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HCA Reports Third Quarter 2017 Results

International Insurance and Healthcare Company Results and Financials News: HCA Healthcare, Inc. (NYSE: HCA) has announced financial and operating results for the third quarter ended September 30, 2017.

Key third quarter metrics (all percentage changes compare 3Q 2017 to 3Q 2016 unless noted):

  • Revenues increased 4.2 percent to $10.696 billion
  • Net income attributable to HCA Healthcare, Inc. totaled $426 million, or $1.15 per diluted share
  • Adjusted EBITDA totaled $1.776 billion
  • Cash flows from operations totaled $1.008 billion
  • Same facility equivalent admissions increased 0.3 percent, while same facility admissions increased 0.6 percent
  • Same facility revenue per equivalent admission increased 2.0 percent
  • Same facility emergency room visits increased 0.3 percent

The HCA Healthcare, Inc. Board of Directors has authorized an additional share repurchase program for up to $2 billion of the Company’s outstanding common stock. Repurchases will be made in accordance with applicable securities laws and may be made at management’s discretion from time to time in the open market, through privately negotiated transactions, or otherwise. The repurchase program has no time limit and may be suspended for periods or discontinued at any time. Including both this program and remaining amounts under the Company’s November 2016 $2 billion share repurchase authorization, as of October 31, 2017, the Company has approximately $2.150 billion currently authorized for share repurchases.

Revenues in the third quarter increased to $10.696 billion, compared to $10.270 billion in the third quarter of 2016. Net income attributable to HCA Healthcare, Inc. totaled $426 million, or $1.15 per diluted share, compared to $618 million, or $1.59 per diluted share, in the third quarter of 2016. The Company recognized tax benefits of $4 million, or $0.01 per diluted share, and $11 million, or $0.03 per diluted share, for the third quarters of 2017 and 2016, respectively, related to excess tax benefits for employee equity award settlements.

Third quarter 2017 results also include gains on sales of facilities of $7 million, or $0.01 per diluted share, and losses on retirement of debt of $39 million, or $0.07 per diluted share. Third quarter 2016 results included gains on sales of facilities of $3 million, or $0.01 per diluted share, losses on retirement of debt of $4 million, or $0.01 per diluted share, and legal claim costs of $11 million, or $0.02 per diluted share. The Company recognized a reduction in the provision for income taxes of $51 million, or $0.13 per diluted share, during the third quarter of 2016, resulting from the completion of the IRS examination of HCA’s 2011 and 2012 federal income tax returns.

Adjusted EBITDA totaled $1.776 billion in the third quarter of 2017 compared to $1.957 billion in the third quarter of 2016. Adjusted EBITDA is a non-GAAP financial measure. A table reconciling net income attributable to HCA Healthcare, Inc. to Adjusted EBITDA is included in this release.

During the third quarter of 2017, the Company incurred additional expenses and experienced losses of revenues estimated at approximately $140 million, or $0.24 per diluted share, associated with hurricanes Harvey and Irma’s impact on our Corpus Christi, Houston, Florida, Georgia and South Carolina facilities. This amount is prior to any insurance recoveries which the Company may receive. All facilities impacted by Harvey and Irma have resumed normal operation, with the exception of 131-bed East Houston Regional Medical Center that experienced flooding.

Also, results for the third quarter of 2017 include a negative impact to operating results related to the Texas Medicaid Waiver program of approximately $50 million, or $0.08 per diluted share. This reflects settlement amounts related to the program year ended September 30, 2017.

Same facility equivalent admissions increased 0.3 percent in the third quarter of 2017 compared to the prior year period. Same facility admissions increased 0.6 percent compared to the prior year period. Same facility emergency room visits increased 0.3 percent in the third quarter of 2017, compared to the prior year period. The Company estimates that hurricanes had unfavorable impacts of 80 basis points on same facility equivalent admissions growth, 30 basis points on same facility admissions growth and 30 basis points on same facility emergency visits growth during the third quarter. Same facility inpatient surgeries declined 0.7 percent, while same facility outpatient surgeries declined 4.2 percent in the third quarter of 2017 compared to the same period of 2016. Same facility revenue per equivalent admission increased 2.0 percent in the third quarter of 2017 compared to the third quarter of 2016.

