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HCA Reports Fourth Quarter and Year-End 2006 Results

NASHVILLE, Tenn., Feb. 6 /PRNewswire/ -- HCA today announced financial and operating results for the fourth quarter and fiscal year ended December 31, 2006.

Revenues for the fourth quarter totaled $6.5 billion compared to $6.2 billion in the fourth quarter of 2005. Adjusted EBITDA for the quarter totaled $1.3 billion, compared to $1.0 billion in the previous year's fourth quarter. A table describing adjusted EBITDA and reconciling net income to adjusted EBITDA is included in this release. Net income for the fourth quarter totaled $122 million, compared to $325 million in the prior year fourth quarter.

Fourth quarter 2006 results include gains on investments of $103 million, gains on sales of facilities of $159 million, transaction costs related to the completed recapitalization of $433 million and an impairment of long-lived assets of $24 million. In the 2005 fourth quarter, HCA results included gains on investments of $1 million and gains on sales of facilities of $49 million. Due primarily to the recapitalization transactions, interest expense increased to $373 million in the fourth quarter of 2006 compared to $166 million in same period of 2005.

Same facility admissions increased 0.3 percent and same facility equivalent admissions increased 0.2 percent in the fourth quarter of 2006 compared to the prior year fourth quarter. Same facility revenue per equivalent admission increased 7.5 percent (8.3 percent increase when adjusted for uninsured discounts) in the fourth quarter of 2006 compared to the fourth quarter of 2005. Same facility uninsured discounts, which reduce revenues and the provision for doubtful accounts by generally equal amounts, totaled $296 million in the fourth quarter of 2006 compared to $226 million in the same quarter of 2005.

As of December 31, 2006, HCA's balance sheet reflected cash and cash equivalents of $634 million, total debt of $28.4 billion, stockholders' deficit (including common and minority equity) of $10.3 billion and total assets of $23.6 billion.

Revenues for the year ended December 31, 2006 increased 4.2 percent to $25.5 billion, compared to $24.5 billion in 2005. Adjusted EBITDA for 2006 totaled $4.5 billion compared to $4.3 billion in the prior year. Net income totaled $1.0 billion in 2006 compared to $1.4 billion in 2005.

Financial results for 2006 include gains on investments of $243 million, gains on sales of facilities of $205 million, transaction costs related to the recapitalization of $442 million, an impairment of long-lived assets of $24 million and a reduction in our professional liability reserves of $136 million. Financial results for 2005 include gains on sales of facilities of $78 million and a reduction in the Company's professional liability reserves of $83 million.

On November 16, 2006, the Company's shareholders approved a merger with an acquiring consortium led by Bain Capital, Kohlberg Kravis Roberts & Co. and Merrill Lynch Global Private Equity, along with HCA founder, Dr. Thomas F. Frist, Jr. and certain members of his family and HCA management for $51.00 per share in cash for each share of HCA common stock held. The transaction closed on November 17, 2006.

At December 31, 2006, HCA operated 173 hospitals and 107 freestanding surgery centers (including seven hospitals and nine freestanding surgery centers operated through equity method joint ventures) located in 20 states, London, England and Geneva, Switzerland.

