e424b3
Filed Pursuant to Rule 424(b)(3)
Registration Nos. 333-159511 and 333-159511-01 to
333-159511-185
(excluding Registration Nos. 333-159511-07,
333-159511-134 and 333-159511-143)
HCA INC.
SUPPLEMENT
NO. 17 TO
MARKET MAKING PROSPECTUS DATED
JULY 10, 2009
THE
DATE OF THIS SUPPLEMENT IS NOVEMBER 11, 2010
This
Prospectus Supplement is being filed to provide additional information contained in filings by HCA Inc. (the
Company) with the Securities and Exchange Commission. This Prospectus Supplement should be read
together with the Prospectus.
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
September 30,
2010
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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.
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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 as of the latest
practicable date.
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Class of Common Stock
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Outstanding at October 31, 2010
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Voting common stock, $.01 par value
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94,644,700 shares
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1
HCA
INC.
Form 10-Q
September 30, 2010
2
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Quarter
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Nine Months
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2010
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2009
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2010
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2009
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Revenues
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$
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7,647
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$
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7,533
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$
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22,947
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$
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22,447
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Salaries and benefits
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3,134
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3,013
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9,282
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8,880
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Supplies
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1,234
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1,206
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3,685
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3,627
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Other operating expenses
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1,268
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1,184
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3,696
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3,410
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Provision for doubtful accounts
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721
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910
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2,073
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2,583
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Equity in earnings of affiliates
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(67
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)
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(53
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(210
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(182
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Depreciation and amortization
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352
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354
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1,062
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1,067
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Interest expense
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525
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510
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1,571
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1,487
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Losses on sales of facilities
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2
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2
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8
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Impairments of long-lived assets
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10
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3
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119
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16
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7,179
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7,127
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21,280
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20,896
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Income before income taxes
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468
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406
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1,667
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1,551
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Provision for income taxes
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143
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132
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488
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480
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Net income
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325
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274
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1,179
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1,071
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Net income attributable to noncontrolling interests
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82
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78
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255
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233
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Net income attributable to HCA Inc.
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$
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243
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$
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196
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$
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924
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$
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838
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Per share data:
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Basic earnings per share
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$
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2.57
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$
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2.07
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$
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9.80
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$
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8.88
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Diluted earnings per share
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$
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2.49
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$
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2.04
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$
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9.55
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$
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8.75
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Shares used in earnings per share calculations (in thousands):
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Basic
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94,642
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94,453
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94,293
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94,409
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Diluted
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97,454
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95,843
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96,718
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95,761
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See accompanying notes.
3
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September 30,
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December 31,
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2010
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2009
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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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377
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$
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312
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Accounts receivable, less allowance for doubtful accounts of
$4,297 and $4,860
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3,636
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3,692
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Inventories
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815
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802
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Deferred income taxes
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1,045
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1,192
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Other
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678
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579
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6,551
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6,577
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Property and equipment, at cost
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25,226
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24,669
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Accumulated depreciation
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(14,090
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(13,242
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11,136
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11,427
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Investments of insurance subsidiary
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665
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1,166
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Investments in and advances to affiliates
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857
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853
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Goodwill
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2,610
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2,577
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Deferred loan costs
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371
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418
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Other
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1,063
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1,113
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$
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23,253
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$
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24,131
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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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1,254
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$
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1,460
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Accrued salaries
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1,007
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849
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Other accrued expenses
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1,373
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1,158
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Long-term debt due within one year
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696
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846
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4,330
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4,313
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Long-term debt
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25,383
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24,824
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Professional liability risks
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1,027
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1,057
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Income taxes and other liabilities
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1,611
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1,768
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Equity securities with contingent redemption rights
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144
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147
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Stockholders deficit:
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Common stock $0.01 par; authorized 125,000,000 shares;
outstanding 94,644,100 shares in 2010 and
94,637,400 shares in 2009
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1
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1
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Capital in excess of par value
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324
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226
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Accumulated other comprehensive loss
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(494
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)
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(450
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)
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Retained deficit
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(10,090
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)
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(8,763
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)
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Stockholders deficit attributable to HCA Inc.
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(10,259
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)
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(8,986
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)
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Noncontrolling interests
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1,017
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1,008
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|
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(9,242
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)
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(7,978
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)
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|
|
|
|
|
|
|
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|
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$
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23,253
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$
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24,131
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See accompanying notes.
4
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2010
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2009
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Cash flows from operating activities:
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Net income
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$
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1,179
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$
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1,071
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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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(1,927
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)
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(2,136
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)
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Provision for doubtful accounts
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2,073
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|
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2,583
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Depreciation and amortization
|
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1,062
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|
|
|
1,067
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Income taxes
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(10
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)
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(485
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)
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Losses on sales of facilities
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2
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|
|
|
8
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Impairments of long-lived assets
|
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|
119
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|
|
|
16
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Amortization of deferred loan costs
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60
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|
|
|
60
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|
Share-based compensation
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|
24
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|
|
|
21
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Pay-in-kind
interest
|
|
|
|
|
|
|
58
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|
Other
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|
29
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|
|
|
52
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|
|
|
|
|
|
|
|
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Net cash provided by operating activities
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|
2,611
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|
|
|
2,315
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Cash flows from investing activities:
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|
|
|
|
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Purchase of property and equipment
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(860
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)
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|
(915
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)
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Acquisition of hospitals and health care entities
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|
(35
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)
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|
(42
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)
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Disposition of hospitals and health care entities
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|
26
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|
|
|
39
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|
Change in investments
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|
|
473
|
|
|
|
113
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|
Other
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|
|
(2
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)
|
|
|
(2
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)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
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|
(398
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)
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|
|
(807
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)
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|
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|
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Cash flows from financing activities:
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|
|
|
|
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Issuance of long-term debt
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|
1,387
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|
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|
2,979
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|
Net change in revolving credit facilities
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|
1,035
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|
|
|
(1,125
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)
|
Repayment of long-term debt
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|
(2,020
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)
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|
|
(3,050
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)
|
Distributions to noncontrolling interests
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|
|
(282
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)
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|
|
(254
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)
|
Payment of debt issuance costs
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|
|
(25
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)
|
|
|
(68
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)
|
Payment of cash distributions to stockholders
|
|
|
(2,251
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)
|
|
|
|
|
Other
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|
|
8
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|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
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|
|
(2,148
|
)
|
|
|
(1,530
|
)
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
65
|
|
|
|
(22
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
312
|
|
|
|
465
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
377
|
|
|
$
|
443
|
|
|
|
|
|
|
|
|
|
|
Interest payments
|
|
$
|
1,399
|
|
|
$
|
1,154
|
|
Income tax payments, net
|
|
$
|
498
|
|
|
$
|
965
|
|
See accompanying notes.
5
HCA
INC.
Unaudited
|
|
NOTE 1
|
INTERIM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
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, or funds sponsored by, Bain Capital Partners,
LLC, Kohlberg Kravis Roberts & Co., Merrill Lynch
Global Private Equity (now BAML Capital Partners) (each a
Sponsor), affiliates of Citigroup Inc. and Bank of
America Corporation (the Sponsor Assignees) and
affiliates of HCA founder, Dr. Thomas F. Frist, Jr.,
(the Frist Entities, and together with the Sponsors
and the Sponsor Assignees, the Investors) and by
members of management and certain other investors. 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. 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.
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 September 30, 2010, these
affiliates owned and operated 154 hospitals, 96 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.
Basis of
Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to
Form 10-Q
and Article 10 of
Regulation S-X.
Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles
for complete consolidated financial statements. In the opinion
of management, all adjustments considered necessary for a fair
presentation have been included and are of a normal and
recurring nature.
The majority of our expenses are cost of revenue
items. Costs that could be classified as general and
administrative would include our corporate office costs, which
were $45 million and $39 million for the quarters
ended September 30, 2010 and 2009, respectively, and
$127 million and $116 million for the nine months
ended September 30, 2010 and 2009, respectively. Operating
results for the quarter and nine months ended September 30,
2010 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2010. 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, 2009.
During 2010, we finalized a settlement with the Appeals Division
of the Internal Revenue Service (IRS) resolving the
deductibility of our 2003 government settlement payment and the
timing of certain patient service revenues for 2003 and 2004.
6
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 2
|
INCOME
TAXES (continued)
|
At September 30, 2010, we were contesting, before the IRS
Appeals Division, certain claimed deficiencies and adjustments
proposed by the IRS Examination Division in connection with its
audit of our 2005 and 2006 federal income tax returns, including
the timing of recognition of certain patient service revenues,
the deductibility of certain debt retirement costs and our
method for calculating the tax allowance for doubtful accounts.
Eight taxable periods of HCA and its predecessors ended in 1997
through 2004, for which the primary remaining issue is the
computation of the tax allowance for doubtful accounts, were
pending before the IRS Examination Division as of
September 30, 2010. We expect the IRS Examination Division
will begin an audit of our 2007, 2008 and 2009 federal income
tax returns and one or more HCA affiliated partnerships during
2010.
Our liability for unrecognized tax benefits was
$387 million, including accrued interest of
$104 million as of September 30, 2010
($628 million and $156 million, respectively, as of
December 31, 2009). The reduction in our liability for
unrecognized tax benefits was principally based on the
resolution with taxing authorities of tax positions taken in
prior years. Unrecognized tax benefits of $173 million
($236 million as of December 31, 2009) would
affect the effective rate, if recognized. The liability for
unrecognized tax benefits does not reflect deferred tax assets
of $57 million ($77 million as of December 31,
2009) related to deductible interest and state income
taxes. The provision for income taxes reflects $5 million
($3 million, net of tax) in reductions in interest expense
and interest expense of $3 million ($2 million, net of
tax) related to taxing authority examinations for the quarters
ended September 30, 2010 and 2009, respectively, and
$79 million and $31 million ($50 million and
$20 million, respectively, net of tax) reductions in
interest expense related to taxing authority examinations for
the nine months ended September 30, 2010 and 2009,
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.
|
|
NOTE 3
|
EARNINGS
PER SHARE
|
We compute basic earnings per share using the weighted average
number of common shares outstanding. We compute diluted earnings
per share using the weighted average number of common shares
outstanding, plus the dilutive effect of outstanding stock
options, computed using the treasury stock method.
The following table sets forth the computation of basic and
diluted earnings per share for the quarters and nine months
ended September 30, 2010 and 2009 (dollars in millions,
except per share amounts, and shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Nine Months
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Net income attributable to HCA Inc.
|
|
$
|
243
|
|
|
$
|
196
|
|
|
$
|
924
|
|
|
$
|
838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
94,642
|
|
|
|
94,453
|
|
|
|
94,293
|
|
|
|
94,409
|
|
Effect of dilutive stock options
|
|
|
2,812
|
|
|
|
1,390
|
|
|
|
2,425
|
|
|
|
1,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used for diluted earnings per share
|
|
|
97,454
|
|
|
|
95,843
|
|
|
|
96,718
|
|
|
|
95,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
2.57
|
|
|
$
|
2.07
|
|
|
$
|
9.80
|
|
|
$
|
8.88
|
|
Diluted earnings per share
|
|
$
|
2.49
|
|
|
$
|
2.04
|
|
|
$
|
9.55
|
|
|
$
|
8.75
|
|
7
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 4
|
INVESTMENTS
OF INSURANCE SUBSIDIARY
|
A summary of our insurance subsidiarys investments at
September 30, 2010 and December 31, 2009 follows
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
Amortized
|
|
|
Amounts
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
311
|
|
|
$
|
17
|
|
|
$
|
|
|
|
$
|
328
|
|
Auction rate securities
|
|
|
261
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
260
|
|
Asset-backed securities
|
|
|
27
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
27
|
|
Money market funds
|
|
|
175
|
|
|
|
|
|
|
|
|
|
|
|
175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
774
|
|
|
|
18
|
|
|
|
(2
|
)
|
|
|
790
|
|
Equity securities
|
|
|
8
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
782
|
|
|
$
|
19
|
|
|
$
|
(3
|
)
|
|
|
798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts classified as current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(133
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment carrying value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
Amortized
|
|
|
Amounts
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
668
|
|
|
$
|
30
|
|
|
$
|
(3
|
)
|
|
$
|
695
|
|
Auction rate securities
|
|
|
401
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
396
|
|
Asset-backed securities
|
|
|
43
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
42
|
|
Money market funds
|
|
|
176
|
|
|
|
|
|
|
|
|
|
|
|
176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,288
|
|
|
|
30
|
|
|
|
(9
|
)
|
|
|
1,309
|
|
Equity securities
|
|
|
8
|
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,296
|
|
|
$
|
31
|
|
|
$
|
(11
|
)
|
|
|
1,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts classified as current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment carrying value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2010 and December 31, 2009, the
investments of our insurance subsidiary were classified as
available-for-sale.
During 2010, investments in debt securities were reduced as a
result of the insurance subsidiary distributing
$500 million of excess capital to the Company. Changes in
temporary unrealized gains and losses are recorded as
adjustments to other comprehensive income. At September 30,
2010 and December 31, 2009, $93 million and
$100 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 4
|
INVESTMENTS
OF INSURANCE SUBSIDIARY (continued)
|
Scheduled maturities of investments in debt securities at
September 30, 2010 were as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
Due in one year or less
|
|
$
|
191
|
|
|
$
|
191
|
|
Due after one year through five years
|
|
|
153
|
|
|
|
161
|
|
Due after five years through ten years
|
|
|
126
|
|
|
|
134
|
|
Due after ten years
|
|
|
16
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
486
|
|
|
|
503
|
|
Auction rate securities
|
|
|
261
|
|
|
|
260
|
|
Asset-backed securities
|
|
|
27
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
774
|
|
|
$
|
790
|
|
|
|
|
|
|
|
|
|
|
The average expected maturity of the investments in debt
securities at September 30, 2010 was 2.9 years,
compared to the average scheduled maturity of 11.2 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 maturities for our auction
rate and asset-backed securities were derived from valuation
models of expected cash flows and involved managements
judgment. At September 30, 2010, the average expected
maturities for our auction rate and asset-backed securities were
4.2 years and 5.8 years, respectively, compared to
average scheduled maturities of 24.4 years and
25.8 years, respectively.
A summary of long-term debt at September 30, 2010 and
December 31, 2009, including related interest rates at
September 30, 2010, follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Senior secured asset-based revolving credit facility (effective
interest rate of 1.8%)
|
|
$
|
1,750
|
|
|
$
|
715
|
|
Senior secured term loan facilities (effective interest rate of
6.9%)
|
|
|
7,566
|
|
|
|
8,987
|
|
Senior secured first lien notes (effective interest rate of 8.4%)
|
|
|
4,073
|
|
|
|
2,682
|
|
Other senior secured debt (effective interest rate of 7.0%)
|
|
|
331
|
|
|
|
362
|
|
|
|
|
|
|
|
|
|
|
First lien debt
|
|
|
13,720
|
|
|
|
12,746
|
|
|
|
|
|
|
|
|
|
|
Senior secured cash-pay notes (effective interest rate of 9.7%)
|
|
|
4,501
|
|
|
|
4,500
|
|
Senior secured toggle notes (effective interest rate of 10.0%)
|
|
|
1,578
|
|
|
|
1,578
|
|
|
|
|
|
|
|
|
|
|
Second lien debt
|
|
|
6,079
|
|
|
|
6,078
|
|
|
|
|
|
|
|
|
|
|
Senior unsecured notes (effective interest rate of 7.0%)
|
|
|
6,280
|
|
|
|
6,846
|
|
|
|
|
|
|
|
|
|
|
Total debt (average life of six years, rates averaging 7.5%)
|
|
|
26,079
|
|
|
|
25,670
|
|
Less amounts due within one year
|
|
|
696
|
|
|
|
846
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,383
|
|
|
$
|
24,824
|
|
|
|
|
|
|
|
|
|
|
During March 2010, we issued $1.400 billion aggregate
principal amount of
71/4% senior
secured first lien notes due 2020 at a price of 99.095% of their
face value, resulting in $1.387 billion of gross proceeds.
After the
9
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 5
|
LONG-TERM
DEBT (continued)
|
payment of related fees and expenses, we used the proceeds to
repay outstanding indebtedness under our senior secured term
loan facilities.
|
|
NOTE 6
|
FINANCIAL
INSTRUMENTS
|
Interest
Rate Swap Agreements
We have entered into interest rate swap agreements to manage our
exposure to fluctuations in interest rates. These swap
agreements involve the exchange of fixed and variable rate
interest payments between two parties based on common notional
principal amounts and maturity dates. Pay-fixed interest rate
swaps effectively convert LIBOR indexed variable rate
obligations to fixed interest rate obligations. Pay-variable
interest rate swaps effectively convert fixed interest rate
obligations to LIBOR indexed variable rate obligations. The
interest payments under these agreements are settled on a net
basis. The net interest payments, based on the notional amounts
in these agreements, generally match the timing of the related
liabilities, for the interest rate swap agreements which have
been designated as cash flow hedges. The notional amounts of the
swap agreements represent amounts used to calculate the exchange
of cash flows and are not our assets or liabilities. Our credit
risk related to these agreements is considered low because the
swap agreements are with creditworthy financial institutions.
The following table sets forth our interest rate swap
agreements, which have been designated as cash flow hedges, at
September 30, 2010 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Maturity Date
|
|
|
Value
|
|
|
Pay-fixed interest rate swaps
|
|
$
|
7,100
|
|
|
|
November 2011
|
|
|
$
|
(353
|
)
|
Pay-fixed interest rate swaps (starting November 2011)
|
|
|
3,000
|
|
|
|
December 2016
|
|
|
|
(199
|
)
|
Certain of our interest rate swaps are not designated as hedges,
and changes in fair value are recognized in results of
operations. The following table sets forth our interest rate
swap agreements, which were not designated as hedges, at
September 30, 2010 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Maturity Date
|
|
|
Value
|
|
|
Pay-fixed interest rate swap
|
|
$
|
500
|
|
|
|
March 2011
|
|
|
$
|
(6
|
)
|
Pay-variable interest rate swap
|
|
|
500
|
|
|
|
March 2011
|
|
|
|
|
|
Pay-fixed interest rate swap
|
|
|
900
|
|
|
|
November 2011
|
|
|
|
(44
|
)
|
Pay-variable interest rate swap
|
|
|
900
|
|
|
|
November 2011
|
|
|
|
4
|
|
During the next 12 months, we estimate $368 million
will be reclassified from other comprehensive income
(OCI) to interest expense.
Cross
Currency Swaps
The Company and certain subsidiaries have incurred obligations
and entered into various intercompany transactions where such
obligations are denominated in currencies, other than the
functional currencies of the parties executing the trade. In
order to mitigate the currency exposure risks and better match
the cash flows of our obligations and intercompany transactions
with cash flows from operations, we entered into various cross
currency swaps. Our credit risk related to these agreements is
considered low because the swap agreements are with creditworthy
financial institutions.
