Form 424b3
Filed Pursuant to Rule 424(b)(3)
Registration Nos. 333-159511 and 333-159511-01 to 333-159511-184
HCA INC.
SUPPLEMENT
NO. 2 TO
MARKET MAKING PROSPECTUS DATED
JULY 10, 2009
THE
DATE OF THIS SUPPLEMENT IS AUGUST 14, 2009
On
August 14, 2009, HCA Inc. filed the attached
Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 2009
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
June 30, 2009
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number 1-11239
HCA Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
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75-2497104
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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One Park Plaza
Nashville, Tennessee
(Address of principal
executive offices)
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37203
(Zip
Code)
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(615) 344-9551
(Registrants
telephone number, including area code)
Not
Applicable
(Former name, former address and
former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer þ
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
Indicate the number of shares outstanding of each of the
issuers classes of common stock of the latest practicable
date.
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Class of Common Stock
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Outstanding at July 31, 2009
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Voting common stock, $.01 par value
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94,410,100 shares
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HCA
INC.
Form 10-Q
June 30, 2009
2
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Quarter
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Six Months
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2009
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2008
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2009
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2008
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Revenues
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$
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7,483
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$
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6,980
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$
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14,914
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$
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14,107
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Salaries and benefits
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2,944
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2,841
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5,867
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5,680
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Supplies
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1,211
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1,149
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2,421
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2,322
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Other operating expenses
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1,124
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1,135
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2,226
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2,249
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Provision for doubtful accounts
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866
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813
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1,673
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1,701
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Equity in earnings of affiliates
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(61
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(62
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(129
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(129
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Depreciation and amortization
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360
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355
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713
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712
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Interest expense
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506
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494
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977
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1,024
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Losses (gains) on sales of facilities
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3
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11
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8
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(40
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Impairment of long-lived assets
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4
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9
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13
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9
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6,957
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6,745
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13,769
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13,528
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Income before income taxes
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526
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235
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1,145
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579
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Provision for income taxes
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161
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38
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348
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157
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Net income
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365
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197
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797
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422
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Net income attributable to noncontrolling interests
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83
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56
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155
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111
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Net income attributable to HCA Inc.
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$
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282
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$
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141
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$
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642
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$
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311
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See accompanying notes.
3
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June 30,
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December 31,
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2009
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2008
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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450
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$
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465
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Accounts receivable, less allowance for doubtful accounts of
$5,764 and $5,435
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3,680
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3,780
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Inventories
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730
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737
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Deferred income taxes
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1,032
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914
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Other
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556
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405
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6,448
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6,301
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Property and equipment, at cost
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24,185
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23,714
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Accumulated depreciation
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(12,752
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(12,185
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11,433
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11,529
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Investments of insurance subsidiary
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1,322
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1,422
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Investments in and advances to affiliates
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854
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842
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Goodwill
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2,594
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2,580
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Deferred loan costs
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444
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458
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Other
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1,146
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1,148
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$
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24,241
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$
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24,280
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LIABILITIES AND STOCKHOLDERS DEFICIT
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Current liabilities:
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Accounts payable
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$
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1,206
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$
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1,370
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Accrued salaries
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876
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854
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Other accrued expenses
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1,119
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1,282
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Long-term debt due within one year
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194
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404
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3,395
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3,910
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Long-term debt
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26,351
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26,585
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Professional liability risks
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1,108
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1,108
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Income taxes and other liabilities
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1,713
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1,782
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Equity securities with contingent redemption rights
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155
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155
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Stockholders deficit:
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Common stock $.01 par; authorized 125,000,000 shares;
outstanding 94,409,800 shares in 2009 and
94,367,500 shares in 2008
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1
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1
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Capital in excess of par value
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186
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165
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Accumulated other comprehensive loss
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(498
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(604
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Retained deficit
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(9,175
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(9,817
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Stockholders deficit attributable to HCA Inc.
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(9,486
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(10,255
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Noncontrolling interests
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1,005
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995
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(8,481
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(9,260
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$
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24,241
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$
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24,280
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See accompanying notes.
4
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2009
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2008
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Cash flows from operating activities:
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Net income
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$
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797
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$
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422
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Adjustments to reconcile net income to net cash provided by
operating activities:
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Changes in operating assets and liabilities
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(1,654
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(1,994
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Provision for doubtful accounts
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1,673
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1,701
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Depreciation and amortization
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713
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712
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Income taxes
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(417
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)
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(376
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)
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Losses (gains) on sales of facilities
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8
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(40
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)
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Impairment of long-lived assets
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13
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9
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Amortization of deferred loan costs
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60
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43
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Pay-in-kind
interest
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58
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Share-based compensation
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14
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19
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Other
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9
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24
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Net cash provided by operating activities
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1,274
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520
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Cash flows from investing activities:
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Purchase of property and equipment
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(619
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(717
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Acquisition of hospitals and health care entities
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(41
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(44
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Disposition of hospitals and health care entities
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29
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110
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Change in investments
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71
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(11
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Other
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11
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13
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Net cash used in investing activities
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(549
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)
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(649
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Cash flows from financing activities:
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Issuance of long-term debt
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1,751
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4
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Net change in revolving bank credit facility
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(505
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900
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Repayment of long-term debt
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(1,782
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)
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(703
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)
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Distributions to noncontrolling interests
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(159
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)
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(83
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Payment of debt issuance costs
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(45
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)
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Other
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(14
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Net cash (used in) provided by financing activities
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(740
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104
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Change in cash and cash equivalents
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(15
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(25
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Cash and cash equivalents at beginning of period
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465
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393
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Cash and cash equivalents at end of period
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$
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450
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$
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368
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Interest payments
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$
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822
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$
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1,007
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Income tax payments, net
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$
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765
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$
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533
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See accompanying notes.
5
Unaudited
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NOTE 1
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INTERIM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Merger,
Recapitalization and Reporting Entity
On November 17, 2006, HCA Inc. completed its merger (the
Merger) with Hercules Acquisition Corporation,
pursuant to which the Company was acquired by Hercules Holding
II, LLC (Hercules Holding), a Delaware limited
liability company owned by a private investor group comprised of
affiliates of Bain Capital Partners (Bain), Kohlberg
Kravis Roberts & Co. (KKR), Merrill Lynch
Global Private Equity (MLGPE) (each a
Sponsor) and of Citigroup Inc. and Bank of America
Corporation (the Sponsor Assignees), by 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. The Merger, the
financing transactions related to the Merger and other related
transactions are collectively referred to in this quarterly
report as the Recapitalization. The Merger was
accounted for as a recapitalization in our financial statements,
with no adjustments to the historical basis of our assets and
liabilities. As a result of the Recapitalization, our
outstanding capital stock is owned by the Investors, certain
members of management and key employees and certain other
investors. On April 29, 2008, we registered our common
stock pursuant to Section 12(g) of the Securities Exchange
Act of 1934, as amended, thus subjecting us to the reporting
requirements of Section 13(a) of the Securities Exchange
Act of 1934, as amended. Our common stock is not traded on a
national securities exchange.
Basis of
Presentation
HCA 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 Inc. and partnerships and joint ventures in which such
subsidiaries are partners. At June 30, 2009, these
affiliates owned and operated 155 hospitals, 97 freestanding
surgery centers and facilities which provided extensive
outpatient and ancillary services. Affiliates of HCA are also
partners in joint ventures that own and operate eight hospitals
and eight freestanding surgery centers which are accounted for
using the equity method. The Companys facilities are
located in 20 states and England. The terms
HCA, Company, we,
our or us, as used in this quarterly
report on
Form 10-Q,
refer to HCA Inc. and its affiliates unless otherwise stated or
indicated by context.
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. In accordance with Statement of Financial
Accounting Standards (SFAS) No. 160,
Noncontrolling Interests in Consolidated Financial
Statements-an Amendment of ARB No. 51
(SFAS 160), references in this report to our
net income attributable to HCA Inc. and stockholders
deficit attributable to HCA Inc. do not include noncontrolling
interests (previously known as minority interests), which we now
report separately. The implementation of SFAS 160 also
results in the cash flow impact of distributions to and certain
other transactions with noncontrolling interests that were
previously classified within operating activities being
classified within financing activities. Such treatment is
consistent with the view that under SFAS 160 transactions
between HCA Inc. and noncontrolling interests are considered to
be equity transactions. The presentation and disclosure
provisions of SFAS 160 have been applied retrospectively
for all periods presented.
We adopted the provisions of SFAS No. 165,
Subsequent Events (SFAS 165),
during the period ended June 30, 2009. SFAS 165
establishes general standards of accounting for and disclosure
of events that occur after the balance sheet date but before
financial statements are issued. We evaluated all events or
transactions that occurred after June 30, 2009, through
August 14, 2009, the date we issued these financial
statements. During this period we did not have any material
recognizable subsequent events that required recognition or
disclosure in the June 30, 2009 financial statements.
6
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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|
NOTE 1
|
INTERIM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
|
Basis of
Presentation (continued)
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 $40 million and $43 million for the quarters
ended June 30, 2009 and 2008, respectively, and
$77 million and $83 million for the six months ended
June 30, 2009 and 2008, respectively. Operating results for
the quarter and six months ended June 30, 2009 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 2009. 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, 2008.
Certain prior year amounts have been reclassified to conform to
the current year presentation.
At June 30, 2009, we were contesting before the Appeals
Division of the Internal Revenue Service (IRS),
certain claimed deficiencies and adjustments proposed by the IRS
in connection with its examination of the 2003 and 2004 federal
income tax returns for HCA and 11 affiliates that are treated as
partnerships for federal income tax purposes (affiliated
partnerships). The disputed items include the timing of
recognition of certain patient service revenues and our method
for calculating the tax allowance for doubtful accounts.
Eight taxable periods of HCA and its predecessors ended in 1995
through 2002 and the 2002 taxable year for seven affiliated
partnerships, for which the primary remaining issue is the
computation of the tax allowance for doubtful accounts, are
pending before the IRS Examination Division or the United States
Tax Court as of June 30, 2009. The IRS began an audit of
the 2005 and 2006 federal income tax returns for HCA and seven
affiliated partnerships during 2008.
Our liability for unrecognized tax benefits was
$613 million, including accrued interest of
$153 million, as of June 30, 2009 ($625 million
and $156 million, respectively, as of December 31,
2008). Unrecognized tax benefits of $250 million
($264 million as of December 31, 2008) would
affect the effective rate, if recognized. The liability for
unrecognized tax benefits does not reflect deferred tax assets
of $76 million ($81 million as of December 31,
2008) related to deductible interest and state income taxes
or the balance of a refundable deposit of $104 million we
made in 2006, which is recorded in noncurrent assets. The
provision for income taxes reflects $14 million and
$6 million reductions in interest expense related to taxing
authority examinations for the quarters ended June 30, 2009
and 2008, respectively. The provision for income taxes reflects
a $34 million reduction in interest expense and interest
expense of $6 million related to taxing authority
examinations for the six months ended June 30, 2009 and
2008, 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 decrease within the next
12 months. However, we are currently unable to estimate the
range of any possible change.
7
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 3
|
INVESTMENTS
OF INSURANCE SUBSIDIARY
|
A summary of our insurance subsidiarys investments at
June 30, 2009 and December 31, 2008 follows
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
Amortized
|
|
|
Amounts
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
754
|
|
|
$
|
22
|
|
|
$
|
(10
|
)
|
|
$
|
766
|
|
Auction rate securities
|
|
|
503
|
|
|
|
|
|
|
|
(31
|
)
|
|
|
472
|
|
Asset-backed securities
|
|
|
47
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
44
|
|
Money market funds
|
|
|
214
|
|
|
|
|
|
|
|
|
|
|
|
214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,518
|
|
|
|
22
|
|
|
|
(44
|
)
|
|
|
1,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stocks
|
|
|
5
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
3
|
|
Common stocks
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,526
|
|
|
$
|
22
|
|
|
$
|
(46
|
)
|
|
|
1,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount classified as current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment carrying value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
Amortized
|
|
|
Amounts
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
808
|
|
|
$
|
20
|
|
|
$
|
(23
|
)
|
|
$
|
805
|
|
Auction rate securities
|
|
|
576
|
|
|
|
|
|
|
|
(40
|
)
|
|
|
536
|
|
Asset-backed securities
|
|
|
51
|
|
|
|
1
|
|
|
|
(5
|
)
|
|
|
47
|
|
Money market funds
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,661
|
|
|
|
21
|
|
|
|
(68
|
)
|
|
|
1,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stocks
|
|
|
6
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
5
|
|
Common stocks
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,670
|
|
|
$
|
21
|
|
|
$
|
(69
|
)
|
|
|
1,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount classified as current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment carrying value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2009 and December 31, 2008, the
investments of our insurance subsidiary were classified as
available-for-sale.
Changes in temporary unrealized gains and losses are recorded as
adjustments to other comprehensive income. At June 30, 2009
and December 31, 2008, $99 million and
$119 million, respectively, of our investments were subject
to restrictions included in insurance bond collateralization and
assumed reinsurance contracts.
8
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 3
|
INVESTMENTS
OF INSURANCE SUBSIDIARY (continued)
|
Scheduled maturities of investments in debt securities at
June 30, 2009 were as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
Due in one year or less
|
|
$
|
295
|
|
|
$
|
296
|
|
Due after one year through five years
|
|
|
295
|
|
|
|
305
|
|
Due after five years through ten years
|
|
|
229
|
|
|
|
235
|
|
Due after ten years
|
|
|
149
|
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
968
|
|
|
|
980
|
|
Auction rate securities
|
|
|
503
|
|
|
|
472
|
|
Asset-backed
securities
|
|
|
47
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,518
|
|
|
$
|
1,496
|
|
|
|
|
|
|
|
|
|
|
The average expected maturity of the investments in debt
securities at June 30, 2009 was 3.8 years, compared to
the average scheduled maturity of 12.2 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 maturity for our auction rate and asset-backed
securities were derived from valuation models of expected cash
flows and involved managements judgment. The average
expected maturities for our auction rate and asset-backed
securities at June 30, 2009 were 5.6 years and
6.4 years, respectively, compared to average scheduled
maturities of 25.0 years and 25.7 years, respectively.