Earnings Conference Call

HCA will host a conference call for investors at 9:00 a.m. Central Standard Time today. All interested investors are invited to access a live audio broadcast of the call via webcast. The broadcast also will be available on a replay basis beginning this afternoon. The webcast can be accessed at: http://www.videonewswire.com/event.asp?id=37414 or through the Company's Investor Relations web page, http://www.hcahealthcare.com.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements based on current management expectations. Those forward-looking statements include all statements other than those made solely with respect to historical fact. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those expressed in any forward-looking statements. These factors include, but are not limited to, (1) the ability to recognize the benefits of the recapitalization; (2) the impact of the substantial indebtedness incurred to finance the consummation of the recapitalization; (3) increases in the amount and risk of collectability of uninsured accounts, and deductibles and copayment amounts for insured accounts; (4) the ability to achieve operating and financial targets, attain expected levels of patient volumes and control the costs of providing services; (5) possible changes in the Medicare, Medicaid and other state programs that may impact reimbursements to health care providers and insurers; (6) the highly competitive nature of the health care business; (7) changes in revenue mix and the ability to enter into and renew managed care provider agreements on acceptable terms; (8) the efforts of insurers, health care providers and others to contain health care costs; (9) the impact of our charity care and uninsured discounting policies; (10) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures and our corporate integrity agreement with the government; (11) changes in federal, state or local regulations affecting the health care industry; (12) delays in receiving payments for services provided; (13) the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical support personnel; (14) the outcome of governmental investigations by the United States Attorney for the Southern District of New York and the Securities and Exchange Commission (the "SEC"); (15) the outcome of certain class action and derivative litigation filed with respect to us; (16) the possible enactment of federal or state health care reform; (17) the availability and terms of capital to fund the expansion of our business; (18) the continuing impact of hurricanes on our facilities and the ability to obtain recoveries under our insurance policies; (19) changes in accounting practices; (20) changes in general economic conditions; (21) future divestitures which may result in charges; (22) changes in business strategy or development plans; (23) the outcome of pending and any future tax audits, appeals and litigation associated with our tax positions; (24) potential liabilities and other claims that may be asserted against us, (25) the ability to amend our credit agreement in order to reduce interest rates, and (26) other risk factors described in our Annual Report on Form 10-K and other filings with the SEC. Many of the factors that will determine our future results are beyond our ability to control or predict. In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

                                   HCA Inc.
                        Consolidated Income Statements
                                Fourth Quarter
                            (Dollars in millions)

                                   2006                      2005
                            Amount       Ratio        Amount       Ratio

    Revenues                $6,489        100.0%      $6,178        100.0%

    Salaries and benefits    2,593         40.0        2,538         41.1
    Supplies                 1,071         16.5        1,024         16.6
    Other operating expenses   988         15.2        1,056         17.1
    Provision for doubtful
     accounts                  710         10.9          625         10.1
    Gains on investments      (103)        (1.6)          (1)          --
    Equity in earnings of
     affiliates                (46)        (0.7)         (71)        (1.2)
    Depreciation and
     amortization              346          5.4          336          5.4
    Interest expense           373          5.7          166          2.7
    Gains on sales of
     facilities               (159)        (2.5)         (49)        (0.8)
    LBO transaction costs      433          6.7           --           --
    Impairment of long-lived
     assets                     24          0.4           --           --

                             6,230         96.0        5,624         91.0

    Income before minority
     interests and income
     taxes                     259          4.0          554          9.0

    Minority interests in
     earnings of consolidated
     entities                   56          0.9           46          0.8

    Income before income taxes 203          3.1          508          8.2

    Provision for income taxes  81          1.2          183          2.9

       Net income             $122          1.9         $325          5.3



                                   HCA Inc.
                        Consolidated Income Statements
                For the Years Ended December 31, 2006 and 2005
                            (Dollars in millions)

                                    2006                      2005
                            Amount       Ratio        Amount       Ratio

    Revenues               $25,477        100.0%     $24,455        100.0%

    Salaries and benefits   10,409         40.9        9,928         40.6
    Supplies                 4,322         17.0        4,126         16.9
    Other operating expenses 4,057         16.0        4,039         16.5
    Provision for doubtful
     accounts                2,660         10.4        2,358          9.6
    Gains on investments      (243)        (1.0)         (53)        (0.2)
    Equity in earnings of
     affiliates               (197)        (0.8)        (221)        (0.9)
    Depreciation and
     amortization            1,391          5.5        1,374          5.6
    Interest expense           955          3.7          655          2.7
    Gains on sales of
     facilities               (205)        (0.8)         (78)        (0.3)
    LBO transaction costs      442          1.7           --           --
    Impairment of long-lived
     assets                     24          0.1           --           --

                            23,615         92.7       22,128         90.5

    Income before minority
     interests and income
     taxes                   1,862          7.3        2,327          9.5

    Minority interests in
     earnings of consolidated
     entities                  201          0.8          178          0.7

    Income before income
     taxes                   1,661          6.5        2,149          8.8

