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 June 30, 2004
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 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 August 5, 2004, 243,404,283 shares of the Registrant’s Class A Common Stock were outstanding.
HEALTH MANAGEMENT ASSOCIATES, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004
INDEX
2
PART I - FINANCIAL INFORMATION
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended June 30, | ||||||
| 2004 |
2003 | |||||
| Net patient service revenue |
$ | 817,341 | $ | 647,127 | ||
| Costs and expenses: |
||||||
| Salaries and benefits |
315,776 | 245,477 | ||||
| Supplies and other |
239,087 | 185,328 | ||||
| Provision for doubtful accounts |
62,514 | 46,448 | ||||
| Depreciation and amortization |
34,030 | 28,003 | ||||
| Rent expense |
16,540 | 12,466 | ||||
| Interest, net |
3,640 | 3,802 | ||||
| Total costs and expenses |
671,587 | 521,524 | ||||
| Income before minority interests and income taxes |
145,754 | 125,603 | ||||
| Minority interests in earnings of consolidated entities |
1,580 | 1,121 | ||||
| Income before income taxes |
144,174 | 124,482 | ||||
| Provision for income taxes |
54,891 | 48,561 | ||||
| Net income |
$ | 89,283 | $ | 75,921 | ||
| Net income per share: |
||||||
| Basic |
$ | .37 | $ | .32 | ||
| Diluted |
$ | .36 | $ | .30 | ||
| Dividends per share |
$ | .02 | $ | .02 | ||
| Weighted average number of shares outstanding: |
||||||
| Basic |
243,175 | 239,108 | ||||
| Diluted |
247,136 | 257,379 | ||||
See accompanying notes.
3
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
| Nine Months Ended June 30, | ||||||
| 2004 |
2003 | |||||
| Net patient service revenue |
$ | 2,407,801 | $ | 1,903,018 | ||
| Costs and expenses: |
||||||
| Salaries and benefits |
943,922 | 733,934 | ||||
| Supplies and other |
711,395 | 548,796 | ||||
| Provision for doubtful accounts |
180,179 | 137,772 | ||||
| Depreciation and amortization |
99,413 | 81,203 | ||||
| Rent expense |
49,386 | 36,677 | ||||
| Interest, net |
12,802 | 11,275 | ||||
| Total costs and expenses |
1,997,097 | 1,549,657 | ||||
| Income before minority interests and income taxes |
410,704 | 353,361 | ||||
| Minority interests in earnings of consolidated entities |
4,115 | 3,106 | ||||
| Income before income taxes |
406,589 | 350,255 | ||||
| Provision for income taxes |
155,520 | 136,613 | ||||
| Net income |
$ | 251,069 | $ | 213,642 | ||
| Net income per share: |
||||||
| Basic |
$ | 1.04 | $ | .89 | ||
| Diluted |
$ | 1.02 | $ | .85 | ||
| Dividends per share |
$ | .06 | $ | .06 | ||
| Weighted average number of shares outstanding: |
||||||
| Basic |
242,488 | 238,790 | ||||
| Diluted |
246,901 | 257,186 | ||||
See accompanying notes.
