outpatient and ancillary services. HCA Holdings, Inc.’s facilities are located in 20 states and England. The terms “Company,” “HCA,” “we,” “our” or “us,” as used herein and unless otherwise stated or indicated by context, refer to HCA 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.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal and recurring nature.

The majority of our expenses are “costs of revenues” items. Costs that could be classified as general and administrative would include our corporate office costs, which were $59 million and $55 million for the quarters ended June 30, 2012 and 2011, respectively, and $112 million and $109 million for the six months ended

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 1 — INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Basis of Presentation (continued)

 

June 30, 2012 and 2011, respectively. Operating results for the quarter and the six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. 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, 2011.

In 2011, we adopted the provisions of Accounting Standards Update (“ASU”) 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”). 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. Operating results for the quarter and six months ended June 30, 2011 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 the quarters and six months ended June 30, 2012 and 2011 are summarized in the following tables (dollars in millions):

 

     Quarter  
     2012     Ratio     2011     Ratio  

Medicare

   $     1,989        24.5   $     1,871        25.8

Managed Medicare

     729        9.0        584        8.1   

Medicaid

     380        4.7        479        6.6   

Managed Medicaid

     358        4.4        316        4.4   

Managed care and other insurers

     4,473        55.1        3,853        53.1   

International (managed care and other insurers)

     266        3.3        233        3.2   
  

 

 

   

 

 

   

 

 

   

 

 

 
     8,195        101.0        7,336        101.2   

Uninsured

     739        9.1        492        6.8   

Other

     219        2.7        196        2.7   
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues before provision for doubtful accounts

     9,153        112.8        8,024        110.7   

Provision for doubtful accounts

     (1,041     (12.8     (775     (10.7
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

   $ 8,112        100.0   $ 7,249        100.0
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 1 — INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Basis of Presentation (continued)

 

     Six Months  
      2012     Ratio     2011     Ratio  

Medicare

   $     4,302        26.0   $     3,871        26.4

Managed Medicare

     1,479        9.0        1,196        8.2   

Medicaid

     810        4.9        987        6.7   

Managed Medicaid

     700        4.2        635        4.3   

Managed care and other insurers

     8,918        54.0        7,631        52.1   

International (managed care and other insurers)

     526        3.2        466        3.2   
  

 

 

   

 

 

   

 

 

   

 

 

 
     16,735        101.3        14,786        100.9   

Uninsured

     1,181        7.2        882        6.0   

Other

     436        2.6        411        2.8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues before provision for doubtful accounts

     18,352        111.1        16,079        109.7   

Provision for doubtful accounts

     (1,835     (11.1     (1,424     (9.7
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

   $ 16,517        100.0   $ 14,655        100.0
  

 

 

   

 

 

   

 

 

   

 

 

 

The increase in revenues for the six months ended June 30, 2012 compared to the six months ended June 30, 2011 includes two adjustments (Rural Floor Provision Settlement and Supplemental Security Income (“SSI”) ratios) related to Medicare revenues for prior periods. The net effect of the Medicare adjustments was an increase of $188 million to revenues. The Rural Floor Provision Settlement was signed on April 5, 2012. As a result of the agreement, we received additional Medicare payments of approximately $271 million during June 2012. This amount was recorded as an increase to Medicare revenues for the quarter ended March 31, 2012. During March 2012, the Centers for Medicare & Medicaid Services (“CMS”) issued new SSI ratios used for calculating Medicare Disproportionate Share Hospital (“DSH”) reimbursement for federal fiscal years ending September 30, 2006 through September 30, 2009. As a result, we recalculated our DSH reimbursement for all applicable periods. The cumulative impact of this retroactive adjustment was a reduction in Medicare revenues of approximately $83 million. This adjustment was recorded as a reduction to Medicare revenues during the quarter ended March 31 2012. The net effect of these adjustments (and related expenses) added $170 million to income before income taxes, or $0.22 per diluted share, for the six months ended June 30, 2012.

We previously reported $39 million of Medicaid electronic health record (“EHR”) incentives for the quarter and six months ended June 30, 2011 in the line item “Revenues” in our condensed consolidated income statements. This amount has been reclassified and is now included in the line item “Electronic health record incentive income” in our condensed consolidated comprehensive income statements for the quarter and six months ended June 30, 2011.

