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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-Q

 

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

Or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     

Commission file number 1-11239

 

 

HCA Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   27-3865930

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

One Park Plaza

Nashville, Tennessee

  37203
(Address of principal executive offices)   (Zip Code)

(615) 344-9551

(Registrant’s 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  x    No  ¨

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  x    No  ¨

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.

 

Large accelerated filer

 

x

  

Accelerated filer

 

¨

Non-accelerated filer

 

¨  (Do not check if a smaller reporting company)

  

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  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

 

Class of Common Stock

 

Outstanding at July 31, 2015

Voting common stock, $.01 par value   415,192,000 shares

 

 

 


Table of Contents

HCA HOLDINGS, INC.

Form 10-Q

June 30, 2015

 

         Page of
Form  10-Q
 

Part I.

  Financial Information   

Item 1.

  Financial Statements (Unaudited):   
 

Condensed Consolidated Income Statements — for the quarters and six months ended June  30, 2015 and 2014

     2   
 

Condensed Consolidated Comprehensive Income Statements — for the quarters and six months ended June 30, 2015 and 2014

     3   
 

Condensed Consolidated Balance Sheets — June 30, 2015 and December 31, 2014

     4   
 

Condensed Consolidated Statements of Cash Flows — for the six months ended June 30, 2015 and 2014

     5   
 

Notes to Condensed Consolidated Financial Statements

     6   

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     29   

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

     49   

Item 4.

 

Controls and Procedures

     49   

Part II.

  Other Information   

Item 1.

 

Legal Proceedings

     49   

Item 1A.

 

Risk Factors

     52   

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

     52   

Item 6.

 

Exhibits

     53   

Signatures

     54   

 

1


Table of Contents

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS

FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

Unaudited

(Dollars in millions, except per share amounts)

 

     Quarter     Six Months  
     2015     2014     2015     2014  

Revenues before provision for doubtful accounts

   $ 10,932      $ 9,958      $ 21,254      $ 19,641   

Provision for doubtful accounts

     1,035        728        1,681        1,579   
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

     9,897        9,230        19,573        18,062   

Salaries and benefits

     4,492        4,098        8,890        8,148   

Supplies

     1,670        1,532        3,308        3,064   

Other operating expenses

     1,755        1,644        3,472        3,289   

Electronic health record incentive income

     (18     (35     (37     (65

Equity in earnings of affiliates

     (10     (9     (29     (18

Depreciation and amortization

     469        454        942        901   

Interest expense

     425        427        844        887   

Losses (gains) on sales of facilities

     5        (11     (4     (32

Losses on retirement of debt

     125        226        125        226   

Legal claim costs

                          78   
  

 

 

   

 

 

   

 

 

   

 

 

 
     8,913        8,326        17,511        16,478   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     984        904        2,062        1,584   

Provision for income taxes

     319        272        677        498   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     665        632        1,385        1,086   

Net income attributable to noncontrolling interests

     158        149        287        256   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to HCA Holdings, Inc.

   $ 507      $ 483      $ 1,098      $ 830   
  

 

 

   

 

 

   

 

 

   

 

 

 

Per share data:

        

Basic earnings per share

   $ 1.22      $ 1.10      $ 2.63      $ 1.88   

Diluted earnings per share

   $ 1.18      $ 1.07      $ 2.54      $ 1.82   

Shares used in earnings per share calculations (in millions):

        

Basic

     416.407        438.833        418.267        440.482   

Diluted

     429.369        453.009        432.329        455.220   

See accompanying notes.

 

2


Table of Contents

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS

FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

Unaudited

(Dollars in millions)

 

     Quarter     Six Months  
     2015     2014     2015     2014  

Net income

   $ 665      $ 632      $ 1,385      $ 1,086   

Other comprehensive income before taxes:

        

Foreign currency translation

     64        30        13        40   

Unrealized (losses) gains on available-for-sale securities

     (5     4        (4     8   

Defined benefit plans

                            

Pension costs included in salaries and benefits

     5        4        11        8   
  

 

 

   

 

 

   

 

 

   

 

 

 
     5        4        11        8   

Change in fair value of derivative financial instruments

     (7     (19     (30     (29

Interest costs included in interest expense

     31        32        62        65   
  

 

 

   

 

 

   

 

 

   

 

 

 
     24        13        32        36   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income before taxes

     88        51        52        92   

Income taxes related to other comprehensive income items

     34        18        19        34   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

     54        33        33        58   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     719        665        1,418        1,144   

Comprehensive income attributable to noncontrolling interests

     158        149        287        256   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to HCA Holdings, Inc.

   $ 561      $ 516      $ 1,131      $ 888   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes.

 

3


Table of Contents

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(Dollars in millions)

 

     June 30,
2015
    December 31,
2014
 
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 673      $ 566   

Accounts receivable, less allowance for doubtful accounts of $4,798 and $5,011

     5,804        5,694   

Inventories

     1,348        1,279   

Deferred income taxes

     376        366   

Other

     1,092        1,025   
  

 

 

   

 

 

 
     9,293        8,930   

Property and equipment, at cost

     33,803        32,980   

Accumulated depreciation

     (19,243     (18,625
  

 

 

   

 

 

 
     14,560        14,355   

Investments of insurance subsidiaries

     404        494   

Investments in and advances to affiliates

     182        165   

Goodwill and other intangible assets

     6,484        6,416   

Other

     787        620   
  

 

 

   

 

 

 
   $ 31,710      $ 30,980   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ DEFICIT     

Current liabilities:

    

Accounts payable

   $ 1,884      $ 2,035   

Accrued salaries

     1,282        1,370   

Other accrued expenses

     1,770        1,737   

Long-term debt due within one year

     1,374        338   
  

 

 

   

 

 

 
     6,310        5,480   

Long-term debt, less net debt issuance costs of $167 and $219

     28,363        29,088   

Professional liability risks

     1,132        1,078   

Income taxes and other liabilities

     1,860        1,832   

Stockholders’ deficit:

    

Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 416,348,900 shares in 2015 and 420,477,900 shares in 2014

     4        4   

Accumulated other comprehensive loss

     (290     (323

Retained deficit

     (7,120     (7,575
  

 

 

   

 

 

 

Stockholders’ deficit attributable to HCA Holdings, Inc.

     (7,406     (7,894

Noncontrolling interests

     1,451        1,396   
  

 

 

   

 

 

 
     (5,955     (6,498
  

 

 

   

 

 

 
   $ 31,710      $ 30,980   
  

 

 

   

 

 

 

See accompanying notes.

