Health Management Associates, Inc.
Health Management Associates — Proxy Contest (July 2013)
43 slides from Health Management Associates's proxy contest presentation, Jul 25, 2013
Slide 1: Schedule 14A Information
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant x Filed by a Party other than the Registrant ¨ Check the appropriate box: ¨ Preliminary Proxy Stat
Slide 2: Creating Shareholder Value
Creating Shareholder Value Presentation by the Health Management Board of Directors This presentation is provided for the recipient only and cannot be reproduced or shared without Health Management Associates, Inc.’s expressed consent © 2013 Health Management Associates, Inc.
Slide 3: Forward-looking statements
Forward-looking statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks, uncertainties and assumpt
Slide 4: Additional information
Additional information Health Management and its directors and executive officers are deemed to be participants in the solicitation of consent revocations from Health Management stockholders in connection with the consent solicitation conducted by Glenview Capital Partners, L.P. and certain of its a
Slide 5: Agenda
Agenda I. Business Performance Overview II. Health Management Board and Governance Drive Value III. Strong Operational Performance and Shareholder Returns IV. Strategic Positioning for Success V. Summary 4 © 2013 Health Management Associates, Inc..
Slide 6: I. Business Performance Overview
* * * * * * * * * * * * * * I. Business Performance Overview 5 © 2013 Health Management Associates, Inc..
Slide 7: Overview
Overview Health Management has achieved consistent growth and solid business results despite a challenging and evolving healthcare environment » Sustained revenue and adjusted EBITDA growth, and stock performance outpacing major indices through the past several years, including the financial downtur
Slide 8: Leading hospital operator with record of growth and value creation
Leading hospital operator with record of growth and value creation • A focus on non-urban markets • 71 hospitals in 15 states • Located primarily in the southeastern U.S. • Strong presence in areas with favorable demographic trends 7 © 2013 Health Management Associates, Inc..
Slide 9: Long-term history of performance and growth
Long-term history of performance and growth Net Revenue(1) Adjusted EBITDA(2) (millions) (millions) 1 Net Revenue before provision for doubtful accounts 2 See Appendix SOURCE: Company Reports 8 © 2013 Health Management Associates, Inc..
Slide 10: Focused on shareholder value creation
Focused on shareholder value creation • Demonstrated record of strategic actions to create value: » Creating efficiencies through scale across 71 hospital locations » Successful turnarounds of acquired hospital operations » Industry-leading cost structure and financial performance » High quality of
Slide 11: History of dividend and share repurchases
History of dividend and share repurchases • Over several years (1999-2007), Health Management repurchased over one-half billion in stock • In that same period, the company paid $2.6 billion in dividends, including $2.4 billion in 2007 in millions, 1999-2007 Share Repurchase Dividend $ 559.2 $ 2,575.
Slide 12: II. Health Management Board and Governance Drive Shareholder Value
II. Health Management Board and Governance Drive Shareholder Value 11 © 2013 Health Management Associates, Inc..
Slide 13: Board of Directors with history of value creation
Board of Directors with history of value creation Health Management’s Board is comprised of individuals who combine relevant business and healthcare experience, with exceptional judgment, to create long-term value Kent P. Dauten – Managing Director, Keystone Capital Investor with transactional, capi
Slide 14: Health Management's corporate governance reflects best practices that promote shareholder interests
Health Management’s corporate governance reflects best practices that promote shareholder interests • Health Management given a QuickScore Governance Rating of 1 by ISS,reflecting lowest risk ratings on scale from 1 to 10. Also earned Compensation Pillar QuickScoreof 1, lowest risk rating • CEO pay
Slide 15: Deep bench, long-tenured local market leadership
Deep bench, long-tenured local market leadership Health Management continues to be led by dynamic, experienced and accomplished executives at all levels of the organization Executive » Corporate-level executives with long and successful leadership track records in the health care industry, leading a
Slide 16: III. Strong Operational Performance and Shareholder Returns
* * * * * * * * * * * * III. Strong Operational Performance and Shareholder Returns 15 © 2013 Health Management Associates, Inc..
