UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from ____ to ____
Commission File Number 000-18799
-----------
HEALTH MANAGEMENT ASSOCIATES, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 61-0963645
-------------------------------- -------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
5811 Pelican Bay Boulevard, Suite 500, Naples, Florida 34108-2710
--------------------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
(941) 598-3131
----------------------------------------------------
(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
At August 2, 1999, the following shares of the Registrant were outstanding:
Class A Common Stock 253,356,553 shares
HEALTH MANAGEMENT ASSOCIATES, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
INDEX
-----
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Statements of Income --
Three Months Ended June 30, 1999 and 1998.................... 3
Consolidated Statements of Income --
Nine months ended June 30, 1999 and 1998...................... 4
Consolidated Balance Sheets--
June 30, 1999 and September 30, 1998......................... 5
Consolidated Statements of Cash Flows--
Nine months ended June 30, 1999 and 1998...................... 6
Notes to Interim Consolidated Financial Statements............. 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 9-15
PART II. OTHER INFORMATION......................................... 16
Signatures.......................................................... 17
Index To Exhibits................................................... 18-19
2
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
June 30,
--------------------
1999 1998
--------------------
Net patient service revenue....... $352,473 $302,150
Costs and expenses:
Salaries and benefits............ 124,382 103,641
Supplies and expenses............ 101,371 88,759
Provision for doubtful accounts.. 35,958 24,661
Depreciation and amortization.... 15,957 13,080
Rent expense..................... 8,603 7,139
Interest, net.................... 2,406 1,242
-------- --------
Total costs and expenses........ 288,677 238,522
-------- --------
Income before income taxes........ 63,796 63,628
Provision for income taxes ....... 25,039 24,973
-------- --------
Net income ....................... $ 38,757 $ 38,655
======== ========
Net income per share:
Basic............................ $ .15 $ .15
======== ========
Diluted.......................... $ .15 $ .15
======== ========
Weighted average number of shares
outstanding:
Basic............................ 251,972 250,871
======== ========
Diluted.......................... 256,513 257,882
======== ========
See accompanying notes.
3
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Nine months ended
June 30,
-------------------
1999 1998
-------------------
Net patient service revenue....... $997,717 $839,642
Costs and expenses:
Salaries and benefits............ 352,698 292,356
Supplies and expenses............ 283,477 247,071
Provision for doubtful accounts.. 94,930 70,380
Depreciation and amortization.... 44,808 35,816
Rent expense..................... 24,073 19,528
Interest, net.................... 4,448 3,315
-------- --------
Total costs and expenses........ 804,434 668,466
-------- --------
Income before income taxes........ 193,283 171,176
Provision for income taxes ....... 75,864 67,186
-------- --------
Net income ....................... $117,419 $103,990
======== ========
Net income per share:
Basic............................ $ .47 $ .42
======== ========
Diluted.......................... $ .46 $ .41
======== ========
Weighted average number of shares
outstanding:
Basic............................ 251,843 248,268
======== ========
Diluted.......................... 257,234 254,865
======== ========
See accompanying notes.
