-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Juye9vzJDVAGt2Q4GndMy1n6MvFp311iV2/OH492WYKuEfcb0vBmu70w2Hr0KX2c 3frcrAGoF0VXRSK7J9wHAw== 0000826490-95-000001.txt : 19950509 0000826490-95-000001.hdr.sgml : 19950508 ACCESSION NUMBER: 0000826490-95-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19941130 FILED AS OF DATE: 19950117 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTHTRUST INC THE HOSPITAL CO CENTRAL INDEX KEY: 0000826490 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-GENERAL MEDICAL & SURGICAL HOSPITALS, NEC [8062] IRS NUMBER: 621234332 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10915 FILM NUMBER: 95501603 BUSINESS ADDRESS: STREET 1: 4525 HARDING RD CITY: NASHVILLE STATE: TN ZIP: 37205 BUSINESS PHONE: 6153834444 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarter ended November 30, 1994 Commission file number 001-10915 Healthtrust, Inc. - The Hospital Company (Exact name of registrant as specified in its charter) Delaware 62-1234332 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 4525 Harding Road Nashville, Tennessee 37205 (Address of principal executive (Zip Code) offices) (615) 383-4444 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 periods 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, $.001 Par Value - 90,895,540 shares as of December 31, 1994. INDEX HEALTHTRUST, INC. - THE HOSPITAL COMPANY PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements (Unaudited) Condensed consolidated balance sheets-- November 30, 1994 and August 31, 1994 3 Condensed consolidated statements of operations--three months ended November 30, 1994 and 1993 4 Condensed consolidated statements of cash flows--three months ended November 30, 1994 and 1993 5 Notes to condensed consolidated financial statements 6 Item 2. Management's Discussion and Analysis of 7-11 Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS HEALTHTRUST, INC. - THE HOSPITAL COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in thousands) November 30, August 31 1994 1994 CURRENT ASSETS Cash and cash equivalents $ 94,783 $ 92,327 Accounts receivable, less allowances for doubtful accounts of $179,050 and $175,838 595,139 549,554 Supplies 87,021 86,576 Other current assets 113,092 113,752 TOTAL CURRENT ASSETS 890,035 842,209 PROPERTY, PLANT AND EQUIPMENT 3,019,994 2,990,559 Less accumulated depreciation 780,266 736,863 2,239,728 2,253,696 EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED 743,514 736,189 OTHER ASSETS 134,188 135,188 TOTAL ASSETS $4,007,465 $3,967,282 CURRENT LIABILITIES Accounts payable $ 118,772 $ 153,821 Other current liabilities 407,533 405,244 TOTAL CURRENT LIABILITIES 526,305 559,065 LONG-TERM DEBT 1,741,921 1,740,872 DEFERRED INCOME TAXES 91,186 91,230 DEFERRED PROFESSIONAL LIABILITY RISKS 224,688 215,503 OTHER LIABILITIES 347,421 335,008 STOCKHOLDERS' EQUITY Common Stock, $.001 par value; 400,000,000 shares authorized, 90,722,600 and 90,733,447 shares issued and outstanding 91 91 Paid-in capital 1,022,340 1,021,929 Retained earnings 53,513 3,584 STOCKHOLDERS' EQUITY 1,075,944 1,025,604 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,007,465 $3,967,282 See accompanying notes. HEALTHTRUST, INC. - THE HOSPITAL COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Dollars in thousands, except per share data) Three Months Ended November 30 1994 1993 Net operating revenue $ 969,924 $ 622,095 Costs and expenses: Hospital service costs: Salaries and benefits 374,748 232,263 Supplies 129,108 87,990 Fees 103,988 64,716 Other expenses 102,380 65,740 Bad debt expense 64,572 43,590 774,796 494,299 Depreciation and amortization 56,080 34,620 Interest 40,458 21,555 Pension expense 16,357 10,218 Other income (net) (3,694) (5,450) 883,997 555,242 INCOME BEFORE MINORITY INTERESTS AND INCOME TAXES 85,927 66,853 Minority interests 2,013 1,442 INCOME BEFORE INCOME TAXES 83,914 65,411 Income tax provision 33,985 26,559 NET INCOME $ 49,929 $ 38,852 Net income per share $ 0.54 $ 0.46 Shares used in computation of net income per share 92,633,566 84,426,187 See accompanying notes. HEALTHTRUST, INC. - THE HOSPITAL COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands) Three Months Ended November 30 1994 1993 OPERATING ACTIVITIES Net income $ 49,929 $ 38,852 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 49,788 32,462 Amortization 6,292 2,158 Non-cash insurance expense 1,881 5,120 Pension expense 16,357 10,218 Increase in accounts and agency receivables (45,104) (21,212) Decrease in accounts payable and accrued liabilities (37,602) (47,244) Other 1,089 (1,860) NET CASH PROVIDED BY OPERATING ACTIVITIES 42,630 18,494 INVESTING ACTIVITIES Purchases of property, plant and equipment (38,164) (34,318) Proceeds from sales of property, plant and equipment 2,344 96,208 Other (8,765) (321) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (44,585) 61,569 FINANCING ACTIVITIES Principal payments on long-term debt (51,000) (65,000) Proceeds from long-term borrowings 55,000 - Other 411 1,007 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,411 (63,993) INCREASE IN CASH AND CASH EQUIVALENTS 2,456 16,070 Cash and cash equivalents at beginning of period 92,327 151,346 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 94,783 $ 167,416 Cash paid during the period for: Interest $ 63,184 $ 41,232 Income taxes 3,326 26,544 See accompanying notes. HEALTHTRUST, INC. - THE HOSPITAL COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. All significant intercompany transactions have been eliminated in consolidation. Operating results for the three months ended November 30, 1994 are not necessarily indicative of the results that may be expected for the fiscal year ending August 31, 1995. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended August 31, 1994 (included in the Company's Annual Report on Form 10-K). Income Per Share Income per share has been computed by dividing the net income for each period by the weighted average number of shares and share equivalents outstanding during the applicable period, adjusted for stock splits. Fully diluted per share data is not presented since the effect would dilute earnings per share by less than three percent (3%). Proposed Merger With Columbia/HCA Healthcare Corporation On October 4, 1994, the Company and Columbia/HCA Healthcare Corporation jointly announced the signing of a definitive merger agreement under which the Company's shareholders will receive 0.88 shares of Columbia common stock in exchange for each share of Healthtrust common stock they hold. The proposed transaction is expected to be accounted for as a pooling of interests. The completion of the transaction is subject to the approval of the shareholders of both companies and regulatory approvals. The shareholders meetings to vote on the proposed merger transaction are scheduled to be held on February 28, 1995. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS SELECTED OPERATING STATISTICS (dollars in millions) Same Hospitals Operating Data (1): Three Months Ended November 30, November 30, 1994 1993 %Increase Number of Hospitals 77 77 Gross Revenue: Inpatient $ 667.9 $ 626.4 6.6% Outpatient $ 360.4 $ 313.0 15.1% Net Operating Revenue $ 623.6 $ 587.9 6.1% Hospital Service Costs $ 479.0 $ 460.7 4.0% Admissions 70,784 67,177 5.4% Adjusted Admissions 108,981 100,749 8.2% Patient Days 345,480 345,106 0.1% Adjusted Patient Days 531,908 517,576 2.8% Average Length of Stay (days) 4.88 5.14 Occupancy Rate 38% 39% Operating Margin 23.2% 21.6% (1) The results of operations applicable to hospital acquisitions and dispositions have been excluded. General The Company continues to experience gross and net operating revenue increases and the Company's results of operations continue to be affected by the trend toward certain services being performed more frequently on an outpatient basis. The Company has been able to achieve increases in net operating revenue due to the higher utilization of outpatient and ancillary services, general price increases and an increased severity of illness for the patients admitted. Although the Company's net operating revenue has grown in each period, the impact of price increases and increases in patient acuity have been partially offset by the increasing proportion of revenue derived from fixed payment sources, including Medicare and Medicaid (approximately 45% and 43%, for the quarters ended November 30, 1994 and 1993, respectively, of the Company's net operating revenue was related to Medicare and Medicaid patients). The growth in outpatient services is expected to continue as procedures currently being performed on an inpatient basis become available on an outpatient basis through continuing advances in pharmaceutical and medical technologies. The redirection of certain procedures to an outpatient basis has also been influenced by pressures from payors to direct certain procedures from inpatient care to outpatient care. While the Company expects the growth in outpatient services to continue, the rate of increase is expected to decline. The Company expects Medicare and Medicaid revenue to continue to increase due to the general aging of the population and the expansion of state Medicaid programs. The Medicare program reimburses the Company's hospitals primarily based on established rates that are dependant on each patient's diagnosis, regardless of the provider's cost to treat the patient or the length of time the patient stays in the hospital. The Medicare program's established rates are indexed for inflation annually, but these increases have historically been less than both the actual inflation rate and the Company's increases to its standard charges. Insurance companies, government programs (other than Medicare) and employers purchasing health care services for their employees are negotiating the amounts they will pay health care providers, rather than paying the providers standard prices. This leads to these purchasers of health care services becoming managed care payors, similar to HMO's and PPO's, in virtually all markets and making it increasingly difficult for providers to maintain their historical net revenue growth trends. The Congress is currently reviewing various proposals for comprehensive health care reform. The reform proposals contain coverage