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

NOTE 2 — INCOME TAXES

At June 30, 2012, we were contesting 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. The IRS Examination Division began an audit of HCA Inc.’s 2007, 2008 and 2009 federal income tax returns in 2010.

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 2 — INCOME TAXES (continued)

 

Our liability for unrecognized tax benefits was $518 million, including accrued interest of $46 million, as of June 30, 2012 ($494 million and $62 million, respectively, as of December 31, 2011). Unrecognized tax benefits of $157 million ($173 million as of December 31, 2011) would affect the effective rate, if recognized. The provision for income taxes reflects $18 million and $2 million ($11 million and $1 million, respectively, net of tax) in reductions in interest expense related to taxing authority examinations for the quarters ended June 30, 2012 and 2011, respectively, and $21 million and $26 million ($13 million and $16 million, respectively, net of tax) in reductions in interest expense related to taxing authority examinations for the six months ended June 30, 2012 and 2011, 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.

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, stock appreciation rights 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, 2012 and 2011 (dollars in millions, except per share amounts, and shares in thousands):

 

     Quarter      Six Months  
     2012      2011      2012      2011  

Net income attributable to HCA Holdings, Inc.

   $ 391       $ 229       $ 931       $     469   

Weighted average common shares outstanding

     439,473         516,448         438,705         480,525   

Effect of dilutive securities

     19,148         22,109         19,762         19,938   
  

 

 

    

 

 

    

 

 

    

 

 

 

Shares used for diluted earnings per share

     458,621         538,557         458,467         500,463   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share:

           

Basic earnings per share

   $ 0.89       $ 0.44       $ 2.12       $     0.98   

Diluted earnings per share

   $ 0.85       $ 0.43       $ 2.03       $     0.94   

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 4 — INVESTMENTS OF INSURANCE SUBSIDIARIES

A summary of our insurance subsidiaries’ investments at June 30, 2012 and December 31, 2011 follows (dollars in millions):

 

     June 30, 2012  
     Amortized
Cost
     Unrealized
Amounts
    Fair
Value
 
        Gains      Losses    

Debt securities:

          

States and municipalities

   $     377       $ 20       $     —      $     397   

Auction rate securities

     76                 (6     70   

Asset-backed securities

     17                        17   

Money market funds

     129                        129   
  

 

 

    

 

 

    

 

 

   

 

 

 
     599         20         (6     613   

Equity securities

     7         1                8   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 606       $ 21       $ (6     621   
  

 

 

    

 

 

    

 

 

   

Amounts classified as current assets

             (126
          

 

 

 

Investment carrying value

           $ 495   
          

 

 

 

 

     December 31, 2011  
     Amortized
Cost
     Unrealized
Amounts
    Fair
Value
 
        Gains      Losses    

Debt securities:

          

States and municipalities

   $     398       $ 19       $     —      $     417   

Auction rate securities

     139                 (8     131   

Asset-backed securities

     20                        20   

Money market funds

     53                        53   
  

 

 

    

 

 

    

 

 

   

 

 

 
     610         19         (8     621   

Equity securities

     7         1         (1     7   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 617       $ 20       $ (9     628   
  

 

 

    

 

 

    

 

 

   

Amounts classified as current assets

             (80
          

 

 

 

Investment carrying value

           $ 548   
          

 

 

 

At June 30, 2012 and December 31, 2011, the investments of our insurance subsidiaries were classified as “available-for-sale.” Changes in temporary unrealized gains and losses are recorded as adjustments to other comprehensive income. At both June 30, 2012 and December 31, 2011, $19 million of our investments were subject to restrictions included in insurance bond collateralization and assumed reinsurance contracts.

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 4 — INVESTMENTS OF INSURANCE SUBSIDIARIES (continued)

 

Scheduled maturities of investments in debt securities at June 30, 2012 were as follows (dollars in millions):

 

     Amortized
Cost
     Fair
Value
 

Due in one year or less

   $     161       $     161   

Due after one year through five years

     115         123   

Due after five years through ten years

     132         140   

Due after ten years

     98         102   
  

 

 

    

 

 

 
     506         526   

Auction rate securities

     76         70   

Asset-backed securities

     17         17   
  

 

 

    

 

 

 
   $ 599       $ 613   
  

 

 

    

 

 

 

The average expected maturity of the investments in debt securities at June 30, 2012 was 3.8 years, compared to the average scheduled maturity of 8.1 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 June 30, 2012, the average expected maturities for our auction rate and asset-backed securities were 4.9 years and 4.4 years, respectively, compared to average scheduled maturities of 24.6 years and 24.3 years, respectively.

