-----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, FBmHUFvv9lfiHcwWnV2c0gxNvW++dFxjIU57TDlZ40pTj9rgIvdKSGPlPKJcEGmB odoxXoFuVvahwvN0AufAtw== 0000860730-94-000030.txt : 19941214 0000860730-94-000030.hdr.sgml : 19941214 ACCESSION NUMBER: 0000860730-94-000030 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19941213 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBIA HCA HEALTHCARE CORP/ CENTRAL INDEX KEY: 0000860730 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-GENERAL MEDICAL & SURGICAL HOSPITALS, NEC [8062] IRS NUMBER: 752497104 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-11239 FILM NUMBER: 94564640 BUSINESS ADDRESS: STREET 1: 201 WEST MAIN STREET CITY: LOUISVILLE STATE: KY ZIP: 40202- BUSINESS PHONE: (502)-572-2000 FORMER COMPANY: FORMER CONFORMED NAME: COLUMBIA HEALTHCARE CORP DATE OF NAME CHANGE: 19930830 FORMER COMPANY: FORMER CONFORMED NAME: COLUMBIA HOSPITAL CORP DATE OF NAME CHANGE: 19930328 10-Q/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A-1 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1994 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 COLUMBIA/HCA HEALTHCARE CORPORATION (Exact name of registrant as specified in its charter) Delaware 75-2497104 (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 201 West Main Street, Louisville, Kentucky 40202 (Address of principal executive offices) (Zip Code) (502) 572-2000 (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, 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 practicable date. Outstanding at Class of Common Stock April 30,1994 Voting common stock, $.01 par value 319,079,300 shares Nonvoting common stock, $.01 par value 18,990,000 shares INTRODUCTION This report on Form 10-Q/A-1 is being filed with the Securities and Exchange Commission to delete Item 2 on Form 10-Q of Columbia/HCA Healthcare Corporation (the "Company") for the quarter ended March 31, 1994 in its entirety and to insert in lieu thereof the following: ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Background Information and Business Strategy HCA Merger As discussed in Note 4 of the Notes to Condensed Consolidated Financial Statements, the HCA Merger was completed on February 10, 1994. For accounting purposes, this transaction was treated as a pooling of interests. Accordingly, the accompanying condensed consolidated financial statements and financial and operating data included in this discussion and analysis give retroactive effect to the HCA Merger and include the combined operations of Columbia and HCA for all periods presented. Galen Merger The Galen Merger was completed on September 1, 1993 and was also accounted for as a pooling of interests. See Note 5 of the Notes to Condensed Consolidated Financial Statements for a discussion of the Galen Merger. The accompanying condensed consolidated financial statements and financial and operating data included in this discussion and analysis give retroactive effect to the Galen Merger and include the combined operations of CHC and Galen for all periods presented. In addition, the historical financial information related to Galen (which prior to the Galen Merger was reported on a fiscal year ending August 31) has been recast to conform to Columbia/HCA's annual reporting period ending December 31. Spinoff Transaction Prior to the merger with CHC, Galen became a publicly held corporation as a result of the Spinoff which was completed on March 1, 1993. The Spinoff separated Humana's previously integrated hospital and managed care health plan businesses and was effected through the distribution of Galen common stock to then current Humana common stockholders on a one-for-one basis. For accounting purposes, because of the relative significance of the hospital business, the pre-Spinoff financial statements of Galen (and now those of Columbia/HCA) include the separate results of Humana's hospital business, while the operating results and net assets of Humana's managed care health plans have been classified as discontinued operations. Business Strategy Columbia/HCA primarily operates hospitals and ancillary health care facilities through either (i) wholly owned subsidiaries or (ii) ownership of controlling interests in various partnerships in which subsidiaries of Columbia/HCA serve as the managing general partner. Columbia/HCA's business strategy centers on the development of comprehensive, integrated healthcare delivery networks with physicians and other healthcare providers in targeted markets, which typically involves significant health care facility acquisitions and consolidation activities. During the past several years, hospital industry inpatient admission trends have been adversely impacted by cost containment efforts initiated by federal and state governments and various third-party payers, including health maintenance organizations, preferred provider organizations, commercial insurance companies and employer-sponsored networks. In addition, a significant number of medical procedures have shifted from inpatient to less expensive outpatient settings as a result of both cost containment pressures and advances in medical technology. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Background Information and Business Strategy (Continued) In response to changes in the health care industry, Columbia/HCA has developed the following strategy to provide the highest quality health care services at the lowest possible cost: Become a significant provider of services - Columbia/HCA attempts to (i) consolidate services to reduce costs and (ii) develop the geographic coverage necessary for inclusion in most managed care and employer- sponsored networks in each market. Provide a comprehensive range of services - In addition to the operation of general, acute care hospitals, Columbia/HCA also operates psychiatric and rehabilitation facilities, outpatient surgery and diagnostic centers, home health agencies and other services. This strategy enables Columbia/HCA to attract business from managed care plans and major employers seeking efficient access to a wide array of health care services. Deliver high quality services - Through the use of clinical information systems and continuous quality enhancement programs, Columbia/HCA focuses on patient outcomes and strives to continuously improve the quality of care and service provided to patients. Integrate fragmented delivery systems - Through its networks, Columbia/HCA focuses on coordinating pricing, contracting, information systems, economic incentives and quality assurance activities among providers in each market. Management intends to implement its strategy discussed above in a substantial number of former Galen and HCA markets as well as new markets, and further develop the integrated health care networks in its five pre- Galen Merger markets. Results of Operations Revenues increased 5% to $2.8 billion in the first quarter of 1994 compared to the same period last year primarily as a result of price increases, growth in inpatient and outpatient volumes and acquisitions. On a same-hospital basis, first quarter 1994 admissions increased 1.4% and outpatient visits increased 8.1% from a year ago. Despite a continued deterioration in payer mix, income from continuing operations before non-recurring transactions, depreciation, interest expense, minority interests, income taxes and amortization ("EBDITA") increased 8% to $603 million from $557 million last year. The increase in EBDITA margins to 21.7% this year from 21.0% last year resulted primarily from volume growth, improvements in staffing levels, increased discounts on medical supplies and other operating efficiencies related to growth in volume of services. Medicare admissions as a percentage of total admissions increased from 40% in the first quarter of 1993 to 41% in the first quarter this year, while discounted and managed care admissions grew from 32% to 37%, respectively. During the first quarter of 1994, Columbia/HCA recorded $159 million (before income taxes) of certain non-recurring charges in connection with the HCA Merger. In addition to investment and advisory fees associated with the HCA Merger, these charges reflect management's actions to reduce overhead costs, eliminate duplicative operating facilities in certain markets and consolidate management information systems. These cost-saving measures should be completed during 1994. Management believes that these actions related to the HCA Merger, combined with cost reductions from renegotiations of medical supply contracts and interest savings from the first quarter 1994 refinancing of long term debt, could result in annual pretax savings of approximately $130 million, of which as much as $75 million could be realized in 1994. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Results of Operations (Continued) Excluding the effects of the non-recurring transactions, income from continuing operations totaled $239 million or $.70 per share, an increase of 15% over last year's $205 million or $.61 per share. The increase was attributable to the previously discussed growth of EBDITA and a $21 million decline in interest expense resulting from refinancing activities and reductions of long-term debt. Results of operations for the first quarter of 1993 include income from discontinued operations of $16 million or $.04 per share related to Humana's health plan business prior to the Spinoff. See Note 6 of the Notes to Condensed Consolidated Financial Statements. In the first quarter of 1994, Columbia/HCA refinanced approximately $2 billion of HCA's high coupon fixed and floating rate long-term debt. These transactions were effected to reduce future interest expense and eliminate certain restrictive covenants. After-tax losses from these extinguishments of debt aggregated $92 million or $.27 per share. In connection with the Galen Merger, Columbia/HCA recorded charges in the third quarter of 1993 totaling $151 million (before income taxes) for management actions similar to those previously discussed as part of the HCA Merger. As of March 31, 1994, consolidation and cost-saving activities related to these charges were substantially completed. Management believes that these actions related to the Galen Merger, combined with cost reductions from renegotiations of medical supply contracts and interest savings from the third quarter 1993 refinancing of long-term debt, could result in annual pretax savings in 1994 of approximately $30 million. Liquidity Cash provided by continuing operations totaled $367 million for the three months ended March 31, 1994 compared to $376 million last year. Cash flows in 1994 were reduced by approximately $75 million in connection with the payment to the IRS related to disputed prior year income taxes and interest. In both periods, cash flows in excess of Columbia/HCA's capital expenditure program were used primarily to reduce long-term debt and in 1993, to finance a payment of $135 million to Humana in connection with the Spinoff. Working capital totaled $758 million at March 31, 1994 compared to $573 million at December 31, 1993. Management believes that cash flows from operations and amounts available under Columbia/HCA's revolving credit facilities and related commercial paper programs are sufficient to meet expected future liquidity needs. A substantial portion of the non-recurring transactions recorded in the first quarter of 1994 comprises the writedown of recorded assets and, accordingly, management does not expect that these transactions will have a material adverse affect on cash flows from continuing operations in 1994. Investments of Columbia/HCA's professional liability insurance subsidiaries to maintain statutory equity and pay claims totaled $778 million at both March 31, 1994 and December 31, 1993. Capital Resources Excluding acquisitions, capital expenditures totaled $214 million in the first quarter of 1994 compared to $181 million in 1993. Planned capital expenditures in 1994 (excluding acquisitions) are expected to approximate $800 million. Management believes that its capital expenditure program is adequate to expand, improve and equip existing health care facilities. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Capital Resources (continued) Columbia/HCA also expended $114 million and $75 million for acquisitions and joint ventures during the respective first quarters of 1994 and 1993. See Note 8 of the Notes to Condensed Consolidated Financial Statements for a description of these activities. As part of its business strategy, Columbia/HCA intends to acquire additional health care facilities in the future. Columbia/HCA intends to finance all capital expenditures with internally generated and borrowed funds. Available sources of capital include public or private debt, commercial paper, unused bank revolving credits and equity. At March 31, 1994, there were projects under construction which had an estimated additional cost to complete of approximately $285 million. At December 31, 1993, Columbia/HCA was a party to certain interest rate agreements covering $380 million of commercial paper classified as long-term debt. These transactions were consummated in connection with the refinancing of high-coupon debt with an average interest rate approximating 13% and provided a cost-effective source of fixed rate financing averaging 7.9%. As part of the previously discussed refinancing of $2 billion of long-term debt in the first quarter of 1994, Columbia/HCA terminated all of its interest rate agreements in advance of their scheduled maturities. The loss on refinancing of long- term debt aggregating $149 million ($92 million net of tax) includes a loss of $21 million ($13 million net of tax) related to the termination of these agreements. At March 31, 1994, Columbia/HCA was not a party to any interest rate agreements. On April 29, 1994, Columbia/HCA filed a registration statement on Form S-3 with the Securities and Exchange Commission in connection with the planned public offering of up to $1.5 billion of long-term debt. The proceeds from the sales of such securities will be used for general corporate purposes, which may include repayment of commercial paper and other indebtedness, additional capitalization of Columbia/HCA's subsidiaries, capital expenditures and possible acquisitions. Other Information As discussed in Note 9 of the Notes to Condensed Consolidated Financial Statements, Columbia/HCA is contesting certain income taxes and related interest aggregating $1.3 billion at March 31, 1994 proposed by the IRS for prior years. Management believes that final resolution of these disputes will not have a material adverse effect on the financial position, results of operations or liquidity of Columbia/HCA. However, if all or a majority of the positions of the IRS are upheld, the financial position, results of operations and liquidity of Columbia/HCA would be materially adversely affected. On March 24, 1994, Columbia/HCA made an advance payment to the IRS of approximately $75 million in connection with certain disputed prior year income taxes and related interest. This payment will not have a material effect on 1994 earnings. Resolution of various other loss contingencies, including litigation pending against Columbia/HCA in the ordinary course of business, is not expected to have a material adverse effect on its financial position or results of operations. Agreements relating to long-term debt require, among other things, maintenance of certain levels of interest coverage and provide limitations on long-term debt, sales of assets, mergers, changes in ownership and certain other financing activities. Columbia/HCA was in compliance with all such covenants at March 31, 1994. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Operating Data 1994 1993 Number of hospitals in operation at: March 31 ...................................... 196 197 June 30 ....................................... 195 September 30 .................................. 191 December 31 ................................... 193 Licensed beds at: March 31 ...................................... 43,171 42,786 June 30 ....................................... 42,576 September 30 .................................. 42,170 December 31 ................................... 42,237 Weighted average licensed beds: Quarter: First ........................................ 41,955 41,525 Second ....................................... 41,824 Third ........................................ 41,149 Fourth ....................................... 41,221 Year .......................................... 41,263 Average daily census: Quarter: First ........................................ 20,341 20,880 Second ....................................... 18,634 Third ........................................ 17,425 Fourth ....................................... 17,917 Year .......................................... 18,702 Admissions: Quarter: First ........................................ 