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HCA Reports Fourth Quarter - Year End 2007 Results
Date:2/7/2008

NASHVILLE, Tenn., Feb. 7 /PRNewswire/ -- HCA today announced financial and operating results for the fourth quarter and year ended December 31, 2007.

Fourth Quarter Summary:

-- Revenues increased 6.1 percent to $6.883 billion.

-- Net income totaled $278 million, compared to $122 million in the

prior year.

-- Adjusted EBITDA totaled $1.153 billion, compared to $1.271 billion

in the prior year.

-- Provision for doubtful accounts increased to $912 million, from

$710 million in the prior year.

-- Interest expense increased to $541 million, from $373 million in

the prior year.

-- Same facility admissions decreased 1.0 percent, and same facility

equivalent admissions increased 0.3 percent.

-- Same facility revenue per equivalent admission increased 6.6

percent.

"We were pleased with the 2007 results for the Company," stated Jack O. Bovender, Jr., HCA's Chairman and CEO. "Our dedication to the communities we serve, physicians and patients remains our top priority as we begin a new year," concluded Bovender.

Revenues for the fourth quarter totaled $6.883 billion, compared to $6.489 billion in the fourth quarter of 2006. Adjusted EBITDA in the quarter totaled $1.153 billion, compared to $1.271 billion in the previous year's fourth quarter. A table describing adjusted EBITDA and reconciling net income to adjusted EBITDA for these periods is included in this release. Net income for the fourth quarter of 2007 totaled $278 million, compared to $122 million in the prior year's fourth quarter. Results for the fourth quarter of 2007 include gains on sales of facilities of $139 million and gains on investments of $2 million. Fourth quarter 2006 results include transaction costs of $433 million related to the November 2006 recapitalization, gains on sales of facilities of $159 million, an aed EBITDA are not measurements

determined in accordance with generally accepted accounting

principles and are susceptible to varying calculations, net income,

excluding gains on sales of facilities, impairment of long-lived

assets and transaction costs, and adjusted EBITDA, as presented, may

not be comparable to other similarly titled measures presented by

other companies.

HCA Inc.

Condensed Consolidated Balance Sheets

(Dollars in millions)

December 31, September 30, December 31,

2007 2007 2006

ASSETS

Current assets:

Cash and cash equivalents $393 $347 $634

Accounts receivable, net 3,895 3,857 3,705

Inventories 710 689 669

Deferred income taxes 592 487 476

Other 615 649 594

Total current assets 6,205 6,029 6,078

Property and equipment, at cost 22,579 22,449 21,907

Accumulated depreciation (11,137) (10,999) (10,238)

11,442 11,450 11,669

Investments of insurance subsidiary 1,669 1,737 1,886

Investments in and advances to

affiliates 688 683 679

Goodwill 2,629 2,652 2,601

Deferred loan costs 539 559 614

Other 853 667 148

$24,025 $23,777 $23,675

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

Accounts payable $1,370 $1,290 $1,415

Accrued salaries 780 731 675

Other accrued expenses 1,391 1,389 1,193

Long-term debt due within one year 308 299 293

Total current liabilities 3,849 3,709 3,576

Long-term debt 27,000 27,246 28,115

Professional liability risks 1,233 1,276 1,309

Income taxes and other liabilities 1,379 1,189 1,017

Minority interests in equity of

consolidated entities 938 915 907

Equity securities with contingent

redemption rights 164 164 125

Stockholders' deficit (10,538) (10,722) (11,374)

$24,025 $23,777 $23,675

HCA Inc.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2007 and 2006

(Dollars in millions)

2007 2006

Cash flows from operating activities:

Net income $874 $1,036

Adjustments to reconcile net income to

net cash provided by operating activities:

Provision for doubtful accounts 3,130 2,660

Depreciation and amortization 1,426 1,391

Income taxes (105) (552)

Gains on sales of facilities (471) (205)

Impairment of long-lived assets 24 24

Change in operating assets and liabilities (3,615) (2,940)

Change in minority interests 40 58

Share-based compensation 24 324

Other 69 49

Net cash provided by operating activities 1,396 1,845

Cash flows from investing activities:

Purchase of property and equipment (1,444) (1,865)

Acquisition of hospitals and health care

entities (32) (112)

Disposal of hospitals and health care entities 767 651

Change in investments 207 26

Other 23 (7)

Net cash used in investing activities (479) (1,307)

Cash flows from financing activities:

Issuance of long-term debt 24 21,758

Net change in revolving bank credit facility (520) (435)

Repayment of long-term debt (750) (3,728)

Repurchase of common stock (2) (653)

Recapitalization - repurchase of common stock -- (20,364)

Recapitalization - equity contributions -- 3,782

Payment of debt issuance costs -- (586)

Issuance of common stock 100 108

Payment of cash dividends -- (201)

Other (10) 79

Net cash used in financing activities (1,158) (240)

Change in cash and cash equivalents (241) 298

Cash and cash equivalents at beginning of period 634 336

Cash and cash equivalents at end of period $393 $634

Interest payments $2,163 $893

Income tax payments, net of refunds $421 $1,087

HCA Inc.