10
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 6
|
FINANCIAL
INSTRUMENTS (continued)
|
Cross
Currency Swaps (continued)
Certain of our cross currency swaps are not designated as
hedges, and changes in fair value are recognized in results of
operations. The following table sets forth our cross currency
swap agreement which was not designated as a hedge at
September 30, 2010 (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
Fair
|
|
|
Amount
|
|
Maturity Date
|
|
Value
|
|
Euro United States Dollar currency swap
|
|
|
351 Euro
|
|
|
|
December 2011
|
|
|
$
|
49
|
|
The following table sets forth our cross currency swap
agreements, which have been designated as cash flow hedges, at
September 30, 2010 (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
Fair
|
|
|
Amount
|
|
Maturity Date
|
|
Value
|
|
GBP United States Dollar currency swaps
|
|
|
100 GBP
|
|
|
|
November 2010
|
|
|
$
|
(19
|
)
|
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
nine months ended September 30, 2010 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Loss
|
|
|
Amount of Loss
|
|
|
|
Amount of Loss
|
|
|
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
|
|
$
|
219
|
|
|
|
Interest expense
|
|
|
$
|
278
|
|
Cross currency swaps
|
|
|
4
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
223
|
|
|
|
|
|
|
$
|
278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Loss
|
|
Amount of Loss
|
|
|
Recognized in
|
|
Recognized in
|
|
|
Operations on
|
|
Operations on
|
Derivatives Not Designated as Hedging Instruments
|
|
Derivatives
|
|
Derivatives
|
|
Interest rate swaps
|
|
|
Other operating expenses
|
|
|
$
|
2
|
|
Cross currency swap
|
|
|
Other operating expenses
|
|
|
|
30
|
|
Credit-risk-related
Contingent Features
We have agreements with each of our derivative counterparties
that contain a provision where we could be declared in default
on our derivative obligations if repayment of the underlying
indebtedness is accelerated by the lender due to our default on
the indebtedness. As of September 30, 2010, we have not
been required to post any collateral related to these
agreements. If we had breached these provisions at
September 30, 2010, we would have been required to settle
our obligations under the agreements at their aggregate,
estimated termination value of $604 million.
|
|
NOTE 7
|
ASSETS
AND LIABILITIES MEASURED AT FAIR VALUE
|
Accounting Standards Codification (ASC) 820, Fair
Value Measurements and Disclosures (ASC 820)
defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements.
ASC 820 applies to reported balances that are required or
permitted to be measured at fair value under existing accounting
pronouncements.
11
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 7
|
ASSETS
AND LIABILITIES MEASURED AT FAIR
VALUE (continued)
|
ASC 820 emphasizes fair value is a market-based measurement, not
an entity-specific measurement. Therefore, a fair value
measurement should be determined based on the assumptions market
participants would use in pricing the asset or liability. As a
basis for considering market participant assumptions in fair
value measurements, ASC 820 establishes a fair value
hierarchy that distinguishes between market participant
assumptions based on market data obtained from sources
independent of the reporting entity (observable inputs
classified within Levels 1 and 2 of the hierarchy) and the
reporting 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 observable for the asset or liability (other than quoted
prices), such as interest rates, foreign exchange rates, and
yield curves observable at commonly quoted intervals.
Level 3 inputs are unobservable inputs for the asset or
liability, which are typically based on an 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 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
tax-exempt ARS, which are backed by student loans substantially
guaranteed by the federal government, of $260 million
($261 million par value) at September 30, 2010. 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 2009 and the first nine months of
2010, certain issuers and their broker/dealers redeemed or
repurchased $172 million and $140 million,
respectively, of our ARS 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 and similar effective
maturities.
Derivative
Financial Instruments
We have entered into interest rate and cross currency swap
agreements to manage our exposure to fluctuations in interest
rates and foreign currency risks. The valuation of these
instruments is determined using widely accepted valuation
techniques, including discounted cash flow analysis on the
expected cash flows of each derivative. This analysis reflects
the contractual terms of the derivatives, including the period
to maturity, and uses observable market-based inputs, including
interest rate curves, foreign exchange rates and implied
volatilities. To comply with the provisions of ASC 820, we
incorporate credit valuation adjustments to reflect both our own
nonperformance risk and the respective counterpartys
nonperformance risk in the fair value measurements.
12
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 7
|
ASSETS
AND LIABILITIES MEASURED AT FAIR
VALUE (continued)
|
Derivative
Financial Instruments (continued)
Although we have determined the majority of the inputs used to
value our derivatives fall within Level 2 of the fair value
hierarchy, the credit valuation adjustments associated with our
derivatives utilize Level 3 inputs, such as estimates of
current credit spreads to evaluate the likelihood of default by
us and our counterparties. However, 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 were not
significant to the overall valuation of our derivatives at
September 30, 2010 and December 31, 2009. As a result,
we have determined that our derivative valuations in their
entirety are classified in Level 2 of the fair value
hierarchy at September 30, 2010 and December 31, 2009.
Fair
Value Summary
The following table summarizes our assets and liabilities
measured at fair value on a recurring basis as of
September 30, 2010 and December 31, 2009, aggregated
by the level in the fair value hierarchy within which those
measurements fall (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
328
|
|
|
$
|
|
|
|
$
|
328
|
|
|
$
|
|
|
Auction rate securities
|
|
|
260
|
|
|
|
|
|
|
|
|
|
|
|
260
|
|
Asset-backed securities
|
|
|
27
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
Money market funds
|
|
|
175
|
|
|
|
175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
790
|
|
|
|
175
|
|
|
|
355
|
|
|
|
260
|
|
Equity securities
|
|
|
8
|
|
|
|
2
|
|
|
|
5
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments of insurance subsidiary
|
|
|
798
|
|
|
|
177
|
|
|
|
360
|
|
|
|
261
|
|
Less amounts classified as current assets
|
|
|
(133
|
)
|
|
|
(133
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
665
|
|
|
$
|
44
|
|
|
$
|
360
|
|
|
$
|
261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swap (Other assets)
|
|
$
|
49
|
|
|
$
|
|
|
|
$
|
49
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps (Income taxes and other liabilities)
|
|
$
|
598
|
|
|
$
|
|
|
|
$
|
598
|
|
|
$
|
|
|
Cross currency swaps (Income taxes and other liabilities)
|
|
|
19
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
13
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 7
|
ASSETS
AND LIABILITIES MEASURED AT FAIR
VALUE (continued)
|
Fair
Value Summary (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and municipalities
|
|
$
|
695
|
|
|
$
|
|
|
|
$
|
695
|
|
|
$
|
|
|
Auction rate securities
|
|
|
396
|
|
|
|
|
|
|
|
|
|
|
|
396
|
|
Asset-backed securities
|
|
|
42
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
Money market funds
|
|
|
176
|
|
|
|
176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,309
|
|
|
|
176
|
|
|
|
737
|
|
|
|
396
|
|
Equity securities
|
|
|
7
|
|
|
|
2
|
|
|
|
4
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments of insurance subsidiary
|
|
|
1,316
|
|
|
|
178
|
|
|
|
741
|
|
|
|
397
|
|
Less amounts classified as current assets
|
|
|
(150
|
)
|
|
|
(150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,166
|
|
|
$
|
28
|
|
|
$
|
741
|
|
|
$
|
397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swap (Other assets)
|
|
$
|
79
|
|
|
$
|
|
|
|
$
|
79
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps (Income taxes and other liabilities)
|
|
$
|
528
|
|
|
$
|
|
|
|
$
|
528
|
|
|
$
|
|
|
Cross currency swaps (Income taxes and other liabilities)
|
|
|
13
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
The following table summarizes the activity related to the
auction rate and equity securities investments of our insurance
subsidiary, which have fair value measurements based on
significant unobservable inputs (Level 3), during the nine
months ended September 30, 2010 (dollars in millions):
|
|
|
|
|
Asset balances at December 31, 2009
|
|
$
|
397
|
|
Unrealized gains included in other comprehensive income
|
|
|
4
|
|
Settlements
|
|
|
(140
|
)
|
|
|
|
|
|
Asset balances at September 30, 2010
|
|
$
|
261
|
|
|
|
|
|
|
The estimated fair value of our long-term debt was
$26.658 billion and $25.659 billion at
September 30, 2010 and December 31, 2009,
respectively, compared to carrying amounts aggregating
$26.079 billion and $25.670 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 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.
14
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 8
|
CONTINGENCIES (continued)
|
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.
The Civil Division of the Department of Justice
(DOJ) has contacted the Company in connection with
its nationwide review of whether, in certain cases, hospital
charges to the federal government relating to implantable
cardio-defibrillators (ICDs) met the Centers for
Medicare & Medicaid Services criteria. In connection
with this nationwide review, the DOJ has indicated that it will
be reviewing certain ICD billing and medical records at 87 HCA
hospitals; the review covers the period from October 2003 to the
present. The review could potentially give rise to claims
against the Company under the False Claims Act or other
statutes, regulations or laws. At this time, we cannot predict
what effect, if any, this review or any resulting claims could
have on the Company.
|
|
NOTE 9
|
COMPREHENSIVE
INCOME AND CAPITAL STRUCTURE
|
The components of comprehensive income, net of related taxes,
for the quarters and nine months ended September 30, 2010
and 2009 are only attributable to HCA Inc. and are as follows
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Nine Months
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Net income attributable to HCA Inc.
|
|
$
|
243
|
|
|
$
|
196
|
|
|
$
|
924
|
|
|
$
|
838
|
|
Change in fair value of derivative instruments
|
|
|
(15
|
)
|
|
|
(31
|
)
|
|
|
(41
|
)
|
|
|
23
|
|
Change in fair value of
available-for-sale
securities
|
|
|
3
|
|
|
|
32
|
|
|
|
(4
|
)
|
|
|
47
|
|
Foreign currency translation adjustments
|
|
|
20
|
|
|
|
(10
|
)
|
|
|
(7
|
)
|
|
|
22
|
|
Defined benefit plans
|
|
|
3
|
|
|
|
2
|
|
|
|
8
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
254
|
|
|
$
|
189
|
|
|
$
|
880
|
|
|
$
|
937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of accumulated other comprehensive loss, net of
related taxes, are as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Change in fair value of derivative instruments
|
|
$
|
(396
|
)
|
|
$
|
(355
|
)
|
Change in fair value of
available-for-sale
securities
|
|
|
10
|
|
|
|
14
|
|
Foreign currency translation adjustments
|
|
|
(10
|
)
|
|
|
(3
|
)
|
Defined benefit plans
|
|
|
(98
|
)
|
|
|
(106
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
$
|
(494
|
)
|
|
$
|
(450
|
)
|
|
|
|
|
|
|
|
|
|
15
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 9
|
COMPREHENSIVE
INCOME AND CAPITAL STRUCTURE (continued)
|
The changes in stockholders deficit, including changes in
stockholders deficit attributable to HCA Inc. and changes
in equity attributable to noncontrolling interests are as
follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity (Deficit) 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, 2009
|
|
|
94,637
|
|
|
$
|
1
|
|
|
$
|
226
|
|
|
$
|
(450
|
)
|
|
$
|
(8,763
|
)
|
|
$
|
1,008
|
|
|
$
|
(7,978
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
924
|
|
|
|
255
|
|
|
|
1,179
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
(44
|
)
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,251
|
)
|
|
|
(282
|
)
|
|
|
(2,533
|
)
|
Share-based benefit plans
|
|
|
7
|
|
|
|
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, September 30, 2010
|
|
|
94,644
|
|
|
$
|
1
|
|
|
$
|
324
|
|
|
$
|
(494
|
)
|
|
$
|
(10,090
|
)
|
|
$
|
1,017
|
|
|
$
|
(9,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On January 27, 2010, our Board of Directors declared a
distribution to the Companys stockholders and holders of
vested stock options. The distribution was $17.50 per share and
vested stock option, or $1.751 billion in the aggregate.
The distribution was paid on February 5, 2010 to holders of
record on February 1, 2010. The distribution was funded
using funds available under our existing senior secured credit
facilities and approximately $100 million of cash on hand.
Pursuant to the terms of our stock option plans, the holders of
nonvested stock options received a $17.50 per share reduction to
the exercise price of their share-based awards.
On May 5, 2010, our Board of Directors declared a
distribution to the Companys stockholders and holders of
vested stock options. The distribution was $5.00 per share and
vested stock option, or $500 million in the aggregate. The
distribution was paid on May 14, 2010 to holders of record
on May 6, 2010. The distribution was funded using funds
available under our existing senior secured credit facilities.
Pursuant to the terms of our stock option plans, the holders of
nonvested stock options received a $5.00 per share reduction to
the exercise price of their share-based awards.
On May 5, 2010, our Board of Directors granted approval for
the Company to file with the Securities and Exchange Commission
a registration statement on
Form S-1
relating to a proposed initial public offering of its common
stock. We filed the
Form S-1
on May 7, 2010. We intend to use the anticipated net
proceeds to repay certain of our existing indebtedness, as will
be determined prior to our offering, and for general corporate
purposes. Upon completion of the offering and in connection with
our termination of the management agreement we have with
affiliates of the Investors, we will be required to pay a
termination fee based upon the net present value of our future
obligations under the management agreement.
|
|
NOTE 10
|
SEGMENT
AND GEOGRAPHIC INFORMATION
|
We operate in one line of business, which is operating hospitals
and related health care entities. During the quarters ended
September 30, 2010 and 2009, approximately 23% and 22%,
respectively, of our patient revenues related to patients
participating in the
fee-for-service
Medicare program. During the nine months ended
September 30, 2010 and 2009, approximately 24% and 23%,
respectively, 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 46 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.
16
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 10
|
SEGMENT
AND GEOGRAPHIC INFORMATION (continued)
|
Adjusted segment EBITDA is defined as income before depreciation
and amortization, interest expense, losses on sales of
facilities, impairments of long-lived assets, income taxes and
net income attributable to noncontrolling interests. We use
adjusted segment EBITDA as an analytical indicator for purposes
of allocating resources to geographic areas and assessing their
performance. Adjusted segment EBITDA is commonly used as an
analytical indicator within the health care industry, and also
serves as a measure of leverage capacity and debt service
ability. Adjusted segment EBITDA should not be considered as a
measure of financial performance under generally accepted
accounting principles, and the items excluded from adjusted
segment EBITDA are significant components in understanding and
assessing financial performance. Because adjusted segment EBITDA
is not a measurement determined in accordance with generally
accepted accounting principles and is thus susceptible to
varying calculations, adjusted segment EBITDA, as presented, may
not be comparable to other similarly titled measures of other
companies. The geographic distributions of our revenues, equity
in earnings of affiliates, adjusted segment
17
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 10
|
SEGMENT
AND GEOGRAPHIC INFORMATION (continued)
|
EBITDA and depreciation and amortization for the quarters and
nine months ended September 30, 2010 and 2009 are
summarized in the following table (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Nine Months
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Group
|
|
$
|
1,806
|
|
|
$
|
1,823
|
|
|
$
|
5,406
|
|
|
$
|
5,431
|
|
Eastern Group
|
|
|
2,251
|
|
|
|
2,191
|
|
|
|
6,757
|
|
|
|
6,647
|
|
Western Group
|
|
|
3,345
|
|
|
|
3,291
|
|
|
|
10,055
|
|
|
|
9,720
|
|
Corporate and other
|
|
|
245
|
|
|
|
228
|
|
|
|
729
|
|
|
|
649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,647
|
|
|
$
|
7,533
|
|
|
$
|
22,947
|
|
|
$
|
22,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of affiliates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Group
|
|
$
|
(1
|
)
|
|
$
|
|
|
|
$
|
(2
|
)
|
|
$
|
(2
|
)
|
Eastern Group
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Western Group
|
|
|
(67
|
)
|
|
|
(53
|
)
|
|
|
(207
|
)
|
|
|
(179
|
)
|
Corporate and other
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(67
|
)
|
|
$
|
(53
|
)
|
|
$
|
(210
|
)
|
|
$
|
(182
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted segment EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Group
|
|
$
|
289
|
|
|
$
|
328
|
|
|
$
|
955
|
|
|
$
|
1,023
|
|
Eastern Group
|
|
|
360
|
|
|
|
312
|
|
|
|
1,192
|
|
|
|
1,085
|
|
Western Group
|
|
|
737
|
|
|
|
666
|
|
|
|
2,306
|
|
|
|
2,111
|
|
Corporate and other
|
|
|
(29
|
)
|
|
|
(33
|
)
|
|
|
(32
|
)
|
|
|
(90
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,357
|
|
|
$
|
1,273
|
|
|
$
|
4,421
|
|
|
$
|
4,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Group
|
|
$
|
89
|
|
|
$
|
88
|
|
|
$
|
266
|
|
|
$
|
264
|
|
Eastern Group
|
|
|
87
|
|
|
|
91
|
|
|
|
267
|
|
|
|
274
|
|
Western Group
|
|
|
146
|
|
|
|
144
|
|
|
|
433
|
|
|
|
434
|
|
Corporate and other
|
|
|
30
|
|
|
|
31
|
|
|
|
96
|
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
352
|
|
|
$
|
354
|
|
|
$
|
1,062
|
|
|
$
|
1,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted segment EBITDA
|
|
$
|
1,357
|
|
|
$
|
1,273
|
|
|
$
|
4,421
|
|
|
$
|
4,129
|
|
Depreciation and amortization
|
|
|
352
|
|
|
|
354
|
|
|
|
1,062
|
|
|
|
1,067
|
|
Interest expense
|
|
|
525
|
|
|
|
510
|
|
|
|
1,571
|
|
|
|
1,487
|
|
Losses on sales of facilities
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
8
|
|
Impairments of long-lived assets
|
|
|
10
|
|
|
|
3
|
|
|
|
119
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
468
|
|
|
$
|
406
|
|
|
$
|
1,667
|
|
|
$
|
1,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 11
|
ACQUISITIONS,
DISPOSITIONS AND IMPAIRMENTS OF LONG-LIVED ASSETS
|
During the nine months ended September 30, 2010 and 2009,
we paid $35 million and $42 million, respectively, to
acquire nonhospital health care entities.
During the nine months ended September 30, 2010, we
received proceeds of $26 million and recognized a net
pretax loss of $2 million related to the sales of real
estate investments. During the nine months ended
September 30, 2009, we received proceeds of
$39 million and recognized a net pretax loss of
$8 million related to sales of hospital facilities and
other investments.
During the quarter ended September 30, 2010, we recorded
impairments of long-lived assets of $10 million, primarily
related to a hospital facility in our Western Group, to adjust
the carrying values to estimated fair value. During the nine
months ended September 30, 2010, we recorded impairments of
long-lived assets of $119 million, primarily comprised of
the third quarter 2010 charges of $10 million and the
impairment charges of $56 million related to revised,
reduced projections of future expected cash flows for a hospital
facility in our Central Group and $35 million for
capitalized engineering and design costs in our Corporate and
Other Group related to certain building safety requirements
(California earthquake standards) that have been revised, to
adjust the carrying values to estimated fair value. During the
quarter and nine months ended September 30, 2009, we
recorded charges of $3 million and $16 million,
respectively, to adjust the carrying values of certain real
estate investments in our Central Group to estimated fair value.