During the third quarter of 2017, salaries and benefits, supplies and other operating expenses totaled $8.933 billion, or 83.5 percent of revenues, compared to $8.335 billion, or 81.1 percent of revenues, in the third quarter of 2016.

Nine Months Ended September 30, 2017

Revenues for the nine months ended September 30, 2017 totaled $32.052 billion compared to $30.849 billion in the same period of 2016. Net income attributable to HCA Healthcare, Inc. was $1.742 billion, or $4.64 per diluted share, compared to $1.970 billion, or $4.93 per diluted share, for the first nine months of 2016. Results for the nine months ended September 30, 2017 include gains on sales of facilities of $10 million, or $0.02 per diluted share, and losses on retirement of debt of $39 million, or $0.07 per diluted share. Results for the nine months ended September 30, 2016 included gains on sales of facilities of $8 million, or $0.01 per diluted share, losses on retirement of debt of $4 million, or $0.01 per diluted share, and legal claim costs of $33 million, or $0.05 per diluted share. The Company recognized a reduction in the provision for income taxes of $51 million, or $0.13 per diluted share, during the nine months ended September 30, 2016, resulting from the completion of the IRS examination of HCA’s 2011 and 2012 federal income tax returns.

During the nine months ended September 30, 2017, the Company incurred additional expenses and experienced losses of revenues estimated at approximately $140 million, or $0.24 per diluted share, associated with the impact of hurricanes. Also in the nine months ended September 30, 2017, the Company incurred a negative impact to results related to the Texas Medicaid Waiver program of approximately $50 million, or $0.08 per diluted share.

Balance Sheet and Cash Flows from Operations

As of September 30, 2017, HCA Healthcare, Inc.’s balance sheet reflected cash and cash equivalents of $718 million, total debt of $32.953 billion, and total assets of $35.731 billion. During the third quarter of 2017, capital expenditures totaled $729 million, excluding acquisitions. Cash flows provided by operating activities in the third quarter totaled $1.008 billion compared to $1.206 billion in the third quarter of 2016. The decline in cash flow was primarily attributable to the $215 million decline in net income.

As of September 30, 2017, HCA’s leverage ratio as measured by Total Debt/Adjusted EBITDA was 4.08x, compared to 3.82x as of December 31, 2016.

During the third quarter of 2017, the Company repurchased 6.3 million shares of its common stock at a cost of $509 million and during the nine months ended September 30, 2017, repurchased 17.8 million shares of its common stock at a cost of $1.475 billion.

As of September 30, 2017, HCA operated 177 hospitals and 119 freestanding surgery centers.

2017 Guidance

The financial impact of the hurricanes and the Texas Medicaid Waiver program were not reflected in our previous guidance. The Company’s 2017 guidance ranges for the year have been updated from our July 25, 2017 second quarter release and are as follows:

       
     

2017 Updated Guidance Ranges

Revenues

   

$43.0 to $44.0 billion

Adjusted EBITDA

   

$8.00 to $8.15 billion

EPS (diluted)

   

$6.45 to $6.70 per diluted share

Capital Expenditures

   

Approximately $3.0 billion

The Company’s 2017 updated guidance contains a number of assumptions, including:

  • 2017 guidance for EPS (diluted) includes an estimated $90 million income tax benefit, or $0.24 per diluted share, related to the accounting standard which requires the recording of excess tax benefits related to employee equity award settlements as a component of the provision for income taxes. The timing and amounts related to employee equity award settlements are difficult to project and may vary from this estimate.
  • 2017 guidance includes expected full-year earnings for the Company’s Oklahoma facilities which are under agreement to be sold. The Company now estimates a closing date of December 31, 2017.
  • 2017 guidance includes the impact of acquisitions completed as of September 30, 2017.
  • 2017 guidance excludes the impact of items such as, but not limited to, gains or losses on sales of facilities, losses on retirement of debt, legal claim costs and impairments of long-lived assets.

Adjusted EBITDA is a non-GAAP financial measure. A table reconciling net income attributable to HCA Healthcare, Inc. to Adjusted EBITDA is included in this release.

The Company’s updated guidance is based on current plans and expectations and is subject to a number of known and unknown uncertainties and risks, including those set forth below in the Company’s “Forward-Looking Statements.”

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