Form 10-Q
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, 2016

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, 2016

Voting common stock, $.01 par value   378,646,200 shares

 

 

 


Table of Contents

HCA HOLDINGS, INC.

Form 10-Q

June 30, 2016

 

         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, 2016 and 2015

     2   
 

Condensed Consolidated Comprehensive Income Statements — for the quarters and six months ended June 30, 2016 and 2015

     3   
 

Condensed Consolidated Balance Sheets — June 30, 2016 and December 31, 2015

     4   
 

Condensed Consolidated Statements of Cash Flows — for the six months ended June 30, 2016 and 2015

     5   
 

Notes to Condensed Consolidated Financial Statements

     6   

Item 2.

 

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

     27   

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

     46   

Item 4.

 

Controls and Procedures

     46   

Part II.

  Other Information   

Item 1.

 

Legal Proceedings

     46   

Item 1A.

 

Risk Factors

     47   

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

     48   

Item 6.

 

Exhibits

     49   

Signatures

     50   

 

1


Table of Contents

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS

FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015

Unaudited

(Dollars in millions, except per share amounts)

 

     Quarter     Six Months  
     2016     2015     2016     2015  

Revenues before provision for doubtful accounts

   $ 11,081      $ 10,932      $ 22,131      $ 21,254   

Provision for doubtful accounts

     762        1,035        1,552        1,681   
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

     10,319        9,897        20,579        19,573   

Salaries and benefits

     4,691        4,492        9,393        8,890   

Supplies

     1,718        1,670        3,432        3,308   

Other operating expenses

     1,873        1,755        3,730        3,472   

Electronic health record incentive income

     (5     (18     (9     (37

Equity in earnings of affiliates

     (10     (10     (22     (29

Depreciation and amortization

     489        469        968        942   

Interest expense

     427        425        843        844   

Losses (gains) on sales of facilities

     (6     5        (5     (4

Losses on retirement of debt

            125               125   

Legal claim costs

     10               22          
  

 

 

   

 

 

   

 

 

   

 

 

 
     9,187        8,913        18,352        17,511   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     1,132        984        2,227        2,062   

Provision for income taxes

     341        319        625        677   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     791        665        1,602        1,385   

Net income attributable to noncontrolling interests

     133        158        250        287   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to HCA Holdings, Inc.

   $ 658      $ 507      $ 1,352      $ 1,098   
  

 

 

   

 

 

   

 

 

   

 

 

 

Per share data:

        

Basic earnings per share

   $ 1.70      $ 1.22      $ 3.45      $ 2.63   

Diluted earnings per share

   $ 1.65      $ 1.18      $ 3.34      $ 2.54   

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

        

Basic

     386.406        416.407        391.401        418.267   

Diluted

     398.659        429.369        404.617        432.329   

See accompanying notes.

 

2


Table of Contents

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS

FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015

Unaudited

(Dollars in millions)

 

     Quarter     Six Months  
     2016     2015     2016     2015  

Net income

   $ 791      $ 665      $ 1,602      $ 1,385   

Other comprehensive income (loss) before taxes:

        

Foreign currency translation

     (86     64        (129     13   

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

     3        (5     5        (4

Defined benefit plans

                            

Pension costs included in salaries and benefits

     5        5        9        11   
  

 

 

   

 

 

   

 

 

   

 

 

 
     5        5        9        11   

Change in fair value of derivative financial instruments

     (32     (7     (70     (30

Interest costs included in interest expense

     28        31        56        62   
  

 

 

   

 

 

   

 

 

   

 

 

 
     (4     24        (14     32   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss) before taxes

     (82     88        (129     52   

Income taxes (benefits) related to other comprehensive income items

     (32     34        (50     19   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     (50     54        (79     33   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     741        719        1,523        1,418   

Comprehensive income attributable to noncontrolling interests

     133        158        250        287   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to HCA Holdings, Inc.

   $ 608      $ 561      $ 1,273      $ 1,131   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes.

