<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A-1
<TABLE>
<C> <S>
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
</TABLE>
COMMISSION FILE NUMBER 1-11239
------------------------
COLUMBIA/HCA HEALTHCARE CORPORATION
(FORMERLY COLUMBIA HEALTHCARE CORPORATION)
(Exact Name of Registrant as Specified in its Charter)
------------------------
<TABLE>
<S> <C>
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)
</TABLE>
Registrant's Telephone Number, Including Area Code: (502) 572-2000
Securities Registered Pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- - -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Common Stock, $.01 Par Value New York Stock Exchange
</TABLE>
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
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
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
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
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
<FN>
- - ------------------------
(a) All other schedules have been omitted because the required information is
not present or not present in material amounts.
</TABLE>
F-1
<PAGE>
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
<PAGE>
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)
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
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
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
F-3
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993 AND 1992
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
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
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
F-4
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COMMON STOCK
-------------- CAPITAL IN
SHARES PAR EXCESS OF RETAINED
(000) VALUE PAR VALUE OTHER EARNINGS TOTAL
------- ----- ---------- ----- -------- ------
<S> <C> <C> <C> <C> <C> <C>
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
------- ----- ---------- ----- -------- ------
------- ----- ---------- ----- -------- ------
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
F-5
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
F-6
<PAGE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
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
--------- --------- ---------
--------- --------- ---------
</TABLE>
Fully diluted earnings per common and common equivalent share is not
presented because it approximates earnings per common and common equivalent
share.
F-8
<PAGE>
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):
<TABLE>
<CAPTION>
COLUMBIA HCA COMBINED
----------- --------- ---------
<S> <C> <C> <C>
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
</TABLE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
CHC GALEN COMBINED
--------- --------- -----------
<S> <C> <C> <C>
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
</TABLE>
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
<PAGE>
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):
<TABLE>
<S> <C>
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
---------
---------
</TABLE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
1993 1992 1991
---- ------ ------
<S> <C> <C> <C>
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
---- ------ ------
---- ------ ------
</TABLE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- -----
<S> <C> <C> <C>
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
---- ---- -----
---- ---- -----
</TABLE>
Reconciliation of federal statutory rate to effective income tax rate
follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
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%
---- ---- ----
---- ---- ----
</TABLE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
1993 1992
--------------------- ---------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------ ------------ ------ ------------
<S> <C> <C> <C> <C>
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
------ ------------ ------ ------------
------ ------------ ------ ------------
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
DECEMBER 31, 1993
----------------------------
UNREALIZED
AMOUNTS
-------------- FAIR
COST GAINS LOSSES VALUE
---- ----- ------- -----
<S> <C> <C> <C> <C>
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
-----
-----
<CAPTION>
DECEMBER 31, 1992
----------------------------
UNREALIZED
AMOUNTS
-------------- FAIR
COST GAINS LOSSES VALUE
---- ----- ------- -----
<S> <C> <C> <C> <C>
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
----
----
</TABLE>
F-18
<PAGE>
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.
<TABLE>
<CAPTION>
FAIR
COST VALUE
--------- ---------
<S> <C> <C>
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
--------- ---------
--------- ---------
</TABLE>
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):
<TABLE>
<CAPTION>
TYPE OF
SECURITY
------------
DEBT EQUITY
---- ------
<S> <C> <C>
Cash proceeds................................................................... $185 $106
Gross realized gains............................................................ 4 19
Gross realized losses........................................................... - 10
</TABLE>
F-19
<PAGE>
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):
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
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
------ ------
------ ------
</TABLE>
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
<PAGE>
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):
<TABLE>
<S> <C>
1994................................................................. $ 123
1995................................................................. 102
1996................................................................. 78
1997................................................................. 63
1998................................................................. 43
Thereafter........................................................... 242
</TABLE>
F-21
<PAGE>
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):
<TABLE>
<S> <C>
Stock option plans................................................. 20,118
Retirement and savings plans....................................... 8,887
Other.............................................................. 2,853
---------
31,858
---------
---------
</TABLE>
F-22
<PAGE>
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):
<TABLE>
<CAPTION>
SHARES
UNDER OPTION PRICE
OPTION PER SHARE
--------- ------------------
<S> <C> <C>
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
---------
---------
</TABLE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
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
--------- ---------
--------- ---------
</TABLE>
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
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1993
--------------------------------------------------------
FIRST SECOND THIRD FOURTH
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
1992
--------------------------------------------------------
FIRST SECOND THIRD FOURTH
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
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
<FN>
- - ------------------------
(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.
</TABLE>
F-25
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
SCHEDULE I -- MARKETABLE SECURITIES -- OTHER SECURITY INVESTMENTS
DECEMBER 31, 1993
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
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
- - ------------------------------------------------------------ ---------------- ---------- ------------ ---------------
<S> <C> <C> <C> <C>
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
---------- ------------ -------
---------- ------------ -------
<FN>
- - ------------------------
(a) Included in current assets.
</TABLE>
F-26
<PAGE>
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)
<TABLE>
<CAPTION>
BALANCE AT
END OF PERIOD
BALANCE AT -----------------
BEGINNING AMOUNTS NOT
OF PERIOD ADDITIONS COLLECTED CURRENT CURRENT
---------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
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
---------- --------- --------- ------- -------
---------- --------- --------- ------- -------
</TABLE>
F-27
<PAGE>
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)
<TABLE>
<CAPTION>
BALANCE AT
END OF PERIOD
BALANCE AT -----------------
BEGINNING AMOUNTS NOT
OF PERIOD ADDITIONS COLLECTED CURRENT CURRENT
---------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
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
---------- --------- --------- ------- -------
---------- --------- --------- ------- -------
</TABLE>
F-28
<PAGE>
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)
<TABLE>
<CAPTION>
BALANCE AT
END OF PERIOD
BALANCE AT -----------------
BEGINNING AMOUNTS NOT
OF PERIOD ADDITIONS COLLECTED CURRENT CURRENT
---------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
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
----- -- --------- -- -------
----- -- --------- -- -------
<FN>
- - ------------------------
(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.
</TABLE>
F-29
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE
BEGINNING ADDITIONS RETIREMENTS TRANSLATION AT END
OF PERIOD AT COST OR SALES ADJUSTMENTS OTHER OF PERIOD
---------- --------- ----------- ----------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
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
---------- --------- ----------- --- ----- ---------
---------- --------- ----------- --- ----- ---------
<FN>
- - ------------------------
(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.
</TABLE>
F-30
<PAGE>
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)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND RETIREMENTS TRANSLATION AT END
OF PERIOD EXPENSES OR SALES ADJUSTMENTS OTHER OF PERIOD
---------- ------------ ----------- ----------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
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
---------- ----- ----------- --- ----- ---------
---------- ----- ----------- --- ----- ---------
<FN>
- - ------------------------
(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.
</TABLE>
F-31
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND DEDUCTIONS AT END
OF PERIOD EXPENSES OR PAYMENTS OF PERIOD
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
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
</TABLE>
F-32
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs..................................... $220 $205 $188
Taxes other than payroll and income taxes................... 217 185 155
</TABLE>
F-33
<PAGE>
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