 

4


Table of Contents

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

Unaudited

(Dollars in millions)

 

     2015     2014  

Cash flows from operating activities:

    

Net income

   $ 1,385      $ 1,086   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Decrease in cash from operating assets and liabilities:

    

Accounts receivable

     (1,784     (1,827

Provision for doubtful accounts

     1,681        1,579   
  

 

 

   

 

 

 

Accounts receivable, net

     (103     (248

Inventories and other assets

     (195     (219

Accounts payable and accrued expenses

     (117     (105

Depreciation and amortization

     942        901   

Income taxes

     (101     (94

Gains on sales of facilities

     (4     (32

Losses on retirement of debt

     125        226   

Legal claim costs

            78   

Amortization of debt issuance costs

     19        23   

Share-based compensation

     103        77   

Other

     21          
  

 

 

   

 

 

 

Net cash provided by operating activities

     2,075        1,693   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchase of property and equipment

     (1,004     (913

Acquisition of hospitals and health care entities

     (95     (27

Disposal of hospitals and health care entities

     22        32   

Change in investments

     67        43   

Other

     1        1   
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,009     (864
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Issuances of long-term debt

     4,048        3,502   

Net change in revolving bank credit facilities

     (300     340   

Repayment of long-term debt

     (3,644     (3,482

Distributions to noncontrolling interests

     (237     (197

Payment of debt issuance costs

     (33     (49

Repurchases of common stock

     (940     (750

Income tax benefits

     197        75   

Other

     (50     (24
  

 

 

   

 

 

 

Net cash used in financing activities

     (959     (585
  

 

 

   

 

 

 

Change in cash and cash equivalents

     107        244   

Cash and cash equivalents at beginning of period

     566        414   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 673      $ 658   
  

 

 

   

 

 

 

Interest payments

   $ 810      $ 899   

Income tax payments, net

   $ 581      $ 517   

See accompanying notes.

 

5


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Reporting Entity

HCA Holdings, 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 Holdings, Inc. and partnerships and joint ventures in which such subsidiaries are partners. At June 30, 2015, these affiliates owned and operated 168 hospitals, 112 freestanding surgery centers and provided extensive outpatient and ancillary services. HCA Holdings, Inc.’s facilities are located in 20 states and England. The terms “Company,” “HCA,” “we,” “our” or “us,” as used herein and unless otherwise stated or indicated by context, refer to HCA Holdings, Inc. and its affiliates. The terms “facilities” or “hospitals” refer to entities owned and operated by affiliates of HCA and the term “employees” refers to employees of affiliates of HCA.

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 “costs of revenues” items. Costs that could be classified as general and administrative would include our corporate office costs, which were $84 million and $67 million for the quarters ended June 30, 2015 and 2014, respectively, and $158 million and $135 million for the six months ended June 30, 2015 and 2014, respectively. Operating results for the quarter and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. 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, 2014.

 

6


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Revenues

Revenues are recorded during the period the health care services are provided, based upon the estimated amounts due from the patients and third-party payers. Third-party payers include federal and state agencies (under Medicare, Medicaid and other programs), managed care health plans (includes the health insurance exchanges), commercial insurance companies and employers. Estimates of contractual allowances under managed care health plans are based upon the payment terms specified in the related contractual agreements. Revenues related to uninsured patients and copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts). We also record a provision for doubtful accounts related to uninsured accounts to record the net self-pay revenues at the estimated amounts we expect to collect. Our revenues from third-party payers, the uninsured and other payers for the quarters and six months ended June 30, 2015 and 2014 are summarized in the following table (dollars in millions):

 

     Quarter  
     2015      Ratio     2014      Ratio  

Medicare

   $ 2,144         21.7   $ 2,040         22.1

Managed Medicare

     1,016         10.3        906         9.8   

Medicaid

     408         4.1        588         6.4   

Managed Medicaid

     571         5.8        452         4.9   

Managed care and other insurers

     5,461         55.1        4,959         53.8   

International (managed care and other insurers)

     327         3.3        334         3.6   
  

 

 

    

 

 

   

 

 

    

 

 

 
     9,927         100.3        9,279         100.6   

Uninsured

     558         5.6        318         3.4   

Other

     447         4.5        361         3.9   
  

 

 

    

 

 

   

 

 

    

 

 

 

Revenues before provision for doubtful accounts

     10,932         110.4        9,958         107.9   

Provision for doubtful accounts

     (1,035      (10.4     (728      (7.9
  

 

 

    

 

 

   

 

 

    

 

 

 

Revenues

   $     9,897         100.0   $     9,230         100.0
  

 

 

    

 

 

   

 

 

    

 

 

 
     Six Months  
     2015      Ratio     2014      Ratio  

Medicare

   $ 4,378         22.4   $ 4,165         23.1

Managed Medicare

     2,068         10.6        1,805         10.0   

Medicaid

     860         4.4        1,032         5.7   

Managed Medicaid

     1,120         5.7        873         4.8   

Managed care and other insurers

     10,677         54.5        9,669         53.5   

International (managed care and other insurers)

     648         3.3        660         3.7   
  

 

 

    

 

 

   

 

 

    

 

 

 
     19,751         100.9        18,204         100.8   

Uninsured

     626         3.2        706         3.9   

Other

     877         4.5        731         4.0   
  

 

 

    

 

 

   

 

 

    

 

 

 

Revenues before provision for doubtful accounts

     21,254         108.6        19,641         108.7   

Provision for doubtful accounts

     (1,681      (8.6     (1,579      (8.7
  

 

 

    

 

 

   

 

 

    

 

 

 

Revenues

   $     19,573         100.0   $     18,062         100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

The decline in Medicaid revenues for the quarter and the six months ended June 30, 2015 compared to the quarter and six months ended June 30, 2014 was primarily due to our recording of an adjustment to Medicaid revenues during the quarter ended June 30, 2014 of $142 million, or $0.20 per diluted share, related to the receipt of reimbursements in excess of our estimates for the indigent care component of the Texas Medicaid Waiver Program for the program year ended September 30, 2013.

 

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Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Recent Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board issued a final, converged, principles-based standard on revenue recognition. Companies across all industries will use a five-step model to recognize revenue from customer contracts. The new standard, which replaces nearly all existing United States Generally Accepted Accounting Principles (“US GAAP”) and International Financial Reporting Standards revenue recognition guidance, will require significant management judgment in addition to changing the way many companies recognize revenue in their financial statements. The standard was originally scheduled to become effective for public entities for annual and interim periods beginning after December 15, 2016. Early adoption was originally not to be permitted under US GAAP. In July 2015, the FASB decided to defer the effective date of the new revenue standard by one year, but will permit entities to adopt one year earlier if they choose (i.e., the original effective date). The FASB decided, based on its outreach to various stakeholders and forthcoming exposure drafts, which amend the new revenue standard, that a deferral was necessary to provide adequate time to effectively implement the new standard. We are continuing to evaluate the effects the adoption of this standard will have on our financial statements and financial disclosures.