19
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 12
|
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
September 30, 2010 and December 31, 2009, condensed
consolidating statements of income for the quarters and nine
months ended September 30, 2010 and 2009 and condensed
consolidating statements of cash flows for the nine months ended
September 30, 2010 and 2009, 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 SEPTEMBER 30, 2010
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
4,415
|
|
|
$
|
3,232
|
|
|
$
|
|
|
|
$
|
7,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
1,829
|
|
|
|
1,305
|
|
|
|
|
|
|
|
3,134
|
|
Supplies
|
|
|
|
|
|
|
698
|
|
|
|
536
|
|
|
|
|
|
|
|
1,234
|
|
Other operating expenses
|
|
|
1
|
|
|
|
678
|
|
|
|
589
|
|
|
|
|
|
|
|
1,268
|
|
Provision for doubtful accounts
|
|
|
|
|
|
|
452
|
|
|
|
269
|
|
|
|
|
|
|
|
721
|
|
Equity in earnings of affiliates
|
|
|
(680
|
)
|
|
|
(27
|
)
|
|
|
(40
|
)
|
|
|
680
|
|
|
|
(67
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
196
|
|
|
|
156
|
|
|
|
|
|
|
|
352
|
|
Interest expense
|
|
|
685
|
|
|
|
(139
|
)
|
|
|
(21
|
)
|
|
|
|
|
|
|
525
|
|
Losses on sales of facilities
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
5
|
|
|
|
5
|
|
|
|
|
|
|
|
10
|
|
Management fees
|
|
|
|
|
|
|
(118
|
)
|
|
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
3,574
|
|
|
|
2,919
|
|
|
|
680
|
|
|
|
7,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
(6
|
)
|
|
|
841
|
|
|
|
313
|
|
|
|
(680
|
)
|
|
|
468
|
|
Provision for income taxes
|
|
|
(249
|
)
|
|
|
303
|
|
|
|
89
|
|
|
|
|
|
|
|
143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
243
|
|
|
|
538
|
|
|
|
224
|
|
|
|
(680
|
)
|
|
|
325
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
4
|
|
|
|
78
|
|
|
|
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
$
|
243
|
|
|
$
|
534
|
|
|
$
|
146
|
|
|
$
|
(680
|
)
|
|
$
|
243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 12
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL
INFORMATION (continued)
|
HCA
INC.
CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE QUARTER ENDED SEPTEMBER 30, 2009
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
4,387
|
|
|
$
|
3,146
|
|
|
$
|
|
|
|
$
|
7,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
1,796
|
|
|
|
1,217
|
|
|
|
|
|
|
|
3,013
|
|
Supplies
|
|
|
|
|
|
|
701
|
|
|
|
505
|
|
|
|
|
|
|
|
1,206
|
|
Other operating expenses
|
|
|
1
|
|
|
|
634
|
|
|
|
549
|
|
|
|
|
|
|
|
1,184
|
|
Provision for doubtful accounts
|
|
|
|
|
|
|
577
|
|
|
|
333
|
|
|
|
|
|
|
|
910
|
|
Equity in earnings of affiliates
|
|
|
(560
|
)
|
|
|
(19
|
)
|
|
|
(34
|
)
|
|
|
560
|
|
|
|
(53
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
196
|
|
|
|
158
|
|
|
|
|
|
|
|
354
|
|
Interest expense
|
|
|
608
|
|
|
|
(83
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
510
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
3
|
|
Management fees
|
|
|
|
|
|
|
(116
|
)
|
|
|
116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49
|
|
|
|
3,688
|
|
|
|
2,830
|
|
|
|
560
|
|
|
|
7,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(49
|
)
|
|
|
699
|
|
|
|
316
|
|
|
|
(560
|
)
|
|
|
406
|
|
Provision for income taxes
|
|
|
(245
|
)
|
|
|
273
|
|
|
|
104
|
|
|
|
|
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
196
|
|
|
|
426
|
|
|
|
212
|
|
|
|
(560
|
)
|
|
|
274
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
13
|
|
|
|
65
|
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
$
|
196
|
|
|
$
|
413
|
|
|
$
|
147
|
|
|
$
|
(560
|
)
|
|
$
|
196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 12
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL
INFORMATION (continued)
|
HCA
INC.
CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
13,268
|
|
|
$
|
9,679
|
|
|
$
|
|
|
|
$
|
22,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
5,464
|
|
|
|
3,818
|
|
|
|
|
|
|
|
9,282
|
|
Supplies
|
|
|
|
|
|
|
2,112
|
|
|
|
1,573
|
|
|
|
|
|
|
|
3,685
|
|
Other operating expenses
|
|
|
4
|
|
|
|
1,981
|
|
|
|
1,711
|
|
|
|
|
|
|
|
3,696
|
|
Provision for doubtful accounts
|
|
|
|
|
|
|
1,309
|
|
|
|
764
|
|
|
|
|
|
|
|
2,073
|
|
Equity in earnings of affiliates
|
|
|
(2,236
|
)
|
|
|
(82
|
)
|
|
|
(128
|
)
|
|
|
2,236
|
|
|
|
(210
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
588
|
|
|
|
474
|
|
|
|
|
|
|
|
1,062
|
|
Interest expense
|
|
|
2,001
|
|
|
|
(376
|
)
|
|
|
(54
|
)
|
|
|
|
|
|
|
1,571
|
|
Losses on sales of facilities
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
58
|
|
|
|
61
|
|
|
|
|
|
|
|
119
|
|
Management fees
|
|
|
|
|
|
|
(356
|
)
|
|
|
356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(231
|
)
|
|
|
10,698
|
|
|
|
8,577
|
|
|
|
2,236
|
|
|
|
21,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
231
|
|
|
|
2,570
|
|
|
|
1,102
|
|
|
|
(2,236
|
)
|
|
|
1,667
|
|
Provision for income taxes
|
|
|
(693
|
)
|
|
|
875
|
|
|
|
306
|
|
|
|
|
|
|
|
488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
924
|
|
|
|
1,695
|
|
|
|
796
|
|
|
|
(2,236
|
)
|
|
|
1,179
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
33
|
|
|
|
222
|
|
|
|
|
|
|
|
255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
$
|
924
|
|
|
$
|
1,662
|
|
|
$
|
574
|
|
|
$
|
(2,236
|
)
|
|
$
|
924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 12
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL
INFORMATION (continued)
|
HCA
INC.
CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
13,200
|
|
|
$
|
9,247
|
|
|
$
|
|
|
|
$
|
22,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
5,311
|
|
|
|
3,569
|
|
|
|
|
|
|
|
8,880
|
|
Supplies
|
|
|
|
|
|
|
2,134
|
|
|
|
1,493
|
|
|
|
|
|
|
|
3,627
|
|
Other operating expenses
|
|
|
13
|
|
|
|
1,870
|
|
|
|
1,527
|
|
|
|
|
|
|
|
3,410
|
|
Provision for doubtful accounts
|
|
|
|
|
|
|
1,631
|
|
|
|
952
|
|
|
|
|
|
|
|
2,583
|
|
Equity in earnings of affiliates
|
|
|
(1,939
|
)
|
|
|
(67
|
)
|
|
|
(115
|
)
|
|
|
1,939
|
|
|
|
(182
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
592
|
|
|
|
475
|
|
|
|
|
|
|
|
1,067
|
|
Interest expense
|
|
|
1,733
|
|
|
|
(219
|
)
|
|
|
(27
|
)
|
|
|
|
|
|
|
1,487
|
|
Losses on sales of facilities
|
|
|
|
|
|
|
6
|
|
|
|
2
|
|
|
|
|
|
|
|
8
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
15
|
|
|
|
1
|
|
|
|
|
|
|
|
16
|
|
Management fees
|
|
|
|
|
|
|
(347
|
)
|
|
|
347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(193
|
)
|
|
|
10,926
|
|
|
|
8,224
|
|
|
|
1,939
|
|
|
|
20,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
193
|
|
|
|
2,274
|
|
|
|
1,023
|
|
|
|
(1,939
|
)
|
|
|
1,551
|
|
Provision for income taxes
|
|
|
(645
|
)
|
|
|
816
|
|
|
|
309
|
|
|
|
|
|
|
|
480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
838
|
|
|
|
1,458
|
|
|
|
714
|
|
|
|
(1,939
|
)
|
|
|
1,071
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
39
|
|
|
|
194
|
|
|
|
|
|
|
|
233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
$
|
838
|
|
|
$
|
1,419
|
|
|
$
|
520
|
|
|
$
|
(1,939
|
)
|
|
$
|
838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 12
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL
INFORMATION (continued)
|
HCA
INC.
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2010
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
92
|
|
|
$
|
285
|
|
|
$
|
|
|
|
$
|
377
|
|
Accounts receivable, net
|
|
|
|
|
|
|
2,142
|
|
|
|
1,494
|
|
|
|
|
|
|
|
3,636
|
|
Inventories
|
|
|
|
|
|
|
494
|
|
|
|
321
|
|
|
|
|
|
|
|
815
|
|
Deferred income taxes
|
|
|
1,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,045
|
|
Other
|
|
|
133
|
|
|
|
172
|
|
|
|
373
|
|
|
|
|
|
|
|
678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,178
|
|
|
|
2,900
|
|
|
|
2,473
|
|
|
|
|
|
|
|
6,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
6,742
|
|
|
|
4,394
|
|
|
|
|
|
|
|
11,136
|
|
Investments of insurance subsidiary
|
|
|
|
|
|
|
|
|
|
|
665
|
|
|
|
|
|
|
|
665
|
|
Investments in and advances to affiliates
|
|
|
|
|
|
|
245
|
|
|
|
612
|
|
|
|
|
|
|
|
857
|
|
Goodwill
|
|
|
|
|
|
|
1,635
|
|
|
|
975
|
|
|
|
|
|
|
|
2,610
|
|
Deferred loan costs
|
|
|
371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
371
|
|
Investments in and advances to subsidiaries
|
|
|
24,066
|
|
|
|
|
|
|
|
|
|
|
|
(24,066
|
)
|
|
|
|
|
Other
|
|
|
890
|
|
|
|
25
|
|
|
|
148
|
|
|
|
|
|
|
|
1,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,505
|
|
|
$
|
11,547
|
|
|
$
|
9,267
|
|
|
$
|
(24,066
|
)
|
|
$
|
23,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
|
|
|
$
|
729
|
|
|
$
|
525
|
|
|
$
|
|
|
|
$
|
1,254
|
|
Accrued salaries
|
|
|
|
|
|
|
630
|
|
|
|
377
|
|
|
|
|
|
|
|
1,007
|
|
Other accrued expenses
|
|
|
393
|
|
|
|
354
|
|
|
|
626
|
|
|
|
|
|
|
|
1,373
|
|
Long-term debt due within one year
|
|
|
654
|
|
|
|
11
|
|
|
|
31
|
|
|
|
|
|
|
|
696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,047
|
|
|
|
1,724
|
|
|
|
1,559
|
|
|
|
|
|
|
|
4,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
25,013
|
|
|
|
105
|
|
|
|
265
|
|
|
|
|
|
|
|
25,383
|
|
Intercompany balances
|
|
|
9,560
|
|
|
|
(12,264
|
)
|
|
|
2,704
|
|
|
|
|
|
|
|
|
|
Professional liability risks
|
|
|
|
|
|
|
|
|
|
|
1,027
|
|
|
|
|
|
|
|
1,027
|
|
Income taxes and other liabilities
|
|
|
1,000
|
|
|
|
420
|
|
|
|
191
|
|
|
|
|
|
|
|
1,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,620
|
|
|
|
(10,015
|
)
|
|
|
5,746
|
|
|
|
|
|
|
|
32,351
|
|
Equity securities with contingent redemption rights
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders (deficit) equity attributable to HCA
Inc.
|
|
|
(10,259
|
)
|
|
|
21,449
|
|
|
|
2,617
|
|
|
|
(24,066
|
)
|
|
|
(10,259
|
)
|
Noncontrolling interests
|
|
|
|
|
|
|
113
|
|
|
|
904
|
|
|
|
|
|
|
|
1,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,259
|
)
|
|
|
21,562
|
|
|
|
3,521
|
|
|
|
(24,066
|
)
|
|
|
(9,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,505
|
|
|
$
|
11,547
|
|
|
$
|
9,267
|
|
|
$
|
(24,066
|
)
|
|
$
|
23,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 12
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL
INFORMATION (continued)
|
HCA
INC.
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2009
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
95
|
|
|
$
|
217
|
|
|
$
|
|
|
|
$
|
312
|
|
Accounts receivable, net
|
|
|
|
|
|
|
2,135
|
|
|
|
1,557
|
|
|
|
|
|
|
|
3,692
|
|
Inventories
|
|
|
|
|
|
|
489
|
|
|
|
313
|
|
|
|
|
|
|
|
802
|
|
Deferred income taxes
|
|
|
1,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,192
|
|
Other
|
|
|
81
|
|
|
|
148
|
|
|
|
350
|
|
|
|
|
|
|
|
579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,273
|
|
|
|
2,867
|
|
|
|
2,437
|
|
|
|
|
|
|
|
6,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
7,034
|
|
|
|
4,393
|
|
|
|
|
|
|
|
11,427
|
|
Investments of insurance subsidiary
|
|
|
|
|
|
|
|
|
|
|
1,166
|
|
|
|
|
|
|
|
1,166
|
|
Investments in and advances to affiliates
|
|
|
|
|
|
|
244
|
|
|
|
609
|
|
|
|
|
|
|
|
853
|
|
Goodwill
|
|
|
|
|
|
|
1,641
|
|
|
|
936
|
|
|
|
|
|
|
|
2,577
|
|
Deferred loan costs
|
|
|
418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
418
|
|
Investments in and advances to subsidiaries
|
|
|
21,830
|
|
|
|
|
|
|
|
|
|
|
|
(21,830
|
)
|
|
|
|
|
Other
|
|
|
963
|
|
|
|
19
|
|
|
|
131
|
|
|
|
|
|
|
|
1,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,484
|
|
|
$
|
11,805
|
|
|
$
|
9,672
|
|
|
$
|
(21,830
|
)
|
|
$
|
24,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
|
|
|
$
|
908
|
|
|
$
|
552
|
|
|
$
|
|
|
|
$
|
1,460
|
|
Accrued salaries
|
|
|
|
|
|
|
542
|
|
|
|
307
|
|
|
|
|
|
|
|
849
|
|
Other accrued expenses
|
|
|
282
|
|
|
|
293
|
|
|
|
583
|
|
|
|
|
|
|
|
1,158
|
|
Long-term debt due within one year
|
|
|
802
|
|
|
|
9
|
|
|
|
35
|
|
|
|
|
|
|
|
846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,084
|
|
|
|
1,752
|
|
|
|
1,477
|
|
|
|
|
|
|
|
4,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
24,427
|
|
|
|
103
|
|
|
|
294
|
|
|
|
|
|
|
|
24,824
|
|
Intercompany balances
|
|
|
6,636
|
|
|
|
(10,387
|
)
|
|
|
3,751
|
|
|
|
|
|
|
|
|
|
Professional liability risks
|
|
|
|
|
|
|
|
|
|
|
1,057
|
|
|
|
|
|
|
|
1,057
|
|
Income taxes and other liabilities
|
|
|
1,176
|
|
|
|
421
|
|
|
|
171
|
|
|
|
|
|
|
|
1,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,323
|
|
|
|
(8,111
|
)
|
|
|
6,750
|
|
|
|
|
|
|
|
31,962
|
|
Equity securities with contingent redemption rights
|
|
|
147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders (deficit) equity attributable to HCA
Inc.
|
|
|
(8,986
|
)
|
|
|
19,787
|
|
|
|
2,043
|
|
|
|
(21,830
|
)
|
|
|
(8,986
|
)
|
Noncontrolling interests
|
|
|
|
|
|
|
129
|
|
|
|
879
|
|
|
|
|
|
|
|
1,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,986
|
)
|
|
|
19,916
|
|
|
|
2,922
|
|
|
|
(21,830
|
)
|
|
|
(7,978
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,484
|
|
|
$
|
11,805
|
|
|
$
|
9,672
|
|
|
$
|
(21,830
|
)
|
|
$
|
24,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 12
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL
INFORMATION (continued)
|
HCA
INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH
FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
924
|
|
|
$
|
1,695
|
|
|
$
|
796
|
|
|
$
|
(2,236
|
)
|
|
$
|
1,179
|
|
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities
|
|
|
111
|
|
|
|
(1,358
|
)
|
|
|
(680
|
)
|
|
|
|
|
|
|
(1,927
|
)
|
Provision for doubtful accounts
|
|
|
|
|
|
|
1,309
|
|
|
|
764
|
|
|
|
|
|
|
|
2,073
|
|
Depreciation and amortization
|
|
|
|
|
|
|
588
|
|
|
|
474
|
|
|
|
|
|
|
|
1,062
|
|
Income taxes
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
Losses on sales of facilities
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
58
|
|
|
|
61
|
|
|
|
|
|
|
|
119
|
|
Amortization of deferred loan costs
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
Share-based compensation
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
Equity in earnings of affiliates
|
|
|
(2,236
|
)
|
|
|
|
|
|
|
|
|
|
|
2,236
|
|
|
|
|
|
Other
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(1,098
|
)
|
|
|
2,292
|
|
|
|
1,417
|
|
|
|
|
|
|
|
2,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
|
|
(338
|
)
|
|
|
(522
|
)
|
|
|
|
|
|
|
(860
|
)
|
Acquisition of hospitals and health care entities
|
|
|
|
|
|
|
(21
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
(35
|
)
|
Disposition of hospitals and health care entities
|
|
|
|
|
|
|
24
|
|
|
|
2
|
|
|
|
|
|
|
|
26
|
|
Change in investments
|
|
|
|
|
|
|
1
|
|
|
|
472
|
|
|
|
|
|
|
|
473
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(334
|
)
|
|
|
(64
|
)
|
|
|
|
|
|
|
(398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of long-term debt
|
|
|
1,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,387
|
|
Net change in revolving credit facilities
|
|
|
1,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,035
|
|
Repayment of long-term debt
|
|
|
(1,956
|
)
|
|
|
(16
|
)
|
|
|
(48
|
)
|
|
|
|
|
|
|
(2,020
|
)
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
(49
|
)
|
|
|
(233
|
)
|
|
|
|
|
|
|
(282
|
)
|
Changes in intercompany balances with affiliates, net
|
|
|
2,913
|
|
|
|
(1,896
|
)
|
|
|
(1,017
|
)
|
|
|
|
|
|
|
|
|
Payment of debt issuance costs
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25
|
)
|
Payment of cash distributions to stockholders
|
|
|
(2,251
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,251
|
)
|
Other
|
|
|
(5
|
)
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
1,098
|
|
|
|
(1,961
|
)
|
|
|
(1,285
|
)
|
|
|
|
|
|
|
(2,148
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
|
|
|
|
(3
|
)
|
|
|
68
|
|
|
|
|
|
|
|
65
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
|
|
95
|
|
|
|
217
|
|
|
|
|
|
|
|
312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
|
|
|
$
|
92
|
|
|
$
|
285
|
|
|
$
|
|
|
|
$
|
377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
HCA
INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 12
|
SUPPLEMENTAL
CONDENSED CONSOLIDATING FINANCIAL
INFORMATION (continued)
|
HCA
INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH
FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
|
|
|
Condensed
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
838
|
|
|
$
|
1,458
|
|
|
$
|
714
|
|
|
$
|
(1,939
|
)
|
|
$
|
1,071
|
|
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash from operating assets and liabilities
|
|
|
201
|
|
|
|
(1,475
|
)
|
|
|
(862
|
)
|
|
|
|
|
|
|
(2,136
|
)
|
Provision for doubtful accounts
|
|
|
|
|
|
|
1,631
|
|
|
|
952
|
|
|
|
|
|
|
|
2,583
|
|
Depreciation and amortization
|
|
|
|
|
|
|
592
|
|
|
|
475
|
|
|
|
|
|
|
|
1,067
|
|
Income taxes
|
|
|
(485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(485
|
)
|
Losses on sales of facilities
|
|
|
|
|
|
|
6
|
|
|
|
2
|
|
|
|
|
|
|
|
8
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
15
|
|
|
|
1
|
|
|
|
|
|
|
|
16
|
|
Amortization of deferred loan costs
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
Share-based compensation
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
Pay-in-kind
interest
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
Equity in earnings of affiliates
|
|
|
(1,939
|
)
|
|
|
|
|
|
|
|
|
|
|
1,939
|
|
|
|
|
|
Other
|
|
|
42
|
|
|
|
5
|
|
|
|
5
|
|
|
|
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(1,204
|
)
|
|
|
2,232
|
|
|
|
1,287
|
|
|
|
|
|
|
|
2,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
|
|
(522
|
)
|
|
|
(393
|
)
|
|
|
|
|
|
|
(915
|
)
|
Acquisition of hospitals and health care entities
|
|
|
|
|
|
|
(38
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
(42
|
)
|
Disposition of hospitals and health care entities
|
|
|
|
|
|
|
18
|
|
|
|
21
|
|
|
|
|
|
|
|
39
|
|
Change in investments
|
|
|
|
|
|
|
9
|
|
|
|
104
|
|
|
|
|
|
|
|
113
|
|
Other
|
|
|
|
|
|
|
(18
|
)
|
|
|
16
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(551
|
)
|
|
|
(256
|
)
|
|
|
|
|
|
|
(807
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of long-term debt
|
|
|
2,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,979
|
|
Net change in revolving credit facilities
|
|
|
(1,125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,125
|
)
|
Repayment of long-term debt
|
|
|
(2,960
|
)
|
|
|
(6
|
)
|
|
|
(84
|
)
|
|
|
|
|
|
|
(3,050
|
)
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
(58
|
)
|
|
|
(196
|
)
|
|
|
|
|
|
|
(254
|
)
|
Changes in intercompany balances with affiliates, net
|
|
|
2,397
|
|
|
|
(1,643
|
)
|
|
|
(754
|
)
|
|
|
|
|
|
|
|
|
Payment of debt issuance costs
|
|
|
(68
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(68
|
)
|
Other
|
|
|
(19
|
)
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
1,204
|
|
|
|
(1,707
|
)
|
|
|
(1,027
|
)
|
|
|
|
|
|
|
(1,530
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
|
|
|
|
(26
|
)
|
|
|
4
|
|
|
|
|
|
|
|
(22
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
|
|
134
|
|
|
|
331
|
|
|
|
|
|
|
|
465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
|
|
|
$
|
108
|
|
|
$
|
335
|
|
|
$
|
|
|
|
$
|
443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
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,
should, seek, approximately,
intend, 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
ability to recognize the benefits of the Recapitalization,
(2) the impact of the substantial indebtedness incurred to
finance the Recapitalization and distributions and proposed
distributions to stockholders and the ability to refinance such
indebtedness on acceptable terms, (3) the effects related
to the enactment of the Health Reform Law, the possible
enactment of additional federal or state health care reform and
possible changes to the Health Reform Law and other federal,
state or local laws or regulations affecting the health care
industry, (4) increases, particularly during periods of
economic slowdown, 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, 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, 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 of assets, 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 liabilities and other claims that may be
asserted against us, and (20) other risk factors described
in our annual report on
Form 10-K
for the year ended December 31, 2009 and our 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.