 

3


Table of Contents

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(Dollars in millions)

 

     June 30,
2016
    December 31,
2015
 
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 691      $ 741   

Accounts receivable, less allowance for doubtful accounts of $5,046 and $5,326

     5,669        5,889   

Inventories

     1,481        1,439   

Other

     1,254        1,163   
  

 

 

   

 

 

 
     9,095        9,232   

Property and equipment, at cost

     35,873        34,614   

Accumulated depreciation

     (20,249     (19,600
  

 

 

   

 

 

 
     15,624        15,014   

Investments of insurance subsidiaries

     341        432   

Investments in and advances to affiliates

     201        178   

Goodwill and other intangible assets

     6,694        6,731   

Other

     1,250        1,157   
  

 

 

   

 

 

 
   $ 33,205      $ 32,744   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ DEFICIT     

Current liabilities:

    

Accounts payable

   $ 1,934      $ 2,170   

Accrued salaries

     1,405        1,233   

Other accrued expenses

     1,833        1,880   

Long-term debt due within one year

     224        233   
  

 

 

   

 

 

 
     5,396        5,516   

Long-term debt, less net debt issuance costs of $173 and $167

     31,228        30,255   

Professional liability risks

     1,126        1,115   

Income taxes and other liabilities

     1,953        1,904   

Stockholders’ deficit:

    

Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 380,061,600 shares in 2016 and 398,738,700 shares in 2015

     4        4   

Accumulated other comprehensive loss

     (344     (265

Retained deficit

     (7,767     (7,338
  

 

 

   

 

 

 

Stockholders’ deficit attributable to HCA Holdings, Inc.

     (8,107     (7,599

Noncontrolling interests

     1,609        1,553   
  

 

 

   

 

 

 
     (6,498     (6,046
  

 

 

   

 

 

 
   $ 33,205      $ 32,744   
  

 

 

   

 

 

 

See accompanying notes.

 

4


Table of Contents

HCA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2015

Unaudited

(Dollars in millions)

 

     2016     2015  

Cash flows from operating activities:

    

Net income

   $ 1,602      $ 1,385   

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

    

Increase (decrease) in cash from operating assets and liabilities:

    

Accounts receivable

     (1,364     (1,784

Provision for doubtful accounts

     1,552        1,681   
  

 

 

   

 

 

 

Accounts receivable, net

     188        (103

Inventories and other assets

     (176     (195

Accounts payable and accrued expenses

     (102     (117

Depreciation and amortization

     968        942   

Income taxes

     67        (101

Gains on sales of facilities

     (5     (4

Losses on retirement of debt

            125   

Legal claim costs

     22          

Amortization of debt issuance costs

     18        19   

Share-based compensation

     129        103   

Other

     37        21   
  

 

 

   

 

 

 

Net cash provided by operating activities

     2,748        2,075   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchase of property and equipment

     (1,172     (1,004

Acquisition of hospitals and health care entities

     (430     (95

Disposal of hospitals and health care entities

     14        22   

Change in investments

     18        67   

Other

     15        1   
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,555     (1,009
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Issuances of long-term debt

     3,000        4,048   

Net change in revolving bank credit facilities

            (300

Repayment of long-term debt

     (2,065     (3,644

Distributions to noncontrolling interests

     (205     (237

Payment of debt issuance costs

     (24     (33

Repurchases of common stock

     (1,858     (940

Other

     (91     147   
  

 

 

   

 

 

 

Net cash used in financing activities

     (1,243     (959
  

 

 

   

 

 

 

Change in cash and cash equivalents

     (50     107   

Cash and cash equivalents at beginning of period

     741        566   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 691      $ 673   
  

 

 

   

 

 

 

Interest payments

   $ 767      $ 810   

Income tax payments, net

   $ 558      $ 581   

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, 2016, these affiliates owned and operated 169 hospitals, 116 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 $93 million and $84 million for the quarters ended June 30, 2016 and 2015, respectively, and $178 million and $158 million for the six months ended June 30, 2016 and 2015, respectively. Operating results for the quarter and the six months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. 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, 2015.