In April 2015, the FASB issued Accounting Standards Update 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The guidance in the new standard is limited to the presentation of debt issuance costs. The recognition and measurement guidance for debt issuance costs are not affected by ASU 2015-03. We elected to adopt the new presentation in the first quarter of 2015, and the applicable prior year amounts have been reclassified in accordance with ASU 2015-03.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

NOTE 2 — ACQUISITIONS AND DISPOSITIONS

During the six months ended June 30, 2015, we paid $15 million to acquire a hospital and $80 million to acquire other nonhospital health care entities. During the six months ended June 30, 2014, we paid $14 million to acquire a hospital and $13 million to acquire other nonhospital health care entities.

During the six months ended June 30, 2015, we received proceeds of $22 million and recognized net pretax gains of $4 million related to sales of real estate and other investments. During the six months ended June 30, 2014, we received proceeds of $32 million and recognized net pretax gains of $32 million related to sales of real estate and other investments.

NOTE 3 — INCOME TAXES

During 2014, the IRS Examination Division began an audit of HCA Holdings Inc.’s 2011 and 2012 federal income tax returns. We are also subject to examination by state and foreign taxing authorities.

Our liability for unrecognized tax benefits was $546 million, including accrued interest of $67 million, as of June 30, 2015 ($548 million and $58 million, respectively, as of December 31, 2014). Unrecognized tax benefits of $224 million ($205 million as of December 31, 2014) would affect the effective rate, if recognized. The provision for income taxes reflects $4 million ($2 million, net of tax) of interest expense related to taxing authority examinations for each of the quarters ended June 30, 2015 and 2014. The provision for income taxes

 

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Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 3 — INCOME TAXES (continued)

 

reflects $4 million and $8 million ($2 million and $5 million, net of tax) of interest expense related to taxing authority examinations for the six months ended June 30, 2015 and 2014, respectively. The provision for income taxes for the quarter and six months ended June 30, 2014 also reflects a reduction of $22 million related primarily to resolutions of prior year examinations.

Depending on the resolution of any IRS, state and foreign tax disputes, the completion of examinations by federal, state or foreign taxing authorities, or the expiration of statutes of limitation for specific taxing jurisdictions, we believe it is reasonably possible that 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 4 — 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, stock appreciation rights and restricted share units, computed using the treasury stock method.

The following table sets forth the computation of basic and diluted earnings per share for the quarters and six months ended June 30, 2015 and 2014 (dollars and shares in millions, except per share amounts):

 

     Quarter      Six Months  
     2015      2014      2015      2014  

Net income attributable to HCA Holdings, Inc.

   $ 507       $ 483       $ 1,098       $ 830   

Weighted average common shares outstanding

     416.407         438.833         418.267         440.482   

Effect of dilutive incremental shares

     12.962         14.176         14.062         14.738   
  

 

 

    

 

 

    

 

 

    

 

 

 

Shares used for diluted earnings per share

     429.369         453.009         432.329         455.220   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share:

           

Basic earnings per share

   $ 1.22       $ 1.10       $ 2.63       $ 1.88   

Diluted earnings per share

   $ 1.18       $ 1.07       $ 2.54       $ 1.82   

NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES

A summary of our insurance subsidiaries’ investments at June 30, 2015 and December 31, 2014 follows (dollars in millions):

 

     June 30, 2015  
     Amortized
Cost
     Unrealized
Amounts
    Fair
Value
 
        Gains      Losses    

Debt securities:

          

States and municipalities

   $ 433       $ 14       $ (1   $ 446   

Money market funds

     32                        32   
  

 

 

    

 

 

    

 

 

   

 

 

 
     465         14         (1     478   

Equity securities

     1         2                3   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 466       $ 16       $ (1     481   
  

 

 

    

 

 

    

 

 

   

Amounts classified as current assets

             (77
          

 

 

 

Investment carrying value

           $ 404   
          

 

 

 

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES (continued)

 

     December 31, 2014  
     Amortized
Cost
     Unrealized
Amounts
    Fair
Value
 
        Gains      Losses    

Debt securities:

          

States and municipalities

   $ 477       $ 18       $ (1   $ 494   

Money market funds

     61                        61   
  

 

 

    

 

 

    

 

 

   

 

 

 
     538         18         (1     555   

Equity securities

     1         2                3   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 539       $ 20       $ (1     558   
  

 

 

    

 

 

    

 

 

   

Amounts classified as current assets

             (64
          

 

 

 

Investment carrying value

           $ 494   
          

 

 

 

At June 30, 2015 and December 31, 2014, the investments of our insurance subsidiaries were classified as “available-for-sale.” Changes in temporary unrealized gains and losses are recorded as adjustments to other comprehensive income (loss). Amounts classified as current assets at June 30, 2015 include $25 million to be distributed to the Company from an insurance subsidiary.

Scheduled maturities of investments in debt securities at June 30, 2015 were as follows (dollars in millions):

 

     Amortized
Cost
     Fair
Value
 

Due in one year or less

   $ 79       $ 80   

Due after one year through five years

     165         168   

Due after five years through ten years

     121         126   

Due after ten years

     100         104   
  

 

 

    

 

 

 
   $ 465       $ 478   
  

 

 

    

 

 

 

The average expected maturity of the investments in debt securities at June 30, 2015 was 3.9 years, compared to the average scheduled maturity of 5.5 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 their scheduled maturity date.

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. 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.

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 6 — FINANCIAL INSTRUMENTS (continued)

Interest Rate Swap Agreements (continued)

 

The following table sets forth our interest rate swap agreements, which have been designated as cash flow hedges, at June 30, 2015 (dollars in millions):

 

     Notional
Amount
     Maturity Date      Fair
Value
 

Pay-fixed interest rate swaps

   $ 3,000         December 2016       $ (134

Pay-fixed interest rate swaps

     1,000         December 2017         (33

During the next 12 months, we estimate $115 million will be reclassified from other comprehensive income (“OCI”) to interest expense.

Derivatives — Results of Operations

The following table presents the effect of our interest rate swaps on our results of operations for the six months ended June 30, 2015 (dollars in millions):

 

Derivatives in Cash Flow Hedging Relationships

   Amount of Loss
Recognized in OCI on
Derivatives, Net of  Tax
     Location of Loss
Reclassified from
Accumulated OCI
into Operations
     Amount of Loss
Reclassified from
Accumulated OCI
into Operations
 

Interest rate swaps

   $ 19         Interest expense       $ 62   

Credit-risk-related Contingent Features

We have agreements with each of our derivative counterparties that contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of June 30, 2015, we have not been required to post any collateral related to these agreements. If we had breached these provisions at June 30, 2015, we would have been required to settle our obligations under the agreements at their aggregate, estimated termination value of $170 million.

NOTE 7 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

Accounting Standards Codification 820, Fair Value Measurements and Disclosures (“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 entity’s 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 entity’s own assumptions, as there is little, if any, related

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)

 

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. The valuation of these securities involves management’s judgment, after consideration of market factors and the absence of market transparency, market liquidity and observable inputs. Our valuation models derived fair market values compared to tax-equivalent yields of other securities of similar credit worthiness and similar effective maturities.