    Provision for income taxes 625          2.4          725          3.0

       Net income           $1,036          4.1       $1,424          5.8



                                   HCA Inc.
                    Supplemental Operating Results Summary
                            (Dollars in millions)

                                                        For the Years
                                Fourth Quarter        Ended December 31,
                             2006         2005         2006         2005

    Revenues                $6,489       $6,178      $25,477      $24,455

    Net income                $122         $325       $1,036       $1,424
      Gains on sales of
       facilities (net of tax) (74)         (19)        (103)         (37)
      LBO transaction costs
       (net of tax)            303           --          309           --
      Impairment of long-lived
       assets (net of tax)      15           --           15           --
      Tax settlement and
       repatriation             --           (2)          --          (72)
    Net income, excluding gains
     on sales of facilities,
     LBO transaction costs,
     impairment of long-lived
     assets and tax settlement
     and repatriation          366          304        1,257        1,315
      Depreciation and
       amortization            346          336        1,391        1,374
      Interest expense         373          166          955          655
      Minority interests in
       earnings of consolidated
       entities                 56           46          201          178
      Provision for income
       taxes                   135          155          665          756

      Adjusted EBITDA (a)   $1,276      $ 1,007       $4,469       $4,278


     (a) Net income, excluding gains on sales of facilities, LBO transaction
         costs, impairment of long-lived assets and tax settlement and
         repatriation and adjusted EBITDA are non-GAAP financial measures.  We
         believe that net income, excluding gains on sales of facilities, LBO
         transaction costs, impairment of long-lived assets and tax settlement
         and repatriation and adjusted EBITDA are important measures that
         supplement discussions and analysis of our results of operations.  We
         believe that it is useful to investors to provide disclosures of our
         results of operations on the same basis as that used by management.
         Management relies upon net income, excluding gains on sales of
         facilities, LBO transaction costs, impairment of long-lived assets
         and tax settlement and repatriation and adjusted EBITDA as the
         primary measures to review and assess operating performance of its
         hospital facilities and their management teams.

         Management and investors review both the overall performance
         (including; net income, excluding gains on sales of facilities, LBO
         transaction costs, impairment of long-lived assets and tax settlement
         and repatriation and GAAP net income) and operating performance
         (adjusted EBITDA) of our health care facilities.  Adjusted EBITDA and
         the adjusted EBITDA margin (adjusted EBITDA divided by revenues) are
         utilized by management and investors to compare our current operating
         results with the corresponding periods during the previous year and
         to compare our operating results with other companies in the health
         care industry.  It is reasonable to expect that gains on sales of
         facilities will occur in future periods, but the amounts recognized
         can vary significantly from quarter to quarter, do not directly
         relate to the ongoing operations of our health care facilities and
         complicate quarterly comparisons of our results of operations and
         operations comparisons with other health care companies.

         Net income, excluding gains on sales of facilities, LBO transaction
         costs, impairment of long-lived assets and tax settlement and
         repatriation and adjusted EBITDA are not measures of financial
         performance under accounting principles generally accepted in the
         United States, and should not be considered as alternatives to net
         income as a measure of operating performance or cash flows from
         operating, investing and financing activities as a measure of
         liquidity.  Because net income, excluding gains on sales of
         facilities, LBO transaction costs, impairment of long-lived assets
         and tax settlement and repatriation and adjusted EBITDA are not
         measurements determined in accordance with generally accepted
         accounting principles and are susceptible to varying calculations,
         net income, excluding gains on sales of facilities, LBO transaction
         costs, impairment of long-lived assets and tax settlement and
         repatriation and adjusted EBITDA, as presented, may not be comparable
         to other similarly titled measures presented by other companies.



