Hospital Corporation of AmericaHospital Corporation of AmericaRovi DasRovi Das
ACG2021.080ACG2021.080
Executive SummaryExecutive Summary
There will always be a need for healthcare. This company is in the fore front in There will always be a need for healthcare. This company is in the fore front in providing care to people who need it. This company is expanding but suffers from providing care to people who need it. This company is expanding but suffers from a shortage of trained employees. The company is in debt which can hurt the a shortage of trained employees. The company is in debt which can hurt the company but all other ratios look good. The stock has split several time in the company but all other ratios look good. The stock has split several time in the past five years and the company recently announce an increase in dividends past five years and the company recently announce an increase in dividends issued to stock holders. The profitability of this company depends on the ability of issued to stock holders. The profitability of this company depends on the ability of the people they treat in their hospitals to pay their bills. HCA recorded a loss in the people they treat in their hospitals to pay their bills. HCA recorded a loss in the fourth quarter because the most of the people they treated for flu symptoms the fourth quarter because the most of the people they treated for flu symptoms could not pay their bill. This company is expanding and is in the forefront of the could not pay their bill. This company is expanding and is in the forefront of the health care treatment industry. There will be a greater demand for the services of health care treatment industry. There will be a greater demand for the services of this company as the age of the population increases. this company as the age of the population increases.
Company’s Annual Report here:Company’s Annual Report here:
http://ir.thomsonfn.com/InvestorRelationshttp://ir.thomsonfn.com/InvestorRelations/IRfiles/8847/pdfs/2002AR.pdf/IRfiles/8847/pdfs/2002AR.pdf
Part A. IntroductionPart A. Introduction
CEO: Jack M. Bovender Jr.CEO: Jack M. Bovender Jr.
Location of home office: Nashville, TNLocation of home office: Nashville, TN Ending date of latest fiscal year: Dec, 31,2002.Ending date of latest fiscal year: Dec, 31,2002. The principal products or services that the company The principal products or services that the company
provides is operation and management of hospitals.provides is operation and management of hospitals. Main geographic area of activity: Nationwide.Main geographic area of activity: Nationwide.
Part A. Audit ReportPart A. Audit Report
Company’s independent auditors: Earnest Company’s independent auditors: Earnest & Young . & Young .
The Auditors stated that they followed The Auditors stated that they followed generally accepted accounting practices in generally accepted accounting practices in the U.S. They also stated that the financial the U.S. They also stated that the financial report was accurate and the responsibility of report was accurate and the responsibility of the company. the company.
Part A. Stock Market InformationPart A. Stock Market Information
Most recent price of the company’s stock: 42.30Most recent price of the company’s stock: 42.30 Twelve month trading range of the company’s stock: 27.30-Twelve month trading range of the company’s stock: 27.30-
46.3046.30
Dividend per share: .13Dividend per share: .13 Date of the above information:23 Feb 04Date of the above information:23 Feb 04 Your opinion about the company stock as an Your opinion about the company stock as an
investment? HOLDinvestment? HOLD
Part B. Industry Situation and Part B. Industry Situation and Company PlansCompany Plans
There will always be a need for medical care. HCA is one of the There will always be a need for medical care. HCA is one of the leaders in the healthcare industry. The population of the country is leaders in the healthcare industry. The population of the country is getting older and there is already a shortage of healthcare getting older and there is already a shortage of healthcare providers. There will always be a demand for the services this providers. There will always be a demand for the services this company provides. It is the largest health care treatment company provides. It is the largest health care treatment company in the U.S. The profits of the company are tied to company in the U.S. The profits of the company are tied to people who can pay for healthcare. According to the annual people who can pay for healthcare. According to the annual report HCA has bought some hospitals in the mid west which it report HCA has bought some hospitals in the mid west which it plans on improving. The shortage of healthcare professionals plans on improving. The shortage of healthcare professionals has created an need for special programs for retention and hiring. has created an need for special programs for retention and hiring. According to a recent report from myway.com’s financial section According to a recent report from myway.com’s financial section this company lost money in the forth quarter because of this company lost money in the forth quarter because of uninsured patients who came to the hospital because of flu uninsured patients who came to the hospital because of flu symptoms. symptoms.
Part C. Income StatementPart C. Income Statement
The format most like a single-The format most like a single-step format.step format.
( In millions of dollars)( In millions of dollars) 20022002 20012001
Gross profitGross profit 11,77011,770 10,67410,674
Income from Income from operationsoperations
1,4551,455 1,5461,546
Net incomeNet income 833833 955955
Gross profit increased but both net income and income Gross profit increased but both net income and income from operations decreased. They were earning more from operations decreased. They were earning more but were less profitable.but were less profitable.
Part C. Balance SheetPart C. Balance Sheet
–(in millions)(in millions)–Total assets, liabilities and stockholders equity increased from the Total assets, liabilities and stockholders equity increased from the previous year.previous year.