4
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
------
June 30, September 30,
1999 1998
------------- -------------
(Unaudited)
Current assets:
Cash and cash equivalents........................ $ 11,722 $ 12,685
Receivables--net................................. 298,979 243,542
Supplies, prepaids and other assets.............. 42,115 32,983
Funds held by trustee............................ 2,089 1,458
Income taxes - receivable and deferred........... 18,039 18,039
---------- ----------
Total current assets......................... 372,944 308,707
Property, plant and equipment..................... 1,184,192 925,956
Less accumulated depreciation and amortization . 218,358 188,201
---------- ----------
Net property, plant and equipment 965,834 737,755
Other assets:
Funds held by trustee............................ 4,555 3,932
Excess of cost over acquired assets, net......... 94,616 46,674
Deferred charges and other assets................ 16,585 15,037
---------- ----------
Total........................................ 115,756 65,643
---------- ----------
$1,454,534 $1,112,105
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable................................. $ 63,609 $ 44,300
Accrued expenses and other liabilities........... 53,245 57,516
Current maturities of long-term debt............. 10,223 8,544
Income taxes--currently payable and deferred..... 51,988 10,186
---------- ----------
Total current liabilities.................... 179,065 120,546
Deferred income taxes............................. 39,603 39,603
Other long-term liabilities....................... 17,521 60,914
Long-term debt.................................... 308,122 134,217
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized.............................. - -
Common stock, Class A, $.01 par value,
300,000,000 shares authorized, 251,997,000 and
251,558,000 shares issued and outstanding at
June 30, 1999 and September 30, 1998,
respectively................................... 2,516 2,491
Additional paid-in capital....................... 285,732 241,677
Retained earnings................................ 630,076 512,657
---------- ----------
918,324 756,825
Less treasury stock, 499,000 shares at cost...... (8,101) -
---------- ----------
Total stockholders' equity................... 910,223 756,825
---------- ----------
$1,454,534 $1,112,105
========== ==========
See accompanying notes.
5
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine months ended
June 30,
------------------------
1999 1998
------------------------
Cash flows from operating activities:
Net income....................................... $ 117,419 $ 103,990
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................. 44,808 35,816
Loss (gain)on sale of fixed assets............ 6,314 (42)
Changes in assets and liabilities:
Receivables--net............................. (39,911) (44,352)
Other current assets......................... (5,336) (4,200)
Deferred charges and other assets............ (37,589) (3,988)
Accounts payable............................. 14,247 3,020
Accrued expenses and other liabilities....... (1,515) (3,109)
Income taxes--
currently payable and deferred.............. 41,802 8,322
Other long term liabilities.................. (357) 487
---------- ----------
Net cash provided by operating activities . 139,882 95,944
---------- ----------
Cash flows from investing activities:
Acquisition of facilities, net of cash acquired.. (168,056) (168,213)
Additions to property, plant and equipment....... (109,070) (42,025)
Proceeds from sale of equipment.................. 83 188
---------- ----------
Net cash used in investing activities...... (277,043) (210,050)
---------- ----------
Cash flows from financing activities:
Proceeds from long-term borrowings............... 156,232 80,535
Principal payments on debt....................... (14,135) (22,187)
Increase in funds held by trustee................ (932) (3,562)
Purchase of treasury stock....................... (8,101) -
Issuance of common stock, net of costs........... 3,134 7,614
---------- ----------
Net cash provided by
financing activities...................... 136,198 62,400
---------- ----------
Net decrease in cash.......................... (963) (51,706)
Cash and cash equivalents at beginning of period.. 12,685 67,381
---------- ----------
Cash and cash equivalents at end of period........ $ 11,722 $ 15,675
========== ==========
See accompanying notes.
6
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
- -------------------------
The consolidated balance sheet as of September 30, 1998 has been derived
from the audited consolidated financial statements included in Health Management
Associates, Inc.'s (the Company's) 1998 Annual Report. The interim consolidated
financial statements at June 30, 1999 and for the three and nine month periods
ended June 30, 1999 and 1998 are unaudited; however, such interim statements
reflect all adjustments (consisting only of a normal recurring nature) which
are, in the opinion of management, necessary for a fair presentation of the
financial position and results of operations for the interim periods presented.
The results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full year. The interim
financial statements should be read in conjunction with the audited consolidated
financial statements of the Company included in its 1998 Annual Report.
2. Earnings Per Share
- ----------------------
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
Three months ended Nine months ended
June 30, June 30,
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
Numerator:
Net income $ 38,757 $ 38,655 $117,419 $103,990
======== ======== ======== ========
Denominator:
Denominator for basic earnings
Per share-weighted average shares 251,972 250,871 251,843 248,268
Effect of dilutive securities-
employee stock options 4,541 7,011 5,391 6,597
-------- -------- -------- --------
Denominator for diluted
earnings per share 256,513 257,882 257,234 254,865
======== ======== ======== ========
Basic earnings per share $ .15 $ .15 $ .47 $ .42
======== ======== ======== ========
Diluted earnings per share $ .15 $ .15 $ .46 $ .41
======== ======== ======== ========
During October 1998 the Company purchased 498,700 shares of its own common
stock on the open market for a total cost of $8,101,000.