Operating Statistics

For the Years

Fourth Quarter Ended December 31,

2007 2006 2007 2006

Consolidating Hospitals:

Number of Hospitals 161 166 161 166

Weighted Average Licensed

Beds 38,784 39,762 39,065 40,653

Licensed Beds at End of

Period 38,405 39,354 38,405 39,354

Reported:

Admissions 384,000 391,500 1,552,700 1,610,100

% Change -1.9% -3.6%

Equivalent Admissions 585,300 586,300 2,352,400 2,416,700

% Change -0.2% -2.7%

Revenue per Equivalent

Admission $11,760 $11,066 $11,417 $10,542

% Change 6.3% 8.3%

Inpatient Revenue per

Admission $11,121 $10,355 $10,718 $9,876

% Change 7.4% 8.5%

Patient Days 1,881,200 1,921,200 7,683,000 7,916,100

Equivalent Patient Days 2,867,400 2,877,800 11,639,700 11,882,100

Inpatient Surgery Cases 126,500 130,000 516,500 533,100

% Change -2.7% -3.1%

Outpatient Surgery Cases 200,100 200,600 804,900 820,900

% Change -0.3% -2.0%

Emergency Room Visits 1,288,300 1,265,800 5,116,100 5,213,500

% Change 1.8% -1.9%

Outpatient Revenues as a

Percentage of Patient

Revenues 36.9% 36.4% 36.9% 36.4%

Average Length of Stay 4.9 4.9 4.9 4.9

Occupancy 52.7% 52.5% 53.9% 53.3%

Equivalent Occupancy 80.3% 78.7% 81.7% 80.0%

Same Facility:

Admissions 376,100 379,900 1,513,100 1,533,700

% Change -1.0% -1.3%

Equivalent Admissions 570,600 569,100 2,286,300 2,302,100

% Change 0.3% -0.7%

Revenue per Equivalent

Admission $11,730 $11,002 $11,367 $10,516

% Change 6.6% 8.1%

Inpatient Revenue per

Admission $11,102 $10,332 $10,700 $9,892

% Change 7.5% 8.2%

Inpatient Surgery Cases 123,900 125,500 505,200 510,400

% Change -1.3% -1.0%

Outpatient Surgery Cases 193,400 195,000 779,000 788,100

% Change -0.8% -1.1%

Emergency Room Visits 1,264,500 1,228,800 5,002,300 4,967,100

% Change 2.9% 0.7%

Number of Consolidating and

Nonconsolidating (50/50 Equity

Joint Ventures) Hospitals:

Consolidating 161 166 161 166

Nonconsolidating (50/50 Equity

Joint Ventures) 8 7 8 7

Total Number of Hospitals 169 173 169 173

sset impairment charge of $24 million and gains on investments of $103 million.

The provision for doubtful accounts increased to $912 million, or 13.2 percent of revenues, in the fourth quarter of 2007 from $710 million, or 10.9 percent of revenues, in the fourth quarter of 2006. At December 31, 2007, our allowance for doubtful accounts represented approximately 89 percent of the $4.825 billion patient due accounts receivable balance. At December 31, 2006, the allowance for doubtful accounts was approximately 86 percent of the $3.972 billion patient due accounts receivable balance.

Interest expense increased to $541 million in the fourth quarter of 2007, compared to $373 million in the same period of 2006, due primarily to the increased debt incurred to complete the November 2006 recapitalization. The provision for income taxes for the fourth quarter was reduced, due primarily to the recognition of certain state tax benefits.

Same facility admissions decreased 1.0 percent and same facility equivalent admissions increased 0.3 percent in the fourth quarter of 2007 compared to the prior year's fourth quarter. Same facility revenue per equivalent admission increased 6.6 percent in the fourth quarter of 2007 compared to the fourth quarter of 2006. Same facility charity and uninsured discounts totaled $796 million in the fourth quarter of 2007 compared to $622 million in the fourth quarter of 2006.