A summary of long-term debt at June 30, 2009 and
December 31, 2008, including related interest rates at
June 30, 2009, follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Senior secured asset-based revolving credit facility (effective
interest rate of 1.8%)
|
|
$
|
1,545
|
|
|
$
|
2,000
|
|
Senior secured revolving credit facility
|
|
|
|
|
|
|
50
|
|
Senior secured term loan facilities (effective interest rate of
6.3%)
|
|
|
10,254
|
|
|
|
12,002
|
|
Senior secured first lien notes (effective interest rate of 9.3%)
|
|
|
1,452
|
|
|
|
|
|
Other senior secured debt (effective interest rate of 6.9%)
|
|
|
366
|
|
|
|
406
|
|
|
|
|
|
|
|
|
|
|
First lien debt
|
|
|
13,617
|
|
|
|
14,458
|
|
|
|
|
|
|
|
|
|
|
Senior secured cash-pay notes (effective interest rate of 9.7%)
|
|
|
4,500
|
|
|
|
4,200
|
|
Senior secured toggle notes (effective interest rate of 10.0%)
|
|
|
1,578
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
Second lien debt
|
|
|
6,078
|
|
|
|
5,700
|
|
|
|
|
|
|
|
|
|
|
Senior unsecured notes payable through 2095 (effective interest
rate of 7.2%)
|
|
|
6,850
|
|
|
|
6,831
|
|
|
|
|
|
|
|
|
|
|
Total debt (average life of six years, rates averaging 7.2%)
|
|
|
26,545
|
|
|
|
26,989
|
|
Less amounts due within one year
|
|
|
194
|
|
|
|
404
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,351
|
|
|
$
|
26,585
|
|
|
|
|
|
|
|
|
|
|
9
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 4
|
LONG-TERM
DEBT (continued)
|
During February 2009, we issued $310 million aggregate
principal amount of
97/8% senior
secured second lien notes due 2017 at a price of 96.673% of
their face value, resulting in $300 million of gross
proceeds. After the payment of related fees and expenses, we
used the proceeds to repay outstanding indebtedness under our
senior secured term loan facilities.
During April 2009, we issued $1.500 billion aggregate
principal amount of
81/2% senior
secured first lien notes due 2019 at a price of 96.755% of their
face value, resulting in $1.451 billion of gross proceeds.
After the payment of related fees and expenses, we used the
proceeds to repay outstanding indebtedness under our senior
secured term loan facilities.
During August 2009, we issued $1.250 billion aggregate
principal amount of
77/8%
senior secured first lien notes due 2020 at a price of 98.254%
of their face value, resulting in $1.228 billion of gross
proceeds. After the payment of related fees and expenses, we
used the proceeds to repay outstanding indebtedness under our
senior secured term loan facilities.
|
|
NOTE 5
|
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
instruments to fixed interest rate obligations. 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 interest payments under these
agreements are settled on a net basis.
The following table sets forth our interest rate swap
agreements, which have been designated as cash flow hedges, at
June 30, 2009 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Termination Date
|
|
|
Value
|
|
|
Pay-fixed interest rate swap
|
|
$
|
4,000
|
|
|
|
November 2011
|
|
|
$
|
(290
|
)
|
Pay-fixed interest rate swap
|
|
|
4,000
|
|
|
|
November 2011
|
|
|
|
(274
|
)
|
Pay-fixed interest rate swap
|
|
|
500
|
|
|
|
March 2011
|
|
|
|
(14
|
)
|
Pay-fixed interest rate swap
|
|
|
500
|
|
|
|
March 2011
|
|
|
|
(13
|
)
|
During the next 12 months, we estimate $347 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 (Great Britain Pound
and Euro), other than the functional currencies (United States
Dollar and Great Britain Pound) 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.
10
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 5
|
FINANCIAL
INSTRUMENTS (continued)
|
Cross
Currency Swaps (continued)
Certain of our cross currency swaps were not designated as
hedges, and changes in fair value are recognized in results of
operations. The following table sets forth these cross currency
swap agreements at June 30, 2009 (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
Fair
|
|
|
Amount
|
|
Termination Date
|
|
Value
|
|
Euro United States Dollar currency swap
|
|
|
471 Euro
|
|
|
|
December 2011
|
|
|
$
|
66
|
|
Euro Great Britain Pound (GBP) currency swap
|
|
|
30 Euro
|
|
|
|
December 2011
|
|
|
|
14
|
|
The following table sets forth our cross currency swap
agreements, which have been designated as cash flow hedges, at
June 30, 2009 (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
Fair
|
|
|
Amount
|
|
Termination Date
|
|
Value
|
|
GBP United States Dollar currency swap
|
|
|
50 GBP
|
|
|
|
November 2010
|
|
|
$
|
(4
|
)
|
GBP United States Dollar currency swap
|
|
|
50 GBP
|
|
|
|
November 2010
|
|
|
|
(5
|
)
|
During the next 12 months, we estimate $3 million will
be reclassified from OCI to interest expense.
Derivatives
Results of Operations
The following tables present the effect on our results of
operations of our interest rate and cross currency swaps for the
six months ended June 30, 2009 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Loss
|
|
|
Amount of Loss
|
|
|
|
Amount of Loss (Gain)
|
|
|
Reclassified from
|
|
|
Reclassified from
|
|
|
|
Recognized in OCI on
|
|
|
Accumulated OCI
|
|
|
Accumulated OCI
|
|
Derivatives in Cash Flow Hedging Relationships
|
|
Derivatives, Net of Tax
|
|
|
into Operations
|
|
|
into Operations
|
|
|
Interest rate swaps
|
|
$
|
53
|
|
|
|
Interest expense
|
|
|
$
|
150
|
|
Cross currency swaps
|
|
|
(11
|
)
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
42
|
|
|
|
|
|
|
$
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Loss
|
|
Amount of Loss
|
|
|
|
|
Recognized in
|
|
Recognized in
|
|
|
|
|
Operations on
|
|
Operations on
|
|
|
Derivatives Not Designated as Hedging Instruments
|
|
Derivatives
|
|
Derivatives
|
|
|
|
Cross currency swaps
|
|
|
Other operating expense
|
|
|
$
|
19
|
|
|
|
|
|
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, 2009, we have not been
required to post any collateral related to these agreements. If
we had breached these provisions at June 30, 2009, we would
have been required to settle our obligations under the
agreements at their aggregate, estimated termination value of
$568 million.
|
|
NOTE 6
|
ASSETS
AND LIABILITIES MEASURED AT FAIR VALUE
|
On January 1, 2008, we adopted SFAS No. 157,
Fair Value Measurements (SFAS 157).
SFAS 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value
measurements. SFAS 157 applies to reported balances that
are required or permitted to be measured at fair value under
existing accounting pronouncements.
11
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 6
|
ASSETS
AND LIABILITIES MEASURED AT FAIR VALUE (continued)
|
SFAS 157 emphasizes that fair value is a market-based
measurement, not an entity-specific measurement. Therefore, a
fair value measurement should be determined based on the
assumptions that market participants would use in pricing the
asset or liability. As a basis for considering market
participant assumptions in fair value measurements,
SFAS 157 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 that are classified within
Levels 1 and 2 of the hierarchy) and the reporting
entitys own assumptions about market participant
assumptions (unobservable inputs classified within Level 3
of the hierarchy).
Level 1 inputs utilize quoted prices (unadjusted) in active
markets for identical assets or liabilities. Level 2 inputs
are inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
or indirectly. Level 2 inputs may include quoted prices for
similar assets and liabilities in active markets, as well as
inputs that are observable for the asset or liability (other
than quoted prices), such as interest rates, foreign exchange
rates, and yield curves that are observable at commonly quoted
intervals. Level 3 inputs are unobservable inputs for the
asset or liability, which are typically based on an
entitys own assumptions, as there is little, if any,
related market activity. In instances where the determination of
the fair value measurement is based on inputs from different
levels of the fair value hierarchy, the level in the fair value
hierarchy within which the entire fair value measurement falls
is based on the lowest level input that is significant to the
fair value measurement in its entirety. Our assessment of the
significance of a particular input to the fair value measurement
in its entirety requires judgment, and considers factors
specific to the asset or liability.
Cash
Traded Investments
Our cash traded investments are generally classified within
Level 1 or Level 2 of the fair value hierarchy because
they are valued using quoted market prices, broker or dealer
quotations, or alternative pricing sources with reasonable
levels of price transparency. Certain types of cash traded
instruments are classified within Level 3 of the fair value
hierarchy because they trade infrequently and therefore have
little or no price transparency. Such instruments include
auction rate securities (ARS) and limited
partnership investments. The transaction price is initially used
as the best estimate of fair value.
Our wholly-owned insurance subsidiary had investments in
municipal, tax-exempt ARS, that are backed by student loans
substantially guaranteed by the federal government, of
$472 million ($502 million par value) at June 30,
2009. 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. These
securities continue to accrue and pay interest semi-annually
based on the failed auction maximum rate formulas stated in
their respective Official Statements. During 2008 and the first
six months of 2009, certain issuers of our ARS redeemed
$93 million and $71 million, respectively, of our
securities at par value. The valuation of these securities
involved managements judgment, after consideration of
market factors and the absence of market transparency, market
liquidity and observable inputs. Our valuation models derived a
fair market value compared to tax-equivalent yields of other
student loan backed variable rate securities of similar credit
worthiness.
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 SFAS 157, we
incorporate credit valuation adjustments to reflect both our own
nonperformance risk and the respective counterpartys
nonperformance risk in the fair value measurements.
Although we have determined that 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
12
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 6
|
ASSETS
AND LIABILITIES MEASURED AT FAIR VALUE (continued)
|
Derivative
Financial Instruments (continued)
as estimates of current credit spreads to evaluate the
likelihood of default by us and our counterparties. We have
assessed the significance of the impact of the credit valuation
adjustments on the overall valuation of our derivative positions
and have determined that the credit valuation adjustments are
significant to the overall valuation of our derivatives. As a
result, we have determined that our derivative valuations in
their entirety are classified in Level 3 of the fair value
hierarchy at June 30, 2009.
The following table summarizes our assets and liabilities
measured at fair value on a recurring basis as of June 30,
2009, aggregated by the level in the fair value hierarchy within
which those measurements fall (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
|
|
|
|
|
|
|
|
|
|
Identical Assets
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
and Liabilities
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
|
Fair Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments of insurance subsidiary
|
|
$
|
1,502
|
|
|
$
|
215
|
|
|
$
|
813
|
|
|
$
|
474
|
|
Less amounts classified as current assets
|
|
|
(180
|
)
|
|
|
(180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,322
|
|
|
|
35
|
|
|
|
813
|
|
|
|
474
|
|
Cross currency swaps (Other assets)
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
80
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps (Income taxes and other liabilities)
|
|
|
591
|
|
|
|
|
|
|
|
|
|
|
|
591
|
|
Cross currency swaps (Income taxes and other liabilities)
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
The following table summarizes the activity related to the
investments of our insurance subsidiary and our cross currency
and interest rate swaps which have fair value measurements based
on significant unobservable inputs (Level 3) during
the six months ended June 30, 2009 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
|
Interest
|
|
|
|
of Insurance
|
|
|
Cross Currency
|
|
|
Rate
|
|
|
|
Subsidiary
|
|
|
Swaps
|
|
|
Swaps
|
|
|
Asset (liability) balances at December 31, 2008
|
|
$
|
538
|
|
|
$
|
97
|
|
|
$
|
(26
|
)
|
|
$
|
(657
|
)
|
Realized gains and losses included in earnings
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
150
|
|
Unrealized gains (losses) included in other comprehensive income
|
|
|
9
|
|
|
|
2
|
|
|
|
17
|
|
|
|
(84
|
)
|
Purchases, issuances and settlements
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset (liability) balances at June 30, 2009
|
|
$
|
474
|
|
|
$
|
80
|
|
|
$
|
(9
|
)
|
|
$
|
(591
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated fair value of our long-term debt was
$24.124 billion and $20.225 billion at June 30,
2009 and December 31, 2008, respectively, compared to
carrying amounts aggregating $26.545 billion and
$26.989 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.
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
13
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 7
|
CONTINGENCIES
(continued)
|
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.
We are subject to claims and suits arising in the ordinary
course of business, including claims for personal injuries or
wrongful restriction of, or interference with, physicians
staff privileges. In certain of these actions the claimants may
seek punitive damages against us which may not be covered by
insurance. It is managements opinion that the ultimate
resolution of these pending claims and legal proceedings will
not have a material, adverse effect on our results of operations
or financial position.
|
|
NOTE 8
|
COMPREHENSIVE
INCOME AND CAPITAL STRUCTURE
|
The components of comprehensive income, net of related taxes,
for the quarters and six months ended June 30, 2009 and
2008 are only attributable to HCA Inc. and are as follows
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Six Months
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Net income attributable to HCA Inc.
|
|
$
|
282
|
|
|
$
|
141
|
|
|
$
|
642
|
|
|
$
|
311
|
|
Change in fair value of derivative instruments
|
|
|
62
|
|
|
|
195
|
|
|
|
54
|
|
|
|
28
|
|
Change in fair value of
available-for-sale
securities
|
|
|
11
|
|
|
|
(8
|
)
|
|
|
15
|
|
|
|
(11
|
)
|
Foreign currency translation adjustments
|
|
|
34
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
Defined benefit plans
|
|
|
3
|
|
|
|
(2
|
)
|
|
|
5
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
392
|
|
|
$
|
326
|
|
|
$
|
748
|
|
|
$
|
327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of accumulated other comprehensive loss, net of
related taxes, are as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Change in fair value of derivative instruments
|
|
$
|
(386
|
)
|
|
$
|
(440
|
)
|
Change in fair value of
available-for-sale
securities
|
|
|
(15
|
)
|
|
|
(30
|
)
|
Foreign currency translation adjustments
|
|
|
4
|
|
|
|
(28
|
)
|
Defined benefit plans
|
|
|
(101
|
)
|
|
|
(106
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
$
|
(498
|
)
|
|
$
|
(604
|
)
|
|
|
|
|
|
|
|
|
|
The changes in stockholders deficit, including changes in
stockholders deficit attributable to HCA Inc. and changes
in equity attributable to noncontrolling interests are as
follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Attributable to HCA Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital in
|
|
|
Accumulated
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Common Stock
|
|
|
Excess of
|
|
|
Other
|
|
|
|
|
|
Attributable to
|
|
|
|
|
|
|
Shares
|
|
|
Par
|
|
|
Par
|
|
|
Comprehensive
|
|
|
Retained
|
|
|
Noncontrolling
|
|
|
|
|
|
|
(000)
|
|
|
Value
|
|
|
Value
|
|
|
Loss
|
|
|
Deficit
|
|
|
Interests
|
|
|
Total
|
|
|
Balances, December 31, 2008
|
|
|
94,367
|
|
|
$
|
1
|
|
|
$
|
165
|
|
|
$
|
(604
|
)
|
|
$
|
(9,817
|
)
|
|
$
|
995
|
|
|
$
|
(9,260
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
642
|
|
|
|
155
|
|
|
|
797
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
106
|
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(159
|
)
|
|
|
(159
|
)
|
Share-based benefit plans
|
|
|
43
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2009
|
|
|
94,410
|
|
|
$
|
1
|
|
|
$
|
186
|
|
|
$
|
(498
|
)
|
|
$
|
(9,175
|
)
|
|
$
|
1,005
|
|
|
$
|
(8,481
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 9
|
SEGMENT
AND GEOGRAPHIC INFORMATION
|
We operate in one line of business, which is operating hospitals
and related health care entities. During the quarters ended
June 30, 2009 and 2008, approximately 23% of our patient
revenues related to patients participating in the
fee-for-service
Medicare program. During the six months ended June 30, 2009
and 2008, approximately 24% of our patient revenues related to
patients participating in the
fee-for-service
Medicare program.