7
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
3. Acquisitions
- ----------------
Effective April 1, 1999 the Company acquired a 473-bed, 2-hospital health
system located in Jackson, Mississippi pursuant to an asset purchase and lease
agreement. The consideration totaled approximately $131 million in cash,
including $16 million in net working capital.
Effective May 1, 1999 the Company acquired a 167-bed, 2-hospital health
system located in the Lower Keys, Florida pursuant to asset purchase and lease
agreements. The consideration totaled approximately $29.9 million, which
included $27 million in cash paid at closing, $18.6 recorded as the net present
value of lease payments required over the 30 year term of the lease, and the
assumption of $4.3 million in debt. The agreements included the assumption of
working capital balances at closing, and also entitle the Company to receive
$1.5 million per year in cash from the seller for the first ten years of the
lease to support indigent care programs. The operating results of the foregoing
hospitals have been included in the accompanying consolidated statements of
income from the respective dates of acquisition.
4. Subsequent event - acquisition
- ----------------------------------
Effective July 1, 1999 the Company acquired a 204-bed acute care hospital
located in Lancaster, Pennsylvania pursuant to a definitive purchase agreement.
The Company paid approximately $15 million in cash, which included approximately
$1 million in net working capital. The Company is committed to the construction
of a replacement hospital, subject to obtaining all required governmental and
regulatory approvals.
5. Subsequent event - stock repurchase
- ---------------------------------------
During July 1999 the Company purchased 7,001,300 shares of its own common
stock on the open market for a total cost of $60,991,000.
8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
---------------------
Three months ended June 30, 1999 compared
-----------------------------------------
to three months ended June 30, 1998
-----------------------------------
Net patient service revenue for the three months ended June 30, 1999
("1999 Period") was $352,473,000, as compared to $302,150,000 for the
three months ended June 30, 1998 ("1998 Period"). This represented an
increase in net patient service revenue of $50,323,000, or 16.7%.
Hospitals in operation for the entire 1999 Period and 1998 Period ("same
hospitals") provided $5,927,000 of the increase in net patient service
revenue. The remaining increase of $44,396,000 included $44,675,000 of
net patient service revenue from the acquisition of the 166-bed Regional
Healthcare, Inc. health system effective June 1, 1998, the 473-bed, 2-
hospital Methodist Healthcare Hospitals health system effective April 1,
1999, and the 167-bed Lower Florida Keys Health System effective May 1,
1999, offset by a decrease of $279,000 in Corporate and miscellaneous
revenue.
As noted above, same hospital net operating revenue increased by
$5,927,000, or a 2.0% increase over the 1998 Period. The increase in net
operating revenue of same hospitals was primarily attributable to
inpatient and outpatient volume increases, partially offset by a decrease
in pricing. The Company has experienced lower payments in a number of
areas, resulting primarily from a) reductions mandated by the Balanced
Budget Act of 1997, particularly in the areas of home health and Medicare
bad debts, b) reduced Medicare outlier payments caused by an increase in
the cost outlier threshhold, c) reductions in various state' Medicaid
programs, and d) an increase in managed care discounts. In response to
payment pressures associated with the above, the Company has closed
several home health agencies and is reducing costs at all remaining home
health agencies. In addition, the Company is negotiating increases in
its managed care contracts, as well as tightening our cost controls
through various cost savings programs to achieve greater operating
efficiencies.
During the 1999 Period the Company's hospitals generated total
patient days of service and an occupancy rate of 181,338 and 44.7%,
respectively, versus 152,880 and 44.8%, respectively, for the 1998
Period. Same hospital patient days and occupancy for the 1999 Period
were 134,801 and 43.2%, respectively, versus 134,797 and 43.7%,
respectively, for the 1998 Period. Same hospital admissions for the
Company during the 1999 Period were 29,950, up 1.0% from the 29,667
admissions during the 1998 Period.
