<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from ____ to ____
Commission File Number 000-18799
-----------
HEALTH MANAGEMENT ASSOCIATES, INC.
--------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 61-0963645
- -------------------------------- ------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
5811 Pelican Bay Boulevard, Suite 500, Naples, Florida 34108-2710
--------------------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
(941)598-3131
-----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No ___
---
At February 1, 2000, the following shares of the Registrant were outstanding:
Class A Common Stock 241,062,641 shares
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
INDEX
-----
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Statements of Income --
Three Months Ended December 31, 1999 and 1998.................. 3
Condensed Consolidated Balance Sheets--
December 31, 1999 and September 30, 1999....................... 4
Condensed Consolidated Statements of Cash Flows--
Three Months Ended December 31, 1999 and 1998.................. 5
Notes to Interim Condensed Consolidated Financial Statements....... 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 8-11
PART II. OTHER INFORMATION......................................... 12
Signatures............................................................ 13
Index To Exhibits..................................................... 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three months ended
December 31,
--------------------------
1999 1998
--------- ----------
Net patient service revenue...................... $370,094 $305,496
Costs and expenses:
Salaries and benefits........................... 136,428 113,643
Supplies and other expenses..................... 109,946 88,361
Provision for doubtful accounts................. 34,173 29,095
Depreciation and amortization................... 18,132 14,507
Rent expense.................................... 9,273 7,577
Interest, net................................... 5,691 1,360
-------- --------
Total costs and expenses.................... 313,643 254,543
-------- --------
Income before income taxes....................... 56,451 50,953
Provision for income taxes....................... 22,159 19,998
-------- --------
Net income....................................... $ 34,292 $ 30,955
======== ========
Net income per share:
Basic....................................... $ .14 $ .12
======== ========
Diluted..................................... $ .14 $ .12
======== ========
Weighted average number of
shares outstanding:
Basic....................................... 241,916 251,653
======== ========
Diluted..................................... 245,015 258,114
======== ========
See accompanying notes.
3
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
------
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................. $ 24,674 $ 12,926
Receivables--net...................................................... 346,253 338,905
Supplies, prepaids and other assets................................... 44,466 41,362
Funds held by trustee................................................. 2,019 1,764
Deferred income taxes................................................. 30,515 30,515
---------- -----------
Total current assets............................................. 447,927 425,472
Property, plant and equipment........................................... 1,170,938 1,142,456
Less accumulated depreciation and amortization........................ 246,024 229,967
---------- -----------
Net property, plant and equipment................................ 924,914 912,489
Other assets:
Funds held by trustee................................................. 4,184 4,131
Excess of cost over acquired assets, net.............................. 156,614 158,499
Deferred charges and other assets..................................... 19,791 16,709
---------- -----------
Total............................................................ 180,589 179,339
---------- -----------
$1,553,430 $ 1,517,300
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable...................................................... $ 81,274 $ 73,595
Accrued expenses and other liabilities................................ 55,703 71,997
Income taxes--currently payable and deferred.......................... 27,667 20,278
Current maturities of long-term debt.................................. 17,888 9,351
---------- -----------
Total current liabilities 182,532 175,221
Deferred income taxes................................................... 32,579 32,579
Other long-term liabilities............................................. 17,741 17,455
Long-term debt.......................................................... 438,108 401,522
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized .................................................. - -
Common stock, Class A, $.01 par value, 750,000,000
shares authorized, 253,600,000 and 253,405,000
shares issued at December 31, 1999
and September 30, 1999, respectively................................ 2,536 2,534
Additional paid-in capital........................................... 294,631 294,579
Retained earnings.................................................... 696,794 662,502
---------- -----------
993,961 959,615
Less treasury stock, 12,500,000 shares at cost....................... (111,491) (69,092)
---------- -----------
Total stockholders' equity......................................... 882,470 890,523
---------- -----------
$1,553,430 $ 1,517,300
========== ===========
</TABLE>
(See accompanying notes)
4
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