NOTE 5 — LONG-TERM DEBT

A summary of long-term debt at June 30, 2012 and December 31, 2011, including related interest rates at June 30, 2012, follows (dollars in millions):

 

     June 30,
2012
     December 31,
2011
 

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

   $ 1,335       $ 2,155   

Senior secured term loan facilities (effective interest rate of 5.0%)

     7,242         7,425   

Senior secured first lien notes (effective interest rate of 7.4%)

     8,434         7,081   

Other senior secured debt (effective interest rate of 6.8%)

     391         350   
  

 

 

    

 

 

 

First lien debt

     17,402         17,011   

Senior secured notes (effective interest rate of 11.0%)

     197         197   

Senior unsecured notes (effective interest rate of 7.3%)

     9,442         9,844   
  

 

 

    

 

 

 

Total debt (average life of 6.8 years, rates averaging 6.5%)

     27,041         27,052   

Less amounts due within one year

     1,309         1,407   
  

 

 

    

 

 

 
   $     25,732       $     25,645   
  

 

 

    

 

 

 

During April 2012, we extended $75 million of our term loan A-1 facility with a final maturity of November 2012 and $651 million of our term loan B-1 facility with a final maturity of November 2013 to term loan A-3 with a final maturity of February 2016.

During February 2012, we issued $1.350 billion aggregate principal amount of 5.875% senior secured notes due 2022. After the payment of related fees and expenses, we used the proceeds for general corporate purposes.

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 5 — LONG-TERM DEBT (continued)

 

During June 2011, we redeemed all $1.000 billion aggregate principal amount of our 9 1/8% senior secured notes due 2014, at a redemption price of 104.563% of the principal amount, and $108 million aggregate principal amount of our 9 7/8% senior secured notes due 2017, at a redemption price of 109.875% of the principal amount. The pretax losses on retirement of debt related to these redemptions were $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. 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. 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 June 30, 2012 (dollars in millions):

 

     Notional
Amount
     Maturity Date      Fair
Value
 

Pay-fixed interest rate swaps

   $ 500         December 2014       $ (8

Pay-fixed interest rate swaps

     3,000         December 2016         (362

Pay-fixed interest rate swaps

     1,000         December 2017         (70

During the next 12 months, we estimate $118 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 enter into various cross currency swaps. Our credit risk related to these agreements is considered low because the swap agreements are with creditworthy financial institutions.

Our cross currency swap is not designated as a hedge, and changes in fair value are recognized in results of operations. The following table sets forth our cross currency swap agreement at June 30, 2012 (amounts in millions):

 

     Notional
Amount
     Maturity Date      Fair
Value
 

Euro — United States dollar currency swap

     266 Euro         November 2013       $ (26 )

 

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Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 6 — FINANCIAL INSTRUMENTS (continued)

 

Derivatives — Results of Operations

The following tables present the effect of our interest rate and cross currency swaps on our results of operations for the six months ended June 30, 2012 (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

   $ 64         Interest expense       $ 60   

 

Derivatives Not Designated as Hedging Instruments

   Location of Loss
Recognized in
Operations on
Derivatives
     Amount of Loss
Recognized in
Operations on
Derivatives
 

Cross currency swap

     Other operating expenses       $ 10   

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, 2012, we have not been required to post any collateral related to these agreements. If we had breached these provisions at June 30, 2012, we would have been required to settle our obligations under the agreements at their aggregate, estimated termination value of $494 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

 

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Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

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

 

value measurement falls is based on the lowest level input significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Cash Traded Investments

Our cash traded investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Certain types of cash traded instruments are classified within Level 3 of the fair value hierarchy because they trade infrequently and therefore have little or no price transparency. The transaction price is initially used as the best estimate of fair value.

Our wholly-owned insurance subsidiaries had investments in tax-exempt auction rate securities (“ARS”), which are backed by student loans substantially guaranteed by the federal government, of $70 million ($76 million par value) at June 30, 2012. We do not currently intend to attempt to sell the ARS as the liquidity needs of our insurance subsidiaries are expected to be met by other investments in their investment portfolios. During 2011 and the six months ended June 30, 2012, certain issuers and their broker/dealers redeemed or repurchased $112 million and $63 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 and ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”), we incorporate credit valuation adjustments to reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. We have made the accounting policy election to use the exception under ASU 2011-04 (commonly referred to as the “portfolio exception”) with respect to measuring counterparty credit risk for derivative instruments.