Slide 17: Recent performance reflects growth story
Recent performance reflects growth story Continuing Operations 2009 2012 CAGR³ (%) Total revenue¹ ($ Millions) Revenues have 5,878 4,050 been growing… Revenues per AA ($) 7,469 8,485 Margins have been preserved… Operating costs² per AA ($) 6,216 7,095 Adjusted EBITDA³ ($ Millions) Adjusted EBITDA 67
Slide 18: Strengthening financial profile following $2.4 billion special dividend to shareholders
Strengthening financial profile following $2.4 billion special dividend to shareholders Leverage Interest Coverage (Debt/EBITDA) (EBITDA/Interest Expense) SOURCE: Company Reports *Note: Health Management returned $2.4 billion to shareholders via a $10 per share one-time special cash dividend on Marc
Slide 19: Health Management continues to lead in operating margin vs. peers
Health Management continues to lead in operating margin vs. peers 2009 2010 2011 2012 EBITDA margin, 2009 - 2012 “EV/EBITDA is a valuation indicator for the Percent overall company rather than solely its common stock.” CFA Level II curriculum, 2013 HMA SOURCE: Quarterly Reports on Form 10-Q and/or A
Slide 20: Health Management continues to lead in returns on invested capital vs. peers
Health Management continues to lead in returns on invested capital vs. peers 2009 2010 2011 2012 “Value-minded executives know that although ROIC (including goodwill) growth is good, returns on invested capital (ROIC) Percent, without capitalized operating leases can be an equally – or still more –
Slide 21: Health Management maintains efficient cost structure vs. peers
Health Management maintains efficient cost structure vs. peers 2012 Average cost per Adjusted Average Admission (AA)¹ LPNT $ 6,305 HMA $ 7,095 CYH $ 8,211 THC $ 9,964 VHS $ 10,479 Avg $ 8,411 Peer average cost per AA is 19% higher than Health Management SOURCE: Quarterly Reports on Form 10-Q and/or
Slide 22: Total return to shareholders based on stock price
Total return to shareholders based on stock price Comparison of Cumulative Five Year Total Return (Includes reinvestment of dividends) SOURCE: Company reports; prepared by Capital IQ (S&P) 21 © 2013 Health Management Associates, Inc..
Slide 23: IV. Strategic Positioning for Success
* * * * * * * * * * * * * * IV. Strategic Positioning for Success 22 © 2013 Health Management Associates, Inc..
Slide 24: Health Management is well-positioned for continued success in evolving market
Health Management is well-positioned for continued success in evolving market • Strong presence in growth markets • Net beneficiary of healthcare reform • Ongoing strategic franchise development via successful acquisitions • Expanding clinical and non-acute affiliations position for population healt
Slide 25: Strong portfolio presence in growth areas
Strong portfolio presence in growth areas % CAGR, 2011-2016 Inpatient admissions, growth by county Health Management hospitals by area growth prospects 1.6+ 12 0.8 - 1.6 22 0 - 0.8 17 -0.8 - 0 15 -1.4 - -0.8 2 Less than -1.4 2 Note: Includes trends like inpatient to outpatient shifts, epidemiologica
Slide 26: Net beneficiary of healthcare reform, based on early view
Net beneficiary of healthcare reform, based on early view 1 Annual impact on operating EBITDA –Base Case NOT CUMULATIVE $ Millions Impact on EBITDA 98 64 38 Range of impact based on ACA as originally written - does not take into account recent delays of implementation and state decisions 175 189 207
Slide 27: Proven track record of successful partnerships
Proven track record of successful partnerships 2009 Growing Revenue & EBITDA Contribution (in millions) 2010 2011 2012 Net Revenue* $ 372 $ 845 $ 1,461 EBITDA $ 41 $ 75 $ 208 *Net Revenue before provision for doubtful accounts SOURCE: Company Reports 26 © 2013 Health Management Associates, Inc..
