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| Health Management Associates, Inc. Reports Second Quarter Earnings |
NAPLES, Fla.--(BUSINESS WIRE)--Aug. 4, 2008--Health Management Associates, Inc. (NYSE:HMA) today announced its consolidated financial results for the second quarter ended June 30, 2008. HMA reported net revenue of $1,105.3 million; earnings before interest, income taxes, depreciation, amortization, gains on sales of assets, refinancing costs and minority interests ("EBITDA") of $163.3 million; income from continuing operations of $21.9 million; net income of $12.4 million; diluted earnings per share ("EPS") of $0.05; diluted EPS from continuing operations of $0.09; and diluted EPS from continuing operations excluding refinancing costs and gains from the sales of assets (as shown in the accompanying table) of $0.10. For continuing operations, compared to the prior year's second quarter, net revenue increased 3.9%; net revenue per adjusted admission increased 5.4%; adjusted admissions, reflecting total admissions adjusted for outpatient volume, decreased 1.5% (approximately 0.8% from fewer uninsured); admissions decreased 3.8% (approximately 0.8% from fewer uninsured); emergency room visits increased 1.6%; and surgeries decreased 0.8%. EBITDA from continuing hospital operations for the quarter was $183.5 million, which represented a margin of 16.6%. "While patient volumes in the second quarter declined, we believe the changes were due in part to short-term issues that we have begun to address," said Burke Whitman, HMA's President and Chief Executive Officer, "and we minimized the impact upon earnings and cash flow through focused managerial discipline." "I am particularly encouraged by the unambiguous progress we are making toward achieving our new vision to lead the industry in quality and satisfaction within two to three years. We had a long way to go in a number of our markets when we launched the Company's new direction on January 1, 2008, but we have made sizable improvements to quality and patient satisfaction. As we continue to improve in quality and patient satisfaction we expect to earn stronger patient and physician loyalty to our hospitals, resulting in meaningful volume growth beginning within one to two years, possibly sooner." Provision for doubtful accounts, or bad debt expense, was $124.8 million, or 11.3% of net revenue, for the quarter compared to $142.7 million, or 13.4% of net revenue, for the same quarter a year ago and $129.0 million, or 11.2% of net revenue, for the first quarter ended March 31, 2008. The provision for doubtful accounts for the quarter ended June 30, 2007 included $39.0 million of additional reserves to reflect a decline in the collectibility of accounts receivable from uninsured patients. Uninsured discounts from continuing operations for the quarter were $149.7 million compared to $147.7 million for the same quarter a year ago, and charity/indigent care write-offs for the quarter were $20.3 million, compared to $18.3 million for the same period a year ago. The sum of uninsured discounts, charity/indigent write-offs and bad debt expense, as a percent of the sum of net revenue, uninsured discounts and charity/indigent write-offs, was 23.1% for the second quarter, compared to 25.1% for the same quarter a year ago. Cash flow from continuing operating activities for the six month period ended June 30, 2008 was $286.2 million, after cash interest and cash tax payments aggregating $83.4 million. As previously announced on May 21, 2008, during the second quarter HMA completed a $250.0 million private placement of convertible senior subordinated notes due 2028. The notes pay interest semi-annually at a rate of 3.75% per annum. The notes are convertible into cash and, in select circumstances, shares of the Company's common stock, or a combination thereof, calculated on a proportionate basis over a 20 trading day observation period at a base conversion rate of 85.0340 shares per $1,000 principal amount of notes, which is equal to a base conversion price of approximately $11.76 per share, subject to adjustment upon the occurrence of certain events. HMA utilized the net proceeds from the offering together with additional cash-on-hand to repurchase, in the open market, approximately $292.0 million of HMA's 4.375% convertible senior subordinated notes due 2023, leaving approximately $282.7 million of the 4.375% convertible senior subordinated notes outstanding as of June 30, 2008. On August 1, 2008, holders of HMA's 4.375% convertible senior subordinated notes exercised a put-right and HMA used cash-on-hand to purchase approximately $282.5 million