10-QPeriod: Q1 FY2012

HCA Healthcare, Inc. Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 9, 2012For Securities:HCA

Summary

HCA Healthcare, Inc. reported strong financial performance for the first quarter of 2012, with revenues increasing by 13.5% to $8.4 billion compared to the same period in 2011. This growth was driven by a 11.4% increase in equivalent admissions and a 1.9% rise in revenue per equivalent admission, partly bolstered by the full consolidation of the HCA-HealthONE LLC venture. Net income attributable to HCA Holdings, Inc. significantly improved, reaching $540 million ($1.18 per diluted share) from $240 million ($0.52 per diluted share) in the prior year. This improvement was aided by substantial Medicare revenue adjustments totaling $188 million, though partially offset by a retroactive reduction of $83 million. The company also benefited from a decrease in interest expense by $91 million due to a lower average effective interest rate on its debt. However, cash flows from operations saw a decline primarily due to changes in working capital. HCA Healthcare continues to manage its significant debt load and is actively engaged in capital allocation, including a $971 million distribution to stockholders declared in February 2012. The company maintains a positive outlook, anticipating continued revenue growth and managing operational costs, while also addressing ongoing legal and regulatory matters.

Financial Highlights

45 data points
Beta

Revenue

$8.40B

Net Income

$540.00M

6.4% Net Margin

EPS (Diluted)

$1.18

Total Assets

$27.14B

Cash & Equivalents

$471.00M

Free Cash Flow

$462.00M

Financial Statements
Beta
Revenue$8.40B
Interest Expense$442.00M
Net Income$540.00M
EPS (Basic)$1.23
EPS (Diluted)$1.18
Shares Outstanding (Basic)437.94M
Shares Outstanding (Diluted)458.31M

Key Highlights

  • 1Revenues increased 13.5% year-over-year to $8.4 billion in Q1 2012.
  • 2Net income attributable to HCA Holdings, Inc. more than doubled to $540 million ($1.18/share) from $240 million ($0.52/share) in Q1 2011.
  • 3Significant Medicare revenue adjustments of $188 million positively impacted Q1 2012 results.
  • 4Interest expense decreased by $91 million due to lower average effective interest rates on debt.
  • 5Total equivalent admissions increased by 11.4%, indicating robust patient volume growth.
  • 6The company declared a $2.00 per share distribution to stockholders, totaling approximately $971 million.
  • 7Cash flows from operations decreased by $121 million, primarily due to changes in working capital.

Frequently Asked Questions

Revenue growth was primarily driven by a combination of increased patient volumes, measured by equivalent admissions which grew 11.4%, and a slight increase in revenue per equivalent admission of 1.9%. The full consolidation of the HCA-HealthONE LLC venture also contributed significantly to the consolidated revenue figures.

Two Medicare revenue adjustments related to prior periods resulted in a net increase of $188 million to revenues in the first quarter of 2012. Specifically, a Rural Floor Provision Settlement added to revenues, while a retroactive adjustment for SSI ratios reduced Medicare revenues. These adjustments added $170 million to income before income taxes, or $0.22 per diluted share.

HCA Healthcare is a highly leveraged company with total debt of $27.9 billion at March 31, 2012. Interest expense decreased by $91 million due to a lower average effective interest rate on its debt. The company actively manages its debt through refinancing and issuance of new debt, such as the $1.35 billion in senior secured notes issued in February 2012. Management believes that cash flows from operations and available credit facilities are sufficient to meet liquidity needs.

The report mentions ongoing IRS audits and disputes, particularly concerning federal income tax returns for 2005-2009. It also notes a shareholder class action lawsuit filed in October 2011 related to the company's initial public offering disclosures, and a Department of Justice review concerning hospital charges for implantable cardio-defibrillators. Management believes the resolution of these matters will not have a material adverse effect on the company's financial position or results of operations, but acknowledges potential risks.