Our operations are structured into three geographically
organized groups: the Eastern Group includes 48 consolidating
hospitals located in the Eastern United States, the Central
Group includes 47 consolidating hospitals located in the Central
United States and the Western Group includes 54 consolidating
hospitals located in the Western United States. We also operate
six consolidating hospitals in England, and these facilities are
included in the Corporate and other group.
Adjusted segment EBITDA is defined as income before depreciation
and amortization, interest expense, losses (gains) on sales of
facilities, impairment of long-lived assets, income taxes and
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 are summarized
in the following table (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Six Months
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Group
|
|
$
|
1,805
|
|
|
$
|
1,652
|
|
|
$
|
3,608
|
|
|
$
|
3,344
|
|
Eastern Group
|
|
|
2,181
|
|
|
|
2,103
|
|
|
|
4,456
|
|
|
|
4,323
|
|
Western Group
|
|
|
3,278
|
|
|
|
2,964
|
|
|
|
6,429
|
|
|
|
5,939
|
|
Corporate and other
|
|
|
219
|
|
|
|
261
|
|
|
|
421
|
|
|
|
501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,483
|
|
|
$
|
6,980
|
|
|
$
|
14,914
|
|
|
$
|
14,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of affiliates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Group
|
|
$
|
(1
|
)
|
|
$
|
|
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
Eastern Group
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Western Group
|
|
|
(59
|
)
|
|
|
(60
|
)
|
|
|
(126
|
)
|
|
|
(126
|
)
|
Corporate and other
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(61
|
)
|
|
$
|
(62
|
)
|
|
$
|
(129
|
)
|
|
$
|
(129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted segment EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Group
|
|
$
|
344
|
|
|
$
|
255
|
|
|
$
|
695
|
|
|
$
|
551
|
|
Eastern Group
|
|
|
340
|
|
|
|
300
|
|
|
|
773
|
|
|
|
654
|
|
Western Group
|
|
|
712
|
|
|
|
550
|
|
|
|
1,445
|
|
|
|
1,120
|
|
Corporate and other
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
(57
|
)
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,399
|
|
|
$
|
1,104
|
|
|
$
|
2,856
|
|
|
$
|
2,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 9
|
SEGMENT
AND GEOGRAPHIC INFORMATION (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Six Months
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Group
|
|
$
|
88
|
|
|
$
|
91
|
|
|
$
|
176
|
|
|
$
|
182
|
|
Eastern Group
|
|
|
93
|
|
|
|
90
|
|
|
|
183
|
|
|
|
180
|
|
Western Group
|
|
|
146
|
|
|
|
138
|
|
|
|
290
|
|
|
|
276
|
|
Corporate and other
|
|
|
33
|
|
|
|
36
|
|
|
|
64
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
360
|
|
|
$
|
355
|
|
|
$
|
713
|
|
|
$
|
712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted segment EBITDA
|
|
$
|
1,399
|
|
|
$
|
1,104
|
|
|
$
|
2,856
|
|
|
$
|
2,284
|
|
Depreciation and amortization
|
|
|
360
|
|
|
|
355
|
|
|
|
713
|
|
|
|
712
|
|
Interest expense
|
|
|
506
|
|
|
|
494
|
|
|
|
977
|
|
|
|
1,024
|
|
Losses (gains) on sales of facilities
|
|
|
3
|
|
|
|
11
|
|
|
|
8
|
|
|
|
(40
|
)
|
Impairment of long-lived assets
|
|
|
4
|
|
|
|
9
|
|
|
|
13
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
526
|
|
|
$
|
235
|
|
|
$
|
1,145
|
|
|
$
|
579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 10
|
ACQUISITIONS,
DISPOSITIONS AND IMPAIRMENT OF LONG-LIVED ASSETS
|
During the six months ended June 30, 2009, we paid
$41 million to acquire other health care entities. During
the six months ended June 30, 2008, we paid
$18 million to acquire one hospital and $26 million to
acquire other health care entities.
During the quarter ended June 30, 2009, we recognized a net
pretax loss of $3 million related to sales of hospital
facilities and other investments. During the six months ended
June 30, 2009, we received proceeds of $29 million and
recognized a net pretax loss of $8 million related to sales
of hospital facilities and other investments. During the quarter
ended June 30, 2008, we recognized a net loss of
$11 million related to sales of real estate investments.
During the six months ended June 30, 2008, we received
proceeds of $110 million and recognized a net gain of
$40 million, which includes a $43 million gain on the
sale of a hospital facility and a $3 million net loss on
sales of real estate and other health care entity investments.
During the quarter and six months ended June 30, 2009, we
recorded charges of $4 million and $13 million,
respectively, to adjust the values of certain real estate
investments in our Central Group to estimated fair value. During
the quarter and six months ended June 30, 2008, we recorded
a charge of $9 million to adjust the value of certain
hospital facilities in our Central Group to estimated fair value.
16
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 11
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
|
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).
Our summarized condensed consolidating balance sheets at
June 30, 2009 and December 31, 2008 and condensed
consolidating statements of income for the quarters and six
months ended June 30, 2009 and 2008 and condensed
consolidating statements of cash flows for the six months ended
June 30, 2009 and 2008, segregating the parent company
issuer, the subsidiary guarantors, the subsidiary non-guarantors
and eliminations, follow:
HCA
INC.
CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE QUARTER ENDED JUNE 30, 2009
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
4,420
|
|
|
$
|
3,063
|
|
|
$
|
|
|
|
$
|
7,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
1,760
|
|
|
|
1,184
|
|
|
|
|
|
|
|
2,944
|
|
Supplies
|
|
|
|
|
|
|
712
|
|
|
|
499
|
|
|
|
|
|
|
|
1,211
|
|
Other operating expenses
|
|
|
7
|
|
|
|
619
|
|
|
|
498
|
|
|
|
|
|
|
|
1,124
|
|
Provision for doubtful accounts
|
|
|
|
|
|
|
546
|
|
|
|
320
|
|
|
|
|
|
|
|
866
|
|
Equity in earnings of affiliates
|
|
|
(674
|
)
|
|
|
(24
|
)
|
|
|
(37
|
)
|
|
|
674
|
|
|
|
(61
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
200
|
|
|
|
160
|
|
|
|
|
|
|
|
360
|
|
Interest expense (income)
|
|
|
583
|
|
|
|
(70
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
506
|
|
Losses (gains) on sales of facilities
|
|
|
|
|
|
|
5
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
3
|
|
Impairment of long-lived assets
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Management fees
|
|
|
|
|
|
|
(115
|
)
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(84
|
)
|
|
|
3,637
|
|
|
|
2,730
|
|
|
|
674
|
|
|
|
6,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
84
|
|
|
|
783
|
|
|
|
333
|
|
|
|
(674
|
)
|
|
|
526
|
|
Provision for income taxes
|
|
|
(198
|
)
|
|
|
273
|
|
|
|
86
|
|
|
|
|
|
|
|
161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
282
|
|
|
|
510
|
|
|
|
247
|
|
|
|
(674
|
)
|
|
|
365
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
12
|
|
|
|
71
|
|
|
|
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
$
|
282
|
|
|
$
|
498
|
|
|
$
|
176
|
|
|
$
|
(674
|
)
|
|
$
|
282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 11
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL
INFORMATION (continued)
|
HCA
INC.
CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE QUARTER ENDED JUNE 30, 2008
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
4,038
|
|
|
$
|
2,942
|
|
|
$
|
|
|
|
$
|
6,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
1,697
|
|
|
|
1,144
|
|
|
|
|
|
|
|
2,841
|
|
Supplies
|
|
|
|
|
|
|
663
|
|
|
|
486
|
|
|
|
|
|
|
|
1,149
|
|
Other operating expenses
|
|
|
(4
|
)
|
|
|
622
|
|
|
|
517
|
|
|
|
|
|
|
|
1,135
|
|
Provision for doubtful accounts
|
|
|
|
|
|
|
500
|
|
|
|
313
|
|
|
|
|
|
|
|
813
|
|
Equity in earnings of affiliates
|
|
|
(463
|
)
|
|
|
(23
|
)
|
|
|
(39
|
)
|
|
|
463
|
|
|
|
(62
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
193
|
|
|
|
162
|
|
|
|
|
|
|
|
355
|
|
Interest expense (income)
|
|
|
525
|
|
|
|
(12
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
494
|
|
Losses on sales of facilities
|
|
|
|
|
|
|
10
|
|
|
|
1
|
|
|
|
|
|
|
|
11
|
|
Impairment of long-lived assets
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
9
|
|
Management fees
|
|
|
|
|
|
|
(107
|
)
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
|
|
3,543
|
|
|
|
2,681
|
|
|
|
463
|
|
|
|
6,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(58
|
)
|
|
|
495
|
|
|
|
261
|
|
|
|
(463
|
)
|
|
|
235
|
|
Provision for income taxes
|
|
|
(199
|
)
|
|
|
155
|
|
|
|
82
|
|
|
|
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
141
|
|
|
|
340
|
|
|
|
179
|
|
|
|
(463
|
)
|
|
|
197
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
14
|
|
|
|
42
|
|
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
$
|
141
|
|
|
$
|
326
|
|
|
$
|
137
|
|
|
$
|
(463
|
)
|
|
$
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 11
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL
INFORMATION (continued)
|
HCA
INC.
CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 2009
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
8,813
|
|
|
$
|
6,101
|
|
|
$
|
|
|
|
$
|
14,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
3,515
|
|
|
|
2,352
|
|
|
|
|
|
|
|
5,867
|
|
Supplies
|
|
|
|
|
|
|
1,433
|
|
|
|
988
|
|
|
|
|
|
|
|
2,421
|
|
Other operating expenses
|
|
|
12
|
|
|
|
1,236
|
|
|
|
978
|
|
|
|
|
|
|
|
2,226
|
|
Provision for doubtful accounts
|
|
|
|
|
|
|
1,054
|
|
|
|
619
|
|
|
|
|
|
|
|
1,673
|
|
Equity in earnings of affiliates
|
|
|
(1,379
|
)
|
|
|
(48
|
)
|
|
|
(81
|
)
|
|
|
1,379
|
|
|
|
(129
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
396
|
|
|
|
317
|
|
|
|
|
|
|
|
713
|
|
Interest expense (income)
|
|
|
1,125
|
|
|
|
(136
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
977
|
|
Losses (gains) on sales of facilities
|
|
|
|
|
|
|
6
|
|
|
|
2
|
|
|
|
|
|
|
|
8
|
|
Impairment of long-lived assets
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
Management fees
|
|
|
|
|
|
|
(231
|
)
|
|
|
231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(242
|
)
|
|
|
7,238
|
|
|
|
5,394
|
|
|
|
1,379
|
|
|
|
13,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
242
|
|
|
|
1,575
|
|
|
|
707
|
|
|
|
(1,379
|
)
|
|
|
1,145
|
|
Provision for income taxes
|
|
|
(400
|
)
|
|
|
543
|
|
|
|
205
|
|
|
|
|
|
|
|
348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
642
|
|
|
|
1,032
|
|
|
|
502
|
|
|
|
(1,379
|
)
|
|
|
797
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
26
|
|
|
|
129
|
|
|
|
|
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
$
|
642
|
|
|
$
|
1,006
|
|
|
$
|
373
|
|
|
$
|
(1,379
|
)
|
|
$
|
642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 11
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL
INFORMATION (continued)
|
HCA
INC.
CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 2008
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
8,197
|
|
|
$
|
5,910
|
|
|
$
|
|
|
|
$
|
14,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
3,406
|
|
|
|
2,274
|
|
|
|
|
|
|
|
5,680
|
|
Supplies
|
|
|
|
|
|
|
1,342
|
|
|
|
980
|
|
|
|
|
|
|
|
2,322
|
|
Other operating expenses
|
|
|
2
|
|
|
|
1,211
|
|
|
|
1,036
|
|
|
|
|
|
|
|
2,249
|
|
Provision for doubtful accounts
|
|
|
|
|
|
|
1,056
|
|
|
|
645
|
|
|
|
|
|
|
|
1,701
|
|
Equity in earnings of affiliates
|
|
|
(988
|
)
|
|
|
(49
|
)
|
|
|
(80
|
)
|
|
|
988
|
|
|
|
(129
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
389
|
|
|
|
323
|
|
|
|
|
|
|
|
712
|
|
Interest expense (income)
|
|
|
1,083
|
|
|
|
(19
|
)
|
|
|
(40
|
)
|
|
|
|
|
|
|
1,024
|
|
Losses (gains) on sales of facilities
|
|
|
|
|
|
|
8
|
|
|
|
(48
|
)
|
|
|
|
|
|
|
(40
|
)
|
Impairment of long-lived assets
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
9
|
|
Management fees
|
|
|
|
|
|
|
(220
|
)
|
|
|
220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97
|
|
|
|
7,124
|
|
|
|
5,319
|
|
|
|
988
|
|
|
|
13,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(97
|
)
|
|
|
1,073
|
|
|
|
591
|
|
|
|
(988
|
)
|
|
|
579
|
|
Provision for income taxes
|
|
|
(408
|
)
|
|
|
375
|
|
|
|
190
|
|
|
|
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
311
|
|
|
|
698
|
|
|
|
401
|
|
|
|
(988
|
)
|
|
|
422
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
26
|
|
|
|
85
|
|
|
|
|
|
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
$
|
311
|
|
|
$
|
672
|
|
|
$
|
316
|
|
|
$
|
(988
|
)
|
|
$
|
311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 11
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL
INFORMATION (continued)
|
HCA
INC.
CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 2009
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
91
|
|
|
$
|
359
|
|
|
$
|
|
|
|
$
|
450
|
|
Accounts receivable, net
|
|
|
|
|
|
|
2,172
|
|
|
|
1,508
|
|
|
|
|
|
|
|
3,680
|
|
Inventories
|
|
|
|
|
|
|
442
|
|
|
|
288
|
|
|
|
|
|
|
|
730
|
|
Deferred income taxes
|
|
|
1,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,032
|
|
Other
|
|
|
40
|
|
|
|
171
|
|
|
|
345
|
|
|
|
|
|
|
|
556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,072
|
|
|
|
2,876
|
|
|
|
2,500
|
|
|
|
|
|
|
|
6,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
7,035
|
|
|
|
4,398
|
|
|
|
|
|
|
|
11,433
|
|
Investments of insurance subsidiary
|
|
|
|
|
|
|
|
|
|
|
1,322
|
|
|
|
|
|
|
|
1,322
|
|
Investments in and advances to affiliates
|
|
|
|
|
|
|
243
|
|
|
|
611
|
|
|
|
|
|
|
|
854
|
|
Goodwill
|
|
|
|
|
|
|
1,659
|
|
|
|
935
|
|
|
|
|
|
|
|
2,594
|
|
Deferred loan costs
|
|
|
444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
444
|
|
Investments in and advances to subsidiaries
|
|
|
20,669
|
|
|
|
|
|
|
|
|
|
|
|
(20,669
|
)
|
|
|
|
|
Other
|
|
|
1,012
|
|
|
|
19
|
|
|
|
115
|
|
|
|
|
|
|
|
1,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,197
|
|
|
$
|
11,832
|
|
|
$
|
9,881
|
|
|
$
|
(20,669
|
)
|
|
$
|
24,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
|
|
|
$
|
747
|
|
|
$
|
459
|
|
|
$
|
|
|
|
$
|
1,206
|
|
Accrued salaries
|
|
|
|
|
|
|
566
|
|
|
|
310
|
|
|
|
|
|
|
|
876
|
|
Other accrued expenses
|
|
|
242
|
|
|
|
325
|
|
|
|
552
|
|
|
|
|
|
|
|
1,119
|
|
Long-term debt due within one year
|
|
|
168
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
410
|
|
|
|
1,638
|
|
|
|
1,347
|
|
|
|
|
|
|
|
3,395
|
|
Long-term debt
|
|
|
25,880
|
|
|
|
95
|
|
|
|
376
|
|
|
|
|
|
|
|
26,351
|
|
Intercompany balances
|
|
|
5,055
|
|
|
|
(9,193
|
)
|
|
|
4,138
|
|
|
|
|
|
|
|
|
|
Professional liability risks
|
|
|
|
|
|
|
|
|
|
|
1,108
|
|
|
|
|
|
|
|
1,108
|
|
Income taxes and other liabilities
|
|
|
1,183
|
|
|
|
384
|
|
|
|
146
|
|
|
|
|
|
|
|
1,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,528
|
|
|
|
(7,076
|
)
|
|
|
7,115
|
|
|
|
|
|
|
|
32,567
|
|
Equity securities with contingent redemption rights
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders (deficit) equity attributable to HCA
Inc.
|
|
|
(9,486
|
)
|
|
|
18,794
|
|
|
|
1,875
|
|
|
|
(20,669
|
)
|
|
|
(9,486
|
)
|
Noncontrolling interests
|
|
|
|
|
|
|
114
|
|
|
|
891
|
|
|
|
|
|
|
|
1,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,486
|
)
|
|
|
18,908
|
|
|
|
2,766
|
|
|
|
(20,669
|
)
|
|
|
(8,481
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,197
|
|
|
$
|
11,832
|
|
|
$
|
9,881
|
|
|
$
|
(20,669
|
)
|
|
$
|
24,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 11
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL
INFORMATION (continued)
|
HCA
INC.
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2008
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
134
|
|
|
$
|
331
|
|
|
$
|
|
|
|
$
|
465
|
|
Accounts receivable, net
|
|
|
|
|
|
|
2,214
|
|
|
|
1,566
|
|
|
|
|
|
|
|
3,780
|
|
Inventories
|
|
|
|
|
|
|
455
|
|
|
|
282
|
|
|
|
|
|
|
|
737
|
|
Deferred income taxes
|
|
|
914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
914
|
|
Other
|
|
|
|
|
|
|
140
|
|
|
|
265
|
|
|
|
|
|
|
|
405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
914
|
|
|
|
2,943
|
|
|
|
2,444
|
|
|
|
|
|
|
|
6,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
7,122
|
|
|
|
4,407
|
|
|
|
|
|
|
|
11,529
|
|
Investments of insurance subsidiary
|
|
|
|
|
|
|
|
|
|
|
1,422
|
|
|
|
|
|
|
|
1,422
|
|
Investments in and advances to affiliates
|
|
|
|
|
|
|
243
|
|
|
|
599
|
|
|
|
|
|
|
|
842
|
|
Goodwill
|
|
|
|
|
|
|
1,643
|
|
|
|
937
|
|
|
|
|
|
|
|
2,580
|
|
Deferred loan costs
|
|
|
458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
458
|
|
Investments in and advances to subsidiaries
|
|
|
19,290
|
|
|
|
|
|
|
|
|
|
|
|
(19,290
|
)
|
|
|
|
|
Other
|
|
|
1,050
|
|
|
|
31
|
|
|
|
67
|
|
|
|
|
|
|
|
1,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,712
|
|
|
$
|
11,982
|
|
|
$
|
9,876
|
|
|
$
|
(19,290
|
)
|
|
$
|
24,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
|
|
|
$
|
881
|
|
|
$
|
489
|
|
|
$
|
|
|
|
$
|
1,370
|
|
Accrued salaries
|
|
|
|
|
|
|
549
|
|
|
|
305
|
|
|
|
|
|
|
|
854
|
|
Other accrued expenses
|
|
|
435
|
|
|
|
284
|
|
|
|
563
|
|
|
|
|
|
|
|
1,282
|
|
Long-term debt due within one year
|
|
|
355
|
|
|
|
|
|
|
|
49
|
|
|
|
|
|
|
|
404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
790
|
|
|
|
1,714
|
|
|
|
1,406
|
|
|
|
|
|
|
|
3,910
|
|
Long-term debt
|
|
|
26,089
|
|
|
|
99
|
|
|
|
397
|
|
|
|
|
|
|
|
26,585
|
|
Intercompany balances
|
|
|
3,663
|
|
|
|
(8,136
|
)
|
|
|
4,473
|
|
|
|
|
|
|
|
|
|
Professional liability risks
|
|
|
|
|
|
|
|
|
|
|
1,108
|
|
|
|
|
|
|
|
1,108
|
|
Income taxes and other liabilities
|
|
|
1,270
|
|
|
|
379
|
|
|
|
133
|
|
|
|
|
|
|
|
1,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,812
|
|
|
|
(5,944
|
)
|
|
|
7,517
|
|
|
|
|
|
|
|
33,385
|
|
Equity securities with contingent redemption rights
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders (deficit) equity attributable to HCA
Inc.
|
|
|
(10,255
|
)
|
|
|
17,788
|
|
|
|
1,502
|
|
|
|
(19,290
|
)
|
|
|
(10,255
|
)
|
Noncontrolling interests
|
|
|
|
|
|
|
138
|
|
|
|
857
|
|
|
|
|
|
|
|
995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,255
|
)
|
|
|
17,926
|
|
|
|
2,359
|
|
|
|
(19,290
|
)
|
|
|
(9,260
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,712
|
|
|
$
|
11,982
|
|
|
$
|
9,876
|
|
|
$
|
(19,290
|
)
|
|
$
|
24,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 11
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL
INFORMATION (continued)
|
HCA
INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2009
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
642
|
|
|
$
|
1,032
|
|
|
$
|
502
|
|
|
$
|
(1,379
|
)
|
|
$
|
797
|
|
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash from operating assets and liabilities
|
|
|
50
|
|
|
|
(1,057
|
)
|
|
|
(647
|
)
|
|
|
|
|
|
|
(1,654
|
)
|
Provision for doubtful accounts
|
|
|
|
|
|
|
1,054
|
|
|
|
619
|
|
|
|
|
|
|
|
1,673
|
|
Depreciation and amortization
|
|
|
|
|
|
|
396
|
|
|
|
317
|
|
|
|
|
|
|
|
713
|
|
Income taxes
|
|
|
(417
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(417
|
)
|
Losses on sales of facilities
|
|
|
|
|
|
|
6
|
|
|
|
2
|
|
|
|
|
|
|
|
8
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
Amortization of deferred loan costs
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
Pay-in-kind
interest
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
Share-based compensation
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
Equity in earnings of affiliates
|
|
|
(1,379
|
)
|
|
|
|
|
|
|
|
|
|
|
1,379
|
|
|
|
|
|
Other
|
|
|
3
|
|
|
|
16
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(969
|
)
|
|
|
1,460
|
|
|
|
783
|
|
|
|
|
|
|
|
1,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
|
|
(344
|
)
|
|
|
(275
|
)
|
|
|
|
|
|
|
(619
|
)
|
Acquisition of hospitals and health care entities
|
|
|
|
|
|
|
(38
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
(41
|
)
|
Disposition of hospitals and health care entities
|
|
|
|
|
|
|
18
|
|
|
|
11
|
|
|
|
|
|
|
|
29
|
|
Change in investments
|
|
|
|
|
|
|
(2
|
)
|
|
|
73
|
|
|
|
|
|
|
|
71
|
|
Other
|
|
|
|
|
|
|
(17
|
)
|
|
|
28
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(383
|
)
|
|
|
(166
|
)
|
|
|
|
|
|
|
(549
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of long-term debt
|
|
|
1,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,751
|
|
Net change in revolving bank credit facility
|
|
|
(505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(505
|
)
|
Repayment of long-term debt
|
|
|
(1,739
|
)
|
|
|
(6
|
)
|
|
|
(37
|
)
|
|
|
|
|
|
|
(1,782
|
)
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
(50
|
)
|
|
|
(109
|
)
|
|
|
|
|
|
|
(159
|
)
|
Changes in intercompany balances with affiliates, net
|
|
|
1,507
|
|
|
|
(1,064
|
)
|
|
|
(443
|
)
|
|
|
|
|
|
|
|
|
Payment of debt issuance costs
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
969
|
|
|
|
(1,120
|
)
|
|
|
(589
|
)
|
|
|
|
|
|
|
(740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
|
|
|
|
(43
|
)
|
|
|
28
|
|
|
|
|
|
|
|
(15
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
|
|
134
|
|
|
|
331
|
|
|
|
|
|
|
|
465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
|
|
|
$
|
91
|
|
|
$
|
359
|
|
|
$
|
|
|
|
$
|
450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 11
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL
INFORMATION (continued)
|
HCA
INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
311
|
|
|
$
|
698
|
|
|
$
|
401
|
|
|
$
|
(988
|
)
|
|
$
|
422
|
|
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash from operating assets and liabilities
|
|
|
(12
|
)
|
|
|
(1,261
|
)
|
|
|
(721
|
)
|
|
|
|
|
|
|
(1,994
|
)
|
Provision for doubtful accounts
|
|
|
|
|
|
|
1,056
|
|
|
|
645
|
|
|
|
|
|
|
|
1,701
|
|
Depreciation and amortization
|
|
|
|
|
|
|
389
|
|
|
|
323
|
|
|
|
|
|
|
|
712
|
|
Income taxes
|
|
|
(376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(376
|
)
|
Losses (gains) on sales of facilities
|
|
|
|
|
|
|
8
|
|
|
|
(48
|
)
|
|
|
|
|
|
|
(40
|
)
|
Impairment of long-lived assets
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
9
|
|
Amortization of deferred loan costs
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
Share-based compensation
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
Equity in earnings of affiliates
|
|
|
(988
|
)
|
|
|
|
|
|
|
|
|
|
|
988
|
|
|
|
|
|
Other
|
|
|
2
|
|
|
|
2
|
|
|
|
20
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(1,001
|
)
|
|
|
892
|
|
|
|
629
|
|
|
|
|
|
|
|
520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
|
|
(359
|
)
|
|
|
(358
|
)
|
|
|
|
|
|
|
(717
|
)
|
Acquisition of hospitals and health care entities
|
|
|
|
|
|
|
(18
|
)
|
|
|
(26
|
)
|
|
|
|
|
|
|
(44
|
)
|
Disposition of hospitals and health care entities
|
|
|
|
|
|
|
19
|
|
|
|
91
|
|
|
|
|
|
|
|
110
|
|
Change in investments
|
|
|
|
|
|
|
(17
|
)
|
|
|
6
|
|
|
|
|
|
|
|
(11
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(375
|
)
|
|
|
(274
|
)
|
|
|
|
|
|
|
(649
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of long-term debt
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
Net change in revolving bank credit facility
|
|
|
900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
900
|
|
Repayment of long-term debt
|
|
|
(636
|
)
|
|
|
(2
|
)
|
|
|
(65
|
)
|
|
|
|
|
|
|
(703
|
)
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
(11
|
)
|
|
|
(72
|
)
|
|
|
|
|
|
|
(83
|
)
|
Changes in intercompany balances with affiliates, net
|
|
|
738
|
|
|
|
(561
|
)
|
|
|
(177
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
(1
|
)
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
1,001
|
|
|
|
(574
|
)
|
|
|
(323
|
)
|
|
|
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
|
|
|
|
(57
|
)
|
|
|
32
|
|
|
|
|
|
|
|
(25
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
|
|
165
|
|
|
|
228
|
|
|
|
|
|
|
|
393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
|
|
|
$
|
108
|
|
|
$
|
260
|
|
|
$
|
|
|
|
$
|
368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking
Statements
This quarterly report on
Form 10-Q
includes certain disclosures which contain forward-looking
statements. Forward-looking statements include all
statements that do not relate solely to historical or current
facts, and can be identified by the use of words like
may, believe, will,
expect, project, estimate,
anticipate, plan, initiative
or continue. These forward-looking statements are
based on our current plans and expectations and are subject to a
number of known and unknown uncertainties and risks, many of
which are beyond our control, that could significantly affect
current plans and expectations and our future financial position
and results of operations. These factors include, but are not
limited to, (1) the ability to recognize the benefits of
the Recapitalization, (2) the impact of the substantial
indebtedness incurred to finance the Recapitalization and the
ability to refinance such indebtedness on acceptable terms,
(3) the possible enactment of federal or state health care
reform and changes in federal, state or local laws or
regulations affecting the health care industry,
(4) increases, particularly in the current economic
downturn, in the amount and risk of collectibility of uninsured
accounts and deductibles and copayment amounts for insured
accounts, (5) the ability to achieve operating and
financial targets, and attain expected levels of patient volumes
and control the costs of providing services, (6) possible
changes in the Medicare, Medicaid and other state programs,
including Medicaid supplemental payments pursuant to upper
payment limit (UPL) programs, that may impact
reimbursements to health care providers and insurers,
(7) the highly competitive nature of the health care
business, (8) changes in revenue mix, including potential
declines in the population covered under managed care agreements
due to the current economic downturn and the ability to enter
into and renew managed care provider agreements on acceptable
terms, (9) the efforts of insurers, health care providers
and others to contain health care costs, (10) the outcome
of our continuing efforts to monitor, maintain and comply with
appropriate laws, regulations, policies and procedures,
(11) increases in wages and the ability to attract and
retain qualified management and personnel, including affiliated
physicians, nurses and medical and technical support personnel,
(12) the availability and terms of capital to fund the
expansion of our business and improvements to our existing
facilities, (13) changes in accounting practices,
(14) changes in general economic conditions nationally and
regionally in our markets, (15) future divestitures which
may result in charges, (16) changes in business strategy or
development plans, (17) delays in receiving payments for
services provided, (18) the outcome of pending and any
future tax audits, appeals and litigation associated with our
tax positions, (19) potential liabilities and other claims
that may be asserted against us, and (20) other risk
factors described in our annual report on
Form 10-K
and other filings with the Securities and Exchange Commission.
