-----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, Zwqugekg3vgpA1OnxVhwAi6JJzULy0+ssZQjlTUmqaJg2uptltVl+Z2oIqkR6TlG ljZlmAso6qEMSF3bJSTIPg== 0000912057-94-002245.txt : 19940712 0000912057-94-002245.hdr.sgml : 19940712 ACCESSION NUMBER: 0000912057-94-002245 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940707 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBIA HCA HEALTHCARE CORP/ CENTRAL INDEX KEY: 0000860730 STANDARD INDUSTRIAL CLASSIFICATION: 8062 IRS NUMBER: 752497104 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-11239 FILM NUMBER: 94538050 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-K/A 1 FORM 10-K/A-1 - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K/A-1 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
COMMISSION FILE NUMBER 1-11239 ------------------------ COLUMBIA/HCA HEALTHCARE CORPORATION (FORMERLY COLUMBIA 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) Indentification No.) 201 WEST MAIN STREET LOUISVILLE, KENTUCKY 40202 (Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (502) 572-2000 Securities Registered Pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - - -------------------------------------------------------- -------------------------------------------------------- Common Stock, $.01 Par Value New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / As of February 28, 1994, there were outstanding 318,289,550 shares of the Registrant's Common Stock and 18,989,999 shares of the Registrant's Nonvoting Common Stock. As of February 28, 1994 the aggregate market value of the Common Stock held by non-affiliates was $12,304,680,760. For purposes of the foregoing calculation only, the Registrant's directors, executive officers, and The Hospital Corporation of America Stock Bonus Plan have been deemed to be affiliates. DOCUMENTS INCORPORATED BY REFERENCE None - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- INTRODUCTION This report on Form 10-K/A-1 is being filed with the Securities and Exchange Commission to amend Item 8 of the Annual Report on Form 10-K of Columbia/HCA Healthcare Corporation (the "Company") for the fiscal year ended December 31, 1993. The Company consummated its merger with HCA -- Hospital Corporation of America on February 10, 1994, which was accounted for as a pooling of interest, and subsequently filed on May 16, 1994 post merger condensed consolidated financial statements for the quarter ended March 31, 1994 on Form 10-Q. Accordingly, the supplemental consolidated financial statements included in the 1993 Annual Report on Form 10-K have become the historical consolidated financial statements of the Company and are included herein along with the report of Ernst & Young. The consent of Ernst & Young is included in this report as Exhibit 23. 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: July 6, 1994 /s/ Richard A. Lechleiter -------------------------------------- VICE PRESIDENT AND CONTROLLER (PRINCIPAL ACCOUNTING OFFICER) 2 COLUMBIA/HCA HEALTHCARE CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE --------- Report of Independent Auditors............................................................................ F-2 Consolidated Financial Statements: Consolidated Statement of Income for the years ended December 31, 1993, 1992 and 1991.......................................................................................... F-3 Consolidated Balance Sheet, December 31, 1993 and 1992.................................................. F-4 Consolidated Statement of Common Stockholders' Equity for the years ended December 31, 1993, 1992 and 1991................................................................................................... F-5 Consolidated Statement of Cash Flows for the years ended December 31, 1993, 1992 and 1991.......................................................................................... F-6 Notes to Consolidated Financial Statements.............................................................. F-7 Quarterly Consolidated Financial Information (Unaudited)................................................ F-25 Consolidated Financial Statement Schedules (a): Schedule I -- Marketable Securities -- Other Security Investments, December 31, 1993.................... F-26 Schedule II -- Amounts Receivable From Related Parties and Underwriters, Promoters and Employees Other Than Related Parties for the years ended December 31, 1993, 1992 and 1991.............................. F-27 Schedule V -- Property, Plant and Equipment for the years ended December 31, 1993, 1992 and 1991........ F-30 Schedule VI -- Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment for the years ended December 31, 1993, 1992 and 1991....................................................... F-31 Schedule VIII -- Valuation and Qualifying Accounts for the years ended December 31, 1993, 1992 and 1991................................................................................................... F-32 Schedule X -- Supplementary Income Statement Information for the years ended December 31, 1993, 1992 and 1991................................................................................................... F-33 - - ------------------------ (a) All other schedules have been omitted because the required information is not present or not present in material amounts.
F-1 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Stockholders Columbia/HCA Healthcare Corporation We have audited the accompanying consolidated balance sheet of Columbia/HCA Healthcare Corporation as of December 31, 1993 and 1992, and the related consolidated statements of income, common stockholders' equity and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index on page F-1 of this Form 10-K/A-1. These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Columbia/HCA Healthcare Corporation as of December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note 7 to the consolidated financial statements, effective January 1, 1992, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." ERNST & YOUNG Louisville, Kentucky July 5, 1994 F-2 COLUMBIA/HCA HEALTHCARE CORPORATION CONSOLIDATED STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
1993 1992 1991 --------- --------- --------- Revenues.......................................................................... $ 10,252 $ 9,932 $ 9,598 --------- --------- --------- Salaries, wages and benefits...................................................... 4,215 4,112 3,976 Supplies.......................................................................... 1,664 1,613 1,467 Other operating expenses.......................................................... 1,893 1,849 1,739 Provision for doubtful accounts................................................... 542 515 508 Depreciation and amortization..................................................... 554 541 524 Interest expense.................................................................. 321 401 597 Investment income................................................................. (66) (81) (64) Non-recurring transactions........................................................ 151 439 300 --------- --------- --------- 9,274 9,389 9,047 --------- --------- --------- Income from continuing operations before minority interests and income taxes...... 978 543 551 Minority interests in earnings of consolidated entities........................... 9 10 9 --------- --------- --------- Income from continuing operations before income taxes............................. 969 533 542 Provision for income taxes........................................................ 394 294 189 --------- --------- --------- Income from continuing operations................................................. 575 239 353 Discontinued operations: Income (loss) from operations of discontinued health plan segment, net of income tax (benefit) of $9 in 1993, ($46) in 1992 and $9 in 1991...................... 16 (108) 16 Costs associated with discontinuance of health plan segment, net of income tax benefit of $2.................................................... - (17) - Extraordinary loss on extinguishment of debt, net of income tax benefit of $51.... (84) - - Cumulative effect on prior years of a change in accounting for income taxes....... - 51 - --------- --------- --------- Net income.................................................................. $ 507 $ 165 $ 369 --------- --------- --------- --------- --------- --------- Earnings per common and common equivalent share: Income from continuing operations............................................... $ 1.70 $ .73 $ 1.20 Discontinued operations: Income (loss) from operations of discontinued health plan segment............. .04 (.33) .05 Costs associated with discontinuance of health plan segment................... - (.06) - Extraordinary loss on extinguishment of debt.................................... (.24) - - Cumulative effect on prior years of a change in accounting for income taxes..... - .16 - --------- --------- --------- Net income.................................................................. $ 1.50 $ .50 $ 1.25 --------- --------- --------- --------- --------- ---------
The accompanying notes are an integral part of the consolidated financial statements. F-3 COLUMBIA/HCA HEALTHCARE CORPORATION CONSOLIDATED BALANCE SHEET DECEMBER 31, 1993 AND 1992 (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) ASSETS
1993 1992 --------- --------- Current assets: Cash and cash equivalents................................................................ $ 224 $ 217 Accounts receivable less allowance for loss of $513 -- 1993 and $475 -- 1992............................................................................ 1,566 1,624 Inventories.............................................................................. 245 238 Other.................................................................................... 453 496 --------- --------- 2,488 2,575 Property and equipment, at cost: Land..................................................................................... 568 553 Buildings................................................................................ 4,049 3,741 Equipment................................................................................ 3,442 3,133 Construction in progress (estimated cost to complete and equip after December 31, 1993 -- $299)................................................................................... 333 258 --------- --------- 8,392 7,685 Accumulated depreciation................................................................. (2,792) (2,437) --------- --------- 5,600 5,248 Net assets of discontinued operations...................................................... - 376 Investments of professional liability insurance subsidiaries............................... 700 644 Intangible assets net of accumulated amortization of $178 -- 1993 and $233 -- 1992.......................................................................... 1,232 1,247 Other...................................................................................... 196 257 --------- --------- $ 10,216 $ 10,347 --------- --------- --------- --------- LIABILITIES AND COMMON STOCKHOLDERS' EQUITY Current liabilities: Accounts payable......................................................................... $ 445 $ 410 Salaries, wages and other compensation................................................... 232 211 Other accrued expenses................................................................... 853 903 Income taxes............................................................................. 22 92 Long-term debt due within one year....................................................... 363 353 --------- --------- 1,915 1,969 Long-term debt............................................................................. 3,335 3,303 Deferred credits and other liabilities..................................................... 1,438 1,353 Minority interests in equity of consolidated entities...................................... 57 31 Contingencies Common stockholders' equity: Common stock $.01 par; authorized 800,000,000 voting shares and 25,000,000 nonvoting shares; issued and outstanding 317,686,800 voting shares and 18,990,000 nonvoting shares -- 1993 and 308,252,100 voting shares and 23,421,700 nonvoting shares -- 1992........... 3 3 Capital in excess of par value........................................................... 2,164 2,070 Other.................................................................................... 59 69 Retained earnings........................................................................ 1,245 1,549 --------- --------- 3,471 3,691 --------- --------- $ 10,216 $ 10,347 --------- --------- --------- ---------
