<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
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 IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
ONE PARK PLAZA 37203
NASHVILLE, TENNESSEE (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(615) 327-9551
(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.
<TABLE>
<CAPTION>
OUTSTANDING AT
CLASS OF COMMON STOCK JULY 31, 1995
--------------------- ------------------
<S> <C>
Voting common stock, $.01 par value 429,537,100 shares
Nonvoting common stock, $.01 par value 14,119,000 shares
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
FORM 10-Q
JUNE 30, 1995
<TABLE>
<CAPTION>
PAGE OF
PART I:FINANCIAL INFORMATION FORM 10-Q
---------------------------- ---------
<C> <S> <C>
Item 1. Financial Statements
Condensed Consolidated Statement of Operations--for the
quarters and six months ended June 30, 1995 and 1994....... 3
Condensed Consolidated Balance Sheet--June 30, 1995 and
December 31, 1994........................................... 4
Consolidated Statement of Cash Flows--for the six months
ended June 30, 1995 and 1994............................... 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 11
<CAPTION>
PART II:OTHER INFORMATION
-------------------------
<C> <S> <C>
Items 1 to 6......................................................... 19
</TABLE>
2
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
UNAUDITED
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER SIX MONTHS
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues............................... $ 4,361 $ 3,521 $ 8,741 $ 6,953
Salaries, wages and benefits........... 1,765 1,442 3,503 2,816
Supplies............................... 643 531 1,278 1,056
Other operating expenses............... 815 674 1,627 1,286
Provision for doubtful accounts........ 247 206 488 399
Depreciation and amortization.......... 246 194 479 372
Interest expense....................... 121 91 236 176
Investment income...................... (18) (23) (39) (39)
Merger and facility consolidation
costs................................. 387 - 387 159
-------- -------- -------- --------
4,206 3,115 7,959 6,225
-------- -------- -------- --------
Income before minority interests and
income taxes.......................... 155 406 782 728
Minority interests in earnings of
consolidated entities................. 25 7 50 13
-------- -------- -------- --------
Income before income taxes............. 130 399 732 715
Provision for income taxes............. 52 156 296 285
-------- -------- -------- --------
Income before extraordinary item....... 78 243 436 430
Extraordinary loss on extinguishment of
debt, net of income tax benefit....... (96) - (96) (92)
-------- -------- -------- --------
Net income (loss).................. $ (18) $ 243 $ 340 $ 338
======== ======== ======== ========
Earnings (loss) per common and common
equivalent share:
Income before extraordinary item..... $ .17 $ .58 $ .97 $ 1.03
Extraordinary loss on extinguishment
of debt............................. (.21) - (.21) (.22)
-------- -------- -------- --------
Net income (loss).................. $ (.04) $ .58 $ .76 $ .81
======== ======== ======== ========
Cash dividends per common share........ $ .03 $ .03 $ .06 $ .06
Shares used in earnings per common and
common equivalent share computation
(000)................................. 447,670 421,204 447,558 418,841
</TABLE>
See accompanying notes.
3
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
UNAUDITED
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
ASSETS -------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 127 $ 68
Accounts receivable less allowances for loss of $865
and $784............................................. 2,446 2,346
Inventories........................................... 395 373
Other................................................. 653 560
-------- -------
3,621 3,347
Property and equipment, at cost......................... 13,637 12,613
Accumulated depreciation................................ (4,360) (3,987)
-------- -------
9,277 8,626
Investments of professional liability insurance subsidi-
ary.................................................... 845 888
Intangible assets....................................... 3,242 3,058
Other................................................... 469 359
-------- -------
$ 17,454 $16,278
======== =======
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 645 $ 609
Salaries, wages and other compensation................ 446 391
Other accrued expenses................................ 1,041 1,131
Long-term debt due within one year.................... 287 124
-------- -------
2,419 2,255
Long-term debt.......................................... 6,106 5,548
Deferred credits and other liabilities.................. 1,857 2,107
Minority interests in equity of consolidated entities... 624 278
Common stockholders' equity:
Common stock, $.01 par; authorized 800,000,000 voting
shares and 25,000,000 nonvoting shares; issued and
outstanding 428,728,900 and 427,837,300 voting shares
and 14,119,000 nonvoting shares...................... 4 4
Other................................................. 6,444 6,086
-------- -------
6,448 6,090
-------- -------
$ 17,454 $16,278
======== =======
</TABLE>
See accompanying notes.