 

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 (including 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, 2016 and 2015 are summarized in the following table (dollars in millions):

 

     Quarter  
     2016      Ratio     2015      Ratio  

Medicare

   $ 2,217         21.5   $ 2,144         21.7

Managed Medicare

     1,078         10.4        1,016         10.3   

Medicaid

     416         4.0        408         4.1   

Managed Medicaid

     608         5.9        571         5.8   

Managed care and other insurers

     5,759         55.8        5,461         55.1   

International (managed care and other insurers)

     324         3.1        327         3.3   
  

 

 

    

 

 

   

 

 

    

 

 

 
     10,402         100.7        9,927         100.3   

Uninsured

     225         2.2        558         5.6   

Other

     454         4.4        447         4.5   
  

 

 

    

 

 

   

 

 

    

 

 

 

Revenues before provision for doubtful accounts

     11,081         107.3        10,932         110.4   

Provision for doubtful accounts

     (762      (7.3     (1,035      (10.4
  

 

 

    

 

 

   

 

 

    

 

 

 

Revenues

   $ 10,319         100.0   $ 9,897         100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

     Six Months  
     2016      Ratio     2015      Ratio  

Medicare

   $ 4,483         21.8   $ 4,378         22.4

Managed Medicare

     2,182         10.6        2,068         10.6   

Medicaid

     843         4.1        860         4.4   

Managed Medicaid

     1,205         5.9        1,120         5.7   

Managed care and other insurers

     11,461         55.7        10,677         54.5   

International (managed care and other insurers)

     641         3.1        648         3.3   
  

 

 

    

 

 

   

 

 

    

 

 

 
     20,815         101.2        19,751         100.9   

Uninsured

     414         2.0        626         3.2   

Other

     902         4.4        877         4.5   
  

 

 

    

 

 

   

 

 

    

 

 

 

Revenues before provision for doubtful accounts

     22,131         107.6        21,254         108.6   

Provision for doubtful accounts

     (1,552      (7.6     (1,681      (8.6
  

 

 

    

 

 

   

 

 

    

 

 

 

Revenues

   $ 20,579         100.0   $ 19,573         100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

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

 

7


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 (continued)

 

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 continuing amendments to the new revenue standard, that a deferral was necessary to provide adequate time to effectively implement the new standard. While we are continuing to evaluate the effects the adoption of this standard will have on our financial statements and financial disclosures, we do not believe the adoption will have a significant impact on our recognition of net revenues.

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (“ASU 2016-02”), which requires lessees to recognize assets and liabilities for most leases. ASU 2016-02 is effective for public business entities for annual periods beginning after December 15, 2018 (calendar year 2019). Early adoption is permitted. ASU 2016-02’s transition provisions will be applied using a modified retrospective approach at the beginning of the earliest comparative period presented in the financial statements. While we are currently evaluating the provisions of ASU 2016-02 to determine how our financial statements will be affected, we believe the primary effect of adopting the new standard will be to record assets and obligations for current operating leases.

In March 2016, the FASB issued Accounting Standards Update 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (“ASU 2016-05”), which clarified that a novation of a derivative contract in a hedge accounting relationship does not, in and of itself, represent a termination of the original derivative instrument or a change in the critical terms of the hedge relationship. We elected to adopt ASU 2016-05 prospectively effective January 1, 2016.

In March 2016, the FASB issued Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which requires changes to how companies account for certain aspects of share-based payments to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. We elected to adopt ASU 2016-09 prospectively effective January 1, 2016.

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, 2016, we paid $343 million to acquire three hospital facilities and $87 million to acquire other nonhospital health care entities. 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, 2016, we received proceeds of $14 million and recognized a net pretax gain of $5 million related to sales of real estate and other investments. During the six months ended June 30, 2015, we received proceeds of $22 million and recognized a net pretax gain of $4 million related to sales of real estate and other investments.

 

8


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

NOTE 3 — INCOME TAXES

Our liability for unrecognized tax benefits was $542 million, including accrued interest of $71 million, as of June 30, 2016 ($554 million and $73 million, respectively, as of December 31, 2015). Unrecognized tax benefits of $223 million ($233 million as of December 31, 2015) would affect the effective rate, if recognized.

Our provision for income taxes for the quarter and six months ended June 30, 2016 included tax benefits of $44 million and $118 million, respectively, related to the adoption of ASU 2016-09, which changes how companies account for certain aspects of share-based payments to employees. Under ASU 2016-09, we no longer record excess tax benefits (when the deductible amount related to the settlement of employee equity awards for tax purposes exceeds the cumulative compensation cost recognized for financial reporting purposes) in equity. Instead, we recognize these tax benefits (and deficiencies, if applicable) as a component of our tax provision. This reporting change is applied prospectively and prior period amounts are not restated (the excess tax benefits for the quarter and six months ending June 30, 2015, related to the settlement of employee equity awards, were $115 million and $185 million, respectively, and were recorded in equity). ASU 2016-09 requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity, as previously required. We have elected to apply the change to the statement of cash flows presentation prospectively.