The accompanying notes are an integral part of the consolidated financial statements. F-4 COLUMBIA/HCA HEALTHCARE CORPORATION CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
COMMON STOCK -------------- CAPITAL IN SHARES PAR EXCESS OF RETAINED (000) VALUE PAR VALUE OTHER EARNINGS TOTAL ------- ----- ---------- ----- -------- ------ Balances, December 31, 1990......................... 255,276 $ 3 $ 734 $ 48 $ 1,314 $2,099 Net income........................................ 369 369 Cash dividends (Galen Health Care, Inc.)...................................... (138) (138) Paid-in-kind dividend on cumulative exchangeable preferred stock.................................. (18) (18) Issuance of common stock.......................... 4,310 61 61 Stock options exercised and related tax benefits, net of 224,000 shares tendered in partial payment therefor......................................... 797 24 24 Accumulated credit under stock option contract.... 413 413 Other............................................. 24 2 10 12 ------- ----- ---------- ----- -------- ------ Balances, December 31, 1991......................... 260,407 3 821 471 1,527 2,822 Net income........................................ 165 165 Cash dividends (Galen Health Care, Inc.)...................................... (143) (143) Issuance of common stock.......................... 48,282 916 916 Stock options exercised and related tax benefits, net of 30,000 shares tendered in partial payment therefor......................................... 22,967 331 (386) (55) Other............................................. 18 2 (16) (14) ------- ----- ---------- ----- -------- ------ Balances, December 31, 1992......................... 331,674 3 2,070 69 1,549 3,691 Net income........................................ 507 507 Cash dividends (Columbia Healthcare Corporation)..................................... (9) (9) Stock options exercised and related tax benefits, net of 81,000 shares tendered in partial payment therefor......................................... 4,000 71 (35) 36 Spinoff transaction with Humana Inc.: Cash payment to Humana Inc...................... (135) (135) Noncash transactions: Issuance of notes payable..................... (250) (250) Distribution of net investment in discontinued health plan operations................................... (392) (392) Transfer of a hospital facility............... (25) (25) Net unrealized gains on investment securities..... 27 27 Other............................................. 1,003 23 (2) 21 ------- ----- ---------- ----- -------- ------ Balances, December 31, 1993......................... 336,677 $ 3 $ 2,164 $ 59 $ 1,245 $3,471 ------- ----- ---------- ----- -------- ------ ------- ----- ---------- ----- -------- ------
The accompanying notes are an integral part of the consolidated financial statements. F-5 COLUMBIA/HCA HEALTHCARE CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
1993 1992 1991 --------- --------- --------- Cash flows from continuing operations: Net income........................................................................ $ 507 $ 165 $ 369 Adjustments to reconcile net income to net cash provided by operating activities: Discontinued operations......................................................... (16) 127 (16) Minority interests in earnings of consolidated entities......................... 9 10 9 Non-recurring transactions...................................................... 151 439 300 Depreciation and amortization................................................... 554 541 524 Amortization of debt discounts and loan costs................................... 45 78 116 Noncash interest on exchange debentures......................................... - 4 57 Deferred income taxes........................................................... (28) 34 (210) Change in operating assets and liabilities: (Increase) decrease in accounts receivable.................................... 19 98 (53) Increase in inventories and other assets...................................... (7) (58) (42) Increase (decrease) in income taxes........................................... 19 (160) 53 Increase (decrease) in other liabilities...................................... (87) 83 164 Change in accounting for income taxes........................................... - (51) - Extraordinary loss on extinguishment of debt.................................... 135 - - Other........................................................................... (3) (23) (14) --------- --------- --------- Net cash provided by continuing operations.................................... 1,298 1,287 1,257 --------- --------- --------- Cash flows from investing activities: Purchase of property and equipment................................................ (836) (668) (645) Acquisition of hospitals and health care facilities............................... (79) (36) (96) Sale of assets.................................................................... 191 225 860 Investment in discontinued operations............................................. - (71) (76) Change in investments............................................................. 21 (35) (33) Other............................................................................. (34) (8) (25) --------- --------- --------- Net cash used in investing activities......................................... (737) (593) (15) --------- --------- --------- Cash flows from financing activities: Issuance of long-term debt........................................................ 1,586 240 216 Net change in commercial paper borrowings and lines of credit..................... 342 (176) 124 Repayment of long-term debt....................................................... (2,325) (1,799) (890) Payment to Humana Inc. in spinoff transaction..................................... (135) - - Payment of cash dividends......................................................... (40) (143) (134) Issuance of common stock.......................................................... 43 741 71 Other............................................................................. (25) (15) (6) --------- --------- --------- Net cash used in financing activities......................................... (554) (1,152) (619) --------- --------- --------- Change in cash and cash equivalents................................................. 7 (458) 623 Cash and cash equivalents at beginning of period.................................... 217 675 52 --------- --------- --------- Cash and cash equivalents at end of period.......................................... $ 224 $ 217 $ 675 --------- --------- --------- --------- --------- --------- Interest payments................................................................... $ 278 $ 319 $ 469 Income tax payments, net of refunds................................................. 347 360 385
The accompanying notes are an integral part of the consolidated financial statements. F-6 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- ACCOUNTING POLICIES Columbia/HCA Healthcare Corporation ("Columbia/HCA") is a Delaware corporation which began operations on February 10, 1994 as a result of a merger involving Columbia Healthcare Corporation ("Columbia") and HCA -- Hospital Corporation of America ("HCA") (the "HCA Merger"). See Note 2 for a description of the specific terms of the HCA Merger. Prior to the HCA Merger, Columbia began operations on September 1, 1993 as a result of a merger involving Columbia Hospital Corporation ("CHC") and Galen Health Care, Inc. ("Galen") (the "Galen Merger"). See Note 3 for a description of the specific terms of the Galen Merger. 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. BASIS OF PRESENTATION The consolidated financial statements include substantially all subsidiaries and partnerships controlled by Columbia/HCA as the managing general partner. Significant intercompany transactions have been eliminated. The HCA Merger and the Galen Merger have been accounted for by the pooling-of-interests method. Accordingly, the consolidated financial statements included herein give retroactive effect to these transactions and include the combined operations of CHC, Galen and HCA 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. REVENUES Columbia/HCA's health care facilities have entered into agreements with third-party payers, including government programs and managed care health plans, under which Columbia/HCA is paid based upon established charges, cost of providing services, predetermined rates by diagnosis, fixed per diem rates or discounts from established charges. Revenues are recorded at estimated amounts due from patients and third-party payers for health care services provided, including anticipated settlements under reimbursement agreements with third-party payers. CASH AND CASH EQUIVALENTS Cash and cash equivalents include highly liquid investments with an original maturity of three months or less. Carrying values of cash and cash equivalents approximate fair value due to the short-term nature of these instruments. ACCOUNTS RECEIVABLE Accounts receivable consist primarily of amounts due from the Medicare and Medicaid programs, other government programs, managed care health plans, commercial insurance companies and individual patients. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market. PROPERTY AND EQUIPMENT Depreciation expense, computed by the straight-line method, was $504 million in 1993, $493 million in 1992 and $478 million in 1991. Columbia/HCA uses component depreciation for buildings. Depreciation rates for buildings are equivalent to useful lives ranging generally from 20 to 25 years. Estimated useful lives of equipment vary generally from 3 to 10 years. F-7 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 -- ACCOUNTING POLICIES (CONTINUED) INVESTMENTS On December 31, 1993, Columbia/HCA adopted the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"), which requires that investments in debt and equity securities be classified according to certain criteria. INTANGIBLE ASSETS Intangible assets consist primarily of costs in excess of the fair value of identifiable net assets of acquired entities and are amortized using the straight-line method over periods ranging from 10 to 40 years. Noncompete and debt issuance costs are amortized based upon the lives of the respective contracts or loans. PROFESSIONAL LIABILITY INSURANCE CLAIMS Provisions for loss for professional liability risks are based upon actuarially determined estimates. To the extent that subsequent claims information varies from management's estimates, earnings are charged or credited. MINORITY INTERESTS IN CONSOLIDATED ENTITIES The consolidated financial statements include all assets, liabilities and earnings of Columbia/ HCA's partnerships, certain partnership interests of which are not owned by Columbia/HCA. Accordingly, management has recorded minority interests in the earnings and equity of such partnerships. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Earnings per common and common equivalent share are based upon the weighted average number of common shares outstanding adjusted for the dilutive effect of common stock equivalents consisting primarily of stock options. The computation also gives retroactive effect to the exchange of common shares in connection with the HCA Merger. The following is a summary of shares used in the computation of earnings per common and common equivalent share (amounts in thousands):
1993 1992 1991 --------- --------- --------- Columbia: Weighted average shares outstanding................................ 150,017 144,897 138,936 Common stock equivalents........................................... 966 718 750 --------- --------- --------- Columbia common and common equivalent shares....................... 150,983 145,615 139,686 --------- --------- --------- HCA: Weighted average shares outstanding................................ 175,374 149,547 113,480 Common stock equivalents........................................... 3,901 24,690 20,109 --------- --------- --------- HCA common and common equivalent shares............................ 179,275 174,237 133,589 Merger exchange ratio.............................................. 1.05 1.05 1.05 --------- --------- --------- Adjusted HCA common and common equivalent shares................... 188,239 182,949 140,268 --------- --------- --------- Shares used in computation of earnings per common and common equivalent share.................................................. 339,222 328,564 279,954 --------- --------- --------- --------- --------- ---------
Fully diluted earnings per common and common equivalent share is not presented because it approximates earnings per common and common equivalent share. F-8 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 -- HCA MERGER On October 2, 1993, Columbia entered into a definitive agreement to merge with HCA. This transaction was completed on February 10, 1994. In connection with the HCA Merger, Columbia stockholders approved an amendment to Columbia's Certificate of Incorporation changing the name of the corporation to Columbia/HCA Healthcare Corporation. HCA was then merged into a wholly owned subsidiary of Columbia/HCA. Shares of HCA Class A voting common stock and Class B nonvoting common stock were converted on a tax-free basis into approximately 166,846,000 shares of Columbia/HCA voting common stock and approximately 18,990,000 shares of Columbia/HCA nonvoting common stock, respectively (an exchange ratio of 1.05 shares of Columbia/HCA common stock for each share of HCA voting and nonvoting common stock). The HCA Merger has been accounted for as a pooling of interests, and accordingly, the consolidated financial statements give retroactive effect to the combined operations of Columbia and HCA for all periods presented. The following is a summary of the results of operations of the separate entities for periods prior to the HCA Merger (dollars in millions):
COLUMBIA HCA COMBINED ----------- --------- --------- 1993: Revenues............................................................. $ 5,130 $ 5,122 $ 10,252 Income from continuing operations.................................... 193 382 575 Net income........................................................... 139 368 507 1992: Revenues............................................................. $ 4,806 $ 5,126 $ 9,932 Income from continuing operations.................................... 211 28 239 Net income........................................................... 137 28 165 1991: Revenues............................................................. $ 4,612 $ 4,986 $ 9,598 Income (loss) from continuing operations............................. 358 (5) 353 Net income (loss).................................................... 374 (5) 369
NOTE 3 -- GALEN MERGER On August 31, 1993, the stockholders of both CHC and Galen approved the Galen Merger, effective as of September 1, 1993. In connection with the Galen Merger, CHC, a Nevada corporation, was merged into Columbia. Each CHC share of common stock was converted on a tax-free basis into one share of Columbia common stock. Immediately subsequent thereto, a wholly owned subsidiary of Columbia was merged into Galen, at which time Galen became a wholly owned subsidiary of Columbia. In connection with this transaction, Columbia issued approximately 123,830,000 shares of common stock in a tax-free exchange for all of the outstanding common shares of Galen (an exchange ratio of 0.775 of a share of Columbia common stock for each share of Galen common stock). F-9 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 3 -- GALEN MERGER (CONTINUED) The Galen Merger has been accounted for as a pooling of interests, and accordingly, the consolidated financial statements give retroactive effect to the combined operations of CHC and Galen for all periods presented. The following is a summary of the results of operations of the separate entities for periods prior to the Galen Merger (dollars in millions):
CHC GALEN COMBINED --------- --------- ----------- Eight months ended August 31, 1993 (unaudited): Revenues................................................................ $ 823 $ 2,600 $ 3,423 Income from continuing operations....................................... 17 176 193 Net income.............................................................. 17 192 209 1992: Revenues................................................................ $ 819 $ 3,987 $ 4,806 Income from continuing operations....................................... 26 185 211 Net income.............................................................. 26 111 137 1991: Revenues................................................................ $ 499 $ 4,113 $ 4,612 Income from continuing operations....................................... 15 343 358 Net income.............................................................. 15 359 374
NOTE 4 -- SPINOFF TRANSACTION AND DISCONTINUED OPERATIONS Prior to the Galen Merger, Galen began operating its hospital business as an independent publicly held corporation on March 1, 1993 as a result of a tax-free spinoff transaction (the "Spinoff") by Humana Inc. ("Humana"), which retained its managed care health plan business. 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 consolidated financial statements of Galen (and now those of Columbia/HCA) include the separate results of Humana's hospital business, while the operations and net assets of Humana's managed care health plans have been classified as discontinued operations. In connection with the Spinoff, Galen entered into various agreements with Humana which were intended to facilitate orderly changes for both the hospital and managed care health plan businesses in a way which would be minimally disruptive to each entity. Principal contracts are summarized below: OPERATIONS -- Certain former Galen hospitals will provide medical services to insureds of Humana for three years subsequent to the Spinoff. The contract includes, among other things, established payment rates for various inpatient and outpatient services and annual increases therein, and hospital utilization guarantees and related penalties. LIABILITIES AND INDEMNIFICATION -- Each entity assumed liability for specified claims. The entities will also share risks with respect to certain litigation and other contingencies, both identified and unknown. INCOME TAXES -- Each entity entered into risk-sharing arrangements in connection with the ultimate resolution of various income tax disputes. F-10 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4 -- SPINOFF TRANSACTION AND DISCONTINUED OPERATIONS (CONTINUED) FINANCING -- In January 1993 certain subsidiaries issued $250 million of notes payable to Humana, and paid to Humana $135 million in cash on March 1, 1993 which was financed principally through the issuance of commercial paper. The $250 million of notes were repaid in September 1993 in connection with the refinancing of certain long-term debt. ADMINISTRATION -- These arrangements relate to leasing of certain administrative facilities, division of information systems, employee benefit and stock option plans, and various administrative service arrangements. Revenues of the discontinued managed care health plan business (included in discontinued operations in the accompanying consolidated statement of income) were $523 million in 1993, $2.9 billion in 1992 and $2.5 billion in 1991. NOTE 5 -- NON-RECURRING TRANSACTIONS 1993 In September 1993 the following charges were recorded in connection with the Galen Merger (dollars in millions): Investment advisory and professional fees, and employee benefit plan costs............................................................... $ 62 Writedown of assets in connection with the consolidation of the combined entity's operations........................................ 63 Administrative facility asset writedowns and conversion costs associated with the transaction..................................... 16 Provision for loss on planned sales of assets........................ 10 --------- $ 151 --------- ---------
