News Column

HCA Reports Second Quarter 2014 Results

July 29, 2014

Earnings In Line with Preview

NASHVILLE, Tenn.--(BUSINESS WIRE)-- HCA Holdings, Inc. (NYSE: HCA) today announced financial and operating results for the second quarter ended June 30, 2014.

Key second quarter metrics (all percentage changes compare 2Q 2014 to 2Q 2013 unless noted):

  • Revenues increased 9.2 percent to $9.230 billion
  • Net income attributable to HCA Holdings, Inc. totaled $483 million, or $1.07 per diluted share
  • Adjusted EBITDA increased 18.5 percent to $2.0 billion
  • Cash flows from operations increased 53.6 percent to $1.250 billion
  • Same facility equivalent admissions increased 2.2 percent while same facility admissions increased 1.2 percent
  • Same facility revenue per equivalent admission increased 5.4 percent

    Revenues in the second quarter increased to $9.230 billion, compared to $8.450 billion in the second quarter of 2013. Net income attributable to HCA Holdings, Inc. totaled $483 million, or $1.07 per diluted share, compared to $423 million, or $0.91 per diluted share, in the second quarter of 2013. Adjusted EBITDA totaled $2.0 billion compared to $1.689 billion in the second quarter of 2013. Adjusted EBITDA is a non-GAAP financial measure. A table reconciling net income attributable to HCA Holdings, Inc. to Adjusted EBITDA is included in this release.

    During the second quarter the Company recorded a $142 million adjustment to increase Medicaid revenues related to the receipt of reimbursements in excess of our estimates for the indigent care component of the Texas Medicaid Waiver Program for the program year ended September 30, 2013. Second quarter 2014 results include losses on retirement of debt of $226 million, or $0.32 per diluted share, and gains on sales of facilities of $11 million, or $0.02 per diluted share. Results for the second quarter of 2013 include gains on sales of facilities of $4 million.

    Same facility revenue per equivalent admission increased 5.4 percent in the second quarter of 2014 compared to the second quarter of 2013, reflecting the increase in Medicaid revenues, improved payor mix and growth in case mix, or acuity, of 1.7 percent on a same facility basis in the quarter.

    Same facility equivalent admissions increased 2.2 percent in the second quarter of 2014 compared to the prior year period. Same facility admissions increased 1.2 percent compared to the prior year period. Same facility emergency room visits increased 5.7 percent in the second quarter of 2014, compared to the prior year period. Same facility inpatient surgeries increased 1.0 percent while same facility outpatient surgeries declined 0.3 percent in the second quarter of 2014 compared to the same period of 2013.

    During the second quarter of 2014, salaries and benefits, supplies and other operating expenses totaled $7.274 billion, or 78.8 percent of revenues, compared to $6.825 billion, or 80.7 percent of revenues, in the second quarter of 2013.

    During the second quarter of 2014, the Company repurchased $750 million, or 14.5 million shares of its common stock from certain of its stockholders, consisting primarily of affiliates or funds sponsored by, Bain Capital Partners, LLC and Kohlberg Kravis Roberts & Co.

    Six Months Ended June 30, 2014

    Revenues for the six months ended June 30, 2014 totaled $18.062 billion compared to $16.890 billion in the same period of 2013. Net income attributable to HCA Holdings, Inc. was $830 million, or $1.82 per diluted share, compared to $767 million, or $1.66 per diluted share, for the first six months of 2013. Results for the six months ended June 30, 2014 include losses on retirement of debt of $226 million, or $0.31 per diluted share, gains on sales of facilities of $32 million, or $0.04 per diluted share, and legal claim costs of $78 million, or $0.11 per diluted share. Results for the six months ended June 30, 2013 include losses on sales of facilities of $12 million, or $0.02 per diluted share, and losses on retirement of debt of $17 million, or $0.02 per diluted share.

    Balance Sheet and Cash Flows from Operations

    As of June 30, 2014, HCA Holdings, Inc.’s balance sheet reflected cash and cash equivalents of $658 million, total debt of $28.988 billion, and total assets of $29.822 billion. During the second quarter of 2014, capital expenditures totaled $513 million, excluding acquisitions. Cash flows provided by operating activities in the quarter totaled $1.250 billion compared to $814 million in the second quarter of 2013. The $436 million increase in cash flows from operating activities related primarily to the combined impact of a $199 million increase in net income attributable to HCA Holdings, Inc., excluding gains on sales of facilities and losses on retirement of debt, and a $156 million increase from changes in working capital items in the second quarter of 2014 compared to the second quarter of 2013.