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, 2012 and December 31, 2011, 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)

 

The following table summarizes our assets and liabilities measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):

 

     June 30, 2012  
           Fair Value Measurements Using  
     Fair Value     Quoted Prices in
Active Markets for
Identical Assets
and Liabilities
(Level 1)
    Significant Other
Observable Inputs
(Level 2)
     Significant
Unobservable Inputs
(Level 3)
 

Assets:

         

Investments of insurance subsidiaries:

         

Debt securities:

         

States and municipalities

   $     397      $     —      $     397       $     —   

Auction rate securities

     70                       70   

Asset-backed securities

     17               17           

Money market funds

     129        129                  
  

 

 

   

 

 

   

 

 

    

 

 

 
     613        129        414         70   

Equity securities

     8        2        5         1   
  

 

 

   

 

 

   

 

 

    

 

 

 

Investments of insurance subsidiaries

     621        131        419         71   

Less amounts classified as current assets

     (126     (126               
  

 

 

   

 

 

   

 

 

    

 

 

 
   $ 495      $ 5      $ 419       $ 71   
  

 

 

   

 

 

   

 

 

    

 

 

 

Liabilities:

         

Cross currency swap (Income taxes and other liabilities)

   $ 26      $      $ 26       $   

Interest rate swaps (Income taxes and other liabilities)

     440               440           

 

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Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

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

 

     December 31, 2011  
     Fair Value     Fair Value Measurements Using  
       Quoted Prices in
Active Markets for
Identical Assets
and Liabilities
(Level 1)
    Significant Other
Observable Inputs
(Level 2)
    Significant
Unobservable Inputs
(Level 3)
 

Assets:

        

Investments of insurance subsidiaries:

        

Debt securities:

        

States and municipalities

   $     417      $     —      $     417      $     —   

Auction rate securities

     131                      131   

Asset-backed securities

     20               20          

Money market funds

     53        53                 
  

 

 

   

 

 

   

 

 

   

 

 

 
     621        53        437        131   

Equity securities

     7        1        5        1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Investments of insurance subsidiaries

     628        54        442        132   

Less amounts classified as current assets

     (80     (54     (26       
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 548      $      $ 416      $ 132   
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

        

Cross currency swap (Income taxes and other liabilities)

   $ 16      $      $ 16      $   

Interest rate swaps (Income taxes and other liabilities)

     399               399          

The following table summarizes the activity related to the auction rate and equity securities investments of our insurance subsidiaries which have fair value measurements based on significant unobservable inputs (Level 3) during the six months ended June 30, 2012 (dollars in millions):

 

Asset balances at December 31, 2011

   $      132   

Unrealized gains included in other comprehensive income

     2   

Settlements

     (63
  

 

 

 

Asset balances at June 30, 2012

   $ 71   
  

 

 

 

The estimated fair value of our long-term debt was $28.146 billion and $27.199 billion at June 30, 2012 and December 31, 2011, respectively, compared to carrying amounts aggregating $27.041 billion and $27.052 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.

 

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Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

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.

Health care companies are subject to numerous investigations by various governmental agencies. Under the federal false claims act (“FCA”) private parties have the right to bring qui tam, or “whistleblower,” suits against companies that submit false claims for payments to, or improperly retain overpayments from, the government. Some states have adopted similar state whistleblower and false claims provisions. Certain of our individual facilities have received 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 CMS 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 FCA 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.

In July 2012, the Civil Division of the U.S. Attorney’s Office in Miami requested information on reviews assessing the medical necessity of interventional cardiology services provided at any Company facility (other than peer reviews). Based upon the Company’s review to date, which is not yet complete, the Company believes that such reviews have occurred at approximately 10 of its affiliated hospitals, located primarily in Florida. At this time, we cannot predict what effect, if any, the request or any resulting claims, including any potential claims under the federal False Claims Act, other statutes, regulations or laws, could have on the Company.