Derivative Financial Instruments

We have entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates. 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 and implied volatilities. We incorporate credit valuation adjustments to reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.

Although we 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. We assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions, and at June 30, 2015 and December 31, 2014, we determined the credit valuation adjustments were not significant to the overall valuation of our derivatives.

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)

Derivative Financial Instruments (continued)

 

The following tables summarize our assets and liabilities measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):

 

    June 30, 2015  
    Fair Value     Fair Value Measurements Using  
      Quoted Prices in
Active Markets for
Identical Assets
and Liabilities
(Level 1)
    Significant Other
Observable Inputs
(Level 2)
    Significant
Unobservable Inputs
(Level 3)
 

Assets:

       

Investments of insurance subsidiaries:

       

Debt securities:

       

States and municipalities

  $ 446      $      $ 440      $ 6   

Money market funds

    32        32                 
 

 

 

   

 

 

   

 

 

   

 

 

 
    478        32        440        6   

Equity securities

    3        3                 
 

 

 

   

 

 

   

 

 

   

 

 

 

Investments of insurance subsidiaries

    481        35        440        6   

Less amounts classified as current assets

    (77     (32     (45       
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 404      $ 3      $ 395      $ 6   
 

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

       

Interest rate swaps (Income taxes and other liabilities)

  $ 167      $      $ 167      $   
    December 31, 2014  
          Fair Value Measurements Using  
    Fair Value     Quoted Prices in
Active Markets for
Identical Assets
and Liabilities
(Level 1)
    Significant Other
Observable Inputs
(Level 2)
    Significant
Unobservable Inputs
(Level 3)
 

Assets:

       

Investments of insurance subsidiaries:

       

Debt securities:

       

States and municipalities

  $ 494      $      $ 488      $ 6   

Money market funds

    61        61                 
 

 

 

   

 

 

   

 

 

   

 

 

 
    555        61        488        6   

Equity securities

    3        3                 
 

 

 

   

 

 

   

 

 

   

 

 

 

Investments of insurance subsidiaries

    558        64        488        6   

Less amounts classified as current assets

    (64     (61     (3       
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 494      $ 3      $ 485      $ 6   
 

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

       

Interest rate swaps (Income taxes and other liabilities)

  $ 199      $      $ 199      $  —   

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)

Derivative Financial Instruments (continued)

 

The estimated fair value of our long-term debt was $31.255 billion and $30.861 billion at June 30, 2015 and December 31, 2014, respectively, compared to carrying amounts, excluding net debt issuance costs, aggregating $29.904 billion and $29.645 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.

NOTE 8 — LONG-TERM DEBT

A summary of long-term debt at June 30, 2015 and December 31, 2014, including related interest rates at June 30, 2015, follows (dollars in millions):

 

     June 30,
2015
     December 31,
2014
 

Senior secured asset-based revolving credit facility (effective interest rate of 1.4%)

   $ 2,580       $ 2,880   

Senior secured revolving credit facility

               

Senior secured term loan facilities (effective interest rate of 4.9%)

     5,696         5,517   

Senior secured first lien notes (effective interest rate of 5.5%)

     11,100         11,100   

Other senior secured debt (effective interest rate of 6.0%)

     626         573   
  

 

 

    

 

 

 

First lien debt

     20,002         20,070   

Senior unsecured notes (effective interest rate of 6.6%)

     9,902         9,575   

Less net debt issuance costs

     167         219   
  

 

 

    

 

 

 

Total debt (average life of 6.3 years, rates averaging 5.4%)

     29,737         29,426   

Less amounts due within one year

     1,374         338   
  

 

 

    

 

 

 
   $ 28,363       $ 29,088   
  

 

 

    

 

 

 

2015 Activity

During June 2015, we entered into a joinder agreement to retire certain of our existing senior secured term loans using proceeds from a new $1.400 billion senior secured term loan credit facility maturing on June 10, 2020. The pretax loss on retirement of debt was $3 million.

During May 2015, we issued $1.600 billion aggregate principal amount of 5.375% senior notes due 2025. We used the net proceeds to redeem all $1.525 billion aggregate principal amount of 7 3/4% senior notes due 2021 of HCA Holdings, Inc. The pretax loss on retirement of debt related to this redemption was $122 million.

During January 2015, we issued $1.000 billion aggregate principal amount of 5.375% senior notes due 2025. We used a portion of the net proceeds to repay at maturity $750 million aggregate principal amount of 6.375% senior unsecured notes due 2015.

2014 Activity

During October 2014, we issued $600 million aggregate principal amount of 4.25% senior secured notes due 2019 and $1.400 billion aggregate principal amount of 5.25% senior secured notes due 2025. During November

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 8 — LONG-TERM DEBT (continued)

2014 Activity (continued)

 

2014, we used a portion of the proceeds from the October 2014 debt issuances to redeem all $1.400 billion aggregate principal amount of our outstanding 7 1/4% senior secured notes due 2020. The pretax loss on retirement of debt related to this redemption was $109 million.

During March 2014, we issued $1.500 billion aggregate principal amount of 3.75% senior secured notes due 2019 and $2.000 billion aggregate principal amount of 5.00% senior secured notes due 2024, and repaid at maturity all $500 million aggregate principal amount of our outstanding 5.75% senior unsecured notes. During April 2014, we used proceeds from the March 2014 debt issuance to redeem all $1.500 billion aggregate principal amount of our outstanding 8   1/2% senior secured notes due 2019 and all $1.250 billion aggregate principal amount of our outstanding 7 7/8% senior secured notes due 2020. The pretax loss on retirement of debt related to these redemptions was $226 million.

NOTE 9 — CONTINGENCIES AND LEGAL CLAIM COSTS

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. We are also 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. We are subject to claims for additional taxes and related interest and penalties. 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.

Government Investigations, Claims and Litigation

Health care companies are subject to numerous investigations by various governmental agencies. Further, under the federal False Claims Act (“FCA”), 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, and may be subject to investigation by, 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.

As initially disclosed in 2010, the Civil Division of the Department of Justice (“DOJ”) 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 indicated that it would be reviewing certain ICD billing and medical records at 95 HCA hospitals. On July 27, 2015, HCA entered into a settlement agreement to resolve this matter. The settlement agreement requires payments from HCA totaling approximately $15.8 million (which amount was accrued in a prior period), and the government releases claims at a number of HCA hospitals relating to ICD implants for the period October 1, 2003 through March 31, 2015. HCA makes no admission of wrongdoing in the settlement. The settlement resolves the government’s review of this matter.

