10-QPeriod: Q3 FY2005

HCA Healthcare, Inc. Quarterly Report for Q3 Ended Sep 30, 2005

Filed November 8, 2005For Securities:HCA

Summary

HCA Healthcare, Inc. (HCA) reported solid financial results for the third quarter and first nine months of 2005, demonstrating revenue growth and improved net income compared to the prior year. Revenues increased by 4.0% in the third quarter to $6.0 billion and by 4.1% for the nine-month period to $18.3 billion. Net income for the third quarter rose to $280 million ($0.62 per diluted share) from $227 million ($0.47 per diluted share) in the same period last year, and for the nine months, net income increased to $1.1 billion ($2.46 per diluted share) from $924 million ($1.88 per diluted share). The company implemented a new uninsured discount policy effective January 1, 2005, which impacted revenue recognition and the provision for doubtful accounts. While this policy reduced reported revenues and increased the provision for doubtful accounts as a percentage of reported revenues, management believes it provides a more comparable view of operational trends when adjusted. The company also experienced costs related to Hurricanes Katrina and Rita, but these were partially offset by a tax benefit from repatriating foreign earnings. HCA continues to manage its debt effectively and reported compliance with its debt covenants.

Key Highlights

  • 1Revenues increased by 4.0% to $6.0 billion for Q3 2005 and by 4.1% to $18.3 billion for the first nine months of 2005.
  • 2Net income grew significantly, with Q3 2005 net income at $280 million (up from $227 million in Q3 2004) and nine-month net income at $1.1 billion (up from $924 million in the prior year).
  • 3Diluted EPS improved to $0.62 in Q3 2005 and $2.46 for the nine-month period, up from $0.47 and $1.88, respectively, in the prior year.
  • 4A new uninsured discount policy implemented in 2005 impacted revenue and provision for doubtful accounts; adjusted figures show stronger underlying revenue per equivalent admission growth.
  • 5The company incurred costs associated with Hurricanes Katrina and Rita, partially offset by a tax benefit from foreign earnings repatriation.
  • 6HCA's financial position remains strong, with $721 million in cash and cash equivalents at the end of Q3 2005 and a credit facility with $1.693 billion available.
  • 7The company is addressing significant ongoing tax disputes with the IRS, though management believes current provisions are adequate and resolution will not materially impact financial position.

Frequently Asked Questions

HCA reported a 4.0% increase in revenue to $6.0 billion for the third quarter ended September 30, 2005, and a 4.1% increase to $18.3 billion for the first nine months of 2005 compared to the same periods in 2004. This growth was driven by increases in equivalent admissions and revenue per equivalent admission.

HCA implemented a revised uninsured discount policy on January 1, 2005. This policy resulted in $241 million in discounts recorded in the third quarter and $534 million for the first nine months. While these discounts reduced reported revenues and increased the provision for doubtful accounts as a percentage of revenues, the company believes that adjusted figures, excluding these discounts, provide a clearer view of underlying operational trends and revenue per equivalent admission growth.

Yes, HCA is involved in ongoing disputes with the IRS concerning tax liabilities for several past years. While the IRS has claimed significant amounts, HCA believes adequate provisions have been made and that the final resolution will not materially adversely affect its financial position. Additionally, HCA received a subpoena from the U.S. Attorney's office and was informed of an SEC investigation related to trading in the company's securities, and it intends to cooperate fully.

Profitability improved significantly. Net income for the third quarter of 2005 was $280 million, or $0.62 per diluted share, an increase from $227 million, or $0.47 per diluted share, in the third quarter of 2004. For the first nine months of 2005, net income was $1.1 billion, or $2.46 per diluted share, up from $924 million, or $1.88 per diluted share, in the comparable 2004 period.