On October 28, 2011, a shareholder action was filed in the United States District Court for the Middle District of Tennessee. The case seeks to include, as a class, all persons who acquired the Company’s stock pursuant or traceable to the Company’s Registration Statement and Prospectus issued in connection with the March 9, 2011 initial public offering. The lawsuit asserts a claim under Section 11 of the Securities Act of 1933 against the Company, certain members of the board of directors, and certain underwriters in the offering. It further asserts a claim under Section 15 of the Securities Act of 1933 against the same members of the board of directors. The action alleged various deficiencies in the Company’s disclosures in the Registration Statement. Subsequently, two additional class action complaints setting forth substantially similar claims were filed in the same federal court. All three cases were consolidated. On July 13, 2012, the lead plaintiff filed an amended complaint asserting claims under Sections 11 and 12(a)(2) of the Securities Act of 1933 against the Company, certain members of the board of directors, and certain underwriters in the offering. It further asserts a claim under Section 15 of the Securities Act of 1933 against the same members of the board of directors and Hercules Holdings II, LLC, a majority shareholder of the Company. The consolidated complaint alleges deficiencies in the Company’s disclosures in the Registration

 

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Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 8 — CONTINGENCIES (continued)

 

Statement and Prospectus relating to: (1) the accounting for the Company’s 2006 recapitalization and 2010 reorganization; (2) the Company’s failure to maintain effective internal controls relating to its accounting for such transactions; and (3) the Company’s Medicare and Medicaid revenue growth rates.

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, 2012 and 2011 are only attributable to HCA Holdings, Inc. and are as follows (dollars in millions):

 

     Quarter      Six Months  
     2012     2011      2012     2011  

Net income attributable to HCA Holdings, Inc.

   $     391      $     229       $     931      $     469   

Change in fair value of derivative instruments

     (29     2         (25     69   

Change in fair value of available-for-sale securities

                    3        (1

Foreign currency translation adjustments

     (14             4        14   

Defined benefit plans

     5        3         9        7   
  

 

 

   

 

 

    

 

 

   

 

 

 

Comprehensive income

   $ 353      $ 234       $ 922      $ 558   
  

 

 

   

 

 

    

 

 

   

 

 

 

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

 

     June 30,
2012
    December 31,
2011
 

Change in fair value of derivative instruments

   $     (278   $     (253

Change in fair value of available-for-sale securities

     10        7   

Foreign currency translation adjustments

     (21     (25

Defined benefit plans

     (160     (169
  

 

 

   

 

 

 

Accumulated other comprehensive loss

   $ (449   $ (440
  

 

 

   

 

 

 

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, 2011

    437,478      $ 4      $ 1,601      $ (440   $ (9,423   $ 1,244      $ (7,014

Net income

                                931        193        1,124   

Other comprehensive loss

                         (9                   (9

Distributions

                                (971     (191     (1,162

Share-based benefit plans

    3,006               65                             65   

Adjustment to the acquired controlling interest in equity investment

                                       30        30   

Other

                  (1                   24        23   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances, June 30, 2012

    440,484      $ 4      $     1,665      $       (449)      $     (9,463)      $     1,300      $     (6,943)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

17


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 9 — COMPREHENSIVE INCOME AND CAPITAL STRUCTURE (continued)

 

On February 3, 2012, our Board of Directors declared a distribution to the Company’s stockholders and holders of vested stock awards. The distribution was $2.00 per share and vested stock award, or $971 million in the aggregate, and was paid on February 29, 2012 to holders of record on February 16, 2012. The distribution was funded using funds available under our senior secured credit facilities.

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. At June 30, 2012, the National Group includes 64 hospitals located in Florida, South Carolina, southern Georgia, Alaska, California, Nevada, Utah and Idaho, the Southwest Group includes 47 hospitals located in Colorado, Texas, Oklahoma and the Wichita, Kansas market, and the Central Group includes 46 hospitals located in Louisiana, Indiana, Kentucky, Tennessee, Virginia, New Hampshire, northern Georgia and the Kansas City market. We also operate six hospitals in England, and these facilities are included in the Corporate and other group.