Health
Care Reform
The Patient Protection and Affordable Care Act, as amended by
the Health Care and Education Reconciliation Act of 2010
(collectively, the Health Reform Law), which was
signed into law on March 23, 2010, will change how health
care services are covered, delivered and reimbursed through
expanded coverage of uninsured individuals, reduced growth in
Medicare program spending, reductions in Medicare and Medicaid
Disproportionate Share Hospital payments, and the establishment
of programs in which reimbursement is tied to quality and
integration. In addition, the Health Reform Law reforms certain
aspects of health insurance, expands existing efforts to tie
Medicare and Medicaid payments to performance and quality, and
contains provisions intended to strengthen fraud and abuse
enforcement. For a more detailed discussion of the Health Reform
Law and its potential impact on the Company, see Part I,
Item 2, Managements Discussion and Analysis of
Financial Condition and Results of Operations Health
Care Reform in our
Form 10-Q
for the quarter ended March 31, 2010.
28
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Third
Quarter 2010 Operations Summary
Net income attributable to HCA Inc. totaled $243 million
for the quarter ended September 30, 2010, compared to
$196 million for the quarter ended September 30, 2009.
Revenues increased to $7.647 billion in the third quarter
of 2010 from $7.533 billion in the third quarter of 2009.
Third quarter 2010 results include losses on sales of facilities
of $2 million and impairments of long-lived assets of
$10 million. Third quarter 2009 results include impairments
of long-lived assets of $3 million.
Revenues increased 1.5% on a consolidated basis and increased
1.6% on a same facility basis for the quarter ended
September 30, 2010 compared to the quarter ended
September 30, 2009. The increase in consolidated revenues
can be attributed to the combined impact of a 1.1% increase in
revenue per equivalent admission and a 0.4% increase in
equivalent admissions. The same facility revenues increase
resulted from the combined impact of a 0.8% increase in same
facility revenue per equivalent admission and a 0.7% increase in
same facility equivalent admissions.
During the quarter ended September 30, 2010, consolidated
admissions and same facility admissions declined 1.0% and 0.6%,
respectively, compared to the quarter ended September 30,
2009. Inpatient surgeries declined 3.0% on a consolidated basis
and 2.6% on a same facility basis during the quarter ended
September 30, 2010, compared to the quarter ended
September 30, 2009. Outpatient surgeries declined 2.5% on a
consolidated basis and declined 1.8% on a same facility basis
during the quarter ended September 30, 2010, compared to
the quarter ended September 30, 2009. Emergency department
visits increased 1.1% on a consolidated basis and increased 1.2%
on a same facility basis during the quarter ended
September 30, 2010, compared to the quarter ended
September 30, 2009.
For the quarter ended September 30, 2010, the provision for
doubtful accounts declined $189 million to 9.4% of
revenues, from 12.1% of revenues for the quarter ended
September 30, 2009. The self-pay revenue deductions for
charity care and uninsured discounts increased $45 million
and $431 million (we increased our uninsured discount
percentages during August 2009), respectively, during the third
quarter of 2010, compared to the third quarter of 2009. The sum
of the provision for doubtful accounts, uninsured discounts and
charity care, as a percentage of the sum of revenues, uninsured
discounts and charity care, was 26.4% for the third quarter of
2010, compared to 24.9% for the third quarter of 2009. Same
facility uninsured admissions increased 3.9% and same facility
uninsured emergency room visits increased 1.6% for the quarter
ended September 30, 2010, compared to the quarter ended
September 30, 2009.
The increases in the self-pay revenue deductions result in
reductions to both the provision for doubtful accounts and
revenues, and were the primary contributing factors to the low
growth rates we experienced in revenues and revenue per
equivalent admission during the quarter ended September 30,
2010.
Interest expense increased $15 million to $525 million
for the quarter ended September 30, 2010, from
$510 million for the quarter ended September 30, 2009.
The additional interest expense was due to small increases in
both the average debt balance and the average effective interest
rate.
Cash flows from operating activities increased
$219 million, from $1.041 billion for the third
quarter of 2009 to $1.260 billion for the third quarter of
2010. The increase related primarily to a decline in income tax
payments, changes in working capital items and an increase in
net income.
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,
29
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Revenue/Volume
Trends (continued)
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 1.5% from $7.533 billion in the third
quarter of 2009 to $7.647 billion in the third quarter of
2010. The increase in consolidated revenues can be attributed to
the combined impact of a 1.1% increase in revenue per equivalent
admission and a 0.4% increase in equivalent admissions. Same
facility revenues increased 1.6% from $7.450 billion in the
third quarter of 2009 to $7.569 billion in the third
quarter of 2010. The increase in same facility revenues can be
attributed to the combined impact of a 0.8% increase in same
facility revenue per equivalent admission and a 0.7% increase in
same facility equivalent admissions. The increases in the
self-pay revenue deductions (charity care and uninsured
discounts) result in reductions to both the provision for
doubtful accounts and revenues, and were the primary
contributing factors to the low growth rates we experienced in
revenues and revenue per equivalent admission during the quarter
ended September 30, 2010.
To quantify the total impact of and trends related to uninsured
accounts, we believe it is beneficial to view these revenue
deductions and provision for doubtful accounts in combination,
rather than each separately. A summary of these amounts for the
quarters and the nine months ended September 30, 2010 and
2009 follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Nine Months
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Provision for doubtful accounts
|
|
$
|
721
|
|
|
$
|
910
|
|
|
$
|
2,073
|
|
|
$
|
2,583
|
|
Uninsured discounts
|
|
|
1,178
|
|
|
|
747
|
|
|
|
3,285
|
|
|
|
1,969
|
|
Charity care
|
|
|
586
|
|
|
|
541
|
|
|
|
1,730
|
|
|
|
1,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
2,485
|
|
|
$
|
2,198
|
|
|
$
|
7,088
|
|
|
$
|
6,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated admissions and same facility admissions declined
1.0% and 0.6%, respectively, in the third quarter of 2010,
compared to the third quarter of 2009. Consolidated outpatient
surgeries declined 2.5% and same facility outpatient surgeries
declined 1.8% in the third quarter of 2010, compared to the
third quarter of 2009. Consolidated and same facility inpatient
surgeries declined 3.0% and 2.6%, respectively, in the third
quarter of 2010, compared to the third quarter of 2009.
Emergency department visits increased 1.1% on a consolidated
basis and increased 1.2% on a same facility basis during the
quarter ended September 30, 2010, compared to the quarter
ended September 30, 2009.
Same facility uninsured admissions increased by 1,043
admissions, or 3.9%, in the third quarter of 2010, compared to
the third quarter of 2009. Same facility uninsured admissions in
2010, compared to 2009, increased 2.1% in the second quarter of
2010 and increased 6.8% in the first quarter of 2010. Same
facility uninsured admissions in 2009, compared to 2008,
increased 0.2% in the fourth quarter of 2009, increased 8.2% in
the third quarter of 2009, increased 10.4% in the third quarter
of 2009 and declined 0.1% in the first quarter of 2009.
30
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
nine months ended September 30, 2010 and 2009 are set forth
in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Nine Months
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Medicare
|
|
|
33
|
%
|
|
|
32
|
%
|
|
|
34
|
%
|
|
|
34
|
%
|
Managed Medicare
|
|
|
10
|
|
|
|
10
|
|
|
|
10
|
|
|
|
10
|
|
Medicaid
|
|
|
9
|
|
|
|
9
|
|
|
|
9
|
|
|
|
9
|
|
Managed Medicaid
|
|
|
8
|
|
|
|
8
|
|
|
|
8
|
|
|
|
7
|
|
Managed care and other insurers
|
|
|
33
|
|
|
|
34
|
|
|
|
32
|
|
|
|
33
|
|
Uninsured
|
|
|
7
|
|
|
|
7
|
|
|
|
7
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
nine months ended September 30, 2010 and 2009 are set forth
in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Nine Months
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Medicare
|
|
|
31
|
%
|
|
|
29
|
%
|
|
|
31
|
%
|
|
|
31
|
%
|
Managed Medicare
|
|
|
9
|
|
|
|
8
|
|
|
|
9
|
|
|
|
8
|
|
Medicaid
|
|
|
9
|
|
|
|
8
|
|
|
|
9
|
|
|
|
8
|
|
Managed Medicaid
|
|
|
4
|
|
|
|
4
|
|
|
|
4
|
|
|
|
4
|
|
Managed care and other insurers
|
|
|
43
|
|
|
|
45
|
|
|
|
44
|
|
|
|
44
|
|
Uninsured
|
|
|
4
|
|
|
|
6
|
|
|
|
3
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increases in uninsured discounts have caused reductions in
the percentage of inpatient revenues related to the uninsured,
as the percentage of uninsured admissions compared to total
admissions has been constant.
At September 30, 2010, we had 72 hospitals in the states of
Texas and Florida. During the third quarter of 2010, 57% of our
admissions and 52% of our revenues were generated by these
hospitals. Uninsured admissions in Texas and Florida represented
63% of our uninsured admissions during the third quarter of 2010.
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. 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 $150 million and $115 million during
the third quarters of 2010 and 2009, respectively, and
$486 million and $276 million during the first nine
months of 2010 and 2009, respectively, of Medicaid supplemental
payments pursuant to UPL programs.
31
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 nine months ended
September 30, 2010 and 2009 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Revenues
|
|
$
|
7,647
|
|
|
|
100.0
|
|
|
$
|
7,533
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
3,134
|
|
|
|
41.0
|
|
|
|
3,013
|
|
|
|
40.0
|
|
Supplies
|
|
|
1,234
|
|
|
|
16.1
|
|
|
|
1,206
|
|
|
|
16.0
|
|
Other operating expenses
|
|
|
1,268
|
|
|
|
16.6
|
|
|
|
1,184
|
|
|
|
15.7
|
|
Provision for doubtful accounts
|
|
|
721
|
|
|
|
9.4
|
|
|
|
910
|
|
|
|
12.1
|
|
Equity in earnings of affiliates
|
|
|
(67
|
)
|
|
|
(0.9
|
)
|
|
|
(53
|
)
|
|
|
(0.7
|
)
|
Depreciation and amortization
|
|
|
352
|
|
|
|
4.7
|
|
|
|
354
|
|
|
|
4.7
|
|
Interest expense
|
|
|
525
|
|
|
|
6.9
|
|
|
|
510
|
|
|
|
6.8
|
|
Losses on sales of facilities
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairments of long-lived assets
|
|
|
10
|
|
|
|
0.1
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,179
|
|
|
|
93.9
|
|
|
|
7,127
|
|
|
|
94.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
468
|
|
|
|
6.1
|
|
|
|
406
|
|
|
|
5.4
|
|
Provision for income taxes
|
|
|
143
|
|
|
|
1.9
|
|
|
|
132
|
|
|
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
325
|
|
|
|
4.2
|
|
|
|
274
|
|
|
|
3.6
|
|
Net income attributable to noncontrolling interests
|
|
|
82
|
|
|
|
1.0
|
|
|
|
78
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
$
|
243
|
|
|
|
3.2
|
|
|
$
|
196
|
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% changes from prior year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
1.5
|
%
|
|
|
|
|
|
|
7.6
|
%
|
|
|
|
|
Income before income taxes
|
|
|
15.2
|
|
|
|
|
|
|
|
91.5
|
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
|
24.3
|
|
|
|
|
|
|
|
126.0
|
|
|
|
|
|
Admissions(a)
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
2.7
|
|
|
|
|
|
Equivalent admissions(b)
|
|
|
0.4
|
|
|
|
|
|
|
|
4.7
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
1.1
|
|
|
|
|
|
|
|
2.7
|
|
|
|
|
|
Same facility % changes from prior year(c):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
1.6
|
|
|
|
|
|
|
|
7.7
|
|
|
|
|
|
Admissions(a)
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
2.7
|
|
|
|
|
|
Equivalent admissions(b)
|
|
|
0.7
|
|
|
|
|
|
|
|
4.8
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
0.8
|
|
|
|
|
|
|
|
2.8
|
|
|
|
|
|
32
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Operating
Results Summary (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Revenues
|
|
$
|
22,947
|
|
|
|
100.0
|
|
|
$
|
22,447
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
9,282
|
|
|
|
40.4
|
|
|
|
8,880
|
|
|
|
39.6
|
|
Supplies
|
|
|
3,685
|
|
|
|
16.1
|
|
|
|
3,627
|
|
|
|
16.2
|
|
Other operating expenses
|
|
|
3,696
|
|
|
|
16.1
|
|
|
|
3,410
|
|
|
|
15.1
|
|
Provision for doubtful accounts
|
|
|
2,073
|
|
|
|
9.0
|
|
|
|
2,583
|
|
|
|
11.5
|
|
Equity in earnings of affiliates
|
|
|
(210
|
)
|
|
|
(0.9
|
)
|
|
|
(182
|
)
|
|
|
(0.8
|
)
|
Depreciation and amortization
|
|
|
1,062
|
|
|
|
4.7
|
|
|
|
1,067
|
|
|
|
4.8
|
|
Interest expense
|
|
|
1,571
|
|
|
|
6.8
|
|
|
|
1,487
|
|
|
|
6.6
|
|
Losses on sales of facilities
|
|
|
2
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
Impairments of long-lived assets
|
|
|
119
|
|
|
|
0.5
|
|
|
|
16
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,280
|
|
|
|
92.7
|
|
|
|
20,896
|
|
|
|
93.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,667
|
|
|
|
7.3
|
|
|
|
1,551
|
|
|
|
6.9
|
|
Provision for income taxes
|
|
|
488
|
|
|
|
2.2
|
|
|
|
480
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
1,179
|
|
|
|
5.1
|
|
|
|
1,071
|
|
|
|
4.8
|
|
Net income attributable to noncontrolling interests
|
|
|
255
|
|
|
|
1.1
|
|
|
|
233
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
$
|
924
|
|
|
|
4.0
|
|
|
$
|
838
|
|
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% changes from prior year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
2.2
|
%
|
|
|
|
|
|
|
6.3
|
%
|
|
|
|
|
Income before income taxes
|
|
|
7.5
|
|
|
|
|
|
|
|
96.1
|
|
|
|
|
|
Net income attributable to HCA Inc.
|
|
|
10.3
|
|
|
|
|
|
|
|
110.9
|
|
|
|
|
|
Admissions(a)
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
0.8
|
|
|
|
|
|
Equivalent admissions(b)
|
|
|
0.9
|
|
|
|
|
|
|
|
3.3
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
1.3
|
|
|
|
|
|
|
|
2.9
|
|
|
|
|
|
Same facility % changes from prior year(c):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
2.3
|
|
|
|
|
|
|
|
6.7
|
|
|
|
|
|
Admissions(a)
|
|
|
|
|
|
|
|
|
|
|
1.2
|
|
|
|
|
|
Equivalent admissions(b)
|
|
|
1.1
|
|
|
|
|
|
|
|
3.8
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
1.2
|
|
|
|
|
|
|
|
2.8
|
|
|
|
|
|
|
|
|
(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. |
33
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Operating
Results Summary (continued)
Supplemental
Non-GAAP Disclosures
Operating Measures on a Cash Revenues Basis
(Dollars in millions)
The results from operations presented on a cash revenues basis
for the quarters and nine months ended September 30, 2010
and 2009 follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
Non-GAAP % of
|
|
|
GAAP % of
|
|
|
|
|
|
Non-GAAP % of
|
|
|
GAAP % of
|
|
|
|
|
|
|
Cash Revenues
|
|
|
Revenues
|
|
|
|
|
|
Cash Revenues
|
|
|
Revenues
|
|
|
|
Amount
|
|
|
Ratios(b)
|
|
|
Ratios(b)
|
|
|
Amount
|
|
|
Ratios(b)
|
|
|
Ratios(b)
|
|
|
Revenues
|
|
$
|
7,647
|
|
|
|
|
|
|
|
100.0
|
|
|
$
|
7,533
|
|
|
|
|
|
|
|
100.0
|
|
Provision for doubtful accounts
|
|
|
721
|
|
|
|
|
|
|
|
|
|
|
|
910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash revenues(a)
|
|
|
6,926
|
|
|
|
100.0
|
|
|
|
|
|
|
|
6,623
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
3,134
|
|
|
|
45.2
|
|
|
|
41.0
|
|
|
|
3,013
|
|
|
|
45.5
|
|
|
|
40.0
|
|
Supplies
|
|
|
1,234
|
|
|
|
17.8
|
|
|
|
16.1
|
|
|
|
1,206
|
|
|
|
18.2
|
|
|
|
16.0
|
|
Other operating expenses
|
|
|
1,268
|
|
|
|
18.4
|
|
|
|
16.6
|
|
|
|
1,184
|
|
|
|
17.9
|
|
|
|
15.7
|
|
% changes from prior year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash revenues
|
|
|
4.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash revenue per equivalent admission
|
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
Non-GAAP % of
|
|
|
GAAP % of
|
|
|
|
|
|
Non-GAAP % of
|
|
|
GAAP % of
|
|
|
|
|
|
|
Cash Revenues
|
|
|
Revenues
|
|
|
|
|
|
Cash Revenues
|
|
|
Revenues
|
|
|
|
Amount
|
|
|
Ratios(b)
|
|
|
Ratios(b)
|
|
|
Amount
|
|
|
Ratios(b)
|
|
|
Ratios(b)
|
|
|
Revenues
|
|
$
|
22,947
|
|
|
|
|
|
|
|
100.0
|
|
|
$
|
22,447
|
|
|
|
|
|
|
|
100.0
|
|
Provision for doubtful accounts
|
|
|
2,073
|
|
|
|
|
|
|
|
|
|
|
|
2,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash revenues(a)
|
|
|
20,874
|
|
|
|
100.0
|
|
|
|
|
|
|
|
19,864
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
9,282
|
|
|
|
44.5
|
|
|
|
40.4
|
|
|
|
8,880
|
|
|
|
44.7
|
|
|
|
39.6
|
|
Supplies
|
|
|
3,685
|
|
|
|
17.7
|
|
|
|
16.1
|
|
|
|
3,627
|
|
|
|
18.3
|
|
|
|
16.2
|
|
Other operating expenses
|
|
|
3,696
|
|
|
|
17.6
|
|
|
|
16.1
|
|
|
|
3,410
|
|
|
|
17.1
|
|
|
|
15.1
|
|
% changes from prior year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
2.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash revenues
|
|
|
5.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash revenue per equivalent admission
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Cash revenues is defined as
reported revenues less the provision for doubtful accounts. We
use cash revenues as an analytical indicator for purposes of
assessing the effect of uninsured patient volumes, adjusted for
the effect of both the revenue deductions related to uninsured
accounts (charity care and uninsured discounts) and the
provision for doubtful accounts (which relates primarily to
uninsured accounts), on our revenues and certain operating
expenses, as a percentage of cash revenues. Variations in the
revenue deductions related to uninsured accounts generally have
the inverse effect on the provision for doubtful accounts. We
increased our uninsured discount percentages during August 2009
and the resulting effects, for the third quarter and first nine
months of 2010, were increases in uninsured discounts of
$431 million and $1.316 billion, respectively, and
declines in the provision for doubtful accounts of
$189 million and $510 million, respectively, compared
to the same periods for 2009. Cash revenues is commonly used as
an analytical indicator within the health care industry. Cash
revenues should not be considered as a measure of financial
performance under generally accepted accounting principles.