in principal value or 99.9% of the notes outstanding. HMA also reported that it has updated its fiscal 2008 diluted EPS from continuing operations objective range to be between $0.41 and $0.47, excluding the previously reported gain from the Novant Health joint venture transaction and other items. This new EPS objective is based on a net revenue objective range of $4.4 to $4.6 billion, and an admissions decrease for the full year of between 1% and 3%. HMA's management team will hold a conference call to discuss HMA's consolidated financial results and the contents of this press release on Tuesday, August 5, 2008 at 11:00 a.m. ET. Investors are invited to access the webcast via HMA's website located at www.hma.com or via www.streetevents.com or join the conference call by dialing 877-476-3476. HMA will archive a copy of the audio webcast, along with any related information that HMA may be required to provide pursuant to Securities and Exchange Commission rules, on its website under the heading "Investor Relations," for a period of 60 days following the conference call. HMA's mission is the delivery of compassionate and high quality health care services that improve the quality of life for its patients, physicians, and the communities it serves. HMA owns and operates 57 hospitals, with approximately 8,100 licensed beds, in non-urban communities located throughout the United States. All references to "HMA" or the "Company" used in this release refer to Health Management Associates, Inc. or its affiliates. Certain statements contained in this release, including, without limitation, statements containing the words "believes," "anticipates," "intends," "expects," "optimistic," "objective," and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may include projections of revenue, income or loss, capital expenditures, debt structure, bad debt expense, capital structure, or other financial items, statements regarding the plans and objectives of management for future operations, statements of future economic performance, statements of the assumptions underlying or relating to any of the foregoing statements, and other statements which are other than statements of historical fact. Statements made throughout this release are based on current estimates of future events, and HMA has no obligation to update or correct these estimates. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially as a result of these various factors.
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Net revenue $1,105,299 $1,064,104 $2,257,871 $2,171,440
Operating expenses:
Salaries and benefits 448,617 424,990 916,420 857,836
Supplies 149,248 146,097 306,121 299,974
Provision for doubtful
accounts 124,837 142,734 253,807 261,542
Depreciation and
amortization 59,626 52,364 117,084 102,661
Rent expense 22,681 20,384 44,816 40,808
Other operating expenses 196,637 192,152 391,810 378,813
---------- ---------- ---------- ----------
Total operating expenses 1,001,646 978,721 2,030,058 1,941,634
---------- ---------- ---------- ----------
Income from operations 103,653 85,383 227,813 229,806
Other income (expense):
Gains on sales of assets
including minority
equity interests, net 6,184 2,586 209,504 3,259
Interest expense (58,656) (61,625) (120,860) (94,867)
Refinancing and debt
modification costs (10,834) - (11,463) (761)
---------- ---------- ---------- ----------
Income from continuing
operations before minority
interest and income taxes 40,347 26,344 304,994 137,437
Minority interests in
earnings of consolidated
entities (5,385) (217) (6,185) (907)
---------- ---------- ---------- ----------
Income from continuing
operations before income
taxes 34,962 26,127 298,809 136,530
Income tax expense (13,039) (10,131) (115,278) (52,914)
---------- ---------- ---------- ----------
Income from continuing
operations 21,923 15,996 183,531 83,616
Loss from discontinued
operations, net of income
taxes (9,526) (4,090) (37,258) (6,671)
---------- ---------- ---------- ----------
Net income $ 12,397 $ 11,906 $ 146,273 $ 76,945
========== ========== ========== ==========
Earnings (loss) per share:
Basic :
Continuing operations $ 0.09 $ 0.07 $ 0.75 $ 0.35
Discontinued
operations (0.04) (0.02) (0.15) (0.03)
---------- ---------- ---------- ----------
Net income $ 0.05 $ 0.05 $ 0.60 $ 0.32
========== ========== ========== ==========
Diluted :
Continuing operations $ 0.09 $ 0.07 $ 0.75 $ 0.34
Discontinued
operations (0.04) (0.02) (0.15) (0.03)
---------- ---------- ---------- ----------
Net income $ 0.05 $ 0.05 $ 0.60 $ 0.31
========== ========== ========== ==========
Dividends per share $ - $ - $ - $ 10.00
========== ========== ========== ==========