                                   HCA Inc.
                      Supplemental Non-GAAP Disclosures
  Operating Measures Adjusted for the Impact of Discounts for the Uninsured
                             Fourth Quarter 2006
        (Dollars in millions, except revenue per equivalent admission)

                                                                    Non-
                          Uninsured     Non-GAAP      GAAP %       GAAP %
                   GAAP   Discounts     Adjusted       of         Adjusted
                  Amounts Adjustment(a) Amounts(b)  Revenues      Revenues
                                                   2006   2005   2006   2005

    Consolidated:
    Revenues      $6,489      $304         $6,793  100.0% 100.0% 100.0% 100.0%

    Salaries and
     benefits      2,593        --          2,593   40.0%  41.1%  38.2%  39.6%
    Supplies       1,071        --          1,071   16.5%  16.6%  15.8%  16.0%
    Other operating
     expenses        988        --            988   15.2%  17.1%  14.5%  16.4%
    Provision for
     doubtful
     accounts        710       304          1,014   10.9%  10.1%  14.9%  13.4%

    Admissions   391,500                  391,500
    Equivalent
     admissions  586,300                  586,300
    Revenue per
     equivalent
     admission   $11,066                  $11,584
    % change
     from prior
     year           8.4%                     9.3%

    Same Facility:
    Revenues      $6,317      $296         $6,613
    Admissions   385,400                  385,400
    Equivalent
     admissions  573,500                  573,500
    Revenue per
     equivalent
     admission   $11,016                  $11,532
    % change
     from prior
     year           7.5%                     8.3%


     (a) Represents the impact of the discounts for the uninsured for the
         period.  On January 1, 2005, we modified our policies to provide
         discounts to uninsured patients who do not qualify for Medicaid or
         charity care.  These discounts are similar to those provided to many
         local managed care plans.  In implementing the discount policy, we
         first attempt to qualify uninsured patients for Medicaid, other
         federal or state assistance or charity care.  If an uninsured patient
         does not qualify for these programs, the uninsured discount is
         applied.  On a consolidated basis, we recorded $304 million and $235
         million of uninsured discounts during the fourth quarters of 2006 and
         2005, respectively.

     (b) Revenues, the provision for doubtful accounts, certain operating
         expense categories as a percentage of revenues and revenue per
         equivalent admission have been adjusted to exclude the discounts
         under our uninsured discount policy (non-GAAP financial measures).
         We believe these non-GAAP financial measures are useful to investors
         to provide disclosures of our results of operations on the same basis
         as that used by management.  Management uses this information to
         compare revenues, the provision for doubtful accounts, certain
         operating expense categories as a percentage of revenues and revenue
         per equivalent admission, adjusted for the impact of the uninsured
         discount policy.  Management finds this information to be useful to
         enable the evaluation of revenue and certain expense category trends
         that are influenced by patient volumes and are generally analyzed as
         a percentage of net revenues.  These non-GAAP financial measures
         should not be considered an alternative to GAAP financial measures.
         We believe this supplemental information provides management and the
         users of its financial statements with useful information for period-
         to-period comparisons.  Investors are encouraged to use GAAP measures
         when evaluating our overall financial performance.



                                   HCA Inc.
                      Supplemental Non-GAAP Disclosures
  Operating Measures Adjusted for the Impact of Discounts for the Uninsured
                         Year Ended December 31, 2006
        (Dollars in millions, except revenue per equivalent admission)

                          Uninsured     Non-GAAP      GAAP %       GAAP %
                   GAAP   Discounts     Adjusted       of         Adjusted
                  Amounts Adjustment(a) Amounts(b)  Revenues      Revenues
                                                   2006   2005   2006   2005

    Consolidated:
    Revenues     $25,477    $1,095        $26,572  100.0% 100.0% 100.0% 100.0%

    Salaries and
     benefits     10,409        --         10,409   40.9%  40.6%  39.2%  39.4%
    Supplies       4,322        --          4,322   17.0%  16.9%  16.3%  16.4%
    Other operating
     expenses      4,057        --          4,057   16.0%  16.5%  15.2%  15.9%
    Provision for
     doubtful
     accounts      2,660     1,095          3,755   10.4%   9.6%  14.1%  12.4%

    Admissions 1,610,100                1,610,100
    Equivalent
     admis-
     sions     2,416,700                2,416,700
    Revenue per
     equivalent
     admission   $10,542                  $10,995
    % change
     from prior
     year           6.8%                     8.0%

    Same Facility:
    Revenues     $24,448    $1,063        $25,511
    Admissions 1,557,700                1,557,700
    Equivalent
     admis-
     sions     2,322,500                2,322,500
    Revenue per
     equivalent
     admission   $10,527                  $10,984
    % change
     from prior
     year           6.2%                     7.3%