As a consequence, current plans, anticipated actions and future
financial position and results of operations may differ from
those expressed in any forward-looking statements made by or on
behalf of HCA. You are cautioned not to unduly rely on such
forward-looking statements when evaluating the information
presented in this report, which forward-looking statements
reflect managements views only as of the date of this
report. We undertake no obligation to revise or update any
forward-looking statements, whether as a result of new
information, future events or otherwise.
Second
Quarter 2009 Operations Summary
Net income attributable to HCA Inc. totaled $282 million
for the quarter ended June 30, 2009, compared to
$141 million for the quarter ended June 30, 2008.
Revenues increased to $7.483 billion in the second quarter
of 2009 from $6.980 billion in the second quarter of 2008.
Second quarter 2009 results include losses on sales of
facilities of $3 million, compared to losses on sales of
facilities of $11 million for the second quarter of 2008.
Second quarter 2009 results also include an impairment of
long-lived assets of $4 million, compared to an impairment
of long-lived assets of $9 million for the second quarter
of 2008.
Revenues increased 7.2% on a consolidated basis and 7.6% on a
same facility basis for the quarter ended June 30, 2009
compared to the quarter ended June 30, 2008. The increase
in consolidated revenues can be attributed to the combined
impact of a 3.3% increase in revenue per equivalent admission
and a 3.8% increase in equivalent admissions. The same facility
revenues increase resulted from the combined impact of a 3.0%
increase in same facility revenue per equivalent admission and a
4.4% increase in same facility equivalent admissions.
25
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Second
Quarter 2009 Operations Summary (continued)
During the quarter ended June 30, 2009, consolidated
admissions increased 1.2% and same facility admissions increased
1.9% compared to the quarter ended June 30, 2008. Inpatient
surgeries declined 0.5% on a consolidated basis and increased
0.5% on a same facility basis during the quarter ended
June 30, 2009, compared to the quarter ended June 30,
2008. Outpatient surgeries declined 0.9% on a consolidated basis
and declined 0.2% on a same facility basis during the quarter
ended June 30, 2009 compared to the quarter ended
June 30, 2008.
For the quarter ended June 30, 2009, the provision for
doubtful accounts decreased to 11.6% of revenues from 11.7% of
revenues for the quarter ended June 30, 2008. The combined
self-pay revenue deductions for charity care and uninsured
discounts increased $320 million during the second quarter
of 2009, compared to the second quarter of 2008. Same facility
uninsured admissions increased 10.4% and same facility uninsured
emergency room visits increased 10.6% for the quarter ended
June 30, 2009 compared to the quarter ended June 30,
2008.
Results
of Operations
Revenue/Volume
Trends
Our revenues depend upon inpatient occupancy levels, the
ancillary services and therapy programs ordered by physicians
and provided to patients, the volume of outpatient procedures
and the charge and negotiated payment rates for such services.
Gross charges typically do not reflect what our facilities are
actually paid. Our facilities have entered into agreements with
third-party payers, including government programs and managed
care health plans, under which the facilities are paid based
upon the cost of providing services, predetermined rates per
diagnosis, fixed per diem rates or discounts from gross charges.
We do not pursue collection of amounts related to patients who
meet our guidelines to qualify for charity care; therefore, they
are not reported in revenues. We provide discounts to uninsured
patients who do not qualify for Medicaid or charity care that
are similar to the discounts provided to many local managed care
plans.
Revenues increased 7.2% from $6.980 billion in the second
quarter of 2008 to $7.483 billion in the second quarter of
2009. The increase in consolidated revenues can be attributed to
the combined impact of a 3.3% increase in revenue per equivalent
admission and a 3.8% increase in equivalent admissions. Same
facility revenues increased 7.6% from $6.818 billion in the
second quarter of 2008 to $7.338 billion in the second
quarter of 2009. The increase in same facility revenues can be
attributed to the combined impact of a 3.0% increase in same
facility revenue per equivalent admission and a 4.4% increase in
same facility equivalent admissions.
Consolidated admissions increased 1.2% and same facility
admissions increased 1.9% compared to the second quarter of
2008. Consolidated outpatient surgeries declined 0.9% and same
facility outpatient surgeries declined 0.2% in the second
quarter of 2009 compared to the second quarter of 2008.
Consolidated inpatient surgeries declined 0.5% and same facility
inpatient surgeries increased 0.5% in the second quarter of 2009
compared to the second quarter of 2008.
Same facility uninsured admissions increased by 2,365
admissions, or 10.4%, in the second quarter of 2009 compared to
the second quarter of 2008. Same facility uninsured admissions
declined by 0.1% in the first quarter of 2009 compared to the
first quarter of 2008. The quarterly trend of same facility
uninsured admissions growth during 2008, compared to 2007, was
5.3% during the first quarter, 1.0% during the second quarter,
0.9% during the third quarter and a decline of 0.4% during the
fourth quarter.
26
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Revenue/Volume
Trends (continued)
The approximate percentages of our admissions related to
Medicare, managed Medicare, Medicaid, managed Medicaid, managed
care and other insurers and the uninsured for the quarters and
six months ended June 30, 2009 and 2008 are set forth in
the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Six Months
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Medicare
|
|
|
34
|
%
|
|
|
34
|
%
|
|
|
35
|
%
|
|
|
35
|
%
|
Managed Medicare
|
|
|
10
|
|
|
|
9
|
|
|
|
10
|
|
|
|
9
|
|
Medicaid
|
|
|
9
|
|
|
|
8
|
|
|
|
9
|
|
|
|
8
|
|
Managed Medicaid
|
|
|
7
|
|
|
|
7
|
|
|
|
7
|
|
|
|
7
|
|
Managed care and other insurers
|
|
|
33
|
|
|
|
36
|
|
|
|
33
|
|
|
|
35
|
|
Uninsured
|
|
|
7
|
|
|
|
6
|
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The approximate percentages of our inpatient revenues related to
Medicare, managed Medicare, Medicaid, managed Medicaid, managed
care and other insurers and the uninsured for the quarters and
six months ended June 30, 2009 and 2008 are set forth in
the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Six Months
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Medicare
|
|
|
32
|
%
|
|
|
32
|
%
|
|
|
32
|
%
|
|
|
32
|
%
|
Managed Medicare
|
|
|
9
|
|
|
|
8
|
|
|
|
8
|
|
|
|
8
|
|
Medicaid
|
|
|
7
|
|
|
|
6
|
|
|
|
7
|
|
|
|
6
|
|
Managed Medicaid
|
|
|
4
|
|
|
|
4
|
|
|
|
4
|
|
|
|
4
|
|
Managed care and other insurers
|
|
|
43
|
|
|
|
44
|
|
|
|
45
|
|
|
|
44
|
|
Uninsured
|
|
|
5
|
|
|
|
6
|
|
|
|
4
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We have implemented an approach for determining emergency
department (ED) evaluation and management
(E/M) assignments based on the American College of
Emergency Physicians model. This model uses interventions, such
as cardiac monitoring, to indicate the acuity of the patient and
the resources involved in the E/M of the patient. These E/M
assignments are utilized in preparing the patient bill. We
converted to this system, which is used by a significant number
of hospitals, because it provides for more consistent ED E/M
assignments than the point system previously used.
As a result of the ED E/M change, we estimated an increase in
net revenue, less the related provision for doubtful accounts,
of approximately $75 million to $100 million in the
first quarter of 2009. We believe the estimated net impact on
second quarter 2009 operations was generally consistent with the
first quarter estimate. We believe there will be continued
future benefits from this change; however, the estimated
quarterly impact on operations may vary and will become more
difficult to quantify in future quarters.
At June 30, 2009, we had 73 hospitals in the states of
Texas and Florida. During the second quarter of 2009, 57% of our
admissions and 51% of our revenues were generated by these
hospitals. Uninsured admissions in Texas and Florida represented
65% of our uninsured admissions during the second quarter of
2009.
We receive a significant portion of our revenues from government
health programs, principally Medicare and Medicaid, which are
highly regulated and subject to frequent and substantial
changes. We have increased the indigent care services we provide
in several communities in the state of Texas, in affiliation
with other hospitals. The state of Texas has been involved in
the effort to increase the indigent care provided by private
hospitals. As a
27
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Revenue/Volume
Trends (continued)
result of this additional indigent care provided by private
hospitals, public hospital districts or counties in Texas have
available funds that were previously devoted to indigent care.
The public hospital districts or counties are under no
contractual or legal obligation to provide such indigent care.
The public hospital districts or counties have elected to
transfer some portion of these newly available funds to the
states Medicaid program. Such action is at the sole
discretion of the public hospital districts or counties. It is
anticipated that these contributions to the state will be
matched with federal Medicaid funds. The state then may make
supplemental payments to hospitals in the state for Medicaid
services rendered. Hospitals receiving Medicaid supplemental
payments may include those that are providing additional
indigent care services. Such payments must be within the federal
UPL established by federal regulation. Our Texas Medicaid
revenues included $98 million and $56 million during
the second quarters of 2009 and 2008, respectively, and
$161 million and $94 million during the first six
months of 2009 and 2008, respectively, of Medicaid supplemental
payments pursuant to UPL programs. We expect to continue to
recognize net benefits related to the Texas Medicaid
supplemental payment program based upon the routine incurrence
of indigent care expenditures and expected processing of
Medicaid supplemental payments.
28
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Operating
Results Summary
The following are comparative summaries of results from
operations for the quarters and six months ended June 30,
2009 and 2008 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Revenues
|
|
$
|
7,483
|
|
|
|
100.0
|
|
|
$
|
6,980
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
2,944
|
|
|
|
39.3
|
|
|
|
2,841
|
|
|
|
40.7
|
|
Supplies
|
|
|
1,211
|
|
|
|
16.2
|
|
|
|
1,149
|
|
|
|
16.5
|
|
Other operating expenses
|
|
|
1,124
|
|
|
|
15.0
|
|
|
|
1,135
|
|
|
|
16.2
|
|
Provision for doubtful accounts
|
|
|
866
|
|
|
|
11.6
|
|
|
|
813
|
|
|
|
11.7
|
|
Equity in earnings of affiliates
|
|
|
(61
|
)
|
|
|
(0.8
|
)
|
|
|
(62
|
)
|
|
|
(0.9
|
)
|
Depreciation and amortization
|
|
|
360
|
|
|
|
4.8
|
|
|
|
355
|
|
|
|
5.0
|
|
Interest expense
|
|
|
506
|
|
|
|
6.8
|
|
|
|
494
|
|
|
|
7.1
|
|
Losses on sales of facilities
|
|
|
3
|
|
|
|
|
|
|
|
11
|
|
|
|
0.2
|
|
Impairment of long-lived assets
|
|
|
4
|
|
|
|
0.1
|
|
|
|
9
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,957
|
|
|
|
93.0
|
|
|
|
6,745
|
|
|
|
96.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
526
|
|
|
|
7.0
|
|
|
|
235
|
|
|
|
3.4
|
|
Provision for income taxes
|
|
|
161
|
|
|
|
2.1
|
|
|
|
38
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
365
|
|
|
|
4.9
|
|
|
|
197
|
|
|
|
2.8
|
|
Net income attributable to noncontrolling interests
|
|
|
83
|
|
|
|
1.1
|
|
|
|
56
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
$
|
282
|
|
|
|
3.8
|
|
|
$
|
141
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% changes from prior year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
7.2
|
%
|
|
|
|
|
|
|
3.7
|
%
|
|
|
|
|
Income before income taxes
|
|
|
123.6
|
|
|
|
|
|
|
|
(5.4
|
)
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
|
100.9
|
|
|
|
|
|
|
|
21.7
|
|
|
|
|
|
Admissions(a)
|
|
|
1.2
|
|
|
|
|
|
|
|
(0.2
|
)
|
|
|
|
|
Equivalent admissions(b)
|
|
|
3.8
|
|
|
|
|
|
|
|
0.9
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
3.3
|
|
|
|
|
|
|
|
2.8
|
|
|
|
|
|
Same facility % changes from prior year(c):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
7.6
|
|
|
|
|
|
|
|
5.1
|
|
|
|
|
|
Admissions(a)
|
|
|
1.9
|
|
|
|
|
|
|
|
1.3
|
|
|
|
|
|
Equivalent admissions(b)
|
|
|
4.4
|
|
|
|
|
|
|
|
2.0
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
3.0
|
|
|
|
|
|
|
|
3.0
|
|
|
|
|
|
29
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Operating
Results Summary (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Revenues
|
|
$
|
14,914
|
|
|
|
100.0
|
|
|
$
|
14,107
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
5,867
|
|
|
|
39.3
|
|
|
|
5,680
|
|
|
|
40.3
|
|
Supplies
|
|
|
2,421
|
|
|
|
16.2
|
|
|
|
2,322
|
|
|
|
16.5
|
|
Other operating expenses
|
|
|
2,226
|
|
|
|
15.1
|
|
|
|
2,249
|
|
|
|
15.8
|
|
Provision for doubtful accounts
|
|
|
1,673
|
|
|
|
11.2
|
|
|
|
1,701
|
|
|
|
12.1
|
|
Equity in earnings of affiliates
|
|
|
(129
|
)
|
|
|
(0.9
|
)
|
|
|
(129
|
)
|
|
|
(0.9
|
)
|
Depreciation and amortization
|
|
|
713
|
|
|
|
4.7
|
|
|
|
712
|
|
|
|
5.0
|
|
Interest expense
|
|
|
977
|
|
|
|
6.5
|
|
|
|
1,024
|
|
|
|
7.3
|
|
Losses (gains) on sales of facilities
|
|
|
8
|
|
|
|
0.1
|
|
|
|
(40
|
)
|
|
|
(0.3
|
)
|
Impairment of long-lived assets
|
|
|
13
|
|
|
|
0.1
|
|
|
|
9
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,769
|
|
|
|
92.3
|
|
|
|
13,528
|
|
|
|
95.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,145
|
|
|
|
7.7
|
|
|
|
579
|
|
|
|
4.1
|
|
Provision for income taxes
|
|
|
348
|
|
|
|
2.4
|
|
|
|
157
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
797
|
|
|
|
5.3
|
|
|
|
422
|
|
|
|
3.0
|
|
Net income attributable to noncontrolling interests
|
|
|
155
|
|
|
|
1.0
|
|
|
|
111
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
$
|
642
|
|
|
|
4.3
|
|
|
$
|
311
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% changes from prior year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
5.7
|
%
|
|
|
|
|
|
|
5.2
|
%
|
|
|
|
|
Income before income taxes
|
|
|
97.8
|
|
|
|
|
|
|
|
(6.3
|
)
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
|
106.7
|
|
|
|
|
|
|
|
4.9
|
|
|
|
|
|
Admissions(a)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
(0.4
|
)
|
|
|
|
|
Equivalent admissions(b)
|
|
|
2.6
|
|
|
|
|
|
|
|
0.4
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
3.0
|
|
|
|
|
|
|
|
4.8
|
|
|
|
|
|
Same facility % changes from prior year(c):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
6.1
|
|
|
|
|
|
|
|
6.6
|
|
|
|
|
|
Admissions(a)
|
|
|
0.5
|
|
|
|
|
|
|
|
1.1
|
|
|
|
|
|
Equivalent admissions(b)
|
|
|
3.2
|
|
|
|
|
|
|
|
1.6
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
2.8
|
|
|
|
|
|
|
|
4.9
|
|
|
|
|
|
|
|
|
(a) |
|
Represents the total number of patients admitted to our
hospitals and is used by management and certain investors as a
general measure of inpatient volume. |
|
(b) |
|
Equivalent admissions are used by management and certain
investors as a general measure of combined inpatient and
outpatient volume. Equivalent admissions are computed by
multiplying admissions (inpatient volume) by the sum of gross
inpatient revenues and gross outpatient revenues and then
dividing the resulting amount by gross inpatient revenues. The
equivalent admissions computation equates outpatient
revenues to the volume measure (admissions) used to measure
inpatient volume, resulting in a general measure of combined
inpatient and outpatient volume. |
|
(c) |
|
Same facility information excludes the operations of hospitals
and their related facilities which were either acquired or
divested during the current and prior period. |
30
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Quarters
Ended June 30, 2009 and 2008
Net income attributable to HCA Inc. totaled $282 million
for the second quarter of 2009 compared to $141 million for
the second quarter of 2008. Revenues increased 7.2% due to the
combined impact of revenue per equivalent admission growth of
3.3% and an increase of 3.8% in equivalent admissions for the
second quarter of 2009 compared to the second quarter of 2008.
