HEALTH MANAGEMENT ASSOCIATES INC - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2004

¨	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 001-11141

HEALTH MANAGEMENT ASSOCIATES, INC.

(Exact name of Registrant as specified in its charter)

Delaware

61-0963645

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

5811 Pelican Bay Boulevard, Suite 500

Naples, Florida

34108-2710

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (239) 598-3131

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

At May 5, 2004, 243,059,391 shares of the Registrant’s Class A Common Stock were outstanding.

HEALTH MANAGEMENT ASSOCIATES, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004

INDEX


		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statements of Income - Three Months Ended March 31, 2004 and 2003	3

	Consolidated Statements of Income - Six Months Ended March 31, 2004 and 2003	4

	Condensed Consolidated Balance Sheets - March 31, 2004 and September 30, 2003	5

	Condensed Consolidated Statements of Cash Flows - Six Months Ended March 31, 2004 and 2003	6

	Notes to Interim Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	25

PART II - OTHER INFORMATION		26

Signatures		28

Index To Exhibits		29

Exhibits

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

HEALTH MANAGEMENT ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)


	Three months ended March 31,
	2004		2003
Net patient service revenue	$	833,907	$	646,472

Costs and expenses:
Salaries and benefits		325,384		245,946
Supplies and other		244,172		183,526
Provision for doubtful accounts		59,578		45,017
Depreciation and amortization		34,380		27,113
Rent expense		17,424		12,106
Interest, net		4,708		3,712

Total costs and expenses		685,646		517,420

Income before minority interests and income taxes		148,261		129,052
Minority interests in earnings of consolidated entities		1,395		1,063

Income before income taxes		146,866		127,989

Provision for income taxes		56,391		49,924

Net income	$	90,475	$	78,065

Net income per share:
Basic	$	.37	$	.33

Diluted	$	.37	$	.31

Dividends per share	$	.02	$	.02

Weighted average number of shares outstanding:
Basic		242,901		238,673

Diluted		247,163		256,993

See accompanying notes.

HEALTH MANAGEMENT ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)


	Six months ended March 31,
	2004		2003
Net patient service revenue	$	1,590,460	$	1,255,891

Costs and expenses:
Salaries and benefits		628,146		488,457
Supplies and other		472,308		363,468
Provision for doubtful accounts		117,665		91,324
Depreciation and amortization		65,383		53,200
Rent expense		32,846		24,211
Interest, net		9,162		7,473

Total costs and expenses		1,325,510		1,028,133

Income before minority interests and income taxes		264,950		227,758
Minority interests in earnings of consolidated entities		2,535		1,985

Income before income taxes		262,415		225,773

Provision for income taxes		100,629		88,052

Net income	$	161,786	$	137,721

Net income per share:
Basic	$	.67	$	.58

Diluted	$	.66	$	.55

Dividends per share	$	.04	$	.04

Weighted average number of shares outstanding:
Basic		242,146		238,631

Diluted		246,758		257,066

See accompanying notes.

HEALTH MANAGEMENT ASSOCIATES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)


	March 31, 2004			September 30, 2003
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	102,794		$	395,338
Accounts receivable, net		664,427			527,254
Supplies, prepaid expenses and other assets		103,764			123,247
Funds held by trustee		12,471			17,470
Deferred income taxes		30,027			30,027

Total current assets		913,483			1,093,336

Property, plant and equipment		2,304,530			1,983,151
Less: accumulated depreciation and amortization		(619,569	)		(555,436	)

Net property, plant and equipment		1,684,961			1,427,715

Funds held by trustee		42,154			15,924
Excess of cost over acquired net assets, net		717,331			397,825
Deferred charges and other assets		43,075			44,687

Total assets	$	3,401,004		$	2,979,487

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	151,319		$	136,136
Accrued expenses and other liabilities		130,212			121,980
Income taxes - currently payable		9,141			5,400
Current maturities of long-term debt		8,856			9,447

Total current liabilities		299,528			272,963

Deferred income taxes		48,984			48,984
Other long-term liabilities		83,479			58,402
Long-term debt		1,103,491			924,713

Minority interests in consolidated entities		39,889			37,350

Stockholders’ equity:
Preferred stock, $.01 par value, 5,000 shares authorized		—			—
Common stock, Class A, $.01 par value, 750,000 shares authorized, 265,475 and 262,705 shares issued at March 31, 2004 and September 30, 2003, respectively		2,655			2,627
Additional paid-in capital		436,546			399,782
Retained earnings		1,687,088			1,535,322

		2,126,289			1,937,731
Less: treasury stock, 22,500 shares of common stock, at cost, at both March 31, 2004 and September 30, 2003		(300,656	)		(300,656	)

Total stockholders’ equity		1,825,633			1,637,075

Total liabilities and stockholders’ equity	$	3,401,004		$	2,979,487

See accompanying notes.

HEALTH MANAGEMENT ASSOCIATES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six months ended March 31,
	2004			2003
Cash flows from operating activities:
Net income	$	161,786		$	137,721
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		65,383			53,200
Provision for doubtful accounts		117,665			91,324
Gain on sale of fixed assets		(789	)		(342	)

Changes in assets and liabilities:
Accounts receivable		(255,696	)		(130,820	)
Supplies and other current assets		28,507			(9,386	)
Deferred charges and other assets		(2,077	)		4,235
Accounts payable		11,308			14,114
Accrued expenses and other liabilities		3,290			5,566
Income taxes-currently payable		19,741			(20,632	)
Other long term liabilities		27,616			2,649

Net cash provided by operating activities		176,734			147,629

Cash flows from investing activities:
Acquisition of facilities, net of cash acquired and purchase price adjustments		(519,016	)		(19,357	)
Additions to property, plant and equipment		(118,407	)		(84,209	)
Proceeds from sale of property, plant and equipment		842			472
Increase in funds held by trustee		(21,231	)		(1,188	)

Net cash used in investing activities		(657,812	)		(104,282	)

Cash flows from financing activities:
Proceeds from borrowings, net of issuance costs		281,332			6,491
Principal payments on debt		(103,726	)		(3,497	)
Payment of dividends		(9,861	)		(9,736	)
Proceeds from issuance of common stock		20,789			319

Net cash provided by (used in) financing activities		188,534			(6,423	)

Net (decrease) increase in cash and cash equivalents		(292,544	)		36,924
Cash and cash equivalents at beginning of period		395,338			123,736

Cash and cash equivalents at end of period	$	102,794		$	160,660

See accompanying notes.

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The condensed consolidated balance sheet as of September 30, 2003 has been derived from the audited consolidated financial statements included in our 2003 Annual Report on Form 10-K. The interim condensed consolidated financial statements at March 31, 2004, and for the three and six month periods ended March 31, 2004 and 2003 are unaudited; however, such interim statements reflect all adjustments (consisting only of a normal recurring nature) which are, in the opinion of our management, necessary for a fair presentation of our financial position and results of operations for the interim periods presented. Our results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our 2003 Annual Report on Form 10-K.

The interim condensed consolidated financial statements include all assets, liabilities, revenues and expenses of certain entities which are controlled by us but not wholly-owned. Accordingly, we have recorded minority interests in the earnings and equity of such entities to reflect the ownership interests of such minority shareholders in the respective entities.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires our management to make estimates and assumptions that affect the amounts reported in the interim condensed consolidated financial statements. Our actual results could differ from these estimates.

2. Stock Compensation

We have elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”). Under APB 25, because the exercise price of employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. As a result, pro forma disclosure of alternative fair value accounting is required under Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, utilizing an option valuation model.

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