    As of June 30, 2014, HCA’s leverage ratio as measured by Total Debt/Adjusted EBITDA was 4.16x, compared to 4.32x as of December 31, 2013. As of June 30, 2014, HCA operated 165 hospitals and 115 freestanding surgery centers.

    2014 Guidance

    The Company on July 16, 2014 updated its previously issued financial guidance ranges for 2014.

     

    Original 2014 Guidance

     

    Revised 2014 Guidance

     
    Revenues $35.50 - $36.50 billion$36.00 - $36.50 billion
    Adjusted EBITDA $6.60 - $6.85 billion$7.00 - $7.15 billion
    Adjusted EPS (diluted) $3.45- $3.75$4.00- $4.25
    Capital Expenditures Approximately $2.2 billion no change


    The revised guidance assumes a benefit to Adjusted EBITDA from the Patient Protection and Affordable Care Act (Health Reform Law) in 2014 of approximately 2 to 3 percent of Adjusted EBITDA (original guidance was 1 to 2 percent), and the second quarter Medicaid revenues from the indigent care component of the Texas Medicaid Waiver Program. Both the original and revised guidance also include estimated electronic health record incentive income assumptions in a range of $110-$130 million and EHR expenses in a range of $110-$130 million. The guidance reflects estimated increases in share-based compensation expense to approximately $160 million (original guidance was $168 million), from $113 million in 2013. Guidance excludes the impact of items, if applicable, that are non-operational in nature including items such as, but not limited to, gains or losses on sales of facilities and businesses, gains or losses on early debt retirement and impairments of long-lived assets. This guidance is also subject to certain risks including those as set forth below in the Company’s “Forward-Looking Statements”.

    Earnings Conference Call

    HCA will host a conference call for investors at 9:00 a.m. Central Daylight Time today. All interested investors are invited to access a live audio broadcast of the call via webcast. The broadcast also will be available on a replay basis beginning this afternoon. The webcast can be accessed at: https://event.webcasts.com/starthere.jsp?ei=1038329or through the Company’s Investor Relations web page, www.hcahealthcare.com.

    Forward-Looking Statements

    This press release contains forward-looking statements within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include statements that do not relate solely to historical facts. Forward-looking statements can be identified by the use of words like “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “initiative” or “continue.” These forward-looking statements are based on our current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond our control, which could significantly affect current plans and expectations and our future financial position and results of operations. These factors include, but are not limited to, (1) the impact of our substantial indebtedness and the ability to refinance such indebtedness on acceptable terms, (2) the effects related to the implementation of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “Health Reform Law”), possible delays in or complications related to implementation of the Health Reform Law, the possible enactment of additional federal or state health care reforms and possible changes to the Health Reform Law and other federal, state or local laws or regulations affecting the health care industry, (3) the effects related to the continued implementation of the sequestration spending reductions required under the Budget Control Act of 2011 (the “BCA”), and related legislation extending these reductions, and the potential for future deficit reduction legislation that may alter these spending reductions, which include cuts to Medicare payments, or create additional spending reductions, (4) increases in the amount and risk of collectability 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 upper payment limit programs or waiver programs, that may impact reimbursements to health care providers and insurers, (7) the highly competitive nature of the health care business, (8) changes in service mix, revenue mix and surgical volumes, including potential declines in the population covered under managed care agreements, the ability to enter into and renew managed care provider agreements on acceptable terms and the impact of consumer driven health plans and physician utilization trends and practices, (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 and possible impairments of long-lived assets, (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 adverse impact of known and unknown government investigations, litigation and other claims that may be made against us, (20) our ongoing ability to demonstrate meaningful use of certified electronic health record technology and recognize income for the related Medicare or Medicaid incentive payments, and (21) other risk factors described in our annual report on Form 10-K for the year ended December 31, 2013 and our other filings with the Securities and Exchange Commission. Many of the factors that will determine our future results are beyond our ability to control or predict. In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

    All references to “Company” and “HCA” as used throughout this release refer to HCA Holdings, Inc. and its affiliates.