Revenues for the year ended December 31, 2007 increased 5.4 percent to $26.858 billion compared to $25.477 billion in 2006. Adjusted EBITDA for 2007 totaled $4.592 billion compared to $4.470 billion in the prior year. Net income totaled $874 million for 2007 compared to $1.036 billion for 2006. The 2007 results include gains on investments of $8 million, gains on sales of facilities of $471 million and an impairment of long-lived assets of $24 million. The 2006 results include gains on investments of $243 million, gains on sales of facilities of $205 million, an impairment of long-lived assets of $24 million and $442 million of transaction costs related to the recapitalization.

As of December 31, 2007, HCA's balance sheet reflected cash and cash equivalents of $393 million, total debt of $27.308 billion, and total assets of $24.025 billion. The Company's total debt balance decreased by $1.100 billion during 2007.

The 2007 gains on sales of facilities included the divestitures of three hospitals for proceeds totaling $661 million and the recognition of a net pretax gain of $443 million, or $272 million net-of-tax. Proceeds were used to reduce debt.

During November 2006, the Company's shareholders approved a merger with an acquiring consortium led by Bain Capital, Kohlberg Kravis Roberts & Co. and Merrill Lynch Global Private Equity, along with HCA founder, Dr. Thomas F. Frist, Jr. and certain members of his family and HCA management in which a cash payment of $51.00 per share was made for each share of HCA common stock held. The merger was accounted for as a recapitalization transaction.

The Company also announced today it had commenced a cash tender offer to purchase up to $500 million of aggregate principal amount of certain series of its outstanding debt securities. The Company expects the completion of the tender offer will reduce its interest expense. The Company intends to finance the purchase of the debt with borrowings under its revolving credit facilities. During the fourth quarter of 2007, the application of proceeds from asset sales contributed to a net reduction of $150 million in borrowings under the revolving credit facilities. For information regarding the tender offer, please refer to the separate press release issued by the Company today regarding the tender offer.

As of December 31, 2007, HCA operated 169 hospitals and 108 freestanding surgery centers (including eight hospitals and nine freestanding surgery centers operated through equity method joint ventures).

Earnings Conference Call

HCA will host a conference call for investors at 9:00 a.m. Central Standard Time today. All interested investors are invited to access a live audio broadcast of the call via webcast. The broadcast also will be available on a replay basis beginning this afternoon. The webcast can be accessed at http://www.videonewswire.com/event.asp?id=45107 or through the Company's Investor Relations web page, http://www.hcahealthcare.com.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements based on current management expectations. Those forward-looking statements include all statements other than those made solely with respect to historical fact. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those expressed in any forward-looking statements. These factors include, but are not limited to, (1) the ability to recognize the benefits of the recapitalization; (2) the impact of the substantial indebtedness incurred to finance the recapitalization; (3) increases in the amount and risk of collectability of uninsured accounts, and deductibles and copayment amounts for insured accounts; (4) the ability to achieve operating and financial targets, attain expected levels of patient volumes and control the costs of providing services; (5) possible changes in the Medicare, Medicaid and other state programs, including Medicaid supplemental payments pursuant to upper payment limit programs, that may impact reimbursements to health care providers and insurers; (6) the highly competitive nature of the health care business; (7) changes in revenue mix and the ability to enter into and renew managed care provider agreements on acceptable terms; (8) the efforts of insurers, health care providers and others to contain health care costs; (9) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures and our corporate integrity agreement with the government; (10) changes in federal, state or local laws or regulations affecting the health care industry; (11) increases in wages and the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical and technical support personnel; (12) the possible enactment of federal or state health care reform; (13) the availability and terms of capital to fund the expansion of our business or improvements to our existing facilities; (14) changes in accounting practices; (15) changes in general economic conditions nationally and regionally in our markets; (16) future divestitures which may result in charges; (17) changes in business strategy or development plans; (18) the outcome of pending and any future tax audits, appeals and litigation associated with our tax positions; (19) delays in receiving payment for services provided; (20) potential liabilities and other claims that may be asserted against us; (21) the ability to complete the announced debt tender offer and reduce interest expense; and (22) other risk factors described in our Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. Many of the factors that will determine our future results are beyond our ability to control or predict. In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

All references to "Company" and "HCA" as used throughout this document refer to HCA, Inc. and its affiliates.

HCA Inc.

