HCA Healthcare, Inc. (Form: 10-Q, Received: 07/30/2020 18:52:51)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number

1-11239

HCA Healthcare, Inc.

(Exact name of registrant as specified in its charter)


Delaware		27-3865930
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Park Plaza Nashville, Tennessee		37203
(Address of principal executive offices)		(Zip Code)

(615) 344-9551

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Voting common stock, $.01 par value	HCA	New York Stock Exchange

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of

Regulation S-T

during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in

Rule 12b-2

of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in

Rule 12b-2

of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.


Class of Common Stock		Outstanding at July 28, 2020
Voting common stock, $.01 par value		338,033,300 shares

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HCA HEALTHCARE, INC.

Form 10-Q

June 30, 2020


		Page of Form 10-Q
Part I.	Financial Information

Item 1.	Financial Statements (Unaudited):

	Condensed Consolidated Income Statements — for the quarters and six months ended June 30, 2020 and 2019		2

	Condensed Consolidated Comprehensive Income Statements — for the quarters and six months ended June 30, 2020 and 2019		3

	Condensed Consolidated Balance Sheets — June 30, 2020 and December 31, 2019		4

	Condensed Consolidated Statements of Stockholders’ Deficit — for the quarters and six months ended June 30, 2020 and 2019		5

	Condensed Consolidated Statements of Cash Flows — for the six months ended June 30, 2020 and 2019		6

	Notes to Condensed Consolidated Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		40

Item 4.	Controls and Procedures		40

Part II.	Other Information

Item 1.	Legal Proceedings		40

Item 1A.	Risk Factors		41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		44

Item 6.	Exhibits		45

Signatures			46

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HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS

FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

Unaudited

(Dollars in millions, except per share amounts)


	Quarter						Six Months
	2020			2019			2020			2019
Revenues	$	11,068		$	12,602		$	23,929		$	25,119

Salaries and benefits		5,330			5,837			11,448			11,484
Supplies		1,748			2,118			3,871			4,159
Other operating expenses		2,147			2,362			4,574			4,661
Government stimulus income		(822	)		—			(822	)		—
Equity in earnings of affiliates		(1	)		(8	)		(8	)		(19	)
Depreciation and amortization		691			636			1,365			1,255
Interest expense		388			477			816			938
Losses (gains) on sales of facilities		27			(18	)		20			(17	)
Losses on retirement of debt		—			—			295			—

	9,508			11,404			21,559			22,461

Income before income taxes		1,560			1,198			2,370			2,658
Provision for income taxes		344			271			456			550

Net income		1,216			927			1,914			2,108
Net income attributable to noncontrolling interests		137			144			254			286

Net income attributable to HCA Healthcare, Inc.	$	1,079		$	783		$	1,660		$	1,822

Per share data:
Basic earnings	$	3.20		$	2.29		$	4.91		$	5.32
Diluted earnings	$	3.16		$	2.25		$	4.84		$	5.22
Shares used in earnings per share calculations (in millions):
Basic		337.760			342.170			338.001			342.513
Diluted		341.599			348.373			342.848			349.334

The accompanying notes are an integral part of the condensed consolidated financial statements.

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HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS

FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

Unaudited

(Dollars in millions)


	Quarter						Six Months
	2020			2019			2020			2019
Net income	$	1,216		$	927		$	1,914		$	2,108
Other comprehensive income (loss) before taxes:
Foreign currency translation		(8	)		(38	)		(81	)		(18	)

Unrealized gains on available-for-sale securities		17			6			12			14

Defined benefit plans		—			—			—			—
Pension costs included in salaries and benefits		4			4			8			7

	4			4			8			7

Change in fair value of derivative financial instruments		(6	)		(34	)		(66	)		(52	)
Interest expense (benefits) included in interest expense		7			(6	)		6			(11	)

		1			(40	)		(60	)		(63	)

Other comprehensive income (loss) before taxes		14			(68	)		(121	)		(60	)
Income taxes (benefits) related to other comprehensive income items		5			(11	)		(19	)		(10	)

Other comprehensive income (loss)		9			(57	)		(102	)		(50	)

Comprehensive income		1,225			870			1,812			2,058
Comprehensive income attributable to noncontrolling interests		137			144			254			286

Comprehensive income attributable to HCA Healthcare, Inc.	$	1,088		$	726		$	1,558		$	1,772

The accompanying notes are an integral part of the condensed consolidated financial statements.

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HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(Dollars in millions)


	June 30, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	4,638		$	621
Accounts receivable		6,139			7,380
Inventories		1,834			1,849
Other		1,420			1,346

		14,031			11,196
Property and equipment, at cost		48,484			47,235
Accumulated depreciation		(25,413	)		(24,520	)

		23,071			22,715
Investments of insurance subsidiaries		364			315
Investments in and advances to affiliates		275			249
Goodwill and other intangible assets		8,578			8,269
Right-of-use operating lease assets		1,863			1,834
Other		527			480

	$	48,709		$	45,058

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	2,882		$	2,905
Accrued salaries		1,631			1,775
Other accrued expenses		3,181			2,932
Contract liabilities-deferred revenues		4,999			—
Long-term debt due within one year		163			145

		12,856			7,757

Long-term debt, less debt issuance costs and discounts of $252 and $239		30,779			33,577
Professional liability risks		1,485			1,370
Right-of-use operating lease obligations		1,531			1,499
Income taxes and other liabilities		1,490			1,420

Stockholders’ equity (deficit):
Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 337,960,400 shares in 2020 and 338,445,600 shares in 2019		3			3
Capital in excess of par value		88			—
Accumulated other comprehensive loss		(562	)		(460	)
Retained deficit		(1,315	)		(2,351	)

Stockholders’ deficit attributable to HCA Healthcare, Inc.		(1,786	)		(2,808	)
Noncontrolling interests		2,354			2,243

		568			(565	)

	$	48,709		$	45,058

The accompanying notes are an integral part of the condensed consolidated financial statements.

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HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

Unaudited

(Dollars in millions)


	Equity (Deficit) Attributable to HCA Healthcare, Inc.														Equity Attributable to Noncontrolling Interests			Total
	Common Stock					Capital in Excess of Par Value			Accumulated Other Comprehensive Loss			Retained Deficit
	Shares (in millions)			Par Value		Capital in Excess of Par Value			Accumulated Other Comprehensive Loss			Retained Deficit
Balances, December 31, 2018		342.895		$	3	$	—		$	(381	)	$	(4,572	)	$	2,032		$	(2,918	)
Comprehensive income										7			1,039			142			1,188
Repurchase of common stock		(2.106	)				32						(310	)					(278	)
Share-based benefit plans		2.242					(29	)											(29	)
Cash dividends declared ($0.40 per share)													(140	)					(140	)
Distributions																(136	)		(136	)
Other							(3	)								61			58

Balances, March 31, 2019		343.031			3		—			(374	)		(3,983	)		2,099			(2,255	)
Comprehensive income										(57	)		783			144			870
Repurchase of common stock		(1.928	)				(107	)					(135	)					(242	)
Share-based benefit plans		0.414					118												118
Cash dividends declared ($0.40 per share)													(139	)					(139	)
Distributions																(111	)		(111	)
Other							(11	)											(11	)

Balances, June 30, 2019		341.517			3		—			(431	)		(3,474	)		2,132			(1,770	)
Comprehensive income										(30	)		612			152			734
Repurchase of common stock		(1.846	)				(132	)					(107	)					(239	)
Share-based benefit plans		0.382					128												128
Cash dividends declared ($0.40 per share)													(138	)					(138	)
Distributions																(157	)		(157	)
Other							4									(9	)		(5	)

Balances, September 30, 2019		340.053			3		—			(461	)		(3,107	)		2,118			(1,447	)
Comprehensive income										1			1,071			202			1,274
Repurchase of common stock		(2.069	)				(95	)					(177	)					(272	)
Share-based benefit plans		0.462					96												96
Cash dividends declared ($0.40 per share)													(138	)					(138	)
Distributions																(138	)		(138	)
Other							(1	)								61			60

Balances, December 31, 2019		338.446			3		—			(460	)		(2,351	)		2,243			(565	)
Comprehensive income										(111	)		581			117			587
Repurchase of common stock		(3.287	)				35						(476	)					(441	)
Share-based benefit plans		2.449					(33	)											(33	)
Cash dividends declared ($0.43 per share)													(148	)					(148	)
Distributions																(154	)		(154	)
Other							(2	)								53			51

Balances, March 31, 2020		337.608			3		—			(571	)		(2,394	)		2,259			(703	)
Comprehensive income										9			1,079			137			1,225
Share-based benefit plans		0.352					93												93
Distributions																(45	)		(45	)
Other							(5	)								3			(2	)

Balances, June 30, 2020		337.960		$	3	$	88		$	(562	)	$	(1,315	)	$	2,354		$	568

The accompanying notes are an integral part of the condensed consolidated financial statements.

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HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

Unaudited

(Dollars in millions)


	2020			2019
Cash flows from operating activities:
Net income	$	1,914		$	2,108
Adjustments to reconcile net income to net cash provided by operating activities:
Increase (decrease) in cash from operating assets and liabilities:
Accounts receivable		1,215			(174	)
Inventories and other assets		(57	)		(231	)
Accounts payable and accrued expenses		(336	)		(238	)
Contract liabilities-deferred revenues		4,999			—
Depreciation and amortization		1,365			1,255
Income taxes		472			27
Losses (gains) on sales of facilities		20			(17	)
Losses on retirement of debt		295			—
Amortization of debt issuance costs and discounts		14			16
Share-based compensation		148			158
Other		49			67

Net cash provided by operating activities		10,098			2,971

Cash flows from investing activities:
Purchase of property and equipment		(1,598	)		(1,745	)
Acquisition of hospitals and health care entities		(346	)		(1,504	)
Sales of hospitals and health care entities		39			41
Change in investments		(11	)		59
Other		(37	)		36

Net cash used in investing activities		(1,953	)		(3,113	)

Cash flows from financing activities:
Issuances of long-term debt		2,700			6,451
Net change in revolving bank credit facilities		(2,480	)		(3,040	)
Repayment of long-term debt		(3,364	)		(98	)
Distributions to noncontrolling interests		(199	)		(247	)
Payment of debt issuance costs		(35	)		(63	)
Payment of dividends		(153	)		(278	)
Repurchases of common stock		(441	)		(520	)
Other		(144	)		(135	)

Net cash (used in) provided by financing activities		(4,116	)		2,070

Effect of exchange rate changes on cash and cash equivalents		(12	)		—

Change in cash and cash equivalents		4,017			1,928
Cash and cash equivalents at beginning of period		621			502

Cash and cash equivalents at end of period	$	4,638		$	2,430

Interest payments	$	854		$	910
Income tax (refunds) payments, net	$	(16	)	$	523

The accompanying notes are an integral part of the condensed consolidated financial statements.

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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Reporting Entity

HCA Healthcare, Inc. is a holding company whose affiliates own and operate hospitals and related health care entities. The term “affiliates” includes direct and indirect subsidiaries of HCA Healthcare, Inc. and partnerships and joint ventures in which such subsidiaries are partners. At June 30, 2020, these affiliates owned and operated 186 hospitals, 122 freestanding surgery centers and provided extensive outpatient and ancillary services. HCA Healthcare, Inc.’s facilities are located in 21 states and England. The terms “Company,” “HCA,” “we,” “our” or “us,” as used herein and unless otherwise stated or indicated by context, refer to HCA Healthcare, Inc. and its affiliates. The terms “facilities” or “hospitals” refer to entities owned and operated by affiliates of HCA and the term “employees” refers to employees of affiliates of HCA.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to

Form 10-Q

and Article 10 of

Regulation S-X.

Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal and recurring nature.

The majority of our expenses are “costs of revenues” items. Costs that could be classified as general and administrative would include our corporate office costs, which were $76 million and $94 million for the quarters ended June 30, 2020 and 2019,

respectively

and $172 million and $180 million for the six months ended June 30, 2020 and 2019, respectively. Operating results for the quarter and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. For further information, refer to the consolidated financial statements and footnotes thereto included in our annual report on

Form 10-K

for the year ended December 31, 2019.

COVID-19

Pandemic and CARES Act Funding

On March 11, 2020, the World Health Organization designated

COVID-19

as a global pandemic. Patient volumes and the related revenues for most of our services were significantly impacted in the last two weeks of the first quarter of 2020 and continued to be impacted in the second quarter of 2020 as various policies were implemented by federal, state and local governments in response to the

COVID-19

pandemic that have caused many people to remain at home and forced the closure of or limitations on certain businesses, as well as suspended elective surgical procedures by health care facilities. While some of these restrictions have been eased across the U.S. and most states have lifted moratoriums on

non-emergent

procedures, some restrictions remain in place, and some state and local governments are

re-imposing

certain restrictions due to increasing rates of

COVID-19

cases. While consolidated patient volumes and revenues experienced gradual improvement beginning in the latter part of April and continuing through the end of the quarter, we are unable to predict the future impact of the pandemic on our operations.

Our pandemic response plan has multiple facets and continues to evolve as the pandemic unfolds. We have taken precautionary steps to enhance our operational and financial flexibility, and react to the risks the

COVID-19

pandemic presents to our business, including the following:

•

Implemented certain cost reduction initiatives;

•

Suspended our authorized share repurchase program;

•

Suspended our quarterly dividend program;

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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

COVID-19

Pandemic and CARES Act Funding (continued)

•

Reduced certain planned projects and capital expenditures;

•

During March 2020, executed a new $2 billion

364-day

term loan facility (which was undrawn at June 30, 2020) to supplement our existing credit facilities; and

•

During the second quarter of 2020, we received

approximately $4.4 billion

of accelerated Medicare payments and approximately $1.4 billion in general and targeted Provider Relief Fund distributions, both as provided for under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

We believe the extent of the

COVID-19

pandemic’s adverse impact on our operating results and financial condition has been and will continue to be driven by many factors, most of which are beyond our control and ability to forecast. Such factors include, but are not limited to, the scope and duration of

stay-at-home

practices and business closures and restrictions, government-imposed or recommended suspensions of elective procedures, continued declines in patient volumes for an indeterminable length of time, increases in the number of uninsured and underinsured patients as a result of higher sustained rates of unemployment, incremental expenses required for supplies and personal protective equipment, and changes in professional and general liability exposure. Because of these and other uncertainties, we cannot estimate the length or severity of the impact of the pandemic on our business. Decreases in cash flows and results of operations may have an impact on the inputs and assumptions used in significant accounting estimates, including estimated implicit price concessions related to uninsured patient accounts, professional and general liability reserves, and potential impairments of goodwill and long-lived assets.

During the second quarter of 2020, we received $922 million from the $50 billion general distribution fund and $454 million of targeted distributions from the CARES Act Provider Relief Fund. These distributions from the Provider Relief Fund are not subject to repayment, provided we are able to attest to and comply with the terms and conditions of the funding

including demonstrating that the distributions received have been used for healthcare-related expenses or lost revenue attributable to COVID-19. Such payments are accounted for as government grants, and are recognized on a systematic and rational basis as other income once there is reasonable assurance that the applicable terms and conditions required to retain the funds will be met. Based on an analysis of the compliance and reporting requirements of the Provider Relief Fund and the impact of the pandemic on our operating results through the end of the second quarter, we

recognized $822 million ($590 million net of tax), or $1.73 per diluted share, related to these general distribution funds, and these payments are recorded under the caption “government stimulus income” in our condensed consolidated income statements. The unrecognized amount of general distributions and targeted distributions are recorded under the caption “contract liabilities-deferred revenues” in our condensed consolidated balance sheet.

We will continue to monitor compliance with the terms and conditions of the Provider Relief Fund and the impact of the pandemic on our revenues and expenses. If we are unable to attest to or comply with current or future terms and conditions our ability to retain some or all of the distributions received may be impacted.

The CARES Act also provides

for a deferral of payments

of the employer portion of payroll tax incurred during the pandemic, allowing half of such payroll taxes be deferred until December 2021 and the remaining half

until

December 2022. At June 30, 2020, the Company had deferred $220 million of payroll taxes recorded under the caption “accrued salaries” in our condensed consolidated balance sheet. Additionally, the CARES Act created a payroll tax credit designed to encourage companies to retain employees during the pandemic. During the second quarter of 2020, the Company evaluated its eligibility for this credit and recorded $60 million of employee retention payroll tax credits pursuant to the CARES Act. These tax credits are recorded as a reduction of salaries and benefits in our condensed consolidated income statement.

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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenues

care services are satisfied. Our performance obligations for inpatient services are generally satisfied over periods that average approximately five days, and revenues are recognized based on charges incurred in relation to total expected charges. Our performance obligations for outpatient services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges. Medicare generally pays for inpatient and outpatient services at prospectively determined rates based on clinical, diagnostic and other factors. Services provided to patients having Medicaid coverage are generally paid at prospectively determined rates per discharge, per identified service or per covered member. Agreements with commercial insurance carriers, managed care and preferred provider organizations generally provide for payments based upon predetermined rates per diagnosis, per diem rates or discounted

fee-for-service

rates. Our revenues for the six months ended June 30, 2020 and 2019, respectively, include $55 million related to the settlement of Medicare outlier calculations for prior periods and $86 million related to the resolution of transaction price differences regarding certain

out-of-network

services performed in prior periods. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

payments

(beginning in August 2020), claims for services provided to Medicare beneficiaries will be applied against the advance payment balance. Any unapplied advance payment amounts must be paid in full within one year from receipt of the advance payments for acute care hospitals and within 210 days for other health care providers. During the second quarter of 2020, we received approximately $4.4 billion from these accelerated Medicare payment requests, and these amounts are recorded under the caption “contract liabilities-deferred revenues” in our condensed consolidated balance sheet.

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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenues (continued)

Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payers. Estimates of contractual adjustments under managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements. Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts). We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record these revenues at the estimated amounts we expect to collect. Patients treated at our hospitals for

non-elective

care, who have income at or below 400% of the federal poverty level, are eligible for charity care. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues. Our revenues by primary third-party payer classification and other (including uninsured patients) for the quarters and six months ended June 30, 2020 and 2019 are summarized in the following table (dollars in millions):


	Quarter
	2020		Ratio			2019		Ratio
Medicare	$	2,272		20.5	%	$	2,635		20.9	%
Managed Medicare		1,488		13.4			1,595		12.7
Medicaid		564		5.1			416		3.3
Managed Medicaid		531		4.8			554		4.4
Managed care and insurers		5,631		50.9			6,425		50.9
International (managed care and insurers)		239		2.2			284		2.3
Other		343		3.1			693		5.5

Revenues	$	11,068		100.0	%	$	12,602		100.0	%


	Six Months
	2020		Ratio			2019		Ratio
Medicare	$	5,015		21.0	%	$	5,405		21.5	%
Managed Medicare		3,314		13.8			3,184		12.7
Medicaid		978		4.1			763		3.0
Managed Medicaid		1,197		5.0			1,167		4.6
Managed care and insurers		12,276		51.4			12,851		51.1
International (managed care and insurers)		531		2.2			581		2.3
Other		618		2.5			1,168		4.8

Revenues	$	23,929		100.0	%	$	25,119		100.0	%

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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenues (continued)

To quantify the total impact of the trends related to uninsured patient accounts, we believe it is beneficial to view total uncompensated care, which is comprised of charity care, uninsured discounts and implicit price concessions. A summary of the estimated cost of total uncompensated care for the quarters and six months ended June 30, 2020 and 2019 follows (dollars in millions):


	Quarter						Six Months
	2020			2019			2020			2019
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)	$	9,916		$	10,953		$	21,258		$	21,559
Cost-to-charges ratio (patient care costs as percentage of gross patient charges)		12.6	%		12.2	%		12.2	%		12.0	%
Total uncompensated care	$	6,729		$	7,695		$	14,602		$	14,780
Multiply by the cost-to-charges ratio		12.6	%		12.2	%		12.2	%		12.0	%

Estimated cost of total uncompensated care	$	844		$	938		$	1,781		$	1,774

The total uncompensated care amounts include charity care of $3.077 billion and $3.311 billion,

respectively

and the related estimated costs of charity care were $387 million and $403 million, for the quarters ended June 30, 2020 and 2019, respectively. The total uncompensated care amounts include charity care of $6.812 billion and $6.216 billion,

respectively

and the related estimated costs of charity care were $831 million and $746 million, for the six months ended June 30, 2020 and 2019, respectively.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

NOTE 2 — ACQUISITIONS AND DISPOSITIONS

During the six months ended June 30, 2020, we paid $346 million to acquire a hospital in New Hampshire and other nonhospital health care entities. Purchase price amounts have been allocated to the related assets acquired and liabilities assumed based upon their respective fair values. The purchase price paid in excess of the fair value of identifiable net assets of these acquired entities aggregated $306 million for the six months ended June 30, 2020. During the six months ended June 30, 2019, we paid $1.397 billion to acquire a

seven-hospital health system in North Carolina and $107 million to acquire other nonhospital health care entities. The consolidated financial statements include the accounts and operations of the acquired entities subsequent to the respective acquisition dates. The pro forma effects of these acquired entities on our results of operations for periods prior to the respective acquisition dates were not significant.

During the six months ended June 30, 2020, we received proceeds of $39 million and recognized a pretax gain of $3 million related to sales of real estate and other investments, and we also recognized a pretax loss of $23 million related to a hospital facility in Mississippi that we have executed a definitive agreement to sell in 2020. During the six months ended June 30, 2019, we received proceeds of $25 million and recognized a pretax loss of $1 million related to a sale of a hospital facility in one of our Louisiana markets, and we also received proceeds of $16 million and recognized a pretax gain of $18 million related to sales of real estate and other investments.

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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 3 — INCOME TAXES

Our provision for income taxes for the quarters ended June 30, 2020 and 2019 was $344 million and $271 million, respectively, and the effective tax rates were 24.2% and 25.7%, respectively. Our provision for income taxes for the six months ended June 30, 2020 and 2019 was $456 million and $550 million, respectively, and the effective tax rates were 21.6% and 23.2%, respectively. Our provision for income taxes included tax benefits related to the settlement of employee equity awards of $54 million and $53 million for the six months ended June 30, 2020 and 2019, respectively.

Our liability for unrecognized tax benefits was $513 million, including accrued interest of $71 million, as of June 30, 2020 ($550 million and $62 million, respectively, as of December 31, 2019). Unrecognized tax benefits of $164 million ($160 million as of December 31, 2019) would affect the effective rate, if recognized.

The Internal Revenue Service was conducting an examination of the Company’s 2016, 2017 and 2018 federal income tax returns at June 30, 2020. We are also subject to examination by state and foreign taxing authorities. Depending on the resolution of any federal, state and foreign tax disputes, the completion of examinations by federal, state or foreign taxing authorities, or the expiration of statutes of limitation for specific taxing jurisdictions, we believe it is reasonably possible that our liability for unrecognized tax benefits may significantly increase or decrease within the next 12 months. However, we are currently unable to estimate the range of any possible change.

NOTE 4 — EARNINGS PER SHARE

We compute basic earnings per share using the weighted average number of common shares outstanding. We compute diluted earnings per share using the weighted average number of common shares outstanding, plus the dilutive effect of outstanding equity awards and potential shares, computed using the treasury stock method.