     (a) Represents the impact of the discounts for the uninsured for the
         period.  On January 1, 2005, we modified our policies to provide
         discounts to uninsured patients who do not qualify for Medicaid or
         charity care.  These discounts are similar to those provided to many
         local managed care plans.  In implementing the discount policy, we
         first attempt to qualify uninsured patients for Medicaid, other
         federal or state assistance or charity care.  If an uninsured patient
         does not qualify for these programs, the uninsured discount is
         applied.  On a consolidated basis, we recorded $1,095 million and
         $769 million of uninsured discounts during the twelve months ended
         December 31, 2006 and 2005, respectively.

     (b) Revenues, the provision for doubtful accounts, certain operating
         expense categories as a percentage of revenues and revenue per
         equivalent admission have been adjusted to exclude the discounts
         under our uninsured discount policy (non-GAAP financial measures).
         We believe these non-GAAP financial measures are useful to investors
         to provide disclosures of our results of operations on the same basis
         as that used by management.  Management uses this information to
         compare revenues, the provision for doubtful accounts, certain
         operating expense categories as a percentage of revenues and revenue
         per equivalent admission, adjusted for the impact of the uninsured
         discount policy.  Management finds this information to be useful to
         enable the evaluation of revenue and certain expense category trends
         that are influenced by patient volumes and are generally analyzed as
         a percentage of net revenues.  These non-GAAP financial measures
         should not be considered an alternative to GAAP financial measures.
         We believe this supplemental information provides management and the
         users of its financial statements with useful information for period-
         to-period comparisons.  Investors are encouraged to use GAAP measures
         when evaluating our overall financial performance.



                                   HCA Inc.
                    Condensed Consolidated Balance Sheets
                            (Dollars in millions)

                                    December 31,  September 30,  December 31,
                ASSETS                 2006           2006           2005

    Current assets:
      Cash and cash equivalents        $634            $541          $336
      Accounts receivable, net        3,705           3,567         3,332
      Inventories                       669             659           616
      Deferred income taxes             476             588           372
      Other                             594             462           559

        Total current assets          6,078           5,817         5,215

    Property and equipment, at cost  21,907          21,957        20,818
    Accumulated depreciation        (10,238)        (10,248)       (9,439)
                                     11,669          11,709        11,379

    Investments of insurance
     subsidiary                       1,886           2,105         2,134
    Investments in and advances to
     affiliates                         679             680           627
    Goodwill                          2,601           2,663         2,626
    Deferred loan costs                 614              72            85
    Other                                84              79           159

                                    $23,611         $23,125       $22,225


     LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable               $1,415          $1,268        $1,484
      Accrued salaries                  675             638           561
      Other accrued expenses          1,193           1,345         1,264
      Long-term debt due within
       one year                         293             831           586

        Total current liabilities     3,576           4,082         3,895

    Long-term debt                   28,115          10,512         9,889
    Professional liability risks      1,309           1,351         1,336
    Deferred taxes and other
     liabilities                        943           1,135         1,414
    Minority interests in equity of
     consolidated entities              907             919           828

    Stockholders' (deficit) equity  (11,239)          5,126         4,863

                                    $23,611         $23,125       $22,225




                                   HCA Inc.
                    Consolidated Statements of Cash Flows
                For the Years Ended December 31, 2006 and 2005
                            (Dollars in millions)

                                                       2006         2005
    Cash flows from operating activities:
      Net income                                      $1,036       $1,424
      Adjustments to reconcile net income to net cash
       provided by operating activities:
         Provision for doubtful accounts               2,660        2,358
         Depreciation and amortization                 1,391        1,374
         Income taxes                                   (552)         162
         Gains on sales of facilities                   (205)         (78)
         Impairment of long-lived assets                  24           -.
         Change in operating assets and liabilities   (2,940)      (2,278)
         Change in minority interest                      58          (13)
         Share-based compensation                        324           30
         Other                                            49           (8)