December 31,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................................. $ 34,292 $ 30,955
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............................................ 18,132 14,507
Loss on sale of fixed assets............................................. 3 70
Changes in assets and liabilities:
Receivables--net........................................................ (19,339) (11,829)
Supplies and other current assets....................................... (3,104) (2,884)
Deferred charges and other assets....................................... (3,243) (4)
Accounts payable........................................................ 7,679 5,515
Accrued expenses and other liabilities.................................. (4,303) 1,011
Income taxes--
currently payable and deferred......................................... 7,389 17,646
Other long term liabilities............................................. 286 (762)
--------- ---------
Net cash provided by
operating activities................................................. 37,792 54,225
--------- ---------
Cash flows from investing activities:
Acquisition of facility..................................................... - (7,021)
Additions to property, plant and equipment.................................. (28,525) (38,000)
Proceeds from sale of equipment............................................. 11 1
--------- ---------
Net cash used in investing activities................................. (28,514) (45,020)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term borrowings.......................................... 47,405 133
Principal payments on debt.................................................. (2,282) (7,761)
Proceeds from issuance of common stock...................................... 54 2,564
Purchases of treasury stock................................................. (42,399) (8,101)
Increase in funds held by trustee........................................... (308) (151)
---------- ---------
Net cash provided by (used in)
financing activities................................................. 2,470 (13,316)
---------- ---------
Net increase (decrease) in cash
and cash equivalents.............................................. 11,748 (4,111)
Cash and cash equivalents at beginning of period............................. 12,926 12,685
---------- ---------
Cash and cash equivalents at end of period................................... $ 24,674 $ 8,574
========== =========
</TABLE>
See accompanying notes.
5
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
- -------------------------
The condensed consolidated balance sheet as of September 30, 1999 has been
derived from the audited consolidated financial statements included in Health
Management Associates, Inc.'s (the Company's) 1999 Annual Report. The interim
consolidated financial statements at December 31, 1999 and for the three months
ended December 31, 1999 and 1998 are unaudited; however, such interim statements
reflect all adjustments (consisting only of a normal recurring nature) which
are, in the opinion of management, necessary for a fair presentation of the
financial position and results of operations for the interim periods presented.
The results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full year. The interim
financial statements should be read in conjunction with the audited consolidated
financial statements of the Company included in its 1999 Annual Report.
2. Use of Estimates
- --------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management of the Company to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements. Actual results could differ from the estimates.
3. Earnings Per Share
- ----------------------
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
December 31,
------------------
1999 1998
-------- --------
Numerator:
Net income $ 34,292 $ 30,955
======== ========
Denominator:
Denominator for basic earnings
per share-weighted average shares 241,916 251,653
Effect of dilutive securities-
Employee stock options 3,099 6,461
-------- --------
Denominator for diluted earnings
per share 245,015 258,114
======== ========
Basic earnings per share $ .14 $ .12
======== ========
Diluted earnings per share $ .14 $ .12
======== ========
6
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. Earnings Per Share (continued)
- ----------------------------------
In September 1999 the Board of Directors approved a stock repurchase
program of up to 25 million shares of common stock. On October 14, 1999 the
Company executed a share repurchase agreement with an independent third party,
whereby the third party agreed to "sell short" 5 million shares of the Company's
common stock to the Company. As of October 19, 1999 the 5 million shares were
delivered to the Company and became treasury stock. From October 15, 1999 to
December 15, 1999, a period of 60 days, the third party covered the "short sale"
by buying shares on the open market. On December 15, 1999 the Company reimbursed
the third party the cost of the common stock purchased plus a commission plus
interest (at LIBOR) on the outstanding balance of funds used to purchase the
common stock. The total cost for the purchase of the 5 million shares of
treasury stock was approximately $43 million.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
---------------------
Three months ended December 31, 1999 compared
---------------------------------------------
to three months ended December 31, 1998
---------------------------------------
Net patient service revenue for the three months ended December
31, 1999 ("1999 Period") was $370.1 million, as compared to $305.5
million for the three months ended December 31, 1998 ("1998 Period").