1992 In September 1992 a pretax charge of $394 million was recorded in connection with the planned divestiture of twenty-two psychiatric hospitals and the unrelated sale of two other facilities. The charge included the writedown to estimated net realizable value of the hospitals to be sold, a $231 million writeoff of permanently impaired cost in excess of net assets acquired, and the costs associated with the replacement of certain credit agreements. Income from continuing operations in 1992 also includes a gain of $93 million on the sale of an investment in common stock of HealthTrust, Inc. -- The Hospital Company ("HealthTrust"). Income from continuing operations in 1992 includes $138 million of charges incurred primarily in connection with the Spinoff, including a provision for loss on the planned sale of hospitals, writedowns of assets in markets with significant declines in operations, administrative facility asset writedowns and certain other costs associated with the separation of the hospital and health plan businesses. Costs aggregating $171 million (before income taxes) incurred by Humana primarily in connection with the Spinoff are included in discontinued operations in 1992. 1991 Income from continuing operations in 1991 includes (i) a charge of $413 million in connection with the acceleration of vesting of stock options under the HCA Nonqualified Stock Option Plan and the establishment of exercise prices at levels substantially less than the then fair value of the underlying common stock, (ii) a charge of $159 million primarily in connection with the anticipated F-11 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 5 -- NON-RECURRING TRANSACTIONS (CONTINUED) loss on the disposition of certain hospitals and other assets, (iii) a gain of $51 million on the sale of a hospital, and (iv) a gain of $221 million on the sale of an investment in preferred stock and warrants of HealthTrust. NOTE 6 -- OTHER BUSINESS COMBINATIONS During the past three years, Columbia/HCA has acquired various hospitals and related ancillary health care facilities (or controlling interests in such facilities), all of which have been accounted for by the purchase method. Accordingly, the aggregate purchase price of these transactions has been allocated to tangible and identifiable intangible assets acquired and liabilities assumed based upon their respective fair values. The consolidated financial statements include the operations of acquired entities since the respective acquisition dates. The following is a summary of acquisitions and joint ventures consummated during the last three years (dollars in millions):
1993 1992 1991 ---- ------ ------ Number of hospitals............................................................. 3 15 2 Number of licensed beds......................................................... 903 2,345 1,420 Purchase price information: Fair value of assets acquired................................................. $164 $ 490 $ 165 Liabilities assumed........................................................... (76) (279) (48) ---- ------ ------ Net assets acquired......................................................... 88 211 117 ---- ------ ------ Issuance of common stock...................................................... - 119 1 Cash acquired................................................................. 9 15 15 Cash received from sale of certain acquired assets............................ - 40 - Other......................................................................... - 1 5 ---- ------ ------ 9 175 21 ---- ------ ------ Net cash paid for acquisitions.............................................. $ 79 $ 36 $ 96 ---- ------ ------ ---- ------ ------
In July 1992 Columbia/HCA acquired Basic American Medical, Inc. ("BAMI") (included in the table above) through a merger into a wholly owned subsidiary. The assets of BAMI included eight hospitals containing 1,203 licensed beds and certain other health care businesses. The transaction was financed through the assumption of approximately $140 million of long-term debt, issuance of 6,995,000 shares of common stock and payment of $38 million in cash to BAMI stockholders. The purchase price paid in excess of the fair value of identifiable net assets of acquired entities aggregated $7 million in 1993, $97 million in 1992 and $19 million in 1991. The pro forma effect of these acquisitions on Columbia/HCA's results of operations was not significant. F-12 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7 -- INCOME TAXES Provision for income taxes consists of the following (dollars in millions):
1993 1992 1991 ---- ---- ----- Current: Federal....................................................................... $357 $232 $ 375 State......................................................................... 69 34 64 ---- ---- ----- 426 266 439 ---- ---- ----- Deferred: Federal....................................................................... (36) 22 (218) State......................................................................... 4 6 (32) ---- ---- ----- (32) 28 (250) ---- ---- ----- $394 $294 $ 189 ---- ---- ----- ---- ---- -----
Reconciliation of federal statutory rate to effective income tax rate follows:
1993 1992 1991 ---- ---- ---- Federal statutory rate.......................................................... 35.0% 34.0% 34.0% State income taxes, net of federal income tax benefit........................... 4.6 4.4 2.9 Gain on sale of HealthTrust investments......................................... - - (3.5) Merger costs.................................................................... 0.6 - - Costs in excess of net assets acquired.......................................... 1.2 16.6 2.3 Tax exempt investment income.................................................... (0.9) (1.7) (1.5) Other items, net................................................................ 0.1 1.8 0.7 ---- ---- ---- Effective income tax rate....................................................... 40.6% 55.1% 34.9% ---- ---- ---- ---- ---- ----
In August 1993 Congress enacted the Omnibus Budget Reconciliation Act of 1993 which included, among other things, an increase in corporate income tax rates retroactive to January 1, 1993. This legislation had no material effect on 1993 net income. Columbia/HCA adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), as of January 1, 1992, the effect of which increased 1992 net income by $51 million. The provisions of SFAS 109 require, among other things, recognition of deferred income taxes using statutory rates at which temporary differences in the tax and book bases of assets and liabilities are expected to affect taxable income in future years. F-13 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7 -- INCOME TAXES (CONTINUED) A summary of deferred income taxes by source included in the consolidated balance sheet at December 31, 1993 and 1992 follows (dollars in millions):
1993 1992 --------------------- --------------------- ASSETS LIABILITIES ASSETS LIABILITIES ------ ------------ ------ ------------ Depreciation.................................................................... $ - $ 766 $ - $ 748 Long-term debt.................................................................. - 26 - 71 Professional liability risks.................................................... 329 - 336 - Doubtful accounts............................................................... 91 - 85 - Property losses................................................................. 87 - 111 - Cash basis...................................................................... - 60 - 89 Compensation.................................................................... 24 - 18 - Capitalized leases.............................................................. 11 - 12 - Other........................................................................... 215 167 202 106 ------ ------------ ------ ------------ $ 757 $1,019 $ 764 $1,014 ------ ------------ ------ ------------ ------ ------------ ------ ------------
Management believes that the deferred tax assets in the table above will ultimately be realized. Management's conclusion is based primarily on its expectation of future taxable income and the existence of sufficient taxable income within the allowable carryback periods to realize the tax benefits of deductible temporary differences recorded at December 31, 1993. Deferred income taxes totaling $295 million and $257 million at December 31, 1993 and 1992, respectively, are included in other current assets. Noncurrent deferred income taxes, included in deferred credits and other liabilities, totaled $557 million and $507 million at December 31, 1993 and 1992, respectively. The Internal Revenue Service (the "Service") has issued statutory notices of deficiency in connection with its examinations of HCA's federal income tax returns for 1981 through 1988. Columbia/HCA is currently contesting these claimed deficiencies in the United States Tax Court. In addition, the Service has proposed certain adjustments in connection with its examinations of HCA's 1989 and 1990 federal income tax returns. The following is a discussion of the disputed items with respect to these years. METHOD OF ACCOUNTING For years 1981 through 1986, most of HCA's hospital subsidiaries (the "Subsidiaries") reported taxable income primarily using the cash method of accounting. This method was prevalent within the hospital industry and the Subsidiaries applied the method in accordance with prior agreements with the Service. The Service now asserts that the accrual method of accounting should have been used by the Subsidiaries. The Tax Reform Act of 1986 (the "1986 Act") requires the use of the accrual method of accounting beginning in 1987. Consequently, the Subsidiaries changed to the accrual method beginning January 1, 1987. In accordance with the provisions of the 1986 Act, income that had been deferred at the end of 1986 is being recognized as taxable income by the Subsidiaries in equal annual installments over ten years. If the Service should ultimately prevail in its claim that the Subsidiaries should have used the accrual method for 1981 through 1986, the claim would be reduced to the extent that HCA has recognized as taxable income a portion of such deferred income taxes since 1986. In addition, the sale by HCA of numerous Subsidiaries in 1987 that had been using the cash method resulted in the recognition of a substantial gain that would not have been recognized had the Subsidiaries been using the accrual method. If the Service were successful with respect to this issue, Columbia/HCA would owe an additional $110 million in income taxes and $432 million in interest as of December 31, 1993. F-14 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7 -- INCOME TAXES (CONTINUED) HOSPITAL ACQUISITIONS In connection with hospitals acquired by HCA in 1981 and 1985, the Service has asserted that a portion of the costs allocated to identifiable assets with ascertainable useful lives should be reclassified as nondeductible goodwill. If the Service ultimately prevails in this regard, Columbia/HCA would owe an additional $113 million in income taxes and $139 million in interest as of December 31, 1993. INSURANCE SUBSIDIARY Based on a Sixth Circuit Court of Appeals decision (the Court having jurisdiction over the HCA issues), HCA has claimed that insurance premiums paid to its wholly owned insurance subsidiary ("Parthenon") are deductible, while the Service asserts that such premiums are not deductible and that corresponding losses are only deductible at the time and to the extent that claims are actually paid. HCA has claimed the additional deductions in its Tax Court petitions. Through December 31, 1993, Columbia/HCA is seeking a refund totaling $51 million in income taxes and $93 million in interest in connection with this issue. As an alternative to its position, HCA has asserted that in connection with the sale of hospitals to HealthTrust