Weighted average number of
shares outstanding:
Basic 243,268 242,355 243,229 242,016
Add: Stock-based
compensation
arrangements 2,510 4,438 1,528 3,592
Convertible debt - 1 - 1
---------- ---------- ---------- ----------
Diluted 245,778 246,794 244,757 245,609
========== ========== ========== ==========
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Six Months Ended June 30,
-------------------------
2008 2007
------------ ------------
Cash flows from operating activities:
Net income $ 146,273 $ 76,945
Adjustments to reconcile net income to net
cash provided by continuing operating
activities:
Depreciation and amortization 120,636 105,079
Provision for doubtful accounts 253,807 261,542
Stock-based compensation expense 8,732 9,860
Minority interests in earnings of
consolidated entities 6,185 907
Gains on sales of assets, including
minority equity interests, net (209,504) (3,259)
Refinancing and debt modification costs 11,463 761
Long-lived asset impairment charge 921 -
Deferred income tax expense (benefit) 56,687 (42,058)
Changes in assets and liabilities of
continuing operations:
Accounts receivable (260,941) (285,082)
Supplies and prepaid expenses (7,293) 389
Prepaid and recoverable income taxes
and income taxes payable 100,773 38,958
Deferred charges and other long-term
assets 965 (2,882)
Accounts payable 9,561 47,044
Accrued expenses and other current
liabilities 12,047 (6,662)
Other long-term liabilities (1,321) 16,207
Equity compensation excess income tax
benefit - (273)
Loss from discontinued operations, net of
income taxes 37,258 6,671
------------ ------------
Net cash provided by continuing operating
activities 286,249 224,147
------------ ------------
Cash flows from investing activities:
Acquisitions of minority interests and
other (2,420) (36,127)
Additions to property, plant and equipment (93,512) (144,098)
Proceeds from sales of assets and
insurance recoveries 7,334 21,937
Proceeds from sale of discontinued
operations 3,500 -
(Increases) decreases in restricted funds,
net 2,780 (12,267)
------------ ------------
Net cash used in continuing investing
activities (82,318) (170,555)
------------ ------------
Cash flows from financing activities:
Proceeds from long-term debt, net 244,452 2,706,735
Principal payments on debt and capital
lease obligations (438,197) (313,655)
Proceeds from exercises of stock options - 24,719
Payments of financing costs (88) (3,277)
Investments by minority shareholders 302,938 8,456
Cash distributions to minority
shareholders (2,287) (2,397)
Payments of cash dividends - (2,425,217)
Equity compensation excess income tax
benefit - 273
------------ ------------
Net cash provided by (used in) continuing
financing activities 106,818 (4,363)
------------ ------------
Net increase in cash and cash equivalents
before discontinued operations 310,749 49,229
Net decrease in cash and cash equivalents
from discontinued operations:
Operating activities (19,893) (2,570)
Investing activities (311) (2,711)
Financing activities (46) (350)
------------ ------------
Net increase in cash and cash equivalents 290,499 43,598
Cash and cash equivalents at beginning of
period 123,987 66,814
------------ ------------
Cash and cash equivalents at end of period $ 414,486 $ 110,412
============ ============
HEALTH MANAGEMENT ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
2008 2007
---------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 414,486 $ 123,987
Accounts receivable, net 624,122 627,879
Other current assets 220,549 287,404
Assets of discontinued
operations 48,129 79,150
Property, plant and
equipment, net 2,405,927 2,403,746
Restricted funds 63,831 76,179
Other assets 1,038,839 1,045,574
----------- ------------
$4,815,883 $4,643,919
=========== ============
Liabilities and
Stockholders' Equity
Current liabilities $ 748,049 $ 597,432
Deferred income taxes 129,224 70,457
Other long-term liabilities 310,213 308,210
Minority interests 123,016 20,223
Long-term debt 3,266,580 3,566,569
Stockholders' equity 238,801 81,028
----------- ------------
$4,815,883 $4,643,919
=========== ============
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ---------------------
2008 2007 2008 2007
-------- ----------- -------- ------------
Total Hospitals(a)
Occupancy 44.2% 44.8% 47.4% 47.0%
Patient Days 317,431 323,639 684,528 677,974
Admissions 73,809 76,757 157,360 159,288
Adjusted Admissions 129,749 131,684 270,817 269,260
Average Length of Stay 4.3 4.2 4.4 4.3
Surgeries 69,649 70,187 140,175 140,802
Outpatient Revenue
Percentage 48.8% 48.0% 47.7% 48.2%
Inpatient Revenue
Percentage 51.2% 52.0% 52.3% 51.8%
(a) Continuing Operations