The Company's operating expenses (salaries and benefits, supplies
and expenses, provision for doubtful accounts and rent expense) for the
1999 Period were $270,314,000 or 76.7% of net patient service revenue as
compared to $224,200,000 or 74.2% of net patient service revenue for the
1998 Period. Of the total $46,114,000 increase, approximately
$12,762,000 related to same hospitals, which was largely attributable to
the increased patient volumes. Another $35,408,000 of increased
operating expense related to the acquisitions mentioned previously. The
9
Item 2. Management's discussion and Analysis of Financial
Condition and Results of Operations (continued)
remaining decrease of $2,056,000 represented a decrease in Corporate and
miscellaneous other operating expenses.
The Company's depreciation and amortization costs increased by
$2,877,000 and interest expense increased by $1,164,000. The increase in
depreciation and amortization resulted primarily from the acquisitions
mentioned previously. The increase in interest expense was due largely
from acquisition related debt and lower investment income in the 1999
Period (which is netted against interest expense), partially offset by
capitalized interest costs during the 1999 Period.
The Company's income before income taxes was $63,796,000 for the
1999 Period as compared to $63,628,000 for the 1998 Period, an increase
of $168,000 or .3%. The increase resulted primarily from same hospital
volume increases and the acquisitions mentioned previously. The
Company's provision for income taxes was $25,039,000 for the 1999 Period
as compared to $24,973,000 for the 1998 Period. These provisions reflect
effective income tax rates of 39.25% for both periods. As a result of
the foregoing, the Company's net income was $38,757,000 for the 1999
Period as compared to $38,655,000 for the 1998 Period.
Results of Operations
---------------------
Nine months ended June 30, 1999 compared
----------------------------------------
to nine months ended June 30, 1998
----------------------------------
Net patient service revenue for the nine months ended June 30, 1999
("1999 Nine Month Period") was $997,717,000, as compared to $839,642,000
for the nine months ended June 30, 1998 ("1998 Nine Month Period"). This
represented an increase in net patient service revenue of $158,075,000,
or 18.8%. Same hospitals provided $37,748,000 of the increase in net
patient service revenue. The remaining increase of $120,327,000 included
$121,056,000 of net patient service revenue from the acquisitions, offset
by a decrease of $729,000 in Corporate and miscellaneous revenue.
As noted above, same hospital net operating revenue increased
$37,748,000, or a 5.2% increase over the 1998 Nine Month Period. The
increase in net operating revenue of same hospitals was primarily
attributable to inpatient and outpatient volume increases, partially
offset by a decrease in pricing. The Company has experienced lower
payments in a number of areas, resulting primarily from a) reductions
mandated by the Balanced Budget Act of 1997, particularly in the areas
of home health and Medicare bad debts, b) reduced Medicare outlier
payments caused by an increase in the cost outlier threshhold, c)
reductions in various states' Medicaid programs, d) an increase in
managed care discounts, and e) a reduction in the Medicare case-mix
index.
During the 1999 Nine Month Period the Company's hospitals generated
531,993 total patient days of service and an occupancy rate of 48.5%,
respectively, versus 461,999 and 48.3%, respectively, for the 1998 Nine
Month Period. Same hospital patient days and occupancy for
10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
the 1999 Nine Month Period were 369,738 and 47.7%, respectively, versus
369,007 and 48.2%, respectively, for the 1998 Nine Month Period. Same
hospital admissions for the Company during the 1999 Nine Month Period
were 82,069, up 2.8% from the 79,826 admissions during the 1998 Nine
Month Period.