For the second quarter of 2009, consolidated admissions
increased 1.2% and same facility admissions increased 1.9%
compared to the second quarter of 2008. Outpatient surgical
volumes declined 0.9% on a consolidated basis and declined 0.2%
on a same facility basis during the second quarter of 2009
compared to the second quarter of 2008. Consolidated inpatient
surgeries declined 0.5% and same facility inpatient surgeries
increased 0.5% in the second quarter of 2009 compared to the
second quarter of 2008.
Salaries and benefits, as a percentage of revenues, were 39.3%
in the second quarter of 2009 and 40.7% in the same quarter of
2008. Salaries and benefits per equivalent admission declined
0.1% in the second quarter of 2009 compared to the second
quarter of 2008. Same facility labor rate increases averaged
4.0% for the second quarter of 2009 compared to the second
quarter of 2008.
Supplies, as a percentage of revenues, were 16.2% in the second
quarter of 2009 and 16.5% in the same quarter of 2008. Supply
cost per equivalent admission increased 1.5% in the second
quarter of 2009 compared to the second quarter of 2008. Same
facility supply costs increased 6.5% for medical devices, 5.9%
for pharmacy supplies, 5.7% for blood products and 6.9% for
general medical and surgical items.
Other operating expenses, as a percentage of revenues, declined
to 15.0% in the second quarter of 2009 compared to 16.2% in the
second quarter of 2008. Other operating expenses is primarily
comprised of contract services, professional fees, repairs and
maintenance, rents and leases, utilities, insurance (including
professional liability insurance) and nonincome taxes. The
overall decline in other operating expenses, as a percentage of
revenues, is comprised of relatively small reductions in several
areas, including repairs and maintenance, utilities, employee
recruitment and travel and entertainment. Other operating
expenses include $49 million and $39 million of
indigent care costs in certain Texas markets during the second
quarters of 2009 and 2008, respectively. Provisions for losses
related to professional liability risks were $49 million
and $56 million for the second quarters of 2009 and 2008,
respectively.
Provision for doubtful accounts, as a percentage of revenues,
decreased to 11.6% in the second quarter of 2009 compared to
11.7% in the second quarter of 2008. The provision for doubtful
accounts and the allowance for doubtful accounts relate
primarily to uninsured amounts due directly from patients. The
combined self-pay revenue deductions for charity care and
uninsured discounts increased $320 million during the
second quarter of 2009, compared to the second quarter of 2008.
At June 30, 2009, our allowance for doubtful accounts
represented approximately 94% of the $6.138 billion total
patient due accounts receivable balance, including accounts, net
of estimated contractual discounts, related to patients for
which eligibility for Medicaid coverage was being evaluated.
Equity in earnings of affiliates declined from $62 million
in the second quarter of 2008 to $61 million in the second
quarter of 2009. Equity in earnings of affiliates relates
primarily to our Denver, Colorado market joint venture.
Depreciation and amortization increased by $5 million, from
$355 million in the second quarter of 2008 to
$360 million in the second quarter of 2009.
Interest expense increased from $494 million in the second
quarter of 2008 to $506 million in the second quarter of
2009 due primarily to an increase in the average interest rate
on our outstanding debt. Our average debt balance was
$26.474 billion for the second quarter of 2009 compared to
$27.501 billion for the second quarter of 2008. The average
interest rate for our long term debt increased from 7.0% at
June 30, 2008 to 7.2% at June 30, 2009.
31
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Quarters
Ended June 30, 2009 and 2008 (continued)
During the second quarter of 2009, we recorded a net loss on
sales of facilities and other investments of $3 million.
During the second quarter of 2008, we recognized a net loss of
$11 million related to sales of real estate investments.
During the second quarter of 2009, we recorded an asset
impairment charge of $4 million to adjust the value of
certain real estate investments to estimated fair value. During
the second quarter of 2008, we recorded an asset impairment
charge of $9 million to adjust the value of certain
hospital facilities to estimated fair value.
The effective tax rate was 36.4% and 21.4% for the second
quarters of 2009 and 2008, respectively. The effective tax rate
computations exclude net income attributable to noncontrolling
interests as it relates to consolidated partnerships. During the
quarter ended June 30, 2008, we reached a settlement with
the IRS Appeals Division resolving proposed adjustments related
to the deductibility of the 2001 government settlement payment,
the timing of recognition of certain patient service revenues
for 2001 and 2002, and the amount of insurance expense deducted
in 2001 and 2002. As a result of this settlement, we reduced our
provision for income taxes for the quarter ended June 30,
2008 by $38 million. Excluding the effect of this
adjustment, the effective tax rate for the second quarter of
2008 would have been 42.4%.
Net income attributable to noncontrolling interests increased
from $56 million for the second quarter of 2008 to
$83 million for the second quarter of 2009. The increase in
net income attributable to noncontrolling interests related
primarily to growth in operating results of hospital joint
ventures in two Texas markets.
Six
Months Ended June 30, 2009 and 2008
Net income attributable to HCA Inc. totaled $642 million in
the six months ended June 30, 2009 compared to
$311 million in the six months ended June 30, 2008.
Revenues increased 5.7% due to the combined impact of revenue
per equivalent admission growth of 3.0% and an increase of 2.6%
in equivalent admissions for the first six months of 2009
compared to the first six months of 2008.
For the first six months of 2009, consolidated admissions
declined 0.1% and same facility admissions increased 0.5%
compared to the first six months of 2008. Outpatient surgical
volumes declined 1.1% on a consolidated basis and declined 0.6%
on a same facility basis during the first six months of 2009
compared to the first six months of 2008. Consolidated inpatient
surgeries declined 1.4% and same facility inpatient surgeries
increased 0.1% in the first six months of 2009 compared to the
first six months of 2008.
Salaries and benefits, as a percentage of revenues, were 39.3%
in the first six months of 2009 and 40.3% in the first six
months of 2008. Salaries and benefits per equivalent admission
increased 0.7% in the first six months of 2009 compared to the
first six months of 2008. Same facility labor rate increases
averaged 4.0% for the first six months of 2009 compared to the
first six months of 2008.
Supplies, as a percentage of revenues, were 16.2% in the first
six months of 2009 and 16.5% in the first six months of 2008.
Supply cost per equivalent admission increased 1.6% in the first
six months of 2009 compared to the first six months of 2008.
Same facility supply costs increased 4.8% for medical devices,
2.8% for pharmacy supplies, 6.1% for blood products and 4.9% for
general medical and surgical items in the first six months of
2009 compared to the first six months of 2008.
Other operating expenses, as a percentage of revenues, declined
to 15.1% in the first six months of 2009 compared to 15.8% in
the first six months of 2008. Other operating expenses is
primarily comprised of contract services, professional fees,
repairs and maintenance, rents and leases, utilities, insurance
(including professional liability insurance) and nonincome
taxes. The overall decline in other operating expenses, as a
percentage of revenues, is comprised of relatively small
reductions in several areas, including repairs and maintenance,
utilities, employee recruitment and travel and entertainment.
Other operating expenses include $88 million and
$77 million
32
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Six Months Ended June 30, 2009 and 2008 (continued)
of indigent care costs in certain Texas markets during the first
six months of 2009 and 2008, respectively. Provisions for losses
related to professional liability risks were $94 million
and $112 million for the first six months of 2009 and 2008,
respectively.
Provision for doubtful accounts, as a percentage of revenues,
declined to 11.2% in the first six months of 2009 compared to
12.1% in the first six months of 2008. The provision for
doubtful accounts and the allowance for doubtful accounts relate
primarily to uninsured amounts due directly from patients. The
provision for doubtful accounts decreased $28 million, but
the combined self-pay revenue deductions for charity care and
uninsured discounts increased $625 million for the first
six months of 2009 compared to the first six months of 2008. At
June 30, 2009, our allowance for doubtful accounts represented
approximately 94% of the $6.138 billion total patient due
accounts receivable balance, including accounts, net of
estimated contractual discounts, related to patients for which
eligibility for Medicaid coverage was being evaluated.
Equity in earnings of affiliates remained flat at
$129 million for each of the first six months of 2009 and
2008. Equity in earnings of affiliates relates primarily to our
Denver, Colorado market joint venture.
Depreciation and amortization increased by $1 million, from
$712 million in the first six months of 2008 to
$713 million in the first six months of 2009.
Interest expense decreased from $1.024 billion in the first
six months of 2008 to $977 million in the first
six months of 2009 due primarily to a reduction in the
average outstanding debt balance. Our average debt balance was
$26.643 billion for the first six months of 2009 compared
to $27.384 billion for the first six months of 2008. The
average interest rate for our long term debt increased from 7.0%
at June 30, 2008 to 7.2% at June 30, 2009.
During the first six months of 2009, we recorded net losses on
sales of facilities and other investments of $8 million.
During the first six months of 2008, we recognized net gains of
$40 million, which includes a $43 million gain on the
sale of a hospital facility and $3 million of net losses on
sales of real estate investments and other health care entity
investments.
During the first six months of 2009, we recorded asset
impairment charges of $13 million to adjust the value of
certain real estate investments to estimated fair value. During
the first six months of 2008, we recorded a charge of
$9 million to adjust the value of certain hospital
facilities to estimated fair value.
The effective tax rate was 35.2% and 33.5% for the first six
months of 2009 and 2008, respectively. The effective tax rate
computations exclude net income attributable to noncontrolling
interests as it relates to consolidated partnerships. Our
provision for income taxes for the first six months of 2009 was
reduced by $39 million due to the completion of certain
state tax examinations, the reporting of certain federal tax
adjustments to state taxing authorities and reductions to
related interest accruals. During the first six months of 2008,
we reached a settlement with the IRS Appeals Division resolving
proposed adjustments related to the deductibility of the 2001
government settlement payment, the timing of recognition of
certain patient service revenues for 2001 and 2002, and the
amount of insurance expense deducted in 2001 and 2002. As a
result of this settlement, we reduced our provision for income
taxes for the first six months of 2008 by $38 million.
Excluding the effect of these adjustments, the effective tax
rates for the first six months of 2009 and 2008 would have been
39.1% and 41.6%, respectively.
Net income attributable to noncontrolling interests increased
from $111 million for the first six months of 2008 to
$155 million for the first six months of 2009. The increase
in net income attributable to noncontrolling interests related
primarily to growth in operating results of hospital joint
ventures in two Texas markets.
33
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Liquidity
and Capital Resources
Cash provided by operating activities totaled
$1.274 billion in the first six months of 2009 compared to
$520 million in the first six months of 2008. The
$754 million increase in cash provided by operating
activities in the first six months of 2009 compared to the first
six months of 2008 related primarily to the $375 million
increase in net income and $312 million improvement from
changes in operating assets and liabilities and the provision
for doubtful accounts. We made $1.587 billion and
$1.540 billion in interest and net tax payments in the
first six months of 2009 and 2008, respectively. Working capital
totaled $3.053 billion at June 30, 2009 and
$2.391 billion at December 31, 2008. The increase in
working capital at June 30, 2009 compared to
December 31, 2008 is due primarily to reductions in
accounts payable, other accrued expenses and the current portion
of long-term debt.
Cash used in investing activities was $549 million in the
first six months of 2009 compared to $649 million in the
first six months of 2008. Excluding acquisitions, capital
expenditures were $619 million in the first six months of
2009 and $717 million in the first six months of 2008.
Capital expenditures are expected to approximate
$1.5 billion in 2009. At June 30, 2009, there were
projects under construction which had estimated additional costs
to complete and equip over the next five years of approximately
$1.2 billion. We expect to finance capital expenditures
with internally generated and borrowed funds. We received cash
flows from our investments of $71 million in the first six
months of 2009 and expended $11 million to increase
investments in the first six months of 2008. We received $29
million and $110 million from sales of hospitals and health
care entities during the first six months of 2009 and 2008,
respectively.
Cash used in financing activities totaled $740 million
during the first six months of 2009, compared to cash provided
by financing activities of $104 million during the first
six months of 2008. During the first six months of 2009, cash
flows from financing activities included a decrease in net
borrowings of $536 million, payments of debt issuance costs
of $45 million and distributions to noncontrolling
interests of $159 million. During the first six months of
2008, cash flows from financing activities included an increase
in net borrowings of $201 million and distributions to
noncontrolling interests of $83 million.