Consolidated Income Statements

Fourth Quarter

(Dollars in millions)

2007 2006

Amount Ratio Amount Ratio

Revenues $6,883 100.0% $6,489 100.0%

Salaries and benefits 2,712 39.4 2,593 40.0

Supplies 1,111 16.2 1,071 16.5

Other operating expenses 1,047 15.2 993 15.3

Provision for doubtful accounts 912 13.2 710 10.9

Gains on investments (2) -- (103) (1.6)

Equity in earnings of affiliates (50) (0.7) (46) (0.7)

Depreciation and amortization 354 5.0 346 5.4

Interest expense 541 7.9 373 5.7

Gains on sales of facilities (139) (2.0) (159) (2.5)

Impairment of long-lived assets -- -- 24 0.4

Transaction costs -- -- 433 6.7

6,486 94.2 6,235 96.1

Income before minority interests

and income taxes 397 5.8 254 3.9

Minority interests in earnings of

consolidated entities 48 0.7 56 0.8

Income before income taxes 349 5.1 198 3.1

Provision for income taxes 71 1.1 76 1.2

Net income $278 4.0 $122 1.9

HCA Inc.

Consolidated Income Statements

For the Years Ended December 31, 2007 and 2006

(Dollars in millions)

2007 2006

Amount Ratio Amount Ratio

Revenues $26,858 100.0% $25,477 100.0%

Salaries and benefits 10,714 39.9 10,409 40.9

Supplies 4,395 16.4 4,322 17.0

Other operating expenses 4,241 15.7 4,056 16.0

Provision for doubtful accounts 3,130 11.7 2,660 10.4

Gains on investments (8) -- (243) (1.0)

Equity in earnings of affiliates (206) (0.8) (197) (0.8)

Depreciation and amortization 1,426 5.4 1,391 5.5

Interest expense 2,215 8.2 955 3.7

Gains on sales of facilities (471) (1.8) (205) (0.8)

Impairment of long-lived assets 24 0.1 24 0.1

Transaction costs -- -- 442 1.7

25,460 94.8 23,614 92.7

Income before minority interests

and income taxes 1,398 5.2 1,863 7.3

Minority interests in earnings of

consolidated entities 208 0.8 201 0.8

Income before income taxes 1,190 4.4 1,662 6.5

Provision for income taxes 316 1.1 626 2.4

Net income $874 3.3 $1,036 4.1

HCA Inc.

Supplemental Operating Results Summary

(Dollars in millions)

For the Years

Fourth Quarter Ended December 31,

2007 2006 2007 2006

Revenues $6,883 $6,489 $26,858 $25,477

Net income $278 $122 $874 $1,036

Gains on sales of facilities

(net of tax) (88) (74) (291) (103)

Impairment of long-lived

assets (net of tax) -- 15 15 15

Transaction costs

(net of tax) -- 303 -- 309

Net income, excluding gains on

sales of facilities, impairment

of long-lived assets and

transaction costs 190 366 598 1,257

Depreciation and amortization 354 346 1,426 1,391

Interest expense 541 373 2,215 955

Minority interests in earnings

of consolidated entities 48 56 208 201

Provision for income taxes 20 130 145 666

Adjusted EBITDA (a) $1,153 $1,271 $4,592 $4,470

(a) Net income, excluding gains on sales of facilities, impairment of

long-lived assets and transaction costs, and adjusted EBITDA are non-

GAAP financial measures. We believe that net income, excluding gains

on sales of facilities, impairment of long-lived assets and

transaction costs, and adjusted EBITDA are important measures that

supplement discussions and analysis of our results of operations. We

believe that it is useful to investors to provide disclosures of our

results of operations on the same basis as that used by management.

Management relies upon net income, excluding gains on sales of

facilities, impairment of long-lived assets and transaction costs,

and adjusted EBITDA as the primary measures to review and assess

operating performance of its hospital facilities and their management

teams.

Management and investors review both the overall performance

(including; net income, excluding gains on sales of facilities,

impairment of long-lived assets and transaction costs, and GAAP net

income) and operating performance (adjusted EBITDA) of our health

care facilities. Adjusted EBITDA and the adjusted EBITDA margin

(adjusted EBITDA divided by revenues) are utilized by management and

investors to compare our current operating results with the

corresponding periods during the previous year and to compare our

operating results with other companies in the health care industry.

It is reasonable to expect that gains on sales of facilities and

impairments of long-lived assets will occur in future periods, but

the amounts recognized can vary significantly from quarter to

quarter, do not directly relate to the ongoing operations of our

health care facilities and complicate quarterly comparisons of our

results of operations and operations comparisons with other health

care companies.

Net income, excluding gains on sales of facilities, impairment of

long-lived assets and transaction costs, and adjusted EBITDA are not

measures of financial performance under accounting principles

generally accepted in the United States, and should not be considered

as alternatives to net income as measures of operating performance or

alternatives to cash flows from operating, investing and financing

activities as measures of liquidity. Because net income, excluding

gains on sales of facilities, impairment of long-lived assets and

transaction costs, and adjust
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SOURCE HCA
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