The Company's operating expenses for the 1999 Nine Month Period were
$755,178,000 or 75.7% of net patient service revenue as compared to
$629,335,,000 or 75.0% of net patient service revenue for the 1998 Nine
Month Period. Of the total $125,843,000 increase, approximately
$36,966,000 related to same hospitals, which was largely attributable to
increased patient volumes. Another $89,841,000 of increased operating
expense related to the hospital acquisitions mentioned previously. The
remaining decrease of $964,000 represented a decrease in Corporate and
miscellaneous other operating expenses.
The Company's depreciation and amortization costs increased by
$8,992,000 and interest expense increased by $1,133,000. The increase in
depreciation and amortization resulted primarily from the acquisitions
previously mentioned. The increase in interest expense was due largely
from acquisition related debt and lower investment income in the 1999
Nine Month Period (which is netted against interest expense), partially
offset by capitalized interest costs during the 1999 Nine Month Period.
The Company's income before income taxes was $193,283,000 for the
1999 Nine Month Period as compared to $171,176,000 for the 1998 Nine
Month Period, an increase of $22,107,000, or 12.9%. The increase
resulted primarily from same hospital volume increases and the
acquisitions mentioned previously. The Company's provision for income
taxes was $75,864,000 for the 1999 Nine Month Period as compared to
$67,186,000 for the 1998 Nine Month Period. These provisions reflect
effective income tax rates of 39.25% for both periods. As a result of
the foregoing, the Company's net income was $117,419,000 for the 1999
Nine Month Period as compared to $103,990,000 for the 1998 Nine Month
Period.
Liquidity and Capital Resources
-------------------------------
The Company's operating cash flows totaled $139,882,000 for the 1999
Nine Month Period as compared to $95,944,000 for the 1998 Nine Month
Period. The continued positive cash flows from operating activities
results from the Company's profitability and management of its working
capital. The Company's investing activities used $277,043,000 and
$210,050,000 for the 1999 Nine Month Period and 1998 Nine Month Period,
respectively. Acquisitions and capital expenditure requirements
(primarily construction of replacement hospitals in the 1999 Nine Month
Period) accounted for substantially all of the funds used in investing
activities in both periods. Financing activities provided net cash of
$136,198,000 for the 1999 Nine Month Period, an increase of $73,798,000
over the $62,400,000 provided during the 1998 Nine Month Period.
Borrowings to finance the Company's acquisitions,
11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
particularly during the 1999 Nine Month Period, provided the majority of
the source of cash flows for the financing activities during both
periods. See the Condensed Consolidated Statements of Cash Flows for the
nine months ended June 30, 1999 and 1998 at page 6 of this Report.
The Company currently has a $300 million Amended and Restated Credit
Agreement with a syndicate of banks. Interest accrues at the option of
the Company at either the prime rate of interest, a fixed certificate of
deposit rate of the agent bank or a LIBOR rate. Under all methods,
interest payments are required either monthly or quarterly. The interest
rate is subject to adjustments based upon certain debt-related financial
statement ratios provided under the Amended and Restated Credit
Agreement. As of August 2, 1999, there was a $263 million outstanding
balance. The $300 million Amended and Restated Credit Agreement permits
the Company to borrow under a revolving credit loan at any time through
November 30, 1999, at which time any outstanding balance becomes due and
payable. The Company is currently negotiating a renewal of the facility.
The Company also has a revolving credit facility with a bank which
provides a $10 million unsecured line of credit commitment through
January 31, 2000. All outstanding loans under this revolving credit
facility are due on January 31, 2000. Interest on the outstanding loans
is payable at the bank's Index Rate (prime) less 1/2%. As of August 2,
1999, there were no amounts outstanding under this line.
The Company is obligated to pay certain commitment fees based upon
amounts borrowed and available for borrowing during the terms of both
such credit facilities ("Credit Facilities").
The Company's Credit Facilities contain certain covenants which,
without prior consent of the banks, limit certain activities of the
Company and its subsidiaries, including those relating to merger,
consolidation and the Company's ability to secure indebtedness, make
guarantees, and grant security interests. The Company must also maintain
minimum levels of consolidated tangible net worth, debt service coverage,
debt to cash flow and net worth.
