Edgar Filing: HCA Holdings, Inc.

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

FORM 10-Q

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

¨	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.

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

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

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.

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.

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.

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.

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	%

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.

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
	Amortized Cost		Gains		Losses			Fair Value
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

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
	Amortized Cost		Gains		Losses			Fair Value
Debt securities:
States and municipalities	$	312	$	12	$	(1	)	$	323
Auction rate securities		251		—		(1	)		250
Asset-backed securities		26		1		(1	)		26
Money market funds		135		—		—			135

		724		13		(3	)		734
Equity securities		8		1		(1	)		8

	$	732	$	14	$	(4	)		742

Amounts classified as current assets									(100	)

Investment carrying value								$	642

At 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.

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 9⁵/8%/10³/8% 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 9¹/4% 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.

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

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

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.

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	$	—

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.

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	)

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
	Common Stock
	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.

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

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 7³/4% senior unsecured notes due 2021. These notes are senior unsecured obligations and are not guaranteed by any of our subsidiaries.

Our senior secured credit facilities and senior secured notes are fully and unconditionally guaranteed by substantially all existing and future, direct and indirect, wholly-owned material domestic subsidiaries that are “Unrestricted Subsidiaries” under our Indenture dated December 16, 1993 (except for certain special purpose subsidiaries that only guarantee and pledge their assets under our senior secured asset-based revolving credit facility).

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

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

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

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

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

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

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company