The following table sets forth the computation of basic and diluted earnings per share for the quarters and six months ended June 30, 2020 and 2019 (dollars and shares in millions, except per share amounts):


	Quarter				Six Months
	2020		2019		2020		2019
Net income attributable to HCA Healthcare, Inc.	$	1,079	$	783	$	1,660	$	1,822

Weighted average common shares outstanding		337.760		342.170		338.001		342.513
Effect of dilutive incremental shares		3.839		6.203		4.847		6.821

Shares used for diluted earnings per share		341.599		348.373		342.848		349.334

Earnings per share:
Basic earnings	$	3.20	$	2.29	$	4.91	$	5.32
Diluted earnings	$	3.16	$	2.25	$	4.84	$	5.22

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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES

A summary of our insurance subsidiaries’ investments at June 30, 2020 and December 31, 2019 follows (dollars in millions):


	June 30, 2020
	Amortized Cost		Unrealized Amounts				Fair Value
	Amortized Cost		Gains		Losses		Fair Value
Debt securities	$	380	$	30	$	—	$	410
Money market funds and other		59		—		—		59

	$	439	$	30	$	—		469

Amounts classified as current assets								(105	)

Investment carrying value							$	364


	December 31, 2019
	Amortized Cost		Unrealized Amounts				Fair Value
	Amortized Cost		Gains		Losses		Fair Value
Debt securities	$	359	$	18	$	—	$	377
Money market funds and other		85		—		—		85

	$	444	$	18	$	—		462

Amounts classified as current assets								(147	)

Investment carrying value							$	315

At June 30, 2020 and December 31, 2019, the investments in debt securities of our insurance subsidiaries were classified as

“available-for-sale.”

Changes in unrealized gains and losses that are not credit-related are recorded as adjustments to other comprehensive income (loss).

Scheduled maturities of investments in debt securities at June 30, 2020 were as follows (dollars in millions):


	Amortized Cost		Fair Value
Due in one year or less	$	14	$	14
Due after one year through five years		114		122
Due after five years through ten years		180		197
Due after ten years		72		77

	$	380	$	410

The average expected maturity of the investments in debt securities at June 30, 2020 was 5.3 years, compared to the average scheduled maturity of 9.8 years. Expected and scheduled maturities may differ because the issuers of certain securities have the right to call, prepay or otherwise redeem such obligations prior to their scheduled maturity date.

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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 6 — FINANCIAL INSTRUMENTS

Interest Rate Swap Agreements

We have entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates. These swap agreements involve the exchange of fixed and variable rate interest payments between us and our counterparties based on common notional principal amounts and maturity dates.

Pay-fixed

interest rate swaps effectively convert variable rate obligations to fixed interest rate obligations. The interest payments under these agreements are settled on a net basis. The net interest payments, based on the notional amounts in these agreements, generally match the timing of the related liabilities for the interest rate swap agreements which have been designated as cash flow hedges. The notional amounts of the swap agreements represent amounts used to calculate the exchange of cash flows and are not our assets or liabilities. Our credit risk related to these agreements is considered low because the swap agreements are with creditworthy financial institutions.

The following table sets forth our interest rate swap

agreements

, which have been designated as cash flow

hedges

, at June 30, 2020 (dollars in millions):


	Notional Amount		Maturity Date		Fair Value
Pay-fixed interest rate swaps	$	2,000		December 2021	$	(40	)
Pay-fixed interest rate swaps		500		December 2022		(24	)

During the next 12 months, we estimate $36 million will be reclassified from other comprehensive income (“OCI”) and will be included in interest expense.

Derivatives — Results of Operations

The following table presents the effect of our interest rate swaps on our results of operations for the six months ended June 30, 2020 (dollars in millions):


Derivatives in Cash Flow Hedging Relationships	Amount of Loss Recognized in OCI on Derivatives, Net of Tax		Location of Loss Reclassified from Accumulated OCI into Operations		Amount of Loss Reclassified from Accumulated OCI into Operations
Interest rate swaps	$	51		Interest expense	$	6

Credit-risk-related Contingent Features

We have agreements with each of our derivative counterparties that contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of June 30, 2020, we have not been required to post any collateral related to these agreements. If we had breached these provisions at June 30, 2020, we would have been required to settle our obligations under the agreements at their aggregate, estimated termination value of $65 million.

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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

Accounting Standards Codification 820,

Fair Value Measurements and Disclosures

(“ASC 820”), emphasizes fair value is a market-based measurement, and fair value measurements should be determined based on the assumptions market participants would use in pricing assets or liabilities. ASC 820 utilizes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment.

Cash Traded Investments

Our cash traded investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

Derivative Financial Instruments

We have entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. We incorporate credit valuation adjustments to reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements of these instruments.

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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)

The following tables summarize our assets and liabilities measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):


	June 30, 2020
				Fair Value Measurements Using
	Fair Value			Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Investments of insurance subsidiaries:
Debt securities	$	410		$	—		$	410		$	—
Money market funds and other		59			59			—			—

Investments of insurance subsidiaries		469			59			410			—
Less amounts classified as current assets		(105	)		(58	)		(47	)		—

	$	364		$	1		$	363		$	—

Liabilities:
Interest rate swaps (Income taxes and other liabilities)	$	64		$	—		$	64		$	—


	December 31, 2019
				Fair Value Measurements Using
	Fair Value			Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Investments of insurance subsidiaries:
Debt securities	$	377		$	—		$	377		$	—
Money market funds and other		85			85			—			—

Investments of insurance subsidiaries		462			85			377			—
Less amounts classified as current assets		(147	)		(83	)		(64	)		—

	$	315		$	2		$	313		$	—

Interest rate swaps (Other)	$	3		$	—		$	3		$	—
Liabilities:
Interest rate swaps (Income taxes and other liabilities)	$	7		$	—		$	7		$	—

The estimated fair value of our long-term debt was $34.000 billion and $37.026 billion at June 30, 2020 and December 31, 2019, respectively, compared to carrying amounts, excluding debt issuance costs and discounts, aggregating $31.194 billion and $33.961 billion, respectively. The estimates of fair value are generally based upon the quoted market prices or quoted market prices for similar issues of long-term debt with the same maturities.

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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 8 — LONG-TERM DEBT

A summary of long-term debt at June 30, 2020 and December 31, 2019, including related interest rates at June 30, 2020, follows (dollars in millions):


	June 30, 2020			December 31, 2019
Senior secured asset-based revolving credit facility	$	—		$	2,480
Senior secured revolving credit facility		—			—
Senior secured 364-day term loan facility		—			—
Senior secured term loan facilities (effective interest rate of 2.8%)		3,698			3,725
Senior secured notes (effective interest rate of 5.1%)		13,850			13,850
Other senior secured debt (effective interest rate of 5.0%)		694			654

Senior secured debt		18,242			20,709
Senior unsecured notes (effective interest rate of 5.5%)		12,952			13,252
Debt issuance costs and discounts		(252	)		(239	)

Total debt (average life of 9.4 years, rates averaging 5.0%)		30,942			33,722
Less amounts due within one year		163			145

	$	30,779		$	33,577

During February 2020, we issued $2.700 billion aggregate principal amount of 3.50% senior notes due 2030. During March 2020, we used the net proceeds for the redemption of all $1.000 billion outstanding aggregate principal amount of HCA Healthcare, Inc.’s 6.25% senior notes due 2021 and, together with available funds, for the redemption of all $2.000 billion outstanding aggregate principal amount of HCA Inc.’s 7.50% senior notes due 2022. The pretax loss on retirement of debt was $295 million.

In response to the risks the

COVID-19

pandemic presents to our business, during March 2020, we entered into a credit agreement that provides for

a 364-day secured

term loan facility for an aggregate principal amount of up to $2.000 billion. The facility will mature in March 2021. If drawn, amounts outstanding under the credit agreement will bear interest at either (i) the LIBOR rate plus 2.50% or (ii) an alternate base rate as defined in the credit agreement. As of June 30, 2020 there were no amounts outstanding nor draw notices pending under the facility.

NOTE 9 — CONTINGENCIES

We operate in a highly regulated and litigious industry. As a result, various lawsuits, claims and legal and regulatory proceedings have been and can be expected to be instituted or asserted against us. We are also subject to claims and suits arising in the ordinary course of business, including claims for personal injuries or wrongful restriction of, or interference with, physicians’ staff privileges. In certain of these actions the claimants may seek punitive damages against us which may not be covered by insurance. We are also subject to claims by various taxing authorities for additional taxes and related interest and penalties. The resolution of any such lawsuits, claims or legal and regulatory proceedings could have a material, adverse effect on our results of operations, financial position or liquidity.

Health care companies are subject to numerous investigations by various governmental agencies. Under the federal False Claims Act (“FCA”), private parties have the right to bring

qui tam

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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9 — CONTINGENCIES (continued)

individual facilities have received, and from time to time, other facilities may receive, government inquiries from, and may be subject to investigation by, federal and state agencies. Depending on whether the underlying conduct in these or future inquiries or investigations could be considered systemic, their resolution could have a material, adverse effect on our results of operations, financial position or liquidity.

Texas operates a state Medicaid program pursuant to a waiver from CMS under Section 1115 of the Social Security Act (“Program”). The Program includes uncompensated-care pools; payments from these pools are intended to defray the uncompensated costs of services provided by our and other hospitals to Medicaid eligible or uninsured individuals. Separately, we and other hospitals provide charity care services in several communities in the state. In 2018, the Civil Division of the U.S. Department of Justice and the U.S. Attorney’s Office for the Southern District of Texas requested information about whether the Program, as operated in Harris County, complied with the laws and regulations applicable to provider related donations, and the Company cooperated with that request. On May 21, 2019, a

qui tam

lawsuit asserting violations of the FCA and the Texas Medicaid Fraud Prevention Act related to the Program, as operated in Harris County, was unsealed by the U.S. District Court for the Southern District of Texas. Both the federal and state governments declined to intervene in the

qui tam

lawsuit. The Company believes that our participation is and has been consistent with the requirements of the Program and is vigorously defending against the lawsuit being pursued by the relator. We cannot predict what effect, if any, the

qui tam

lawsuit could have on the Company.

NOTE 10 — SHARE REPURCHASE TRANSACTIONS AND OTHER COMPREHENSIVE LOSS

During January 2020 and 2019, our Board of Directors authorized share repurchase programs for up to $4 billion ($2 billion for each authorization) of our outstanding common stock. In response to the risks the

COVID-19

pandemic presents to our business, during March 2020, we announced the suspension of our share repurchase programs and expect to evaluate the resumption of the programs at a future date. During

the

quarter ended March 31, 2020, we repurchased 3.287 million shares of our common stock at an average price of $134.18 per share through market purchases pursuant to the $2.0 billion share repurchase program authorized during January 2019, and we made no repurchases during the quarter ended June 30, 2020. At June 30, 2020, we had $2.800 billion of repurchase authorization available under the January 2019 and 2020 authorizations.

The components of accumulated other comprehensive loss are as follows (dollars in millions):


	Unrealized Gains on Available- for-Sale Securities		Foreign Currency Translation Adjustments			Defined Benefit Plans			Change in Fair Value of Derivative Instruments			Total
Balances at December 31, 2019	$	14	$	(283	)	$	(187	)	$	(4	)	$	(460	)
Unrealized gains on available-for-sale securities, net of $3 of income taxes		9											9
Foreign currency translation adjustments, net of $10 income tax benefit				(71	)								(71	)
Change in fair value of derivative instruments, net of $15 income tax benefit										(51	)		(51	)
Expense reclassified into operations from other comprehensive income, net of $2 and $1 income tax benefits, respectively							6			5			11

Balances at June 30, 2020	$	23	$	(354	)	$	(181	)	$	(50	)	$	(562	)

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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 11 — SEGMENT AND GEOGRAPHIC INFORMATION

We operate in one line of business, which is operating hospitals and related health care entities. We operate in two geographically organized groups: the National and American Groups. The National Group includes 96 hospitals located in Alaska, California, Florida, southern Georgia, Idaho, Indiana, northern Kentucky, Nevada, New Hampshire, North Carolina, South Carolina, Utah and Virginia, and the American Group includes 84 hospitals located in Colorado, northern Georgia, Kansas, southern Kentucky, Louisiana, Mississippi, Missouri, Tennessee and Texas. We also operate six hospitals in England, and these facilities are included in the Corporate and other group.

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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 11 — SEGMENT AND GEOGRAPHIC INFORMATION (continued)

Adjusted segment EBITDA is defined as income before depreciation and amortization, interest expense, losses (gains) on sales of facilities, losses on retirement of debt, income taxes and net income attributable to noncontrolling interests. We use adjusted segment EBITDA as an analytical indicator for purposes of allocating resources to geographic areas and assessing their performance. Adjusted segment EBITDA is commonly used as an analytical indicator within the health care industry, and also serves as a measure of leverage capacity and debt service ability. Adjusted segment EBITDA should not be considered as a measure of financial performance under generally accepted accounting principles, and the items excluded from adjusted segment EBITDA are significant components in understanding and assessing financial performance. Because adjusted segment EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, adjusted segment EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. The geographic distributions of our revenues, equity in earnings of affiliates, adjusted segment EBITDA and depreciation and amortization for the quarters and six months ended June 30, 2020 and 2019 are summarized in the following table (dollars in millions):


	Quarter						Six Months
	2020			2019			2020			2019
Revenues:
National Group	$	5,546		$	6,444		$	12,020		$	12,761
American Group		5,103			5,626			10,847			11,221
Corporate and other		419			532			1,062			1,137

	$	11,068		$	12,602		$	23,929		$	25,119

Equity in earnings of affiliates:
National Group	$	(4	)	$	(3	)	$	(3	)	$	(5	)
American Group		(2	)		(11	)		(11	)		(22	)
Corporate and other		5			6			6			8

	$	(1	)	$	(8	)	$	(8	)	$	(19	)

Adjusted segment EBITDA:
National Group	$	1,485		$	1,364		$	2,700		$	2,818
American Group		1,408			1,117			2,523			2,258
Corporate and other		(227	)		(188	)		(357	)		(242	)

	$	2,666		$	2,293		$	4,866		$	4,834

Depreciation and amortization:
National Group	$	312		$	283		$	618		$	548
American Group		295			270			582			551
Corporate and other		84			83			165			156

	$	691		$	636		$	1,365		$	1,255

Adjusted segment EBITDA	$	2,666		$	2,293		$	4,866		$	4,834
Depreciation and amortization		691			636			1,365			1,255
Interest expense		388			477			816			938
Losses (gains) on sales of facilities		27			(18	)		20			(17	)
Losses on retirement of debt		—			—			295			—

Income before income taxes	$	1,560		$	1,198		$	2,370		$	2,658

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This quarterly report on

Form 10-Q

includes certain disclosures which contain “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include statements regarding expected share-based compensation expense, expected capital expenditures and expected net claim payments and all other statements that do not relate solely to historical or current facts, and can be identified by the use of words like “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “initiative” or “continue.” These forward-looking statements are based on our current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond our control, which could significantly affect current plans and expectations and our future financial position and results of operations. These factors include, but are not limited to, (1) developments related to

COVID-19,

including, without limitation, related to the length and severity of the pandemic; the volume of canceled or rescheduled procedures and the volume of

COVID-19

patients cared for across our health systems; measures we are taking to respond to the

COVID-19

pandemic; the impact of government and administrative regulation and stimulus (including the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, the Paycheck Protection Program and Health Care Enhancement (“PPPHCE”) Act and other enacted legislation); changes in revenues due to declining patient volumes, changes in payor mix and deteriorating macroeconomic conditions (including increases in uninsured and underinsured patients); potential increased expenses related to labor, supply chain or other expenditures; workforce disruptions; supply shortages and disruptions; and the timing and availability of effective medical treatments and vaccines, (2) the impact of our substantial indebtedness and the ability to refinance such indebtedness on acceptable terms, as well as risks associated with disruptions in the financial markets and the business of financial institutions as the result of the

COVID-19

pandemic which could impact us from a financial perspective, (3) the impact of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”), including the effects of court challenges to, any repeal of, or changes to, the Affordable Care Act or additional changes to its implementation, the possible enactment of additional federal or state health care reforms and possible changes to other federal, state or local laws or regulations affecting the health care industry, including single-payer proposals (often referred to as “Medicare for All”), and also including any such laws or governmental regulations which are adopted in response to the

COVID-19

pandemic, (4) the effects related to the continued implementation of the sequestration spending reductions required under the Budget Control Act of 2011, and related legislation extending these reductions, and the potential for future deficit reduction legislation that may alter these spending reductions, which include cuts to Medicare payments, or create additional spending reductions, (5) increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts, (6) the ability to achieve operating and financial targets, and attain expected levels of patient volumes and control the costs of providing services, (7) possible changes in Medicare, Medicaid and other state programs, including Medicaid supplemental payment programs or Medicaid waiver programs, that may impact reimbursements to health care providers and insurers and the size of the uninsured or underinsured population, (8) the highly competitive nature of the health care business, (9) changes in service mix, revenue mix and surgical volumes, including potential declines in the population covered under third-party payer agreements, the ability to enter into and renew third-party payer provider agreements on acceptable terms and the impact of consumer-driven health plans and physician utilization trends and practices, (10) the efforts of health insurers, health care providers, large employer groups and others to contain health care costs, (11) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures, (12) increases in wages and the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical and technical support personnel, (13) the availability and terms of capital to fund the expansion of our business and improvements to our existing facilities, (14) changes in accounting practices, (15) changes in general economic conditions nationally and regionally in our markets, including economic and business conditions (and the impact thereof on the financial markets and banking industry) resulting from the

COVID-19

pandemic, (16) the emergence of and

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Forward-Looking Statements (continued)

effects related to other pandemics, epidemics and infectious diseases, (17) future divestitures which may result in charges and possible impairments of long-lived assets, (18) changes in business strategy or development plans, (19) delays in receiving payments for services provided, (20) the outcome of pending and any future tax audits, disputes and litigation associated with our tax positions, (21) potential adverse impact of known and unknown government investigations, litigation and other claims that may be made against us, (22) the impact of potential cybersecurity incidents or security breaches, (23) our ongoing ability to demonstrate meaningful use of certified electronic health record (“EHR”) technology and the impact of interoperability requirements, (24) the impact of natural disasters, such as hurricanes and floods, or similar events beyond our control, (25) changes in the U.S. federal, state, or foreign tax laws including interpretive guidance that may be issued by taxing authorities or other standard setting bodies, and (26) other risk factors described in our annual report on

Form 10-K

for the year ended December 31, 2019, our quarterly report on Form

10-Q

for the quarter ended March 31, 2020 and our other filings with the Securities and Exchange Commission. As a consequence, current plans, anticipated actions and future financial position and results of operations may differ from those expressed in any forward-looking statements made by or on behalf of HCA. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this report, which forward-looking statements reflect management’s views only as of the date of this report. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.

COVID-19

Pandemic and CARES Act Funding

On March 11, 2020, the World Health Organization designated

COVID-19

non-emergent

procedures, some restrictions remain in place, and some state and local governments are

re-imposing

certain restrictions due to increasing rates of

COVID-19

pandemic presents to our business, including the following:

•

Implemented certain cost reduction initiatives;

•

Suspended our authorized share repurchase program;

•

Suspended our quarterly dividend program;

•

Reduced certain planned projects and capital expenditures;

•

During March 2020, executed a new $2 billion

364-day

term loan facility (which was undrawn at June 30, 2020) to supplement our existing credit facilities; and

•

During the second quarter of 2020, we received approximately $4.4 billion of accelerated Medicare payments and approximately $1.4 billion in general and targeted Provider Relief Fund distributions, both as provided for under the CARES Act.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

COVID-19

Pandemic and CARES Act Funding (continued)

We believe the extent of the

COVID-19

stay-at-home

Second Quarter 2020 Operations Summary

Revenues declined to $11.068 billion in the second quarter of 2020 from $12.602 billion in the second quarter of 2019. Net income attributable to HCA Healthcare, Inc. totaled $1.079 billion, or $3.16 per diluted share, for the quarter ended June 30, 2020, compared to $783 million, or $2.25 per diluted share, for the quarter ended June 30, 2019. Second quarter results for 2020 include $822 million ($590 million net of tax), or $1.73 per diluted share, of government stimulus income related to general distribution funds and $60 million, or $0.13 per diluted share, of employee retention payroll tax credits, as provided for by the CARES Act. Second quarter results for 2020 also include losses on sales of facilities of $27 million, or $0.07 per diluted share, and second quarter results for 2019 include gains on sales of facilities of $18 million, or $0.04 per diluted share. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 341.599 million shares for the quarter ended June 30, 2020 and 348.373 million shares for the quarter ended June 30, 2019. During 2019 and the first six months of 2020, we repurchased 7.949 million shares and 3.287 million shares of our common stock, respectively.

Due to the

COVID-19

pandemic, patient volumes and the related revenues for most of our services, particularly elective surgical procedures, were significantly impacted in April as various

COVID-19

stay-at-home

and business closure policies were implemented by federal, state and local governments. Patient volumes gradually improved in the latter part of April and continuing through the end of the quarter as the states began to

re-open

and allow for

non-emergent

procedures. Revenues declined 12.2% on a consolidated basis and declined 12.1% on a same facility basis for the quarter ended June 30, 2020, compared to the quarter ended June 30, 2019. The decline in consolidated revenues can be primarily attributed to the net impact of a 20.0% decline in equivalent admissions offset by a 9.7% increase in revenue per equivalent admission. The same facility revenues decline primarily resulted from the net impact of a 20.1% decline in same facility equivalent admissions offset by a 10.0% increase in same facility revenue per equivalent admission.

During the quarter ended June 30, 2020, consolidated admissions and same facility admissions declined 12.6% and 12.8%, respectively, compared to the quarter ended June 30, 2019. Surgeries declined 26.5% on both a consolidated basis and on a same facility basis during the quarter ended June 30, 2020, compared to the quarter ended June 30, 2019. Emergency department visits declined 32.7% and 32.9% on a consolidated basis and on a same facility basis, respectively, during the quarter ended June 30, 2020, compared to the quarter ended June 30, 2019. Consolidated and same facility uninsured admissions declined 10.8% and 10.0%, respectively, for the quarter ended June 30, 2020, compared to the quarter ended June 30, 2019.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Second Quarter 2020 Operations Summary (continued)

Cash flows from operating activities increased $6.726 billion, from $1.997 billion for the second quarter of 2019 to $8.723 billion for the second quarter of 2020. The increase in cash provided by operating activities was primarily related to the combined effect of the receipt of $4.999 billion related to unapplied accelerated Medicare payments and unrecognized general and targeted distributions as provided for in the CARES Act, positive changes in working capital of $787 million, primarily from the collection of patient accounts receivable, increases related to the deferral of income taxes of $593 million and an increase in net income, excluding losses (gains) on sales of facilities, of $327 million.

Results of Operations

Revenue/Volume Trends

Our revenues generally relate to contracts with patients in which our performance obligations are to provide health care services to the patients. Revenues are recorded during the period our obligations to provide health care services are satisfied. Our performance obligations for inpatient services are generally satisfied over periods that average approximately five days, and revenues are recognized based on charges incurred in relation to total expected charges. Our performance obligations for outpatient services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges. Medicare generally pays for inpatient and outpatient services at prospectively determined rates based on clinical, diagnostic and other factors. Services provided to patients having Medicaid coverage are generally paid at prospectively determined rates per discharge, per identified service or per covered member. Agreements with commercial insurance carriers, managed care and preferred provider organizations generally provide for payments based upon predetermined rates per diagnosis, per diem rates or discounted

fee-for-service

rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

Revenues declined 12.2% from $12.602 billion in the second quarter of 2019 to $11.068 billion in the second quarter of 2020. Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payers. Estimates of contractual allowances under managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements. Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts). We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record

self-pay

revenues at the estimated amounts we expect to collect. Patients treated at our hospitals for

non-elective


	Quarter
	2020		Ratio			2019		Ratio
Medicare	$	2,272		20.5	%	$	2,635		20.9	%
Managed Medicare		1,488		13.4			1,595		12.7
Medicaid		564		5.1			416		3.3
Managed Medicaid		531		4.8			554		4.4
Managed care and insurers		5,631		50.9			6,425		50.9
International (managed care and insurers)		239		2.2			284		2.3
Other		343		3.1			693		5.5

Revenues	$	11,068		100.0	%	$	12,602		100.0	%


	Six Months
	2020		Ratio			2019		Ratio
Medicare	$	5,015		21.0	%	$	5,405		21.5	%
Managed Medicare		3,314		13.8			3,184		12.7
Medicaid		978		4.1			763		3.0
Managed Medicaid		1,197		5.0			1,167		4.6
Managed care and insurers		12,276		51.4			12,851		51.1
International (managed care and insurers)		531		2.2			581		2.3
Other		618		2.5			1,168		4.8

Revenues	$	23,929		100.0	%	$	25,119		100.0	%

Consolidated and same facility revenue per equivalent admission increased 9.7% and 10.0%, respectively, in the second quarter of 2020, compared to the second quarter of 2019. Consolidated and same facility equivalent admissions declined 20.0% and 20.1%, respectively, in the second quarter of 2020, compared to the second quarter of 2019. Consolidated and same facility outpatient surgeries both declined 32.6% in the second quarter of 2020, compared to the second quarter of 2019. Consolidated and same facility inpatient surgeries declined 15.6% and 15.7%, respectively, in the second quarter of 2020, compared to the second quarter of 2019. Consolidated and same facility emergency department visits declined 32.7% and 32.9%, respectively, in the second quarter of 2020, compared to the second quarter of 2019.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)


	Quarter						Six Months
	2020			2019			2020			2019
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)	$	9,916		$	10,953		$	21,258		$	21,559
Cost-to-charges ratio (patient care costs as percentage of gross patient charges)		12.6	%		12.2	%		12.2	%		12.0	%
Total uncompensated care	$	6,729		$	7,695		$	14,602		$	14,780
Multiply by the cost-to-charges ratio		12.6	%		12.2	%		12.2	%		12.0	%

Estimated cost of total uncompensated care	$	844		$	938		$	1,781		$	1,774

Same facility uninsured admissions declined by 4,264 admissions, or 10.0%, in the second quarter of 2020 compared to the second quarter of 2019. Same facility uninsured admissions increased 7.1%, in the first quarter of 2020 compared to the first quarter of 2019. Same facility uninsured admissions in 2019, compared to 2018, increased 6.8% in the fourth quarter, increased 2.1% in the third quarter, increased 5.1% in the second quarter, and were flat in the first quarter.