4
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
UNAUDITED
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................. $ 340 $ 338
Adjustments to reconcile net income to net cash provided by
operating activities:
Merger and facility consolidation costs.................. 387 159
Depreciation and amortization............................ 479 372
Deferred income taxes.................................... (257) (52)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable............. (16) 92
Increase in inventories and other assets............... (57) (66)
Increase (decrease) in income taxes.................... (26) 66
Decrease in other liabilities.......................... (153) (180)
Extraordinary loss on extinguishment of debt............. 157 149
Other.................................................... 11 26
------- -------
Net cash provided by operating activities.............. 865 904
------- -------
Cash flows from investing activities:
Purchase of property and equipment......................... (632) (527)
Acquisition of EPIC Holdings, Inc. ........................ - (221)
Acquisition of hospitals and health care facilities........ (751) (179)
Disposition of property and equipment...................... 160 68
Change in investments...................................... (49) (50)
Other...................................................... (65) (114)
------- -------
Net cash used in investing activities.................. (1,337) (1,023)
------- -------
Cash flows from financing activities:
Issuance of long-term debt................................. 1,265 1,449
Net changes in commercial paper borrowings and lines of
credit.................................................... 1,120 1,510
Repayment of long-term debt................................ (1,827) (3,192)
Payment of cash dividends.................................. (24) (15)
Issuance of common stock................................... - 186
Other...................................................... (3) 14
------- -------
Net cash provided by (used in) financing activities.... 531 (48)
------- -------
Change in cash and cash equivalents.......................... 59 (167)
Cash and cash equivalents at beginning of period............. 68 348
------- -------
Cash and cash equivalents at end of period................... $ 127 $ 181
======= =======
Interest payments............................................ $ 262 $ 203
Income tax payments, net of refunds.......................... 498 215
</TABLE>
See accompanying notes.
5
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1--BASIS OF PRESENTATION
Columbia/HCA Healthcare Corporation ("Columbia/HCA") (the "Company") is a
Delaware corporation that operates hospitals and ancillary health care
facilities through (i) corporate subsidiaries, (ii) joint ventures or (iii)
ownership of controlling interests in various partnerships in which
subsidiaries of Columbia/HCA serve as the managing general partner.
The accompanying condensed consolidated financial statements do not include
all of the disclosures normally required by generally accepted accounting
principles or those normally required in annual reports filed on Form 10-K.
Accordingly, these financial statements should be read in conjunction with the
audited consolidated financial statements of Columbia/HCA for the year ended
December 31, 1994 filed on Form 10-K with the Securities and Exchange
Commission as supplemented by Columbia/HCA's current report on Form 8-K dated
April 24, 1995.
The financial information has been prepared in accordance with Columbia/HCA's
customary accounting practices and has not been audited. Management believes
that the financial information presented reflects all adjustments necessary for
a fair statement of interim results.
On April 24, 1995, Columbia/HCA consummated a merger with Healthtrust, Inc.--
The Hospital Company ("Healthtrust") (the "Healthtrust Merger"). See Note 3 for
a description of the Healthtrust Merger.
NOTE 2--EARNINGS PER 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. Fully diluted
earnings per common and common equivalent share are not presented because such
amounts approximate earnings per common and common equivalent share.
NOTE 3--HEALTHTRUST MERGER
On October 4, 1994, Columbia/HCA entered into a definitive agreement to merge
with Healthtrust. This transaction was approved by the stockholders of both
companies on February 28, 1995 and was consummated on April 24, 1995. Shares of
Healthtrust common stock were converted on a tax-free basis into approximately
80,411,800 shares of Columbia/HCA voting common stock (an exchange ratio of
0.88 of a share of Columbia/HCA common stock for each share of Healthtrust
common stock).
The Healthtrust Merger has been accounted for as a pooling of interests, and
accordingly, the condensed consolidated financial statements give retroactive
effect to the Healthtrust Merger and include the combined operations of
Columbia/HCA and Healthtrust for all periods presented. The following is a
summary of the results of operations of the separate entities for the periods
prior to the Healthtrust Merger (dollars in millions):
<TABLE>
<CAPTION>
COLUMBIA/HCA HEALTHTRUST COMBINED
------------ ----------- --------
<S> <C> <C> <C>
Three months ended March 31, 1995:
Revenues.............................. $3,337 $1,043 $4,380
Net income............................ 292 66 358
Three months ended June 30, 1994:
Revenues.............................. $2,689 $ 836 $3,521(a)
Net income............................ 205 38 243
Six months ended June 30, 1994:
Revenues.............................. $5,467 $1,495 $6,953(a)
Net income............................ 250 88 338
</TABLE>
--------
(a) Includes pooling adjustments of $4 million and $9 million for the three
months and six months ended June 30, 1994, respectively, to eliminate data
center fees charged by Columbia/HCA to Healthtrust.