In July 2012, the Civil Division of the U.S. Attorney’s Office in Miami requested information on reviews assessing the medical necessity of interventional cardiology services provided at any Company facility (other

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9 — CONTINGENCIES AND LEGAL CLAIM COSTS (continued)

Government Investigations, Claims and Litigation (continued)

 

than peer reviews). The Company cooperated with the government’s request and produced medical records associated with particular reviews at eight hospitals, located primarily in Florida. On February 24, 2015, the United States District Court for the Southern District of Florida unsealed a qui tam action which had been filed under seal on February 16, 2012 and alleges particular FCA violations relating to two specific facilities that were among the subjects of the Miami U.S. Attorney’s Office investigation. On January 30, 2015, the U.S. Attorney’s Office filed with the District Court a formal notice that the Department of Justice had declined to intervene in that action. An additional qui tam action relating to these topics was unsealed and voluntarily dismissed by the relator. The U.S. Attorney’s Office in Miami is continuing its evaluation of the medical necessity of certain interventional cardiology services at the other hospitals for which the Company produced records. At this time, we cannot predict what effect, if any, the qui tam action, or any claims that might result from the U.S. Attorney’s continued review, including any potential claims under the federal FCA, other statutes, regulations or laws, could have on the Company.

On April 2, 2014, the UK Competition and Markets Authority (“Authority”) issued a final report on its investigation of the private health care market in London. It concluded, among other things, that many private hospitals face little competition in central London, and that there are high barriers to entry. As part of its remedies package, the Authority ordered HCA to sell either: (a) its London Bridge and Princess Grace hospitals; or (b) its Wellington Hospital, including the Hospital Platinum Medical Centre. It also imposed other remedial conditions on HCA and other private health care providers, including: regulation of incentives to referring physicians; increased access to information about fees and performance; and restrictions on future arrangements between private providers and National Health Service private patient units. HCA disagrees with the Authority’s assessment of the competitive conditions for hospitals in London, as well as its proposed divestiture remedy, and appealed the decision to the Competition Appeal Tribunal. The Competition Appeal Tribunal overturned certain of the Authority’s findings and sent the matter back to the Authority for further proceedings, which are ongoing. A decision is anticipated in early 2016.

Securities Class Action Litigation

On October 28, 2011, a shareholder action, Schuh v. HCA Holdings, Inc. et al., was filed in the United States District Court for the Middle District of Tennessee seeking monetary relief. The case sought to include as a class all persons who acquired the Company’s stock pursuant or traceable to the Company’s Registration Statement issued in connection with the March 9, 2011 initial public offering. The lawsuit asserted a claim under Section 11 of the Securities Act of 1933 against the Company, certain members of the board of directors, and certain underwriters in the offering. It further asserted a claim under Section 15 of the Securities Act of 1933 against the same members of the board of directors. The action alleged various deficiencies in the Company’s disclosures in the Registration Statement. Subsequently, two additional class action complaints, Kishtah v. HCA Holdings, Inc. et al. and Daniels v. HCA Holdings, Inc. et al., setting forth substantially similar claims against substantially the same defendants were filed in the same federal court on November 16, 2011 and December 12, 2011, respectively. All three of the cases were consolidated. On May 3, 2012, the court appointed New England Teamsters & Trucking Industry Pension Fund as Lead Plaintiff for the consolidated action. On July 13, 2012, the lead plaintiff filed an amended complaint asserting claims under Sections 11 and 12(a)(2) of the Securities Act of 1933 against the Company, certain members of the board of directors, and certain underwriters in the offering. It further asserts a claim under Section 15 of the Securities Act of 1933 against the same members of the board of directors and Hercules Holding II, LLC, a majority shareholder of the Company at the time of the initial public offering. The consolidated complaint alleges deficiencies in the Company’s disclosures in the Registration Statement and Prospectus relating to: (1) the accounting for the Company’s 2006 recapitalization and 2010 reorganization; (2) the Company’s failure to maintain effective internal controls relating to its accounting for

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9 — CONTINGENCIES AND LEGAL CLAIM COSTS (continued)

Securities Class Action Litigation (continued)

 

such transactions; and (3) the Company’s Medicare and Medicaid revenue growth rates. The Company and other defendants moved to dismiss the amended complaint on September 11, 2012. The court granted the motion in part on May 28, 2013. The action proceeded to discovery on the remaining claims. The plaintiffs’ motion for class certification was granted on September 22, 2014. The court certified a class consisting of all persons that acquired HCA stock on or before October 28, 2011 (the date of the lawsuit) pursuant to the Registration Statement issued in connection with the March 9, 2011 initial public offering. A request to the court of appeals to hear an immediate appeal of this ruling was denied. Trial is currently set for January 2016.

In addition to the above described shareholder class actions, on December 8, 2011, a federal shareholder derivative action, Sutton v. Bracken, et al., putatively initiated in the name of the Company, was filed in the United States District Court for the Middle District of Tennessee against certain officers and present and former directors of the Company seeking monetary relief. The action alleges breaches of fiduciary duties by the named officers and directors in connection with the accounting and earnings claims set forth in the shareholder class actions described above. Setting forth substantially similar claims against substantially the same defendants, an additional federal derivative action, Schroeder v. Bracken, et al., was filed in the United States District Court for the Middle District of Tennessee on December 16, 2011, and a state derivative action, Bagot v. Bracken, et al., was filed in Tennessee state court in the Davidson County Circuit Court on December 20, 2011. The federal derivative actions were consolidated in the Middle District of Tennessee and stayed pending developments in the shareholder class actions. The state derivative action had also been stayed pending developments in the shareholder class actions, but that stay has expired. The plaintiff in the state derivative action subsequently filed an amended complaint on September 9, 2013 that added additional allegations made in the shareholder class actions. On September 24, 2013, an additional state derivative action, Steinberg v. Bracken, et al., was filed in Tennessee state court in the Davidson County Circuit Court. This action against our board of directors has been consolidated with the earlier filed state derivative action. The plaintiffs in the consolidated action filed a consolidated complaint on December 4, 2013. The Company filed a motion to again stay the state derivative action pending developments in the class action, but the court has not yet acted on that motion.