4
HEALTH MANAGEMENT ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| June 30, 2004 |
September 30, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 115,612 | $ | 395,338 | ||||
| Accounts receivable, net |
632,314 | 527,254 | ||||||
| Supplies, prepaid expenses and other assets |
107,147 | 123,247 | ||||||
| Funds held by trustee |
12,541 | 17,470 | ||||||
| Deferred income taxes |
30,027 | 30,027 | ||||||
| Total current assets |
897,641 | 1,093,336 | ||||||
| Property, plant and equipment |
2,354,888 | 1,983,151 | ||||||
| Less: accumulated depreciation and amortization |
(651,426 | ) | (555,436 | ) | ||||
| Net property, plant and equipment |
1,703,462 | 1,427,715 | ||||||
| Funds held by trustee |
52,160 | 15,924 | ||||||
| Excess of cost over acquired net assets, net |
722,572 | 397,825 | ||||||
| Deferred charges and other assets |
43,837 | 44,687 | ||||||
| Total assets |
$ | 3,419,672 | $ | 2,979,487 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
145,401 | $ | 136,136 | |||||
| Accrued expenses and other liabilities |
137,050 | 121,980 | ||||||
| Income taxes - currently payable |
11,028 | 5,400 | ||||||
| Current maturities of long-term debt |
8,790 | 9,447 | ||||||
| Total current liabilities |
302,269 | 272,963 | ||||||
| Deferred income taxes |
48,984 | 48,984 | ||||||
| Other long-term liabilities |
87,491 | 58,402 | ||||||
| Long-term debt |
1,024,150 | 924,713 | ||||||
| Minority interests in consolidated entities |
41,352 | 37,350 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $.01 par value, 5,000 shares authorized |
— | — | ||||||
| Common stock, Class A, $.01 par value, 750,000 shares authorized, 265,881 and 262,705 shares issued at June 30, 2004 and September 30, 2003, respectively |
2,659 | 2,627 | ||||||
| Additional paid-in capital |
442,012 | 399,782 | ||||||
| Retained earnings |
1,771,411 | 1,535,322 | ||||||
| 2,216,082 | 1,937,731 | |||||||
| Less: treasury stock, 22,500 shares of common stock, at cost, at both June 30, 2004 and September 30, 2003 |
(300,656 | ) | (300,656 | ) | ||||
| Total stockholders’ equity |
1,915,426 | 1,637,075 | ||||||
| Total liabilities and stockholders’ equity |
$ | 3,419,672 | $ | 2,979,487 | ||||
See accompanying notes.
5
HEALTH MANAGEMENT ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Nine Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 251,069 | $ | 213,642 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
99,413 | 81,203 | ||||||
| Provision for doubtful accounts |
180,179 | 137,772 | ||||||
| Gain on sale of fixed assets |
(2,669 | ) | (363 | ) | ||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
(286,099 | ) | (163,986 | ) | ||||
| Supplies and other current assets |
25,124 | (9,299 | ) | |||||
| Deferred charges and other assets |
(4,830 | ) | 1,512 | |||||
| Accounts payable |
5,390 | (4,221 | ) | |||||
| Accrued expenses and other liabilities |
6,481 | 10,398 | ||||||
| Income taxes - currently payable |
21,628 | (362 | ) | |||||
| Other long term liabilities |
33,091 | (575 | ) | |||||
| Net cash provided by operating activities |
328,777 | 265,721 | ||||||
| Cash flows from investing activities: |
||||||||
| Acquisition of facilities, net of cash acquired and purchase price adjustments |
(517,774 | ) | (19,269 | ) | ||||
| Additions to property, plant and equipment |
(173,569 | ) | (123,321 | ) | ||||
| Proceeds from sale of property, plant and equipment |
4,509 | 774 | ||||||
| (Increase) decrease in funds held by trustee |
(31,308 | ) | 15 | |||||
| Net cash used in investing activities |
(718,142 | ) | (141,801 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from borrowings, net of issuance costs |
283,947 | 9,782 | ||||||
| Principal payments on debt |
(185,748 | ) | (6,969 | ) | ||||
| Payment of dividends |
(14,822 | ) | (14,608 | ) | ||||
| Proceeds from issuance of common stock |
26,262 | 12,413 | ||||||
| Net cash provided by financing activities |
109,639 | 618 | ||||||
| Net (decrease) increase in cash and cash equivalents |
(279,726 | ) | 124,538 | |||||
| Cash and cash equivalents at beginning of period |
395,338 | 123,736 | ||||||
| Cash and cash equivalents at end of period |
$ | 115,612 | $ | 248,274 | ||||
See accompanying notes.
6
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 June 30, 2004, and for the three and nine month periods ended June 30, 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.
7
HEALTH MANAGEMENT ASSOCIATES, INC.