The approximate percentages of our admissions related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers and the uninsured for the quarters and six months ended June 30, 2020 and 2019 are set forth in the following table.


	Quarter						Six Months
	2020			2019			2020			2019
Medicare		25	%		29	%		26	%		29	%
Managed Medicare		19			18			20			19
Medicaid		6			5			6			5
Managed Medicaid		12			12			12			12
Managed care and insurers		29			27			28			27
Uninsured		9			9			8			8

		100	%		100	%		100	%		100	%

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

The approximate percentages of our inpatient revenues related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers for the quarters and six months ended June 30, 2020 and 2019 are set forth in the following table.


	Quarter						Six Months
	2020			2019			2020			2019
Medicare		26	%		28	%		28	%		29	%
Managed Medicare		15			15			15			14
Medicaid		7			5			6			4
Managed Medicaid		6			5			6			5
Managed care and insurers		46			47			45			48

		100	%		100	%		100	%		100	%

At June 30, 2020, we had 91 hospitals in the states of Texas and Florida. During the second quarter of 2020, 56% of our admissions and 49% of our revenues were generated by these hospitals. Uninsured admissions in Texas and Florida represented 74% of our uninsured admissions during the second quarter of 2020.

We receive a significant portion of our revenues from government health programs, principally Medicare and Medicaid, which are highly regulated and subject to frequent and substantial changes. In December 2017, the Centers for Medicare & Medicaid Services (“CMS”) announced that it will phase out federal matching funds for Designated State Health Programs under waivers granted under Section 1115 of the Social Security Act. Texas currently operates its Healthcare Transformation and Quality Improvement Program pursuant to a Medicaid waiver. In December 2017, CMS approved an extension of this waiver through September 30, 2022, but indicated that it will phase out some of the federal funding. Our Texas Medicaid revenues included Medicaid supplemental payments of $186 million and $106 million during the second quarters of 2020 and 2019, respectively, and $301 million and $214 million during the first six months of 2020 and 2019, respectively.

In addition, we receive supplemental payments in several other states. We are aware these supplemental payment programs are currently being reviewed by certain state agencies and some states have made requests to CMS to replace their existing supplemental payment programs. It is possible these reviews and requests will result in the restructuring of such supplemental payment programs and could result in the payment programs being reduced or eliminated. Because deliberations about these programs are ongoing, we are unable to estimate the financial impact the program structure modifications, if any, may have on our results of operations.

Key Performance Indicators

We present certain metrics and statistical information that management uses when assessing our results of operations. We believe this information is useful to investors as it provides insight to how management evaluates operational performance and trends between reporting periods. Information on how these metrics and statistical information are defined is provided in the following tables summarizing operating results and statistical data.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Operating Results Summary

The following is a comparative summary of results of operations for the quarters and six months ended June 30, 2020 and 2019 (dollars in millions):


	Quarter
	2020						2019
	Amount			Ratio			Amount			Ratio
Revenues	$	11,068			100.0		$	12,602			100.0

Salaries and benefits		5,330			48.2			5,837			46.3
Supplies		1,748			15.8			2,118			16.8
Other operating expenses		2,147			19.3			2,362			18.8
Government stimulus income		(822	)		(7.4	)		—			—
Equity in earnings of affiliates		(1	)		—			(8	)		(0.1	)
Depreciation and amortization		691			6.3			636			5.0
Interest expense		388			3.5			477			3.8
Losses (gains) on sales of facilities		27			0.2			(18	)		(0.1	)

		9,508			85.9			11,404			90.5

Income before income taxes		1,560			14.1			1,198			9.5
Provision for income taxes		344			3.1			271			2.1

Net income		1,216			11.0			927			7.4
Net income attributable to noncontrolling interests		137			1.2			144			1.2

Net income attributable to HCA Healthcare, Inc.	$	1,079			9.8		$	783			6.2

% changes from prior year:
Revenues		(12.2	)%					9.3	%
Income before income taxes		30.3						(3.2	)
Net income attributable to HCA Healthcare, Inc.		37.9						(4.5	)
Admissions(a)		(12.6	)					4.8
Equivalent admissions(b)		(20.0	)					6.2
Revenue per equivalent admission		9.7						3.0
Same facility % changes from prior year(c):
Revenues		( 12.1	)					4.3
Admissions(a)		(12.8	)					2.1
Equivalent admissions(b)		(20.1	)					2.6
Revenue per equivalent admission		10.0						1.7

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Operating Results Summary (continued)


	Six Months
	2020						2019
	Amount			Ratio			Amount			Ratio
Revenues	$	23,929			100.0		$	25,119			100.0

Salaries and benefits		11,448			47.8			11,484			45.7
Supplies		3,871			16.2			4,159			16.6
Other operating expenses		4,574			19.1			4,661			18.6
Government stimulus income		(822	)		(3.4	)		—			—
Equity in earnings of affiliates		(8	)		—			(19	)		(0.1	)
Depreciation and amortization		1,365			5.7			1,255			5.0
Interest expense		816			3.4			938			3.7
Losses (gains) on sales of facilities		20			0.1			(17	)		(0.1	)
Losses on retirement of debt		295			1.2			—			—

		21,559			90.1			22,461			89.4

Income before income taxes		2,370			9.9			2,658			10.6
Provision for income taxes		456			1.9			550			2.2

Net income		1,914			8.0			2,108			8.4
Net income attributable to noncontrolling interests		254			1.1			286			1.1

Net income attributable to HCA Healthcare, Inc.	$	1,660			6.9		$	1,822			7.3

% changes from prior year:
Revenues		(4.7	)%					9.4	%
Income before income taxes		(10.8	)					(4.3	)
Net income attributable to HCA Healthcare, Inc.		(8.9	)					(7.2	)
Admissions(a)		(5.8	)					3.9
Equivalent admissions(b)		(10.1	)					5.5
Revenue per equivalent admission		6.0						3.8
Same facility % changes from prior year(c):
Revenues		(5.5	)					5.4
Admissions(a)		(6.0	)					1.6
Equivalent admissions(b)		(10.2	)					2.3
Revenue per equivalent admission		5.3						3.0

(a)	Represents the total number of patients admitted to our hospitals and is used by management and certain investors as a general measure of inpatient volume.

(b)

Equivalent admissions are used by management and certain investors as a general measure of combined inpatient and outpatient volume. Equivalent admissions are computed by multiplying admissions (inpatient volume) by the sum of gross inpatient revenues and gross outpatient revenues and then dividing the resulting amount by gross inpatient revenues. The equivalent admissions computation “equates” outpatient revenues to the volume measure (admissions) used to measure inpatient volume, resulting in a general measure of combined inpatient and outpatient volume.

(c)	Same facility information excludes the operations of hospitals and their related facilities which were either acquired or divested during the current and prior period.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Quarters Ended June 30, 2020 and 2019

Due to the

COVID-19

pandemic, patient volumes and the related revenues for most of our services, particularly elective surgical procedures, were significantly impacted in April as various

COVID-19

stay-at-home

and business closure policies and other restrictions were implemented by federal, state and local governments. Patient volumes gradually improved beginning in the latter part of April and continuing through the end of the quarter as the states began to

re-open

and allow for

non-emergent

procedures. Revenues declined 12.2%, primarily due to the net impact of revenue per equivalent admission growth of 9.7% and a 20.0% decline in equivalent admissions for the second quarter of 2020 compared to the second quarter of 2019.

Salaries and benefits, as a percentage of revenues, were 48.2% in the second quarter of 2020 and 46.3% in the second quarter of 2019. Salaries and benefits per equivalent admission increased 14.1% in the second quarter of 2020 compared to the second quarter of 2019. Same facility labor rate increases averaged 0.3% for the second quarter of 2020 compared to the second quarter of 2019.

Supplies, as a percentage of revenues, were 15.8% in the second quarter of 2020 and 16.8% in the second quarter of 2019. Supply costs per equivalent admission increased 3.2% in the second quarter of 2020 compared to the second quarter of 2019. Supply costs per equivalent admission increased 2.3% for pharmacy supplies and 5.6% for general medical and surgical items and declined 0.2% for medical devices in the second quarter of 2020 compared to the second quarter of 2019.

Other operating expenses, as a percentage of revenues, were 19.3% in the second quarter of 2020 and 18.8% in the second quarter of 2019. Other operating expenses is primarily comprised of contract services, professional fees, repairs and maintenance, rents and leases, utilities, insurance (including professional liability insurance) and nonincome taxes. Provisions for losses related to professional liability risks were $139 million and $133 million for the second quarters of 2020 and 2019, respectively.

During the second quarter of 2020, we recorded $822 million ($590 million net of tax) of government stimulus income related to general distribution funds received from the Provider Relief Fund established by the CARES Act.

Equity in earnings of affiliates was $1 million and $8 million in the second quarters of 2020 and 2019, respectively.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Quarters Ended June 30, 2020 and 2019 (continued)

Depreciation and amortization increased $55 million, from $636 million in the second quarter of 2019 to $691 million in the second quarter of 2020. The increase in depreciation relates primarily to capital expenditures at our existing facilities.

Interest expense was $388 million in the second quarter of 2020 and $477 million in the second quarter of 2019. Our average debt balance was $31.921 billion for the second quarter of 2020 compared to $35.079 billion for the second quarter of 2019. The average effective interest rate for our long-term debt declined to 4.9% for the quarter ended June 30, 2020 from 5.5% for the quarter ended June 30, 2019.

During the second quarters of 2020 and 2019, we recorded losses on sales of facilities of $27 million and gains on sales of facilities of $18 million, respectively.

The effective tax rates were 24.2% and 25.7% for the second quarters of 2020 and 2019, respectively. The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships.

Net income attributable to noncontrolling interests declined from $144 million for the second quarter of 2019 to $137 million for the second quarter of 2020. The decline in net income attributable to noncontrolling interests related primarily to the operations of our surgery center partnerships.

Six Months Ended June 30, 2020 and 2019

Revenues declined to $23.929 billion in the first six months of 2020 from $25.119 billion in the first six months of 2019. Net income attributable to HCA Healthcare, Inc. totaled $1.660 billion, or $4.84 per diluted share, for the first six months ended June 30, 2020, compared to $1.822 billion, or $5.22 per diluted share, for the first six months ended June 30, 2019. Results for the first six months of 2020 included $822 million ($590 million net of tax), or $1.72 per diluted share, of government stimulus income related to general distribution funds and $60 million, or $0.13 per diluted share, of employee retention payroll tax credits, as provided for by the CARES Act. Results for the first six months of 2020 also included losses on retirement of debt of $295 million, or $0.66 per diluted share, and losses on sales of facilities of $20 million, or $0.06 per diluted share. Results for the first six months of 2019 included gains on sales of facilities of $17 million, or $0.04 per diluted share, respectively. Revenues for the first six months of 2020 and 2019, respectively, include $55 million, or $0.12 per diluted share, related to the settlement of Medicare outlier calculations for prior periods and $86 million, or $0.19 per diluted share, related to the resolution of transaction price differences regarding certain

out-of-network

services performed in prior periods. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 342.848 million shares for the six months ended June 30, 2020 and 349.334 million shares for the six months ended June 30, 2019. During 2019 and the first six months of 2020, we repurchased 7.949 million shares and 3.287 million shares of our common stock, respectively.

Due to the

COVID-19

pandemic, patient volumes and the related revenues for most of our services, particularly elective surgical procedures, were significantly impacted in the last two weeks of the first quarter and continued to be impacted through the second quarter as various

COVID-19

stay-at-home

re-open

and allow for

non-emergent

procedures. Revenues declined 4.7% due primarily to the net impact of revenue per equivalent admission growth of 6.0% and a 10.1% decline in equivalent admissions for the first six months of 2020 compared to the first six months of 2019.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Six Months Ended June 30, 2020 and 2019 (continued)

Salaries and benefits, as a percentage of revenues, were 47.8% in the first six months of 2020 and 45.7% in the first six months of 2019. Salaries and benefits per equivalent admission increased 10.9% in the first six months of 2020 compared to the first six months of 2019. Same facility labor rate increases averaged 1.5% for the first six months of 2020 compared to the first six months of 2019.

Supplies, as a percentage of revenues, were 16.2% in the first six months of 2020 and 16.6% in the first six months of 2019. Supply costs per equivalent admission increased 3.5% in the first six months of 2020 compared to the first six months of 2019. Supply costs per equivalent admission increased 1.6% for medical devices, 0.9% for pharmacy supplies and 5.9% for general medical and surgical items in the first six months of 2020 compared to the first six months of 2019.

Other operating expenses, as a percentage of revenues, were 19.1% in the first six months of 2020 and 18.6% in the first six months of 2019. Other operating expenses is primarily comprised of contract services, professional fees, repairs and maintenance, rents and leases, utilities, insurance (including professional liability insurance) and nonincome taxes. Provisions for losses related to professional liability risks were $279 million and $269 million for the first six months of 2020 and 2019, respectively.

During the first six months of 2020, we recorded $822 million ($590 million net of tax) of government stimulus income related to general distribution funds received from the Provider Relief Fund established by the CARES Act.

Equity in earnings of affiliates was $8 million and $19 million in the first six months of 2020 and 2019, respectively.

Depreciation and amortization increased $110 million, from $1.255 billion in the first six months of 2019 to $1.365 billion in the first six months of 2020. The increase in depreciation relates to both acquired facilities and increased capital expenditures at our existing facilities.

Interest expense was $816 million in the first six months of 2020 and $938 million in the first six months of 2019. Our average debt balance was $32.766 billion for the first six months of 2020 compared to $34.520 billion for the first six months of 2019. The average effective interest rate for our long-term debt declined to 5.0% for the six months ended June 30, 2020 from 5.5% for the six months ended June 30, 2019.

During the first six months of 2020 and 2019, we recorded net losses on sales of facilities of $20 million and gains on sales of facilities of $17 million, respectively.

During February 2020, we issued $2.700 billion aggregate principal amount of 3.50% senior unsecured notes due 2030. During March 2020, we used the net proceeds for the redemption of all $1.000 billion outstanding aggregate principal amount of HCA Healthcare, Inc.’s 6.25% senior notes due 2021 and, together with available funds, for the redemption of all $2.000 billion outstanding aggregate principal amount of HCA Inc.’s 7.50% senior notes due 2022. The pretax loss on retirement of debt was $295 million.

The effective tax rates were 21.6% and 23.2% for the first six months of 2020 and 2019, respectively. The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships. Our provisions for income taxes for the first six months of 2020 and 2019 included tax benefits of $54 million and $53 million, respectively, related to employee equity award settlements. Excluding the effect of these adjustments, the effective tax rate for the first six months of 2020 and 2019 would have been 24.1% and 25.4%, respectively.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Six Months Ended June 30, 2020 and 2019 (continued)

Net income attributable to noncontrolling interests declined from $286 million for the first six months of 2019 to $254 million for the first six months of 2020. The decline in net income attributable to noncontrolling interests related primarily to the operations of our surgery center partnerships.

Liquidity and Capital Resources

Cash provided by operating activities totaled $10.098 billion in the first six months of 2020 compared to $2.971 billion in the first six months of 2019. The $7.127 billion increase in cash provided by operating activities in the first six months of 2020 compared to the first six months of 2019, related primarily to the combined effect of the receipt of $4.999 billion related to the unapplied accelerated Medicare payments and unrecognized general and targeted distributions as provided for in the CARES Act, positive changes in working capital of $1.465 billion, primarily from the collection of patient accounts receivable, and an increase related to the deferral of income taxes of $445 million. The net combination of interest payments and net tax refunds in the first six months of 2020 was $838 million, and the combined interest payments and net tax payments in the first six months of 2019 was $1.433 billion. Interest payments decreased in 2020 due to lower average debt balances, and net tax payments decreased as quarterly estimated income tax payments were deferred until July 2020 by the IRS in response to the

COVID-19

pandemic. Working capital totaled $1.175 billion at June 30, 2020 and $3.439 billion at December 31, 2019. The $2.264 billion decline in working capital is primarily related to the net effect of an increase in cash and cash equivalents of $4.017 billion, offset by a decline in accounts receivable of $1.241 billion and an increase in contract liabilities-deferred revenues of $4.999 billion.

Cash used in investing activities was $1.953 billion in the first six months of 2020 compared to $3.113 billion in the first six months of 2019. Acquisitions of hospitals and health care entities declined from $1.504 billion in the first six months of 2019 (which included the acquisition of a seven-hospital health system in North Carolina) to $346 million in the first six months of 2020. Excluding acquisitions, capital expenditures were $1.598 billion in the first six months of 2020 and $1.745 billion in the first six months of 2019. Planned capital expenditures are expected to approximate $2.8 billion to $3.0 billion in 2020. At June 30, 2020, there were projects under construction which had estimated additional costs to complete and equip over the next five years of approximately $3.0 billion. We expect to finance capital expenditures with internally generated and borrowed funds.

Cash used in financing activities totaled $4.116 billion in the first six months of 2020 compared to cash provided by financing activities of $2.070 billion in the first six months of 2019. During the first six months of 2020, net cash flows used in financing activities included a net decline of $3.144 billion in our indebtedness, payments of dividends of $153 million, repurchases of common stock of $441 million, distributions to noncontrolling interests of $199 million and payments of debt issuance costs of $35 million. During the first six months of 2019, net cash flows provided by financing activities included a net increase of $3.313 billion in our indebtedness, payment of dividends of $278 million, repurchases of common stock of $520 million, distributions to noncontrolling interests of $247 million and payments of debt issuance costs of $63 million.

In response to the risks the

COVID-19

pandemic presents to our business, we have suspended our share repurchase and quarterly dividend programs and reduced certain planned projects and capital expenditures. We expect to evaluate resumption of these programs at a future date.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

We are a highly leveraged company with significant debt service requirements. Our debt totaled $30.942 billion at June 30, 2020. Our interest expense was $816 million for the first six months of 2020 and $938 million for the first six months of 2019.

In addition to cash flows from operations, available sources of capital include amounts available under our senior secured credit facilities ($7.718 billion available as of both June 30, 2020 and July 28, 2020, respectively) and anticipated access to public and private debt markets.

In response to the risks the

COVID-19

pandemic presents to our business, during March 2020, we entered into a credit agreement that provides for

a 364-day secured

term loan facility for an aggregate principal amount of up to $2.000 billion. The facility will mature in March 2021. If drawn, amounts outstanding under the credit agreement will bear interest at either (i) the LIBOR rate plus 2.50% or (ii) an alternate base rate as defined in the credit agreement. As of June 30, 2020 and July 28, 2020, there were no amounts outstanding nor draw notices pending under the facility.

During the second quarter of 2020, we requested accelerated Medicare payments as provided for in the CARES Act, which allows for eligible health care facilities to request up to six months of advance Medicare payments for acute care hospitals or up to three months of advance Medicare payments for other health care providers. After 120 days past receipt of the advance payments (beginning in August 2020), claims for services provided to Medicare beneficiaries will be applied against the advance payment balance. Any unapplied advance payment amounts must be paid in full within one year from receipt of the advance payments for acute care hospitals and within 210 days for other health care providers. During the second quarter of 2020, we also received approximately $1.4 billion in general and targeted distributions from the CARES Act Provider Relief Fund, and in July 2020 we received approximately $300 million in targeted distributions. These distributions from the Provider Relief Fund will not be subject to repayment, provided we are able to attest to and comply with the terms and conditions of the funding.

Investments of our insurance subsidiaries, held to maintain statutory equity levels and to provide liquidity to pay claims, totaled $469 million and $462 million at June 30, 2020 and December 31, 2019, respectively. An insurance subsidiary maintained net reserves for professional liability risks of $181 million and $175 million at June 30, 2020 and December 31, 2019, respectively. Our facilities are insured by a 100% owned insurance subsidiary for losses up to $50 million per occurrence; however, this coverage is generally subject, in most cases, to a $15 million per occurrence self-insured retention. Net reserves for the self-insured professional liability risks retained were $1.744 billion and $1.606 billion at June 30, 2020 and December 31, 2019, respectively. Claims payments, net of reinsurance recoveries, during the next 12 months are expected to approximate $477 million. We estimate that approximately $427 million of the expected net claim payments during the next 12 months will relate to claims subject to the self-insured retention.

Considering the actions discussed above to respond to the uncertainty arising from the

COVID-19

pandemic and provide additional financial flexibility, management believes that cash flows from operations, amounts available under our senior secured credit facilities and our anticipated access to public and private debt markets will be sufficient to meet expected liquidity needs during the next 12 months.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

Summarized Financial Information

HCA Inc., a direct wholly-owned subsidiary of HCA Healthcare, Inc., is the obligor under a substantial portion of our indebtedness, including our senior secured credit facilities, senior secured notes and senior unsecured notes. The senior secured notes and senior unsecured notes issued by HCA Inc. are fully and unconditionally guaranteed by HCA Healthcare, Inc. The senior secured credit facilities and senior secured notes are fully and unconditionally guaranteed, subject to customary release provisions, by substantially all existing and future, direct and indirect, 100% owned material domestic subsidiaries that are “Unrestricted Subsidiaries” under our Indenture dated December 16, 1993 (except for certain special purpose subsidiaries that only guarantee and pledge their assets under our senior secured asset-based revolving credit facility). For further information regarding such guarantees, refer to the applicable indentures that are filed as exhibits to our annual report on Form

10-K

for the year ended December 31, 2019.