Due to the Recapitalization, we are a highly leveraged company
with significant debt service requirements. Our debt totaled
$26.545 billion at June 30, 2009. Our interest expense
was $1.024 billion for the first six months of 2008 and
$977 million for the first six months of 2009.
In addition to cash flows from operations, available sources of
capital include amounts available under our senior secured
credit facilities ($2.359 billion and $2.768 billion
available as of June 30, 2009 and July 31, 2009,
respectively) and anticipated access to public and private debt
markets.
Investments of our professional liability insurance subsidiary,
to maintain statutory equity and pay claims incurred prior to
2007, totaled $1.502 billion and $1.622 billion at
June 30, 2009 and December 31, 2008, respectively. The
insurance subsidiary maintained net reserves for professional
liability risks of $727 million and $782 million at
June 30, 2009 and December 31, 2008, respectively. Our
facilities are insured by our wholly- owned insurance subsidiary
for losses up to $50 million per occurrence; however, since
January 2007, this coverage is subject to a $5 million per
occurrence self-insured retention. Net reserves for the
self-insured professional liability risks retained were
$586 million and $548 million at June 30, 2009
and December 31, 2008, respectively. Claims payments, net
of reinsurance recoveries, during the next 12 months are
expected to approximate $230 million. We estimate that
approximately $50 million of the expected net claim
payments during the next 12 months will relate to claims
incurred subsequent to 2006.
During February 2009, we issued $310 million aggregate
principal amount of
97/8% senior
secured first lien notes due 2017 at a price of 96.673% of their
face value, resulting in $300 million of gross proceeds.
After the payment of related fees and expenses, we used the
proceeds to repay outstanding indebtedness under our senior
secured term loan facilities.
During April 2009, we issued $1.500 billion aggregate
principal amount of
81/2% senior
secured second lien notes due 2019 at a price of 96.755% of
their face value, resulting in $1.451 billion of gross
proceeds. After the
34
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Liquidity
and Capital Resources (continued)
payment of related fees and expenses, we used the proceeds to
repay outstanding indebtedness under our senior secured term
loan facilities.
During August 2009, we issued $1.250 billion aggregate
principal amount of
77/8% senior
secured second lien notes due 2020 at a price of 98.254% of
their face value, resulting in $1.228 billion of gross
proceeds. After the payment of related fees and expenses, we
used the proceeds to repay outstanding indebtedness under our
senior secured term loan facilities.
Management believes that cash flows from operations, amounts
available under our senior secured credit facilities and our
anticipated access to public and private debt markets will be
sufficient to meet expected liquidity needs during the next
twelve months.
Market
Risk
We are exposed to market risk related to changes in market
values of securities. The investments in debt and equity
securities of our wholly-owned insurance subsidiary were
$1.496 billion and $6 million, respectively, at
June 30, 2009. These investments are carried at fair value,
with changes in unrealized gains and losses being recorded as
adjustments to other comprehensive income. At June 30,
2009, we had a net unrealized loss of $24 million on the
insurance subsidiarys investment securities.
We are exposed to market risk related to market illiquidity.
Liquidity of the investments in debt and equity securities of
our wholly-owned insurance subsidiary could be impaired by the
inability to access the capital markets. Should the wholly-owned
insurance subsidiary require significant amounts of cash in
excess of normal cash requirements to pay claims and other
expenses on short notice, we may have difficulty selling these
investments in a timely manner or be forced to sell them at a
price less than what we might otherwise have been able to in a
normal market environment. At June 30, 2009, our
wholly-owned insurance subsidiary had invested $472 million
($502 million par value) in municipal, tax-exempt student
loan auction rate securities which were classified as long-term
investments. The auction rate securities (ARS) are
publicly issued securities with long-term stated maturities for
which the interest rates are reset through a Dutch auction every
seven to 35 days. With the liquidity issues experienced in
global credit and capital markets, the ARS held by our
wholly-owned insurance subsidiary have experienced multiple
failed auctions, beginning on February 11, 2008, as the
amount of securities submitted for sale exceeded the amount of
purchase orders. There is a very limited market for the ARS at
this time. 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.
These securities continue to accrue and pay interest
semi-annually based on the failed auction maximum rate formulas
stated in their respective Official Statements. If uncertainties
in the credit and capital markets continue or there are ratings
downgrades on the ARS held by our insurance subsidiary, we may
be required to recognize
other-than-temporary
impairments on these long-term investments in future periods.
We are also exposed to market risk related to changes in
interest rates, and we periodically enter into interest rate
swap agreements to manage our exposure to these fluctuations.
Our interest rate swap agreements involve the exchange of fixed
and variable rate interest payments between two parties, based
on common notional principal amounts and maturity dates. The
notional amounts of the swap agreements represent balances used
to calculate the exchange of cash flows and are not our assets
or liabilities. Our credit risk related to these agreements is
considered low because the swap agreements are with creditworthy
financial institutions. The interest payments under these
agreements are settled on a net basis. These derivatives have
been recognized in the financial statements at their respective
fair values. Changes in the fair value of these derivatives are
included in other comprehensive income.
With respect to our interest-bearing liabilities, approximately
$2.801 billion of long-term debt at June 30, 2009 is
subject to variable rates of interest, while the remaining
balance in long-term debt of $23.744 billion at
June 30, 2009 is subject to fixed rates of interest. Both
the general level of interest rates and, for the senior secured
credit
35
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Liquidity
and Capital Resources (continued)
Market Risk (continued)
facilities, our leverage affect our variable interest rates. Our
variable debt is comprised primarily of amounts outstanding
under the senior secured credit facilities. Borrowings under the
senior secured credit facilities bear interest at a rate equal
to an applicable margin plus, at our option, either (a) a
base rate determined by reference to the higher of (1) the
federal funds rate plus 0.50% and (2) the prime rate of
Bank of America or (b) a LIBOR rate for the currency of
such borrowing for the relevant interest period. The applicable
margin for borrowings under the senior secured credit facilities
may fluctuate according to a leverage ratio, with the exception
of term loan B where the margin is static. The average rate for
our long-term debt increased from 7.0% at June 30, 2008 to
7.2% at June 30, 2009.
The estimated fair value of our total long-term debt was
$24.124 billion at June 30, 2009. The estimates of
fair value are based upon the quoted market prices for the same
or similar issues of long-term debt with the same maturities.
Based on a hypothetical 1% increase in interest rates, the
potential annualized reduction to future pretax earnings would
be approximately $28 million. To mitigate the impact of
fluctuations in interest rates, we generally target a portion of
our debt portfolio to be maintained at fixed rates.
Our international operations and foreign currency denominated
loans expose us to market risks associated with foreign
currencies. In order to mitigate the currency exposure related
to foreign currency denominated debt service obligations, we
have entered into cross currency swap agreements. A cross
currency swap is an agreement between two parties to exchange a
stream of principal and interest payments in one currency for a
stream of principal and interest payments in another currency
over a specified period. Our credit risk related to these
agreements is considered low because the swap agreements are
with creditworthy financial institutions.
Pending
IRS Disputes
At June 30, 2009, we were contesting before the IRS Appeals
Division, certain claimed deficiencies and adjustments proposed
by the IRS in connection with its examinations of the 2003 and
2004 federal income returns for HCA and 11 affiliates that are
treated as partnerships for federal income tax purposes. The
disputed items include the timing of recognition of certain
patient service revenues and our method for calculating the tax
allowance for doubtful accounts.
Eight taxable periods of HCA and its predecessors ended in 1995
through 2002 and the 2002 taxable year of seven affiliated
partnerships, for which the primary remaining issue is the
computation of the tax allowance for doubtful accounts, are
pending before the IRS Examination Division or the United States
Tax Court as of June 30, 2009. The IRS began an audit of
the 2005 and 2006 federal income tax returns for HCA and seven
affiliated partnerships during 2008.
Management believes that adequate provisions have been recorded
to satisfy final resolution of the disputed issues. Management
believes that HCA, its predecessors, subsidiaries and affiliates
properly reported taxable income and paid taxes in accordance
with applicable laws and agreements established with the IRS and
that final resolution of these disputes will not have a
material, adverse effect on our results of operations or
financial position. However, if payments due upon final
resolution of these issues exceed our recorded estimates, such
resolutions could have a material, adverse effect on our results
of operations or financial position.
36
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Operating
Data
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
CONSOLIDATING
|
|
|
|
|
|
|
|
|
Number of hospitals in operation at:
|
|
|
|
|
|
|
|
|
March 31
|
|
|
155
|
|
|
|
161
|
|
June 30
|
|
|
155
|
|
|
|
161
|
|
September 30
|
|
|
|
|
|
|
158
|
|
December 31
|
|
|
|
|
|
|
158
|
|
Number of freestanding outpatient surgical centers in operation
at:
|
|
|
|
|
|
|
|
|
March 31
|
|
|
97
|
|
|
|
101
|
|
June 30
|
|
|
97
|
|
|
|
99
|
|
September 30
|
|
|
|
|
|
|
99
|
|
December 31
|
|
|
|
|
|
|
97
|
|
Licensed hospital beds at(a):
|
|
|
|
|
|
|
|
|
March 31
|
|
|
38,763
|
|
|
|
38,375
|
|
June 30
|
|
|
38,793
|
|
|
|
38,448
|
|
September 30
|
|
|
|
|
|
|
38,386
|
|
December 31
|
|
|
|
|
|
|
38,504
|
|
Weighted average licensed beds(b):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
38,811
|
|
|
|
38,406
|
|
Second
|
|
|
38,817
|
|
|
|
38,419
|
|
Third
|
|
|
|
|
|
|
38,390
|
|
Fourth
|
|
|
|
|
|
|
38,474
|
|
Year
|
|
|
|
|
|
|
38,422
|
|
Average daily census(c):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
21,701
|
|
|
|
22,248
|
|
Second
|
|
|
20,577
|
|
|
|
20,743
|
|
Third
|
|
|
|
|
|
|
19,932
|
|
Fourth
|
|
|
|
|
|
|
20,273
|
|
Year
|
|
|
|
|
|
|
20,795
|
|
Admissions(d):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
396,200
|
|
|
|
401,700
|
|
Second
|
|
|
387,400
|
|
|
|
382,600
|
|
Third
|
|
|
|
|
|
|
377,400
|
|
Fourth
|
|
|
|
|
|
|
380,100
|
|
Year
|
|
|
|
|
|
|
1,541,800
|
|
37
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Operating Data (Continued)
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Equivalent admissions(e):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
610,200
|
|
|
|
601,300
|
|
Second
|
|
|
609,900
|
|
|
|
587,600
|
|
Third
|
|
|
|
|
|
|
587,400
|
|
Fourth
|
|
|
|
|
|
|
587,300
|
|
Year
|
|
|
|
|
|
|
2,363,600
|
|
Average length of stay (days)(f):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
4.9
|
|
|
|
5.0
|
|
Second
|
|
|
4.8
|
|
|
|
4.9
|
|
Third
|
|
|
|
|
|
|
4.9
|
|
Fourth
|
|
|
|
|
|
|
4.9
|
|
Year
|
|
|
|
|
|
|
4.9
|
|
Emergency room visits(g):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
1,359,700
|
|
|
|
1,368,800
|
|
Second
|
|
|
1,398,000
|
|
|
|
1,297,600
|
|
Third
|
|
|
|
|
|
|
1,303,100
|
|
Fourth
|
|
|
|
|
|
|
1,276,900
|
|
Year
|
|
|
|
|
|
|
5,246,400
|
|
Outpatient surgeries(h):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
194,400
|
|
|
|
196,900
|
|
Second
|
|
|
200,200
|
|
|
|
202,100
|
|
Third
|
|
|
|
|
|
|
196,500
|
|
Fourth
|
|
|
|
|
|
|
201,900
|
|
Year
|
|
|
|
|
|
|
797,400
|
|
Inpatient surgeries(i):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
122,600
|
|
|
|
125,400
|
|
Second
|
|
|
124,400
|
|
|
|
125,000
|
|
Third
|
|
|
|
|
|
|
121,400
|
|
Fourth
|
|
|
|
|
|
|
121,300
|
|
Year
|
|
|
|
|
|
|
493,100
|
|
38
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Operating Data (Continued)
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Days in accounts receivable(j):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
47
|
|
|
|
53
|
|
Second
|
|
|
45
|
|
|
|
51
|
|
Third
|
|
|
|
|
|
|
49
|
|
Fourth
|
|
|
|
|
|
|
48
|
|
Year
|
|
|
|
|
|
|
49
|
|
Gross patient revenues(k) (dollars in millions):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
$
|
28,742
|
|
|
$
|
25,804
|
|
Second
|
|
|
28,500
|
|
|
|
25,065
|
|
Third
|
|
|
|
|
|
|
24,783
|
|
Fourth
|
|
|
|
|
|
|
27,191
|
|
Year
|
|
|
|
|
|
|
102,843
|
|
Outpatient revenues as a% of patient revenues(l):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
38
|
%
|
|
|
36
|
%
|
Second
|
|
|
39
|
%
|
|
|
38
|
%
|
Third
|
|
|
|
|
|
|
39
|
%
|
Fourth
|
|
|
|
|
|
|
38
|
%
|
Year
|
|
|
|
|
|
|
37
|
%
|
NONCONSOLIDATING(m)
|
|
|
|
|
|
|
|
|
Number of hospitals in operation at:
|
|
|
|
|
|
|
|
|
March 31
|
|
|
8
|
|
|
|
8
|
|
June 30
|
|
|
8
|
|
|
|
8
|
|
September 30
|
|
|
|
|
|
|
8
|
|
December 31
|
|
|
|
|
|
|
8
|
|
Number of freestanding outpatient surgical centers in operation
at:
|
|
|
|
|
|
|
|
|
March 31
|
|
|
8
|
|
|
|
8
|
|
June 30
|
|
|
8
|
|
|
|
8
|
|
September 30
|
|
|
|
|
|
|
8
|
|
December 31
|
|
|
|
|
|
|
8
|
|
Licensed hospital beds at:
|
|
|
|
|
|
|
|
|
March 31
|
|
|
2,367
|
|
|
|
2,337
|
|
June 30
|
|
|
2,369
|
|
|
|
2,337
|
|
September 30
|
|
|
|
|
|
|
2,367
|
|
December 31
|
|
|
|
|
|
|
2,367
|
|
39
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Operating Data (Continued)
BALANCE
SHEET DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Accounts Receivable
|
|
|
|
Under 91 Days
|
|
|
91 180 Days
|
|
|
Over 180 Days
|
|
|
Accounts receivable aging at June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare and Medicaid
|
|
|
10
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
Managed care and other discounted
|
|
|
17
|
|
|
|
3
|
|
|
|
3
|
|
Uninsured
|
|
|
18
|
|
|
|
11
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
45
|
%
|
|
|
15
|
%
|
|
|
40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Licensed beds are those beds for which a facility has been
granted approval to operate from the applicable state licensing
agency. |
|
(b) |
|
Weighted average licensed beds represents the average number of
licensed beds, weighted based on periods owned. |
|
(c) |
|
Represents the average number of patients in our hospital beds
each day. |
|
(d) |
|
Represents the total number of patients admitted to our
hospitals and is used by management and certain investors as a
general measure of inpatient volume. |
|
(e) |
|
Equivalent admissions are used by management and certain
investors as a general measure of combined inpatient and
outpatient volume. Equivalent admissions are computed by
multiplying admissions (inpatient volume) by the sum of gross
inpatient revenues and gross outpatient revenues and then
dividing the resulting amount by gross inpatient revenues. The
equivalent admissions computation equates outpatient
revenues to the volume measure (admissions) used to measure
inpatient volume resulting in a general measure of combined
inpatient and outpatient volume. |
|
(f) |
|
Represents the average number of days admitted patients stay in
our hospitals. |
|
(g) |
|
Represents the number of patients treated in our emergency rooms. |
|
(h) |
|
Represents the number of surgeries performed on patients who
were not admitted to our hospitals. Pain management and
endoscopy procedures are not included in outpatient surgeries. |
|
(i) |
|
Represents the number of surgeries performed on patients who
have been admitted to our hospitals. Pain management and
endoscopy procedures are not included in inpatient surgeries. |
|
(j) |
|
Days in accounts receivable are calculated by dividing the
revenues for the period by the days in the period (revenues per
day). Accounts receivable, net of allowance for doubtful
accounts, at the end of the period is then divided by the
revenues per day. |
|
(k) |
|
Gross patient revenues are based upon our standard charge
listing. Gross charges/revenues typically do not reflect what
our hospital facilities are paid. Gross charges/revenues are
reduced by contractual adjustments, discounts and charity care
to determine reported revenues. |
|
(l) |
|
Represents the percentage of patient revenues related to
patients who are not admitted to our hospitals. |
|
(m) |
|
The nonconsolidating facilities include facilities operated
through 50/50 joint ventures which we do not control and are
accounted for using the equity method of accounting. |
40
|
|
ITEM 3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
The information called for by this item is provided under the
caption Market Risk under Item 2.