HEALTH MANAGEMENT ASSOCIATES, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME INFORMATION
(unaudited, in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2008 (a) 2007 (a) 2008 (a) 2007 (a)
----------- ----------- ----------- -----------
Net revenue $1,105,299 $1,064,104 $2,257,871 $2,171,440
Less acquisitions,
corporate and other - - 32,773 21,028
----------- ----------- ----------- -----------
Same hospital net
revenue $1,105,299 $1,064,104 $2,225,098 $2,150,412
=========== =========== =========== ===========
Income from continuing
operations before
income taxes $ 34,962 $ 26,127 $ 298,809 $ 136,530
Adjustments:
Interest expense 58,656 61,625 120,860 94,867
Gains on sales of
assets, including
minority equity
interests (6,184) (2,586) (209,504) (3,259)
Depreciation and
amortization 59,626 52,364 117,084 102,661
Minority interests
in earnings of
consolidated
entities 5,385 217 6,185 907
Refinancing and debt
modification costs 10,834 - 11,463 761
----------- ----------- ----------- -----------
EBITDA (b) 163,279 137,747 344,897 332,467
Adjustment for
acquisitions,
corporate and other 20,229 19,657 42,632 49,709
----------- ----------- ----------- -----------
Same hospital EBITDA $ 183,508 $ 157,404 $ 387,529 $ 382,176
=========== =========== =========== ===========
Same hospital EBITDA
margins =
Same hospital EBITDA
/ same hospital
net revenue (b) 16.6% 14.8% 17.4% 17.8%
=========== =========== =========== ===========
(a) Continuing operations.
(b) EBITDA is defined as earnings before interest, refinancing costs,
income taxes, depreciation and amortization, gains and losses on
sales of assets and minority interests. EBITDA margin is defined as
EBITDA divided by net revenue. EBITDA does not represent cash flows
from operations as defined by generally accepted accounting
principles in the United States, commonly known as GAAP, and should
not be considered as either an alternative to net income or as an
indicator of HMA's operating performance or as an alternative to cash
flows as a measure of HMA's liquidity. Nevertheless, HMA believes
that providing non-GAAP information regarding EBITDA is important for
investors and other readers of HMA's financials statements, as it
provides a measure of HMA's liquidity. In addition, EBITDA is
commonly used as an analytical indicator within the health care
industry and HMA's debt facilities contain covenants that use EBITDA
in their calculations. Because EBITDA is not a measurement determined
in accordance with GA
HEALTH MANAGEMENT ASSOCIATES, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME INFORMATION
(unaudited, in thousands, except per share amounts)
The following tables provide information regarding income from
continuing operations, excluding the impact of the gains on sales of
assets and minority interests and refinancing costs. These tables
are a non-GAAP presentation; nonetheless, HMA believes that providing
this detail is beneficial to investors and other readers of HMA's
financial statements due to the significant impact these items had on
income from continuing operations.
For the Three Months Ended June 30, 2008
--------------------------------------------------
Gains on Refinancing
Sales of Assets and Debt Total,
Continuing and Minority Modification As
Operations Interests Costs Reported
---------- --------------- ------------ ----------
Income from
continuing
operations before
income taxes $ 39,612 $ 6,184 $ (10,834) $ 34,962
Income tax expense (14,773) (2,307) 4,041 (13,039)
---------- --------------- ------------ ----------
Income from
continuing
operations $ 24,839 $ 3,877 $ (6,793) $ 21,923
========== =============== ============ ==========
Earnings per share:
Basic $ 0.10 $ 0.02 $ (0.03) $ 0.09
========== =============== ============ ==========
Diluted $ 0.10 $ 0.02 $ (0.03) $ 0.09
========== =============== ============ ==========
For the Six Months Ended June 30, 2008
--------------------------------------------------
Gains on Refinancing
Sales of Assets and Debt Total,
Continuing and Minority Modification As
Operations Interests Costs Reported
---------- --------------- ------------ ----------
Income from
continuing
operations before
income taxes $ 100,768 $ 209,504 $ (11,463) $ 298,809
Income tax expense (38,875) (80,825) 4,422 (115,278)
---------- --------------- ------------ ----------
Income from
continuing
operations $ 61,893 $ 128,679 $ (7,041) $ 183,531
========== =============== ============ ==========
Earnings per share:
Basic $ 0.25 $ 0.53 $ (0.03) $ 0.75
========== =============== ============ ==========
Diluted $ 0.25 $ 0.53 $ (0.03) $ 0.75
========== =============== ============ ==========
CONTACT: Health Management Associates, Inc., Naples |