guarantees, benefits standards and cost control mechanisms. The Company cannot predict what reforms the Congress will adopt, when such reforms will be implemented or the resulting implications for providers, at this time. However, the Company believes that the delivery of primary care, emergency care, obstetrical services and rehabilitative services, on a local basis, to rural and suburban markets will be an integral component of any strategy for controlling health care costs and the Company believes it is well positioned to provide these services. The Company acquired EPIC Holdings, Inc. (EPIC), which owned 34 hospitals and various related healthcare entities, and three other hospital facilities during 1994. These acquisitions were made during the third and fourth quarters of fiscal 1994, therefore the results of operations of these acquired facilities are included in consolidated operations for the quarter ended November 30, 1994, but are not included for the quarter ended November 30, 1993. Three Months Ended November 30, 1994 and 1993 Net operating revenue for the Company's hospitals for the three months ended November 30, 1994, increased 55.9% (14.2% excluding EPIC) to $969.9 million, while same hospitals net operating revenue increased 6.1%. Gross revenue during the three months ended November 30, 1994, increased 59.1% (15.8% excluding EPIC) due to a 73.3% increase (23.3% excluding EPIC) in gross outpatient revenue and a 49.9% increase (12.0% excluding EPIC) in gross inpatient revenue. On a same hospitals basis, gross revenue increased 9.4% compared to the prior year period, due to a 15.0% increase in gross outpatient revenue and a 6.6% increase in gross inpatient revenue. In each case, gross revenue grew faster than net operating revenue, primarily because the patient day mix became more heavily weighted to Medicare, Medicaid and specialty unit patients (for which reimbursement rate increases have been less than implemented price increases) and increased utilization by managed care programs. Costs of hospital services (salaries and benefits, fees, supplies, bad debt expense and other expenses) for the three months ended November 30, 1994 increased 56.7%. The 55.9% increase in net operating revenue and 56.7% increase in the costs of hospital services resulted in the operating margin decreasing from 20.5% for the three months ended November 30, 1993 to 20.1% for the 1994 period. Salaries and benefits, the largest component of hospital services, increased from 37.3% to 38.6% of net operating revenue due to higher than average expense at the facilities acquired during the third and fourth quarters of fiscal 1994. Supplies expense decreased from 14.2% of net operating revenue for the three months ended November 30, 1993 to 13.3% of net operating revenue for the 1994 period, reflecting the benefits from the Company's efforts to standardize supplies and consolidate vendors. Bad debt expense declined from 7.0% to 6.7% of net operating revenue for the three months ended November 30, 1994. Interest expense increased from $21.6 million to $40.5 million for the three months ended November 30, 1994, due primarily to the additional debt incurred to finance the acquisition of EPIC and the other fiscal 1994 acquisitions. Income before income taxes increased $18.5 million, due primarily to the net effect of the $67.3 million increase in net operating revenue less hospital service costs and $46.5 million increase in depreciation, amortization, interest, and pension expenses. The Company's combined federal and state effective tax rate was 40.5% for the three months ended November 30, 1994 and 40.6% for the 1993 period. The Company continues to generate significant levels of cash flows from operating activities, $42.6 million for the three months ended November 30, 1994 and $18.5 million for the 1993 period. Although net income increased by $11.1 million, increases in depreciation and amortization resulted in cash flows from operations increasing by $24.1 million. Liquidity and Capital Resources Healthtrust ended the first quarter of fiscal 1995 in its strongest financial position: cash totaled $94.8 million; total assets reached $4.01 billion; stockholders' equity climbed to $1.08 billion; and debt as a percentage of total capital was at 61.8%. Cash provided from operations continued to satisfy all of the Company's working capital, capital expenditure (excluding EPIC and other facility acquisitions) and debt principal payment requirements. Management believes that, based upon its analysis of the Company's financial condition, the cash flow generated from operations in the future should provide sufficient liquidity to meet all cash requirements for at least the next year without substantial additional borrowings. In addition, the Company believes, based on current internal long-term projections of future results of operations, that it will be able to satisfy its current and expected obligations as they become due without incurring substantial additional indebtedness, and that satisfaction of such obligations will not prevent the Company from meeting liquidity requirements for