Health Midwest Litigation

In October 2009, the Health Care Foundation of Greater Kansas City, a nonprofit health foundation, filed suit against HCA Inc. in the Circuit Court of Jackson County, Missouri and alleged that HCA did not fund the level of capital expenditures and uncompensated care agreed to in connection with HCA’s purchase of hospitals from Health Midwest in 2003. The central issue in the case was whether HCA’s construction of new hospitals counted towards its $450 million five-year capital commitments. In addition, the plaintiff alleged that HCA did not make its required capital expenditures in a timely fashion. On January 24, 2013, the court ruled in favor of the plaintiff and awarded at least $162 million. The court also ordered a court-supervised accounting of HCA’s capital expenditures, as well as of expenditures on charity and uncompensated care during the ten years following the purchase. The court also indicated it would award plaintiff attorneys fees, which the parties have stipulated are approximately $12 million for the trial phase. HCA recorded $175 million of legal claim costs in the fourth quarter of 2012 related to this ruling, and consistent with the judge’s order, has been accruing interest on that sum at 9% per annum. On April 25, 2014, the parties stipulated to an additional $78 million shortfall relating to the capital expenditures issue. HCA recorded $78 million of legal claims costs in the first quarter of 2014 as a result of the stipulation, and is accruing interest on that amount at 9% per annum. Pursuant to the terms of the stipulation, the parties have preserved their respective rights to contest the judge’s underlying ruling, whether through motions in the trial court or on appeal. On February 9, 2015, the parties reached an agreement to settle the part of their dispute relating to charity and uncompensated care for $15 million. The foundation is required to

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9 — CONTINGENCIES AND LEGAL CLAIM COSTS (continued)

Health Midwest Litigation (continued)

 

use that amount, net of attorneys fees, for charitable activities in the Kansas City area. The parties also agreed on an additional amount for attorneys fees for the plaintiff for the accounting phase of the case. Parties have filed post-trial motions, and rulings on the motions as well as any final judgment are anticipated for sometime in late 2015. At this time, we cannot predict what effect, if any, the final judgment could have on the Company. If the court denies HCA’s post-trial motion and enters judgment on the capital expenditures issues, HCA plans to pursue an appeal.

NOTE 10 — CAPITAL STRUCTURE

The changes in stockholders’ deficit, including changes in stockholders’ deficit attributable to HCA Holdings, Inc. and changes in equity attributable to noncontrolling interests, are as follows (dollars and shares in millions):

 

    Equity (Deficit) Attributable to HCA Holdings, Inc.     Equity
Attributable to
Noncontrolling
Interests
    Total  
    Common Stock     Capital in
Excess of
Par
Value
    Accumulated
Other
Comprehensive
Loss
    Retained
Deficit
     
    Shares     Par Value            

Balances at December 31, 2014

    420.478      $ 4      $      $ (323   $ (7,575   $ 1,396      $ (6,498

Comprehensive income

                         33        1,098        287        1,418   

Repurchase of common stock

    (12.552            (297            (643            (940

Distributions

                                       (237     (237

Share-based benefit plans

    8.423               311                             311   

Other

                  (14                   5        (9
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at June 30, 2015

    416.349      $ 4      $      $ (290   $ (7,120   $ 1,451      $ (5,955
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

On April 18, 2015, the Company entered into an agreement to repurchase 3,806,460 shares of its common stock beneficially owned by affiliates of Bain Capital Investors, LLC (“the Bain Entities”) and certain charitable organizations that received shares of common stock as charitable contributions from certain partners and other employees of the Bain Entities at a purchase price of $77.26 per share, the closing price of the Company’s common stock on the New York Stock Exchange on April 17, 2015, less a discount of 1% (the “Share Repurchase”). The Share Repurchase was made pursuant to the Company’s February 2015 $1.0 billion repurchase program. During the six months ended June 30, 2015, we repurchased 8,745,784 shares of our common stock at an average price of $73.84 per share through market purchases, resulting in total repurchases pursuant to the February 2015 authorization of 12,552,244 shares of our common stock at an average price of $74.88 per share. At June 30, 2015, we had $60 million of repurchase authorization available under the $1.0 billion February 2015 authorization.

During May 2015, our Board of Directors authorized an additional share repurchase program for up to $1.0 billion of our outstanding common stock. At June 30, 2015, no repurchases had been made pursuant to this May 2015 authorization.

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10 — CAPITAL STRUCTURE (continued)

 

The components of accumulated other comprehensive loss are as follows (dollars in millions):

 

     Unrealized
Gains on
Available-
for-Sale
Securities
    Foreign
Currency
Translation
Adjustments
    Defined
Benefit
Plans
    Change
in Fair
Value of
Derivative
Instruments
    Total  

Balances at December 31, 2014

   $ 13      $ (36   $ (174   $ (126   $ (323

Unrealized losses on available-for-sale securities, net of $1 income tax benefit

     (3                          (3

Foreign currency translation adjustments, net of $5 of income taxes

            8                      8   

Change in fair value of derivative instruments, net of $11 income tax benefit

                          (19     (19

Expense reclassified into operations from other comprehensive income, net of $3 and $23, respectively, income tax benefits

                   8        39        47   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at June 30, 2015

   $ 10      $ (28   $ (166   $ (106   $ (290
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOTE 11 — SEGMENT AND GEOGRAPHIC INFORMATION

We operate in one line of business, which is operating hospitals and related health care entities. We operate in two geographically organized groups: the National and American Groups. The National Group includes 83 hospitals located in Alaska, California, Florida, southern Georgia, Idaho, Indiana, northern Kentucky, Nevada, New Hampshire, South Carolina, Utah and Virginia, and the American Group includes 79 hospitals located in Colorado, northern Georgia, Kansas, southern Kentucky, Louisiana, Mississippi, Missouri, Oklahoma, Tennessee and Texas. We also operate six hospitals in England, and these facilities are included in the Corporate and other group.

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 11 — SEGMENT AND GEOGRAPHIC INFORMATION (continued)

 

Adjusted segment EBITDA is defined as income before depreciation and amortization, interest expense, losses (gains) on sales of facilities, losses on retirement of debt, legal claim costs, 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 EBITDA and depreciation and amortization for the quarters and six months ended June 30, 2015 and 2014 are summarized in the following table (dollars in millions):

 

     Quarter      Six Months  
     2015      2014      2015      2014  

Revenues:

           

National Group

   $ 4,698       $ 4,270       $ 9,348       $ 8,432   

American Group

     4,699         4,447         9,200         8,599   

Corporate and other

     500         513         1,025         1,031   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 9,897       $ 9,230       $ 19,573       $ 18,062   
  

 

 

    

 

 

    

 

 

    

 

 

 

Equity in earnings of affiliates:

           

National Group

   $ (4    $ (3    $ (7    $ (6

American Group

     (8      (8      (16      (15

Corporate and other

     2         2         (6      3   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ (10    $ (9    $ (29    $ (18
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted segment EBITDA:

           

National Group

   $ 1,086       $ 946       $ 2,165       $ 1,803   

American Group

     1,043         1,133         1,991         1,983   

Corporate and other

     (121      (79      (187      (142
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 2,008       $ 2,000       $ 3,969       $ 3,644   
  

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation and amortization:

           

National Group

   $ 188       $ 190       $ 377       $ 377   

American Group

     222         210         443         415   

Corporate and other

     59         54         122         109   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 469       $ 454       $ 942       $ 901   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted segment EBITDA

   $ 2,008       $ 2,000       $ 3,969       $ 3,644   

Depreciation and amortization

     469         454         942         901   

Interest expense

     425         427         844         887   

Losses (gains) on sales of facilities

     5         (11      (4      (32

Losses on retirement of debt

     125         226         125         226   

Legal claim costs

                             78   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

   $ 984       $ 904       $ 2,062       $ 1,584   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

NOTE 12 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

During November 2010, HCA Holdings, Inc. issued $1.525 billion aggregate principal amount of 7 3/4% senior unsecured notes due 2021. During May 2015, we redeemed all $1.525 billion aggregate principal amount of 7 3/4% unsecured senior notes due 2021. During December 2012, HCA Holdings, Inc. issued $1.000 billion aggregate principal amount of 6.25% senior unsecured notes due 2021. These notes are senior unsecured obligations and are not guaranteed by any of our subsidiaries.