     
    HCA Holdings, Inc.
    Condensed Consolidated Comprehensive Income Statements
    Second Quarter
    (Dollars in millions, except per share amounts)
     
    2014 2013
    AmountRatioAmountRatio
     
    Revenues before provision for doubtful accounts $9,958 $ 9,473
    Provision for doubtful accounts   728     1,023  
    Revenues 9,230100.0% 8,450 100.0
     
    Salaries and benefits 4,09844.4 3,848 45.5
    Supplies 1,53216.6 1,470 17.4
    Other operating expenses 1,64417.8 1,507 17.8
    Electronic health record incentive income (35)(0.4) (52 ) (0.6 )
    Equity in earnings of affiliates (9)(0.1) (12 ) (0.1 )
    Depreciation and amortization 4544.9 425 5.1
    Interest expense 4274.6 462 5.5
    Gains on sales of facilities (11)(0.1) (4 ) (0.1 )
    Losses on retirement of debt   226   2.5     -   -  
     
      8,326   90.2     7,644   90.5  
     
    Income before income taxes 9049.8 806 9.5
     
    Provision for income taxes   272   3.0     269   3.2  
     
    Net income 6326.8 537 6.3
     
    Net income attributable to noncontrolling interests   149   1.6     114   1.3  
     
    Net income attributable to HCA Holdings, Inc.$483   5.2   $ 423   5.0  
     
    Diluted earnings per share $1.07 $ 0.91
     
    Shares used in computing diluted earnings per share (000) 453,009 463,184
     
    Comprehensive income attributable to HCA Holdings, Inc.$516   $ 472  
     
    HCA Holdings, Inc.
    Condensed Consolidated Comprehensive Income Statements
    For the Six Months Ended June 30, 2014 and 2013
    (Dollars in millions, except per share amounts)
     
     
     
    2014 2013
    AmountRatioAmountRatio
     
    Revenues before provision for doubtful accounts $19,641 $ 18,667
    Provision for doubtful accounts   1,579     1,777  
    Revenues 18,062100.0% 16,890 100.0 %
     
    Salaries and benefits 8,14845.1 7,765 46.0
    Supplies 3,06417.0 2,949 17.5
    Other operating expenses 3,28918.2 3,030 17.8
    Electronic health record incentive income (65)(0.4) (91 ) (0.5 )
    Equity in earnings of affiliates (18)(0.1) (20 ) (0.1 )
    Depreciation and amortization 9015.0 849 5.0
    Interest expense 8874.9 934 5.5
    Losses (gains) on sales of facilities (32)(0.2) 12 0.1
    Losses on retirement of debt 2261.3 17 0.1
    Legal claim costs   78   0.4     -   -  
     
      16,478   91.2     15,445   91.4  
     
    Income before income taxes 1,5848.8 1,445 8.6
     
    Provision for income taxes   498   2.8     470   2.8  
     
    Net income 1,0866.0 975 5.8
     
    Net income attributable to noncontrolling interests   256   1.4     208   1.3  
     
    Net income attributable to HCA Holdings, Inc.$830   4.6   $ 767   4.5  
     
    Diluted earnings per share $1.82 $ 1.66
     
    Shares used in computing diluted earnings per share (000) 455,220 462,782
     
    Comprehensive income attributable to HCA Holdings, Inc.$888   $ 798  
     
    HCA Holdings, Inc.
    Supplemental Non-GAAP Disclosures
    Operating Results Summary
    (Dollars in millions, except per share amounts)
           
     
    For the Six Months
    Second QuarterEnded June 30,
      2014     2013     2014     2013
     
    Revenues $9,230 $ 8,450 $18,062 $ 16,890
     
    Net income attributable to HCA Holdings, Inc.$483 $ 423 $830 $ 767
    Losses (gains) on sales of facilities (net of tax) (7) (3 ) (20) 8
    Losses on retirement of debt (net of tax) 143 - 143 11
    Legal claim costs (net of tax)   -     -     49     -
    Net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, losses
    on retirement of debt and legal claim costs (a) 619 420 1,002 786
    Depreciation and amortization 454 425 901 849
    Interest expense 427 462 887 934
    Provision for income taxes 351 268 598 480
    Net income attributable to noncontrolling interests   149     114     256     208
     
    Adjusted EBITDA (a) $2,000   $ 1,689   $3,644   $ 3,257
     
    Diluted earnings per share:
    Net income attributable to HCA Holdings, Inc.$1.07 $ 0.91 $1.82 $ 1.66
    Losses (gains) on sales of facilities (0.02) - (0.04) 0.02
    Losses on retirement of debt 0.32 - 0.31 0.02
    Legal claim costs   -     -     0.11     -
    Net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities,
    losses on retirement of debt and legal claim costs(a) $1.37   $ 0.91   $2.20   $ 1.70
     