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. 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 equity awards and potential shares, 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, 2016 and 2015 (dollars and shares in millions, except per share amounts):

 

     Quarter      Six Months  
     2016      2015      2016      2015  

Net income attributable to HCA Holdings, Inc.

   $ 658       $ 507       $ 1,352       $ 1,098   

Weighted average common shares outstanding

     386.406         416.407         391.401         418.267   

Effect of dilutive incremental shares

     12.253         12.962         13.216         14.062   
  

 

 

    

 

 

    

 

 

    

 

 

 

Shares used for diluted earnings per share

     398.659         429.369         404.617         432.329   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share:

           

Basic earnings per share

   $ 1.70       $ 1.22       $ 3.45       $ 2.63   

Diluted earnings per share

   $ 1.65       $ 1.18       $ 3.34       $ 2.54   

 

9


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES

A summary of our insurance subsidiaries’ investments at June 30, 2016 and December 31, 2015 follows (dollars in millions):

 

     June 30, 2016  
     Amortized
Cost
     Unrealized
Amounts
     Fair
Value
 
        Gains      Losses     

Debt securities:

           

States and municipalities

   $ 392       $ 22       $       $ 414   

Money market funds

     49                         49   
  

 

 

    

 

 

    

 

 

    

 

 

 
     441         22                 463   

Equity securities

     1         3                 4   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 442       $ 25       $         467   
  

 

 

    

 

 

    

 

 

    

Amounts classified as current assets

              (126
           

 

 

 

Investment carrying value

            $ 341   
           

 

 

 
     December 31, 2015  
     Amortized
Cost
     Unrealized
Amounts
     Fair
Value
 
        Gains      Losses     

Debt securities:

           

States and municipalities

   $ 428       $ 17       $ (1    $ 444   

Money market funds

     34                         34   
  

 

 

    

 

 

    

 

 

    

 

 

 
     462         17         (1      478   

Equity securities

             4                 4   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 462       $ 21       $ (1      482   
  

 

 

    

 

 

    

 

 

    

Amounts classified as current assets

              (50
           

 

 

 

Investment carrying value

            $ 432   
           

 

 

 

At June 30, 2016 and December 31, 2015, 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, 2016 include $75 million to be distributed to the Company from a 100% owned insurance subsidiary.

Scheduled maturities of investments in debt securities at June 30, 2016 were as follows (dollars in millions):

 

     Amortized
Cost
     Fair
Value
 

Due in one year or less

   $ 88       $ 88   

Due after one year through five years

     160         165   

Due after five years through ten years

     124         136   

Due after ten years

     69         74   
  

 

 

    

 

 

 
   $ 441       $ 463   
  

 

 

    

 

 

 

 

10


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES (continued)

 

The average expected maturity of the investments in debt securities at June 30, 2016 was 3.7 years, compared to the average scheduled maturity of 5.2 years. Expected and scheduled maturities may differ because the issuers of certain securities have the right to call, prepay or otherwise redeem such obligations prior to 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.

The following table sets forth our interest rate swap agreements, which have been designated as cash flow hedges, at June 30, 2016 (dollars in millions):

 

     Notional
Amount
     Maturity Date      Fair
Value
 

Pay-fixed interest rate swaps

   $ 3,000         December 2016       $ (46

Pay-fixed interest rate swaps

     1,000         December 2017         (26

Pay-fixed interest rate swaps (starting in December 2016)

     2,000         December 2021         (52

During the next 12 months, we estimate $73 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, 2016 (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

   $ 44         Interest expense       $ 56   

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, 2016, we have not been required to post any collateral related to these agreements. If we had breached these provisions at June 30, 2016, we would have been required to settle our obligations under the agreements at their aggregate, estimated termination value of $126 million.

 

11


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

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 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, 2016 and December 31, 2015, we determined the credit valuation adjustments were not significant to the overall valuation of our derivatives.

