Health Management Associates, Inc. Reports Third Quarter Earnings

NAPLES, Fla., Oct 28, 2008 (BUSINESS WIRE) — Health Management Associates, Inc. (HMA 1.80, -0.20, -10.0%) today announced its consolidated financial results for the third quarter ended September 30, 2008. HMA reported diluted earnings per share ("EPS") from continuing operations, excluding refinancing costs, of $0.07, as shown in the accompanying table. HMA also reported net revenue of $1,081.9 million and earnings, before interest, refinancing and debt modification costs, income taxes, depreciation and amortization, gains and losses on sales of assets and minority interests ("EBITDA") of $141.9 million. Income from continuing operations was $10.4 million, or $0.04 per diluted share, and net income was $6.4 million, or $0.02 per diluted share.

For continuing operations, compared to the prior year’s third quarter, net revenue increased 3.4%; net revenue per adjusted admission increased 4.4%; adjusted admissions, reflecting total admissions adjusted for outpatient volume, decreased 1.0%; admissions decreased 3.3% (approximately 0.6% from fewer uninsured patients); emergency room visits decreased 1.3%; and surgeries decreased 2.6%. EBITDA from continuing hospital operations for the quarter was $160.1 million, which represented a margin of 14.8%.

During the quarter, the company’s operations were negatively impacted by approximately $3.3 million, or approximately $0.01 per diluted share, which represented $2.1 million of lost revenue and actual expenses incurred attributable to two hurricanes and one tropical storm affecting over a dozen hospitals in Florida and Mississippi, as well as $1.2 million of compensation expense attributable to the company’s recent CEO change during the quarter.

"We are pleased with the progress that has been made during the third quarter, as we held bad debt expense relatively steady, significantly reduced our debt, and continued to improve our quality metrics," said Gary D. Newsome, HMA’s President and Chief Executive Officer. "We have a very good foundation to build upon going forward as we implement a more disciplined operational focus. By focusing and successfully improving HMA’s hospital operation fundamentals, we will produce tangible results both in the near term and in the long run."

For the third quarter, the provision for doubtful accounts, or bad debt expense, was $124.2 million, or 11.5% of net revenue, compared to $122.7 million, or 11.7% of net revenue, for the same quarter a year ago.

Uninsured discounts from continuing operations for the quarter were $149.8 million compared to $152.8 million for the same quarter a year ago, and charity/indigent care write-offs for the quarter were $25.5 million compared to $16.5 million for the same period a year ago. The sum of uninsured discounts, charity/indigent write-offs and bad debt expense, as a percent of the sum of net revenue, uninsured discounts and charity/indigent write-offs, was 23.8% for the third quarter, compared to 24.0% for the same quarter a year ago.

Cash flow from continuing operating activities for the nine month period ended September 30, 2008 was $376.1 million, after cash interest and cash tax payments aggregating $141.4 million.

During the second quarter ended June 30, 2008, HMA utilized the net proceeds from a private placement of $250.0 million of 3.75% senior subordinated convertible notes due 2028 together with additional cash-on-hand to repurchase, in the open market, approximately $292.0 million in principal face value of HMA’s 4.375% convertible senior subordinated notes due 2023, leaving approximately $282.7 million in principal face value of such 4.375% convertible senior subordinated notes outstanding as of June 30, 2008. On August 1, 2008, holders of 99.9% of HMA’s remaining 4.375% convertible notes exercised a put right, and HMA repurchased $282.5 million of the principal face value of HMA’s outstanding 2023 convertible senior subordinated notes.

Between HMA’s repurchases of 4.375% convertible senior subordinated notes due 2023, HMA’s repayment of the Term B loan under the February 16, 2007 Credit Facility with Bank of America, N.A., and HMA’s repayment of miscellaneous minor debt, HMA will have reduced its net debt by approximately $500 million, or 13% of total debt, by December 31, 2008. Substantially all of HMA’s debt is fixed-rate with a total weighted average of 6.4%, and HMA’s first significant debt maturity occurs in February 2014.

HMA is reiterating its fiscal 2008 diluted EPS from continuing operations objective range to be between $0.41 and $0.47, excluding a previously reported gain from the Novant Health joint venture transaction and other items. As previously stated, HMA’s EPS objective is based on a net revenue objective range of $4.4 to $4.6 billion, and takes into account an admissions decrease for the full year of between 1% and 3%.

HMA’s management team will hold a conference call to discuss HMA’s consolidated financial results and the contents of this press release later this morning at 11:00 a.m. ET. Investors are invited to access the webcast via HMA’s website located at www.hma.com or via www.streetevents.com or join the conference call by dialing 877-476-3476. HMA will archive a copy of the audio webcast, along with any related information that HMA may be required to provide pursuant to Securities and Exchange Commission rules, on its website under the heading "Investor Relations," for a period of 60 days following the conference call.

HMA’s mission is the delivery of compassionate and high quality health care services that improve the quality of life for its patients, physicians, and the communities it serves. HMA owns and operates 56 hospitals, with approximately 8,000 licensed beds, in non-urban communities located throughout the United States. All references to "HMA" or the "Company" used in this release refer to Health Management Associates, Inc. or its affiliates.