 

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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, 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 Southwest Group’s increases in revenues, adjusted segment EBITDA and depreciation and amortization, and the declines in equity in earnings of affiliates, for the quarter and six months ended June 30, 2012 compared to the quarter and six months ended June 30, 2011 are primarily attributable to the financial consolidation of our 2011 acquisition of our partner’s interest in the HCA-HealthONE LLC venture for periods subsequent to our acquisition of controlling interests during October 2011. 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, 2012 and 2011 are summarized in the following table (dollars in millions):

 

     Quarter     Six Months  
     2012     2011     2012     2011  

Revenues:

        

National Group

   $     3,143      $     3,013      $     6,431      $     6,117   

Southwest Group

     2,840        2,220        5,754        4,485   

Central Group

     1,789        1,735        3,664        3,486   

Corporate and other

     340        281        668        567   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 8,112      $ 7,249      $ 16,517      $ 14,655   
  

 

 

   

 

 

   

 

 

   

 

 

 

Equity in earnings of affiliates:

        

National Group

   $ (3   $ (1   $ (7   $ (2

Southwest Group

     (7     (73     (14     (148

Central Group

                   (1       

Corporate and other

     1        1        2        1   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ (9   $ (73   $ (20   $ (149
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted segment EBITDA:

        

National Group

   $ 663      $ 576      $ 1,409      $ 1,248   

Southwest Group

     650        567        1,397        1,162   

Central Group

     331        318        733        651   

Corporate and other

     (75     (41     (147     (51
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 1,569      $ 1,420      $ 3,392      $ 3,010   
  

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization:

        

National Group

   $ 143      $ 127      $ 283      $ 252   

Southwest Group

     147        110        296        221   

Central Group

     87        89        175        177   

Corporate and other

     43        32        83        66   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 420      $ 358      $ 837      $ 716   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

19


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

NOTE 10 — SEGMENT AND GEOGRAPHIC INFORMATION (continued)

 

     Quarter      Six Months  
     2012      2011      2012      2011  

Adjusted segment EBITDA

   $ 1,569       $ 1,420       $ 3,392       $ 3,010   

Depreciation and amortization

     420         358         837         716   

Interest expense

     448         520         890         1,053   

Losses on sales of facilities

     2                 3         1   

Losses on retirement of debt

             75                 75   

Termination of management agreement

                             181   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

   $ 699       $ 467       $ 1,662       $ 984   
  

 

 

    

 

 

    

 

 

    

 

 

 

NOTE 11 — ACQUISITIONS AND DISPOSITIONS

During the six months ended June 30, 2012, we paid $58 million, assumed liabilities of $33 million and recorded goodwill of $53 million related to the acquisition of a hospital facility in the Southwest Group. During the six months ended June 30, 2011, we paid $136 million to acquire a hospital in the National Group. During the six months ended June 30, 2012 and 2011, we paid $81 million and $32 million, respectively, to acquire nonhospital health care entities. During the six months ended June 30, 2012, we recorded final adjustments to the purchase price allocation related to our 2011 acquisition of our partner’s interest in the HCA-HealthONE LLC joint venture. These adjustments resulted in a $30 million increase to noncontrolling interests, a $26 million reduction to property and equipment and a $56 million increase to goodwill.

During the six months ended June 30, 2012, we received proceeds of $6 million and recognized net pretax losses of $3 million related to sales of real estate investments. 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.

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).

 

20


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 comprehensive income statements for the quarters and six months ended June 30, 2012 and 2011, condensed consolidating balance sheets at June 30, 2012 and December 31, 2011 and condensed consolidating statements of cash flows for the six months ended June 30, 2012 and 2011, segregating HCA Holdings, Inc. issuer, HCA Inc. issuer, the subsidiary guarantors, the subsidiary non-guarantors and eliminations, follow:

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT

FOR THE QUARTER ENDED JUNE 30, 2012

(Dollars in millions)

 

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

Revenues before provision for doubtful accounts

  $     —      $     —      $ 4,753      $ 4,400      $     —      $     9,153   

Provision for doubtful accounts

                  558        483               1,041   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

                  4,195        3,917               8,112   

Salaries and benefits

                  1,951        1,756               3,707   

Supplies

                  738        684               1,422   

Other operating expenses

                  751        742               1,493   

Electronic health record incentive income

                  (48     (22            (70

Equity in earnings of affiliates

    (409            (1     (8     409        (9

Depreciation and amortization

                  209        211               420   

Interest expense

    30        529        (85     (26            448   

Losses on sales of facilities

                  2                      2   

Management fees

                  (168     168                 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (379     529        3,349        3,505        409        7,413   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    379        (529     846        412        (409     699   

Provision (benefit) for income taxes

    (12     (189     297        118               214   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    391        (340     549        294        (409     485   

Net income attributable to noncontrolling interests

                  16        78               94   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

  $ 391      $ (340   $ 533      $ 216      $ (409   $ 391   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