Because cash revenues is not a measurement determined in
accordance with generally accepted accounting principles and is
thus susceptible to varying calculations, cash revenues, as
presented, may not be comparable to other similarly titled
measures of other health care companies.
|
|
(b)
|
|
Salaries and benefits, supplies and
other operating expenses, as a percentage of cash revenues (a
non-GAAP financial measure), present the impact on these ratios
due to the adjustment of deducting the provision for doubtful
accounts from reported revenues and results in these ratios
being non-GAAP financial measures. We believe these non-GAAP
financial measures are useful to investors to provide
disclosures of our results of operations on the same basis as
that used by management. Management uses this information to
compare certain operating expense categories as a percentage of
cash revenues. Management finds this information useful to
evaluate certain expense category trends without the influence
of whether adjustments related to revenues for uninsured
accounts are recorded as revenue adjustments (charity care and
uninsured discounts) or operating expenses (provision for
doubtful accounts), and thus the expense category trends are
generally analyzed as a percentage of cash revenues. These
non-GAAP financial measures should not be considered
alternatives to GAAP financial measures. We believe this
supplemental information provides management and the users of
our financial statements with useful information for
period-to-period
comparisons. Investors are encouraged to use GAAP measures when
evaluating our overall financial performance.
|
34
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Quarters
Ended September 30, 2010 and 2009
Net income attributable to HCA Inc. totaled $243 million
for the third quarter of 2010 compared to $196 million for
the third quarter of 2009. Revenues increased 1.5% due to the
combined impact of revenue per equivalent admission growth of
1.1% and an increase of 0.4% in equivalent admissions for the
third quarter of 2010 compared to the third quarter of 2009.
Cash revenues (reported revenues less the provision for doubtful
accounts) increased 4.6% for the third quarter of 2010 compared
to the third quarter of 2009.
For the third quarter of 2010, consolidated admissions and same
facility admissions declined 1.0% and 0.6%, respectively,
compared to the third quarter of 2009. Outpatient surgical
volumes declined 2.5% on a consolidated basis and declined 1.8%
on a same facility basis during the third quarter of 2010,
compared to the third quarter of 2009. Consolidated and same
facility inpatient surgeries declined 3.0% and 2.6%,
respectively, in the third quarter of 2010, compared to the
third quarter of 2009. Emergency department visits increased
1.1% on a consolidated basis and increased 1.2% on a same
facility basis during the quarter ended September 30, 2010,
compared to the quarter ended September 30, 2009.
Salaries and benefits, as a percentage of revenues, were 41.0%
in the third quarter of 2010 and 40.0% in the third quarter of
2009. Salaries and benefits, as a percentage of cash revenues,
were 45.2% in the third quarter of 2010 and 45.5% in the third
quarter of 2009. Salaries and benefits per equivalent admission
increased 3.6% in the third quarter of 2010 compared to the
third quarter of 2009. Same facility labor rate increases
averaged 3.0% for the third quarter of 2010 compared to the
third quarter of 2009.
Supplies, as a percentage of revenues, were 16.1% in the third
quarter of 2010 and 16.0% in the third quarter of 2009.
Supplies, as a percentage of cash revenues, were 17.8% in the
third quarter of 2010 and 18.2% in the third quarter of 2009.
Supply cost per equivalent admission increased 1.8% in the third
quarter of 2010 compared to the third quarter of 2009. Supply
costs per equivalent admission increased 4.2% for pharmacy
supplies, 2.4% for medical devices and 2.0% for general medical
and surgical items and declined 0.8% for blood products in the
third quarter of 2010 compared to the third quarter of 2009.
Other operating expenses, as a percentage of revenues, increased
to 16.6% in the third quarter of 2010 from 15.7% in the third
quarter of 2009. Other operating expenses, as a percentage of
cash revenues, increased to 18.4% in the third quarter of 2010
from 17.9% in the third quarter of 2009. 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. Other operating expenses
includes $87 million and $57 million of indigent care
costs in certain Texas markets during the third quarters of 2010
and 2009, respectively, and this increase is the primary
component of the overall increase in other operating expenses.
Provisions for losses related to professional liability risks
were $56 million and $60 million for the third
quarters of 2010 and 2009, respectively.
Provision for doubtful accounts declined $189 million, from
$910 million in the third quarter of 2009 to
$721 million in the third quarter of 2010, and as a
percentage of revenues, declined to 9.4% in the third quarter of
2010 from 12.1% in the third quarter of 2009. 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 $476 million during the third
quarter of 2010, compared to the third quarter of 2009. The sum
of the provision for doubtful accounts, uninsured discounts and
charity care, as a percentage of the sum of revenues, uninsured
discounts and charity care, was 26.4% for the third quarter of
2010, compared to 24.9% for the third quarter of 2009. To
quantify the total impact of and trends related to uninsured
accounts, we believe it is beneficial to review the related
revenue deductions and the provision for doubtful accounts in
combination, rather than separately. At September 30, 2010,
our allowance for doubtful accounts represented approximately
93% of the $4.615 billion total patient due accounts
receivable balance. The patient due accounts receivable balance
represents the estimated uninsured portion of our accounts
receivable.
35
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Quarters
Ended September 30, 2010 and
2009 (continued)
Equity in earnings of affiliates was $67 million and
$53 million in the third quarters of 2010 and 2009,
respectively. Equity in earnings of affiliates relates primarily
to our Denver, Colorado market joint venture.
Depreciation and amortization declined $2 million, from
$354 million in the third quarter of 2009 to
$352 million in the third quarter of 2010.
Interest expense increased from $510 million in the third
quarter of 2009 to $525 million in the third quarter of
2010 due primarily to small increases in both the average debt
balance and the average effective interest rate. Our average
debt balance was $26.446 billion for the third quarter of
2010 compared to $26.139 billion for the third quarter of
2009. The average effective interest rate for our long term debt
increased from 7.7% for the quarter ended September 30,
2009 to 7.9% for the quarter ended September 30, 2010.
During the third quarter of 2010, we recorded net losses on
sales of facilities of $2 million. During the third quarter
of 2009, no gains or losses on sales of facilities were
recognized.
During the third quarters of 2010 and 2009, we recorded
impairments of long-lived assets of $10 million and
$3 million, respectively, to adjust the value of certain
real estate investments to estimated fair value.
The effective tax rate was 37.0% and 40.2% for the third
quarters of 2010 and 2009, respectively. The effective tax rate
computations exclude net income attributable to noncontrolling
interests as it relates to consolidated partnerships.
Net income attributable to noncontrolling interests increased
from $78 million for the third quarter of 2009 to
$82 million for the third quarter of 2010. The increase in
net income attributable to noncontrolling interests related
primarily to growth in operating results of a hospital joint
venture in a Texas market.
Nine
Months Ended September 30, 2010 and 2009
Net income attributable to HCA Inc. totaled $924 million in
the nine months ended September 30, 2010 compared to
$838 million in the nine months ended September 30,
2009. Revenues increased 2.2% due to the combined impact of
revenue per equivalent admission growth of 1.3% and an increase
of 0.9% in equivalent admissions for the first nine months of
2010 compared to the first nine months of 2009. Cash revenues
(reported revenues less the provision for doubtful accounts)
increased 5.1% in the nine months ended September 30, 2010
compared the nine months ended September 30, 2009.
For the first nine months of 2010, consolidated admissions
declined 0.3% and same facility admissions remained unchanged,
compared to the first nine months of 2009. Outpatient surgical
volumes declined 1.7% and 1.5% on a consolidated basis and a
same facility basis, respectively, during the first nine months
of 2010, compared to the first nine months of 2009. Inpatient
surgeries declined 1.7% both on both a consolidated basis and
same facility basis during the first nine months of 2010,
compared to the first nine months of 2009. Emergency department
visits increased 1.5% on a consolidated basis and increased 1.7%
on a same facility basis during the nine months ended
September 30, 2010, compared to the nine months ended
September 30, 2009.
Salaries and benefits, as a percentage of revenues, were 40.4%
in the first nine months of 2010 and 39.6% in the first nine
months of 2009. Salaries and benefits, as a percentage of cash
revenues, were 44.5% in the first nine months of 2010 and 44.7%
in the first nine months of 2009. Salaries and benefits per
equivalent admission increased 3.6% in the first nine months of
2010 compared to the first nine months of 2009. Same facility
labor rate increases averaged 2.9% for the first nine months of
2010 compared to the first nine months of 2009.
Supplies, as a percentage of revenues, were 16.1% in the first
nine months of 2010 and 16.2% in the first nine months of 2009.
Supplies, as a percentage of cash revenues, were 17.7% in the
first nine months of 2010 and 18.3% in the first nine months of
2009. Supply cost per equivalent admission increased 0.7% in the
first nine months of
36
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Nine
Months Ended September 30, 2010 and
2009 (continued)
2010 compared to the first nine months of 2009. Supply costs per
equivalent admission increased 2.9% for medical devices and 3.4%
for general medical and surgical items, blood products were
unchanged and pharmacy supplies declined 1.2% in the first nine
months of 2010 compared to the first nine months of 2009.
Other operating expenses, as a percentage of revenues, increased
to 16.1% in the first nine months of 2010 from 15.1% in the
first nine months of 2009. Other operating expenses, as a
percentage of cash revenues, increased to 17.6% in the first
nine months of 2010 from 17.1% in the first nine months of 2009.
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. Other operating expenses
includes $268 million and $145 million of indigent
care costs in certain Texas markets during the first nine months
of 2010 and 2009, respectively, and this increase is the primary
component of the overall increase in other operating expenses.
Provisions for losses related to professional liability risks
were $167 million and $154 million for the first nine
months of 2010 and 2009, respectively.
Provision for doubtful accounts declined $510 million, from
$2.583 billion in the first nine months of 2009 to
$2.073 billion in the first nine months of 2010, and as a
percentage of revenues, declined to 9.0% in the first nine
months of 2010 from 11.5% in the first nine months of 2009. 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 $1.429 billion
during the first nine months of 2010, compared to the first nine
months of 2009. The sum of the provision for doubtful accounts,
uninsured discounts and charity care, as a percentage of the sum
of revenues, uninsured discounts and charity care, was 25.3% for
the first nine months of 2010, compared to 23.7% for the first
nine months of 2009. To quantify the total impact of and trends
related to uninsured accounts, we believe it is beneficial to
review the related revenue deductions and the provision for
doubtful accounts in combination, rather than separately. At
September 30, 2010, our allowance for doubtful accounts
represented approximately 93% of the $4.615 billion total
patient due accounts receivable balance. The patient due
accounts receivable balance represents the estimated uninsured
portion of our accounts receivable.
Equity in earnings of affiliates was $210 million and
$182 million in the first nine months of 2010 and 2009,
respectively. Equity in earnings of affiliates relates primarily
to our Denver, Colorado market joint venture.
Depreciation and amortization declined $5 million, from
$1.067 billion in the first nine months of 2009 to
$1.062 billion in the first nine months of 2010.
Interest expense increased from $1.487 billion in the first
nine months of 2009 to $1.571 billion in the first nine
months of 2010, due primarily to an increase in the average
effective interest rate. Our average debt balance was
$26.525 billion for the first nine months of 2010 compared
to $26.452 billion for the first nine months of 2009. The
average effective interest rate for our long term debt increased
from 7.5% for the first nine months of 2009 to 7.9% for the
first nine months of 2010.
During the first nine months of 2010 and 2009, we recorded net
losses on sales of facilities of $2 million and
$8 million, respectively.
During the first nine months of 2010, we recorded impairments of
long-lived assets of $119 million, including impairment
charges of $73 million for two hospital facilities and
$35 million for capitalized engineering and design costs
related to certain building safety requirements (California
earthquake standards) that have been revised, to adjust the
carrying values to estimated fair value. During the first nine
months of 2009, we recorded asset impairment charges of
$16 million to adjust the value of certain real estate
investments to estimated fair value.
The effective tax rate was 34.6% and 36.4% for the first nine
months of 2010 and 2009, respectively. The effective tax rate
computations exclude net income attributable to noncontrolling
interests as it relates to
37
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results
of Operations (continued)
Nine
Months Ended September 30, 2010 and
2009 (continued)
consolidated partnerships. Our provision for income taxes for
the first nine months of 2010 and 2009 was reduced by
$50 million and $20 million, respectively, related to
reductions in interest expense related to taxing authority
examinations. Excluding the effect of these adjustments, the
effective tax rate for the first nine months of 2010 and 2009
would have been 38.1% and 37.9%, respectively.
Net income attributable to noncontrolling interests increased
from $233 million for the first nine months of 2009 to
$255 million for the first nine months of 2010. The
increase in net income attributable to noncontrolling interests
related primarily to growth in operating results of hospital
joint ventures in two Texas markets.
Liquidity
and Capital Resources
Cash provided by operating activities totaled
$2.611 billion in the first nine months of 2010 compared to
$2.315 billion in the first nine months of 2009. The
$296 million increase in cash provided by operating
activities in the first nine months of 2010 compared to the
first nine months of 2009 was primarily comprised of the net
impact of the $108 million increase in net income, a
$301 million decline from changes in operating assets and
liabilities and the provision for doubtful accounts and a
$475 million decrease in income taxes. We made
$1.897 billion and $2.119 billion in combined interest
and net tax payments in the first nine months of 2010 and 2009,
respectively. Working capital totaled $2.221 billion at
September 30, 2010 and $2.264 billion at
December 31, 2009.
Cash used in investing activities was $398 million in the
first nine months of 2010 compared to $807 million in the
first nine months of 2009. Excluding acquisitions, capital
expenditures were $860 million in the first nine months of
2010 and $915 million in the first nine months of 2009. We
expended $35 million and $42 million for acquisitions
of nonhospital health care facilities during the first nine
months of 2010 and 2009, respectively. Capital expenditures are
expected to approximate $1.400 billion in 2010. At
September 30, 2010, there were projects under construction
which had estimated additional costs to complete and equip over
the next five years of approximately $1.240 billion. We
expect to finance capital expenditures with internally generated
and borrowed funds. We received $26 million and
$39 million from sales of hospitals and health care
entities during the first nine months of 2010 and 2009,
respectively. We received net cash flows from our investments of
$473 million and $113 million in the first nine months
of 2010 and 2009, respectively. During the first nine months of
2010, we liquidated certain investments of the insurance
subsidiary in order to distribute $500 million of excess
capital to the Company.
Cash used in financing activities totaled $2.148 billion
during the first nine months of 2010 compared to
$1.530 billion during the first nine months of 2009. During
the first nine months of 2010, cash flows used in financing
activities included payment of cash distributions to
stockholders of $2.251 billion, increases in net borrowings
of $402 million, payments of debt issuance costs of
$25 million and distributions to noncontrolling interests
of $282 million. During the first nine months of 2009, cash
flows used in financing activities included reductions in net
borrowings of $1.196 billion, payment of debt issuance
costs of $68 million and distributions to noncontrolling
interests of $254 million.
We are a highly leveraged company with significant debt service
requirements. Our debt totaled $26.079 billion at
September 30, 2010. Our interest expense was
$1.571 billion for the first nine months of 2010 and
$1.487 billion for the first nine months of 2009. The
increase in interest expense is due primarily to an increase in
the average effective interest rate.
In addition to cash flows from operations, available sources of
capital include amounts available under our senior secured
credit facilities ($2.157 billion and $2.198 billion
available as of September 30, 2010 and October 31,
2010, respectively) and anticipated access to public and private
debt markets.
Investments of our professional liability insurance subsidiary,
to maintain statutory equity and pay claims, totaled
$798 million and $1.316 billion at September 30,
2010 and December 31, 2009, respectively. Investments
38
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Liquidity
and Capital Resources (continued)
were reduced during 2010 as a result of the insurance subsidiary
distributing $500 million of excess capital to the Company.
The insurance subsidiary maintained net reserves for
professional liability risks of $534 million and
$590 million at September 30, 2010 and
December 31, 2009, 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 $745 million and
$679 million at September 30, 2010 and
December 31, 2009, respectively. Claims payments, net of
reinsurance recoveries, during the next 12 months are
expected to approximate $263 million. We estimate that
approximately $130 million of the expected net claim
payments during the next 12 months will relate to claims in
the self-insured retention.
On January 27, 2010, our Board of Directors declared a
distribution to the Companys stockholders and holders of
vested stock options. The distribution was $17.50 per share and
vested stock option, or $1.751 billion in the aggregate.
The distribution was paid on February 5, 2010 to holders of
record on February 1, 2010. The distribution was funded
using funds available under our existing senior secured credit
facilities and approximately $100 million of cash on hand.
On May 5, 2010, our Board of Directors declared a
distribution to the Companys stockholders and holders of
vested stock options. The distribution was $5.00 per share and
vested stock option, or $500 million in the aggregate. The
distribution was paid on May 14, 2010 to holders of record
on May 6, 2010. The distribution was funded using funds
available under our existing senior secured credit facilities.