           Net cash provided by operating activities   1,845        2,971

    Cash flows from investing activities:
      Purchase of property and equipment              (1,865)      (1,592)
      Acquisition of hospitals and health care entities (112)        (126)
      Disposal of hospitals and health care entities     651          320
      Change in investments                               26         (311)
      Other                                               (7)          28

         Net cash used in investing activities        (1,307)      (1,681)

    Cash flows from financing activities:
      Issuance of long-term debt                      21,758          858
      Net change in revolving bank credit facility      (435)        (225)
      Repayment of long-term debt                     (3,728)        (739)
      Repurchase of common stock                        (653)      (1,856)
      Recapitalization - repurchase of common stock  (20,364)          .-
      Recapitalization - equity contributions          3,782           -.
      Payment of debt issuance costs                    (586)          -.
      Issuance of common stock                           108        1,009
      Payment of cash dividends                         (201)        (258)
      Other                                               79           (1)

         Net cash used in financing activities          (240)      (1,212)

    Change in cash and cash equivalents                  298           78
    Cash and cash equivalents at beginning of period     336          258

    Cash and cash equivalents at end of period          $634         $336

    Interest payments                                   $856         $624
    Income tax payments, net of refunds               $1,087         $563



                                   HCA Inc.
                             Operating Statistics

                                                        For the Years
                                Fourth Quarter        Ended December 31,
                             2006         2005         2006         2005
    Consolidated Hospitals:

      Number of Hospitals    166          175          166          175
      Weighted Average
       Licensed Beds      39,762       41,713       40,653       41,902
      Licensed Beds at
       End of Period      39,354       41,265       39,354       41,265

    Reported:
     Admissions          391,500      402,500    1,610,100    1,647,800
       % Change            -2.8%                     -2.3%
     Equivalent
      Admissions         586,300      605,000    2,416,700    2,476,600
       % Change            -3.1%                     -2.4%
     Revenue per
      Equivalent
      Admission          $11,066      $10,212      $10,542       $9,874
       % Change             8.4%                      6.8%
     Inpatient Revenue
      per Admission      $10,355       $9,572       $9,876       $9,274
       % Change             8.2%                      6.5%

     Patient Days      1,921,200    1,980,300    7,916,100    8,112,200
     Equivalent Patient
      Days             2,877,800    2,976,400   11,882,100   12,192,600

     Inpatient Surgery
      Cases              130,000      133,200      533,100      541,400
       % Change            -2.4%                     -1.5%

     Outpatient Surgery
      Cases              200,600      203,100      820,900      836,600
       % Change            -1.2%                     -1.9%

     Emergency Room
      Visits           1,265,800    1,320,100    5,213,500    5,415,200
       % Change            -4.1%                     -3.7%

     Outpatient Revenues
      as a Percentage of
      Patient Revenues     36.4%        36.3%        36.4%        36.4%

     Average Length of Stay  4.9          4.9          4.9          4.9

     Occupancy             52.5%        51.6%        53.3%        53.0%
     Equivalent Occupancy  78.7%        77.5%        80.0%        79.7%

    Same Facility:
     Admissions          385,400      384,400    1,557,700    1,555,000
       % Change             0.3%                      0.2%
     Equivalent
      Admissions         573,500      572,300    2,322,500    2,321,700
       % Change             0.2%                      0.0%
     Revenue per
      Equivalent
      Admission          $11,016      $10,250      $10,527       $9,917
       % Change             7.5%                      6.2%
     Inpatient Revenue
      per Admission      $10,346       $9,683       $9,910       $9,355
       % Change             6.8%                      5.9%

     Inpatient Surgery
      Cases              127,000      128,000      516,300      512,700
       % Change            -0.7%                      0.7%
     Outpatient Surgery
      Cases              190,800      192,000      772,900      782,300
       % Change            -0.7%                     -1.2%

     Emergency Room
      Visits           1,242,300    1,248,500    5,023,400    5,061,600
       % Change            -0.5%                     -0.8%


    Number of Consolidated and Non-Consolidated
    (50/50 Equity Joint Ventures) Hospitals:

     Consolidated            166          175          166          175
     Non-Consolidated (50/50
      Equity Joint Ventures)   7            7            7            7
     Total Number of
      Hospitals              173          182          173          182

SOURCE HCA

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