This represented an increase in net patient service revenue of $64.6
million, or 21.1%. Hospitals in operation for the entire 1999 Period
and 1998 Period ("same hospitals") provided $13.6 million of the
increase in net patient service revenue. The remaining increase of
$51.0 million included $51.1 million of net patient service revenue
from the April 1999 acquisition of a 473-bed hospital system, the May
1999 acquisition of a 167-bed hospital system and the July 1999
acquisition of a 204-bed hospital, offset by a decrease of $.1 million
in Corporate and miscellaneous revenue.
During the 1999 Period the Company's hospitals generated patient
days of service and an occupancy rate of 194,260 and 45.3%,
respectively, versus 161,915 and 46.1%, respectively, for the 1998
Period. Same hospital patient days and occupancy rates were 152,245
and 46.9%, respectively, for the 1999 Period, and 146,021 and 45.0%,
respectively, for the 1998 Period. Same hospital admissions for the
Company during the 1999 Period were 34,531, up 6.0% from the 32,586
admissions during the 1998 Period.
The Company's operating expenses (salaries and benefits, supplies
and other expenses, provision for doubtful accounts and rent expense)
for the 1999 Period were $289.8 million or 78.3% of net patient
service revenue as compared to $238.7 million or 78.1% of net patient
service revenue for the 1998 Period. Of the total $51.1 million
increase, approximately $10.1 million related to same hospitals, which
was largely attributable to increased patient volumes. Another $40.3
million of increased operating expense related to the acquisitions
mentioned previously. The remaining $.7 million represented an
increase in Corporate and miscellaneous other operating expenses.
The Company's depreciation and amortization costs increased by
$3.6 million and interest expense increased by $4.3 million. The
increase in depreciation and amortization resulted primarily from the
acquisitions mentioned previously. The increase in interest expense
was due largely from acquisition related debt and lower investment
income in the 1999 Period (which is netted against interest expense).
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The Company's income before income taxes was $56.5 million for
the 1999 Period as compared to $51.0 million for the 1998 Period, an
increase of $5.5 million, or 10.8%. The increase resulted primarily
from same hospital volume increases and the acquisitions mentioned
previously. The Company's provision for income taxes was $22.2 million
for the 1999 Period, as compared to $20.0 million for the 1998 Period.
These provisions reflect effective income tax rates of 39.25% for both
periods. As a result of the foregoing, the Company's net income was
$34.3 million for the 1999 Period as compared to $31.0 million for the
1998 Period.
Liquidity and Capital Resources
-------------------------------
1999 Period Cash Flows compared to 1998 Period Cash Flows
The Company's operating cash flows totaled $37.8 million for the
1999 Period as compared to $54.2 million for the 1998 Period. The
continued positive cash flows from operating activities results from
the Company's profitability and management of its working capital. The
Company's investing activities used $28.5 million and $45.0 million
for the 1999 Period and 1998 Period, respectively. Construction costs
related to the replacement of existing hospitals accounted for the
majority of the expenditures in both periods. Financing activities
provided net cash of $2.5 million for the 1999 Period and used net
cash of $13.3 million for the 1998 Period. Increased borrowings and
the purchase of the Company=s common stock accounted for the majority
of the change from the 1998 Period to the 1999 Period. See the
Condensed Consolidated Statements of Cash Flows for the three months
ended December 31, 1999 and 1998 at page 5 of this Report.