On May 5, 2010, our Board of Directors granted approval for
the Company to file with the Securities and Exchange Commission
a registration statement on
Form S-1
relating to a proposed initial public offering of its common
stock. We filed the
Form S-1
on May 7, 2010. We intend to use the anticipated net
proceeds to repay certain of our existing indebtedness, as will
be determined prior to our offering, and for general corporate
purposes. Upon completion of the offering and in connection with
our termination of the management agreement we have with
affiliates of the Investors, we will be required to pay a
termination fee based upon the net present value of our future
obligations under the management agreement.
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. 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.
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.
During March 2010, we issued $1.400 billion aggregate
principal amount of
71/4% senior
secured first lien notes due 2020 at a price of 99.095% of their
face value, resulting in $1.387 billion of gross proceeds.
After the payment of related fees and expenses, we used the
proceeds from these debt issuances to repay outstanding
indebtedness under our senior secured term loan facilities.
On April 6, 2010, we entered into an amendment of our
senior secured term loan B facility extending the maturity of
$2.0 billion of loans from November 17, 2013 to
March 31, 2017 and to increase the ABR margin and LIBOR
margin with respect to such extended term loans to 2.25% and
3.25%, respectively.
It is contemplated that, subject to applicable legal and
contractual restrictions, during the fourth quarter of 2010, an
approximate $2 billion distribution will be declared to the
Companys existing stockholders and holders of vested stock
options. A portion of such distribution would be funded using
funds available under the Companys existing senior secured
revolving credit facilities. The balance of such distribution,
if any, would be funded with proceeds from new indebtedness
contemplated to be incurred by a newly-created holding company
for HCA. There can be no assurance that the incurrence of such
indebtedness and related holding company restructuring and
distribution will be completed on the terms contemplated, or at
all.
39
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Liquidity
and Capital Resources (continued)
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
$790 million and $8 million, respectively, at
September 30, 2010. These investments are carried at fair
value, with changes in unrealized gains and losses being
recorded as adjustments to other comprehensive income. At
September 30, 2010, we had a net unrealized gain of
$16 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 September 30, 2010, our
wholly-owned insurance subsidiary had invested $260 million
($261 million par value) in tax-exempt student loan auction
rate securities that continue to experience market illiquidity.
It is uncertain if auction-related market liquidity will resume
for these securities. We may be required to recognize
other-than-temporary
impairments on these long-term investments in future periods
should issuers default on interest payments or should the fair
market valuations of the securities deteriorate due to ratings
downgrades or other issue specific factors.
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,
which are designated as cash flow hedges, are included in other
comprehensive income, and changes in the fair value of
derivatives which have not been designated as hedges are
recorded in operations.
With respect to our interest-bearing liabilities, approximately
$2.218 billion of long-term debt at September 30, 2010
was subject to variable rates of interest, while the remaining
balance in long-term debt of $23.861 billion at
September 30, 2010 was subject to fixed rates of interest.
Both the general level of interest rates and, for the senior
secured credit 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 effective interest rate for our
long-term debt increased from 7.5% for the nine months ended
September 30, 2009 to 7.9% for the nine months ended
September 30, 2010.
The estimated fair value of our total long-term debt was
$26.658 billion at September 30, 2010. 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
40
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Liquidity
and Capital Resources (continued)
Market
Risk (continued)
earnings would be approximately $22 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 September 30, 2010, we were contesting, before the IRS
Appeals Division, certain claimed deficiencies and adjustments
proposed by the IRS Examination Division in connection with its
audit of our 2005 and 2006 federal income tax returns, including
the timing of recognition of certain patient service revenues,
the deductibility of certain debt retirement costs and our
method for calculating the tax allowance for doubtful accounts.
Eight taxable periods of HCA and its predecessors ended in 1997
through 2004, for which the primary remaining issue is the
computation of the tax allowance for doubtful accounts, were
pending before the IRS Examination Division as of
September 30, 2010. We expect the IRS Examination Division
will begin an audit of our 2007, 2008 and 2009 federal income
tax returns and one or more HCA affiliated partnerships during
2010.
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.
41
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Operating
Data
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
CONSOLIDATING
|
|
|
|
|
|
|
|
|
Number of hospitals in operation at:
|
|
|
|
|
|
|
|
|
March 31
|
|
|
154
|
|
|
|
155
|
|
June 30
|
|
|
154
|
|
|
|
155
|
|
September 30
|
|
|
154
|
|
|
|
155
|
|
December 31
|
|
|
|
|
|
|
155
|
|
Number of freestanding outpatient surgical centers in operation
at:
|
|
|
|
|
|
|
|
|
March 31
|
|
|
98
|
|
|
|
97
|
|
June 30
|
|
|
98
|
|
|
|
97
|
|
September 30
|
|
|
96
|
|
|
|
97
|
|
December 31
|
|
|
|
|
|
|
97
|
|
Licensed hospital beds at(a):
|
|
|
|
|
|
|
|
|
March 31
|
|
|
38,719
|
|
|
|
38,763
|
|
June 30
|
|
|
38,636
|
|
|
|
38,793
|
|
September 30
|
|
|
38,636
|
|
|
|
38,829
|
|
December 31
|
|
|
|
|
|
|
38,839
|
|
Weighted average licensed beds(b):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
38,687
|
|
|
|
38,811
|
|
Second
|
|
|
38,607
|
|
|
|
38,817
|
|
Third
|
|
|
38,645
|
|
|
|
38,829
|
|
Fourth
|
|
|
|
|
|
|
38,843
|
|
Year
|
|
|
|
|
|
|
38,825
|
|
Average daily census(c):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
21,696
|
|
|
|
21,701
|
|
Second
|
|
|
20,418
|
|
|
|
20,577
|
|
Third
|
|
|
19,848
|
|
|
|
20,087
|
|
Fourth
|
|
|
|
|
|
|
20,256
|
|
Year
|
|
|
|
|
|
|
20,650
|
|
Admissions(d):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
398,900
|
|
|
|
396,200
|
|
Second
|
|
|
385,200
|
|
|
|
387,400
|
|
Third
|
|
|
383,800
|
|
|
|
387,600
|
|
Fourth
|
|
|
|
|
|
|
385,300
|
|
Year
|
|
|
|
|
|
|
1,556,500
|
|
42
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Operating Data (Continued)
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Equivalent admissions(e):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
615,500
|
|
|
|
610,200
|
|
Second
|
|
|
617,900
|
|
|
|
609,900
|
|
Third
|
|
|
617,700
|
|
|
|
615,100
|
|
Fourth
|
|
|
|
|
|
|
603,800
|
|
Year
|
|
|
|
|
|
|
2,439,000
|
|
Average length of stay (days)(f):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
4.9
|
|
|
|
4.9
|
|
Second
|
|
|
4.8
|
|
|
|
4.8
|
|
Third
|
|
|
4.8
|
|
|
|
4.8
|
|
Fourth
|
|
|
|
|
|
|
4.8
|
|
Year
|
|
|
|
|
|
|
4.8
|
|
Emergency room visits(g):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
1,367,100
|
|
|
|
1,359,700
|
|
Second
|
|
|
1,436,200
|
|
|
|
1,398,000
|
|
Third
|
|
|
1,457,100
|
|
|
|
1,441,200
|
|
Fourth
|
|
|
|
|
|
|
1,394,600
|
|
Year
|
|
|
|
|
|
|
5,593,500
|
|
Outpatient surgeries(h):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
190,700
|
|
|
|
194,400
|
|
Second
|
|
|
198,600
|
|
|
|
200,200
|
|
Third
|
|
|
194,100
|
|
|
|
199,100
|
|
Fourth
|
|
|
|
|
|
|
200,900
|
|
Year
|
|
|
|
|
|
|
794,600
|
|
Inpatient surgeries(i):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
122,500
|
|
|
|
122,600
|
|
Second
|
|
|
121,800
|
|
|
|
124,400
|
|
Third
|
|
|
121,600
|
|
|
|
125,300
|
|
Fourth
|
|
|
|
|
|
|
122,200
|
|
Year
|
|
|
|
|
|
|
494,500
|
|
43
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Operating Data (Continued)
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Days in accounts receivable(j):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
46
|
|
|
|
47
|
|
Second
|
|
|
44
|
|
|
|
45
|
|
Third
|
|
|
44
|
|
|
|
43
|
|
Fourth
|
|
|
|
|
|
|
45
|
|
Year
|
|
|
|
|
|
|
45
|
|
Gross patient revenues(k) (dollars in millions):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
$
|
31,054
|
|
|
$
|
28,742
|
|
Second
|
|
|
30,731
|
|
|
|
28,500
|
|
Third
|
|
|
30,647
|
|
|
|
28,340
|
|
Fourth
|
|
|
|
|
|
|
30,100
|
|
Year
|
|
|
|
|
|
|
115,682
|
|
Outpatient revenues as a % of patient revenues(l):
|
|
|
|
|
|
|
|
|
Quarter:
|
|
|
|
|
|
|
|
|
First
|
|
|
36
|
%
|
|
|
38
|
%
|
Second
|
|
|
38
|
%
|
|
|
39
|
%
|
Third
|
|
|
38
|
%
|
|
|
38
|
%
|
Fourth
|
|
|
|
|
|
|
36
|
%
|
Year
|
|
|
|
|
|
|
38
|
%
|
NONCONSOLIDATING(m)
|
|
|
|
|
|
|
|
|
Number of hospitals in operation at:
|
|
|
|
|
|
|
|
|
March 31
|
|
|
8
|
|
|
|
8
|
|
June 30
|
|
|
8
|
|
|
|
8
|
|
September 30
|
|
|
8
|
|
|
|
8
|
|
December 31
|
|
|
|
|
|
|
8
|
|
Number of freestanding outpatient surgical centers in operation
at:
|
|
|
|
|
|
|
|
|
March 31
|
|
|
8
|
|
|
|
8
|
|
June 30
|
|
|
8
|
|
|
|
8
|
|
September 30
|
|
|
8
|
|
|
|
8
|
|
December 31
|
|
|
|
|
|
|
8
|
|
Licensed hospital beds at:
|
|
|
|
|
|
|
|
|
March 31
|
|
|
2,369
|
|
|
|
2,367
|
|
June 30
|
|
|
2,369
|
|
|
|
2,369
|
|
September 30
|
|
|
2,369
|
|
|
|
2,369
|
|
December 31
|
|
|
|
|
|
|
2,369
|
|
44
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 September 30, 2010(n):
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare and Medicaid
|
|
|
13
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
Managed care and other discounted
|
|
|
19
|
|
|
|
4
|
|
|
|
4
|
|
Uninsured
|
|
|
19
|
|
|
|
7
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
51
|
%
|
|
|
12
|
%
|
|
|
37
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. |
|
(n) |
|
Accounts receivable aging data is based upon consolidated gross
accounts receivable of $7.933 billion (each 1% is
equivalent to approximately $79.33 million of gross
accounts receivable). |
45
|
|
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
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.
Government
Investigations, Claims and Litigation
Health care companies are subject to numerous investigations by
various governmental agencies. Further, under the federal False
Claims Act, private parties have the right to bring qui
tam, or whistleblower, suits against companies
that submit false claims for payments to, or improperly retain
overpayments from, the government. Some states have adopted
similar state whistleblower and false claims provisions. Certain
of our individual facilities have received, and from time to
time, other facilities may receive, government inquiries from
federal and state agencies. Depending on whether the underlying
conduct in these or future inquiries or investigations could be
considered systemic, their resolution could have a material,
adverse effect on our financial position, results of operations
and liquidity.
In January 2001, we entered into an eight-year Corporate
Integrity Agreement (CIA) with the Office of
Inspector General at the Secretary of the Department of Health
and Human Services (OIG), which expired on
January 24, 2009. Under the CIA, we had numerous
affirmative obligations, including the requirement to report
potential violations of applicable federal health care laws and
regulations. Pursuant to these obligations, we reported a number
of potential violations of the Stark Law, the Anti-kickback
Statute, the Emergency Medical Treatment and Active Labor Act
and other laws, most of which we consider to be nonviolations or
technical violations. We submitted our final report pursuant to
the CIA on April 30, 2009, and in April 2010, we received
notice from the OIG that our final report was accepted,
relieving us of future obligations under the CIA. However, the
government could still determine that our reporting
and/or our
resolution of reported issues was inadequate. Violation or
breach of the CIA, or violation of federal or state laws
relating to Medicare, Medicaid or similar programs, could
subject us to substantial monetary fines, civil and criminal
penalties
and/or
exclusion from participation in the Medicare and Medicaid
programs. Alleged violations may be pursued by the government or
through private qui tam actions. Sanctions imposed
against us as a result of such actions could have a material,
adverse effect on our results of operations or financial
position.
46
The Civil Division of the Department of Justice
(DOJ) has contacted the Company in connection with
its nationwide review of whether, in certain cases, hospital
charges to the federal government relating to implantable
cardio-defibrillators (ICDs) met the Centers for
Medicare & Medicaid Services criteria. In connection
with this nationwide review, the DOJ has indicated that it will
be reviewing certain ICD billing and medical records at 87 HCA
hospitals; the review covers the period from October 2003 to the
present. The review could potentially give rise to claims
against the Company under the False Claims Act or other
statutes, regulations or laws. At this time, we cannot predict
what effect, if any, this review or any resulting claims could
have on the Company.
New
Hampshire Hospital Litigation
In 2006, the Foundation for Seacoast Health (the
Foundation) filed suit against HCA in state court in
New Hampshire. The Foundation alleged that both the 2006
Recapitalization transaction and a prior 1999 intra-corporate
transaction violated a 1983 agreement that placed certain
restrictions on transfers of the Portsmouth Regional Hospital.
In May 2007, the trial court ruled against the Foundation on all
its claims. On appeal, the New Hampshire Supreme Court affirmed
the ruling on the Recapitalization, but remanded to the trial
court the claims based on the 1999 intra-corporate transaction.
The trial court ruled in December 2009 that the 1999
intra-corporate transaction breached the transfer restriction
provisions of the 1983 agreement. The court will now conduct
additional proceedings to determine whether any harm has flowed
from the alleged breach, and if so, what the appropriate remedy
should be. The court may consider whether to, among other
things, award monetary damages, rescind or undo the 1999
intra-corporate transfer or give the Foundation a right to
purchase hospital assets at a price to be determined (which the
Foundation asserts should be below the fair market value of the
hospital). Trial for the remedies phase is currently set for May
2011.
General
Liability and Other Claims
We are a party to certain proceedings relating to claims for
income taxes and related interest before the IRS Appeals
Division. 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, 2009 and our quarterly
reports on
Form 10-Q
for the quarters ended March 31, 2010 and June 30,
2010, 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
and our quarterly reports on
Form 10-Q
for the quarters ended March 31, 2010 and June 30,
2010.
47
|
|
Item 2:
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
The following table provides certain information with respect to
our repurchases of common stock from July 1, 2010 through
September 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
|
|
|
|
Total Number
|
|
|
Dollar Value of
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
Shares That
|
|
|
|
|
|
|
|
|
|
Purchased as
|
|
|
May Yet Be
|
|
|
|
|
|
|
|
|
|
Part of
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
Publicly
|
|
|
Under Publicly
|
|
|
|
Total Number
|
|
|
|
|
|
Announced
|
|
|
Announced
|
|
|
|
of Shares
|
|
|
Average Price
|
|
|
Plans or
|
|
|
Plans or
|
|
Period
|
|
Purchased
|
|
|
Paid per Share
|
|
|
Programs
|
|
|
Programs
|
|
|
July 1, 2010 through July 31, 2010
|
|
|
60
|
|
|
$
|
114.00
|
|
|
|
|
|
|
$
|
|
|
August 1, 2010 through August 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 1, 2010 through September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for Third Quarter 2010
|
|
|
60
|
|
|
$
|
114.00
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the third quarter of 2010, we purchased 60 shares of
common stock pursuant to the terms of the Management
Stockholders Agreement
and/or
separation agreements and stock purchase agreements between
former employees and the Company.
|
|
Item 5:
|
Other
Information
|
On November 8, 2010, an amended and restated joinder
agreement was entered into with respect to our senior secured
revolving credit facility to establish a new replacement
revolving credit series, which will mature on November 17,
2015. The replacement revolving credit commitments will become
effective upon the earlier of (i) our receipt of all or a
portion of the proceeds (including by way of contribution) from
an initial public offering of the common stock of HCA Inc. or
its direct or indirect parent company (the IPO Proceeds
Condition) and (ii) May 17, 2012, subject to the
satisfaction of certain other conditions. If the IPO Proceeds
Condition has not been satisfied, on May 17, 2012 or, if
the IPO Proceeds Condition has been satisfied prior to
May 17, 2012, on November 17, 2012, the applicable ABR
and LIBOR margins with respect to the replacement revolving
loans will be increased from the applicable ABR and LIBOR
margins of the existing revolving loans based upon the
achievement of a certain leverage ratio, which level will
decrease from the levels of the existing revolving loans.
(a) List of Exhibits:
|
|
|
|
|
Exhibit 4.1
|
|
|
|
Amended and Restated Joinder Agreement No. 1, dated as of
November 8, 2010, among HCA Inc., the lending institutions
from time to time parties thereto, and Bank of America, N.A., as
Administrative Agent and as Collateral Agent.
|
Exhibit 31.1
|
|
|
|
Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
Exhibit 31.2
|
|
|
|
Certification of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
Exhibit 32
|
|
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of
Sarbanes-Oxley
Act of 2002.
|
48
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.
|
|
|
|
By:
|
/s/ R.
Milton Johnson
|
R. Milton Johnson
Executive Vice President and
Chief Financial Officer
Date: November 9, 2010
49
Exhibit 4.1
EXECUTION VERSION
AMENDED AND RESTATED JOINDER AGREEMENT NO. 1
AMENDED AND RESTATED JOINDER AGREEMENT No. 1, dated as of November 8, 2010 (this Agreement),
by and among each of the financial institutions listed as a Replacement-1 Revolving Credit Lender
on Schedule A hereto (each, a Replacement-1 Revolving Credit Lender and, collectively with their
respective successors and assigns in such capacity, the Replacement-1 Revolving Credit Lenders),
HCA INC., a Delaware corporation (the Company), BANK OF AMERICA, N.A., as Administrative Agent
and as Collateral Agent, and the other parties listed on the signature pages hereto.
RECITALS:
WHEREAS, reference is hereby made to the Credit Agreement, dated as of November 17, 2006 (as
amended on February 16, 2007 and further amended on March 2, 2009, June 18, 2009 and April 6, 2010
(the Existing Credit Agreement), and as the same may be further amended, restated, supplemented
or otherwise modified from time to time, the Credit Agreement), among the Company, HCA UK Capital
Limited (the European Subsidiary Borrower and, collectively with the Company, the Borrowers),
the Lenders party thereto, Bank of America, N. A., as Administrative Agent and Collateral Agent and
the other parties named therein (capitalized terms used but not defined herein having the
respective meanings provided in the Credit Agreement);
WHEREAS, the Credit Agreement provides that the Borrowers may, subject to the terms and
conditions set forth therein, establish New Revolving Credit Commitments (including Replacement
Revolving Credit Commitments) and/or New Term Loan Commitments by, among other things, entering
into one or more Joinder Agreements with New Term Loan Lenders and/or New Revolving Loan Lenders,
as applicable; and
WHEREAS, the Company and the Replacement-1 Revolving Credit Lenders wish to establish a new
Replacement Revolving Credit Series of Replacement Revolving Credit Commitments in accordance with
the Credit Agreement and on the terms set forth herein to replace in full the Revolving Credit
Commitments;
WHEREAS, the parties hereto have previously entered into that certain Joinder Agreement, dated
as of June 16, 2010 (the Original Joinder Agreement No. 1) and the parties wish to amend and
restate the Original Joinder Agreement No. 1 in its entirety as follows:
NOW, THEREFORE, in consideration of the premises, agreements, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. |
|
Establishment of Replacement-1 Revolving Credit Facility. |
(a) Subject to the satisfaction of the conditions set forth in Section 2 of this
Agreement, there is hereby established, effective as of the Replacement-1 Revolving Credit
Commitment Effective Date (as defined below), a Replacement Revolving Credit
Series of Replacement Revolving Credit Commitments under the Credit Agreement which
shall be designated as the Replacement-1 Revolving Credit Commitments.