Managements Discussion and Analysis of Financial Condition
and Results of Operations.
|
|
ITEM 4.
|
CONTROLS
AND PROCEDURES
|
Evaluation
of Disclosure Controls and Procedures
HCAs chief executive officer and chief financial officer
have reviewed and evaluated the effectiveness of HCAs
disclosure controls and procedures (as defined in
Rules 13a-15(e)
and
15d-15(e)
promulgated under the Securities Exchange Act of 1934 (the
Exchange Act)) as of the end of the period covered
by this quarterly report. Based on that evaluation, the chief
executive officer and chief financial officer have concluded
that HCAs disclosure controls and procedures effectively
and timely provide them with material information relating to
HCA and its consolidated subsidiaries required to be disclosed
in the reports HCA files or submits under the Exchange Act.
Changes
in Internal Control Over Financial Reporting
During the period covered by this report, there have been no
changes in our internal control over financial reporting that
have materially affected or are reasonably likely to materially
affect our internal control over financial reporting.
Part II:
Other Information
|
|
Item 1:
|
Legal
Proceedings
|
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 materially and
adversely affect our results of operations and financial
position in a given period.
Merger
Litigation in State Court
On October 23, 2006, the Foundation for Seacoast Health
(the Foundation) filed a lawsuit against us and one
of our affiliates, HCA Health Services of New Hampshire, Inc.,
in the Superior Court of Rockingham County, New Hampshire.
Among other things, the complaint seeks to enforce certain
provisions of an asset purchase agreement between the parties,
including a purported right of first refusal to purchase a New
Hampshire hospital, that allegedly were triggered by the Merger
and other prior events. The Foundation initially sought to
enjoin the Merger. However, the parties reached an agreement
that allowed the Merger to proceed, while preserving the
plaintiffs opportunity to litigate whether the Merger
triggered the right of first refusal to purchase the hospital
and, if so, at what price the hospital could be repurchased. On
May 25, 2007, the court granted HCAs motion for
summary judgment disposing of the Foundations central
claims. The Foundation filed an appeal from the final judgment.
On July 15, 2008, the New Hampshire Supreme Court held that
the Merger did not trigger the right of first refusal. The Court
remanded to the lower court the claim that a right of first
refusal had been triggered by certain intra-corporate
transactions in 1999. The Court did not determine the merits of
that claim, and we will continue to defend the claim vigorously.
General
Liability and Other Claims
On April 10, 2006, a class action complaint was filed
against us in the District Court of Kansas alleging, among other
matters, nurse understaffing at all of our hospitals, certain
consumer protection act violations, negligence and unjust
enrichment. The complaint is seeking, among other relief,
declaratory relief and monetary damages, including disgorgement
of profits of $12.250 billion. A motion to dismiss this
action was granted on July 27, 2006,
41
but the plaintiffs appealed this dismissal. While the appeal was
pending, the Kansas Supreme Court for the first time construed
the Kansas Consumer Protection Act to apply to the provision of
medical services. Based on that new ruling, the
10th Circuit reversed the district courts dismissal
and remanded the action for further consideration by the trial
court. We will continue to defend this claim vigorously.
We are a party to certain proceedings relating to claims for
income taxes and related interest in the United States Tax
Court. For a description of those proceedings, see Part I.
Item 2, Managements Discussion and Analysis of
Financial Condition and Results of Operations
Pending IRS Disputes and Note 2 to our condensed
consolidated financial statements.
We are also subject to claims and suits arising in the ordinary
course of business, including claims for personal injuries or
for wrongful restriction of, or interference with,
physicians staff privileges. In certain of these actions
the claimants have asked for punitive damages against us, which
may not be covered by insurance. In the opinion of management,
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.
Reference is made to the factors set forth under the caption
Forward-Looking Statements in Part I,
Item 2 of this
Form 10-Q
and other risk factors described in our annual report on
Form 10-K
for the year ended December 31, 2008, which are
incorporated herein by reference. There have not been any
material changes to the risk factors previously disclosed in our
annual report on
Form 10-K,
except as set forth below.
Health
care reform and changes in governmental programs may reduce our
revenues.
National health care reform is a focus at the federal level, and
Congress is currently considering a number of proposals that may
significantly impact the health care industry. Among other
things, these proposals intend to decrease or eliminate the
number of uninsured individuals and reduce health care costs.
Various mechanisms to fund health care reform legislation are
being considered, including proposals that would reduce hospital
reimbursement. Several states are also considering health care
reform measures. Federal or state health care reform could
adversely affect our business and results of operations.
The focus on health care reform may also increase the likelihood
of significant changes affecting existing government health care
programs. A significant portion of our patient volumes is
derived from government health care programs, principally
Medicare and Medicaid, which are highly regulated and subject to
frequent and substantial changes. We derived approximately 59%
of our admissions from the Medicare and Medicaid programs in
2008. In recent years, legislative and regulatory changes have
resulted in limitations on and, in some cases, reductions in
levels of payments to health care providers for certain services
under these government programs. Possible future changes in the
Medicare, Medicaid, and other state programs, may reduce
reimbursements to health care providers and insurers and may
also increase our operating costs, which could reduce our
profitability.
Centers for Medicare and Medicaid Services (CMS)
issued final regulations effective January 1, 2008 that
increased ambulatory surgery centers (ASC) payment
groups from nine clinically disparate payment groups to an
extensive list of covered surgical procedures among the
Ambulatory Payment Classification Groups (APCs) used
under the outpatient prospective payment system
(PPS) for these surgical services. The final
regulation establishes a four-year transition period for
implementing the revised payment rates. This regulation
significantly expands the number of procedures that Medicare
reimburses if performed in an ASC and limits ASC reimbursement
for procedures commonly performed in physicians offices.
More Medicare procedures that are now performed in hospitals,
such as ours, may be moved to ASCs, reducing surgical volume in
our hospitals. Also, more Medicare procedures that are now
performed in ASCs, such as ours, may be moved to
physicians offices. Commercial third-party payers may
adopt similar policies.
In federal fiscal year 2008 CMS began a two-year implementation
of the Medicare severity-adjusted diagnosis related group
(MS-DRGs) system. This change represents a
refinement to the existing Medicare diagnosis related group
(DRG) system. Realignments in the DRG system could
impact the margins we receive for certain services.
42
For federal fiscal year 2010, CMS has provided a 2.1% market
basket update for hospitals that submit certain quality patient
care indicators and a 0.1% update for hospitals that do not
submit this data. While we will endeavor to comply with all
quality data submission requirements, our submissions may not be
deemed timely or sufficient to entitle us to the full market
basket adjustment for all of our hospitals. Medicare payments to
hospitals in federal fiscal years 2008 and 2009 have been
reduced to eliminate what CMS estimates is the effect of coding
or classifications changes as a result of hospitals implementing
the MS-DRG system. CMS may retrospectively determine if the
adjustment levels for federal fiscal years 2008 and 2009 were
adequate and may impose an adjustment in future years if CMS
finds that the adjustments were inadequate. CMS has announced
its intent to impose payment adjustments in federal fiscal years
2011 and 2012 because of what CMS has determined to be an
inadequate adjustment in federal fiscal year 2008. Additionally,
Medicare payments to hospitals are subject to a number of other
adjustments, and the actual impact on payments to specific
hospitals may vary. In some cases, commercial third-party payers
and other payers such as some state Medicaid programs rely on
all or portions of the Medicare DRG system to determine payment
rates, and adjustments that negatively impact Medicare payments
may also negatively impact payments from Medicaid programs or
commercial third-party payers and other payers.
Since most states must operate with balanced budgets and since
the Medicaid program is often the states largest program,
states can be expected to adopt or consider adopting legislation
designed to reduce their Medicaid expenditures. The current
economic downturn has increased the budgetary pressures on most
states, and these budgetary pressures have resulted and likely
will continue to result in decreased spending for Medicaid
programs in many states. Further, many states have also adopted,
or are considering, legislation designed to reduce coverage and
program eligibility, enroll Medicaid recipients in managed care
programs
and/or
impose additional taxes on hospitals to help finance or expand
the states Medicaid systems.
On May 1, 2009, the Department of Defense implemented a
prospective payment system for hospital outpatient services
furnished to TRICARE beneficiaries similar to that utilized for
services furnished to Medicare beneficiaries. Because the
Medicare outpatient prospective payment system APC rates have
historically been below TRICARE rates, the adoption of this
payment methodology for TRICARE beneficiaries will reduce our
reimbursement. This change in TRICARE will have a material
impact on our revenues from this program; however, TRICARE
outpatient services do not represent a significant portion of
our patient volumes.
Changes in laws or regulations regarding government health
programs or other changes in the administration of government
health programs could have a material, adverse effect on our
financial position and results of operations.
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Item 2:
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Unregistered
Sales of Equity Securities and Use of Proceeds
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During the quarter ended June 30, 2009, HCA issued and sold
36,928 shares of common stock for aggregate consideration
of $1,889,606 to certain employees. HCA issued and sold
22,769 shares of common stock in connection with the
cashless exercise of stock options for aggregate consideration
of $290,305 resulting in 11,971 net settled shares. HCA
also issued and sold 898 shares of common stock in
connection with the cash exercise of stock options for aggregate
consideration of $11,450. These shares were issued without
registration in reliance on the exemptions afforded by
Section 4(2) of the Securities Act of 1933, as amended, and
Rule 701 promulgated thereunder.
43
On April 29, 2008, we registered our common stock pursuant
to Section 12(g) of the Securities Exchange Act of 1934, as
amended. The following table provides certain information with
respect to our repurchases of common stock from April 1,
2009 through June 30, 2009.
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Approximate
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Total Number
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Dollar Value of
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of Shares
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Shares That
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Purchased as
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May Yet Be
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Part of
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Purchased
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Publicly
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Under Publicly
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Total Number
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Announced
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Announced
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of Shares
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Average Price
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Plans or
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Plans or
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Period
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Purchased
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Paid per Share
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Programs
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Programs
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April 1, 2009 through April 30, 2009
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2,138
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$
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51.17
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$
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May 1, 2009 through May 31, 2009
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62
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$
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51.17
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June 1, 2009 through June 30, 2009
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16,829
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$
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55.37
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Total for Second Quarter 2009
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19,029
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$
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54.89
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$
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During the second quarter of 2009, we purchased
19,029 shares pursuant to the terms of the Management
Stockholders Agreement
and/or
separation agreements and stock purchase agreements between
former employees and the Company.
(a) List of Exhibits:
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Exhibit 31.1
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Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
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Exhibit 31.2
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Certification of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
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Exhibit 32
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Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of
2002.
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44
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
HCA INC.
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By:
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/s/ R.
Milton Johnson
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R. Milton Johnson
Executive Vice President and
Chief Financial Officer
Date: August 14, 2009
45
EXHIBIT 31.1
CERTIFICATION
I, Richard M. Bracken, certify that:
1. I have reviewed this quarterly report on
Form 10-Q
of HCA Inc.;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in
Exchange Act
Rules 13a-15(f)
and
15d-15(f))
for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial
reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the
registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; and
5. The registrants other certifying officer(s) and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting.
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|
|
|
By:
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/s/
Richard M. Bracken
|
Richard M. Bracken
President and Chief Executive Officer
Date: August 14, 2009
EXHIBIT 31.2
CERTIFICATION
I, R. Milton Johnson, certify that:
1. I have reviewed this quarterly report on
Form 10-Q
of HCA Inc.;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in
Exchange Act
Rules 13a-15(f)
and
15d-15(f))
for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial
reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the
registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; and
5. The registrants other certifying officer(s) and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting.
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|
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By:
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/s/ R.
Milton Johnson
|
R. Milton Johnson
Executive Vice President and
Chief Financial Officer
Date: August 14, 2009
EXHIBIT 32
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of HCA Inc. (the
Company) on
Form 10-Q
for the quarter ended June 30, 2009, as filed with the
Securities and Exchange Commission on the date hereof (the
Report), each of the undersigned certifies, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition and
results of operations of the Company.
|
|
|
|
By:
|
/s/ Richard
M. Bracken
|
Richard M. Bracken
President and Chief Executive Officer
August 14, 2009
|
|
|
|
By:
|
/s/ R.
Milton Johnson
|
R. Milton Johnson
Executive Vice President and
Chief Financial Officer
August 14, 2009