YearYear Total Total AssetsAssets
LiabilitiesLiabilities Stockholders Stockholders
equityequity
20022002 18,74118,741 12,42812,428 5,7025,702
20012001 17,73017,730 12,40512,405 4,7624,762
Part C. Statement of Cash Part C. Statement of Cash FlowsFlows
Cash flows is from operations is more than Cash flows is from operations is more than net income for the past two years.net income for the past two years.The company growing through investing The company growing through investing activities, like buying property, plant and activities, like buying property, plant and equipment.equipment.The company’s primary source of financing is The company’s primary source of financing is stock sales.stock sales.Overall, cash has increased over the past two Overall, cash has increased over the past two years.years.
Part D. Accounting PoliciesPart D. Accounting PoliciesThe significant accounting policies, relating to The significant accounting policies, relating to revenue recognition, cash, short-term investments, revenue recognition, cash, short-term investments, inventories, and property and equipment is LIFO is inventories, and property and equipment is LIFO is used in the accounting process.used in the accounting process.The topics of the notes to the financial statements The topics of the notes to the financial statements are: Accounting Policies, investigations and are: Accounting Policies, investigations and settlements of certain government claims, settlements of certain government claims, acquisitions and dispositions, impairments of long-acquisitions and dispositions, impairments of long-lived assets, impairment of investment securities, lived assets, impairment of investment securities, income taxes, earnings per share, investments of income taxes, earnings per share, investments of insurance subsidiary, financial instruments, long-term insurance subsidiary, financial instruments, long-term debt, contingencies, capital stock and stock debt, contingencies, capital stock and stock repurchases, stock benefit plans, employee benefit repurchases, stock benefit plans, employee benefit plans, segment and geographic information, other plans, segment and geographic information, other comprehensive income, accrued expenses and comprehensive income, accrued expenses and allowances for doubtful accounts.allowances for doubtful accounts.
Part E. Financial AnalysisPart E. Financial AnalysisLiquidity RatiosLiquidity Ratios
For the past two years:For the past two years: Working Capital: Working Capital: 2002- 766 million2002- 766 million 2001 957 million. The working capital of 2001 957 million. The working capital of
the company went down from 2001 to 2002 but is still liquid.the company went down from 2001 to 2002 but is still liquid.
Current Ratio: Current Ratio: 2002-1.20 2001-1.30. The current ratio went down from the 2002-1.20 2001-1.30. The current ratio went down from the previous year. The abilities to pay bills went down a little from the previous year.previous year. The abilities to pay bills went down a little from the previous year.
Receivable turnover: Receivable turnover: 2002-7.75, 2001- 7.41. The effectiveness of credit 2002-7.75, 2001- 7.41. The effectiveness of credit policies increased from the year before. policies increased from the year before.
Average days’ sales uncollected: Average days’ sales uncollected: 2002-47.1,2001-49.2. The 2002-47.1,2001-49.2. The average days it takes to collect on accounts receivable went down from the previous year.average days it takes to collect on accounts receivable went down from the previous year.
Inventory turnover: Inventory turnover: 2002-17.97, 2001-17.2. The inventory went up from the 2002-17.97, 2001-17.2. The inventory went up from the previous year. previous year.
Average days’ inventory on hand: Average days’ inventory on hand: 2002-20.3, 2001-21.22. The 2002-20.3, 2001-21.22. The average days inventory went down from the previous year. average days inventory went down from the previous year.
Part E. Financial AnalysisPart E. Financial AnalysisProfitability RatiosProfitability Ratios
For the past two years:For the past two years: Profit margin: Profit margin: 2002- 4.2%, 2001-5.5%. The net income from each 2002- 4.2%, 2001-5.5%. The net income from each
dollar of sales has gone down from the previous year. dollar of sales has gone down from the previous year.
Asset turnover:Asset turnover:2002-1.08, 2001-1.02. Asset turnover went up 2002-1.08, 2001-1.02. Asset turnover went up from 2001 to 2002. Assets used to produced sales increased in efiency. from 2001 to 2002. Assets used to produced sales increased in efiency.
Return on assetsReturn on assets:2002-4.5%,2001-%5.4. The companies :2002-4.5%,2001-%5.4. The companies earning power went down in 2002.earning power went down in 2002.
Return on equity:Return on equity:2002-15.9%, 2001-5.4%. The profitability of 2002-15.9%, 2001-5.4%. The profitability of stockholders investments went up from 2001 to 2002.stockholders investments went up from 2001 to 2002.
Part E. Financial AnalysisPart E. Financial AnalysisSolvency RatioSolvency Ratio
Debt to equityDebt to equity:: 2002-2.17, 2001-2.60. HCA has a high 2002-2.17, 2001-2.60. HCA has a high
debt to equity ratio. The creditors currently own this company. debt to equity ratio. The creditors currently own this company.
Part E. Financial AnalysisPart E. Financial AnalysisMarket Strength RatiosMarket Strength Ratios
For the past two years:For the past two years:
Price/earnings per share:Price/earnings per share:2002-81.3, 2001-21.62. The 2002-81.3, 2001-21.62. The
price/earnings per share went up from the previous year. This means that investors have price/earnings per share went up from the previous year. This means that investors have more confidence in the company than the previous year.more confidence in the company than the previous year.
Dividend yield: Dividend yield: 2002-.003, 2001-.001. Dividend yield went up from the 2002-.003, 2001-.001. Dividend yield went up from the
previous year. It is having more of a return to investors. previous year. It is having more of a return to investors.