50
The amount of the Replacement-1 Revolving Credit Commitment of each Replacement-1 Revolving
Credit Lender shall be the amount set forth on Schedule A hereto opposite such
Replacement-1 Revolving Credit Lenders name; provided that prior to the
Replacement-1 Revolving Credit Commitment Effective Date, the aggregate amount of the
Replacement-1 Revolving Credit Commitments shall be automatically reduced in the event and
by the aggregate amount of any reduction or termination of Revolving Credit Commitments
(other than the reduction or termination contemplated to occur pursuant to Section 2 of this
Agreement) and any such automatic reduction of the Replacement-1 Revolving Credit
Commitments shall be applied on a pro rata basis to reduce the Replacement-1 Revolving
Credit Commitment of each Replacement-1 Revolving Credit Lender.
(b) Subject to the satisfaction of the conditions set forth in Section 2 of this
Agreement, the Replacement-1 Revolving Credit Commitments shall become effective and
available on a fully revolving basis during the period (the Replacement-1 Revolving
Commitment Period) from and including the Replacement-1 Revolving Credit Commitment
Effective Date until November 17, 2015 or, if such day is not a Business Day, the next
preceding Business Day (the Replacement-1 Revolving Credit Maturity Date). During the
Replacement-1 Revolving Commitment Period, subject to the applicable terms and conditions of
the Credit Agreement as contemplated by the following paragraph (c) of this Section 1 of
this Agreement and the terms of the Credit Agreement, the Company may utilize the
Replacement-1 Revolving Credit Commitments (i) by borrowing a loan or loans thereunder
denominated in Dollars or one or more Alternative Currencies (any such loan a Replacement-1
Revolving Loan), (ii) by borrowing Swingline Loans from the Swingline Lender or (iii)
through the issuance or renewal of Letters of Credit by any Letter of Credit Issuer. The
Replacement-1 Revolving Credit Commitments and the extensions of credit thereunder are
collectively referred to as the Replacement-1 Revolving Credit Facility.
(c) Subject to clauses (i) through (vii) of the proviso to this paragraph (c) below,
the terms and conditions applicable to the Replacement-1 Revolving Credit Facility and of
the Replacement-1 Revolving Credit Commitments, Replacement-1 Revolving Loans and
participations of Replacement-1 Revolving Credit Lenders in Swingline Loans and Letters of
Credit (including, without limitation, the procedures for and limitations applicable to
borrowings, repayments and prepayments, funding of risk participations, termination and
reduction of commitments, payments of interest, fees, expenses, voting and other amounts and
assignments) shall be identical to the provisions of the Credit Agreement applicable to the
Revolving Credit Facility and the Revolving Credit Commitments, Revolving Credit Loans and
participations of Revolving Credit Lenders in Swingline Loans and Letters of Credit,
respectively, and, with respect to matters arising following the Replacement-1 Revolving
Credit Commitment Effective Date, references in the Credit Agreement and the other Credit
Documents to Revolving Credit Commitment, Revolving Credit Facility, Revolving Credit
Loan, Revolving Credit Lender and Revolving Credit Maturity Date shall apply to the
rights and obligations of the Credit Parties and the Replacement-1 Revolving Credit Lenders
under the Replacement-1 Revolving Credit Facility as though such terms referred to the
Replacement-1 Revolving Credit Commitments, the Replacement-1 Revolving Credit Facility,
the Replace-
51
ment-1 Revolving Loans, the Replacement-1 Revolving Credit Lenders and the
Replacement-1 Revolving Credit Maturity Date; provided that:
(i) From and after the Relevant Step-Up Date (as defined below), the following
definitions shall apply only to the Replacement-1 Revolving Credit Facility in lieu of the
definitions contained in the Credit Agreement that would otherwise be applicable thereto by
virtue of the deemed applicability to the Replacement-1 Revolving Credit Facility (and
related defined terms) of references to the Revolving Credit Facility (and related defined
terms) pursuant to paragraph (b) above:
Level I Status shall mean, on any date, the circumstance that the Consolidated
Total Debt to Consolidated EBITDA Ratio is greater than or equal to 4.50 to 1.00 as
of such date.
Level II Status shall mean, on any date, the circumstance that Level I Status does
not exist and the Consolidated Total Debt to Consolidated EBITDA Ratio is greater
than or equal to 4.00 to 1.00 as of such date.
Level III Status shall mean, on any date, the circumstance that neither Level I
Status nor Level II Status exists and the Consolidated Total Debt to Consolidated
EBITDA Ratio is greater than or equal to 3.50 to 1.00 as of such date.
Level IV Status shall mean, on any date, the circumstance that none of Level I
Status, Level II Status and Level III Status exists.
(ii) The Applicable ABR Margin for purposes of the Replacement-1 Revolving Credit
Facility (including Replacement-1 Revolving Loans and Swingline Loans thereunder) (x) on any
date prior to November 17, 2012 (or, if the IPO Proceeds Condition (as defined below) has
not been satisfied on the Replacement-1 Revolving Credit Commitment Effective Date, May 17,
2012) (such relevant date, the Relevant Step-Up Date) shall be the Applicable ABR Margin
that would have applied to the Revolving Credit Facility on such date in accordance with the
Credit Agreement as in effect on the date of this Agreement and (y) on any date from and
after the Relevant Step-Up Date shall, in lieu of the definition of Applicable ABR Margin
set forth in the Credit Agreement that is applicable to the Revolving Credit Facility, be
the applicable percentage per annum set forth below based upon the Status in effect on such
date:
|
|
|
|
|
Status |
|
Applicable ABR Margin |
Level I Status |
|
|
1.75 |
% |
Level II Status |
|
|
1.50 |
% |
Level III Status |
|
|
1.00 |
% |
Level IV Status |
|
|
0.75 |
% |
(iii) The Applicable LIBOR Margin for purposes of the Replacement-1 Revolving Credit
Facility (including Replacement-1 Revolving Loans and Swingline Loans thereunder) (x) on any
date prior to the Relevant Step-Up Date shall be the Appli-
52
cable LIBOR Margin that would have applied to the Revolving Credit Facility on such
date in accordance with the Credit Agreement as in effect on the date of this Agreement and
(y) on any date from and after the Relevant Step-Up Date shall, in lieu of the definition of
Applicable LIBOR Margin set forth in the Credit Agreement that is applicable to the
Revolving Credit Facility, be the applicable percentage per annum set forth below based upon
the Status in effect on such date:
|
|
|
|
|
Status |
|
Applicable LIBOR Margin |
Level I Status |
|
|
2.75 |
% |
Level II Status |
|
|
2.50 |
% |
Level III Status |
|
|
2.00 |
% |
Level IV Status |
|
|
1.75 |
% |
(iv) The Commitment Fee Rate for purposes of the Replacement-1 Revolving Credit
Facility shall mean, with respect to the Available Commitment (x) on any date prior to the
Relevant Step-Up Date, the Commitment Fee Rate that would have applied to the Revolving
Credit Facility on such date in accordance with the Credit Agreement as in effect on the
date of this Agreement and (y) on any date from and after the Relevant Step-Up Date shall,
in lieu of the definition of Commitment Fee Rate set forth in the Credit Agreement that is
applicable to the Revolving Credit Facility, be the rate per annum set forth below opposite
the Status in effect on such day:
|
|
|
|
|
Status |
|
Commitment Fee Rate |
Level I Status |
|
|
0.50 |
% |
Level II Status |
|
|
0.375 |
% |
Level III Status |
|
|
0.375 |
% |
Level IV Status |
|
|
0.375 |
% |
|
(v) |
|
The Replacement-1 Revolving Credit Facility shall become
effective and be available during the Replacement-1 Revolving Commitment
Period and Commitment Fees shall commence accruing on the Available Commitment
under the Replacement-1 Revolving Credit Facility on the Replacement-1
Revolving Credit Commitment Effective Date. |
|
|
(vi) |
|
Subject to the satisfaction of the conditions set forth in
Section 2 of this Agreement, the Company may designate any Letters of Credit
outstanding under the Revolving Credit Facility immediately prior to the
Replacement-1 Revolving Credit Commitment Effective Date to automatically be
deemed to be issued and outstanding under the Replacement-1 Revolving Credit
Facility from and after the Replacement-1 Revolving Credit Commitment Effective
Date. |
|
|
(vii) |
|
The Credit Agreement will be amended as (and at such time and
in the manner) provided in Section 3 of Extension Amendment No. 1 to the Credit
Agreement, dated as of April 6, 2010 and each of the Replacement-1 |
53
|
|
|
Revolving Credit Lenders hereby acknowledges, agrees and consents to each
such amendment contained therein. |
2. |
|
Effectiveness of Replacement-1 Revolving Credit Commitments. The Replacement-1 Revolving
Credit Commitments shall become effective, on the first date (the Replacement-1 Revolving
Credit Commitment Effective Date) on or prior to November 17, 2012 on which each of the
following conditions has been satisfied: |
|
(a) |
|
the Administrative Agent shall have received executed signature
pages to this Agreement from each of the Replacement-1 Revolving Credit
Lenders, the Swingline Lender, each Letter of Credit Issuer and each Credit
Party; |
|
|
(b) |
|
the Revolving Credit Termination Date shall have occurred with
respect to the Revolving Credit Facility (or will occur concurrently with the
Replacement-1 Revolving Credit Commitment Effective Date); |
|
|
(c) |
|
either (i) the Company shall have received all or a portion of
the proceeds (including by way of contribution) from an initial public offering
of common stock of the Company or its direct or indirect parent company, as the
case may be (the IPO Proceeds Condition) or (ii) May 17, 2012 shall have
occurred; |
|
|
(d) |
|
the Company shall have paid an upfront fee to the
Administrative Agent for the account of each Replacement-1 Revolving Credit
Lender listed on Schedule A hereto that is indicated to be entitled to upfront
fees on such Schedule, on the Replacement-1 Revolving Credit Commitment
Effective Date, equal to 0.125% of its Replacement-1 Revolving Credit
Commitment (as set forth on Schedule A); |
|
|
(e) |
|
(i) the conditions to each credit extension set forth in
Section 7.1 of the Credit Agreement shall be satisfied on such date and (ii) no
termination of any Commitments or acceleration of any of the Obligations shall
have previously occurred pursuant to Section 11 of the Credit Agreement and
(iii) the Administrative Agent shall have received a certificate of a
responsible officer of the Company stating that the condition set forth in
subclause (i) has been satisfied; |
|
|
(f) |
|
the Administrative Agent shall have received with respect to
each Mortgaged Property subject to a Mortgage by any U.S. Credit Party, a
completed Life-of-Loan Federal Emergency Management Agency Standard Flood
Hazard Determination (together with (y) a notice about special flood hazard
area status and flood disaster assistance duly executed by the Company and each
U.S. Credit Party relating thereto and (z) evidence of insurance with respect
to the Mortgaged Properties in form and substance reasonably satisfactory to
the Administrative Agent; and |
54
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(g) |
|
the Administrative Agent shall have received from the Company
an opinion of counsel from Simpson Thacher & Bartlett LLP reasonably acceptable
to the Administrative Agent covering customary matters with respect to this
Agreement. |
3. |
|
Acknowledgements. Each Replacement-1 Revolving Credit Lender (i) confirms that it has
received a copy of the Credit Agreement and the other Credit Documents and the exhibits
thereto, together with copies of the financial statements referred to therein and such other
documents and information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Agreement; (ii) agrees that it will, independently and without
reliance upon the Administrative Agent or any other Replacement-1 Revolving Credit Lender or
any other Lender or Agent and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (iii) appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under the Credit Agreement
and the other Credit Documents as are delegated to the Administrative Agent by the terms
thereof, together with such powers as are reasonably incidental thereto; and (iv) agrees that
it will perform in accordance with their terms all of the obligations which by the terms of
the Credit Agreement are required to be performed by it as a Replacement-1 Revolving Credit
Lender. |
|
4. |
|
Credit Agreement Governs. Except as otherwise set forth in this Agreement, the Replacement-1
Revolving Credit Facility shall otherwise be subject to the applicable provisions of the
Credit Agreement and the other Credit Documents (after giving effect to the deemed
applicability to such Replacement-1 Revolving Credit Facility (and related defined terms) of
references to the Revolving Credit Facility (and related defined terms) pursuant to Section
2(b) above). Each Replacement-1 Revolving Credit Lender acknowledges its receipt of a copy
of, agrees to be bound by the terms of, the Loss Sharing Agreement, dated as of November 17,
2006, by and among the Lenders and the Administrative Agent, to the same extent as though it
were an original signatory thereto. |
|
5. |
|
Borrowers Certifications. By its execution of this Agreement, the undersigned officer, to
the best of his or her knowledge, and such Borrower hereby certifies that: |
|
(i) |
|
The representations and warranties contained in the Credit
Agreement and the other Credit Documents are true and correct in all material
respects on and as of the date hereof to the same extent as though made on and
as of the date hereof, except to the extent such representations and warranties
expressly relate to an earlier date, in which case such representations and
warranties were true and correct in all material respects on and as of such
earlier date; and |
|
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(ii) |
|
No event has occurred and is continuing or would result from
the consummation of the proposed Borrowing contemplated hereby that would
constitute a Default or an Event of Default. |
55
6. |
|
Tax Forms. Each Replacement-1 Revolving Credit Lender that is not a Lender under the
Existing Credit Agreement hereby agrees to deliver herewith to the Administrative Agent such
forms, certificates or other evidence with respect to United States federal income tax
withholding matters as such Replacement-1 Revolving Credit Lender may be required to deliver
to the Administrative Agent pursuant to Section 5.4(d) and/or Section 5.4(e) of the Credit
Agreement. |
|
7. |
|
Recordation of the Replacement Revolving Credit Facility. On the Replacement-1 Revolving
Credit Commitment Effective Date, the Administrative Agent will make such recordings and other
modifications or updates to the Register as are necessary to give effect to and to reflect the
Replacement-1 Revolving Credit Facility and the existence and respective holders of the
Replacement-1 Revolving Commitments thereunder as of such date as provided for herein. In the
event that prior to the Replacement-1 Revolving Credit Commitment Effective Date, any
Replacement-1 Revolving Credit Lender (an Assigning Lender) assigns all or a portion of its
Revolving Credit Commitment to an assignee (an Assignee Lender) in accordance with the
requirements of Section 14.6 of the Credit Agreement (including, after obtaining the
receipt of any consent(s) required therefor), the parties hereby agree such assignment shall
also constitute an assignment of a corresponding portion of the Assigning Lenders
Replacement-1 Revolving Commitment to the Assignee Lender and, upon the effectiveness of such
assignment of a Revolving Credit Commitment, the Administrative Agent, the Assigning Lender,
the Assignee Lender and the Parent Borrower shall enter into an amendment to this Agreement to
reflect the assignment and assumption of the Replacement-1 Revolving Credit Commitment so
assigned. |
|
8. |
|
Post-Effectiveness Covenant. |
(a) Within 90 days after the Replacement-1 Revolving Credit Commitment Effective Date, the
Administrative Agent shall have received:
|
(i) |
|
amendments to each Mortgage to which a U.S. Credit Party is
then party (except to the extent the Administrative Agent determines such
amendment is not required) for purposes of providing the benefit of the
security interest of such Mortgage for the benefit of the Replacement-1
Revolving Credit Lenders on substantially the same basis as is provided under
the U.S. Security Agreement and U.S. Pledge Agreement (and with such other
changes as are reasonably acceptable to the Collateral Agent and the Company); |
|
|
(ii) |
|
executed legal opinions, in form and substance reasonably
satisfactory to the Administrative Agent, with respect to such amended
Mortgages; and |
|
|
(iii) |
|
with respect to each amended Mortgage, a date-down or
modification endorsement to the policy or policies of title insurance insuring
the Lien of each Mortgage, issued by a nationally recognized title insurance
company insuring the Lien of each amended Mortgage as a valid Lien on the
Mortgaged Property described therein, free of any other Liens except
as ex- |
56
|
|
|
pressly permitted by Section 10.2 of the Credit Agreement or consented to by
the Administrative Agent, together with such endorsements, coinsurance and
reinsurance as the Administrative Agent may reasonably request having the
effect of a valid, issued and binding title insurance policy. |
(b) The Company shall pay an upfront fee to the Administrative Agent for the account of each
Replacement-1 Revolving Credit Lender listed on Schedule A hereto that is indicated to be entitled
to upfront fees on such Schedule, on November 17, 2012, equal to 0.125% of its Replacement-1
Revolving Credit Commitment as in effect on such date
9. |
|
Effect of Restatement; Amendment, Modification and Waiver. Effective upon the execution and
delivery of this Agreement by each Replacement 1-Revolving Credit Lender listed on Schedule A
hereto and each of the other parties listed on the signature pages hereto, this Agreement
shall supersede the Original Joinder Agreement No. 1 in its entirety and the Original Joinder
Agreement No. 1 shall be of no further force and effect. Except as contemplated by Section 7,
this Agreement may not be amended, modified or waived except by an instrument or instruments
in writing signed and delivered on behalf of each of the parties hereto. |
|
10. |
|
Entire Agreement. This Agreement, the Existing Credit Agreement and the other Credit
Documents constitute the entire agreement among the parties with respect to the subject matter
hereof and thereof and supersede all other prior agreements and understandings, both written
and verbal, among the parties or any of them with respect to the subject matter hereof. |
|
11. |
|
GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL
BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK. |
|
12. |
|
Severability. Any term or provision of this Agreement which is invalid or unenforceable in
any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so
broad as would be enforceable. |
|
13. |
|
Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed
to be an original, but all of which shall constitute one and the same agreement. |
57
IN WITNESS WHEREOF, each of the undersigned has caused its duly authorized officer to execute
and deliver this Joinder Agreement as of November 1, 2010.
|
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|
BANK OF AMERICA, N.A.
|
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By: |
/s/ David H. Strickert
|
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Name: |
David H. Strickert |
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Title: |
Senior Vice President |
|
|
Notice Address: 100 N. Tryon St., NC1-007-17-15,
Charlotte, NC 28255
Attention: David Strickert
Telephone: 980.386.3798
Facsimile:704.719.8949
[Additional Lender Signature Pages Omitted]
58
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as
of the date first above written.
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HCA INC.