operations and capital expenditures. However, there can be no assurance that future developments in the health care industry or general economic trends will not adversely affect the Company's operations or its ability to meet such obligations. During April 1994, the Company entered into a credit agreement with the Bank of Nova Scotia, acting as administrative agent for the lenders (the "1994 Credit Agreement"). The 1994 Credit Agreement provides for an aggregate of up to $1.2 billion in credit available to the Company. Loans under the 1994 Credit Agreement bear interest at fluctuating rates, as selected by the Company at specified times, equal to either (i) an alternate base rate (the higher of the Bank of Nova Scotia's base rate for dollar loans or the Federal Funds rate plus 50 basis points)plus 50 basis points or (ii) LIBO plus 150 basis points. At November 30, 1994, the Company had outstanding $394 million of term loans, $277 million of delayed term loans and $80 million of revolving loans under the 1994 Credit Agreement. At November 30, 1994, the Company had approximately $428 million of credit available under the 1994 Credit Agreement. During 1994, the Company spent $221 million (excluding the EPIC and other facility acquisitions) for capital expenditures, primarily to renovate and add new equipment and technology to existing facilities. The Company intends to continue to invest in its existing facilities and in new facilities within its existing health care business and capital expenditures for fiscal 1995 are expected to be approximately $300 million. The Company may seek to sell certain of its hospitals from time to time. Management does not consider the sale of any assets to be necessary to repay the Company's indebtedness or to provide working capital. The Company's cash, cash expected to be generated from operations and available sources of capital are believed by management to be adequate to finance its planned future growth. The Company receives payment for services rendered from federal and state agencies (under the Medicare, Medicaid and Champus programs), private insurance carriers, employers, managed care programs and patients. During the three months ended November 30, 1994, approximately 45% of the Company's net operating revenue related to patients participating in the Medicare and Medicaid programs. The Company recognizes that revenue and receivables from government agencies are significant to the Company's operations, but the Company does not believe that there are any significant credit risks associated with these government agencies. The Company does not believe that there are any other significant concentrations of revenue from any particular payor that would subject the Company to any significant credit risks in the collection of its accounts receivable. The Company is primarily self-insured for professional and general liability risks. The unfunded reserve for professional and general liability risks was $246.2 million at November 30, 1994. Payments of professional and general liability claims aggregated $13.4 million for the three months ended November 30, 1994. The Company does not believe that the payment of these self-insured risks will have any significant impact on the Company's liquidity or working capital. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are included herein: (11) Statement re: Computation of Earnings Per Share (27) Financial Data Schedule (included only in filings under the EDGAR system) (b) The Company filed a report on Form 8-K dated October 4, 1994, announcing the signing of a definitive agreement between the Company and Columbia/HCA Healthcare Corp. to merge in a tax- free, stock-for-stock transaction. A copy of the press release issued by the Company was included in the report. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Healthtrust, Inc. - The Hospital Company (Registrant) January 17, 1995 /S/ R. Clayton McWhorter Date R. Clayton McWhorter Chairman of the Board, Chief Executive Officer and President January 17, 1995 /S/ Kenneth C. Donahey Date Kenneth C. Donahey Senior Vice President and Controller Chief Accounting Officer EX-11 2 HEALTHTRUST, INC. - THE HOSPITAL COMPANY Exhibit 11 - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE Three Months Ended November 30, 1994 and 1993 (Dollars in thousands, except per share data) Three Months Ended November 30 1994 1993 Primary: Weighted average shares outstanding 90,671,526 81,097,606 Net effect of dilutive warrants 695,092 2,610,014 Net effect of dilutive stock options 1,266,948 718,567 Total shares and share equivalents 92,633,566 84,426,187 Net income $ 49,929 $ 38,852 Net income per share $ 0.54 $ 0.46 Fully Diluted: Weighted average shares outstanding 90,671,526 81,097,606 Net effect of dilutive warrants 695,092 2,633,083 Net effect of dilutive stock options 1,266,948 764,757 Total shares and share equivalents 92,633,566 84,495,446 Net income $ 49,929 $ 38,852 Net income per share $ 0.54 $ 0.46 EX-27 3 FINANCIAL DATA SCHEDULE (EXHIBIT 27) WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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