Capital Resources
During November 1999 the Company closed on a $600 million Credit
Agreement (the "Agreement"), thereby refinancing and replacing its
existing $300 million Credit Agreement ("Credit Agreement") which
expired on November 30, 1999. The Agreement is an unsecured revolving
credit loan, comprised of a $150 million 364-day credit loan and a
$450 million 5-year credit loan. Similar to the Credit Agreement, the
new Agreement permits the Company to borrow under either loan at any
time through the respective loan's termination date, at which time all
outstanding revolving credit loans become due and payable. Under
either loan, the Company may choose a Base Rate Loan (prime interest
rate) or a Eurodollar Rate Loan (LIBOR interest rate). The initial
interest rate for a Eurodollar Rate Loan is set at LIBOR plus 1.00
percent, and will increase or decrease in relation to a change in the
Company's credit rating. As of January 31, 2000 the outstanding
balance was $340 million.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The Company also has a revolving credit facility with a bank
which provides a $10 million unsecured line of credit commitment
through January 31, 2000. The credit facility has been verbally
extended pending execution of the credit facility documents. Interest
on the outstanding loans is payable at the bank's Index Rate (prime)
less 1/2%. As of January 31, 2000, there were no amounts outstanding
under this line.
The Company is obligated to pay certain commitment fees based
upon amounts borrowed and available for borrowing during the terms of
both such credit facilities ("Credit Facilities").
The credit agreements for the Credit Facilities contain certain
covenants which, without prior consent of the banks, limit certain
activities of the Company and its subsidiaries, including those
relating to merger, consolidation and the Company's ability to secure
indebtedness, make guarantees and grant security interests. The
Company must also maintain minimum levels of consolidated net worth,
interest coverage and debt to cash flow.
Year 2000 Update
----------------
As described in the Company's Annual Report on Form 10-K for the
year ended September 30, 1999, the Company had implemented its plan to
address possible exposures related to the impact of Year 2000 computer
issues on its computer systems, its equipment and third parties with
which the Company's systems interface. Since entering the year 2000,
the Company has not experienced any disruptions to its business nor is
it aware of any significant Year 2000-related disruptions impacting
its third party payors or vendors. The Company will continue to
monitor its critical systems over the next several months but does not
anticipate any significant impacts due to Year 2000 exposures from its
internal systems as well as from third parties.
Costs incurred to achieve Year 2000 readiness included the use of
both internal and external resources. Such costs have been expensed as
incurred, and have not had a material adverse effect on the Company's
results of operations.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Forward-Looking Statements
--------------------------
Certain statements contained in this Form 10-Q, including,
without limitation, statements containing the words "believes,"
"anticipates," "intends," "expects" and words of similar import,
constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other
factors that may cause the actual results, performance or achievements
of the Company or industry results to be materially different from any
future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others,
the following: general economic and business conditions, both
nationally and in the regions in which the Company operates; industry
capacity; demographic changes; existing governmental regulations and
changes in, or the failure to comply with, governmental regulations;
legislative proposals for health care reform; the ability to enter
into managed care provider arrangements on acceptable terms; changes
in Medicare and Medicaid payment levels; liability and other claims
asserted against the Company; competition; the loss of any significant
ability to attract and retain qualified personnel, including
physicians; the availability and terms of capital to fund additional
acquisitions or replacement facilities. Given these uncertainties,
prospective investors are cautioned not to place undue reliance on
such forward-looking statements. The Company disclaims any obligation
to update any such factors or to publicly announce the results of any
revision to any of the forward-looking statements contained herein to
reflect future events or developments.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
None.
Item 2. Changes in Securities.
---------------------
None.
Item 3. Defaults upon Senior Securities.
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information.
-----------------
In September 1999 the Board of Directors of the Company approved a
stock repurchase program of up to 25 million shares of common stock.
During October 1999 the Company purchased 5 million shares. In a
Company news release dated January 18, 2000, which announced the
Company's results for its first quarter ended December 31, 1999, the
Company also announced that it has currently suspended the stock
repurchase program.
Effective October 28, 1998 the Company filed a Form S-3 to register
$300 million of senior unsecured debt securities. Effective January 4,
2000 the Company deregistered such securities. None of such securities
were offered or sold.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
a. Exhibits:
--------
See Index to Exhibits located on page 14.
b. Reports on Form 8-K:
-------------------
None
12
<PAGE>
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.
