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