HCA Inc., a direct wholly-owned subsidiary of HCA Holdings, Inc., is the obligor under a significant portion of our other indebtedness, including our senior secured credit facilities, senior secured notes and senior unsecured notes (other than the senior unsecured notes issued by HCA Holdings, Inc.). The senior secured notes and senior unsecured notes issued by HCA Inc. are fully and unconditionally guaranteed by HCA Holdings, Inc. The senior secured credit facilities and senior secured notes are fully and unconditionally guaranteed by substantially all existing and future, direct and indirect, 100% 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 comprehensive income statements for the quarters and six months ended June 30, 2015 and 2014, condensed consolidating balance sheets at June 30, 2015 and December 31, 2014 and condensed consolidating statements of cash flows for the six months ended June 30, 2015 and 2014, segregating HCA Holdings, Inc. issuer, HCA Inc. issuer, the subsidiary guarantors, the subsidiary non-guarantors and eliminations, follow:

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT

FOR THE QUARTER ENDED JUNE 30, 2015

(Dollars in millions)

 

    HCA
Holdings, Inc.
Issuer
    HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
Consolidated
 

Revenues before provision for doubtful accounts

  $      $      $ 5,597      $ 5,335      $      $ 10,932   

Provision for doubtful accounts

                  550        485               1,035   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

                  5,047        4,850               9,897   

Salaries and benefits

                  2,250        2,242               4,492   

Supplies

                  869        801               1,670   

Other operating expenses

    (4            838        921               1,755   

Electronic health record incentive income

                  (12     (6            (18

Equity in earnings of affiliates

    (603            (2     (8     603        (10

Depreciation and amortization

                  223        246               469   

Interest expense

    38        604        (168     (49            425   

Losses on sales of facilities

                  5                      5   

Losses on retirement of debt

    122        3                             125   

Management fees

                  (178     178                 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (447     607        3,825        4,325        603        8,913   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    447        (607     1,222        525        (603     984   

Provision (benefit) for income taxes

    (60     (234     462        151               319   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    507        (373     760        374        (603     665   

Net income attributable to noncontrolling interests

                  24        134               158   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to HCA Holdings, Inc.

  $ 507      $ (373   $ 736      $ 240      $ (603   $ 507   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to HCA Holdings, Inc.

  $ 561      $ (358   $ 740      $ 275      $ (657   $ 561   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

 

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT

FOR THE QUARTER ENDED JUNE 30, 2014

(Dollars in millions)

 

     HCA
Holdings, Inc.
Issuer
    HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
Consolidated
 

Revenues before provision for doubtful accounts

   $      $      $ 5,079      $ 4,879      $      $ 9,958   

Provision for doubtful accounts

                   394        334               728   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

                   4,685        4,545               9,230   

Salaries and benefits

                   2,118        1,980               4,098   

Supplies

                   805        727               1,532   

Other operating expenses

     5               789        850               1,644   

Electronic health record incentive income

                   (24     (11            (35

Equity in earnings of affiliates

     (516            (1     (8     516        (9

Depreciation and amortization

                   224        230               454   

Interest expense

     46        536        (112     (43            427   

Gains on sales of facilities

                   (11                   (11

Losses on retirement of debt

            226                             226   

Management fees

                   (176     176                 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (465     762        3,612        3,901        516        8,326   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     465        (762     1,073        644        (516     904   

Provision (benefit) for income taxes

     (18     (277     381        186               272   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     483        (485     692        458        (516     632   

Net income attributable to noncontrolling interests

                   18        131               149   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to HCA Holdings, Inc.

   $ 483      $ (485   $ 674      $ 327      $ (516   $ 483   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to HCA Holdings, Inc.

   $ 516      $ (477   $ 677      $ 349      $ (549   $ 516   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

 

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT

FOR THE SIX MONTHS ENDED JUNE 30, 2015

(Dollars in millions)

 

     HCA
Holdings, Inc.
Issuer
    HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
Consolidated
 

Revenues before provision for doubtful accounts

   $      $      $ 10,798      $ 10,456      $      $ 21,254   

Provision for doubtful accounts

                   846        835               1,681   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

                   9,952        9,621               19,573   

Salaries and benefits

                   4,467        4,423               8,890   

Supplies

                   1,723        1,585               3,308   

Other operating expenses

     2               1,658        1,812               3,472   

Electronic health record incentive income

                   (25     (12            (37

Equity in earnings of affiliates

     (1,226            (3     (26     1,226        (29

Depreciation and amortization

                   453        489               942   

Interest expense

     84        1,199        (342     (97            844   

Gains on sales of facilities

                   (4                   (4

Losses on retirement of debt

     122        3                             125   

Management fees

                   (356     356                 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (1,018     1,202        7,571        8,530        1,226        17,511   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     1,018        (1,202     2,381        1,091        (1,226     2,062   

Provision (benefit) for income taxes

     (80     (458     890        325               677   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     1,098        (744     1,491        766        (1,226     1,385   

Net income attributable to noncontrolling interests

                   47        240               287   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to HCA Holdings, Inc.

   $ 1,098      $ (744   $ 1,444      $ 526      $ (1,226   $ 1,098   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to HCA Holdings, Inc.

   $ 1,131      $ (724   $ 1,452      $ 531      $ (1,259   $ 1,131   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

 

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(Dollars in millions)

 

     HCA
Holdings, Inc.
Issuer
    HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
Consolidated
 

Revenues before provision for doubtful accounts

   $      $      $ 10,109      $ 9,532      $      $ 19,641   

Provision for doubtful accounts

                   931        648               1,579   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

                   9,178        8,884               18,062   

Salaries and benefits

                   4,217        3,931               8,148   

Supplies

                   1,619        1,445               3,064   

Other operating expenses

     10               1,562        1,717               3,289   

Electronic health record incentive income

                   (46     (19            (65

Equity in earnings of affiliates

     (894            (2     (16     894        (18

Depreciation and amortization

                   442        459               901   

Interest expense

     92        1,093        (234     (64            887   

Gains on sales of facilities

                   (32                   (32

Losses on retirement of debt

            226                             226   

Legal claim costs

            78                             78   

Management fees

                   (350     350                 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (792     1,397        7,176        7,803        894        16,478   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     792        (1,397     2,002        1,081        (894     1,584   

Provision (benefit) for income taxes

     (38     (524     733        327               498   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     830        (873     1,269        754        (894     1,086   

Net income attributable to noncontrolling interests

                   47        209               256   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to HCA Holdings, Inc.