6
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
UNAUDITED
NOTE 4--MERGER AND FACILITY CONSOLIDATION COSTS AND EXTINGUISHMENT OF DEBT
Merger and Facility Consolidation Costs
In the second quarter of 1995 Columbia/HCA recorded the following charges in
connection with the Healthtrust Merger and facility consolidation costs
(dollars in millions):
<TABLE>
<S> <C>
Employee benefit and certain severance actions......................... $ 46
Investment advisory and professional fees.............................. 14
Costs of information systems consolidations
primarily related to the writedown of assets.......................... 19
Other.................................................................. 26
----
105
----
Writedown of assets in connection with the
consolidation of duplicative facilities and facility replacements..... 282
----
$387
====
</TABLE>
The writedown of assets relates to management's assessment of certain markets
in which there exists duplication of services and excess capacity in hospital
facilities. In the identified markets, Columbia/HCA expects to be able to
provide services more cost effectively by eliminating the fixed costs of the
facilities being closed and applying the fixed costs of the other facilities to
a larger patient base. The charge that was incurred is the amount considered
necessary to record the identified assets at their estimated net realizable
value and is substantially a non-cash charge. Columbia/HCA expects to have all
replacement facilities in progress and to have completed the identified
facility consolidations within twelve months.
Results of operations for the six months ended June 30, 1994 include $159
million (before income taxes) of merger and facility consolidation costs
related primarily to the merger with HCA--Hospital Corporation of America
("HCA") (the "HCA Merger").
Extinguishment of Debt
In connection with the Healthtrust Merger, Columbia/HCA completed exchange
offers for substantially all of Healthtrust's $1.0 billion subordinated notes
and debentures. Columbia/HCA remains a co-obligor with Healthtrust with respect
to the securities that were not exchanged (approximately $44 million).
Also in connection with the Healthtrust Merger, $706 million in outstanding
borrowings under the Healthtrust $1.2 billion bank credit agreement were
refinanced.
The completion of the exchange offers and the refinancing of the borrowings
under the credit facility reduced net income in the second quarter of 1995 by
$96 million or $.21 per share.
Net income for the six months ended June 30, 1994 includes a $92 million or
$.22 per share extraordinary loss related to refinancing of long-term debt and
replacing HCA's bank credit agreement.
7
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
UNAUDITED
NOTE 5--OTHER BUSINESS COMBINATIONS
The following is a summary of acquisitions and joint ventures (excluding the
merger with EPIC Holdings, Inc. ("EPIC") (the "EPIC Merger")) consummated
during the respective six month periods (dollars in millions):
<TABLE>
<CAPTION>
1995 1994
------ -----
<S> <C> <C>
Number of hospitals.............................................. 15 8
Number of licensed beds.......................................... 2,874 2,005
Purchase price information:
Fair value of assets acquired.................................. $1,183 $ 335
Liabilities assumed............................................ (99) (58)
------ -----
Net assets acquired.......................................... 1,084 277
Net assets sold in exchange for acquired properties............ - (45)
Contributions from minority partners........................... (329) (47)
Net cash acquired.............................................. (4) (6)
------ -----
Net cash paid for acquisitions............................. $ 751 $ 179
====== =====
</TABLE>
NOTE 6--INCOME TAXES
The Internal Revenue Service (the "IRS") 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 (the "Tax Court"). In
addition, the IRS 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.
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
IRS. The IRS 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 of accounting 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 IRS 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
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 IRS were successful with respect to this issue,
Columbia/HCA would owe an additional $68 million in income taxes and $512
million in interest as of June 30, 1995.
Hospital Acquisitions
In connection with hospitals acquired by HCA in 1981 and 1985, the IRS has
asserted that a portion of the costs allocated to identifiable assets with
ascertainable useful lives should be reclassified as nondeductible goodwill. If
the IRS ultimately prevails in this regard, Columbia/HCA would owe an
additional $122 million in income taxes and $194 million in interest as of June
30, 1995.
8
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
UNAUDITED
NOTE 6--INCOME TAXES (CONTINUED)
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 IRS 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 June 30, 1995, Columbia/HCA is seeking a refund totaling $63
million in income taxes and $127 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 IRS has disallowed the deduction and is claiming an
additional $4 million in income taxes and $19 million in interest as of June
30, 1995. 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 IRS 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 IRS
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 IRS is claiming additional interest of $77 million
through June 30, 1995.
Also in connection with the 1987 sale of certain Subsidiaries to Healthtrust,
the IRS 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 IRS position is
contrary to a Tax Court decision in a similar case. The IRS is claiming
additional income taxes of $79 million and interest of $90 million through June
30, 1995.
In connection with the 1987 Healthtrust transactions, the IRS 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 transition period after the sale. Should
the IRS prevail, Columbia/HCA would owe $9 million of additional income taxes
and $24 million of interest through June 30, 1995. The position of the IRS is
an alternative to its denial of the use of the cash method of accounting
previously discussed.
Doubtful Accounts
The IRS 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 IRS is asserting that HCA
9
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
UNAUDITED
NOTE 6--INCOME TAXES (CONTINUED)
was not entitled to exclude from income amounts which are unlikely to be
collected. Management believes that such exclusions are permissible under the
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 IRS disagrees, asserting that HCA is
engaged, at least in part, in a merchandising business. Notwithstanding this
assertion, the IRS contends that the exclusion taken by HCA is excessive under
applicable Temporary Treasury Regulations. Columbia/HCA believes that the
calculation of the exclusion proposed by the IRS is inaccurate since it does
not permit the exclusion in accordance with the controlling statute. If the IRS
prevails, Columbia/HCA would owe additional income taxes of $137 million and
interest of $84 million through June 30, 1995.