Effective October 28, 1998 the Company completed a Form S-3 to
register $300 million of senior unsecured debt securities. The Company
may issue all or part of the issue at a future date for general corporate
purposes, including acquisitions, capital expenditures, refinancing of
indebtedness, working capital, and repurchase and redemption of
securities.
Effective April 1, 1999 the Company acquired a 473-bed, 2-hospital
health system located in Jackson, Mississippi pursuant to an asset
purchase and lease agreement. The consideration totaled approximately
12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
$131 million in cash, including $16 million in net working capital.
Effective May 1, 1999 the Company acquired a 167-bed, 2-hospital
system located in Key West, Florida pursuant to asset purchase and lease
agreements. The consideration totaled approximately $49.9 million, which
included $27 million in cash paid at closing, $18.6 recorded as the net
present value of lease payments required over the 30 year term of the
lease, and the assumption of $4.3 million in debt. The agreements
included the assumption of working capital balances at closing, and also
entitle the Company to receive $1.5 million per year in cash from the
seller for the first ten years of the lease to support indigent care
programs.
Effective July 1, 1999 the Company acquired a 204-bed acute care
hospital located in Lancaster, Pennsylvania pursuant to a definitive
purchase agreement. The Company paid approximately $15 million in cash,
which included approximately $1 million in net working capital. The
Company is committed to the construction of a replacement hospital,
subject to obtaining all required governmental and regulatory approvals.
During July 1999 the Company purchased 7,001,300 shares of its own
common stock on the open market for a total cost of $60,991,000. The
Company used its unsecured line of credit to pay for the stock
repurchases.
At the present time, the Company anticipates that cash on hand,
internally generated funds, and funds available under its Credit
Facilities and Form S-3 mentioned above will be sufficient to satisfy the
Company's requirements for capital expenditures, future acquisitions and
working capital.
Year 2000 Computer Issues
-------------------------
The Year 2000 Computer Issue is the result of most computer programs
using two digits rather than four to identify a year in a data field.
These programs were designed and developed without considering the impact
of the upcoming change in the century. If not corrected, many computer
applications could fail or create erroneous results on or after January
1, 2000.
The Company has implemented a plan to evaluate and correct the
effect of this problem on the Company's computer system and programs. As
part of the plan, the Company is also contacting its principal vendors
and suppliers to identify and correct the potential effects of
13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
this problem relating to embedded systems of certain computer aided
medical and other equipment. In addition, the Company is contacting the
Federal and State governments, other payors and other companies with
which the Company's systems interface or on which they rely to monitor
their timely completion of necessary upgrades.
The Company's financial systems, including general ledger, accounts
payable, cash management, payroll and patient accounting are now Year
2000 compliant. The Company has completed the implementation of the
compliant financial systems at all facilities, including its recently
acquired hospitals.
The Company is utilizing both internal and external resources to
complete the Year 2000 modifications. The majority of the costs relating
to the Year 2000 Issue have been expensed as incurred. To date, such
costs have not had a material adverse impact to the Company's results of
operation. However, there can be no guarantee that increased Year 2000
costs could affect future actual results and differ materially from those
anticipated. Factors that might cause material differences include, but
are not limited to, the availability and cost of trained personnel and
the ability to locate and correct all relevant computer coding and all
medical equipment affected.
As noted above, the Company is contacting its principal suppliers,
other vendors and payors, including Federal and State governments,
Medicare fiscal intermediaries, insurance companies and managed care
companies, concerning the status of their Year 2000 compliance. The
Company is not aware at this time whether those other systems are or will
be Year 2000 compliant and is unable to estimate at this time the impact
on the Company if one or more of those systems is not Year 2000
compliant. For the foregoing reasons, the Company is not able to
determine at this time whether the Year 2000 Computer Issue will
materially affect its future financial results or financial condition.