in 1987, premiums paid to Parthenon by the sold hospitals, if not deductible as discussed above, became deductible at the time of the sale. Accordingly, HCA claimed such deduction in its 1987 federal income tax return. The Service has disallowed the deduction and is claiming an additional $5 million in income taxes and $15 million in interest. A final determination that the premiums are not deductible either when paid to Parthenon or upon the sale of certain hospitals to HealthTrust would increase the taxable basis in the hospitals sold, thereby reducing HCA's gain realized on the sale. HEALTHTRUST SALE In connection with its sale of certain Subsidiaries to HealthTrust in 1987 in exchange for cash, HealthTrust preferred stock and stock purchase warrants, HCA calculated its gain based on the valuation of such stock and warrants by an independent appraiser. The Service claims a higher aggregate valuation, based on the face amount of the preferred stock and a separate appraisal HealthTrust obtained for the stock purchase warrants. Application of the higher valuation would increase the gain recognized by HCA on the sale. However, if the Service succeeds in its assertion, HCA's tax basis in its HealthTrust preferred stock and warrants will be increased accordingly, thereby substantially reducing the tax from the sale of such preferred stock and warrants by a corresponding amount. By December 31, 1992, HCA had sold its entire interest in the HealthTrust preferred stock and warrants. Including the effect of the sales of these securities, the Service is claiming additional interest of $64 million through December 31, 1993. Also in connection with the 1987 sale of certain Subsidiaries to HealthTrust, the Service claims that HCA's basis in the stock of the Subsidiaries sold to HealthTrust should be calculated by adjusting such basis to reflect accelerated rather than straight-line depreciation, which would reduce HCA's basis in the stock sold and increase the taxable gain on the sale. The Service position is contrary to a Tax Court decision in a similar case. The Service is claiming additional income taxes of $79 million and interest of $66 million through December 31, 1993. In connection with the 1987 HealthTrust transactions, the Service further asserts that, to the extent the Subsidiaries were properly on the cash method through 1986, and therefore properly recognizing taxable income over the ten-year transition period, HCA should have additional income in 1987 equal to the unamortized portion of the deferred income. It is HCA's position that no additional income need be included in 1987 and that the deferred income continues to qualify for the ten-year F-15 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7 -- INCOME TAXES (CONTINUED) transition period after the sale. Should the Service prevail, Columbia/HCA would owe $11 million of additional income taxes and $17 million of interest through December 31, 1993. The position of the Service is an alternative to its denial of the use of the cash method of accounting previously discussed. DOUBTFUL ACCOUNTS The Service is asserting that in 1986 HCA was not entitled to include charity care writeoffs in the formula used to calculate its deduction for doubtful accounts. For years 1987 and 1988, the Service is asserting that HCA was not entitled to exclude from income amounts which are unlikely to be collected. Management believes that such exclusions are permissible under an accrual method of accounting, and because HCA is a "service business" and not a "merchandising business," it is entitled to a special exclusion provided to service businesses by the 1986 Act. The Service disagrees, asserting that HCA is engaged, at least in part, in a merchandising business. Notwithstanding this assertion, the Service contends that the exclusion taken by HCA is excessive under applicable Temporary Treasury Regulations. Columbia/HCA believes that the calculation of the exclusion is inaccurate since it does not permit the exclusion in accordance with the controlling statute. If the Service prevails, Columbia/HCA would owe additional income taxes of $102 million and interest of $48 million through December 31, 1993. LEVERAGED BUY-OUT EXPENSES The Service has asserted that no deduction is allowed for various expenses incurred in connection with HCA's leveraged buy-out transaction in 1989, including the amortization of loan costs incurred to borrow funds to acquire the stock of the former shareholders, certain fees incurred by the Special Committee of HCA's Board of Directors to evaluate the buy-out proposal, compensation payments to cancel employee stock plans, and various other costs incurred after the buy-out which have been treated as part of the transaction by the Service. Columbia/HCA believes that all of these costs are deductible. If the Service prevails on these issues, Columbia/HCA would owe income taxes of $94 million and interest of $24 million through December 31, 1993. OTHER ISSUES Additional federal income tax issues primarily concern disputes over the depreciable lives utilized by HCA for constructed hospital facilities, investment tax credits, vacation pay deductions and income from foreign operations. Many of these items, including depreciation, investment tax credits and foreign issues, have been resolved favorably in previous settlements. The Service is claiming an additional $44 million in income taxes and $28 million in interest through December 31, 1993 with respect to these issues. Management believes that HCA had properly reported its income and paid its taxes in accordance with applicable laws and agreements established with the Service during previous examinations, and that final resolution of these disputes will not have a material adverse effect on the results of operations or financial position of Columbia/HCA. NOTE 8 -- PROFESSIONAL LIABILITY RISKS Columbia/HCA insures a substantial portion of its professional liability risks through wholly owned insurance subsidiaries. Provisions for such risks underwritten by the subsidiaries and deductibles at certain hospitals, including expenses incident to claim settlements, were $96 million for 1993, $102 million for 1992 and $111 million for 1991. Amounts funded to the insurance subsidiaries were $62 million for 1993, $55 million for 1992 and $56 million for 1991. Allowances for professional liability risks, included principally in deferred credits and other liabilities, were $817 million and $791 million at December 31, 1993 and 1992, respectively. F-16 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8 -- PROFESSIONAL LIABILITY RISKS (CONTINUED) As discussed in Note 1, Columbia/HCA adopted the provisions of SFAS 115 on December 31, 1993. Accordingly, common stockholders' equity was increased by $27 million (net of deferred income taxes) to reflect the net unrealized gain on investments classified as available for sale. Prior to the adoption of SFAS 115, debt securities were recorded at amortized cost (which approximated fair value), while equity securities were recorded at the lower of aggregate cost or fair value. The adoption of SFAS 115 had no effect on earnings in 1993. The provisions of SFAS 115 require that investments in debt and equity securities be classified according to the following criteria: TRADING ACCOUNT -- Assets held for resale in anticipation of short-term changes in market conditions are recorded at fair value and gains and losses, both realized and unrealized, are included in income. Columbia/HCA does not maintain a trading account portfolio. HELD TO MATURITY -- Certain debt securities of Columbia/HCA's professional liability insurance subsidiaries are expected to be held to maturity as a result of management's intent and ability to do so. These investments are carried at amortized cost. AVAILABLE FOR SALE -- Debt and equity securities not classified as either trading securities or held to maturity are classified as available for sale and recorded at fair value. Unrealized gains and losses are excluded from income and recorded as a separate component of common stockholders' equity. F-17 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8 -- PROFESSIONAL LIABILITY RISKS (CONTINUED) The following is a summary of the insurance subsidiaries' investments at December 31, 1993 and 1992 (dollars in millions):
DECEMBER 31, 1993 ---------------------------- UNREALIZED AMOUNTS -------------- FAIR COST GAINS LOSSES VALUE ---- ----- ------- ----- Held to maturity: United States Government obligations....................... $ 44 $ - $ - $ 44 ---- ----- ------- ----- Available for sale: Bonds: United States Government................................. 19 1 - 20 States and municipalities................................ 372 16 - 388 Mortgage-backed securities............................... 54 1 - 55 Corporate and other...................................... 51 2 (1) 52 Money market funds......................................... 31 - - 31 Redeemable preferred stocks................................ 17 1 - 18 ---- ----- ------- ----- 544 21 (1) 564 ---- ----- ------- ----- Equity securities: Adjustable rate preferred stocks......................... 13 1 - 14 Common stocks............................................ 133 27 (4) 156 ---- ----- ------- ----- 146 28 (4) 170 ---- ----- ------- ----- $734 $ 49 $ (5) 778 ---- ----- ------- ---- ----- ------- Amounts classified as current assets......................... (78) ----- Investment carrying value.................................... $ 700 ----- ----- DECEMBER 31, 1992 ---------------------------- UNREALIZED AMOUNTS -------------- FAIR COST GAINS LOSSES VALUE ---- ----- ------- ----- Held to maturity: United States Government obligations....................... $ 19 $ - $ - $ 19 Certificates of deposit.................................... 20 - - 20 ---- ----- ------- ----- 39 - - 39 ---- ----- ------- ----- Available for sale: Bonds: United States Government................................. 22 1 - 23 States and municipalities................................ 312 9 - 321 Mortgage-backed securities............................... 55 - - 55 Corporate and other...................................... 39 2 - 41 Money market funds......................................... 68 - - 68 Redeemable preferred stocks................................ 18 - - 18 ---- ----- ------- ----- 514 12 - 526 ---- ----- ------- ----- Equity securities: Adjustable rate preferred stocks......................... 20 1 - 21 Common stocks............................................ 136 21 (9) 148 ---- ----- ------- ----- 156 22 (9) 169 ---- ----- ------- ----- 709 $ 34 $ (9) $ 734 ----- ------- ----- ----- ------- ----- Amounts classified as current assets......................... (65) ---- Investment carrying value.................................... $644 ---- ----
F-18 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8 -- PROFESSIONAL LIABILITY RISKS (CONTINUED) The cost and estimated fair value of debt and equity securities at December 31, 1993 by contractual maturity are shown below (dollars in millions). Expected and contractual maturities will differ because the issuers of certain securities may have the right to prepay or otherwise redeem such obligations without penalty.