309,800 306,200 Second ....................................... 286,500 Third ........................................ 278,600 Fourth ....................................... 287,100 Year .......................................... 1,158,400 Length of stay: Quarter: First ........................................ 5.9 6.1 Second ....................................... 5.9 Third ........................................ 5.8 Fourth ....................................... 5.7 Year .......................................... 5.9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Operating Data 1994 1993 Outpatient visits: Quarter: First ........................................1,459,400 1,378,500 Second ....................................... 1,411,800 Third ........................................ 1,311,600 Fourth ....................................... 1,389,000 Year .......................................... 5,490,900 Emergency room visits: Quarter: First ........................................ 788,300 791,900 Second ....................................... 792,600 Third ........................................ 778,500 Fourth ....................................... 776,700 Year .......................................... 3,139,700 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Condensed Consolidated Statement Of Income 1993 Quarters Unaudited (Dollars in millions, except per share amounts)
First Second Third Fourth Year Revenues ................................ $2,654 $2,536 $2,491 $2,571 $10,252 Salaries, wages and benefits ............ 1,072 1,049 1,034 1,060 4,215 Supplies ................................ 433 413 405 413 1,664 Other operating expenses ................ 478 461 474 480 1,893 Provision for doubtful accounts ......... 126 132 152 132 542 Depreciation and amortization ........... 136 138 140 140 554 Interest expense ........................ 85 85 81 70 321 Investment income ....................... (12) (15) (18) (21) (66) Non-recurring transactions .............. - - 151 - 151 2,318 2,263 2,419 2,274 9,274 Income from continuing operations before minority interests and income taxes ................................. 336 273 72 297 978 Minority interests in earnings of consolidated entities ................. 4 3 3 (1) 9 Income from continuing operations before income taxes ................... 332 270 69 298 969 Provision for income taxes .............. 127 104 41 122 394 Income from continuing operations ....... 205 166 28 176 575 Income from operations of discontinued health plan segment, net of income taxes ................................. 16 - - - 16 Extraordinary loss on extinguishment of debt, net of income tax benefit .... - - (84) - (84) Net income (loss) .................. $ 221 $ 166 $ (56) $ 176 $ 507 Earnings (loss) per common and common equivalent share: Income from continuing operations ..... $ .61 $ .49 $ .08 $ .52 $ 1.70 Income from operations of discontinued health plan segment ................. .04 - - - .04 Extraordinary loss on extinguishment of debt ............................. - - (.24) - (.24) Net income (loss) .................. $ .65 $ .49 $ (.16) $ .52 $ 1.50 Shares used in earnings per common and common equivalent share computation (000) ..................... 337,739 338,544 340,145 340,642 339,222
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Condensed Consolidated Statement Of Income 1992 Quarters Unaudited (Dollars in millions, except per share amounts)
First Second Third Fourth Year Revenues ................................ $2,559 $2,450 $2,451 $2,472 $9,932 Salaries, wages and benefits ............ 1,037 1,006 1,028 1,041 4,112 Supplies ................................ 407 390 405 411 1,613 Other operating expenses ................ 466 456 479 448 1,849 Provision for doubtful accounts ......... 121 126 144 124 515 Depreciation and amortization ........... 135 136 139 131 541 Interest expense ........................ 127 95 89 90 401 Investment income ....................... (20) (19) (26) (16) (81) Non-recurring transactions .............. - - 532 (93) 439 2,273 2,190 2,790 2,136 9,389 Income (loss) from continuing operations before minority interests and income taxes ................................. 286 260 (339) 336 543 Minority interests in earnings of consolidated entities ................. 3 3 2 2 10 Income (loss) from continuing operations before income taxes ................... 283 257 (341) 334 533 Provision for income taxes .............. 109 99 (41) 127 294 Income (loss) from continuing operations ............................ 174 158 (300) 207 239 Income (loss) from operations of discontinued health plan segment, net of income taxes (benefit) ......... 3 (2) (132) 6 (125) Cumulative effect on prior years of a change in accounting for income taxes ................................. 51 - - - 51 Net income (loss) .................. $ 228 $ 156 $ (432) $ 213 $ 165 Earnings (loss) per common and common equivalent share: Income from continuing operations ..... $ .57 $ .48 $ (.89) $ .61 $ .73 Income (loss) from operations of discontinued health plan segment .... .02 (.02) (.39) .02 (.39) Cumulative effect on prior years of a change in accounting for income taxes ............................... .16 - - - .16 Net income (loss) .................. $ .75 $ .46 $(1.28) $ .63 $ .50 Shares used in earnings per common and common equivalent share computation (000) ..................... 304,401 331,969 337,675 340,065 328,564
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. COLUMBIA/HCA HEALTHCARE CORPORATION Date: December 13, 1994 /s/ Richard A. Lechleiter Vice President and Controller (Principal Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----