14. This problem asks you to analyze the capital structure of HCA, Inc., the largest private...

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14. This problem asks you to analyze the capital structure of HCA, Inc., the largest private operator of health care facilities in the world. In 2006, a syndicate of private equity firms acquired the firm for $31.6 billion and took it private. In November 2010, as interest rates hit record lows, the company announced a dividend recapitalization in which it would distribute an extraordinary $2 billion dividend financed in large part by a $1.53 billion bond offering. A spreadsheet with HCA's financial statements for 2005-2009 and specific questions is available for download through McGraw-Hill's Connect or your course instructor (see the Preface for more information). HCA INC. INCOME STATEMENT (S millions) 2005 2006 2007 2008 2009 Sales Cost of Goods Sold Gross Profit 24,455 25,477 26,858 28,374 30,052 20,391 21,448 22,480 24,023 24,826 4,064 4.029 4,378 4,351 5,226 Depreciation 1,374 1,391 1,426 1,416 1,425 Operating Profit 2,690 2,638 2,952 2,935 3,801 Interest Expense 655 955 2,215 2,021 1,987 Non-Operating Income/Expense 412 179 661 256 188 Pretax Income 2,327 1,862 1,398 1,170 2,002 Total Income Taxes 725 625 316 268 627 Minority Interest 178 201 208 229 321 Net Income 1,424 1,036 874 673 1,054 BALANCE SHEET (S millions) ASSETS Cash & Equivalents Net Receivables Inventories 2005 2006 2007 2008 2009 336 634 393 465 312 3,332 3,705 3,895 3,780 3,692 616 669 710 737 802 Other Current Assets 931 1,070 1,207 1,319 1,771 Total Current Assets 5,215 6,078 6,205 6,301 6,577 Gross Plant, Property & Equipment 20,818 21,907 22,579 23,714 24,669 Accumulated Depreciation 9,439 10,238 11,137 12,185 13,242 Net Plant, Property & Equipment 11,379 11,669 11,442 11,529 11,427 Investments at Equity 627 679 688 842 853 Other Investments 2,134 1,886 1,669 1,422 1,166 Intangibles 2,626 2.601 2,629 2,580 2.577 Deferred Charges 85 614 539 458 418 Other Assets 159 148 853 1,148 1,113 TOTAL ASSETS 22,225 23,675 24,025 24,280 24,131 LIABILITIES Long Term Debt Due In One Year 586 293 308 404 Accounts Payable 1,484 1,415 1,370 1,370 846 1,460 Taxes Payable 0 0 190 224 Accrued Expenses 1,825 1,868 1,981 1,912 0 2,007 Total Current Liabilities 3,895 3,576 3,849 3.910 4,313 Long Term Debt 9,889 28,115 27,000 26.585 24,824 Deferred Taxes 830 390 0 0 0 Minority Interest 828 907 938 995 1,008 Other Liabilities 1,920 1,936 2,612 2,890 2,825 TOTAL LIABILITIES 17,362 34,924 34,399 34,380 32.970 Preferred Stock 0 125 164 155 147 Common Stock 4 1 1 1 1 Capital Surplus 0 0 112 165 226 Retained Earnings 4,859 (11,375) (10,651) (10,421) (9,213) Common Equity 4,863 (11,374) (10,538) (10,255) (8,986) TOTAL EQUITY 4,863 (11,249) (10,374) (10,100) (8,839) TOTAL LIABILITIES & EQUITY 22,225 23,675 24,025 24,280 24,131 14. This problem asks you to analyze the capital structure of HCA, Inc., the largest private operator of health care facilities in the world. In 2006, a syndicate of private equity firms acquired the firm for $31.6 billion and took it private. In November 2010, as interest rates hit record lows, the company announced a dividend recapitalization in which it would distribute an extraordinary $2 billion dividend financed in large part by a $1.53 billion bond offering. A spreadsheet with HCA's financial statements for 2005-2009 and specific questions is available for download through McGraw-Hill's Connect or your course instructor (see the Preface for more information). HCA INC. INCOME STATEMENT (S millions) 2005 2006 2007 2008 2009 Sales Cost of Goods Sold Gross Profit 24,455 25,477 26,858 28,374 30,052 20,391 21,448 22,480 24,023 24,826 4,064 4.029 4,378 4,351 5,226 Depreciation 1,374 1,391 1,426 1,416 1,425 Operating Profit 2,690 2,638 2,952 2,935 3,801 Interest Expense 655 955 2,215 2,021 1,987 Non-Operating Income/Expense 412 179 661 256 188 Pretax Income 2,327 1,862 1,398 1,170 2,002 Total Income Taxes 725 625 316 268 627 Minority Interest 178 201 208 229 321 Net Income 1,424 1,036 874 673 1,054 BALANCE SHEET (S millions) ASSETS Cash & Equivalents Net Receivables Inventories 2005 2006 2007 2008 2009 336 634 393 465 312 3,332 3,705 3,895 3,780 3,692 616 669 710 737 802 Other Current Assets 931 1,070 1,207 1,319 1,771 Total Current Assets 5,215 6,078 6,205 6,301 6,577 Gross Plant, Property & Equipment 20,818 21,907 22,579 23,714 24,669 Accumulated Depreciation 9,439 10,238 11,137 12,185 13,242 Net Plant, Property & Equipment 11,379 11,669 11,442 11,529 11,427 Investments at Equity 627 679 688 842 853 Other Investments 2,134 1,886 1,669 1,422 1,166 Intangibles 2,626 2.601 2,629 2,580 2.577 Deferred Charges 85 614 539 458 418 Other Assets 159 148 853 1,148 1,113 TOTAL ASSETS 22,225 23,675 24,025 24,280 24,131 LIABILITIES Long Term Debt Due In One Year 586 293 308 404 Accounts Payable 1,484 1,415 1,370 1,370 846 1,460 Taxes Payable 0 0 190 224 Accrued Expenses 1,825 1,868 1,981 1,912 0 2,007 Total Current Liabilities 3,895 3,576 3,849 3.910 4,313 Long Term Debt 9,889 28,115 27,000 26.585 24,824 Deferred Taxes 830 390 0 0 0 Minority Interest 828 907 938 995 1,008 Other Liabilities 1,920 1,936 2,612 2,890 2,825 TOTAL LIABILITIES 17,362 34,924 34,399 34,380 32.970 Preferred Stock 0 125 164 155 147 Common Stock 4 1 1 1 1 Capital Surplus 0 0 112 165 226 Retained Earnings 4,859 (11,375) (10,651) (10,421) (9,213) Common Equity 4,863 (11,374) (10,538) (10,255) (8,986) TOTAL EQUITY 4,863 (11,249) (10,374) (10,100) (8,839) TOTAL LIABILITIES & EQUITY 22,225 23,675 24,025 24,280 24,131