Summarized financial information is presented on a combined basis and transactions between the combining entities have been eliminated. Financial information for nonguarantor entities has been excluded. The summarized operating results information for the six months ended June 30, 2020 and year ended December 31, 2019 and the summarized balance sheet information at June 30, 2020 and December 31, 2019, for HCA Healthcare, Inc., HCA Inc. and the subsidiary guarantors (the Parent, Subsidiary Issuer and Subsidiary Guarantors) follow (dollars in millions):

Six Months Ended June 30, 2020 and Year Ended December 31, 2019:


	Six Months June 30, 2020			Year December 31, 2019
Revenues	$	14,425		$	29,220
Income before income taxes		1,801			3,912
Net income		1,425			2,993
Net income attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors		1,392			2,902

At June 30, 2020 and December 31, 2019:

	June 30, 2020			December 31, 2019
Current assets	$	9,122		$	6,090
Property and equipment, net		14,896			13,418
Goodwill and other intangible assets		5,807			5,743
Total noncurrent assets		21,696			19,977
Total assets		30,818			26,067

Current liabilities		8,341			4,504
Long-term debt, net		30,449			33,227
Intercompany balances		2,739			(53	)
Income taxes and other liabilities		862			879
Total noncurrent liabilities		34,502			34,398

Stockholders’ deficit attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors		(12,125	)		(12,941	)
Noncontrolling interests		100			106

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

Market Risk

We are exposed to market risk related to changes in market values of securities. The investments in our 100% owned insurance subsidiaries were $469 million at June 30, 2020. These investments are carried at fair value, with changes in unrealized gains and losses that are not credit-related being recorded as adjustments to other comprehensive income. At June 30, 2020, we had a net unrealized gain of $30 million on the insurance subsidiaries’ investments.

We are exposed to market risk related to market illiquidity. Investments in debt and equity securities of our 100% owned insurance subsidiaries could be impaired by the inability to access the capital markets. Should the 100% owned insurance subsidiaries require significant amounts of cash in excess of normal cash requirements to pay claims and other expenses on short notice, we may have difficulty selling these investments in a timely manner or be forced to sell them at a price less than what we might otherwise have been able to in a normal market environment. We may be required to recognize credit-related impairments on our investment securities in future periods should issuers default on interest payments or should the fair market valuations of the securities deteriorate due to ratings downgrades or other issue-specific factors.

We are also exposed to market risk related to changes in interest rates, and we periodically enter into interest rate swap agreements to manage our exposure to these fluctuations. Our interest rate swap agreements involve the exchange of fixed and variable rate interest payments between two parties, based on common notional principal amounts and maturity dates. The notional amounts of the swap agreements represent balances used to calculate the exchange of cash flows and are not our assets or liabilities. Our credit risk related to these agreements is considered low because the swap agreements are with creditworthy financial institutions. The interest payments under these agreements are settled on a net basis. These derivatives have been recognized in the financial statements at their respective fair values. Changes in the fair value of these derivatives, which are designated as cash flow hedges, are included in other comprehensive income.

With respect to our interest-bearing liabilities, approximately $1.198 billion of long-term debt at June 30, 2020 was subject to variable rates of interest, while the remaining balance in long-term debt of $29.744 billion at June 30, 2020 was subject to fixed rates of interest. Both the general level of interest rates and, for the senior secured credit facilities, our leverage affect our variable interest rates. Our variable debt is comprised primarily of amounts outstanding under the senior secured credit facilities. Borrowings under the senior secured credit facilities bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the higher of (1) the federal funds rate plus 0.50% or (2) the prime rate of Bank of America or (b) a LIBOR rate for the currency of such borrowing for the relevant interest period. The applicable margin for borrowings under the senior secured credit facilities may fluctuate according to a leverage ratio. The average effective interest rate for our long-term debt was 5.0% and 5.5% for the six months ended June 30, 2020 and 2019, respectively.

The estimated fair value of our total long-term debt was $34.000 billion at June 30, 2020. The estimates of fair value are based upon the quoted market prices for the same or similar issues of long-term debt with the same maturities. Based on a hypothetical 1% increase in variable interest rates, the potential annualized reduction to future pretax earnings would be approximately $12 million. To mitigate the impact of fluctuations in interest rates, we generally target a portion of our debt portfolio to be maintained at fixed rates.

We are exposed to currency translation risk related to our foreign operations. We currently do not consider the market risk related to foreign currency translation to be material to our consolidated financial statements or our liquidity.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Tax Examinations

The Internal Revenue Service was conducting an examination of the Company’s 2016, 2017 and 2018 federal income tax returns at June 30, 2020. We are also subject to examination by state and foreign taxing authorities. Management believes HCA Healthcare, Inc. and its predecessors, subsidiaries and affiliates properly reported taxable income and paid taxes in accordance with applicable laws and agreements established with IRS, state and foreign taxing authorities and final resolution of any disputes will not have a material, adverse effect on our results of operations or financial position. However, if payments due upon final resolution of any issues exceed our recorded estimates, such resolutions could have a material, adverse effect on our results of operations or financial position.

Operating Data


	2020		2019
Number of hospitals in operation at:
March 31		186		185
June 30		186		184
September 30				184
December 31				184
Number of freestanding outpatient surgical centers in operation at:
March 31		123		124
June 30		122		125
September 30				125
December 31				123
Licensed hospital beds at(a):
March 31		49,357		48,455
June 30		49,403		48,483
September 30				48,588
December 31				49,035
Weighted average licensed beds(b):
Quarter:
First		49,160		48,036
Second		49,358		48,429
Third				48,535
Fourth				48,911
Year				48,480
Average daily census(c):
Quarter:
First		28,822		28,966
Second		24,844		27,808
Third				27,502
Fourth				28,274
Year				28,134
Admissions(d):
Quarter:
First		528,244		523,196
Second		452,992		518,253
Third				527,284
Fourth				540,194
Year				2,108,927

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Data (continued)


	2020			2019
Equivalent admissions(e):
Quarter:
First		889,035			889,956
Second		723,136			903,419
Third					918,964
Fourth					933,996
Year					3,646,335
Average length of stay (days)(f):
Quarter:
First		5.0			5.0
Second		5.0			4.9
Third					4.8
Fourth					4.8
Year					4.9
Emergency room visits(g):
Quarter:
First		2,264,707			2,287,440
Second		1,516,116			2,253,337
Third					2,269,364
Fourth					2,350,988
Year					9,161,129
Outpatient surgeries(h):
Quarter:
First		226,319			240,846
Second		170,911			253,441
Third					249,177
Fourth					266,483
Year					1,009,947
Inpatient surgeries(i):
Quarter:
First		135,145			137,363
Second		118,591			140,473
Third					143,215
Fourth					145,584
Year					566,635
Days revenues in accounts receivable(j):
Quarter:
First		49			53
Second		50			52
Third					52
Fourth					50
Outpatient revenues as a % of patient revenues(k):
Quarter:
First		37	%		38	%
Second		32	%		39	%
Third					39	%
Fourth					39	%
Year					39	%

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Data (continued)

(a)	Licensed beds are those beds for which a facility has been granted approval to operate from the applicable state licensing agency.

(b)	Represents the average number of licensed beds, weighted based on periods owned.

(c)	Represents the average number of patients in our hospital beds each day.

(d)	Represents the total number of patients admitted to our hospitals and is used by management and certain investors as a general measure of inpatient volume.

(e)

Equivalent admissions are used by management and certain investors as a general measure of combined inpatient and outpatient volume. Equivalent admissions are computed by multiplying admissions (inpatient volume) by the sum of gross inpatient revenues and gross outpatient revenues and then dividing the resulting amount by gross inpatient revenues. The equivalent admissions computation “equates” outpatient revenues to the volume measure (admissions) used to measure inpatient volume resulting in a general measure of combined inpatient and outpatient volume.

(f)	Represents the average number of days admitted patients stay in our hospitals.

(g)	Represents the number of patients treated in our emergency rooms.

(h)	Represents the number of surgeries performed on patients who were not admitted to our hospitals. Pain management and endoscopy procedures are not included in outpatient surgeries.

(i)	Represents the number of surgeries performed on patients who have been admitted to our hospitals. Pain management and endoscopy procedures are not included in inpatient surgeries.

(j)	Revenues per day is calculated by dividing revenues for the quarter by the days in the quarter. Days revenues in accounts receivable is then calculated as accounts receivable at the end of the quarter divided by revenues per day.

(k)	Represents the percentage of patient revenues related to patients who are not admitted to our hospitals.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by this item is provided under the caption “Market Risk” under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

HCA’s management, with participation of HCA’s chief executive officer and chief financial officer, has evaluated the effectiveness of HCA’s disclosure controls and procedures as of June 30, 2020. Based on that evaluation, HCA’s chief executive officer and chief financial officer concluded that HCA’s disclosure controls and procedures were effective as of June 30, 2020.

Changes in Internal Control Over Financial Reporting

During the period covered by this report, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Health care companies are subject to numerous investigations by various governmental agencies. Under the federal False Claims Act (“FCA”), private parties have the right to bring

qui tam

, or “whistleblower,” suits against companies that submit false claims for payments to, or improperly retain overpayments from, the government. Some states have adopted similar state whistleblower and false claims provisions. Certain of our individual facilities have received, and from time to time, other facilities may receive, government inquiries from, and may be subject to investigation by, federal and state agencies. Depending on whether the underlying conduct in these or future inquiries or investigations could be considered systemic, their resolution could have a material, adverse effect on our results of operations, financial position or liquidity.

qui tam

qui

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tam

qui tam

lawsuit could have on the Company.

ITEM 1A. RISK FACTORS

Reference is made to the factors set forth under the caption “Forward-Looking Statements” in Part I, Item 2 of this quarterly report on

Form 10-Q

and other risk factors described in our annual report on

Form 10-K

for the year ended December 31, 2019, which are incorporated herein by reference. There have not been any material changes to the risk factors previously disclosed in our annual report on

Form 10-K

for the year ended December 31, 2019 and our quarterly report on Form

10-Q

for the quarter ended March 31, 2020, except as set forth below.

The COVID-19 pandemic is significantly affecting our operations, business and financial condition. Our liquidity could also be negatively impacted, particularly if the U.S. economy remains unstable for a significant amount of time.

On January 31, 2020, the Secretary of U.S. Department of Health and Human Services (“HHS”) declared a national public health emergency (“PHE”) due to a novel coronavirus. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19, a disease caused by this novel coronavirus, a pandemic. This disease continues to spread throughout the United States and other parts of the world. The COVID-19 pandemic is significantly affecting our employees, patients, hospitals, communities and business operations, as well as the U.S. economy and financial markets. As the COVID-19 crisis continues to evolve, the full extent to which the COVID-19 outbreak will impact our business, results of operations, financial condition and liquidity will depend on future developments that are highly uncertain and cannot be accurately predicted. For example, we are not able to predict or control the severity or duration of the pandemic, including whether there will be additional periods of increases in the number of COVID-19 cases in areas in which we operate, the timing and availability of effective medical treatments and vaccines or the efficacy of public health controls. Florida and Texas, our two largest markets, have recently emerged as among the latest “hot spots” of the COVID-19 pandemic. Due to the concentration of our hospitals in Texas and Florida, we are particularly sensitive to the increase in COVID-19 cases in those states where the pandemic could have a disproportionate effect on our business.

We have been working with federal, state and local health authorities to respond to COVID-19 cases in the markets we serve and continue to take and support measures to try to limit the spread of the virus and to mitigate the burden on the health care system. For example, some states are requiring hospitals to maintain a reserve of personal protective equipment (“PPE”) and mandating COVID-19 screening for new patients and certain hospital staff. We have incurred and will continue to incur additional costs related to protecting the health and well-being and meeting the needs of our patients, employees, medical staff members and contractors, including pandemic pay, hoteling our staff and additional scrub laundering. We expect to continue to incur additional costs, which may be significant, as we continue to implement operational changes in response to this pandemic. Further, our management is focused on mitigating the impact of the COVID-19 pandemic, which has required and will continue to require a substantial investment of time and resources across our enterprise.

As a front line provider of health care services, we have been and will continue to be impacted by the health and economic effects of COVID-19. Although we are implementing considerable safety measures, treatment of COVID-19 patients has associated risks to our employees, patients and physicians. These risks, and how clinical staff perceive and respond to them, may adversely affect our operating capacity. Despite considerable efforts to source vital supplies, we have experienced and may continue to experience supply chain disruptions, including delays and price increases in equipment, pharmaceuticals and medical supplies, particularly PPE, and we may experience shortages. Our current PPE inventory is satisfactory, but we cannot be certain that our supplies will remain sufficient in the future. In addition, restrictive measures taken to address the COVID-19 pandemic may impact the availability of employed and contract labor staffing for corporate support services, including, but not limited to, coding, billing, collection and other business office functions, which could

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adversely affect our execution of established control procedures that may not be sufficiently mitigated through execution of our business continuity plans. Staffing, equipment, and pharmaceutical and medical supplies shortages may impact our ability to schedule, admit and treat patients. The combined impact of these factors, despite our efforts to mitigate their effect, could result in reduced employee morale and increased exposure to labor unrest, work stoppages or other workforce disruptions.

Restrictions on elective procedures, travel bans, social distancing, quarantines and stay-at-home and shelter-in-place orders, and other restrictive measures have reduced, and may in the future reduce, the volume of procedures performed at our facilities, as well as the volume of emergency room and physician office visits unrelated to COVID-19. In the last two weeks of March 2020 and in the second quarter of 2020, we cancelled a substantial amount of elective procedures at our facilities and closed or reduced operating hours at a significant number of our surgery centers that specialize in elective procedures, resulting in significantly reduced patient volumes and operating revenues. Although social contact restrictions have eased across the U.S. and most states have lifted moratoriums on non-emergent procedures, some restrictions remain in place, and some states are re-imposing certain restrictions due to increasing rates of COVID-19 cases. Further, additional closings and restrictions on hours and services may occur for an unpredictable amount of time. Some state and local governments are limiting hospital volume by requiring a minimum percentage of vacant beds in case of a surge in COVID-19 patients. We are currently selectively suspending elective procedures at certain facilities based upon the local COVID-19 volume trends, bed capacity and staffing levels. It is unclear whether certain markets, such as Florida and Texas, will continue to experience periods of increases or spikes in the number of COVID-19 cases.

Some individuals may choose to postpone medical care for an undetermined period of time even in the absence of government or industry-adopted restrictions. At this time, we believe that certain of the patient volume declines we are experiencing reflect a deferral of health care services utilization to a later period, rather than a permanent reduction in demand for our services; however, we cannot provide assurances as to the recovery of pre-pandemic patient volumes or the ultimate impact on demand. Further, our patient volumes may be adversely impacted by the expanded use of telehealth services from other providers as a result of reduced regulatory barriers on the use and reimbursement of telehealth services and individuals becoming more comfortable with receiving remote care.

Broad economic factors resulting from the current COVID-19 pandemic, including high unemployment and underemployment rates and reduced consumer spending and confidence, also affect our service mix, revenue mix payer mix and patient volumes, as well as our ability to collect outstanding receivables. Business closings and layoffs in the areas where we operate may lead to increases in the uninsured and underinsured populations and adversely affect demand for our services, as well as the ability of patients and other payers to pay for services rendered. Any increase in the amount or deterioration in the collectability of patient accounts receivable will adversely affect our cash flows and results of operations, requiring an increased level of working capital. In addition, our results and financial condition may be adversely affected by federal, state or local laws, regulations, orders, or other governmental or regulatory actions addressing the current COVID-19 pandemic or the U.S. health care system, which could result in direct or indirect restrictions to our business, financial condition, results of operations and cash flow. We may also be subject to claims from patients, employees and others exposed to COVID-19 at our facilities. Such actions may involve large demands, as well as substantial defense costs, though there is no certainty at this time whether any such claims will be filed or the outcome of such claims if filed. Our professional and general liability insurance, a portion of which is provided through a 100% owned insurance subsidiary, may not cover all claims against us.

If general economic conditions continue to deteriorate or remain uncertain for an extended period of time, our liquidity and ability to repay our outstanding debt may be harmed and the trading price of our common stock could decline. Furthermore, the current COVID-19 pandemic may cause disruption in the financial markets and banking industry. These factors may affect the availability, terms or timing on which we may obtain any additional funding and our ability to access our cash. There can be no assurance that we will be able to raise additional funds on terms acceptable to us, if at all.

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The foregoing and other continued disruptions to our business as a result of the COVID-19 pandemic could heighten the risks in certain of the other risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2019, any of which could have a material adverse effect on our results of operations and financial position.

There is a high degree of uncertainty regarding the implementation and impact of the CARES Act and other existing or future stimulus legislation, if any. There can be no assurance as to the total amount of financial assistance or types of assistance we will receive, that we will be able to comply with the applicable terms and conditions to retain such assistance, that we will be able to benefit from provisions intended to increase access to resources and ease regulatory burdens for health care providers or that additional stimulus legislation will be enacted.

The CARES Act is a $2 trillion economic stimulus package signed into law on March 27, 2020, in response to the COVID-19 pandemic. In an effort to stabilize the U.S. economy, the CARES Act provides for cash payments to individuals and loans and grants to small businesses, among other measures. The PPPHCE Act, an expansion of the CARES Act that includes additional emergency appropriations, was signed into law on April 24, 2020. Together, the CARES Act and the PPPHCE Act authorize $175 billion in funding to be distributed to hospitals and other health care providers through the Public Health and Social Services Emergency Fund (“PHSSEF”), also known as the Provider Relief Fund. These funds are intended to reimburse eligible providers and suppliers for healthcare-related expenses or lost revenues attributable to COVID-19.

Recipients are not required to repay PHSSEF funds, provided that they attest to and comply with certain terms and conditions, including limitations on balance billing and not using PHSSEF funds to reimburse expenses or losses that other sources are obligated to reimburse. HHS allocated $50 billion of the CARES Act provider relief funding for general distribution to Medicare providers impacted by COVID-19, to be distributed proportional to providers’ share of 2018 net patient revenue. HHS expects to distribute $15 billion to eligible Medicaid and CHIP providers that have not received a payment from the general distribution allocation and $13 billion to safety net hospitals. In addition, HHS is making targeted distributions for providers in areas particularly impacted by COVID-19, rural providers, providers of services with lower shares of Medicare reimbursement or who predominantly serve the Medicaid population, and providers requesting reimbursement for treatment of uninsured Americans, among others. A portion of the available funding is being distributed to reimburse health care providers that submit claims requests for COVID-19-related treatment of uninsured patients at Medicare rates. HHS has not yet announced the precise method by which all future payments from the PHSSEF will be determined or allocated, so the potential impact to us is not currently known. As of the date of the filing of this report, we have received $1.684 billion in grants from the PHSSEF, including $931 million of general distributions and $753 million for targeted distributions.

The CARES Act also makes other forms of financial assistance available to health care providers, including Medicare and Medicaid payments adjustments and an expansion of the Medicare Accelerated and Advance Payment Program, which makes available advance payments of Medicare funds in order to increase cash flow to providers. During the quarter ended June 30, 2020, we received approximately $4.4 billion in accelerated Medicare payments, which are required to be repaid or recouped by CMS. However, CMS is reevaluating new applications from hospitals and other Medicare Part A providers for accelerated payments in light of direct payments made available through PHSSEF and has suspended the advance payment program for physicians and other Medicare Part B providers.

In addition to financial assistance, the CARES Act and related legislation include provisions intended to increase access to medical supplies and equipment and ease financial, legal and regulatory burdens on health care providers. For example, the CARES Act and related legislation suspend the Medicare sequestration payment adjustment from May 1, 2020 through December 31, 2020 (but extend sequestration through 2030), provide for a 20% add-on payment under the hospital inpatient PPS for care provided to patients with COVID-19, expand access to and payment for telehealth services under Medicare, prioritize review of drug applications to help with

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shortages of emergency drugs, delay Medicaid DSH reductions, and provide funding to reimburse providers for conducting COVID-19 testing for the uninsured. HHS and CMS have announced other flexibilities for health care providers in response to COVID-19, such as extensions for and relief from data submission requirements for providers participating in certain quality reporting programs. It is unclear how changes to these and other value-based programs will affect our financial condition.

Due to the recent enactment of the CARES Act, the PPPHCE Act and other enacted legislation, there is still a high degree of uncertainty surrounding their implementation, and the COVID-19 pandemic continues to evolve. Some of the measures allowing for flexibility in delivery of care and various financial supports for health care providers are available only for the duration of the PHE, and it is unclear whether or for how long the PHE declaration will be extended. The current PHE determination expires October 23, 2020. The HHS Secretary may choose to renew the PHE declaration for successive 90-day periods for as long as the emergency continues to exist and may terminate the declaration whenever he determines that the PHE no longer exists. The federal government may consider additional stimulus and relief efforts, but we are unable to predict whether additional stimulus measures will be enacted or their impact. There can be no assurance as to the total amount of financial and other types of assistance we will receive under the CARES Act, PPPHCE Act or future legislation, if any, and it is difficult to predict the impact of such legislation on our operations. Further, there can be no assurance that the terms and conditions of provider relief funding or other relief programs will not change or be interpreted in ways that affect our ability to comply with such terms and conditions in the future (which could affect our ability to retain assistance), the amount of total stimulus funding we will receive or our eligibility to participate in such stimulus funding. We will continue to monitor our compliance with the terms and conditions of the Provider Relief Fund, including demonstrating that the distributions received have been used for healthcare-related expenses or lost revenue attributable to COVID-19. If we are unable to attest to or comply with current or future terms and conditions our ability to retain some or all of the distributions received may be impacted. We will continue to assess the potential impact of COVID-19 and government responses to the pandemic on our business, results of operations, financial condition and cash flows.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

COVID-19

pandemic presents to our business, during March 2020, we announced the suspension of our share repurchase programs and expect to evaluate the resumption of the programs at a future date. There were no share repurchases of our outstanding common stock during the second quarter of 2020. At June 30, 2020, we had $2.800 billion of repurchase authorization available under the January 2019 and 2020 authorizations.

In response to the

COVID-19

pandemic concerns, we announced the suspension of the Company’s quarterly dividend program for the second quarter of 2020. The Company expects to evaluate resumption of the program at a future date. Any other future declarations of quarterly dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors. Our ability to declare future dividends may also from time to time be limited by the terms of our debt agreements.

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ITEM 6. EXHIBITS

(a) List of Exhibits:


3.1	—	Amended and Restated Certificate of Incorporation of the Company (restated for SEC filing purposes only).

3.2	—	Amended and Restated Bylaws of the Company (restated for SEC filing purposes only).

10.1	—	2020 Stock Incentive Plan for Key Employees of HCA Healthcare, Inc., and its Affiliates (filed as Exhibit 4.4 to the Company’s Registration Statement on Form S-8 (File No. 333-237967), and incorporated herein by reference).*

10.2	—	Form of Stock Appreciation Right Award Agreement Under the 2020 Stock Incentive Plan for Key Employees of HCA Healthcare, Inc. and its Affiliates (filed as Exhibit 4.5 to the Company’s Registration Statement on Form S-8 (File No. 333-237967), and incorporated herein by reference).*

10.3	—	Form of Employee Restricted Share Unit Award Agreement Under the 2020 Stock Incentive Plan for Key Employees of HCA Healthcare, Inc. and its Affiliates (filed as Exhibit 4.6 to the Company’s Registration Statement on Form S-8 (File No. 333-237967), and incorporated herein by reference).*

10.4	—	Form of Performance Share Unit Award Agreement Under the 2020 Stock Incentive Plan for Key Employees of HCA Healthcare, Inc. and its Affiliates (filed as Exhibit 4.7 to the Company’s Registration Statement on Form S-8 (File No. 333-237967), and incorporated herein by reference).*

10.5	—	Amendment to the Amended and Restated HCA Restoration Plan, effective June 5, 2020.*

22	—	List of Subsidiary Guarantors (filed as Exhibit 22 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (File No. 001-11239), and incorporated herein by reference).

31.1	—	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	—	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32	—	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	—	The following financial information from our quarterly report on Form 10-Q for the quarters and six months ended June 30, 2020 and 2019, filed with the SEC on July 30, 2020, formatted in Inline Extensible Business Reporting Language: (i) the condensed consolidated balance sheets at June 30, 2020 and December 31, 2019, (ii) the condensed consolidated income statements for the quarters and six months ended June 30, 2020 and 2019, (iii) the condensed consolidated comprehensive income statements for the quarters and six months ended June 30, 2020 and 2019, (iv) the condensed consolidated statements of stockholders’ deficit for the quarters and six months ended June 30, 2020 and 2019, (v) the condensed consolidated statements of cash flows for the six months ended June 30, 2020 and 2019 and (vi) the notes to condensed consolidated financial statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

104	—	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL (included in Exhibit 101).