 

12


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

 

The following tables summarize our assets and liabilities measured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):

 

    June 30, 2016  
    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

  $ 414      $      $ 409      $ 5   

Money market funds

    49        49                 
 

 

 

   

 

 

   

 

 

   

 

 

 
    463        49        409        5   

Equity securities

    4        4                 
 

 

 

   

 

 

   

 

 

   

 

 

 

Investments of insurance subsidiaries

    467        53        409        5   

Less amounts classified as current assets

    (126     (49     (77       
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 341      $ 4      $ 332      $ 5   
 

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

       

Interest rate swaps (Income taxes and other liabilities)

  $ 124      $      $ 124      $   
    December 31, 2015  
          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

  $ 444      $      $ 438      $ 6   

Money market funds

    34        34                 
 

 

 

   

 

 

   

 

 

   

 

 

 
    478        34        438        6   

Equity securities

    4        4                 
 

 

 

   

 

 

   

 

 

   

 

 

 

Investments of insurance subsidiaries

    482        38        438        6   

Less amounts classified as current assets

    (50     (34     (16       
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 432      $ 4      $ 422      $ 6   
 

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

       

Interest rate swaps (Income taxes and
other liabilities)

  $ 110      $      $ 110      $   

 

13


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

 

We had $1 million of settlements related to the investments of our insurance subsidiaries which have fair value measurements based on significant unobservable inputs (Level 3) during the six months ended June 30, 2016. The estimated fair value of our long-term debt was $33.018 billion and $31.411 billion at June 30, 2016 and December 31, 2015, respectively, compared to carrying amounts, excluding net debt issuance costs, aggregating $31.625 billion and $30.655 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, 2016 and December 31, 2015, including related interest rates at June 30, 2016, follows (dollars in millions):

 

     June 30,
2016
    December 31,
2015
 

Senior secured asset-based revolving credit facility (effective interest rate of 1.9%)

   $ 3,030      $ 3,030   

Senior secured revolving credit facility

              

Senior secured term loan facilities (effective interest rate of 5.3%)

     5,134        5,639   

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

     12,600        11,100   

Other senior secured debt (effective interest rate of 5.7%)

     609        634   
  

 

 

   

 

 

 

First lien debt

     21,373        20,403   

Senior unsecured notes (effective interest rate of 6.5%)

     10,252        10,252   

Net debt issuance costs

     (173     (167
  

 

 

   

 

 

 

Total debt (average life of 6.3 years, rates averaging 5.5%)

     31,452        30,488   

Less amounts due within one year

     224        233   
  

 

 

   

 

 

 
   $ 31,228      $ 30,255   
  

 

 

   

 

 

 

2016 Activity

During March 2016, we issued $1.500 billion aggregate principal amount of 5.250% senior secured notes due 2026. We used the net proceeds for general corporate purposes and to retire a portion of one of our senior secured term loans. We also entered into a joinder agreement to retire the remaining portion of this senior secured term loan using proceeds from a new $1.500 billion senior secured term loan facility maturing in March 2023.

2015 Activity

During December 2015, we issued $500 million aggregate principal amount of 5.875% senior notes due 2026. We used the net proceeds for general corporate purposes.

During November 2015, we issued $1.000 billion aggregate principal amount of 5.875% senior notes due 2026. We used the net proceeds to redeem all $1.000 billion aggregate principal amount of our outstanding 6.500% senior notes due 2016.

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 in June 2020. The pretax loss on retirement of debt was $3 million.

 

14


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 8 — LONG-TERM DEBT (continued)

2015 Activity (continued)

 

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 our outstanding 7 3/4% senior notes due 2021. 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 our $750 million aggregate principal amount of 6.375% senior notes due 2015.

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, financial position or liquidity.

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 results of operations, financial position or liquidity.

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 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. In November 2015, following consideration of additional evidence, the Authority issued a provisional decision that again found there were adverse effects on competition in the private hospital market in central London. The November 2015 provisional decision modified some of the Authority’s earlier factual conclusions and acknowledged certain mitigating factors for some of the effects noted in the prior decision. The November 2015 provisional decision also offered additional potential remedies, which continued to include divestment of one or more of HCA’s London hospitals. Following a period of consultation on the potential additional remedies, the Authority

 

15


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9 — CONTINGENCIES AND LEGAL CLAIM COSTS (continued)

Government Investigations, Claims and Litigation (continued)

 

concluded, in a provisional decision issued March 22, 2016, that none of the additional remedies, including divestiture, would be both effective and proportionate. A final decision is expected during the third quarter of 2016. Should HCA or any other party disagree with the Authority’s final decision, there would be an opportunity to appeal to the Competitive Appeal Tribunal.