FAIR COST VALUE --------- --------- Held to maturity: Due in one year or less.................................................. $ 44 $ 44 --------- --------- Available for sale: Due in one year or less.................................................. 34 34 Due after one year through five years.................................... 134 136 Due after five years through ten years................................... 131 137 Due after ten years...................................................... 245 257 --------- --------- 544 564 Equity securities........................................................ 146 170 --------- --------- 690 734 --------- --------- $ 734 $ 778 --------- --------- --------- ---------
The fair value of the subsidiaries' investments is based generally on quoted market prices. The average life of the above investments (excluding common stocks) approximated five years at December 31, 1993 and four years at December 31, 1992, and the tax equivalent yield on such investments averaged 10% for the last three years. Tax equivalent yield is the rate earned on invested assets, excluding unrealized gains and losses, adjusted for the benefit of nontaxable investment income. Sales of securities for the year ended December 31, 1993 are summarized below (dollars in millions):
TYPE OF SECURITY ------------ DEBT EQUITY ---- ------ Cash proceeds................................................................... $185 $106 Gross realized gains............................................................ 4 19 Gross realized losses........................................................... - 10
F-19 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 9 -- LONG-TERM DEBT A summary of long-term debt at December 31 follows (dollars in millions):
1993 1992 ------ ------ Senior collateralized debt, 5% to 13.8% (rates generally fixed) payable in periodic installments through 2034............................................. $ 211 $ 401 Senior debt, 8% to 13.3% (rates generally fixed) payable in periodic installments through 2023...................................................... 1,158 1,166 Fixed rate note agreement (13% rate)............................................ 100 100 Commercial paper (rates fixed under interest rate agreements averaging four years at 7.9%)................................................................. 380 380 Commercial paper (floating rates averaging 3.4%)................................ 495 153 Bank credit agreement (floating rates averaging 4.4%)........................... 1,172 1,067 Bank line of credit (floating rates averaging 3.6%)............................. 100 - Subordinated credit agreement (floating rates averaging 5.9%)................... - 300 Subordinated debt, 8.5% to 15% (rates generally fixed) payable in periodic installments through 2008...................................................... 82 89 ------ ------ Total debt, average life of six years (rates averaging 6.7%).................... 3,698 3,656 Amounts due within one year..................................................... 363 353 ------ ------ Long-term debt.................................................................. $3,335 $3,303 ------ ------ ------ ------
Borrowings under the commercial paper programs are classified as long-term debt due to the credit available under the revolving credit agreements discussed below and management's intention to refinance these borrowings on a long-term basis. Maturities of long-term debt in years 1995 through 1998 are $1.1 billion, $161 million, $64 million and $1.1 billion, respectively. Such amounts reflect maturities of debt issued for refinancings through March 24, 1994 and, as to short-term debt classified as long-term, are based upon maturities of the revolving credit agreements. Approximately 8% of Columbia/HCA's property and equipment is pledged on senior collateralized debt. During the past three years Columbia/HCA has reduced interest costs and eliminated certain restrictive covenants by refinancing or prepaying high interest rate debt, primarily through the use of existing cash and cash equivalents and issuance of long-term debt, commercial paper and equity. Amounts refinanced or prepaid totaled $787 million in 1993, $1 billion in 1992 and $275 million in 1991. After-tax losses from refinancing activities in 1993 aggregated $84 million or $.24 per share. In February 1994 Columbia/HCA entered into revolving credit agreements (the "Credit Facilities") in the aggregate amount of $3 billion. The Credit Facilities comprise a four-year $1 billion revolving credit agreement and a 364-day $2 billion revolving credit agreement. The Credit Facilities were established to support Columbia/HCA's commercial paper programs and replace $3.2 billion of prior revolving credit agreements associated with HCA ($1.6 billion) and Columbia ($1.6 billion). Interest is payable generally at either LIBOR plus 1/4% to 1/2% (depending on Columbia/HCA's credit rating), or the higher of prime, the bank certificate of deposit rate plus 1% or the Federal Funds rate plus 1/2%. In December 1993 Columbia/HCA issued $150 million of 6 1/8% Notes due 2000 and $150 million of 7 1/2% Notes due 2023. During 1992 Columbia/HCA sold $100 million face amount of 10 7/8% Senior Subordinated Notes due 2002 and $135 million face amount of 11 1/2% Senior Subordinated Notes due 2002. In September 1993 $232 million face amount of these notes were retired through the completion of a tender offer. F-20 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 9 -- LONG-TERM DEBT (CONTINUED) Proceeds from the public offering of 41,055,000 shares of voting common stock in 1992 were used to repay $352 million of debt outstanding under a bank credit agreement and redeem the 15 3/4% Subordinated Discount Debentures and related interest aggregating $444 million. In connection with the acquisition of BAMI in 1992, Columbia/HCA assumed approximately $140 million of long-term debt, including approximately $64 million of senior collateralized notes payable in quarterly installments through 1998 at interest rates ranging from 10.7% to 11.7%. In September 1993 Columbia/HCA effected the defeasance of these notes. In 1991 one of Columbia/HCA's partnerships issued $95 million of 11.45% Senior Secured Notes due 2001. Proceeds from the issuance were used to repay $66 million of bank debt and finance expansion. These notes were retired in connection with the refinancing of debt in September 1993. Columbia/HCA also issued in 1991 a $40 million face amount 9% Subordinated Mandatory Convertible Note due 1999. The note is convertible at the option of the holder into Columbia/HCA voting common stock at a price of $18.50 per share (adjusted for stock splits, recapitalizations and reorganizations). The note will be automatically converted into common stock if the average per share market price for four months preceding the July 1 anniversary exceeds a specified amount ranging from $27.00 in 1994 to $34.00 in 1996. In 1991 Columbia/HCA exchanged its Cumulative Exchangeable Preferred Stock for 17 1/2% Junior Subordinated Exchangeable Debentures due 2005. These debentures were redeemed in 1992 from proceeds on the 1991 sale of HealthTrust preferred stock and warrants. Columbia/HCA's credit facilities contain customary covenants which include (i) limitations on additional debt, (ii) limitations on sales of assets, mergers and changes of ownership and (iii) maintenance of certain interest coverage ratios. The estimated fair value of Columbia/HCA's long-term debt was $4.1 billion at both December 31, 1993 and 1992, compared to carrying amounts aggregating $3.7 billion at the end of each year. Certain subsidiaries of Columbia/HCA have entered into agreements which reduce the impact of changes in interest rates on $380 million of floating rate long-term debt. At December 31, 1993 and 1992, the fair value of Columbia/HCA's net payable position under these agreements (included in the aggregate fair value amounts above) totaled $34 million and $29 million, respectively. The estimate of fair value is based upon the quoted market prices for the same or similar issues of long-term debt, or on rates available to Columbia/HCA as a result of the HCA Merger for debt of the same remaining maturities. As discussed in Note 4, in connection with the Spinoff, certain subsidiaries issued notes payable ($250 million) and paid cash ($135 million financed primarily through the issuance of commercial paper) to Humana in 1993. If the Spinoff had occurred on December 31, 1992, Columbia/HCA's ratio of debt to debt plus common stockholders' equity would have increased from 50% to 58%. NOTE 10 -- LEASES Columbia/HCA leases real estate and equipment under cancelable and non-cancelable arrangements. Future minimum payments under non-cancelable operating leases are as follows (dollars in millions): 1994................................................................. $ 123 1995................................................................. 102 1996................................................................. 78 1997................................................................. 63 1998................................................................. 43 Thereafter........................................................... 242
F-21 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 10 -- LEASES (CONTINUED) Rent expense aggregated $196 million, $190 million and $170 million for the years ended December 31, 1993, 1992 and 1991, respectively. NOTE 11 -- CONTINGENCIES Management continually evaluates contingencies based upon the best available evidence. In addition, allowances for loss are provided currently for disputed items that have continuing significance, such as certain third-party reimbursements and deductions that continue to be claimed in current cost reports and tax returns. Management believes that allowances for loss have been provided to the extent necessary and that its assessment of contingencies is reasonable. Management believes that resolution of contingencies will not materially affect Columbia/HCA's financial position or results of operations. Principal contingencies are described below: REVENUES -- Certain third-party payments are subject to examination by agencies administering the programs. Columbia/HCA is contesting certain issues raised in audits of prior year cost reports. PROFESSIONAL LIABILITY RISKS -- Columbia/HCA has provided for loss for professional liability risks based upon actuarially determined estimates. Actual settlements and expenses incident thereto may differ from the provisions for loss. INTEREST RATE AGREEMENTS -- Certain subsidiaries of Columbia/HCA are parties to agreements which reduce the impact of changes in interest rates on its floating rate long-term debt. In the event of nonperformance by other parties to these agreements, Columbia/HCA may incur a loss on the difference between market rates and contract rates. INCOME TAXES -- Columbia/HCA is contesting adjustments proposed by the IRS. SPINOFF -- Certain subsidiaries of Columbia/HCA are parties to risk-sharing arrangements with Humana. REGULATORY REVIEW -- Federal regulators are investigating certain financial arrangements with physicians at two psychiatric hospitals. LITIGATION -- Various suits and claims arising in the ordinary course of business are pending against Columbia/HCA. NOTE 12 -- CAPITAL STOCK The terms and conditions associated with each class of Columbia/HCA common stock are substantially identical except for voting rights. All nonvoting common stockholders may convert their shares on a one-for-one basis into voting common stock, subject to certain limitations. In addition, certain voting common stockholders may convert their shares on a one-for-one basis into nonvoting common stock. The following shares of common stock were reserved at December 31, 1993 (amounts in thousands): Stock option plans................................................. 20,118 Retirement and savings plans....................................... 8,887 Other.............................................................. 2,853 --------- 31,858 --------- ---------
