HCA Holdings 2012 Annual Report Download - page 85

HCA HOLDINGS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Years Ended December 31, 2011 and 2010 (continued)
Our Investors provided management and advisory services to the Company, pursuant to a management
agreement among HCA and the Investors executed in connection with the Investors’ acquisition of HCA in
November 2006. In March 2011, the management agreement was terminated pursuant to its terms upon
completion of the initial public offering of our common stock, and the Investors were paid a final fee of
$181 million.
The effective tax rate was 22.6% and 35.3% for 2011 and 2010, respectively. The effective tax rate
computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships.
Our income before income taxes for 2011 included $1.255 billion of nontaxable gain related to the reported gain
on the acquisition of a controlling interest in an equity investment. Our provision for income taxes for 2010 was
reduced by $44 million related to reductions in interest expense related to taxing authority examinations.
Excluding the effect of these adjustments, the effective tax rate for 2011 and 2010 would have been 37.3% and
37.6%, respectively.
Net income attributable to noncontrolling interests increased from $366 million for 2010 to $377 million for
2011. The increase in net income attributable to noncontrolling interests related primarily to growth in operating
results of certain surgery center joint ventures.
Liquidity and Capital Resources
Our primary cash requirements are paying our operating expenses, servicing our debt, capital expenditures
on our existing properties, acquisitions of hospitals and other health care entities, repurchases of our common
stock, distributions to stockholders and distributions to noncontrolling interests. Our primary cash sources are
cash flows from operating activities, issuances of debt and equity securities and dispositions of hospitals and
other health care entities.
Cash provided by operating activities totaled $4.175 billion in 2012 compared to $3.933 billion in 2011 and
$3.085 billion in 2010. Working capital totaled $1.591 billion at December 31, 2012 and $1.679 billion at
December 31, 2011. The $242 million increase in cash provided by operating activities for 2012, compared to
2011, was primarily related to a positive impact from changes in working capital items of $236 million, as cash
benefits from income items were offset by increased tax payments. The $848 million increase in cash provided
by operating activities for 2011, compared to 2010, was primarily related to $885 million improvement from
lower income tax payments. Cash payments for interest and income taxes increased $610 million for 2012
compared to 2011 and declined $780 million for 2011 compared to 2010.
Cash used in investing activities was $2.063 billion, $2.995 billion and $1.039 billion in 2012, 2011 and
2010, respectively. Excluding acquisitions, capital expenditures were $1.862 billion in 2012, $1.679 billion in
2011 and $1.325 billion in 2010. We expended $258 million, $1.682 billion and $233 million for acquisitions of
hospitals and health care entities during 2012, 2011 and 2010, respectively. Expenditures for acquisitions in 2012
included one hospital, expenditures for acquisitions in 2011 included eight hospital facilities, seven of which
were related to the acquisition of the remaining interests in HealthONE, and expenditures for acquisitions in
2010 included two hospital facilities. Planned capital expenditures are expected to approximate $2.0 billion in
2013. At December 31, 2012, there were projects under construction which had an estimated additional cost to
complete and equip over the next five years of approximately $1.9 billion. We expect to finance capital
expenditures with internally generated and borrowed funds.
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