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 commitment. 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, began 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 accrued interest on that amount at 9% per annum. Pursuant to the terms of the stipulation, the parties 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 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. The parties filed post-trial motions, on which the court ruled on October 21, 2015. The court denied defendants’ motion to have the court change its rulings on liability and damages related to the capital expenditures issue. The court granted the plaintiff’s motion for an award of additional pre-judgment interest, but did not specify whether the interest awarded was simple interest or would be compounded. The court subsequently concluded that interest was to be compounded, and on December 9, 2015, the court entered judgment in the case in the total sum of $434 million, with interest continuing to accrue at 9% per annum, compounded annually, from and after November 19, 2015, until the matter is resolved. At June 30, 2016, the Company had accrued liabilities of $458 million for the damages, costs and interest related to this litigation. On January 15, 2016, the Company filed a Notice of Appeal in the Missouri Court of Appeals for the Western District. The Court of Appeals has set a schedule that would complete the parties’ briefing by November 2016. Briefing will likely be followed by oral argument, which has not yet been scheduled.

 

16


Table of Contents

HCA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

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, 2015

    398.739      $ 4      $      $ (265   $ (7,338   $ 1,553      $ (6,046

Comprehensive income

                         (79     1,352        250        1,523   

Repurchase of common stock

    (24.427            (77            (1,781            (1,858

Distributions

                                       (205     (205

Share-based benefit plans

    5.750               74                             74   

Other

                  3                      11        14   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at June 30, 2016

    380.062      $ 4      $      $ (344   $ (7,767   $ 1,609      $ (6,498
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

During May 2016, we repurchased 9.361 million shares of our common stock beneficially owned by affiliates of Kohlberg Kravis Roberts & Co. at a purchase price of $80.12 per share, the closing price of our common stock on the New York Stock Exchange on May 10, 2016, less a discount of 1%. During the six months ended June 30, 2016, we also repurchased 15.066 million shares of our common stock at an average price of $73.51 per share through market purchases, resulting in total repurchases of 24.427 million shares of our common stock at an average price of $76.04 per share for the six months ended June 30, 2016 pursuant to the $3.0 billion share repurchase program authorized during October 2015. At June 30, 2016, we had $746 million of repurchase authorization available under the October 2015 authorization.

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, 2015

   $ 13       $ (74   $ (135   $ (69   $ (265

Unrealized gains on available-for-sale securities, net of $2 of income taxes

     3                              3   

Foreign currency translation adjustments, net of $50 income tax benefit

             (79                   (79

Change in fair value of derivative instruments, net of $26 income tax benefit

                           (44     (44

Expense reclassified into operations from other comprehensive income, net of $3 and $21, respectively, income tax benefits

                    6        35        41   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balances at June 30, 2016

   $ 16       $ (153   $ (129   $ (78   $ (344
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

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 84 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.

 

17


Table of Contents

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, 2016 and 2015 are summarized in the following table (dollars in millions):

 

     Quarter      Six Months  
     2016      2015      2016      2015  

Revenues:

           

National Group

   $ 4,931       $ 4,698       $ 9,898       $ 9,348   

American Group

     4,855         4,699         9,635         9,200   

Corporate and other

     533         500         1,046         1,025   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 10,319       $ 9,897       $ 20,579       $ 19,573   
  

 

 

    

 

 

    

 

 

    

 

 

 

Equity in earnings of affiliates:

           

National Group

   $ (2    $ (4    $ (4    $ (7

American Group

     (8      (8      (17      (16

Corporate and other

             2         (1      (6
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ (10    $ (10    $ (22    $ (29
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted segment EBITDA:

           

National Group

   $ 1,131       $ 1,088       $ 2,269       $ 2,169   

American Group

     1,004         1,044         1,987         1,993   

Corporate and other

     (83      (124      (201      (193
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 2,052       $ 2,008       $ 4,055       $ 3,969   
  

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation and amortization:

           