   $ 830      $ (873   $ 1,222      $ 545      $ (894   $ 830   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to HCA Holdings, Inc.

   $ 888      $ (851   $ 1,227      $ 576      $ (952   $ 888   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

24


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

 

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

JUNE 30, 2015

(Dollars in millions)

 

    HCA
Holdings, Inc.
Issuer
    HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
Consolidated
 
ASSETS            

Current assets:

           

Cash and cash equivalents

  $      $      $ 130      $ 543      $      $ 673   

Accounts receivable, net

                  2,907        2,897               5,804   

Inventories

                  807        541               1,348   

Deferred income taxes

    376                                    376   

Other

    57               421        614               1,092   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    433               4,265        4,595               9,293   

Property and equipment, net

                  7,968        6,592               14,560   

Investments of insurance subsidiaries

                         404               404   

Investments in and advances to affiliates

    23,262               16        166        (23,262     182   

Goodwill and other intangible assets

                  1,704        4,780               6,484   

Other

    571               21        195               787   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 24,266      $      $ 13,974      $ 16,732      $ (23,262   $ 31,710   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND

STOCKHOLDERS’ (DEFICIT)

EQUITY

           

Current liabilities:

           

Accounts payable

  $ 7      $      $ 1,149      $ 728      $      $ 1,884   

Accrued salaries

                  721        561               1,282   

Other accrued expenses

    29        359        507        875               1,770   

Long-term debt due within one year

           1,264        59        51               1,374   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    36        1,623        2,436        2,215               6,310   

Long-term debt, net

    982        26,865        225        291               28,363   

Intercompany balances

    30,108        (11,233     (22,244     3,369                 

Professional liability risks

                         1,132               1,132   

Income taxes and other liabilities

    546        467        459        388               1,860   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    31,672        17,722        (19,124     7,395               37,665   

Stockholders’ (deficit) equity attributable to HCA Holdings, Inc.

    (7,406     (17,722     32,976        8,008        (23,262     (7,406

Noncontrolling interests

                  122        1,329               1,451   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (7,406     (17,722     33,098        9,337        (23,262     (5,955
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 24,266      $      $ 13,974      $ 16,732      $ (23,262   $ 31,710   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

25


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

 

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2014

(Dollars in millions)

 

    HCA
Holdings, Inc.
Issuer
    HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
Consolidated
 
ASSETS            

Current assets:

           

Cash and cash equivalents

  $      $      $ 87      $ 479      $      $ 566   

Accounts receivable, net

                  2,812        2,882               5,694   

Inventories

                  756        523               1,279   

Deferred income taxes

    366                                    366   

Other

    118               376        531               1,025   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    484               4,031        4,415               8,930   

Property and equipment, net

                  7,871        6,484               14,355   

Investments of insurance subsidiaries

                         494               494   

Investments in and advances to affiliates

    21,970               16        149        (21,970     165   

Goodwill and other intangible assets

                  1,705        4,711               6,416   

Other

    435               27        158               620   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 22,889      $      $ 13,650      $ 16,411      $ (21,970   $ 30,980   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
EQUITY
           

Current liabilities:

           

Accounts payable

  $ 1      $      $ 1,272      $ 762      $      $ 2,035   

Accrued salaries

                  783        587               1,370   

Other accrued expenses

    45        317        517        858               1,737   

Long-term debt due within one year

           231        56        51               338   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    46        548        2,628        2,258               5,480   

Long-term debt, net

    2,499        26,124        185        280               29,088   

Intercompany balances

    27,685        (10,141     (21,405     3,861                 

Professional liability risks

                         1,078               1,078   

Income taxes and other liabilities

    553        487        605        187               1,832   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    30,783        17,018        (17,987     7,664               37,478   

Stockholders’ (deficit) equity attributable to HCA Holdings, Inc.

    (7,894     (17,018     31,516        7,472        (21,970     (7,894

Noncontrolling interests

                  121        1,275               1,396   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (7,894     (17,018     31,637        8,747        (21,970     (6,498
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 22,889      $      $ 13,650      $ 16,411      $ (21,970   $ 30,980   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

26


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

 

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2015

(Dollars in millions)

 

    HCA
Holdings, Inc.
Issuer
    HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
Consolidated
 

Cash flows from operating activities:

           

Net income (loss)

  $ 1,098      $ (744   $ 1,491      $ 766      $ (1,226   $ 1,385   

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

           

Changes in operating assets and liabilities

    21        22        (1,360     (779            (2,096

Provision for doubtful accounts

                  846        835               1,681   

Depreciation and amortization

                  453        489               942   

Income taxes

    (101                                 (101

Gains on sales of facilities

                  (4                   (4

Losses on retirement of debt

    122        3                             125   

Amortization of debt issuance costs

    2        17                             19   

Share-based compensation

    103                                    103   

Equity in earnings of affiliates

    (1,226                          1,226          

Other

    34               (2     (11            21   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

    53        (702     1,424        1,300               2,075   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

           

Purchase of property and equipment

                  (470     (534            (1,004

Acquisition of hospitals and health care entities

                  (16     (79            (95

Disposition of hospitals and health care entities

                  14        8               22   

Change in investments

                  6        61               67   

Other

                  (6     7               1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

                  (472     (537            (1,009
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

           

Issuance of long-term debt

           4,048                             4,048   

Net change in revolving credit facilities

           (300                          (300

Repayment of long-term debt

    (1,632     (1,971     (24     (17            (3,644

Distributions to noncontrolling interests

                  (46     (191            (237

Payment of debt issuance costs

           (33                          (33

Repurchases of common stock

    (940                                 (940

Changes in intercompany balances with affiliates, net

    2,354        (1,042     (839     (473              

Income tax benefits

    197                                    197   

Other

    (32                   (18            (50
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by financing activities

    (53     702        (909     (699            (959
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Change in cash and cash equivalents

                  43        64               107   

Cash and cash equivalents at beginning of period

                  87        479               566   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

  $      $      $ 130      $ 543      $      $ 673   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

27


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

 

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(Dollars in millions)

 

    HCA
Holdings, Inc.
Issuer
    HCA Inc.
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Condensed
Consolidated
 

Cash flows from operating activities:

           

Net income (loss)

  $ 830      $ (873   $ 1,269      $ 754      $ (894   $ 1,086   

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

           

Changes in operating assets and liabilities

    13        (32     (1,258     (874            (2,151

Provision for doubtful accounts

                  931        648               1,579   

Depreciation and amortization

                  442        459               901   

Income taxes

    (94                                 (94

Gains on sales of facilities