    Shares used in computing diluted earnings per share (000) 453,009 463,184 455,220 462,782
     
     
     

    (a) Net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, losses on retirement of debt and legal claim costs, and Adjusted EBITDA should not be considered as measures of financial performance under generally accepted accounting principles ("GAAP"). We believe net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, losses on retirement of debt and legal claim costs, and Adjusted EBITDA are important measures that supplement discussions and analysis of our results of operations. We believe it is useful to investors to provide disclosures of our results of operations on the same basis used by management. Management relies upon net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, losses on retirement of debt and legal claim costs, and Adjusted EBITDA as the primary measures to review and assess operating performance of its hospital facilities and their management teams.

     

    Management and investors review both the overall performance (including net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, losses on retirement of debt and legal claim costs, and GAAP net income attributable to HCA Holdings, Inc.) and operating performance (Adjusted EBITDA) of our health care facilities. Adjusted EBITDA and the Adjusted EBITDA margin (Adjusted EBITDA divided by revenues) are utilized by management and investors to compare our current operating results with the corresponding periods during the previous year and to compare our operating results with other companies in the health care industry. It is reasonable to expect that losses (gains) on sales of facilities, losses on retirement of debt and legal claim costs will occur in future periods, but the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our health care facilities and complicate period comparisons of our results of operations and operations comparisons with other health care companies.

     
    Net income attributable to HCA Holdings, Inc., excluding losses on sales of facilities, losses on retirement of debt and legal claim costs, and Adjusted EBITDA are not measures of financial performance under GAAP, and should not be considered as alternatives to net income attributable to HCA Holdings, Inc. as a measure of operating performance or cash flows from operating, investing and financing activities as a measure of liquidity. Because net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, losses on retirement of debt and legal claim costs, and Adjusted EBITDA are not measurements determined in accordance with GAAP and are susceptible to varying calculations, net income attributable to HCA Holdings, Inc., excluding losses (gains) on sales of facilities, losses on retirement of debt and legal claim costs, and Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures presented by other companies.
    HCA Holdings, Inc.
    Condensed Consolidated Balance Sheets
    (Dollars in millions)
       
     
     
    June 30,March 31,December 31,
    2014   2014   2013  
     
    ASSETS
    Current assets:
    Cash and cash equivalents $658$850 $ 414
    Accounts receivable, net 5,4725,489 5,208
    Inventories 1,2111,187 1,179
    Deferred income taxes 500492 489
    Other   931     859     747  
    Total current assets 8,7728,877 8,037
     
    Property and equipment, at cost 31,84131,369 31,073
    Accumulated depreciation   (18,120)   (17,757)   (17,454 )
    13,72113,612 13,619
     
    Investments of insurance subsidiaries 426453 448
    Investments in and advances to affiliates 150142 121
    Goodwill and other intangible assets 5,9095,910 5,903
    Deferred loan costs 230271 237
    Other   614     544     466  
     
    $29,822   $29,809   $ 28,831  
     
     
     
    LIABILITIES AND STOCKHOLDERS' DEFICIT
    Current liabilities:
    Accounts payable $1,717$1,735 $ 1,803
    Accrued salaries 1,1401,052 1,193
    Other accrued expenses 1,9922,063 1,913
    Long-term debt due within one year   1,046     1,041     786  
    Total current liabilities 5,8955,891 5,695
     
    Long-term debt 27,94227,883 27,590
    Professional liability risks 1,019978 949
    Income taxes and other liabilities 1,5541,524 1,525
     
    EQUITY (DEFICIT)
    Stockholders' deficit attributable to HCA Holdings, Inc.(7,990)(7,828) (8,270 )
    Noncontrolling interests   1,402     1,361     1,342  
    Total deficit   (6,588)   (6,467)   (6,928 )
    $29,822   $29,809   $ 28,831  
    HCA Holdings, Inc.
    Condensed Consolidated Statements of Cash Flows
    For the Six Months Ended June 30, 2014 and 2013
    (Dollars in millions)
       
     
     
    2014   2013  
     
    Cash flows from operating activities:
    Net income $1,086 $ 975
    Adjustments to reconcile net income to net cash provided by operating activities:
    Changes in operating assets and liabilities (2,151) (2,335 )
    Provision for doubtful accounts 1,579 1,777
    Depreciation and amortization 901 849
    Income taxes (94) 183
    Losses (gains) sales of facilities (32) 12
    Loss on retirement of debt 226 17
    Legal claim costs 78 -
    Amortization of deferred loan costs 23 28
    Share-based compensation 77 51
    Other   -     (3 )
     