Leveraged Buy-out Expenses
The IRS 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 IRS. Columbia/HCA believes that all of these costs are deductible. If
the IRS prevails on these issues, Columbia/HCA would owe income taxes of $95
million and interest of $42 million through June 30, 1995.
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
IRS is claiming an additional $38 million in income taxes and $23 million in
interest through June 30, 1995.
In September 1994, Columbia/HCA presented its case in Tax Court for all
issues included in the statutory notices of deficiency for 1981 through 1988
other than the deductibility of insurance premiums paid to Parthenon, (which
was presented in November 1994). A Tax Court decision is expected in 1995.
Resolution of disputed income tax issues by the Tax Court will not be affected
by the merger with Healthtrust.
Management believes that HCA had properly reported its income and paid its
taxes in accordance with applicable laws and agreements established with the
IRS 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.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BACKGROUND INFORMATION AND BUSINESS STRATEGY
Healthtrust Merger
In April 1995 Columbia/HCA completed a merger transaction with Healthtrust,
Inc. -- The Hospital Company ("Healthtrust") (the "Healthtrust Merger"). At
the time of the Healthtrust Merger, Healthtrust operated 117 hospitals and
certain other ancillary health care facilities located in twenty-two states
with annual revenues approximating $3.4 billion. For accounting purposes, the
Healthtrust Merger was treated as a pooling of interests. Accordingly, the
accompanying condensed consolidated financial statements and operating data
included in this discussion and analysis give retroactive effect to the
Healthtrust Merger and include the combined operations of Columbia/HCA and
Healthtrust for all periods presented.
Business Strategy
Columbia/HCA's business strategy centers on working with physician and other
healthcare providers to develop comprehensive, integrated healthcare delivery
networks in targeted markets. The implementation of this strategy typically
involves significant health care facility acquisition 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.
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 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 the providers in each market.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
RESULTS OF OPERATIONS
The following is a summary of operations before extraordinary item for the
quarters and six months ended June 30, 1995 and 1994 (dollars in millions,
except per share amounts):
<TABLE>
<CAPTION>
QUARTER
----------------------------
1995 1994
------------- -------------
AMOUNT RATIO AMOUNT RATIO
------ ----- ------ -----
<S> <C> <C> <C> <C>
Revenues.................................... $4,361 100.0 $3,521 100.0
Salaries, wages and benefits................ 1,765 40.5 1,442 41.0
Supplies.................................... 643 14.7 531 15.1
Other operating expenses.................... 815 18.7 674 19.2
Provision for doubtful accounts............. 247 5.7 206 5.8
Investment income........................... (18) (0.4) (23) (0.7)
------ ----- ------ -----
3,452 79.2 2,830 80.4
------ ----- ------ -----
EBDITA (a).................................. 909 20.8 691 19.6
Depreciation and amortization............... 246 5.5 194 5.5
Interest expense............................ 121 2.8 91 2.6
Merger and facility consolidation costs..... 387 8.9 - -
------ ----- ------ -----
Income before minority interests and income
taxes...................................... 155 3.6 406 11.5
Minority interests.......................... 25 0.6 7 0.2
------ ----- ------ -----
Income before income taxes.................. 130 3.0 399 11.3
Provision for income taxes.................. 52 1.2 156 4.4
------ ----- ------ -----
Income before extraordinary item............ $ 78 1.8 $ 243 6.9
====== ===== ====== =====
Earnings per common and common equivalent
share:
Excluding merger and facility
consolidation costs...................... $ 0.70 $ 0.58
Merger and facility consolidation costs... (0.53) -
------ ------
Income before extraordinary item.......... $ 0.17 $ 0.58
====== ======
% changes from prior year:
Revenues.................................. 23.9
EBDITA.................................... 31.7
Income before income taxes................ (67.5)
Income before extraordinary item.......... (67.9)
Earnings per common and common equivalent
share before extraordinary item.......... (70.7)
Other information excluding the effect of
merger and facility consolidation costs:
Income before income taxes................ $ 517 11.9 $ 399 11.3
Income before extraordinary item.......... 313 7.2 243 6.9
% changes from prior year:
Income before income taxes.............. 29.5
Income before extraordinary item........ 29.1
Earnings per common and common
equivalent share before extraordinary
item................................... 20.7
</TABLE>
--------
(a) Income before merger and facility consolidation costs, depreciation,
interest, minority interests, income taxes and amortization. Although EBDITA
is not a measure of operating performance calculated in accordance with
generally accepted accounting principles, it is commonly used as an
analytical indicator within the health care provider industry. In addition,
EBDITA also serves as a measurement of leverage capacity and debt service
ability. EBDITA should not be considered as a measure of profitability or
liquidity or as an alternative to net income, cash flows generated by
operating, investing or financing activities or other financial statement