*	Management compensatory plan or arrangement.

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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.


HCA Healthcare, Inc.

By:		/S/ WILLIAM B. RUTHERFORD
		William B. Rutherford
		Executive Vice President and Chief Financial Officer

Date: July 30, 2020

Exhibit 3.1

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

HCA HEALTHCARE, INC.

ARTICLE I

NAME

The name of the Corporation is HCA Healthcare, Inc. (hereinafter, the “Corporation”).

ARTICLE II

REGISTERED OFFICE AND AGENT

The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.

ARTICLE III

PURPOSE

The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “DGCL”).

ARTICLE IV

CAPITAL STOCK

The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is Two Billion (2,000,000,000), of which:

(i) One Billion Eight Hundred Million (1,800,000,000) shares shall be shares of common stock, par value $.01 per share (the “Common Stock”); and

(ii) Two Hundred Million (200,000,000) shares shall be shares of preferred stock, par value $.01 per share (the “Preferred Stock”).

Such stock may be issued from time to time by the Corporation for such consideration as may be fixed by the Board of Directors of the Corporation.

SECTION 1. Stock Split. Upon the filing and effectiveness of this Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Effective Time”) each outstanding share (including shares held in treasury) of Common Stock of the Corporation (the “Old Common Stock”) shall be automatically split up, reclassified and converted into 4.505 shares of Common Stock (the “New Common Stock”). This stock split of the outstanding shares of Common Stock shall not affect the total number of shares of Common Stock that the Corporation is authorized to issue, which shall remain as set forth in the first sentence of this Article IV.

The forward split of the Old Common Stock effected by the foregoing paragraph shall be referred to herein as the “Forward Split.” The Forward Split shall occur without any further action on the part of the Corporation or the holders of shares of Old Common Stock or New Common Stock and whether or not certificates representing such holders’ shares prior to the Forward Split are surrendered for cancellation. No fractional interest in a share of New Common Stock shall be deliverable upon the Forward Split. Stockholders who otherwise would have been entitled to receive any fractional interests in the New Common Stock, in lieu of receipt of such fractional interest, shall be entitled to receive from the Corporation an amount in cash equal to the fair value of such fractional interest as of the Effective Time. Except where the context otherwise requires, all references to “Common Stock” in this Certificate of Incorporation shall be to the New Common Stock.

The Forward Split will be effected on a stockholder-by-stockholder (as opposed to certificate-by-certificate) basis. Certificates or book-entries dated as of a date prior to the Effective Time representing outstanding shares of Old Common Stock shall, immediately after the Effective Time, represent a number of shares equal to the same number of shares of New Common Stock as is reflected on the face of such certificates or book entries, multiplied by 4.505 and rounded down to the nearest whole number. The Corporation may, but shall not be obliged to, issue new certificates evidencing the shares of New Common Stock outstanding as a result of the Forward Split unless and until the certificates evidencing the shares held by a holder prior to the Forward Split are either delivered to the Corporation or its transfer agent, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates. Every share number, dollar amount and other provision contained in this Amended and Restated Certificate of Incorporation have been adjusted for the Forward Split, and there shall be no further adjustments made to such share numbers, dollar amounts or other provisions, except in the case of any stock splits, stock dividends, reclassifications and the like occurring after the Effective Time.

SECTION 2. Common Stock. Except as (i) otherwise required by law or (ii) expressly provided in this Amended and Restated Certificate of Incorporation (as may be amended from time to time), each share of Common Stock shall have the same powers, rights, and privileges and shall rank equally, share ratably, and be identical in all respects as to all matters.

(A) Dividends. Subject to applicable law and the rights of the holders of any class or series of Preferred Stock, and to the other provisions of this Amended and Restated Certificate of Incorporation (as may be amended from time to time), holders of Common Stock shall be entitled to receive equally, on a per share basis, such dividends and other distributions in cash, securities, or other property of the Corporation as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor.

(B) Voting Rights. At every annual or special meeting of stockholders of the Corporation, each holder of Common Stock shall be entitled to cast one vote for each share of Common Stock standing in such holder’s name on the stock transfer records of the Corporation.

(C) Liquidation Rights. In the event of any liquidation, dissolution, or winding up of the affairs of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the Corporation’s debts and amounts payable upon shares of any class or series of Preferred Stock entitled to a preference, if any, over holders of Common Stock upon such dissolution, liquidation, or winding up, the remaining net assets of the Corporation shall be distributed among holders of shares of Common Stock equally on a per share basis. A merger or consolidation of the Corporation with or into any other corporation or other entity, or a sale or conveyance of all or any part of the assets of the Corporation (which shall not in fact result in the liquidation of the Corporation and the distribution of assets to its stockholders) shall not be deemed to be a voluntary or involuntary liquidation or dissolution or winding up of the Corporation within the meaning of this Paragraph (C).

(D) Conversion Rights. The Common Stock shall not be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same class of the Corporation’s capital stock.

(E) Preemptive Rights. No holder of Common Stock shall have any preemptive rights hereunder with respect to the Common Stock or any other securities of the Corporation, or to any obligations convertible (directly or indirectly) into securities of the Corporation whether now or hereafter authorized.

SECTION 3. Preferred Stock. The Board of Directors is authorized, subject to limitations prescribed by law, to provide by resolution or resolutions for the issuance of all or any of the shares of Preferred Stock in one or more class or series, to establish the number of shares to be included in each such class or series, and to fix the voting powers, designations, powers, preferences, and relative, participating, optional, or other rights, if any, of the shares of each such class or series, and any qualifications, limitations, or restrictions thereof including, without limitation, the authority to provide that any such class or series may be (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; or (iv) convertible into, or exchangeable for, shares of any other class or classes of stock, or of any other series of the same or any other class or classes of stock, of the Corporation at such price or prices or at such rates of exchange and with such adjustments; all as may be stated in such resolution or resolutions. Irrespective of the provisions of Section 242(b)(2) of the DGCL, the number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote, without the separate vote of the holders of the Preferred Stock as a class.

ARTICLE V

DURATION

The Corporation is to have perpetual existence.

ARTICLE VI

BOARD OF DIRECTORS

SECTION 1. Number Of Directors. Subject to any rights of the holders of any class or series of Preferred Stock to elect additional directors under specified circumstances as set forth in a certificate of designation relating to any such class or series of Preferred Stock, the number of directors which shall constitute the Board of Directors shall be not less than three, the exact number of which shall be fixed from time to time by resolution adopted by the affirmative vote of a majority of the total number of directors then in office.

SECTION 2. Term of Office. Each director shall hold office for a term expiring at the next annual meeting of stockholders of the Corporation and until a successor is duly elected and qualified or until his or her earlier death, resignation, disqualification, or removal. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

SECTION 3. Newly-Created Directorships and Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office, or any other cause may be filled, so long as there is at least one remaining director, only by the Board of Directors, provided that a quorum is then in office and present, or by a majority of the directors then in office, if less than a quorum is then in office, or by the sole remaining director. Directors elected to fill a newly created directorship or other vacancies shall hold office until such director’s successor has been duly elected and qualified or until his or her earlier death, resignation, disqualification or removal as hereinafter provided.

SECTION 4. Removal of Directors. Subject to the rights of the holders of any series of Preferred Stock then outstanding, and subject to the provisions of any applicable stockholders agreement with the Corporation, any director may be removed from office at any time, either with or without cause, at a meeting of the stockholders called for that purpose.

SECTION 5. Rights of Holders of Preferred Stock. Notwithstanding the provisions of this Article VI, whenever the holders of one or more series of Preferred Stock issued by the Corporation shall have the right, voting separately or together by series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies, and other features of such directorship shall be governed by the rights of such Preferred Stock as set forth in the certificate of designations governing such series.

SECTION 6. Bylaws. The Board of Directors is expressly authorized to make, alter, amend, change, add to or repeal the Bylaws of the Corporation by the affirmative vote of a majority of the total number of directors then in office. Any amendment, alteration, change, addition or repeal of the Bylaws of the Corporation by the stockholders of the Corporation shall require the affirmative vote of the holders of a majority of the outstanding shares of the Corporation, voting together as a class, entitled to vote on such amendment, alteration, change, addition or repeal.

For purposes of this Amended and Restated Certificate of Incorporation, (i) “Trigger Date” shall mean the first date on which Hercules Holding II, LLC (or its successor) ceases, or in the event of a liquidation of, or other distribution of shares of Common Stock by, Hercules Holding II, LLC, the Equity Sponsors (as defined below) and their affiliates (other than the Corporation and its subsidiaries), collectively, cease, to beneficially own (directly or indirectly) shares representing a majority of the then issued and outstanding shares of Common Stock of the Corporation (it being understood that the retention of either direct or indirect beneficial ownership of a majority of the then issued and outstanding shares of Common Stock by Hercules Holding II, LLC (or its successor) or the Equity Sponsors and their affiliates (other than the Corporation and its subsidiaries), as applicable, shall mean that the Trigger Date has not occurred) and (ii) the “Equity Sponsors” shall mean each of Bain Capital Partners, Kohlberg Kravis Roberts & Co., BAML Capital Partners, Citigroup Inc., Bank of America Corporation, and Dr. Thomas F. Frist, Jr. and their respective affiliates, subsidiaries, successors and assignees (other than the Corporation and its subsidiaries).

ARTICLE VII

LIMITATION OF LIABILITY

To the fullest extent permitted by the DGCL as it now exists or may hereafter be amended, no director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages arising from a breach of fiduciary duty owed to the Corporation or its stockholders. Any repeal or modification of this Article VII shall not adversely affect any right or protection of a current or former director of the Corporation existing at the time of such repeal or modification.

ARTICLE VIII

INDEMNIFICATION; ADVANCEMENT OF EXPENSES

SECTION 1. Right To Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved (including, without limitation, as a witness) in any actual or threatened action, suit, or proceeding, whether civil, criminal, administrative, or investigative, including any appeal therefrom (hereinafter a “proceeding”), by reason of the fact that he or she is or was, or has agreed to become, a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation or of a partnership, limited liability company, joint venture, trust, or other enterprise, including service with respect to an employee benefit plan (hereinafter an “Indemnitee”), shall be indemnified and held harmless by the Corporation to the full extent authorized by the DGCL, as the same exists or may hereafter be amended, or by other applicable law as then in effect, against all expense, liability, and loss (including attorneys’ fees and related disbursements, judgments, fines, excise taxes and penalties under the Employee Retirement Income Security Act of 1974, as amended from time to time (“ERISA”), other penalties, and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such Indemnitee in connection therewith, and such indemnification rights shall continue as to a person who has ceased to be a director or officer of the Corporation or serving as a director, officer, employee or agent of another corporation, partnership, limited liability company, joint venture, trust or other enterprise at the request of the

Corporation. Service by a director or officer of the Corporation shall be deemed to be at the request of the Corporation if he or she is or was serving as a director, officer, employee, or agent of a subsidiary of the Corporation or an employee benefit plan of the Corporation or subsidiary of the Corporation. Notwithstanding the first sentence of this Section 1, except as otherwise provided in Section 3 of this Article VIII, the Corporation shall be required to indemnify an Indemnitee in connection with a proceeding (or part thereof) commenced by such Indemnitee only if the commencement of such proceeding (or part thereof) by the Indemnitee was authorized in advance by the Corporation’s Board of Directors.

SECTION 2. Advancement Of Expenses. Expenses (including attorneys’ fees, costs, and charges) incurred by an Indemnitee in defending a proceeding or, pursuing a claim described in Section 3 of this Article VIII or the last sentence of Section 1 of this Article VIII shall be paid by the Corporation in advance of the final disposition of such proceeding, within twenty (20) days of the Corporation’s receipt of a request therefor and an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that such Indemnitee is not entitled to be indemnified by the Corporation.

SECTION 3. Procedure For Indemnification. If a determination is required by the DGCL, any indemnification (but not advancement of expenses) under this Article VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Indemnitee is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the DGCL, as the same exists or hereafter may be amended. Such determination shall be made with respect to a person who is a director or officer of the Corporation at the time of such determination (a) by a majority vote of the directors who are not parties to such proceeding (the “Disinterested Directors”), even though less than a quorum, (b) by a committee of Disinterested Directors designated by a majority vote of Disinterested Directors, even though less than a quorum, (c) if there are no such Disinterested Directors, or if such Disinterested Directors so direct, by independent legal counsel in a written opinion, or (d) by the stockholders. Any indemnification under this Article VIII shall be made promptly, and in any event within sixty (60) days after the Corporation’s receipt of a written request therefor, provided that the Corporation shall not be required to pay a claim for indemnification prior to the final disposition of the proceeding from which the claim arose. The right to indemnification or advancement of expenses as granted by this Article VIII shall be enforceable by the Indemnitee in any court of competent jurisdiction, if the Corporation denies such request, in whole or in part, or if a claim for indemnification or advancement of expenses is not timely paid in full. Such person’s reasonable costs and expenses incurred in connection with successfully establishing his or her right to indemnification or advancement of expenses, in whole or in part, in any such action shall also be indemnified by the Corporation. In any such action the Corporation shall have the burden of proving that the claimant is not entitled to the requested indemnification or advancement of expenses under applicable law. Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the DGCL, as the same exists or hereafter may be amended, nor the fact that there has been an actual determination by the Corporation (including

its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Indemnitee did not act in good faith and in a manner that he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal proceeding, had reasonable cause to believe that his or her conduct was unlawful.

SECTION 4. Other Rights; Continuation of Right to Indemnification and Advancement. The rights to indemnification and advancement of expenses provided by this Article VIII shall not be deemed exclusive of, and shall be in addition to, any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), provision of this Amended and Restated Certificate of Incorporation, bylaw, agreement, vote of stockholders or Disinterested Directors, or otherwise, and shall inure to the benefit of the estate, heirs, executors, and administrators of such person. All rights to indemnification and advancement of expenses conferred on any person under this Article VIII shall be deemed to be contract rights and be retroactive and available with respect to events occurring prior to the adoption of this Amended and Restated Certificate of Incorporation. Any repeal or modification of this Article VIII or, to the fullest extent permitted by applicable law, any repeal or modification of relevant provisions of the DGCL or any other applicable laws shall not in any way diminish any rights to indemnification or advancement of expenses of such person or the obligations of the Corporation arising hereunder with respect to any proceeding arising out of, or relating to, any actions, omissions, transactions, or facts occurring prior to the final adoption of such modification or repeal. For the purposes of this Article VIII, references to the “Corporation” include all constituent corporations (including any constituent of a constituent) absorbed in a consolidation or merger as well as the resulting or surviving corporation, so that any person who is or was a director or officer of such a constituent corporation or, while a director or officer of such constituent corporation, is or was serving at the request of such constituent corporation as a director, officer, employee, or agent of another corporation, partnership, limited liability company, joint venture, trust, or other enterprise, shall stand in the same position under the provisions of this Article VIII, with respect to the resulting or surviving corporation, as he or she would if he or she had served the resulting or surviving corporation in the same capacity.

SECTION 5. Insurance. The Corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, limited liability company, joint venture, trust, or other enterprise against any expense, liability, or loss asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability, or loss under the DGCL.

SECTION 6. Reliance. Persons who after the date of the adoption of this Amended and Restated Certificate of Incorporation become or remain directors or officers of the Corporation or who, while a director or officer of the Corporation, become or remain a director, officer, employee, or agent of a subsidiary, shall be conclusively presumed to have relied on the rights to indemnity, advancement of expenses, and other rights contained in this Article VIII in entering into or continuing such service. The rights to indemnification and to the advancement of expenses conferred in this Article VIII shall apply to claims made against an Indemnitee arising out of acts or omissions that occurred or occur both prior and subsequent to the adoption hereof.

SECTION 7. Savings Clause. If this Article VIII or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless (i) indemnify each person entitled to indemnification under the first paragraph of this Article VIII as to all expense, liability, and loss (including attorneys’ fees and related disbursements, judgments, fines, ERISA excise taxes and penalties, other penalties, and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such person and for which indemnification is available to such person pursuant to this Article VIII and (ii) advance expenses to each Indemnitee entitled to advancement of expenses under Section 2 of this Article VIII in accordance therewith, in each case to the full extent permitted by any applicable portion of this Article VIII that shall not have been invalidated and to the full extent permitted by applicable law.

SECTION 8. Other Sources of Payment. Except as may be otherwise agreed to by the Corporation and the Indemnitee (or any entity which has designated the nomination or appointment of such Indemnitee), in the event of any payment under this Article VIII, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of such Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Corporation to bring suit to enforce such rights. Except as may be otherwise agreed to by the Corporation and the Indemnitee (or any entity which has designated the nomination or appointment of such Indemnitee), the Corporation shall not be obligated to an Indemnitee under this Article VIII to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that such Indemnitee has otherwise actually received such payment under any insurance policy maintained by the Corporation, contract, agreement or otherwise, and in the event that the Corporation makes any payment to an Indemnitee under this Article VIII and such Indemnitee subsequently otherwise receives such payment under any insurance policy maintained by the Corporation, contract, agreement or otherwise, such Indemnitee shall promptly refund such amounts to the Corporation. Except as may be otherwise agreed to by the Corporation and the Indemnitee (or any entity which has designated the nomination or appointment of such Indemnitee), the Corporation’s obligations under this Article VIII to an Indemnitee who while a director or officer of the Corporation is or was serving at the request of the Corporation as a director, officer, employee or agent of any other corporation, limited liability company, partnership, joint venture, trust or other enterprise shall be reduced by any amount such Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, limited liability company, partnership, joint venture, trust or other enterprise.

SECTION 9. Partial Indemnification. If an Indemnitee is entitled under any provision of this Article VIII to indemnification by the Corporation for some or a portion of the expenses (including attorneys’ fees), judgments, fines or amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with any proceeding, but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify the Indemnitee for the portion of such expenses (including attorneys’ fees), judgments, fines or amounts paid in settlement to which the Indemnitee is entitled.

SECTION 10. Successful Defense. In the event that any proceeding to which an Indemnitee is a party is resolved in any manner other than by adverse judgment against the Indemnitee (including, without limitation, settlement of such proceeding with or without payment of money or other consideration) it shall be presumed that the Indemnitee has been successful on the merits or otherwise in such proceeding pursuant to Section 145(c) of the DGCL. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

ARTICLE IX

SPECIAL MEETINGS OF STOCKHOLDERS; ADVANCE NOTICE; ACTION BY WRITTEN CONSENT

Special meetings of stockholders of the Corporation may be called by the Board of Directors pursuant to a resolution adopted by the affirmative vote of the majority of the total number of directors then in office, by the Chairman of the Board or by the Chief Executive Officer of the Corporation and, subject to the provisions of the Bylaws of the Corporation, a special meeting of the stockholders of the Corporation shall be called by the Secretary of the Corporation upon written request of the holders of record of at least fifteen percent (15%) of the voting power of all outstanding shares of Common Stock entitled to vote at such meeting, such voting power to be calculated and determined in the manner specified, and with any limitations as may be set forth, in the Corporation’s Bylaws. Subject to the rights of the holders of any shares of Preferred Stock issued and outstanding at such time, special meetings of stockholders may not be called by any other person or persons. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation. Any action required or permitted to be taken at any annual or special meeting of the stockholders of the Corporation may be taken only upon the vote of the stockholders at an annual or special meeting duly called and may not be taken by written consent of the stockholders.

ARTICLE X

CORPORATE OPPORTUNITIES

To the fullest extent permitted by applicable law, the Corporation, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Corporation and its subsidiaries in, or in being offered an opportunity to participate in, business opportunities that are from time to time presented to any of the Equity Sponsors or any of their respective officers, directors, agents, shareholders, members, partners, affiliates and subsidiaries (other than the Corporation and its subsidiaries) (each, a “Specified Party”), even if the opportunity is one that the Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so and each such Specified Party shall have no duty to communicate or offer such business opportunity to the Corporation and, to the fullest extent permitted by applicable law, shall not be liable to the Corporation or any of its subsidiaries for breach of any fiduciary or other duty, as a director or officer or otherwise, by reason of the fact that such Specified Party pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to the Corporation or its subsidiaries. Notwithstanding the foregoing, a Specified Party who is a director or officer of the Corporation and who is offered a business opportunity expressly in his or her capacity as a director or officer of the Corporation (a “Directed Opportunity”) shall be obligated to communicate such Directed Opportunity to the Corporation; provided, however, that all of the protections of this Article X shall otherwise apply to the Specified Parties with respect to such Directed Opportunity, including, without limitation, the ability of the Specified Parties to pursue or acquire such Directed Opportunity or to direct such Directed Opportunity to another person.

Neither the amendment nor repeal of this Article X, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation, nor, to the fullest extent permitted by Delaware law, any modification of law, shall adversely affect any right or protection of any person granted pursuant hereto existing at, or arising out of or related to any event, act or omission that occurred prior to, the time of such amendment, repeal, adoption or modification (regardless of when any proceeding (or part thereof) relating to such event, act or omission arises or is first threatened, commenced or completed).

If any provision or provisions of this Article X shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (a) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article X (including, without limitation, each portion of any paragraph of this Article X containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) to the fullest extent possible, the provisions of this Article X (including, without limitation, each such portion of any paragraph of this Article X containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service to or for the benefit of the Corporation to the fullest extent permitted by law.

This Article X shall not limit any protections or defenses available to, or indemnification or advancement rights of, any director or officer of the Corporation under this Amended and Restated Certificate of Incorporation or applicable law.

Any person or entity purchasing or otherwise acquiring any interest in any securities of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article X.

ARTICLE XI

AMENDMENT

The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by the DGCL, and all rights conferred upon stockholders herein are granted subject to this reservation. Notwithstanding any other provision of this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, this Amended and Restated Certificate of Incorporation, the Bylaws of the Corporation, or otherwise, but in addition to any affirmative vote of the holders of any particular class or series of the capital stock required by law, this Amended and Restated Certificate of Incorporation, the Bylaws of the Corporation, or otherwise, the affirmative vote of the holders of at least a majority of the voting power of all outstanding shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt any provision inconsistent with, or to amend or repeal any provision of this Amended and Restated Certificate of Incorporation.

Exhibit 3.2

SECOND

AMENDED AND RESTATED BYLAWS

HCA HEALTHCARE, INC.

A Delaware Corporation

ARTICLE I

OFFICES

SECTION 1. REGISTERED OFFICE. The registered office of HCA Healthcare, Inc. (the “Corporation”) in the State of Delaware shall be located at Corporation Trust Center, 1209 Orange Street, in the city of Wilmington, County of New Castle, 19801. The name of the Corporation’s registered agent at such address shall be The Corporation Trust Company. The registered office and/or registered agent of the Corporation may be changed from time to time by action of the Board of Directors of the Corporation (the “Board of Directors”).

SECTION 2. OTHER OFFICES. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

SECTION 1. PLACE OF MEETINGS. The Board of Directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting.