National Group

   $ 201       $ 188       $ 398       $ 377   

American Group

     225         222         443         443   

Corporate and other

     63         59         127         122   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 489       $ 469       $ 968       $ 942   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted segment EBITDA

   $ 2,052       $ 2,008       $ 4,055       $ 3,969   

Depreciation and amortization

     489         469         968         942   

Interest expense

     427         425         843         844   

Losses (gains) on sales of facilities

     (6      5         (5      (4

Losses on retirement of debt

             125                 125   

Legal claim costs

     10                 22           
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

   $ 1,132       $ 984       $ 2,227       $ 2,062   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

18


Table of Contents

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, which were redeemed in full during May 2015. During December 2012, HCA Holdings, Inc. issued $1.000 billion aggregate principal amount of 6.250% 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, 2016 and 2015, condensed consolidating balance sheets at June 30, 2016 and December 31, 2015 and condensed consolidating statements of cash flows for the six months ended June 30, 2016 and 2015, 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, 2016

(Dollars in millions)

 

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

Revenues before provision for doubtful accounts

   $      $      $ 5,693      $ 5,388      $      $ 11,081   

Provision for doubtful accounts

                   498        264               762   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

                   5,195        5,124               10,319   

Salaries and benefits

                   2,347        2,344               4,691   

Supplies

                   886        832               1,718   

Other operating expenses

     2               895        976               1,873   

Electronic health record incentive income

                   (2     (3            (5

Equity in earnings of affiliates

     (563            (1     (9     563        (10

Depreciation and amortization

                   238        251               489   

Interest expense

     16        670        (204     (55            427   

Gains on sales of facilities

                   (2     (4            (6

Legal claim costs

            10                             10   

Management fees

                   (235     235                 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (545     680        3,922        4,567        563        9,187   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     545        (680     1,273        557        (563     1,132   

Provision (benefit) for income taxes

     (113     (303     555        202               341   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     658        (377     718        355        (563     791   

Net income attributable to noncontrolling interests

                   21        112               133   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 658      $ (377   $ 697      $ 243      $ (563   $ 658   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 608      $ (379   $ 701      $ 191      $ (513   $ 608   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

19


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 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   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

20


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, 2016

(Dollars in millions)

 

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

Revenues before provision for doubtful accounts

   $      $      $ 11,366      $ 10,765      $      $ 22,131   

Provision for doubtful accounts

                   992        560               1,552   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

                   10,374        10,205               20,579   

Salaries and benefits

                   4,701        4,692               9,393   

Supplies

                   1,784        1,648               3,432   

Other operating expenses

     4               1,755        1,971               3,730   

Electronic health record incentive income

                   (5     (4            (9

Equity in earnings of affiliates

     (1,270            (3     (19     1,270        (22

Depreciation and amortization

                   465        503               968   

Interest expense

     32        1,320        (411     (98            843   

Gains on sales of facilities

                          (5            (5

Legal claim costs

            22                             22   

Management fees

                   (395     395                 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (1,234     1,342        7,891        9,083        1,270        18,352   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     1,234        (1,342     2,483        1,122        (1,270     2,227   

Provision (benefit) for income taxes

     (118     (495     900        338               625   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     1,352        (847     1,583        784        (1,270     1,602   

Net income attributable to noncontrolling interests

                   43        207               250   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 1,352      $ (847   $ 1,540      $ 577      $ (1,270   $ 1,352   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 1,273      $ (856   $ 1,546      $ 501      $ (1,191   $ 1,273   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

21


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, 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   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

22


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, 2016

(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

   $      $      $ 82      $ 609       $      $ 691   

Accounts receivable, net

                   2,917        2,752                5,669   

Inventories

                   885        596                1,481   

Other

                   530        724                1,254   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
                   4,414        4,681                9,095   

Property and equipment, net

                   8,491        7,133                15,624   

Investments of insurance subsidiaries

                          341                341   

Investments in and advances to affiliates

     25,571               16        185         (25,571     201   

Goodwill and other intangible assets

                   1,705        4,989                6,694   

Other

     1,041               16        193                1,250   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
   $ 26,612      $      $ 14,642      $ 17,522       $ (25,571   $ 33,205   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

LIABILITIES AND

STOCKHOLDERS’ (DEFICIT)

EQUITY

             

Current liabilities:

             