data presented in the consolidated financial statements as an indicator of
financial performance.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS
----------------------------
1995 1994
------------- -------------
AMOUNT RATIO AMOUNT RATIO
------ ----- ------ -----
<S> <C> <C> <C> <C>
Revenues........................................ $8,741 100.0 $6,953 100.0
Salaries, wages and benefits.................... 3,503 40.1 2,816 40.5
Supplies........................................ 1,278 14.6 1,056 15.2
Other operating expenses........................ 1,627 18.6 1,286 18.6
Provision for doubtful accounts................. 488 5.6 399 5.7
Investment income............................... (39) (0.5) (39) (0.6)
------ ----- ------ -----
6,857 78.4 5,518 79.4
------ ----- ------ -----
EBDITA (a)...................................... 1,884 21.6 1,435 20.6
Depreciation and amortization................... 479 5.6 372 5.3
Interest expense................................ 236 2.7 176 2.5
Merger and facility consolidation costs......... 387 4.4 159 2.3
------ ----- ------ -----
Income before minority interests and income tax-
es............................................. 782 8.9 728 10.5
Minority interests.............................. 50 0.5 13 0.2
------ ----- ------ -----
Income before income taxes...................... 732 8.4 715 10.3
Provision for income taxes...................... 296 3.4 285 4.1
------ ----- ------ -----
Income before extraordinary item................ $ 436 5.0 $ 430 6.2
====== ===== ====== =====
Earnings per common and common equivalent share:
Excluding merger and facility consolidation
costs........................................ $ 1.50 $ 1.27
Merger and facility consolidation costs....... (.53) (.24)
------ ======
Income before extraordinary item.............. $ .97 $ 1.03
====== ======
% changes from prior year:
Revenues...................................... 25.7
EBDITA........................................ 31.3
Income before income taxes.................... 2.3
Income before extraordinary item.............. 1.6
Earnings per common and common equivalent
share before
extraordinary item........................... (5.8)
Other information excluding the effect of merger
and facility
consolidation costs:
Income before income taxes.................... $1,119 12.8 $ 874 12.6
Income before extraordinary item.............. 671 7.7 532 7.6
% changes from prior year:
Income before income taxes................... 27.9
Income before extraordinary item............. 26.3
Earnings per common and common equivalent
share before
extraordinary item.......................... 18.1
</TABLE>
--------
(a) Income before merger and facility consolidation costs, depreciation,
interest, minority interests, income taxes and amortization. Although EBDITA
is not a measure of operating performance calculated in accordance with
generally accepted accounting principles, it is commonly used as an
analytical indicator within the health care provider industry. In addition,
EBDITA also serves as a measurement of leverage capacity and debt service
ability. EBDITA should not be considered as a measure of profitability or
liquidity or as an alternative to net income, cash flows generated by
operating, investing or financing activities or other financial statement
data presented in the consolidated financial statements as an indicator of
financial performance.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Second Quarters Ended June 30, 1995 and 1994
Revenues increased 23.9% to $4.4 billion in the second quarter of 1995
compared to the same period last year, primarily as a result of acquisitions,
growth in inpatient and outpatient volumes and price increases. On a same-
hospital basis, second quarter 1995 admissions increased 3.8% and outpatient
visits increased 69.7% from a year ago. The increase in outpatient visits is
primarily a result of expanding home health and other outpatient ancillary
services.
Income before income taxes decreased to $130 million in 1995 from $399
million in 1994 and pretax margins decreased to 3.0% in 1995 from 11.3% in
1994. Excluding the effect of the merger and facility consolidation costs
charged in the second quarter of 1995, income before taxes increased 29.5% to
$517 million in 1995 from $399 million in 1994 and pretax margins increased to
11.9% in 1995 from 11.3% in 1994. The improvement in pretax income was
attributable to the combination of growth in revenues and improvements in the
margin. Pretax margins increased due to improvements in staffing levels and
increased discounts on medical supplies. Salaries, wages and benefits declined
as a percentage of revenues to 40.5% in 1995 from 41.0% in 1994, while supply
costs declined as a percentage of revenues to 14.7% in 1995 compared to 15.1%
in 1994.
Income before extraordinary item decreased 67.9% to $78 million ($.17 per
share) in the second quarter of 1995 compared to $243 million ($.58 per share)
in 1994. Excluding the effects of the merger and facility consolidation costs,
income before extraordinary item increased 29.1% to $313 million ($.70 per
share) in 1995 compared to $243 million ($.58 per share) in 1994.
During the second quarter of 1995, Columbia/HCA recorded $105 million of
pretax costs incurred in connection with the Healthtrust Merger. These costs
included severance costs, investment advisory fees, and certain charges based
upon management's implementation of actions to reduce corporate overhead costs
and consolidate management information systems. Pretax charges of $282 million
were recorded to writedown assets to estimated net realizable value in
connection with management's plans to consolidate duplicative facilities and
replace facilities in certain markets.