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By: |
/s/ David G. Anderson
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Name: |
David G. Anderson |
|
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Title: |
Senior Vice President
Finance and Treasurer |
|
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|
HCA UK CAPITAL LIMITED
|
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By: |
/s/ James Petkas
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Name: |
James Petkas |
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Title: |
Chief Financial Officer |
|
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|
Each of the U.S. GUARANTORS listed on Schedule
II hereto
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By: |
/s/ John M. Franck II
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Name: |
John M. Franck II |
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Title: |
Vice President and
Assistant Secretary |
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59
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EXECUTED by |
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HCA UK HOLDINGS LIMITED |
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) |
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Director |
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/s/ James Petkas |
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acting by |
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) |
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Witness: |
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/s/ Verity Broadhurst |
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as a European Guarantor |
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) |
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Verity Broadhurst |
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EXECUTED by |
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HCA UK CAPITAL LIMITED |
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) |
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Director |
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/s/ James Petkas |
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acting by |
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) |
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) |
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Witness: |
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/s/ Verity Broadhurst |
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as a European Guarantor |
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) |
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Verity Broadhurst |
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EXECUTED by |
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) |
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HCA UK SERVICES LIMITED |
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) |
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Director |
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/s/ James Petkas |
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acting by |
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) |
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) |
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Witness: |
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/s/ Verity Broadhurst |
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as a European Guarantor |
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) |
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Verity Broadhurst |
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EXECUTED by |
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) |
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HCA INTERNATIONAL |
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) |
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HOLDINGS LIMITED |
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) |
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Director |
|
/s/ James Petkas |
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acting by |
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) |
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) |
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Witness: |
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/s/ Verity Broadhurst |
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as a European Guarantor |
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) |
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Verity Broadhurst |
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EXECUTED by |
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) |
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HCA UK INVESTMENTS |
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) |
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LIMITED |
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) |
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Director |
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/s/ James Petkas |
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acting by |
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) |
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) |
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Witness: |
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/s/ Verity Broadhurst |
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as a European Guarantor |
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) |
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Verity Broadhurst |
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60
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EXECUTED by |
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) |
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THE HARLEY STREET |
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) |
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CANCER CLINIC LIMITED |
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) |
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Director |
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/s/ James Petkas |
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acting by |
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) |
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) |
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Witness: |
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/s/ Verity Broadhurst |
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as a European Guarantor |
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) |
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Verity Broadhurst |
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EXECUTED by |
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) |
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HCA INTERNATIONAL |
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) |
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LIMITED |
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) |
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Director |
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/s/ James Petkas |
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acting by |
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) |
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) |
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Witness: |
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/s/ Verity Broadhurst |
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as a European Guarantor |
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) |
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Verity Broadhurst |
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EXECUTED by |
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) |
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HCA UK LIMITED |
|
) |
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Director |
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/s/ James Petkas |
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acting by |
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) |
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) |
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Witness: |
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/s/ Verity Broadhurst |
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as a European Guarantor |
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) |
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Verity Broadhurst |
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EXECUTED by |
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) |
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ST MARTINS LIMITED |
|
) |
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Director |
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/s/ James Petkas |
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acting by |
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) |
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) |
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Witness: |
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/s/ Verity Broadhurst |
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as a European Guarantor |
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) |
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Verity Broadhurst |
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EXECUTED by |
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) |
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ST MARTINS HEALTHCARE |
|
) |
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LIMITED |
|
) |
|
Director |
|
/s/ James Petkas |
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acting by |
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) |
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) |
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Witness: |
|
/s/ Verity Broadhurst |
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as a European Guarantor |
|
) |
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Verity Broadhurst |
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EXECUTED by |
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) |
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HCA STAFFING LIMITED |
|
) |
|
Director |
|
/s/ James Petkas |
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acting by |
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) |
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) |
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Witness: |
|
/s/ Verity Broadhurst |
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as a European Guarantor |
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) |
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Verity Broadhurst |
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61
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EXECUTED by |
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) |
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LA TOUR FINANCE
LIMITED PARTNERSHIP |
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) |
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acting by |
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) |
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HCA SWITZERLAND
HOLDING SARL, general
partner acting by |
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/s/ R. Milton Johnson |
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R. Milton Johnson |
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and |
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/s/ John M. Franck II |
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John M. Franck II
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acting under the authority of the company
62
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Consented to by:
BANK OF AMERICA, N.A.,
as Administrative Agent, Letter of Credit Issuer and
Swingline Lender
|
|
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By: |
/s/ David H. Strickert
|
|
|
|
Name: |
David H. Strickert |
|
|
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Title: |
Senior Vice President |
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JPMORGAN CHASE BANK, N.A.,
as a Letter of Credit Issuer
|
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By: |
/s/ Dawn Lee Lum
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|
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Name: |
Dawn Lee Lum |
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Title: |
Executive Director |
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|
63
Schedule II
to Amended and Restated Joinder Agreement No. 1
|
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By its |
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By its |
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By the General |
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General |
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Sole |
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Partner of its Sole |
U.S. Guarantor |
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Partner |
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Member |
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Member |
American Medicorp Development Co. |
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Bay Hospital, Inc. |
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Brigham City Community Hospital, Inc. |
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Brookwood Medical Center of Gulfport, Inc. |
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Capital Division, Inc. |
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Centerpoint Medical Center of Independence, LLC |
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Central Florida Regional Hospital, Inc. |
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Central Shared Services, LLC |
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Central Tennessee Hospital Corporation |
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CHCA Bayshore, L.P.
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* |
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CHCA Conroe, L.P.
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* |
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CHCA Mainland, L.P.
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* |
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CHCA West Houston, L.P.
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* |
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CHCA Womans Hospital, L.P.
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* |
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Chippenham & Johnston-Willis Hospitals, Inc. |
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CMS GP, LLC |
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Colorado Health Systems, Inc. |
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Columbia ASC Management, L.P.
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* |
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Columbia Jacksonville Healthcare System, Inc. |
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Columbia LaGrange Hospital, Inc. |
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Columbia Medical Center of Arlington Subsidiary, L.P.
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* |
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Columbia Medical Center of Denton Subsidiary, L.P.
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* |
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Columbia Medical Center of Las Colinas, Inc. |
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Columbia Medical Center of Lewisville Subsidiary, L.P.
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* |
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Columbia Medical Center of McKinney Subsidiary, L.P.
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* |
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Columbia Medical Center of Plano Subsidiary, L.P.
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* |
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Columbia North Hills Hospital Subsidiary, L.P.
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* |
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Columbia Ogden Medical Center, Inc. |
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Columbia Parkersburg Healthcare System, LLC |
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Columbia Plaza Medical Center of Fort Worth Subsidiary,
L.P.
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* |
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Columbia Polk General Hospital, Inc. |
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Columbia Rio Grande Healthcare, L.P.
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* |
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Columbia Riverside, Inc. |
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Columbia Valley Healthcare System, L.P.
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* |
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Columbia/Alleghany Regional Hospital, Incorporated |
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Columbia/HCA John Randolph, Inc. |
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Columbine Psychiatric Center, Inc. |
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Columbus Cardiology, Inc. |
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64
2
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By its |
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By its |
|
By the General |
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|
General |
|
Sole |
|
Partner of its Sole |
U.S. Guarantor |
|
Partner |
|
Member |
|
Member |
Conroe Hospital Corporation |
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Dallas/Ft. Worth Physician, LLC |
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Dauterive Hospital Corporation |
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Dublin Community Hospital, LLC |
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Eastern Idaho Health Services, Inc. |
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Edward White Hospital, Inc. |
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El Paso Surgicenter, Inc. |
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Encino Hospital Corporation, Inc. |
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EP Health, LLC |
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Fairview Park GP, LLC |
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|
Fairview Park, Limited Partnership
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|
* |
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|
Frankfort Hospital, Inc. |
|
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|
Galen Property, LLC |
|
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|
Good Samaritan Hospital, L.P.
|
|
* |
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|
Goppert-Trinity Family Care, LLC |
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GPCH-GP, Inc. |
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Grand Strand Regional Medical Center, LLC |
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Green Oaks Hospital Subsidiary, L.P.
|
|
* |
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|
Greenview Hospital, Inc. |
|
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HCA IT&S Field Operations, Inc. |
|
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HCA IT&S Inventory Management, Inc. |
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HCA Central Group, Inc. |
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|
HCA Health Services of Florida, Inc. |
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|
HCA Health Services of Louisiana, Inc. |
|
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HCA Health Services of Oklahoma, Inc. |
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HCA Health Services of Tennessee, Inc. |
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|
HCA Health Services of Virginia, Inc. |
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|
HCA Management Services, L.P.
|
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* |
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|
HCA Realty, Inc. |
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|
HD&S Corp. Successor, Inc. |
|
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Health Midwest Office Facilities Corporation |
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|
Health Midwest Ventures Group, Inc. |
|
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HTI MOB, LLC
|
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|
* |
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|
Hendersonville Hospital Corporation |
|
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Hospital Corporation of Tennessee |
|
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Hospital Corporation of Utah |
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Hospital Development Properties, Inc. |
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HSS Holdco, LLC |
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HSS Systems VA, LLC |
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HSS Systems, LLC |
|
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|
HSS Virginia, L.P.
|
|
* |
|
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|
HTI Memorial Hospital Corporation |
|
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|
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|
Integrated Regional Lab, LLC |
|
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|
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|
|
Integrated Regional Laboratories, LLP
|
|
* |
|
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65
3
|
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By its |
|
By its |
|
By the General |
|
|
General |
|
Sole |
|
Partner of its Sole |
U.S. Guarantor |
|
Partner |
|
Member |
|
Member |
JFK Medical Center Limited Partnership
|
|
* |
|
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|
KPH-Consolidation, Inc. |
|
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|
Lakeland Medical Center, LLC |
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Lakeview Medical Center, LLC |
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Largo Medical Center, Inc. |
|
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Las Vegas Surgicare, Inc. |
|
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Lawnwood Medical Center, Inc. |
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Lewis-Gale Hospital, Incorporated |
|
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Lewis-Gale Medical Center, LLC |
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Lewis-Gale Physicians, LLC |
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Los Robles Regional Medical Center |
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Management Services Holdings, Inc. |
|
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Marietta Surgical Center, Inc. |
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Marion Community Hospital, Inc. |
|
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MCA Investment Company |
|
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Medical Centers of Oklahoma, LLC |
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Medical Office Buildings of Kansas, LLC |
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Memorial Healthcare Group, Inc. |
|
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Midwest Division ACH, LLC |
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Midwest Division LRHC, LLC |
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Midwest Division LSH, LLC |
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Midwest Division MCI, LLC |
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Midwest Division MMC, LLC |
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Midwest Division OPRMC, LLC |
|
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Midwest Division PFC, LLC |
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Midwest Division RBH, LLC |
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Midwest Division RMC, LLC |
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Midwest Division RPC, LLC |
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Midwest Holdings, Inc. |
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Montgomery Regional Hospital, Inc. |
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Mountain View Hospital, Inc. |
|
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Nashville Shared Services General Partnership
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|
* |
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National Patient Account Services, Inc. |
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New Port Richey Hospital, Inc. |
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New Rose Holding Company, Inc. |
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North Florida Immediate Care Center, Inc. |
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North Florida Regional Medical Center, Inc. |
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Northern Utah Healthcare Corporation |
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Northern Virginia Community Hospital, LLC |
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Northlake Medical Center, LLC |
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Notami Hospitals of Louisiana, Inc. |
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Notami Hospitals, LLC |
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Okaloosa Hospital, Inc. |
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Okeechobee Hospital, Inc. |
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66
4
|
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By its |
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By its |
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By the General |
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|
General |
|
Sole |
|
Partner of its Sole |
U.S. Guarantor |
|
Partner |
|
Member |
|
Member |
Outpatient Cardiovascular Center of Central Florida, LLC |
|
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Palms West Hospital Limited Partnership
|
|
* |
|
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|
Palmyra Park Hospital, Inc. |
|
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|
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|
Pasadena Bayshore Hospital, Inc. |
|
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|
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Plantation General Hospital Limited Partnership
|
|
* |
|
|
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|
Pulaski Community Hospital, Inc. |
|
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Redmond Park Hospital, LLC |
|
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Redmond Physician Practice Company |
|
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Regional Health System of Acadiana, LLC, The |
|
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Reston Hospital Center, LLC |
|
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Retreat Hospital, LLC |
|
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Rio Grande Regional Hospital, Inc. |
|
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|
Riverside Healthcare System, L.P.
|
|
* |
|
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|
Riverside Hospital, Inc. |
|
|
|
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|
|
Samaritan, LLC |
|
|
|
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|
San Jose Healthcare System, LP
|
|
* |
|
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|
San Jose Hospital, L.P.
|
|
* |
|
|
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|
San Jose Medical Center, LLC |
|
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San Jose, LLC |
|
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Sarasota Doctors Hospital, Inc. |
|
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SJMC, LLC |
|
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Southern Hills Medical Center, LLC |
|
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Spotsylvania Medical Center, Inc. |
|
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Spring Branch Medical Center, Inc. |
|
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Spring Hill Hospital, Inc. |
|
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St. Marks Lone Peak Hospital, Inc. |
|
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Sun City Hospital, Inc. |
|
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Sunrise Mountainview Hospital, Inc. |
|
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Surgicare of Brandon, Inc. |
|
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|
Surgicare of Florida, Inc. |
|
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|
Surgicare of Houston Womens, Inc. |
|
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|
Surgicare of Manatee, Inc. |
|
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|
Surgicare of New Port Richey, Inc. |
|
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|
Surgicare of Palms West, LLC |
|
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|
Surgicare of Riverside, LLC
|
|
|
|
|
|
* |
Tallahassee Medical Center, Inc. |
|
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|
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|
TCMC Madison-Portland, Inc. |
|
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|
Terre Haute Hospital GP, Inc. |
|
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|
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|
Terre Haute Hospital Holdings, Inc. |
|
|
|
|
|
|
Terre Haute MOB, L.P.
|
|
* |
|
|
|
|
Terre Haute Regional Hospital, L.P.
|
|
* |
|
|
|
|
Timpanogos Regional Medical Services, Inc. |
|
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Trident Medical Center, LLC |
|
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Utah Medco, LLC |
|
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67
5
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By its |
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By its |
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By the General |
|
|
General |
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Sole |
|
Partner of its Sole |
U.S. Guarantor |
|
Partner |
|
Member |
|
Member |
VH Holdco, Inc. |
|
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VH Holdings, Inc. |
|
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Virginia Psychiatric Company, Inc. |
|
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|
W & C Hospital, Inc. |
|
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Walterboro Community Hospital, Inc. |
|
|
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Wesley Medical Center, LLC |
|
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West Florida Regional Medical Center, Inc. |
|
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West Valley Medical Center, Inc. |
|
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Western Plains Capital, Inc. |
|
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WHMC, Inc. |
|
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Womans Hospital of Texas, Incorporated |
|
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|
68
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 9, 2010 (November 9,
2010)
HCA INC.
(Exact name of registrant as specified in its charter)
|
|
|
|
|
Delaware
(State or other
jurisdiction
of incorporation)
|
|
001-11239
(Commission File Number)
|
|
75-2497104
(IRS Employer
Identification No.) |
|
|
|
One Park Plaza, Nashville, Tennessee
(Address of principal executive offices)
|
|
37203
(Zip Code) |
Registrants telephone number, including area code: (615) 344-9551
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
|
|
|
o
|
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
|
|
o
|
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
|
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|
o
|
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
|
|
o
|
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
69
On November 9, 2010, the Company announced that HCA Holdings, Inc. (Holdings) intends to
offer $1.525 billion aggregate principal amount of senior unsecured notes due 2021 (the
Notes). Holdings is a Delaware corporation recently formed under the name HCA Subsidiary,
Inc. and a wholly owned subsidiary of HCA Inc. HCA Subsidiary, Inc., whose name will be
changed to HCA Holdings, Inc., was formed in connection with HCA Inc.s proposed corporate
reorganization whereby, upon the consummation thereof, HCA Inc. will become a wholly owned
subsidiary of Holdings. Holdings intends to use the net proceeds of the offering, together
with borrowings by HCA Inc. under its senior secured credit facilities, to make a
distribution to Holdings stockholders and optionholders and to pay related fees and
expenses. The corporate reorganization is subject to the receipt of certain regulatory
approvals and, if these approvals are not received by the closing date of the Notes
offering, the net proceeds therefrom will be held in escrow until such time as the corporate
reorganization is completed and the conditions to release the funds from escrow have been
satisfied.
The Notes have not been registered under the Securities Act of 1933, as amended (the
Securities Act), and, unless so registered, may not be offered or sold in the United
States absent registration or an applicable exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act and other applicable securities
laws.
The text of the press release is set forth as Exhibit 99.2
|
|
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Item 9.01. |
|
Financial Statements and Exhibits. |
(d)
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|
Exhibit Number |
|
Exhibit Title |
99.2
|
|
Press Release dated November 9, 2010 |
70
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 hereunto duly authorized.
|
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HCA INC.
(Registrant)
|
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By: |
/s/ R. Milton Johnson
|
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R. Milton Johnson |
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Executive Vice President and Chief Financial
Officer |
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|
Date: November 9, 2010
71
EXHIBIT INDEX
|
|
|
Exhibit Number |
|
Exhibit Title |
99.2
|
|
Press Release dated November 9, 2010 |
72
Exhibit 99.2
|
|
|
|
|
news |
|
|
FOR IMMEDIATE RELEASE |
INVESTOR CONTACT:
|
|
MEDIA CONTACT: |
Mark Kimbrough
|
|
Ed Fishbough |
615-344-2688
|
|
615-344-2810 |
HCA Announces Offering of $1.525 Billion Senior Unsecured Notes
Nashville, Tenn., November 9, 2010 HCA Inc. today announced that HCA Holdings, Inc. (Holdings)
intends to offer $1.525 billion aggregate principal amount of senior unsecured notes due 2021 (the
Notes). Holdings is a Delaware corporation recently formed under the name HCA Subsidiary, Inc.
and a wholly owned subsidiary of HCA Inc. HCA Subsidiary, Inc., whose name will be changed to HCA
Holdings, Inc., was formed in connection with HCA Inc.s proposed corporate reorganization whereby,
upon the consummation thereof, HCA Inc. will become a wholly owned subsidiary of Holdings.
Holdings intends to use the net proceeds of the offering, together with borrowings by HCA Inc.
under its senior secured credit facilities, to make a distribution to Holdings stockholders and
optionholders and to pay related fees and expenses. The corporate reorganization is subject to the
receipt of certain regulatory approvals and, if these approvals are not received by the closing
date of the Notes offering, the net proceeds therefrom will be held in escrow until such time as
the corporate reorganization is completed and the conditions to release the funds from escrow have
been satisfied.
The Notes have not been registered under the Securities Act of 1933, as amended (the
Securities Act), and, unless so registered, may not be offered or sold in the United States
absent registration or an applicable exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and other applicable securities laws.
This press release shall not constitute an offer to sell or the solicitation of an offer to
buy, nor shall there be any sale of the Notes in any jurisdiction in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under the securities laws of any
such jurisdiction. This notice is being issued pursuant to and in accordance with Rule 135(c) under
the Securities Act.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements based on current management
expectations. Those forward-looking statements include all statements other than those made solely
with respect to historical fact. Numerous risks, uncertainties and other factors may cause actual
results to differ materially from those expressed in any forward-looking statements. These factors
include, but are not limited to, (1) the ability to recognize the benefits of the recapitalization
described in our filings with the SEC, (2) the impact of the substantial indebtedness incurred to
finance the recapitalization and distributions and proposed distributions to stockholders and the
ability to refinance such indebtedness on acceptable terms, (3) the effects related to the
enactment of federal health care reform, the possible enactment of additional federal or state
health care reform and possible changes to health care reform and other federal, state or local
laws or regulations affecting the health care industry, (4) increases, particularly during periods
of economic slowdown, 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 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 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
73
2
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 liabilities and other claims that may
be asserted against us, and (20) other risk factors described in our annual report on Form 10-K for
the year ended December 31, 2009 and 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 managements 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.
74