Accounts payable

   $      $      $ 1,210      $ 724       $      $ 1,934   

Accrued salaries

                   775        630                1,405   

Other accrued expenses

     46        406        486        895                1,833   

Long-term debt due within one year

            109        60        55                224   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
     46        515        2,531        2,304                5,396   

Long-term debt, net

     992        29,742        201        293                31,228   

Intercompany balances

     33,138        (11,391     (24,731     2,984                  

Professional liability risks

                          1,126                1,126   

Income taxes and other liabilities

     543        582        425        403                1,953   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
     34,719        19,448        (21,574     7,110                39,703   

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

     (8,107     (19,448     36,074        8,945         (25,571     (8,107

Noncontrolling interests

                   142        1,467                1,609   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
     (8,107     (19,448     36,216        10,412         (25,571     (6,498
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
   $ 26,612      $      $ 14,642      $ 17,522       $ (25,571   $ 33,205   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

23


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, 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

   $      $      $ 155      $ 586       $      $ 741   

Accounts receivable, net

                   2,982        2,907                5,889   

Inventories

                   852        587                1,439   

Other

     223               403        537                1,163   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
     223               4,392        4,617                9,232   

Property and equipment, net

                   8,328        6,686                15,014   

Investments of insurance subsidiaries

                          432                432   

Investments in and advances to affiliates

     24,380               14        164         (24,380     178   

Goodwill and other intangible assets

                   1,703        5,028                6,731   

Other

     943               19        195                1,157   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
   $ 25,546      $      $ 14,456      $ 17,122       $ (24,380   $ 32,744   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ (DEFICIT)

EQUITY

             

Current liabilities:

             

Accounts payable

   $ 2      $      $ 1,375      $ 793       $      $ 2,170   

Accrued salaries

                   712        521                1,233   

Other accrued expenses

     172        340        458        910                1,880   

Long-term debt due within one year

            114        65        54                233   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
     174        454        2,610        2,278                5,516   

Long-term debt, net

     984        28,756        226        289                30,255   

Intercompany balances

     31,432        (11,171     (23,435     3,174                  

Professional liability risks

                          1,115                1,115   

Income taxes and other liabilities

     555        548        417        384                1,904   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
     33,145        18,587        (20,182     7,240                38,790   

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

     (7,599     (18,587     34,510        8,457         (24,380     (7,599

Noncontrolling interests

                   128        1,425                1,553   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
     (7,599     (18,587     34,638        9,882         (24,380     (6,046
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
   $ 25,546      $      $ 14,456      $ 17,122       $ (24,380   $ 32,744   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

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 STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

(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)

  $ 1,352      $ (847   $ 1,583      $ 784      $ (1,270   $ 1,602   

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

           

Changes in operating assets and liabilities

    (23     66        (1,140     (545            (1,642

Provision for doubtful accounts

                  992        560               1,552   

Depreciation and amortization

                  465        503               968   

Income taxes

    67                                    67   

Gains on sales of facilities

                         (5            (5

Legal claim costs

           22                             22   

Amortization of debt issuance costs

           18                             18   

Share-based compensation

                  129                      129   

Equity in earnings of affiliates

    (1,270                          1,270          

Other

    37               (2     2               37   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

    163        (741     2,027        1,299               2,748   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

           

Purchase of property and equipment

                  (482     (690            (1,172

Acquisition of hospitals and health care entities

                  (148     (282            (430

Disposition of hospitals and health care entities

                  9        5               14   

Change in investments

                  3        15               18   

Other

                  (1     16               15   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

                  (619     (936            (1,555
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

           

Issuance of long-term debt

           3,000                             3,000   

Repayment of long-term debt

           (2,005     (38     (22            (2,065

Distributions to noncontrolling interests

                  (29     (176            (205

Payment of debt issuance costs

           (24                          (24

Repurchases of common stock

    (1,858                                 (1,858

Changes in intercompany balances with affiliates, net

    1,799        (230)        (1,414     (155              

Other

    (104                   13               (91
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by financing activities

    (163     741        (1,481     (340            (1,243
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Change in cash and cash equivalents

                  (73     23               (50

Cash and cash equivalents at beginning of period

                  155        586               741   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

  $      $      $ 82      $ 609      $      $ 691   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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 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                      &n