The acute care facilities acquired in connection with the EPIC Merger in May
1994 increased revenues in the second quarter of 1995 by $267 million, while
the free-standing surgical center business acquired in connection with the
merger with Medical Care America, Inc. ("MCA") (the "MCA Merger") in September
1994 increased revenues by $125 million.
In connection with the Healthtrust Merger, substantially all of Healthtrust's
debt was refinanced to reduce future interest expense and eliminate certain
restrictive covenants. In the second quarter of 1995, Columbia/HCA exchanged
approximately $1 billion of Healthtrust's long-term debt and refinanced $706
million of the borrowings under the Healthtrust bank credit agreement resulting
in an after-tax loss of $96 million ($.21 per share).
Six Months Ended June 30, 1995 and 1994
Revenues increased 25.7% to $8.7 billion for the six months ended June 30,
1995 compared to the same period last year, primarily as a result of
acquisitions, growth in inpatient and outpatient volumes and price increases.
On a same-hospital basis, admissions increased 4.6% and outpatient visits
increased 80.2% from a year ago. The increase in outpatient visits is primarily
a result of expanding home health and other outpatient ancillary services.
Income before income taxes increased to $732 million in 1995 from $715
million in 1994 and pretax margins decreased to 8.4% in 1995 from 10.3% in
1994. Excluding the effect of the merger and facility consolidation costs
charged in 1995 and 1994, income before taxes increased 27.9% to $1,119 million
in 1995 from $874 million in 1994 and pretax margins increased to 12.8% in 1995
from 12.6% in 1994. The improvement in pretax income was attributable to the
combination of growth in revenues and improvements in the margin. Pretax
margins increased due to improvements in staffing levels and increased
discounts on
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
medical supplies. Salaries, wages and benefits declined as a percentage of
revenues to 40.1% in 1995 from 40.5% in 1994, while supply costs declined as a
percentage of revenues to 14.6% in 1995 compared to 15.2% in 1994.
Income before extraordinary item increased 1.6% to $436 million ($.97 per
share) during the first six months of 1995 compared to $430 million ($1.03 per
share) in 1994. Excluding the effects of the merger and facility consolidation
costs charged in 1995 and 1994, income before extraordinary item increased
26.3% to $671 million ($1.50 per share) in 1995 compared to $532 million ($1.27
per share) in 1994.
During the first six months of 1995, Columbia/HCA recorded $105 million of
pretax costs incurred in connection with the Healthtrust Merger. These costs
included severance costs, investment advisory fees, and certain charges based
upon management's implementation of actions to reduce corporate overhead costs
and consolidate management information systems. Pretax charges of $282 were
recorded to writedown assets to estimated net realizable value in connection
with management's plans to consolidate duplicative facilities and replace
facilities in certain markets.
During the first six months of 1994, Columbia/HCA recorded $159 million
(before income taxes) of merger and facility consolidation costs in connection
with the HCA Merger.
The acute care facilities acquired in connection with the EPIC Merger in May
1994 increased revenues in the first six months of 1995 by $555 million, while
the free-standing surgical center business acquired in connection with the MCA
Merger in September 1994 increased revenues by $245 million.
In connection with the Healthtrust Merger, substantially all of Healthtrust's
debt was refinanced to reduce future interest expense and eliminate certain
restrictive covenants. During the first six months of 1995, Columbia/HCA
exchanged approximately $1 billion of Healthtrust's long-term debt and
refinanced $706 million of the borrowings under the Healthtrust bank credit
agreement resulting in an after-tax loss of $96 million ($.21 per share).
In connection with the HCA Merger, substantial amounts of high-coupon long-
term debt were refinanced to reduce future interest expense and eliminate
certain restrictive covenants. During the first six months of 1994,
Columbia/HCA refinanced approximately $2 billion of long-term debt resulting in
an after-tax loss of $92 million ($.22 per share).
LIQUIDITY
Cash provided by operating activities totaled $865 million for the six months
ended June 30, 1995 compared to $904 million last year. In both periods, cash
flows in excess of Columbia/HCA's capital expenditure program were used
primarily to finance acquisitions. Working capital totaled $1.2 billion at
June 30, 1995 compared to $1.1 billion at December 31, 1994. 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 merger and facility consolidation costs in 1995
and 1994 comprises the writedown of recorded assets and, accordingly, these
transactions did not have a material adverse effect on cash flows from
operations.
Investments of Columbia/HCA's professional liability insurance subsidiaries
to maintain statutory equity and pay claims totaled $930 million at June 30,
1995 and $973 million at December 31, 1994.
Columbia/HCA's ratio of earnings to fixed charges was 1.72 and 4.30 for the
three months ended June 30, 1995 and 1994, respectively, and 3.27 and 4.02 for
the six months ended June 30, 1995 and 1994, respectively.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
CAPITAL RESOURCES
Excluding acquisitions, capital expenditures totaled $632 million for the six
months ended June 30, 1995 compared to $527 million for the same period in
1994. Planned capital expenditures in 1995 (excluding acquisitions) are
expected to approximate $1.3 billion. Management believes that its capital
expenditure program is adequate to expand, improve and equip existing health
care facilities.