    Net cash provided by operating activities   1,693     1,554  
     
     
    Cash flows from investing activities:
    Purchase of property and equipment (913) (896 )
    Acquisition of hospitals and health care entities (27) (23 )
    Disposition of hospitals and health care entities 32 31
    Change in investments 43 102
    Other   1     (4 )
     
    Net cash used in investing activities   (864)   (790 )
     
     
    Cash flows from financing activities:
    Issuance of long-term debt 3,502 -
    Net change in revolving credit facilities 340 (20 )
    Repayment of long-term debt (3,482) (768 )
    Distributions to noncontrolling interests (197) (196 )
    Payment of debt issuance costs (49) (5 )
    Repurchase of common stock (750) -
    Distributions to stockholders (7) (10 )
    Income tax benefits 75 61
    Other   (17)   (69 )
     
    Net cash used in financing activities   (585)   (1,007 )
     
     
    Change in cash and cash equivalents 244 (243 )
    Cash and cash equivalents at beginning of period   414     705  
     
     
    Cash and cash equivalents at end of period $658   $ 462  
     
     
    Interest payments $899 $ 909
    Income tax payments, net $517 $ 226
    HCA Holdings, Inc.
    Operating Statistics
           
     
    For the Six Months
    Second QuarterEnded June 30,
    2014   2013   2014   2013  
     
    Operations:
    Number of Hospitals 165 161 165 161
    Number of Freestanding Outpatient Surgery Centers 115 114 115 114
    Licensed Beds at End of Period 43,025 41,792 43,025 41,792
    Weighted Average Licensed Beds 43,020 41,842 42,989 41,855
     
    Reported:
    Admissions 442,800 433,000 887,900 877,200

          % Change

    2.3%1.2%
    Equivalent Admissions 734,200 708,700 1,447,200 1,416,700

          % Change

    3.6%2.2%
    Revenue per Equivalent Admission $12,570 $ 11,924 $12,480 $ 11,922

          % Change

    5.4%4.7%
    Inpatient Revenue per Admission $12,529 $ 11,811 $12,308 $ 11,765

          % Change

    6.1%4.6%
     
    Patient Days 2,135,600 2,049,600 4,332,800 4,222,800

          % Change

    4.2%2.6%
    Equivalent Patient Days 3,542,500 3,355,700 7,062,500 6,819,900

          % Change

    5.6%3.6%
     
    Inpatient Surgery Cases 128,700 126,500 255,000 251,200

          % Change

    1.7%1.5%
    Outpatient Surgery Cases 225,000 222,200 435,500 433,300

          % Change

    1.3%0.5%
     
    Emergency Room Visits 1,849,800 1,726,400 3,614,800 3,475,700

          % Change

    7.1%4.0%
     
    Outpatient Revenues as a

        Percentage of Patient Revenues

    38.0% 37.7 % 37.5% 37.1 %
     
    Average Length of Stay 4.8 4.7 4.9 4.8
     
    Occupancy 54.6% 53.8 % 55.7% 55.7 %
    Equivalent Occupancy 90.5% 88.1 % 90.8% 90.0 %
     
    Same Facility:
    Admissions 437,900 432,700 878,300 876,000

          % Change

    1.2%0.3%
    Equivalent Admissions 723,800 708,300 1,427,200 1,413,800

          % Change

    2.2%0.9%
    Revenue per Equivalent Admission $12,556 $ 11,910 $12,465 $ 11,921

          % Change

    5.4%4.6%
    Inpatient Revenue per Admission $12,608 $ 11,807 $12,381 $ 11,769

          % Change

    6.8%5.2%
     
    Inpatient Surgery Cases 127,900 126,600 253,100 251,000

          % Change

    1.0%0.9%
    Outpatient Surgery Cases 221,000 221,700 427,900 432,400

          % Change

    -0.3%-1.0%
     
    Emergency Room Visits 1,820,400 1,722,900 3,559,300 3,464,300

          % Change

    5.7%2.7%





    HCA Holdings, Inc.

    INVESTOR CONTACT:

    Mark Kimbrough, 615-344-2688

    or

    MEDIA CONTACT:

    Ed Fishbough, 615-344-2810


    Source: HCA Holdings, Inc.


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