Forward-Looking Statements
--------------------------
Certain statements contained in this Form 10-Q, including, without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects" and words of similar import, constitute "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company or
industry results to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general
economic and business conditions, both nationally and in the regions in
14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
which the Company operates; industry capacity; demographic changes;
existing governmental regulations and changes in, or the failure to
comply with, governmental regulations; legislative proposals for health
care reform; the ability to enter into managed care provider arrangements
on acceptable terms; changes in Medicare and Medicaid payment levels;
liability and other claims asserted against the Company; competition; the
loss of any significant ability to attract and retain qualified
personnel, including physicians; the availability and terms of capital to
fund additional acquisitions or replacement facilities. Given these
uncertainties, prospective investors are cautioned not to place undue
reliance on such forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly announce the results
of any revision to any of the forward-looking statements contained herein
to reflect future events or developments.
15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
None.
Item 2. Changes in Securities.
---------------------
None.
Item 3. Defaults upon Senior Securities.
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information.
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
a. Exhibits:
--------
See Index to Exhibits located on page 18.
b. Reports on Form 8-K:
-------------------
None
16
SIGNATURES
Pursuant to the requirements of the securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HEALTH MANAGEMENT ASSOCIATES, INC.
DATE: August 6, 1999 BY: /s/ Stephen M. Ray
-----------------------------
Stephen M. Ray
Executive Vice President-Finance
(Duly authorized officer and
Principal Financial Officer)
17
INDEX TO EXHIBITS
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession.
Not applicable.
(3) (i) Articles of Incorporation
3.1 The Fifth Restated Certificate of Incorporation, previously filed and
included as Exhibit 3.1 to the Company's Quarterly Report on Form 10-
Q for the quarter ended March 31, 1995, is incorporated herein by
reference.
3.2 Certificate of Amendment to Fifth Restated Certificate of
Incorporation, previously filed and included as Exhibit 4.5 to the
Company's Annual Report on Form 10-K for the year ended September 30,
1998, is incorporated herein by reference.
(ii) By-laws
The By-laws, as amended, previously filed and included as Exhibit 3.2
to the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1995, is incorporated herein by reference.
(4) Instruments defining the rights of security holders, including indentures.
The Exhibits referenced under (3) of this Index to Exhibits are
incorporated herein by reference.
Fourth Amended and Restated Credit and Reimbursement Agreement among the
Company and NationsBank of Florida National Association and the Banks named
therein, dated December 1, 1994, previously filed and included as Exhibit
4.12 to the Company's Annual Report on Form 10-K for the year ended
September 30, 1994, is incorporated herein by reference.
Credit Agreement dated May 6, 1996 between First Union National Bank of
Florida and the Company, pertaining to a $10 million working capital and
cash management line of credit, previously filed and included as Exhibit
4.3 to the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996, is incorporated herein by reference.
Amendment Agreement No. 1 to Fourth Amended and Restated Revolving Credit
and Reimbursement Agreement, made as of September 30, 1996, previously
filed and included as Exhibit 4.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997, is incorporated herein by
reference.
(10) Material contracts.
Agreement by and among Methodist Healthcare - Jackson Hospitals, Methodist
Healthcare Central Mississippi Medical Associates, Jackson HMA, Inc.,
Health Management Associates, Inc. and Methodist Healthcare, as Guarantor,
dated February 16, 1999, is included herein as Exhibit 10.1 at page 20 of
this Report.
18
INDEX TO EXHIBITS (Continued)
(11) Statement re computation of per share earnings.
Not applicable.
(15) Letter re unaudited interim financial information.
Not applicable.
(18) Letter re change in accounting principles.
Not applicable.
(19) Report furnished to security holders.
Not applicable.
(22) Published report regarding matters submitted to vote of security holders.
Not applicable.
(23) Consents of experts and counsel.
Not applicable.
(24) Power of attorney.
Not applicable.
(27) Financial Data Schedule.
Financial Data Schedule is included herein as Exhibit 27.1 at page 71 of
this report.
(99) Additional exhibits.
Not applicable.
19