Columbia/HCA also expended $751 million and $179 million for acquisitions and
joint ventures (excluding the EPIC Merger in 1994) during the respective six
months ended June 30, 1995 and 1994. See Note 5 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 (either through
purchase or joint venture transactions) 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
June 30, 1995, there were projects under construction which had an estimated
additional cost to complete of approximately $481 million.
As part of the Healthtrust Merger, Columbia/HCA amended its revolving credit
agreement from an aggregate amount of $2.25 billion to $3.75 billion. In
addition, Columbia/HCA refinanced approximately $1 billion of Healthtrust long-
term debt and all outstanding borrowings under the Healthtrust $1.2 billion
bank credit agreement. The refinancing of the Healthtrust debt should result in
annual interest expense reductions of approximately $30 million.
OTHER INFORMATION
As discussed in Note 6 of the Notes to Condensed Consolidated Financial
Statements, Columbia/HCA is contesting certain income taxes and related
interest aggregating $1.6 billion at June 30, 1995 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.
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 June 30, 1995.
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
OPERATING DATA
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Number of hospitals in operation at:
March 31.................................................. 318 277
June 30................................................... 321 312
September 30.............................................. 311
December 31............................................... 311
Number of freestanding outpatient surgical centers in opera-
tion at:
March 31.................................................. 111 6
June 30................................................... 115 6
September 30.............................................. 103
December 31............................................... 104
Licensed hospital beds at:
March 31.................................................. 61,261 54,179
June 30................................................... 61,885 58,888
September 30.............................................. 59,594
December 31............................................... 59,595
Weighted average licensed beds:
Quarter:
First..................................................... 60,960 53,909
Second.................................................... 61,801 57,263
Third..................................................... 59,260
Fourth.................................................... 59,576
Year...................................................... 57,517
Average daily census:
Quarter:
First..................................................... 27,713 24,905
Second.................................................... 25,384 23,540
Third..................................................... 23,066
Fourth.................................................... 23,874
Year....................................................... 23,841
Admissions:
Quarter:
First..................................................... 454,500 387,100
Second.................................................... 435,100 384,200
Third..................................................... 390,200
Fourth.................................................... 404,000
Year....................................................... 1,565,500
Length of stay:
Quarter:
First..................................................... 5.5 5.8
Second.................................................... 5.3 5.6
Third..................................................... 5.4
Fourth.................................................... 5.4
Year....................................................... 5.6
</TABLE>
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
OPERATING DATA (CONTINUED)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Outpatient visits:
Quarter:
First.................................................... 4,933,300 2,199,200
Second................................................... 5,207,200 2,871,500
Third.................................................... 3,441,000
Fourth................................................... 4,046,500
Year...................................................... 12,558,200
Surgery cases:
Quarter:
First.................................................... 443,700 271,400
Second................................................... 437,600 295,700
Third.................................................... 331,800
Fourth................................................... 409,700
Year...................................................... 1,308,600
Emergency room visits:
Quarter:
First.................................................... 1,258,900 1,060,000
Second................................................... 1,284,600 1,188,300
Third.................................................... 1,216,600
Fourth................................................... 1,186,100
Year...................................................... 4,651,000
</TABLE>
18
<PAGE>
PART II: OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Stockholders was held June 8, 1995. Matters
voted on at the meeting included the following:
(1) The stockholders approved amendments to the Columbia/HCA Healthcare
Corporation Employee Stock Purchase Plan which, among other things,
increased the number of authorized shares thereunder from 2,000,000 to
10,000,000 with 305,365,149 affirmative votes, 3,539,309 negative votes and
1,171,274 abstentions.
(2) The stockholders approved the adoption of the Columbia/HCA Healthcare
Corporation 1995 Management Stock Purchase Plan with 290,856,358
affirmative votes, 17,724,164 negative votes and 1,495,211 abstentions.
ITEM 5: OTHER INFORMATION.
Columbia/HCA's ratio of earnings to fixed charges was 1.72 and 4.30 for the
three months ended June 30, 1995 and 1994, respectively, and 3.27 and 4.02 for
the six months ended June 30, 1995 and 1994, respectively.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit 11--Statement re Computation of Earnings Per Common and Common
Equivalent Share.
Exhibit 12--Statement re Computation of Ratio of Earnings to Fixed
Charges.
Exhibit 27--Financial Data Schedule (included only in filings under the
Electronic Data, Gathering, Analysis, and Retrieval system)
(b) Reports on Form 8-K:
On April 24, 1995, Columbia/HCA filed a report on form 8-K announcing the
completion of the merger with Healthtrust. The report also included
supplemental selected financial data, supplemental management's discussion
and analysis and supplemental consolidated financial statements and schedule
for each of the three years in the period ended December 31, 1994, which
give retroactive effect to the merger of Columbia/HCA and Healthtrust.