SECTION 2. ANNUAL MEETING; ELECTION OF DIRECTORS. The annual meeting of stockholders shall be held at such date, time and place, if any, as shall be designated by the Board of Directors and stated in a notice of meeting or in a duly executed waiver thereof. At such annual meeting, the stockholders shall elect the Board of Directors and transact such other business as may properly be brought before the meeting. In uncontested director elections each director is elected by the vote of the majority of the votes cast; provided, however, that if the number of nominees proposed to be elected at that annual meeting of stockholders exceeds the number of directors proposed to be elected at that annual meeting of stockholders, then the persons receiving the greatest number of votes, up to the number of directors proposed to be elected at that annual meeting of stockholders, shall be elected. An uncontested director election means an election in which the number of nominees proposed to be elected at that annual meeting of stockholders is equal to the number of directors proposed to be elected at that annual meeting of stockholders. A majority of the votes cast means that the number of shares voted “for” a director’s election exceeds the number of shares voted “against” that director. Shares voted shall not include a share otherwise present at the meeting but which abstains from voting on a director, or gives no authority or direction. An incumbent nominee not receiving a majority of the votes cast shall tender his or her resignation to the secretary of the Corporation for consideration by the Board of Directors, which resignation shall be contingent upon the acceptance thereof by the Board of Directors. The Nominating and Corporate Governance Committee of the Board of Directors shall recommend to the Board of Directors the action to be taken with respect to the resignation. The Board of Directors will publicly disclose its decision with respect to the resignation and the rationale behind its decision within ninety (90) days of the certification of the election results. The Nominating and Corporate Governance Committee in making its recommendation to the Board of Directors and the Board of Directors in making its decision with respect to the resignation may each consider any factors or other information that they consider appropriate and relevant. The director who tenders his or her resignation will not participate in the

recommendation of the Nominating and Corporate Governance Committee of the Board of Directors or the decision of the Board of Directors with respect to his or her resignation. An incumbent nominee not receiving a majority of the votes cast in an uncontested election shall continue to serve until (i) the director’s successor is elected and qualifies or (ii) the Board of Directors accepts the director’s resignation. If a director’s resignation is accepted by the Board of Directors pursuant to this Section 2, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board of Directors may fill the resulting vacancy pursuant to the provisions of Section 11 of Article III of these Bylaws or may decrease the size of the Board of Directors pursuant to the Corporation’s certificate of incorporation as then in effect (the “Certificate of Incorporation”).

SECTION 3. SPECIAL MEETINGS. A. Special meetings of the stockholders may be called at any time by the Board of Directors pursuant to a resolution adopted by the affirmative vote of the majority of the total number of directors then in office, by the chairman of the Board of Directors, or by the chief executive officer, and, subject to the requirements of this Section 3 and such other sections of these Bylaws as are applicable, a special meeting of the stockholders shall be called by the secretary of the Corporation upon written request to the secretary of the Corporation (each such request, a “Special Meeting Request” and such meeting a “Stockholder Requested Special Meeting”) of the holders of record of at least fifteen percent (15%) of the voting power of all outstanding shares of common stock of the Corporation (the “Common Stock”) entitled to vote at such meeting, which shares are determined to be “owned” (as defined below) (the “Requisite Percentage”), who have held such shares continuously for at least one year (such period, the “One-Year Period”) as of both (1) the date (the “Request Date”) such Special Meeting Request is delivered to or mailed to and received by the secretary of the Corporation in accordance with this Section 3 and (2) the record date for determining the stockholders entitled to vote at the Stockholder Requested Special Meeting and must continue to own the Requisite Percentage through such Stockholder Requested Special Meeting date; and who have complied in full with the requirements set forth in these Bylaws. A special meeting of stockholders, including any Stockholder Requested Special Meeting, may be held at such date, time and place, if any, within or without the State of Delaware as may be designated by the Board of Directors; provided, however, that the date of any Stockholder Requested Special Meeting shall be no fewer than thirty (30) and no more than ninety (90) days from the date a Special Meeting Request(s) satisfying the requirements set forth in these Bylaws and representing the Requisite Percentage is received by the secretary of the Corporation (or, in the case of any litigation related to the validity of the Special Meeting Request(s), 90 days after the resolution of such litigation); provided, further, that the Board of Directors shall have the discretion to cancel any Stockholder Requested Special Meeting that has been called but not yet held for any of the reasons set forth in Section 3(D) below. Except in accordance with this Section 3, stockholders shall not be permitted to propose business to be brought before a special meeting of the stockholders.

For purposes of determining the Requisite Percentage, a stockholder shall be deemed to “own” only those shares of Common Stock as to which the stockholder(s) of record making the Special Meeting Request or beneficial owner(s), if any, on whose behalf the Special Meeting Request is being made (each such record owner and beneficial owner, a “Requesting Stockholder”) possesses both (a) the full voting and investment rights pertaining to the shares and (b) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares; provided, that the number of shares calculated in accordance with clauses (a) and (b) shall not include any shares (1) sold by such stockholder or any of its Affiliates in any transaction that has not been settled or closed, (2) borrowed by such stockholder or any of its Affiliates for any purposes or purchased by such stockholder or any of its Affiliates pursuant to an agreement to resell or (3) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such stockholder or any of its Affiliates, whether any such instrument or agreement is to be settled with shares of Common Stock of the Corporation or with cash based on the notional amount or value of shares of outstanding Common Stock of the Corporation subject thereto, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of (A) reducing in any manner, to any extent or at any time in the future, such stockholder’s or its Affiliates’ full right to vote or direct the voting of any such shares, and/or (B) hedging, offsetting or altering to any degree any gain or loss realized or realizable arising from maintaining the full economic ownership of such shares by such stockholder or Affiliate. For purposes of this Section 3, a stockholder shall “own” shares held in the name of its bank, broker or other nominee or intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares through the special meeting date. A stockholder’s ownership of shares shall be deemed to continue during any period in which the stockholder has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the stockholder. A stockholder’s ownership of shares shall be deemed to continue during any period in which the stockholder has loaned such shares, provided that the person has the power to recall such loaned shares on no more than five (5) business days’ notice and (x) will promptly recall such loaned shares upon having received notice of the Stockholder Requested Special Meeting and (y) will continue to hold such recalled shares through the date of the Stockholder Requested Special Meeting. The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of Common Stock of the Corporation are “owned” for these purposes shall be determined by the Board of Directors or any committee thereof, which determination shall be conclusive and binding on the Corporation and its stockholders.

B. To be in proper form and valid, a Special Meeting Request must be signed by the holders of the Requisite Percentage (or their duly authorized agents), be delivered to or mailed to and received by the secretary of the Corporation at the Corporation’s principal executive offices by registered mail, return receipt requested or by nationally recognized private overnight courier service and shall (A) set forth a statement of the specific purpose or purposes of the meeting and the matters proposed to be acted on at such special meeting (including the text of any resolutions proposed for consideration and, if such business includes a proposal to amend the Bylaws, the language of the proposed amendment), (B) bear the date of signature of each stockholder (or duly authorized agent) signing the request, (C) include (w) the name and address, as they appear in the Corporation’s books, of each stockholder signing such request (or on whose behalf the request is signed), (x) the number of shares of Common Stock “owned” by such stockholder, (y) one or more written statements from the record holder of the shares (and from each intermediary through which the shares are or have been held during the One-Year Period) verifying that, as of a date within seven (7) calendar days prior to the Request Date, the Requesting Stockholder owns, and has owned continuously for the One-Year Period, the Requisite Percentage, and the Requesting Stockholder’s agreement to provide, within five (5) business days after the record date for the Stockholder Requested Special Meeting, written statements from the record holder and intermediaries verifying the Requesting Stockholder’s continuous ownership of the Requisite Percentage through the record date; and (z) a certification from the stockholder submitting the request that the stockholders signing the request in the aggregate satisfy the Requisite Percentage, (D) describe any material interest of each such stockholder in the specific purpose or purposes of the meeting, (E) contain any other information that would be required to be provided by a stockholder seeking to nominate directors or bring an item of business before an annual meeting of stockholders pursuant to Section 11 of Article II of these Bylaws, (F) include an acknowledgment by each stockholder and any duly authorized agent that any reduction in shares of Common Stock “owned” by such stockholder as of the date of delivery of the Special Meeting Request and prior to the record date for the proposed Stockholder Requested Special Meeting shall constitute a revocation of such request to the extent of such reduction, (G) include an agreement by each stockholder and any duly authorized agent to continue to satisfy the Requisite Percentage through the date of the Stockholder Requested Special Meeting and to notify the Corporation promptly, in the event of any decrease in shares of Common Stock “owned” by such stockholder following the delivery of the Special Meeting Request, and (H) include an agreement by each stockholder and any duly authorized agent to update the information provided to the Corporation to ensure that it is true and correct as of the record date for notice of the Stockholder Requested Special Meeting, and as of fifteen (15) days prior to the Stockholder Requested Special Meeting or any adjournment or postponement thereof, and such update shall be delivered to the secretary of the Corporation at the Corporation’s principal executive offices by registered mail, return receipt requested or by nationally recognized private overnight courier service not later than five (5) days after the record date of the Stockholder Requested Special Meeting (in the case of the update required to be made as of the record date), and not later than ten (10) days prior to the date of the Stockholder Requested Special Meeting or, if practical, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the Stockholder Requested Special Meeting has been adjourned or postponed) (in the case of the update required to be made as of fifteen (15) days prior to the Stockholder Requested Special Meeting or any adjournment or postponement thereof). In addition, the stockholder and any duly authorized agent shall promptly provide any other information reasonably requested by the Corporation. For the avoidance of doubt, in the event that the Requesting Stockholder consists of a group of stockholders, the requirements and obligations applicable to an individual Requesting Stockholder that are set forth in these Bylaws, including the One-Year Period, shall apply to each member of such group individually; provided, however, that the Requisite Percentage shall apply to the continuous ownership of the eligible group in the aggregate.

C. In determining whether a special meeting of stockholders has been requested by the record holders of shares representing in the aggregate at least the Requisite Percentage who have held such shares continuously for the One-Year Period, multiple Special Meeting Requests delivered to the secretary of the Corporation will be considered together only if (i) each Special Meeting Request identifies substantially the same purpose or purposes of the special meeting and substantially the same matters proposed to be acted on at the special meeting, in each case as determined by the Board of Directors (which, if such purpose is the nominating of a person or persons for election to the Board of Directors, will mean that the exact same person or persons are nominated in each relevant Special Meeting Request), and (ii) such Special Meeting Requests have been dated and delivered to the secretary of the Corporation within sixty (60) days of the earliest dated Special Meeting Request. A stockholder may revoke a Special Meeting Request at any time by written revocation delivered to the secretary of the Corporation. If, following such revocation, there are unrevoked requests from stockholders representing in the aggregate less than the Requisite Percentage, the Board of Directors, in its discretion, may cancel the special meeting.

D. At any Stockholder Requested Special Meeting, the business transacted shall be limited to the purpose(s) stated in the Special Meeting Request; provided, however, that the Board of Directors shall have the authority in its discretion to submit additional matters to the stockholders and to cause other business to be transacted. Notwithstanding the foregoing provisions of this Section 3, a Stockholder Requested Special Meeting shall not be held if (i) the Special Meeting Request does not comply with these Bylaws, (ii) the business specified in the Special Meeting Request is not a proper subject for stockholder action under applicable law, (iii) the Board of Directors has called or calls for an annual or special meeting of stockholders to be held within 90 days after the secretary of the Corporation receives the Special Meeting Request and the Board of Directors determines that the business of such meeting includes (among any other matters properly brought before the annual or special meeting) the business specified in the Special

Meeting Request, (iv) the Special Meeting Request is received by the secretary of the Corporation during the period commencing 90 days prior to the anniversary date of the prior year’s annual meeting of stockholders and ending on the date of the final adjournment of the next annual meeting of stockholders, (v) an identical or substantially similar item (a “Similar Item”) was presented at any meeting of stockholders held within 90 days prior to receipt by the secretary of the Corporation of the Special Meeting Request (and, for purposes of this clause (v), the nomination, election or removal of directors shall be deemed a “Similar Item” with respect to all items of business involving the nomination, election or removal of directors, the changing of the size of the Board of Directors and the filling of vacancies and/or newly created directorships), or (vi) the Special Meeting Request was made in a manner that involved a violation of Regulation 14A under the Exchange Act (as hereinafter defined), or other applicable law.

E. Except to the extent previously determined by the Board of Directors in connection with a Special Meeting Request, the chairperson of the Stockholder Requested Special Meeting shall determine at such meeting whether any proposed business or other matter to be transacted by the stockholders has not been properly brought before the special meeting and, if he or she should so determine, the chairperson shall declare that such proposed business or other matter was not properly brought before the meeting and such business or other matter shall not be presented for stockholder action at the meeting. In addition, notwithstanding the foregoing provisions of this Section 3, unless otherwise required by law, if the Requesting Stockholder(s) (or a qualified representative of the stockholder) does not appear at the Stockholder Requested Special Meeting to present a nomination or other proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.

SECTION 4. NOTICE OF MEETINGS. Whenever stockholders are required or permitted to take action at a meeting, notice of each annual and special meeting of stockholders stating the date, time and place, if any, of the meeting, the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the meeting), and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each stockholder of record entitled to vote at the meeting as of the record date for determining stockholders entitled to notice of the meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting. Business transacted at any special meeting of stockholders shall be limited to the purpose or purposes stated in the notice. Subject to the requirements of applicable law, notice may be provided by mail, private carrier, facsimile transmission or other form of wire, wireless or other means of electronic transmission. Subject to the requirements of applicable law, notice provided to a stockholder’s e-mail address as indicated on the records of the Corporation shall be deemed proper notice for any purpose set forth in these Bylaws. Notice by mail shall be deemed given at the time when the same shall be deposited in the United States mail, postage prepaid. Notice of any meeting shall not be required to be given to any person who attends such meeting, except when such person attends the meeting in person or by proxy for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, or who, either before or after the meeting, shall submit a signed written waiver of notice, in person or by proxy. Neither the business to be transacted at, nor the purpose of, an annual or special meeting of stockholders need be specified in any waiver of notice.

SECTION 5. LIST OF STOCKHOLDERS. The officer having charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before each meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order, showing the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principle place of business of the Corporation. If the meeting is to be held at a place, the list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

SECTION 6. QUORUM; ADJOURNMENTS. The holders of a majority of the voting power of the issued and outstanding stock of the Corporation entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of stockholders, except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented by proxy at any meeting of stockholders, the chairman of the meeting or the stockholders entitled to vote thereon, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented by proxy. At such adjourned meeting at which a quorum shall be present or represented by proxy, any business may be transacted which might have been transacted at the meeting as originally called. If the adjournment is for more than thirty (30) days a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after adjournment a new record date for the determination of stockholders entitled to vote is set, the Board of Directors shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give a notice of the adjourned meeting to each stockholder of record as of the record date fixed for notice of the adjourned meeting.

SECTION 7. ORGANIZATION; CONDUCT OF MEETING. At each meeting of stockholders, the chairman of the board, if one shall have been elected, or, in his absence or if one shall not have been elected, the chief executive officer shall act as chairman of the meeting. The secretary or, in his absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting shall act as secretary of the meeting and keep the minutes thereof. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the chairman of the meeting. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of the meeting shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) rules and procedures for maintaining order at the meeting and the safety of those present; (ii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iii) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (iv) limitations on the time allotted to questions or comments by participants. The chairman of the meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a nomination or matter or business was not properly brought before the meeting and if such chairman should determine, such chairman shall so declare to the meeting and any such nomination or matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

SECTION 8. ORDER OF BUSINESS. The order of business at all meetings of the stockholders shall be as determined by the chairman of the meeting.

SECTION 9. VOTING. Except as otherwise provided by the Certificate of Incorporation, the General Corporation Law of the State of Delaware or the certificate of designation relating to any outstanding class or series of preferred stock, each stockholder of the Corporation shall be entitled at each meeting of stockholders to one vote for each share of capital stock of the Corporation standing in his name on the record of stockholders of the Corporation:

A. on the date fixed pursuant to the provisions of Section 13 of this Article II as the record date for the determination of the stockholders who shall be entitled to vote at such meeting; or

B. if no such record date shall have been so fixed, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be the close of business on the day next preceding the day on which notice thereof shall be given, or, if notice is waived, at the close of business on the date next preceding the day on which the meeting is held.

Each stockholder entitled to vote at any meeting of stockholders may authorize another person or persons to act for him by a proxy which is in writing or transmitted as permitted by law, including, without limitation, electronically, via telegram, internet, interactive voice response system, or other means of electronic transmission executed or authorized by such stockholder or his attorney-in-fact, but no proxy shall be voted after three (3) years from its date, unless the proxy provides for a longer period. Any such proxy shall be delivered to the secretary of the meeting at or prior to the time designated in the order of business for so delivering such proxies. Any proxy transmitted electronically shall set forth information from which it can be determined by the secretary of the meeting that such electronic transmission was authorized by the stockholder. When a quorum is present at any meeting, the vote of the holders of a majority of the voting power of the issued and outstanding stock of the Corporation entitled to vote thereon, present in person or represented by proxy, shall decide any question brought before such meeting, unless the question is one upon which by express provision of the General Corporation Law of the State of Delaware, the rules or regulations of any stock exchange applicable to the Corporation or pursuant to any law or regulation applicable to the Corporation or its securities or of the Certificate of Incorporation or of these Bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question. Unless required by statute, or determined by the chairman of the meeting to be advisable, the vote on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy.

SECTION 10. INSPECTORS. The Board of Directors may, and shall if required by law, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If any of the inspectors so appointed shall fail to appear or act, the chairman of the meeting shall, or if inspectors shall not have been appointed, the chairman of the meeting may, appoint one or more inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath to faithfully execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the Corporation, the inspectors may consider such information as is permitted by applicable law. No director or candidate for the office of director shall act as an inspector of an election of directors. Inspectors need not be stockholders.

SECTION 11. PROPOSALS AND NOMINATIONS FOR MEETINGS OF STOCKHOLDERS.

A. At an annual meeting of stockholders, only such nominations of persons for election to the Board of Directors and other business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, nominations and other business must be:

brought before the meeting by the Corporation and specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors or an authorized committee thereof,

ii.

brought before the meeting by or at the direction of the Board of Directors or an authorized committee thereof, or

iii.

otherwise properly brought before the meeting by a stockholder who:

(a)

was a stockholder of record (and, with respect to any beneficial owner, if different, on whose behalf such nominations of persons for election to the Board of Directors or other business is proposed, only if such beneficial owner was the beneficial owner of shares of the Corporation) both at the time of giving the notice provided for in this Section 11 and at the time of the meeting,

(b)

is entitled to vote at the meeting, and

(c)

has complied with this Section 11 and, if applicable, Section 14 of this Article II as to such business.

Except for proposals properly made in accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (as so amended and inclusive of such rules and regulations, the “Exchange Act”), or pursuant to Section 14 of this Article II, the foregoing clause (iii) shall be the exclusive means for a stockholder to propose business to be brought before an annual meeting of stockholders or to make any nomination of a person or persons for election to the Board of Directors at an annual meeting of stockholders. The only matters that may be brought before a special meeting of stockholders are the matters specified in the notice of meeting given by or at the direction of the person calling the meeting pursuant to Section 4 of this Article II.

B. For business to be properly brought before an annual meeting by a stockholder, or for a stockholder to make any nomination of a person or persons for election to the Board of Directors at an annual meeting or a special meeting of stockholders properly called for the election of directors pursuant to Section 3 of this Article II, the stockholder must provide timely written notice in proper form to the Corporation (the “Stockholder Notice”) and provide any updates or supplements to such Stockholder Notice at the times and in the forms required by this Section 11 (or, as applicable, Section 14 of this Article II). This Section 11 shall constitute an “advance notice provision” for purposes of Rule 14a-4(c)(1) under the Exchange Act.

C. To be timely, the Stockholder Notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation, addressed to the secretary of the Corporation:

in the case of an annual meeting, no earlier than one hundred twenty (120) days and no later than ninety (90) days prior to the first anniversary of the date of the preceding year’s annual meeting; provided, however, that if (A) the annual meeting is advanced by more than thirty (30) days, or delayed by more than sixty (60) days, from the first anniversary of the preceding year’s annual meeting, or (B) no annual meeting was held during the preceding year, to be timely the Stockholder Notice must be received no earlier than one hundred twenty (120) days before such annual meeting and no later than the later of ninety (90) days before such annual meeting or the tenth day after the day on which Public Disclosure of the date of such meeting is first made, and

ii.

in the case of a nomination of a person or persons for election to the Board of Directors at a special meeting of stockholders called for the purpose of electing directors, no earlier than one hundred twenty (120) days before such special meeting and no later than the later of ninety (90) days before such special meeting or the tenth day after the day on which Public Disclosure of the date of such meeting is first made.

In no event shall an adjournment, postponement or deferral, or Public Disclosure of an adjournment, postponement or deferral, of a meeting of stockholders commence a new time period (or extend any time period) for the giving of the Stockholder Notice.

D. To be in proper form, the Stockholder Notice must:

set forth the name and address of the stockholder giving the Stockholder Notice (and any beneficial owner, if different, on whose behalf such Stockholder Notice is submitted) (the stockholder giving the Stockholder Notice, or, if the Stockholder Notice is submitted on behalf of a beneficial owner, such beneficial owner, is referred to herein as the “Proponent”) as they appear on the Corporation’s books and the name and address of any Stockholder Associated Person(s) for which disclosure is required by clause (ii) below,

ii.

set forth the following information:

(a)

the class and number of shares of capital stock of the Corporation that are owned beneficially (within the meaning of Rule 13d-3 under the Exchange Act) and of record by the Proponent and any Stockholder Associated Person,

(b)

the date such shares were acquired,

(c)

a description in reasonable detail of any option, warrant, convertible security, stock appreciation right or similar right directly or indirectly owned by the Proponent or any Stockholder Associated Person with an exercise or conversion privilege or a settlement payment or mechanism at a price related to shares of any class or series of stock of the Corporation, or with a value derived in whole or in part from the price, value or volatility of shares of any class or series of stock of the Corporation, whether or not such instrument or right shall convey any voting rights in such shares, be subject to settlement in the underlying class or series of stock of the Corporation or be subject to other transactions that hedge or mitigate the economic effect of such transactions, or any other direct or indirect opportunity to profit from any increase or decrease in the value of shares of any class or series of stock of the Corporation (“Derivative Interests”),

(d)

a description in reasonable detail of any proxy, contract, arrangement, understanding or other relationship pursuant to which the Proponent or any Stockholder Associated Person has a right to vote any shares of any class or series of stock of the Corporation (other than a revocable proxy or consent given in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a solicitation statement filed on Schedule 14A),

(e)

any agreement, arrangement, understanding or relationship, including any repurchase or so-called “stock borrowing” agreement or arrangement, engaged in directly or indirectly by the Proponent or any Stockholder Associated Person, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of shares of any class or series of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such Proponent or Stockholder Associated Person with respect to the shares of any class or series of stock of the Corporation, or which provides, directly or indirectly, the opportunity to profit from any decrease in the price or value of the shares of any class or series of stock of the Corporation (“Short Interests”),

(f)

any rights to dividends on the shares of any class or series of stock of the Corporation owned beneficially by the Proponent or any Stockholder Associated Person that are separated or separable from the underlying shares of stock of the Corporation,

(g)

any performance-related fees (other than an asset-based fee) that the Proponent or any Stockholder Associated Person is entitled to based on any increase or decrease in the value of shares of any class or series of the stock of the Corporation or any Derivative Interest or Short Interest,

(h)

any arrangements, rights or other interests described in Section 11(D)(ii)(c)-(g) above held by members of the Proponent’s or any Stockholder Associated Person’s immediate family sharing the same household,

(i)

a representation that the Proponent intends to appear in person or by proxy at the meeting to nominate the person(s) named or propose the business specified in the Stockholder Notice and whether or not the Proponent intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding shares of capital stock required to approve the nomination(s) or the business proposed and/or otherwise to solicit proxies or votes from stockholders in support of the nomination(s) or other business proposed,

(j)

a certification regarding whether or not the Proponent and Stockholder Associated Person(s) have complied with all applicable federal, state and other legal requirements in connection with the Proponent’s and/or Stockholder Associated Persons’ acquisition of shares of capital stock or other securities of the Corporation and/or the Proponent’s and/or Stockholder Associated Persons’ acts or omissions as a stockholder of the Corporation,

(k)

any other information relating to the Proponent that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations thereunder, and

(l)

any other information as reasonably requested by the Corporation (the disclosures to be made pursuant to the foregoing causes (a) through (k) are referred to as “Disclosable Interests”; provided, however, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proponent solely as a result of being the stockholder directed to prepare and submit the Stockholder Notice on behalf of a beneficial owner).