HEALTH MANAGEMENT ASSOCIATES, INC.
DATE: February 4, 2000 BY: /s/ Stephen M. Ray
---------------------------------
Stephen M. Ray
Executive Vice President-Finance
(Duly authorized officer and
Principal Financial Officer)
13
<PAGE>
INDEX TO EXHIBITS
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession.
Not applicable.
(3) (i) Articles of Incorporation
3.1 The Fifth Restated Certificate of Incorporation, previously filed and
included as Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995, is incorporated herein by
reference.
3.2 Certificate of Amendment to Fifth Restated Certificate of
Incorporation, previously filed and included as Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999, is incorporated herein by reference.
(ii) By-laws
The By-laws, as amended, previously filed and included as Exhibit 3.3
to the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999, is incorporated herein by reference.
(4) Instruments defining the rights of security holders, including indentures.
The Exhibits referenced under (3) of this Index to Exhibits are
incorporated herein by reference.
Fourth Amended and Restated Credit and Reimbursement Agreement among the
Company and NationsBank of Florida National Association and the Banks named
therein, dated December 1, 1994, previously filed and included as Exhibit
4.12 to the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, is incorporated herein by reference.
Credit Agreement dated May 6, 1996 between First Union National Bank of
Florida and the Company, pertaining to a $10 million working capital and
cash management line of credit, previously filed and included as Exhibit
4.3 to the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996, is incorporated herein by reference.
Amendment Agreement No. 1 to Fourth Amended and Restated Revolving Credit
and Reimbursement Agreement, made as of September 30, 1996, previously
filed and included as Exhibit 4.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997, is incorporated herein by
reference.
Credit Agreement by and among Health Management Associates, Inc., as
Borrower, Bank of America, N.A., as Administrative Agent and as Lender,
First Union National Bank, as Syndication Agent and as Lender, and the
Chase Manhattan Bank, as Syndication Agent and as lender, and The Lenders
Party Hereto From Time To Time, dated November 30, 1999, previously filed
and included as Exhibit 4.5 to the Company=s Annual Report on Form 10-K for
the fiscal year ended September 30, 1999, is incorporated herein by
reference.
14
<PAGE>
INDEX TO EXHIBITS (Continued)
(10) Material contracts.
Not applicable
(11) Statement re computation of per share earnings.
Not applicable.
(15) Letter re unaudited interim financial information.
Not applicable.
(18) Letter re change in accounting principles.
Not applicable.
(19) Report furnished to security holders.
Not applicable.
(22) Published report regarding matters submitted to vote of security holders.
Not applicable.
(23) Consents of experts and counsel.
Not applicable.
(24) Power of attorney.
Not applicable.
(27) Financial Data Schedule.
Financial Data Schedule is included herein as Exhibit 27.1 at page 16 of
this report.
(99) Additional exhibits.
Not applicable.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included within the Comapny's December 31, 1999 Form 10-Q
and is qualified in its entirety by refernce to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 24,674
<SECURITIES> 0
<RECEIVABLES> 465,706
<ALLOWANCES> 119,453
<INVENTORY> 33,504
<CURRENT-ASSETS> 447,927
<PP&E> 1,170,938
<DEPRECIATION> 246,024
<TOTAL-ASSETS> 1,553,430
<CURRENT-LIABILITIES> 182,532
<BONDS> 438,108
0
0
<COMMON> 2,536
<OTHER-SE> 879,934
<TOTAL-LIABILITY-AND-EQUITY> 1,553,430
<SALES> 0
<TOTAL-REVENUES> 370,094
<CGS> 0
<TOTAL-COSTS> 246,374
<OTHER-EXPENSES> 27,405
<LOSS-PROVISION> 34,173
<INTEREST-EXPENSE> 5,691
<INCOME-PRETAX> 56,451
<INCOME-TAX> 22,159
<INCOME-CONTINUING> 34,292
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,292
<EPS-BASIC> .14
<EPS-DILUTED> .14
</TABLE>