  $ 391      $ (369   $ 538      $ 202      $ (409   $ 353   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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 COMPREHENSIVE INCOME STATEMENT

FOR THE QUARTER ENDED JUNE 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

   $      $      $     4,494      $     3,530      $      $     8,024   

Provision for doubtful accounts

                   457        318               775   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

                   4,037        3,212               7,249   

Salaries and benefits

                   1,872        1,448               3,320   

Supplies

                   720        575               1,295   

Other operating expenses

            2        686        638               1,326   

Electronic health record incentive income

                   (21     (18            (39

Equity in earnings of affiliates

     (246            (30     (43     246        (73

Depreciation and amortization

                   194        164               358   

Interest expense

     30        741        (153     (98            520   

Losses on retirement of debt

            75                             75   

Management fees

                   (129     129                 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (216     818        3,139        2,795        246        6,782   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     216        (818     898        417        (246     467   

Provision (benefit) 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   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

   $     229      $ (493   $ 536      $ 208      $ (246   $ 234   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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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 COMPREHENSIVE INCOME STATEMENT

FOR THE SIX MONTHS ENDED JUNE 30, 2012

(Dollars in millions)

 

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

Revenues before provision for doubtful accounts

   $      $       $ 9,656      $ 8,696      $       $     18,352   

Provision for doubtful accounts

                    1,021        814                1,835   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Revenues

                    8,635        7,882                16,517   

Salaries and benefits

                    3,933        3,510                7,443   

Supplies

                    1,491        1,350                2,841   

Other operating expenses

            4         1,480        1,502                2,986   

Electronic health record incentive income

                    (89     (36             (125

Equity in earnings of affiliates

     (969             (3     (17     969         (20

Depreciation and amortization

                    409        428                837   

Interest expense

     60        1,058         (176     (52             890   

Losses on sales of facilities

                    3                       3   

Management fees

                    (328     328                  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 
     (909     1,062         6,720        7,013        969         14,855   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Income (loss) before income taxes

     909        (1,062)         1,915        869        (969)         1,662   

Provision (benefit) for income taxes

     (22     (389)         689        260                538   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Net income (loss)

     931        (673)         1,226        609        (969)         1,124   

Net income attributable to noncontrolling interests

                    33        160                193   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

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

   $ 931      $ (673)       $ 1,193      $ 449      $ (969)       $ 931   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

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

   $ 931      $ (698)       $ 1,202      $ 456      $ (969)       $ 922   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

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 COMPREHENSIVE INCOME STATEMENT

FOR THE SIX MONTHS ENDED JUNE 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

   $      $      $     9,072      $     7,007      $      $     16,079   

Provision for doubtful accounts

                   874        550               1,424   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

                   8,198        6,457               14,655   

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   

Electronic health record incentive income

                   (21     (18            (39

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   

Losses on retirement of debt

            75                             75   

Termination of management agreement

            181                             181   

Management fees

                   (253     253                 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (444     1,692        6,321        5,598        504        13,671   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     444        (1,692     1,877        859        (504     984   

Provision (benefit) 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   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

   $     469      $ (925   $ 1,091      $ 427      $ (504   $ 558   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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 BALANCE SHEET

JUNE 30, 2012

(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

  $      $      $ 123      $ 395      $      $ 518   

Accounts receivable, net

                  2,336        2,149               4,485   

Inventories

                  611        444               1,055   

Deferred income taxes

    323                                    323   

Other

                  349        407               756   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    323               3,419        3,395               7,137   

Property and equipment, net

                  7,146        5,700               12,846   

Investments of insurance subsidiaries

                         495               495   

Investments in and advances to affiliates

                  15        87               102   

Goodwill and other intangible assets

                  1,666        3,765               5,431   

Deferred loan costs

    21        260                             281   

Investments in and advances to subsidiaries

    17,794                             (17,794       

Other

    590               29        221               840   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 18,728      $ 260      $ 12,275      $ 13,663      $ (17,794   $     27,132   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY            

Current liabilities:

           

Accounts payable

  $      $      $ 1,000      $ 517      $      $ 1,517   

Accrued salaries

                  546        424               970   

Other accrued expenses

    114        379        426        732               1,651   

Long-term debt due within one year

           1,242        33        34               1,309   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    114        1,621        2,005        1,707               5,447   