Such information shall be provided as of the date of the Stockholder Notice and shall be supplemented by the Proponent not later than ten (10) days after the record date for the determination of stockholders entitled to notice of the meeting to disclose information as of the record date.

iii.

if the Stockholder Notice relates to any business that the Proponent proposes to bring before the meeting other than a nomination of a person or persons for election to the Board of Directors, it must set forth:

(a)

a brief description of the business that the Proponent proposes to bring before the meeting, the text of the proposal (including the text of any resolutions proposed for consideration and, if such business includes a proposal to amend the Certificate of Incorporation or Bylaws, the language of the proposed amendment) and the reasons for conducting such business at the meeting,

(b)

any material interest in such business of the Proponent or any Stockholder Associated Person, and

(c)

a reasonably detailed description of all agreements, arrangements and understandings between the Proponent or any Stockholder Associated Person and any other person (including their names) in connection with the proposed business.

iv.

set forth, as to each person, if any, whom the Proponent proposes to nominate for election or reelection to the Board of Directors:

(a)

all information relating to the nominee (including, without limitation, the nominee’s name, age, business and residence address and principal occupation or employment and the class or series and number of shares of capital stock of the Corporation that are owned beneficially or of record by the nominee) that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for an election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected),

(b)

a description of any agreements, arrangements and understandings between or among the Proponent or any Stockholder Associated Person, on the one hand, and any other persons (including any Stockholder Associated Person), on the other hand, in connection with the nomination of such person for election as a director, and

(c)

a description of all direct and indirect compensation and other material monetary agreements, arrangements, and understandings during the past three years, and any other material relationships, between or among the Proponent or any Stockholder Associated Person, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 of Regulation S-K if the Proponent making the nomination or on whose behalf the nomination is made, if any, or any Stockholder Associated Person, were the “registrant” for purposes of Item 404 and the nominee were a director or executive officer of such registrant.

include a completed and signed questionnaire with respect to each nominee for election or reelection to the Board of Directors, in the form to be provided by the secretary of the Corporation upon request, setting forth the information described in clause (E) below. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of the proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of the nominee.

E. For a nominee of a stockholder to be eligible to be a nominee for election or reelection as a director of the Corporation, a person must complete and deliver (in accordance with the time periods prescribed for delivery of a Stockholder Notice under this Section 11 or, in the case of a Stockholder Nominee (as defined below), the time periods prescribed for delivery of a Proxy Access Notice under Section 14 of this Article II) to the secretary at the principal executive offices of the Corporation a written questionnaire providing the information requested about the background and qualifications of such person and the background of any other person or entity on whose behalf the nomination is being made and a written representation and agreement (the questionnaire, representation, and agreement to be in the form provided by the secretary upon written request) that such person:

is not and will not become a party to:

(a)

any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how the person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation, or

(b)

any Voting Commitment that could limit or interfere with the person’s ability to comply, if elected as a director of the Corporation, with the person’s fiduciary duties under applicable law,

ii.

is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement, or indemnification in connection with service or action as a director that has not been disclosed therein, and

iii.

in the person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality, and stock ownership and trading policies and guidelines of the Corporation.

F. Only such persons who are nominated in accordance with the procedures set forth in this Section 11 and, if applicable, Section 14 of this Article II shall be eligible to serve as directors. Only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 11. The chairman of the meeting shall determine whether any nominee or business proposed to be transacted by the stockholders has been properly brought before the meeting and, if any nominee or proposed business has not been properly brought before the meeting, the chairman shall declare that such nominee shall not be considered for election or such proposed business shall not be presented for stockholder action at the meeting. Notwithstanding the foregoing provisions of this Section 11, unless otherwise required by law, if the stockholder does not provide the supplemental information required regarding both the stockholder and any Stockholder Associated Persons under Section 11(D)(ii) or if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting to present the nominee or proper business described in the Stockholder Notice, such nominee shall not be presented for election or such business shall not be transacted, notwithstanding that proxies in respect of such election or such business may have been received by the Corporation. For purposes of this Section 11, to be considered a “qualified representative” of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as a proxy at the meeting and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting.

G. As referred to herein, “Public Disclosure” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or the filing of information with the Securities and Exchange Commission via the EDGAR filing system.

H. As referred to herein, “Stockholder Associated Person” of any stockholder means (i) any person controlling, directly or indirectly, or acting in concert with, such stockholder, (ii) any beneficial owner of shares of any class or series of stock of the Corporation owned of record or beneficially by such stockholder and (iii) any person controlling, controlled by or under common control with such Stockholder Associated Person.

I. The foregoing notice requirements of this Section 11 shall be deemed satisfied by a stockholder with respect to business other than a nomination if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with applicable rules and regulations promulgated under the Exchange Act and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting.

J. Notwithstanding anything to the contrary contained in this Section 11, for as long as the Stockholders’ Agreement dated as of March 9, 2011 among the Corporation, Hercules Holding II and affiliates of various equity sponsors (as may be amended, supplemented or modified from time to time, the “Stockholders’ Agreement”) remains in effect, no Investor Group (as defined in the Stockholders’ Agreement) that has the right to nominate a person to be elected to the Board of Directors pursuant to the Stockholders’ Agreement shall be subject to the procedures of this Section 11 or Section 14 of this Article II to nominate any such person to be elected to the Board of Directors.

SECTION 12. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken only upon the vote of the stockholders at an annual or special meeting duly called and may not be taken by written consent of the stockholders.

SECTION 13. FIXING A RECORD DATE. In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.

In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which shall not be more than sixty (60) days prior to such other action. If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

SECTION 14. PROXY ACCESS FOR DIRECTOR NOMINATIONS.

A. With respect to the election of directors at an annual meeting of stockholders, subject to the provisions of this Section 14 and Section 11 of this Article II (as applicable), the Corporation shall include in its proxy statement (including its form of proxy) for such annual meeting, in addition to any persons nominated for election by the Board of Directors, the name, together with the “Proxy Access Required Information,” of any person or persons, as applicable, nominated for election to the Board of Directors (the “Stockholder Nominee(s)”), each of whom satisfies the requirements of this Section 14 and Section 11 of this Article II (as applicable) and the director qualification requirements set forth in the Corporation’s Corporate Governance Guidelines and any other document(s) setting forth qualifications for directors, by an individual eligible stockholder or group of up to twenty (20) eligible stockholders (such eligible stockholder or eligible members of a group, the “Proxy Access Eligible Stockholder”) who expressly elects in writing at the time of providing the notice required by this Section 14 (the “Proxy

Access Notice”) to have its nominee or nominees, as applicable, included in the Corporation’s proxy materials pursuant to this Section 14; provided, however, that a stockholder that has a contractual right to designate one or more nominees for director shall not be, and any of such stockholder’s respective affiliates or associates and/or any others acting in concert with any of the foregoing shall not be, a Proxy Access Eligible Stockholder and shall not be eligible to participate in a group of stockholders constituting a Proxy Access Eligible Stockholder.

B. To be timely for purposes of this Section 14, the Proxy Access Notice must be made by notice in writing delivered to, or mailed and received by, the secretary of the Corporation at the principal executive offices of the Corporation no earlier than one hundred fifty (150) days and no later than one hundred twenty (120) days prior to the first anniversary of the date that the Corporation mailed its proxy statement for the preceding year’s annual meeting of stockholders; provided, however, that in the event that no annual meeting of stockholders was held in the previous year or the annual meeting of stockholders is called for a date that is not within thirty (30) days before or after such anniversary date, such Proxy Access Notice shall be made by notice in writing delivered to, or mailed and received by, the secretary of the Corporation no later than ninety (90) days prior to such annual meeting of stockholders or, if later, ten (10) days following the day on which notice of the date of the meeting was mailed or Public Disclosure of the date of such annual meeting of stockholders was first made, whichever occurs first. In no event will an adjournment or postponement of an annual meeting of stockholders or the announcement thereof commence a new time period for the giving of a Proxy Access Notice as provided above.

C. The maximum number of Stockholder Nominees nominated by all Proxy Access Eligible Stockholders that will be required to be included in the Corporation’s proxy materials with respect to an annual meeting of stockholders shall not exceed the greater of (i) two (2) or (ii) the Specified Percentage of the number of directors in office as of the last day on which a Proxy Access Notice may be timely delivered pursuant to and in accordance with this Section 14 (the “Final Proxy Access Nomination Date”), rounded down to the closest whole number below the Specified Percentage if such amount is not a whole number; provided, however, that the maximum number of Stockholder Nominees shall be reduced by (1) the number of director candidates for which the Corporation shall have received one or more valid Stockholder Notices pursuant to Section 11 of this Article II, (2) the number of director candidates that the Board of Directors nominates pursuant to an agreement, arrangement or other understanding with one or more stockholders in lieu of such director candidates being formally nominated pursuant to this Section 14, (3) the number of directors in office that will be included in the Corporation’s proxy materials with respect to such annual meeting of stockholders for whom access to the Corporation’s proxy materials was previously provided pursuant to this Section 14, other than any such director referred to in clause (2) or this clause (3) who, at the time of such annual meeting of stockholders, will have served as a director continuously as a nominee of the Board of Directors for at least three annual terms and (4) the number of Stockholder Nominees whose names were submitted for inclusion in the Corporation’s proxy materials pursuant to this Section 14 but who were subsequently withdrawn or who the Board of Directors decides to nominate as Board of Director nominees. In the event that one or more vacancies for any reason occurs on the Board of Directors after the Final Proxy Access Nomination Date but before the date of the annual meeting of stockholders and the Board of Directors resolves to reduce the size of the Board of Directors in connection therewith, the maximum number of Stockholder Nominees included in the Corporation’s proxy materials shall be calculated based on the number of directors in office as so reduced. Any Proxy Access Eligible Stockholder submitting more than one Stockholder Nominee for inclusion in the Corporation’s proxy materials pursuant to this Section 14 shall rank such Stockholder Nominees based on the order that the Proxy Access Eligible Stockholder desires such Stockholder Nominees to be selected for inclusion in the Corporation’s proxy statement in the event that the total number of Stockholder Nominees submitted by Proxy Access Eligible Stockholders pursuant to this Section 14 exceeds the maximum number of

nominees provided for in this Section 14. In the event that the number of Stockholder Nominees submitted by Proxy Access Eligible Stockholders pursuant to this Section 14 exceeds the maximum number of nominees provided for in this Section 14, the highest ranking Stockholder Nominee who meets the requirements of this Section 14 from each Proxy Access Eligible Stockholder will be selected for inclusion in the Corporation’s proxy materials until the maximum number is reached, going in order of the amount (largest to smallest) of shares of capital stock of the Corporation each Proxy Access Eligible Stockholder disclosed as owned in its respective Proxy Access Notice submitted to the Corporation. If the maximum number is not reached after the highest ranking Stockholder Nominee who meets the requirements of this Section 14 from each Proxy Access Eligible Stockholder has been selected, this process will continue as many times as necessary, following the same order each time, until the maximum number is reached. Notwithstanding anything to the contrary contained in this Section 14, if the Corporation receives notice pursuant to Section 11 of this Article II that a stockholder intends to nominate for election at such meeting a number of nominees greater than or equal to a majority of the total number of directors to be elected at such meeting, no Stockholder Nominees will be included in the Corporation’s proxy materials with respect to such meeting pursuant to this Section 14.

D. For purposes of this Section 14:

the term “Affiliates” shall have the meaning ascribed to it in Rule 12b-2 under the Exchange Act,

ii.

the “Minimum Holding Period” is three (3) years,

iii.

the “Proxy Access Required Information” that the Corporation will include in its proxy statement is the information provided to the secretary of the Corporation concerning the Stockholder Nominee(s) and the Proxy Access Eligible Stockholder that is required to be disclosed in the Corporation’s proxy statement by Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder, and, if the Proxy Access Eligible Stockholder so elects, a written statement, not to exceed 500 words, in support of the Stockholder Nominee(s)’ candidacy (the “Statement”). Notwithstanding anything to the contrary contained in this Section 14, the Corporation may omit from its proxy materials any information or Statement (or portion thereof) that it, in good faith, believes would violate any applicable law, rule, regulation or listing standard,

iv.

the “Required Ownership Percentage” is 3% or more,

the “Specified Percentage” is 20%, and

vi.

a Proxy Access Eligible Stockholder shall be deemed to “own” only those outstanding shares of capital stock of the Corporation as to which the stockholder possesses both (a) the full voting and investment rights pertaining to the shares and (b) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares; provided, that the number of shares calculated in accordance with clauses (a) and (b) shall not include any shares (1) sold by such stockholder or any of its Affiliates in any transaction that has not been settled or closed, (2) borrowed by such stockholder or any of its Affiliates for any purposes or purchased by such stockholder or any of its Affiliates pursuant to an agreement to resell or (3) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such stockholder or any of its Affiliates, whether any such instrument or agreement is

to be settled with shares of capital stock of the Corporation or with cash based on the notional amount or value of shares of outstanding capital stock of the Corporation subject thereto, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of (A) reducing in any manner, to any extent or at any time in the future, such stockholder’s or its Affiliates’ full right to vote or direct the voting of any such shares, and/or (B) hedging, offsetting or altering to any degree any gain or loss realized or realizable arising from maintaining the full economic ownership of such shares by such stockholder or Affiliate. For purposes of this Section 14, a stockholder shall “own” shares held in the name of its bank, broker or other nominee or intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares through the annual meeting date. A stockholder’s ownership of shares shall be deemed to continue during any period in which the stockholder has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the stockholder. A stockholder’s ownership of shares shall be deemed to continue during any period in which the stockholder has loaned such shares, provided that the person has the power to recall such loaned shares on no more than five (5) business days’ notice and (x) will promptly recall such loaned shares upon being notified that any of its Stockholder Nominees will be included in the Corporation’s proxy materials and (y) will continue to hold such recalled shares through the annual meeting date. The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of capital stock of the Corporation are “owned” for these purposes shall be determined by the Board of Directors or any committee thereof, which determination shall be conclusive and binding on the Corporation and its stockholders.

E. In order to make a nomination pursuant to this Section 14, a Proxy Access Eligible Stockholder must have owned the Required Ownership Percentage of the outstanding shares of capital stock of the Corporation entitled to vote in the election of directors (the “Required Shares”) continuously for the Minimum Holding Period as of both (1) the date the Proxy Access Notice is delivered to or mailed to and received by the secretary of the Corporation in accordance with this Section 14 and (2) the record date for determining the stockholders entitled to vote at the annual meeting of stockholders, and must continue to own the Required Shares through such annual meeting date. A Proxy Access Eligible Stockholder shall certify in its Proxy Access Notice the number of eligible shares of outstanding capital stock of the Corporation it asserts it is deemed to own for the purposes of this Section 14. The aggregate number of stockholders whose collective stock ownership may be counted for the purpose of satisfying the Required Ownership Percentage shall not exceed twenty (20), and no stockholder may be a member of more than one group under this Section 14. Two or more funds that are part of the same family of funds under common management and investment control (a “Qualifying Fund Family”) shall be treated as one stockholder for the purpose of determining the aggregate number of stockholders under this Section 14. No later than the end of the time period specified in this Section 14 for delivering the Proxy Access Notice, a Qualifying Fund Family whose stock ownership is counted for purposes of qualifying as a Proxy Access Eligible Stockholder must provide to the secretary of the Corporation documentation reasonably satisfactory to the Board of Directors, or any committee thereof, that demonstrates that the funds comprising the Qualifying Fund Family satisfy the definition thereof. Within the time period specified in this Section 14 for delivering the Proxy Access Notice, a Proxy Access Eligible Stockholder (including each stockholder, whether individually or as a member of an eligible group, and each fund comprising a Qualifying Fund Family) must provide the following information in writing to the secretary

of the Corporation: (i) one or more written statements from the record holder of the shares (and from each intermediary through which the shares are or have been held during the Minimum Holding Period) verifying that, as of a date within seven (7) calendar days prior to the date the Proxy Access Notice is delivered to or mailed to and received by the secretary of the Corporation, the Proxy Access Eligible Stockholder owns, and has owned continuously for the Minimum Holding Period, the Required Shares, and the Proxy Access Eligible Stockholder’s agreement to provide, within five (5) business days after the record date for the annual meeting of stockholders, written statements from the record holder and intermediaries verifying the Proxy Access Eligible Stockholder’s continuous ownership of the Required Shares through the record date; (ii) a copy of the Schedule 14N that has been filed with the Securities and Exchange Commission as required by Rule 14a-18 under the Exchange Act; (iii) the information and representations that are the same as those that would be required to be set forth in a Stockholder Notice of nomination pursuant to Section 11 of this Article II; (iv) the consent of each Stockholder Nominee to being named in the Corporation’s proxy statement as a nominee and to serving as a director if elected; (v) a representation that the Proxy Access Eligible Stockholder (a) acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control at the Corporation, and does not have any such intent, (b) will maintain qualifying ownership of the Required Shares through the date of the annual meeting of stockholders, (c) has not engaged and will not engage in, and has not and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the annual meeting of stockholders other than its Stockholder Nominee(s) or a nominee of the Board of Directors, (d) will not distribute to any stockholder any form of proxy for the meeting other than the form distributed by the Corporation, (e) has not nominated and will not nominate for election any individual as a director at the annual meeting of stockholders other than its Stockholder Nominee(s), (f) agrees to comply with all applicable laws, rules and regulations with respect to any solicitation in connection with the meeting and will file with the Securities and Exchange Commission any solicitation or other communication with the Corporation’s stockholders relating to the meeting at which the Stockholder Nominee will be nominated, regardless of whether any such filing is required under Regulation 14A of the Exchange Act or an exemption from filing is available thereunder, and (g) will provide facts, statements and other information in all communications with the Corporation and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; (vi) an undertaking that the Proxy Access Eligible Stockholder agrees to (a) assume all liability stemming from any legal or regulatory violation arising out of the Proxy Access Eligible Stockholder’s communications with the stockholders of the Corporation or out of the information that the Proxy Access Eligible Stockholder provided to the Corporation and (b) indemnify and hold harmless the Corporation and each of its directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers or employees arising out of any nomination submitted and/or efforts to have its Stockholder Nominee(s) elected by the Proxy Access Eligible Stockholder pursuant to this Section 14; and (vii) in the case of a nomination under this Section 14 by a group of stockholders, the designation by all group members of one group member that is authorized to act on behalf of all members of the nominating stockholder group with respect to the nomination and matters related thereto, including withdrawal of the nomination. For the avoidance of doubt, in the event that the Proxy Access Eligible Stockholder consists of a group of stockholders, the requirements and obligations applicable to an individual Proxy Access Eligible Stockholder that are set forth in these Bylaws, including the Minimum Holding Period, shall apply to each member of such group individually; provided, however, that the Required Ownership Percentage shall apply to the continuous ownership of the eligible group in the aggregate.

F. In the event that any information or communications provided by the Proxy Access Eligible Stockholder or any Stockholder Nominee(s) to the Corporation or its stockholders ceases to be true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, each Proxy Access Eligible Stockholder or Stockholder Nominee, as the case may be, shall promptly notify the secretary of the Corporation of any defect in such previously provided information and of the information that is required to correct any such defect; it being understood that providing any such notification shall not be deemed to cure any such defect or limit the remedies (including without limitation under these Bylaws) available to the Corporation relating to any such defect.

G. The Corporation shall not be required to include, pursuant to this Section 14, a Stockholder Nominee in its proxy materials for any meeting of stockholders (i) whose election as a member of the Board of Directors would cause the Corporation to be in violation of these Bylaws, the Certificate of Incorporation, the rules and listing standards of the principal U.S. exchanges upon which the shares of capital stock of the Corporation are traded, or any applicable state or federal law, rule or regulation, or any of the Corporation’s publicly disclosed standards or qualifications applicable to its directors; (ii) for which the secretary of the Corporation receives a notice that a stockholder has nominated such Stockholder Nominee for election to the Board of Directors pursuant to the advance notice requirements for stockholder nominees for director set forth in Section 11 of this Article II; (iii) who is not independent as determined by the Board of Directors under (a) the listing standards of each principal U.S. exchange upon which the shares of capital stock of the Corporation are listed, (b) any applicable rules of the Securities and Exchange Commission and (c) any publicly disclosed standards used by the Board of Directors in determining independence of the Corporation’s directors; (iv) if the Proxy Access Eligible Stockholder that has nominated such Stockholder Nominee or any such Stockholder Nominee has engaged in or is currently engaged in, or has been or is a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the annual meeting of stockholders other than the Proxy Access Eligible Stockholder’s Stockholder Nominee(s) or a nominee of the Board of Directors; (v) if the Stockholder Nominee is or becomes a party to any compensatory, payment, reimbursement, indemnification or other financial agreement, arrangement or understanding with any person or entity other than the Corporation, or is receiving or will receive any such compensation, payment, reimbursement or indemnification from any person or entity other than the Corporation, in each case, in connection with service as a director of the Corporation; (vi) if the Stockholder Nominee is or becomes a party to any Voting Commitment; (vii) who is or has been, within the past three years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914; (viii) who is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past ten (10) years; (ix) who is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended; (x) if such Stockholder Nominee or the applicable Proxy Access Eligible Stockholder shall have provided information to the Corporation in respect to such nomination that was untrue in any material respect or omitted to state a material fact necessary in order to make the statement(s) made, in light of the circumstances under which they were made, not misleading, as determined by the Board of Directors or any committee thereof; (xi) whose then-current or prior business or personal interests place such Stockholder Nominee in a conflict of interest with the Corporation or any of its subsidiaries that would cause such Stockholder Nominee to violate any fiduciary duties of directors established pursuant to applicable law; or (xii) the Proxy Access Eligible Stockholder or applicable Stockholder Nominee fails to comply with its obligations, agreements, representations and/or undertakings pursuant to these Bylaws, including this Section 14.

H. Any Stockholder Nominee who is included in the Corporation’s proxy materials for a particular annual meeting of stockholders but either (i) does not receive at least 25% of the votes cast in favor of such Stockholder Nominee’s election or (ii) becomes ineligible or unavailable for or withdraws from election at the annual meeting of stockholders, will be ineligible to be a Stockholder Nominee

pursuant to this Section 14 for the next two annual meetings of stockholders. Any Proxy Access Eligible Stockholder (including each stockholder or fund comprising a Qualifying Fund Family whose stock ownership is counted for the purposes of qualifying as a Proxy Access Eligible Stockholder) whose Stockholder Nominee is elected as a director at an annual meeting of stockholders will not be eligible to nominate or participate in the nomination of a Stockholder Nominee for the following two annual meetings of stockholders other than the nomination of such previously elected Stockholder Nominee in accordance with this Section 14. Notwithstanding anything to the contrary set forth herein, the Board of Directors or the presiding officer of the annual meeting of stockholders shall declare a nomination by a Proxy Access Eligible Stockholder to be invalid, and such nomination shall be disregarded notwithstanding that proxies in respect of such vote may have been received by the Corporation, if (i) the Stockholder Nominee(s) and/or the applicable Proxy Access Eligible Stockholder shall have breached its or their obligations under this Section 14, as determined by the Board of Directors or such presiding officer or (ii) the Proxy Access Eligible Stockholder (or a qualified representative thereof) does not appear at the meeting of stockholders to present any nomination pursuant to this Section 14.

I. This Section 14 shall be the exclusive method for stockholders to include nominees for director in the Corporation’s proxy materials. This Section 14 shall not prevent a stockholder from nominating a person to the Board of Directors pursuant to and in accordance with Section 11 of this Article II instead of pursuant to and in accordance with this Section 14. For the avoidance of doubt, the Corporation may in its sole discretion solicit against, and include in the proxy statement its own statements or other information relating to, any Proxy Access Eligible Stockholder and/or stockholder director nominees (including any Stockholder Nominee) for director, including any information provided to the Corporation with respect to the foregoing.

ARTICLE III

DIRECTORS

SECTION 1. GENERAL POWERS. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The Board of Directors may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by the General Corporation Law of the State of Delaware or the Certificate of Incorporation directed or required to be exercised or done by the stockholders.

SECTION 2. ANNUAL MEETINGS. Unless the Board of Directors shall otherwise provide, the annual meeting of the Board of Directors shall be held without other notice than this Bylaw immediately after, and at the same place, if any, as, the annual meeting of stockholders.

