HCA second quarter revenues increase 4% to $8.063 billion

HCA Holdings, Inc. (NYSE: HCA) today announced financial and operating results for the second quarter ended June 30, 2011.

“While the Company had favorable admissions growth during the quarter, we experienced a shift in service mix from more complex surgical cases to less acute medical cases. This resulted in lower than anticipated revenue growth and earnings”

Key second quarter metrics (all percentage changes compare 2Q 2011 to 2Q 2010 unless noted):

• Revenues increased 4 percent to $8.063 billion; cash revenues increased 4.6 percent to $7.288 billion
• Net income attributable to HCA Holdings, Inc. totaled $229 million, or $0.43 per diluted share, which includes a pre-tax loss on retirement of debt of $75 million, or $0.08 per diluted share
• Adjusted EBITDA declined 4.7 percent to $1.420 billion
• Cash flows from operations increased 71.6 percent to $748 million
• Cash revenue per equivalent admission increased 1.1 percent
• Same facility equivalent admissions increased 1.9 percent while same facility admissions increased 1.8 percent

"While the Company had favorable admissions growth during the quarter, we experienced a shift in service mix from more complex surgical cases to less acute medical cases. This resulted in lower than anticipated revenue growth and earnings," said Richard M. Bracken, Chairman of the Board and Chief Executive Officer of HCA.

Patient volume in the second quarter of 2011 primarily reflects growth in medical admissions of 3.7 percent, while surgical admissions declined 1.6 percent on a same facility basis (excluding International facilities) in the quarter. Same facility equivalent admissions increased 1.9 percent in the second quarter of 2011 compared to the prior year period, while same facility admissions increased 1.8 percent. Hospital emergency room visits increased 4.5 percent in the second quarter of 2011, on a same facility basis, compared to the prior year period.

Revenues in the second quarter increased to $8.063 billion, from $7.756 billion in the second quarter of 2010. Cash revenues totaled $7.288 billion in the second quarter of 2011, compared to $6.968 billion in the prior year's second quarter. Cash revenues is a non-GAAP financial measure and reflects the Company's reported revenues less the provision for doubtful accounts (bad debts). Revenue growth was driven by increased volume and revenue per equivalent admission growth. Revenues for the second quarter of 2011 included $39 million of Medicaid incentive revenues related to certain of our hospitals completing attestations to their adoption of certified electronic health record technology.

Net income attributable to HCA Holdings, Inc. totaled $229 million, or $0.43 per diluted share, compared to $293 million, or $0.67 per diluted share, in the second quarter of 2010. Results for the second quarter of 2011 include a loss on retirement of debt of $75 million, or $0.08 per diluted share. Results for the second quarter of 2010 include impairments of long-lived assets of $91 million, or $0.13 per diluted share. (All "per diluted share" disclosures are based upon amounts net of the applicable income taxes.) Shares used in computing diluted earnings per share increased to 538.6 million in the second quarter of 2011 compared to 437.1 million in the second quarter of 2010. The increase was due to the initial public offering of 87.7 million shares of our common stock in March of 2011. Adjusted EBITDA declined to $1.420 billion compared to $1.490 billion in the prior year period. Adjusted EBITDA is a non-GAAP financial measure. Tables providing supplemental information on adjusted EBITDA and cash revenues and reconciling net income attributable to HCA Holdings, Inc. to adjusted EBITDA, and reported revenues to cash revenues, are included in this release.

The Company's provision for doubtful accounts declined to $775 million, or 9.6 percent of revenues, in the second quarter of 2011, from $788 million, or 10.2 percent of revenues, in the same period of 2010. The sum of the provision for doubtful accounts, uninsured discounts and charity care, as a percentage of the sum of revenues, uninsured discounts and charity care, was 27.6 percent for the second quarter of 2011, compared to 26.1 percent for the second quarter of 2010. Same facility uninsured admissions increased 10.6 percent in the second quarter compared to the prior year period and comprised 7.4 percent of total same facility admissions compared to 6.8 percent of total same facility admissions in the second quarter of 2010.

During the second quarter of 2011, salaries and benefits, supplies and other operating expenses totaled $5.941 billion, or 73.7 percent of revenues (81.5 percent of cash revenues), compared to $5.553 billion, or 71.6 percent of revenues (79.7 percent of cash revenues), in the second quarter of 2010.

Six Months Ended June 30, 2011

Revenues for the six months ended June 30, 2011 totaled $16.118 billion compared to $15.300 billion in the same period of 2010. Net income attributable to HCA Holdings, Inc. was $469 million, or $0.94 per diluted share, compared to $681 million, or $1.56 per diluted share, for the first six months of 2010. Results for the six months ended June 30, 2011 include a loss on retirement of debt of $75 million, or $0.09 per diluted share, and a charge for the termination of a management agreement of $181 million, or $0.30 per diluted share. Results for the six months ended June 30, 2010 include impairments of long-lived assets of $109 million, or $0.16 per diluted share. Adjusted EBITDA for the six months ended June 30, 2011 totaled $3.010 billion compared to $3.064 billion in the prior year period.

Balance Sheet

As of June 30, 2011, HCA Holdings, Inc.'s balance sheet reflected cash and cash equivalents of $539 million, total debt of $25.320 billion, and total assets of $23.877 billion. During the second quarter of 2011, capital expenditures totaled $447 million, excluding acquisitions. Net cash provided by operating activities in the second quarter of 2011 totaled $748 million compared to $436 million in the prior year's second quarter. The improvement in cash flows from operating activities was primarily due to lower tax payments during the second quarter of 2011.

As of June 30, 2011, HCA operated 164 hospitals and 111 freestanding surgery centers (including seven hospitals and 13 freestanding surgery centers operated through equity method joint ventures).

Acquisitions

During the second quarter of 2011, HCA completed the acquisition of the 473 bed Mercy Hospital in Coral Gables, Florida.

On June 15, 2011, HCA announced that it had entered into a non-binding Memorandum of Understanding with the Colorado Health Foundation for the purchase of the Foundation's remaining ownership interest in the HCA HealthONE LLC joint venture for $1.45 billion. Subject to regulatory review and negotiation of a definitive agreement, the transaction is expected to close in the third quarter of 2011.

Initial Public Offering of Equity

During March 2011, HCA completed the initial public offering of shares of its common stock, including the issuance and sale by HCA of 87,719,300 shares at a price of $30.00 per share. Net proceeds from the offering to HCA were approximately $2.506 billion, after underwriter discounts, commissions and other related offering expenses. The Company's common stock is now traded on the New York Stock Exchange (symbol: "HCA").