Long-term debt

    1,525        23,548        140        519               25,732   

Intercompany balances

    24,766        (12,201     (16,285     3,720                 

Professional liability risks

                         1,039               1,039   

Income taxes and other liabilities

    566        466        593        232               1,857   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    26,971        13,434        (13,547     7,217               34,075   

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

    (8,243     (13,174     25,727        5,241        (17,794     (8,243

Noncontrolling interests

                  95        1,205               1,300   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (8,243     (13,174     25,822        6,446        (17,794     (6,943
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 18,728      $ 260      $ 12,275      $ 13,663      $ (17,794   $ 27,132   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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 BALANCE SHEET

DECEMBER 31, 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

  $      $      $ 115      $ 258      $      $ 373   

Accounts receivable, net

                  2,429        2,104               4,533   

Inventories

                  602        452               1,054   

Deferred income taxes

    594                                    594   

Other

    50               184        445               679   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    644               3,330        3,259               7,233   

Property and equipment, net

                  7,088        5,746               12,834   

Investments of insurance subsidiaries

                         548               548   

Investments in and advances to affiliates

                  15        86               101   

Goodwill and other intangible assets

                  1,605        3,646               5,251   

Deferred loan costs

    22        268                             290   

Investments in and advances to subsidiaries

    16,825                             (16,825       

Other

    450               21        170               641   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     17,941      $ 268      $ 12,059      $     13,455      $     (16,825   $     26,898   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY            

Current liabilities:

           

Accounts payable

  $      $      $ 899      $ 698      $      $ 1,597   

Accrued salaries

                  568        397               965   

Other accrued expenses

    15        367        449        754               1,585   

Long-term debt due within one year

           1,347        28        32               1,407   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    15        1,714        1,944        1,881               5,554   

Long-term debt

    1,525        23,454        110        556               25,645   

Intercompany balances

    24,121        (12,814     (15,183     3,876                 

Professional liability risks

                         993               993   

Income taxes and other liabilities

    538        415        556        211               1,720   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    26,199        12,769        (12,573     7,517               33,912   

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

    (8,258     (12,501     24,534        4,792        (16,825     (8,258

Noncontrolling interests

                  98        1,146               1,244   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (8,258     (12,501     24,632        5,938        (16,825     (7,014
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 17,941      $ 268      $ 12,059      $ 13,455      $ (16,825   $ 26,898   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

26


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 SIX MONTHS ENDED JUNE 30, 2012

(Dollars in millions)

 

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

Cash flows from operating activities:

           

Net income (loss)

  $ 931      $ (673   $ 1,226      $ 609      $ (969   $ 1,124   

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

           

Changes in operating assets and liabilities

           12        (995     (944            (1,927

Provision for doubtful accounts

                  1,021        814               1,835   

Depreciation and amortization

                  409        428               837   

Income taxes

    326                                    326   

Losses on sales of facilities

                  3                      3   

Amortization of deferred loan costs

    1        28                             29   

Share-based compensation

    23                                    23   

Equity in earnings of affiliates

    (969                          969          

Other

           8        (1                   7   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

    312        (625     1,663        907               2,257   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

           

Purchase of property and equipment

                  (408     (376            (784

Acquisition of hospitals and health care entities

                  (72     (67            (139

Disposition of hospitals and health care entities

                  1        5               6   

Change in investments

                  (8     43               35   

Other

                  (1     (3            (4
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

                  (488     (398            (886
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

           

Issuance of long-term debt

           1,350                             1,350   

Net change in revolving bank credit facilities

           (820                          (820

Repayment of long-term debt

           (545     (16     (47            (608

Distributions to noncontrolling interests

                  (36     (155            (191

Payment of debt issuance costs

           (19                          (19

Distributions to stockholders

    (982                                 (982

Changes in intercompany balances with affiliates, net

    628        659        (1,115     (172              

Income tax benefits

    71                                    71   

Other

    (29                   2               (27
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by financing activities

    (312     625        (1,167     (372            (1,226
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Change in cash and cash equivalents

                  8        137               145   

Cash and cash equivalents at beginning of period

                  115        258               373   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

  $      $      $ 123      $ 395      $      $ 518   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

27


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 SIX MONTHS ENDED JUNE 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 (loss)

  $ 469      $ (994   $ 1,115      $ 568      $ (504   $ 654   

Adjustments to reconcile net income (loss) 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

                  16        (15            1   

Losses 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     1,478        784               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