SECTION 3. REGULAR MEETINGS AND SPECIAL MEETINGS. Regular meetings of the Board of Directors, other than the annual meeting, may be held without notice at such time and at such place, if any, as shall from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the chairman of the board, the chief executive officer (if the chief executive officer is a director) or upon the written request of at least a majority of the directors then in office.

SECTION 4. NOTICE OF MEETINGS. Notice of regular meetings of the Board of Directors need not be given except as otherwise required by law or these Bylaws. Notice of each special meeting of the Board of Directors, and of each regular and annual meeting of the Board of Directors for which notice shall be required, shall be given by the secretary as hereinafter provided in this Section 4, in which notice shall be stated the date, time and place, if any, of the meeting. Except as otherwise required by these Bylaws, such notice need not state the purposes of such meeting. Notice of any special meeting, and of any regular or annual meeting for which notice is required, shall be given to each director at least

(a) twenty-four (24) hours before the meeting if by telephone or by being personally delivered or sent by facsimile transmission, e-mail or other form of wire, wireless, or other means of electronic transmission or (b) five (5) days before the meeting if delivered by mail to the director’s residence or usual place of business. Such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage prepaid, or when transmitted if sent by facsimile transmission, e-mail or other form of wire, wireless, or other means of electronic transmission. Neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.

SECTION 5. WAIVER OF NOTICE AND PRESUMPTION OF ASSENT. Any director may waive notice of any meeting by a written waiver signed by the director entitled to the notice or a waiver by electronic transmission by the director entitled to the notice. Any member of the Board of Directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action.

SECTION 6. CHAIRMAN OF THE BOARD, QUORUM, REQUIRED VOTE AND ADJOURNMENT. The Board of Directors shall elect, by the affirmative vote of a majority of the total number of directors then in office, a chairman of the board, who shall preside at all meetings of the stockholders and Board of Directors at which he or she is present and shall have such powers and perform such duties as the Board of Directors may from time to time prescribe. If the chairman of the board is not present at a meeting of stockholders or the Board of Directors, the chief executive officer (if the chief executive officer is a director and is not also the chairman of the board) shall preside at such meeting, and, if the chief executive officer is not present at such meeting or is not a director, a majority of the directors present at such meeting shall elect one (1) of their members to so preside. A majority of the total number of directors then in office shall constitute a quorum for the transaction of business. Unless by express provision of an applicable law, the Certificate of Incorporation or these Bylaws a different vote is required, the vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, a majority of the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

SECTION 7. COMMITTEES. The Board of Directors (i) may, by resolution passed by the Board of Directors, designate one or more committees, including an executive committee, consisting of one or more of the directors of the Corporation, and (ii) shall during such period of time as any securities of the Corporation are listed on a securities exchange, by resolution passed by the Board of Directors, designate all committees required by the rules and regulations of the principal U.S. exchange upon which the shares of capital stock of the Corporation are listed. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Except to the extent restricted by applicable law or the Certificate of Incorporation, each such committee, to the extent provided in the resolution creating it, shall have and may exercise all the powers and authority of the Board of Directors. Each such committee shall serve at the pleasure of the Board of Directors as may be determined from time to time by resolution adopted by the Board of Directors or as required by the rules and regulations of the principal U.S. exchange upon which the shares of capital stock of the Corporation are listed, if applicable. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors upon request.

SECTION 8. COMMITTEE RULES. Each committee of the Board of Directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the Board of Directors designating such committee. Unless otherwise provided in such a resolution, the presence of at least a majority of the members of the committee shall be necessary to constitute a quorum. Unless otherwise provided in such a resolution, in the event that a member and that member’s alternate, if alternates are designated by the Board of Directors, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member.

SECTION 9. COMMUNICATIONS EQUIPMENT. Members of the Board of Directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear and speak with each other, and participation in the meeting pursuant to this Section 9 shall constitute presence in person at the meeting.

SECTION 10. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of such board or committee, as the case may be, consent thereto in accordance with applicable law, and the writing or other evidence (including electronic transmission) of such consent is filed with the minutes of proceedings of the Board of Directors or committee, as applicable.

SECTION 11. RESIGNATIONS; NEWLY CREATED DIRECTORSHIPS; VACANCIES; AND REMOVALS. Any director of the Corporation may resign at any time by giving notice in writing or by electronic transmission of his resignation to the Corporation. Except as contemplated by Section 2 of Article II of these Bylaws, any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt. Unless otherwise specified therein or as contemplated by Section 2 of Article II of these Bylaws, the acceptance of such resignation shall not be necessary to make it effective. Newly created directorships resulting from any increase in the number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal or any other cause shall be filled as provided in the Certificate of Incorporation. Any director may be removed as provided in the Certificate of Incorporation.

SECTION 12. COMPENSATION. The Board of Directors shall have the authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Corporation in any capacity.

SECTION 13. RELIANCE ON BOOKS AND RECORDS. A member of the Board of Directors, or a member of any committee designated by the Board of Directors shall, in the performance of such person’s duties, be fully protected in relying in good faith upon records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees of the Board of Directors, or by any other person as to matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

ARTICLE IV

OFFICERS

SECTION 1. NUMBER. The officers of the Corporation shall be elected by the Board of Directors and may include the chairman of the board, the chief executive officer, the president, the chief financial officer, the chief operating officer, one or more group officers (including group presidents and group financial officers), one or more vice presidents (including senior vice presidents, executive vice presidents or other classifications of vice presidents), the secretary and treasurer, and such other officers and assistant officers as may be deemed necessary or desirable by the Board of Directors. Any number of offices may be held by the same person, except that neither the chief executive officer nor the president shall also hold the office of secretary.

SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation shall be elected annually by the Board of Directors. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided.

SECTION 3. RESIGNATIONS. Any officer of the Corporation may resign at any time by giving written notice of his or her resignation to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon receipt by the Corporation. Unless otherwise specified therein, the acceptance of any such resignation shall not be necessary to make it effective.

SECTION 4. REMOVAL. Any officer or agent elected by the Board of Directors may be removed by the Board of Directors at its discretion, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.

SECTION 5. VACANCIES. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise may be filled by the Board of Directors. In its discretion, the Board of Directors may choose not to fill any office for any period as it may deem advisable, except that the offices of chief executive officer and secretary shall be filled as expeditiously as possible.

SECTION 6. COMPENSATION. Compensation of all executive officers shall be approved by the Board of Directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the Corporation; provided, however, that compensation of some or all executive officers may be determined by a committee established for that purpose if so authorized by the Board of Directors or as required by applicable law or regulation, including any exchange or market upon which the Corporation’s securities are then listed for trading or quotation.

SECTION 7. CHIEF EXECUTIVE OFFICER. The chief executive officer, subject to the Board of Directors, shall have general executive charge, management, and control of the properties and operations of the Corporation in the ordinary course of its business, with all such powers with respect to such properties and operations as may be reasonably incident to such responsibilities. If the Board of Directors has not elected a chairman or in the absence or inability to act of the chairman of the board, the chief executive officer shall exercise all of the powers and discharge all of the duties of the chairman of the board, but only if the chief executive officer is a director of the Corporation.

SECTION 8. PRESIDENT. The president shall have the general powers and duties of supervision and management usually vested in the office of the president of a corporation and shall perform such other duties as the Board of Directors, the chairman of the board or the chief executive officer may, from time to time, prescribe. At the request of the chief executive officer or in his or her absence or in the event of his or her inability or refusal to act, the president shall perform the duties of the chief executive officer.

SECTION 9. CHIEF OPERATING OFFICER. The chief operating officer shall have the general powers and duties of supervision and management usually vested in the office of the chief operating officer of a corporation and shall perform such other duties as the Board of Directors, the chairman of the board or the chief executive officer may, from time to time, prescribe.

SECTION 10. GROUP OFFICERS. Each group officer shall perform all such duties as from time to time may be assigned to him or her by the Board of Directors, the chairman of the board, the chief executive officer or the president.

SECTION 11. VICE-PRESIDENTS. Each vice president shall perform all such duties as from time to time may be assigned to him or her by the Board of Directors, the chairman of the board, the chief executive officer or the president.

SECTION 12. SECRETARY AND ASSISTANT SECRETARIES. The secretary shall attend all meetings of the Board of Directors (other than executive sessions thereof) and all meetings of the stockholders and record all the proceedings of the meetings in a book or books to be kept for that purpose or shall ensure that his or her designee attends each such meeting to act in such capacity. Under the chairman of the board’s supervision, the secretary shall give, or cause to be given, all notices required to be given by these Bylaws or by law; shall have such powers and perform such duties as the Board of Directors, the chairman of the board, the chief executive officer, the president or these Bylaws may, from time to time, prescribe; and shall have custody of the corporate seal of the Corporation. The secretary, or an assistant secretary, shall have authority to affix the corporate seal to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature. The assistant secretary, or if there be more than one, any of the assistant secretaries, shall in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors, the chairman of the board, the chief executive officer, the president or secretary may, from time to time, prescribe.

SECTION 13. CHIEF FINANCIAL OFFICER. The chief financial officer shall have the custody of the corporate funds and securities; shall keep full and accurate all books and accounts of the Corporation as shall be necessary or desirable in accordance with applicable law or generally accepted accounting principles; shall deposit all monies and other valuable effects in the name and to the credit of the Corporation as may be ordered by the chairman of the board or the Board of Directors; shall cause the funds of the Corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the Board of Directors, at its regular meeting or when the Board of Directors so requires, an account of the financial condition of the Corporation; shall have such powers and perform such duties incident to the position of chief financial officer as the Board of Directors, the chairman of the board, the chief executive officer, the president or these Bylaws may, from time to time, prescribe. The chief financial officer may also be the treasurer if so determined by the Board of Directors.

SECTION 14. OTHER OFFICERS, ASSISTANT OFFICERS AND AGENTS. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these Bylaws, shall have such authority and perform such duties as may from time to time be assigned to him or her by the Board of Directors, the chairman of the board, the chief executive officer, the president or a vice president.

SECTION 15. OFFICERS’ BONDS OR OTHER SECURITY. If required by the Board of Directors, any officer of the Corporation shall give a bond or other security for the faithful performance of his or her duties, in such amount and with such surety as the Board of Directors may require.

SECTION 16. ABSENCE OR DISABILITY OF OFFICERS. In the case of the absence or disability of any officer of the Corporation and of any person hereby authorized to act in such officer’s place during such officer’s absence or disability, the Board of Directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person selected by it.

ARTICLE V

CERTIFICATES OF STOCK

SECTION 1. SHARES WITH OR WITHOUT CERTIFICATES. The Board of Directors may authorize that some or all of the shares of any or all of the Corporation’s classes or series of stock be evidenced by a certificate or certificates of stock. The Board of Directors may also authorize the issue of some or all of the shares of any or all of the Corporation’s classes or series of stock without certificates. The rights and obligations of stockholders with the same class and/or series of stock shall be identical whether or not their shares are represented by certificates.

SECTION 2. SHARES WITH CERTIFICATES. If the Board of Directors chooses to issue shares of stock evidenced by a certificate or certificates, each individual certificate shall include the following on its face: (i) the Corporation’s name, (ii) the fact that the Corporation is organized under the laws of the State of Delaware, (iii) the name of the person to whom the certificate is issued, (iv) the number of shares represented thereby, (v) the class of shares and the designation of the series, if any, which the certificate represents, and (vi) such other information as applicable law may require or as may be lawful.

If the Corporation is authorized to issue different classes of shares or different series within a class, the designations, relative rights, preferences and limitations determined for each series (and the authority of the Board of Directors to determine variations for future series) may be summarized on the front or back of each certificate. Alternatively, each certificate may state on its front or back that the Corporation will furnish the stockholder this information in writing, without charge, upon request.

Each certificate of stock issued by the Corporation shall be signed (either manually or in facsimile) by the chairperson or vice-chairperson of the Board of Directors, or the president or a vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the Corporation. If the person who signed a certificate no longer holds office when the certificate is issued, the certificate is nonetheless valid.

SECTION 3. SHARES WITHOUT CERTIFICATES. If the Board of Directors chooses to issue shares of stock without certificates, the Corporation, if required by the General Corporation Law of the State of Delaware, shall, within a reasonable time after the issue or transfer of shares without certificates, send the stockholder a written statement of the information required on certificates by Section 2 of Article V of these Bylaws and any other information required by the General Corporation Law of the State of Delaware. The Corporation may adopt a system of issuance, recordation and transfer of its shares of stock by electronic or other means not involving the issuance of certificates, provided the use of such system by the Corporation is permitted in accordance with applicable law.

SECTION 4. SUBSCRIPTIONS FOR SHARES. Subscriptions for shares of the Corporation shall be valid only if they are in writing. Unless the subscription agreement provides otherwise, subscriptions for shares, regardless of the time when they are made, shall be paid in full at such time, or in such installments and at such periods, as shall be determined by the Board of Directors. All calls for payment on subscriptions shall be uniform as to all shares of the same class or of the same series, unless the subscription agreement specifies otherwise.

SECTION 5. TRANSFERS. Transfers of shares of the capital stock of the Corporation shall be made only on the books of the Corporation by (i) the holder of record thereof, (ii) by his or her legal representative, who, upon request of the Corporation, shall furnish proper evidence of authority to transfer, or (iii) his or her attorney, authorized by a power of attorney duly executed and filed with the secretary of the Corporation or a duly appointed transfer agent. Such transfers shall be made only upon surrender, if applicable, of the certificate or certificates for such shares properly endorsed and with all taxes thereon paid. Shares of capital stock of the Corporation that are not represented by a certificate shall be transferred in accordance with applicable law.

SECTION 6. LOST, DESTROYED OR STOLEN CERTIFICATES. In case of loss, mutilation or destruction of a certificate of stock, a duplicate certificate may be issued upon the terms prescribed by the Board of Directors, including provision for indemnification of the Corporation secured by a bond or other security sufficient to protect the Corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of the certificate or the issuance of the replacement certificate.

ARTICLE VI

GENERAL PROVISIONS

SECTION 1. DIVIDENDS. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, in accordance with applicable law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to the provisions of applicable law and the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or any other purpose and the directors may modify or abolish any such reserve in the manner in which it was created.

SECTION 2. CHECKS, NOTES, DRAFTS, ETC. All checks, notes, drafts or other orders for the payment of money of the Corporation shall be signed, endorsed or accepted in the name of the Corporation by such officer, officers, person or persons as from time to time may be designated by the Board of Directors or by an officer or officers authorized by the Board of Directors to make such designation.

SECTION 3. CONTRACTS. In addition to the powers otherwise granted to officers pursuant to Article IV hereof, the Board of Directors may authorize any officer or officers, or any agent or agents, of the Corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances.

SECTION 4. LOANS. Subject to compliance with applicable law (including the Sarbanes-Oxley Act of 2002, as amended), the Corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Corporation or of its subsidiaries, including any officer or employee who is a director of the Corporation or its subsidiaries, whenever, in the judgment of

the directors, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Corporation. Nothing in this Section 4 shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Corporation at common law or under any statute.

SECTION 5. FISCAL YEAR. The fiscal year of the Corporation shall end on December 31 of each fiscal year and may hereafter be changed by resolution of the Board of Directors.

SECTION 6. CORPORATE SEAL. The seal of the Corporation shall be in such form as shall be approved by the Board of Directors. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Notwithstanding the foregoing, no seal shall be required by virtue of this Section 6.

SECTION 7. VOTING SECURITIES OWNED BY CORPORATION. Voting securities in any other entity held by the Corporation shall be voted by the chief executive officer, the president or a vice-president, unless the Board of Directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution.

SECTION 8. INSPECTION OF BOOKS AND RECORDS. The Board of Directors shall have power from time to time to determine to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders; and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation.

SECTION 9. SECTION HEADINGS. Section headings in these Bylaws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein.

SECTION 10. INCONSISTENT PROVISIONS. In the event that any provision of these Bylaws is or becomes inconsistent with any provision of the Certificate of Incorporation, the General Corporation Law of the State of Delaware or any other applicable law, the provision of these Bylaws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect.

ARTICLE VII

AMENDMENTS

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized to make, alter, amend, change, add to or repeal these Bylaws by the affirmative vote of a majority of the total number of directors then in office. Any amendment, alteration, change, addition or repeal of these Bylaws by the stockholders of the Corporation shall require the affirmative vote of the holders of at least a majority of the outstanding shares of the Corporation, voting together as a class, entitled to vote on such amendment, alteration, change, addition or repeal.

Exhibit 10.5

AMENDMENT TO THE

HCA RESTORATION PLAN

(as amended and restated December 22, 2010)

THIS AMENDMENT to the HCA Restoration Plan, as originally adopted effective January 1, 2001, and last amended and restated effective December 22, 2010 (the “Plan”), is hereby adopted and executed by the undersigned duly authorized officer of HCA Inc. (the “Company”) as of the date set forth below.

W I T N E S S E T H :

WHEREAS, the Company maintains the Plan for the benefit of its employees; and

WHEREAS, Section 9.1 of the Plan provides that the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has the authority to amend the Plan at any time; and

WHEREAS, the Compensation Committee has authorized the undersigned officer of HCA Inc. to execute this Amendment to the Plan to eliminate Tier A contributions effective as of January 1, 2020, except where inconsistent with the terms of a collective bargaining agreement; and

WHEREAS, the Compensation Committee has authorized the members of member of the Benefits Oversight Committee of HCA Inc. (the “BOC”) to amend the Plan to the extent that such amendment neither (i) affects the Plan benefit of any member of the senior leadership of the Company, nor (ii) has a significant cost impact to the Company; and

WHEREAS, the undersigned officer of the Company is a member of the BOC and desires to amend the Plan to expand and modify the procedures for participants to designate beneficiaries to receive their benefits in the event of their death.

NOW, THEREFORE, the Plan is hereby amended as follows:

Effective as of January 1, 2020, Section 3.1 of the Plan is amended to read as follows:

3.1

Amounts Credited.

(a)

Tier A. Following the end of each Plan Year beginning on or after January 1, 2020, but no later than the 5th day of March following the Plan Year, the Account of each Active Participant who is an Active Union Participant (as defined below) for such Plan Year will be credited the following amounts of benefits:


Years of Service		Compensation over the SSWB up to Code §401(a)(17) Limit
0-4		1.5%
5-9		2.0
10-14		3.0
15-19		3.5
20-24		4.0
25+		4.5

For purposes of this subsection (a), an Active Participant will be an “Active Union Participant” for a Plan Year if such Active Participant’s employment is subject to the terms of a collective bargaining agreement between employee representatives and one or more Employers, which provides for the benefits described in this subsection (a) for such Plan Year.

(b)

Tier B. Following the end of each Plan Year beginning on or after January 1, 2020, but no later than the 5th day of March following the Plan Year, the Account of each Active Participant will be credited the following amounts of benefits:


Years of Service		Compensation over the Code §401(a)(17) Limit
0-4		3.0%
5-9		4.0
10-14		6.0
15-19		7.0
20-24		8.0
25+		9.0

(c)

Tier C. In addition to the foregoing contributions, if an Active Participant could have received greater matching contributions under the HCA 401(k) Plan if the Code Section 402(g) limit did not apply with respect to the HCA 401(k) Plan (assuming the Active Participant would contribute the elective deferrals at the rate necessary to receive the maximum matching contributions), then the Active Participant’s Account will be credited with the excess of the maximum elective deferral contributions that could be credited to his account under the HCA 401(k) Plan if the Code Section 402(g) limit did not apply to the HCA 401(k) Plan and the contribution rate necessary to produce the maximum matching contributions possible applied, minus the Code Section 402(g) limit.

2. Effective as of the date this Amendment is executed, Section 6.1 of the Plan is hereby amended to read as follows:

6.1

Death.

a) In General. The beneficiary or beneficiaries who survive the Participant will receive the Participant’s Account (or remaining Account, if installments were in the process of being paid at the time of death). However, if no beneficiary survives the Participant, then the contingent beneficiary or beneficiaries who survive the Participant will receive his Account (or remaining Account, if installments were in the process of being paid at the time of death). Regardless of whether a payment form was chosen for death benefits, if installments were being paid at the time of death, the installment payments in process will continue to be made to the beneficiary or beneficiaries or to the contingent beneficiary or beneficiaries (as applicable). In the event of divorce of a married participant who previously named his spouse as his beneficiary or contingent beneficiary, any designation of spouse as beneficiary will be void upon divorce and any amount that would have been paid to the spouse but for voiding will be paid as if the spouse did not survive the Participant. Marriage of a single Participant will void existing beneficiary and contingent beneficiary elections. If no beneficiary is named or if no beneficiary or contingent beneficiary survives the Participant, then death benefits will be paid pursuant to the hierarchy applicable under the HCA 401(k) Plan when no beneficiary is named. If a lump-sum distribution is payable, it will be paid as soon as administratively feasible following death (but no later than the 15th day of the third month following the month of death). If installment payments are payable, then the first installment will be paid during the month of July of the calendar year following the calendar year during which death occurred. If installment payments have already begun, the remaining installments will continue to be paid to the death beneficiary(ies) at the time such payments would have been made to the Participant. No additional benefits will be payable thereafter to anyone with respect to such Participant or his benefits.

b) Beneficiary Designation. Each Participant may designate one or more individuals or trusts as death beneficiaries and contingent beneficiaries. The consent of neither the Participant’s spouse nor any other individual shall be required for such designation.

c) Divorce. Notwithstanding any provision of this definition or the Plan to the contrary, if a Participant divorces, then, effective as of the date of the divorce, the spouse will be deemed to have predeceased the Participant. If such Participant subsequently names the former spouse as a beneficiary or contingent beneficiary, or if the Participant remarries such former spouse, the preceding sentence will no longer apply.

d) Forfeiture of Benefits by Killers. Notwithstanding anything to the contrary in the Plan, no payment of benefits will be made under any provision of the Plan to any individual who kills the Participant with respect to whom such amount would otherwise be payable. An individual will be treated as having killed a Participant for purposes of this paragraph d) only if, by virtue of such individual’s involvement in the death of the Participant, such individual’s entitlement to any interest in assets of the deceased could be denied (whether or not there is in fact any such entitlement) under any applicable law, state or federal, including without limitation laws governing intestate succession, wills, jointly-owned property, bonds, and life insurance. For purposes of the Plan, any such killer will be deemed to have predeceased the Participant. The Committee may withhold distribution of benefits otherwise payable under the Plan for such period of time as is necessary or appropriate under the circumstances to make a determination with regard to the application of this paragraph d).

e) Simultaneous Death of Participant and Beneficiary. If a Participant and his beneficiary should die simultaneously, or under circumstances that render it difficult or impossible to determine who predeceased the other, then the Committee will presume conclusively that the beneficiary predeceased the Participant.

3. All provisions of the Plan not inconsistent herewith are hereby ratified and confirmed.

IN WITNESS WHEREOF, the undersigned officer of HCA Inc., as duly authorized by the Compensation Committee, has executed this Amendment as of the date set forth below.


By:		/s/ Sherri M. Henry
		Sherri M. Henry
		Vice President, Employee Benefits

Date:		June 5, 2020

EXHIBIT 31.1

CERTIFICATION

I, Samuel N. Hazen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HCA Healthcare, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


By:		/S/ SAMUEL N. HAZEN
		Samuel N. Hazen
		Chief Executive Officer

Date: July 30, 2020

EXHIBIT 31.2

CERTIFICATION

I, William B. Rutherford, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HCA Healthcare, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


By:		/S/ WILLIAM B. RUTHERFORD
		William B. Rutherford
		Executive Vice President and Chief Financial Officer

Date: July 30, 2020

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of HCA Healthcare, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


By:		/S/ SAMUEL N. HAZEN
		Samuel N. Hazen
		Chief Executive Officer

July 30, 2020


By:		/S/ WILLIAM B. RUTHERFORD
		William B. Rutherford
		Executive Vice President and Chief Financial Officer

July 30, 2020