F-22 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12 -- CAPITAL STOCK (CONTINUED) Columbia/HCA has plans under which options to purchase common stock may be granted to officers, employees and directors. Except for those discussed in Note 5, options have been granted at not less than market price on the date of grant. Exercise provisions vary, but most options are exercisable in whole or in part beginning one to four years after grant and ending four to fifteen years after grant. Activity in the plans is summarized below (share amounts in thousands):
SHARES UNDER OPTION PRICE OPTION PER SHARE --------- ------------------ Balances, December 31, 1990................................ 37,163 $ 0.22 to $37.00 Granted.................................................. 4,078 0.60 to 25.24 Exercised................................................ (1,021) 7.21 to 23.37 Cancelled or lapsed...................................... (1,142) 0.60 to 37.00 --------- Balances, December 31, 1991................................ 39,078 0.22 to 25.71 Granted.................................................. 3,950 0.60 to 22.62 Conversion of BAMI stock options......................... 466 3.18 to 11.59 Exercised................................................ (22,998) 0.22 to 17.25 Cancelled or lapsed...................................... (7,399) 0.22 to 23.37 --------- Balances, December 31, 1992................................ 13,097 0.22 to 25.71 Granted.................................................. 1,660 0.60 to 33.38 Exercised................................................ (4,018) 0.22 to 23.37 Cancelled or lapsed...................................... (709) 0.22 to 25.71 --------- Balances, December 31, 1993................................ 10,030 $ 0.22 to $33.38 --------- ---------
At December 31, 1993, options for 4,026,700 shares were exercisable. Shares of common stock available for future grants were 10,088,000 at December 31, 1993 and 11,442,900 at December 31, 1992. In connection with the Galen Merger, certain preferred stock purchase rights were redeemed which were previously issued to Galen common stockholders. The cost of this transaction was not significant. In addition, a stockholder rights plan was adopted upon consummation of the Galen Merger (similar to that of Galen) under which common stockholders have the right to purchase Series A Preferred Stock in the event of accumulation of or tender offer for certain percentages of Columbia/HCA's common stock. The rights will expire in 2003 unless redeemed earlier by Columbia/ HCA. In September 1993 the Board of Directors initiated a regular quarterly cash dividend on common stock of $.03 per share. In March 1992 Columbia/HCA issued 41,055,000 shares of voting common stock, the net proceeds from which ($796 million) were used to reduce long-term debt. Assuming that these shares were issued and the proceeds therefrom were used to reduce long-term debt at the beginning of the year, earnings per common and common equivalent share would have been $.53 in 1992. In connection with the HCA Merger, Columbia/HCA stockholders voted to increase the aggregate number of authorized voting shares of common stock from 400 million to 800 million, and the number of authorized nonvoting common shares was established at 25 million. In addition, authorized shares of preferred stock (none of which are outstanding) were increased from 10 million to 25 million. F-23 COLUMBIA/HCA HEALTHCARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 13 -- EMPLOYEE BENEFIT PLANS Columbia/HCA maintains noncontributory defined contribution retirement plans covering substantially all employees. Benefits are determined as a percentage of a participant's earned income and are vested over specified periods of employee service. Retirement plan expense was $97 million for 1993, $102 million for 1992 and $86 million for 1991. Amounts equal to retirement plan expense are funded annually. Columbia/HCA maintains various contributory savings plans which are available to employees who meet certain minimum requirements. Certain of the plans require that Columbia/HCA match an amount ranging from 50% to 60% of a participant's contribution up to certain maximum levels. The cost of these plans totaled $20 million for 1993, $19 million for 1992 and $15 million for 1991. Columbia/HCA contributions are funded periodically during the year. NOTE 14 -- ACCRUED EXPENSES The following is a summary of other accrued expenses at December 31 (dollars in millions):
1993 1992 --------- --------- Workers' compensation...................................................... $ 102 $ 90 Taxes other than income.................................................... 143 118 Professional liability risks............................................... 89 80 Employee benefit plans..................................................... 158 197 Interest................................................................... 181 167 Other...................................................................... 180 251 --------- --------- $ 853 $ 903 --------- --------- --------- ---------
NOTE 15 -- SUBSEQUENT EVENTS INCOME TAXES 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 transaction will not have a material effect on 1994 earnings. LONG-TERM DEBT Since completion of the HCA Merger, certain HCA and other long-term debt has been refinanced in an effort to reduce future interest expense. These transactions were financed primarily through the issuance of commercial paper, $175 million of 6 1/2% Notes due 1999 and $150 million of 7.15% Notes due 2004. Management anticipates that losses resulting from these refinancing activities will reduce Columbia/HCA's first quarter 1994 net income by approximately $80 million. F-24 COLUMBIA/HCA HEALTHCARE CORPORATION QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
1993 -------------------------------------------------------- FIRST SECOND THIRD FOURTH ----------- ----------- ----------- ----------- Revenues............................................. $ 2,654 $ 2,536 $ 2,491 $ 2,571 Net income (loss): Continuing operations (a).......................... 205 166 28 176 Discontinued operations............................ 16 - - - Extraordinary loss on extinguishment of debt.............................................. - - (84 ) - Net income (loss)................................ 221 166 (56 ) 176 Per common share: Earnings (loss): Continuing operations (a)........................ .61 .49 .08 .52 Discontinued operations.......................... .04 - - - Extraordinary loss on extinguishment of debt............................................ - - (.24 ) - Net income (loss).............................. .65 .49 (.16 ) .52 Market prices (b): High............................................. 24 1/2 27 3/4 31 33 7/8 Low.............................................. 16 1/4 19 1/4 25 3/8 27
1992 -------------------------------------------------------- FIRST SECOND THIRD FOURTH ----------- ----------- ----------- ----------- Revenues............................................. $ 2,559 $ 2,450 $ 2,451 $ 2,472 Net income (loss): Continuing operations (c)(d)....................... 174 158 (300 ) 207 Discontinued operations (c)........................ 3 (2 ) (132 ) 6 Change in accounting for income taxes.............. 51 - - - Net income (loss)................................ 228 156 (432 ) 213 Per common share: Earnings (loss): Continuing operations (c)(d)..................... .57 .48 (.89 ) .61 Discontinued operations (c)...................... .02 (.02 ) (.39 ) .02 Change in accounting for income taxes............ .16 - - - Net income (loss).............................. .75 .46 (1.28 ) .63 Market prices (b): High............................................. 21 1/4 22 19 1/4 21 3/4 Low.............................................. 16 1/2 16 1/4 16 1/4 13 3/4 - - ------------------------ (a) Third quarter loss includes $98 million ($.29 per share) of costs related to the Galen Merger. See Note 5 of the Notes to Consolidated Financial Statements. (b) Represents high and low sales prices of CHC common stock for periods prior to the Galen Merger and Columbia common stock prior to the HCA Merger. Columbia/HCA common stock is traded on the New York Stock Exchange (ticker symbol -- COL). (c) Third quarter net loss includes charges of $221 million ($.65 per share) related primarily to the Spinoff, of which $86 million ($.25 per share) is included in continuing operations and $135 million ($.40 per share) is included in discontinued operations. The loss also includes $330 million ($.98 per share) associated with divestitures of certain assets. See Note 5 of the Notes to Consolidated Financial Statements. (d) Fourth quarter net income includes a gain of $58 million ($.17 per share) on the sale of HealthTrust common stock. See Note 5 of the Notes to Consolidated Financial Statements.
F-25 COLUMBIA/HCA HEALTHCARE CORPORATION SCHEDULE I -- MARKETABLE SECURITIES -- OTHER SECURITY INVESTMENTS DECEMBER 31, 1993 (DOLLARS IN MILLIONS)
AMOUNT AT WHICH EACH PORTFOLIO OF EQUITY NUMBER OF SHARES MARKET VALUE SECURITY ISSUE OR UNITS - OF EACH AND EACH OTHER PRINCIPAL AMOUNT ISSUE AT SECURITY ISSUE OF BONDS AND COST OF BALANCE CARRIED IN THE NAME OF ISSUER AND TITLE OF EACH ISSUE NOTES EACH ISSUE SHEET DATE BALANCE SHEET - - ------------------------------------------------------------ ---------------- ---------- ------------ --------------- Short-term investments of professional liability insurance subsidiaries (a): United States Government and government agency obligations.............................................. $ 44 $ 44 $ 44 $ 44 State and municipal obligations........................... $ 14 14 14 14 Money market funds........................................ 20 20 20 ---------- ------------ ------- $ 78 $ 78 $ 78 ---------- ------------ ------- ---------- ------------ ------- Long-term investments: United States Government and government agency bonds...... $ 20 $ 19 $ 20 $ 20 State and municipal bonds................................. $ 365 358 374 374 Mortgage-backed securities................................ $ 52 54 55 55 Corporate and other bonds................................. $ 49 51 52 52 Money market funds........................................ 11 11 11 Redeemable preferred stocks............................... 17 18 18 Adjustable rate preferred stocks.......................... 13 14 14 Common stocks............................................. 133 156 156 ---------- ------------ ------- Investments of professional liability insurance subsidiaries........................................... $ 656 $ 700 $ 700 ---------- ------------ ------- ---------- ------------ ------- - - ------------------------ (a) Included in current assets.