19
<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
/s/ Kenneth C. Donahey
Date: August 14, 1995 -------------------------------------
KENNETH C. DONAHEY
SENIOR VICE PRESIDENT AND CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
20
<PAGE>
EXHIBIT 11
COLUMBIA/HCA HEALTHCARE CORPORATION
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER SIX MONTHS
---------------- ----------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Earnings (loss):
Income before extraordinary item.......... $ 78 $ 243 $ 436 $ 430
Extraordinary loss on extinguishment of
debt, net of income tax benefit.......... (96) - (96) (92)
------- ------- ------- -------
Net income (loss)..................... $ (18) $ 243 $ 340 $ 338
======= ======= ======= =======
Shares used in the computation (000):
Weighted average common shares outstand-
ing...................................... 442,768 415,100 442,628 411,892
Dilutive effect of common stock equiva-
lents.................................... 4,902 6,104 4,930 6,949
------- ------- ------- -------
Shares used in earnings per common and
common equivalent share computation.... 447,670 421,204 447,558 418,841
======= ======= ======= =======
Primary earnings per common and common
equivalent share:
Income before extraordinary item.......... $ .17 $ .58 $ .97 $ 1.03
Extraordinary loss on extinguishment of
debt..................................... (.21) - (.21) (.22)
------- ------- ------- -------
Net income (loss)..................... $ (.04) $ .58 $ .76 $ .81
======= ======= ======= =======
FULLY DILUTED EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Earnings (loss):
Income before extraordinary item.......... $ 78 $ 243 $ 436 $ 430
Interest add-back on convertible
securities, net of income taxes.......... 2 1 4 1
------- ------- ------- -------
Income applicable to common stock......... 80 244 440 431
Extraordinary loss on extinguishment of
debt, net of
income tax benefit....................... (96) - (96) (92)
------- ------- ------- -------
Net income (loss)..................... $ (16) $ 244 $ 344 $ 339
======= ======= ======= =======
Shares used in the computation (000):
Weighted average common shares
outstanding.............................. 442,768 415,100 442,628 411,892
Dilutive effect of common stock
equivalents and other
dilutive securities...................... 7,267 8,199 7,524 8,176
------- ------- ------- -------
Shares used in earnings per common and
common equivalent share computation.... 450,035 423,299 450,152 420,068
======= ======= ======= =======
Fully diluted earnings per common and common
equivalent share:
Income before extraordinary item $ .18 $ .58 $ .98 $ 1.02
Extraordinary loss on extinguishment of
debt..................................... (.22) - (.22) (.21)
------- ------- ------- -------
Net income (loss)..................... $ (.04) $ .58 $ .76 $ .81
======= ======= ======= =======
</TABLE>
21
<PAGE>
EXHIBIT 12
COLUMBIA/HCA HEALTHCARE CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
QUARTER SIX MONTHS
------------- -------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Earnings:
Income before income taxes........................ $ 130 $ 399 $ 732 $ 715
Fixed charges, exclusive of capitalized interest.. 160 114 303 222
------ ------ ------ ------
$ 290 $ 513 $1,035 $ 937
====== ====== ====== ======
Fixed Charges:
Interest charged to expense....................... $ 121 $ 91 $ 236 $ 176
One-third of rent expense and amortization of
deferred loan costs and capitalized interest (a). 39 23 67 46
------ ------ ------ ------
Fixed charges, exclusive of capitalized interest.. 160 114 303 222
Capitalized interest.............................. 8 5 13 11
------ ------ ------ ------
$ 168 $ 119 $ 316 $ 233
====== ====== ====== ======
Ratio of earnings to fixed charges................ 1.72 4.30 3.27 4.02
====== ====== ====== ======
</TABLE>
--------
(a) One-third of rent expense is considered representative of the underlying
interest.
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
statement of income and balance and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 127
<SECURITIES> 0
<RECEIVABLES> 2446
<ALLOWANCES> 865
<INVENTORY> 395
<CURRENT-ASSETS> 3621
<PP&E> 13637
<DEPRECIATION> 4360
<TOTAL-ASSETS> 17454
<CURRENT-LIABILITIES> 2419
<BONDS> 6106
<COMMON> 4
0
0
<OTHER-SE> 6444
<TOTAL-LIABILITY-AND-EQUITY> 17454
<SALES> 0
<TOTAL-REVENUES> 8741
<CGS> 0
<TOTAL-COSTS> 4781
<OTHER-EXPENSES> 1627
<LOSS-PROVISION> 488
<INTEREST-EXPENSE> 236
<INCOME-PRETAX> 732
<INCOME-TAX> 296
<INCOME-CONTINUING> 436
<DISCONTINUED> 0
<EXTRAORDINARY> (96)
<CHANGES> 0
<NET-INCOME> 340
<EPS-PRIMARY> .76
<EPS-DILUTED> .76
</TABLE>