Slide 28: Enhancing shareholder value through strategic franchise development
Enhancing shareholder value through strategic franchise development Extending Tennessee franchise Extending Florida franchise Bert Fish Munroe Bayfront Legend Recent Acquisitions In exclusive negotiations Tennova Wuesthoff & Shands Revenue & EBITDA Revenue Contribution Revenue & EBITDA Contribution
Slide 29: Extensive clinical affiliations and non-acute relationships strengthen population management
Extensive clinical affiliations and non-acute relationships strengthen population management • Clinical Affiliation • Ambulatory Care • Physician EHR and Practice Management • Health Management Home Health Network • Alternative Provider Organization Integrated Healthcare Organization 28 © 2013 Healt
Slide 30: Strong pipeline momentum
Strong pipeline momentum April 2013 • Completed transaction to partner with the 480- bed Bayfront Health System in St. Petersburg, FL May 2013 • New Payor Partnership with Florida Blue - Accountable Provider Organization June 2013 • Signed LOI to Lease 421-bed Munroe Regional in Ocala, FL • Announce
Slide 31: Continually improving quality of care
Continually improving quality of care 97% • 97%* of our hospitals/health systems are accredited by The Joint Commission and have received Gold Seal of Approval • A majority of our hospitals/health systems are Top Performers 64% on Key Quality Measuresby The Joint Commission 27% • 27% of our hospital
Slide 32: The Health Management Board has a forward-looking plan for success
The Health Management Board has a forward-looking plan for success The Board’s plan responds to the dynamics of today’s healthcare marketplace: » Center-led capabilities: Improving home office capability to take advantage of scale and improve overall efficiencies and performance » Differentiated pro
Slide 33: Government investigations being diligently addressed
Government investigations being diligently addressed • Health Management is working steadily to address ongoing regulatory investigations and related litigation: » Represented by world-class legal counsel » Cooperating fully with investigations, supported by Board and management » Vigorously defendi
Slide 34: V. Summary
* * * * * * * * * * * * * * V. Summary 33 © 2013 Health Management Associates, Inc..
Slide 35: Summary
Summary Health Management has achieved consistent growth and solid business results despite a challenging and evolving healthcare environment » Sustained revenue and adjusted EBITDA growth, and stock performance outpacing major indices through the past several years, including during the financial d
Slide 36: Health Management Board is providing strong leadership during a challenging time
Health Management Board is providing strong leadership during a challenging time The Health Management Board is comprised of the right group of business leaders at a challenging time: » Board re-elected on May 21 with average approval of 85%, reflecting near unanimous support (given Glenview withhel
Slide 37: Appendix
* * * * * * * * * * * * * * Appendix 36 © 2013 Health Management Associates, Inc..
Slide 38: The Health Management Board
The Health Management Board William J. Schoen, Chairman Mr. Schoen has more than 25 years of experience as Health Management’s President, Chief Executive Officer and Chairman. This experience provides Mr. Schoena deep and unique understanding of Health Management and the health care industry. Additi
Slide 39: The Health Management Board, Continued
The Health Management Board, Continued DonaldE. Kiernan, Corporate Governanceand NominatingCommittee Chair Mr. Kiernan has 20 years of experience as a Certified Public Accountant in private practice, including management positions with an international public accounting firm, and served in senior le
Slide 40: The Health Management Board, Continued
The Health Management Board, Continued William C. Steere, Jr. As former Chairman and Chief Executive Officer of Pfizer Inc., a Fortune 50 company, Mr. Steere is widely regarded as one of the most distinguished leaders of the pharmaceutical industry, bringing substantial expertise leading a large pub
Slide 41: Health Management existing Long Term Debt
Health Management existing Long Term Debt Amount Bank Borrowings Rate (as of 6/30/2013) Revolving Credit Facility due 2016 Libor + 2.50%* $ 150,000,000 Term Loan A due 2016 Libor + 2.50%* 633,369,000 Libor + 2.75%* Term Loan B due 2018 (Floor .75%) 1,357,805,000 Senior Notes due 2020 7.375% 875,000,
Slide 42: Capital allocation - alternative strategy evaluative impact
Capital allocation - alternative strategy evaluative impact (In 000’s) Average Variable Debt Outstanding 2012: $ 2,069,813 Average Fixed Rate Spread: 0.981% Incremental Interest Expense: $ 20,306 Per Share: $ 0.05 41 © 2013 Health Management Associates, Inc..
Slide 43: Adjusted EBITDA
Adjusted EBITDA Health Management Associates Adjusted EBITDA(1) 2008 through 2012 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008 Consolidated net income $ 191,242 $ 203,925 $ 172,248 $ 163,941 $ 184,157 Adjustments: Loss from discontinued operations, net of income taxes 7,617 2,409 13,526 (2
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