F-26 COLUMBIA/HCA HEALTHCARE CORPORATION SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS)
BALANCE AT END OF PERIOD BALANCE AT ----------------- BEGINNING AMOUNTS NOT OF PERIOD ADDITIONS COLLECTED CURRENT CURRENT ---------- --------- --------- ------- ------- Year ended December 31, 1991: Mark Aanonson............................................................ $ 46 $ (46) James Bohanon............................................................ 200 (200) James Bohanon............................................................ 16 (16) Daniel Brothman.......................................................... 135 $ 135 Craig Cooper............................................................. 170 (120) 50 William Heburn........................................................... $558 $558 Gary Hill................................................................ 50 (50) Samuel Holtzman.......................................................... 120 20 100 Ronald Hytoff............................................................ 106 (4) 102 Ira Korman............................................................... 50 (50) Ira Korman............................................................... 30 (30) Ruben Perez.............................................................. 884 (144) 740 Doris Porth.............................................................. 135 135 George Schneider......................................................... 148 (1) 1 146 George Schneider......................................................... 550 550 George Schneider......................................................... 150 150 Russell Schneider........................................................ 764 3 (158) 609 Donald Stewart........................................................... 100 (100) Donald Stewart........................................................... 3 3 Charles Stokes........................................................... 75 75 Charles Stokes........................................................... 40 (1) 39 Charles Stokes........................................................... 100 100 ---------- --------- --------- ------- ------- $3,502 $931 $(920) $579 $ 2,934 ---------- --------- --------- ------- ------- ---------- --------- --------- ------- -------
F-27 COLUMBIA/HCA HEALTHCARE CORPORATION SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS)
BALANCE AT END OF PERIOD BALANCE AT ----------------- BEGINNING AMOUNTS NOT OF PERIOD ADDITIONS COLLECTED CURRENT CURRENT ---------- --------- --------- ------- ------- Year ended December 31, 1992: Daniel Brothman.......................................................... $ 135 $135 Craig Cooper............................................................. 50 $ (50) William Heburn........................................................... 558 (558) Gary Hill................................................................ $127 $127 Samuel Holtzman.......................................................... 120 (20) 100 Ronald Hytoff............................................................ 102 (102) Ruben Perez.............................................................. 740 (740) Doris Porth.............................................................. 135 135 George Schneider......................................................... 147 (147) George Schneider......................................................... 550 (550) George Schneider......................................................... 150 (150) Russell Schneider........................................................ 609 (609) Donald Stewart........................................................... 100 100 Donald Stewart........................................................... 3 (3) Charles Stokes........................................................... 75 (75) Charles Stokes........................................................... 39 (39) Charles Stokes........................................................... 100 (100) ---------- --------- --------- ------- ------- $3,513 $227 $ (3,143) $127 $470 ---------- --------- --------- ------- ------- ---------- --------- --------- ------- -------
F-28 COLUMBIA/HCA HEALTHCARE CORPORATION SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS)
BALANCE AT END OF PERIOD BALANCE AT ----------------- BEGINNING AMOUNTS NOT OF PERIOD ADDITIONS COLLECTED CURRENT CURRENT ---------- --------- --------- ------- ------- Year ended December 31, 1993: Daniel Brothman.......................................................... $135 $135(a) Gary Hill................................................................ 127 $(127) Samuel Holtzman.......................................................... 100 100(a) Doris Porth.............................................................. 135 135(a) Donald Stewart........................................................... 100 100(a) ----- -- --------- -- ------- $597 $ - $(127) $ - $470 ----- -- --------- -- ------- ----- -- --------- -- ------- - - ------------------------ (a) Noninterest bearing; generally collateralized by deed of trust on personal residence; payable either in periodic installments or upon termination of employment, sale of residence or default on any collateralized instrument having priority over Columbia/HCA's deed of trust.
F-29 COLUMBIA/HCA HEALTHCARE CORPORATION SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
BALANCE AT BALANCE BEGINNING ADDITIONS RETIREMENTS TRANSLATION AT END OF PERIOD AT COST OR SALES ADJUSTMENTS OTHER OF PERIOD ---------- --------- ----------- ----------- ----- --------- Year ended December 31, 1991: Land................................................... $ 525 $ 29 $ (10) $ - $ - $ 544 Buildings.............................................. 3,563 269 (96) (3) (85)(a) 3,648 Equipment.............................................. 2,690 396 (129) (2) - 2,955 Construction in progress............................... 130 40 (1) - - 169 ---------- --------- ----------- --- ----- --------- $6,908 $ 734 $(236) $ (5) $ (85) $7,316 ---------- --------- ----------- --- ----- --------- ---------- --------- ----------- --- ----- --------- Year ended December 31, 1992: Land................................................... $ 544 $ 48 $ (11) $ (1) $ (27)(b) $ 553 Buildings.............................................. 3,648 365 (48) (13) (211)(b) 3,741 Equipment.............................................. 2,955 384 (94) (6) (106)(b) 3,133 Construction in progress............................... 169 94 (4) - (1) 258 ---------- --------- ----------- --- ----- --------- $7,316 $ 891 $(157) $(20) $(345) $7,685 ---------- --------- ----------- --- ----- --------- ---------- --------- ----------- --- ----- --------- Year ended December 31, 1993: Land................................................... $ 553 $ 24 $ (9) $ - $ - $ 568 Buildings.............................................. 3,741 476 (134) (1) (33)(c) 4,049 Equipment.............................................. 3,133 464 (133) (1) (21)(c) 3,442 Construction in progress............................... 258 78 (2) - (1)(c) 333 ---------- --------- ----------- --- ----- --------- $7,685 $1,042 $(278) $ (2) $ (55) $8,392 ---------- --------- ----------- --- ----- --------- ---------- --------- ----------- --- ----- --------- - - ------------------------ (a) During the third and fourth quarters of 1991, Columbia/HCA provided for the estimated costs and expenses associated with the disposition of certain hospitals and other assets. (b) During the third quarter of 1992, Columbia/HCA provided for the estimated costs and expenses associated with the disposition of certain hospitals, recorded writedowns of assets in markets with significant declines in operations and wrote off assets destroyed by Hurricane Andrew. (c) During the third quarter of 1993, Columbia/HCA recorded provisions for loss in connection with the Galen Merger, including writedowns of assets in connection with the consolidation of operations and expected losses on the sale of certain assets.
F-30 COLUMBIA/HCA HEALTHCARE CORPORATION SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
ADDITIONS BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND RETIREMENTS TRANSLATION AT END OF PERIOD EXPENSES OR SALES ADJUSTMENTS OTHER OF PERIOD ---------- ------------ ----------- ----------- ----- --------- Year ended December 31, 1991: Buildings......................................... $ 719 $162 $ (29) $ (1) $ - $ 851 Equipment......................................... 983 316 (65) (1) - 1,233 ---------- ----- ----------- --- ----- --------- $1,702 $478 $ (94) $ (2) $ - $2,084 ---------- ----- ----------- --- ----- --------- ---------- ----- ----------- --- ----- --------- Year ended December 31, 1992: Buildings......................................... $ 851 $168 $ (19) $ (4) $(21)(a) $ 975 Equipment......................................... 1,233 325 (67) (3) (26)(a) 1,462 ---------- ----- ----------- --- ----- --------- $2,084 $493 $ (86) $ (7) $(47) $2,437 ---------- ----- ----------- --- ----- --------- ---------- ----- ----------- --- ----- --------- Year ended December 31, 1993: Buildings......................................... $ 975 $173 $ (56) $ (1) $ - $1,091 Equipment......................................... 1,462 331 (92) - - 1,701 ---------- ----- ----------- --- ----- --------- $2,437 $504 $(148) $ (1) $ - $2,792 ---------- ----- ----------- --- ----- --------- ---------- ----- ----------- --- ----- --------- - - ------------------------ (a) During the third quarter of 1992, Columbia/HCA provided for the estimated costs and expenses associated with the disposition of certain hospitals, recorded writedowns of assets in markets with significant declines in operations and wrote off assets destroyed by Hurricane Andrew.
F-31 COLUMBIA/HCA HEALTHCARE CORPORATION SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
ADDITIONS BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND DEDUCTIONS AT END OF PERIOD EXPENSES OR PAYMENTS OF PERIOD ---------- ---------- ----------- --------- Allowances for loss on accounts receivable: Year ended December 31, 1991.................................................. $499 $508 $(560) $447 Year ended December 31, 1992.................................................. 447 515 (487) 475 Year ended December 31, 1993.................................................. 475 542 (504) 513
F-32 COLUMBIA/HCA HEALTHCARE CORPORATION SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
1993 1992 1991 ---- ---- ---- Maintenance and repairs..................................... $220 $205 $188 Taxes other than payroll and income taxes................... 217 185 155
F-33 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements on Forms S-3 (File Nos. 33-52379, 33-53409 and 33-50985) and Forms S-8 (File Nos. 33-52253, 33-51082, 33-50151, 33-50147, 33-36571, 33-51052, 33-51114, 33-55272, 33-55270 and 33-49783) of Columbia/HCA Healthcare Corporation (including its predecessors) and in the related Prospectus of our report dated July 5, 1994, with respect to the consolidated financial statements and schedules of Columbia/HCA Healthcare Corporation included in this Annual Report (Form 10-K/A-1) for the year ended December 31, 1993. ERNST & YOUNG Louisville, Kentucky July 5, 1994 -----END PRIVACY-ENHANCED MESSAGE-----