Q2 2021 Healthcare Trust Of America Inc Earnings Call
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Good day and welcome to the Healthcare Trust of America second quarter 2021 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then 1 on day Touchtone phone to withdraw your question Press Star then 2 please note. This event is being recorded I would now like to turn the conference over to David Carson said pleased of cheap Chief account Officer. Please go ahead.
Thank you and welcome to Healthcare Trust of America second quarter 2021 of earnings call with all of our earnings release from our financial supplement today after the close.
These documents can be found in the Investor Relations section of our website or with the SEC.
Please note this call is being webcast and will be available for replay for the next 90 days, we'll be happy to take your questions at the conclusion of our prepared remarks.
During the course of the call we will make forward looking statements. These forward looking statements are based on the current beliefs of management and information currently available to us.
Results will be affected by known and unknown risks trends uncertainties and factors that are beyond our control or ability of predict although we believe that our assumptions are reasonable they are not guarantees of future performance and therefore, our actual future results could materially differ from our current expectations for a detailed description on potential risks. Please refer to our SEC filings, which can be found in.
Of Investor Relations section of our website I will now turn the call over to Brad Blair Chairman of Healthcare Trust of America Brad.
Thank you David Good afternoon, and thank you for joining us today for Healthcare Trust of America second quarter 2021, Investor update call.
Joining me on the call today is Peter Foss, our newly announced Chief Executive Officer, Robert Milligan, Our Chief Financial Officer, Amanda Houghton, Our executive Vice President of asset management.
Before we discuss H D A's performance for the quarter I first wanted to comment on the voluntary resignation of our chairman and CEO Scott Peters.
Scott founded the company in 2006 and director of this progress as we successor successfully grew to become the largest owner and operator of medical office buildings in the United States. We're extraordinarily proud of the company HTS become I know that we are all very well positioned to exceed in our next phase as a leader in this evolving sector all of them.
On the board. Thank Scott for his 15 years of service to HCA and wish him well in his future endeavors.
As a result of this resignation as I've said, we have appointed Peter Foss as our Chief Executive Officer Toledo store in this transition period Peters, an established leader and executive serving over 35 years at GE well of leading multiple divisions in spearheading key growth initiatives for the company.
Served on H D. As board since 2000 feet 2 excuse me 2015, with the relationships and insights to partner with a strong leadership team as we execute our business existing business plans.
1 final thing to note is <unk>.
Noted in the 8-K the board is fairly engaged and I read a review of several items related to the company's first of all of our line reviews are in their early stages and at this point, we do not anticipate them, having any material adverse financial impact of the company's operations. However, we will be unable to provide any.
Additional color on this matter at this time I'll now turn it over to Peter.
Thank you Brad and thanks to all of you have joined US today on this call.
I've been with HCA for over 6 years now.
[noise] firsthand the strength of the company and then out of the management team that I'm joining a.
A company that is of balance short term performance with investments that will pay off from the long run.
In my time here of the company has more than doubled in size and growing earnings over 20% of tremendous performance led by Scott Peters.
We survey that we survey the healthcare landscape H T. A is uniquely positioned to be a leader in medical office is broader healthcare continues to grow and shift to an outpatient model of theres more convenient and closer to the consumer.
We positioned our portfolio of scale in great markets, we have a full service capability, they're focused on delivering for our tenants.
We are of a strong balance sheet that allows us to invest we have demonstrated the ability to grow our earnings and our dividends and most importantly, a strong leadership team that has been critical to this execution well, we may certainly look to add talent to meet the opportunity before us the core is strong.
In short I'm stepping into a company that Scott Peters of credit is in great shape with tremendous opportunities in front of us our second quarter performance certainly demonstrates that fact with record earnings tremendous investment pipeline and the ability of reiterate our guidance and raised our dividend for the eighth year in a row now I'm going.
Turn it over to Robert Amanda for our operating performance reported that do that I want to make a couple of more comments.
As of 77 year old coming into this.
I've I've been around a lot of years and seen a lot and I was encouraged yesterday when I saw a 63 year old Australia and want to go of metal and made me feel a lot younger.
But you know I come here today. It wasn't my plan to be doing this but I am honored to be here I am used to driving organizations focused on growth of employee development and I couldn't be happier to be able to do this at HCA with an outstanding team a team that's demonstrated in continuing basis their ability to drive results and so.
I said before of doubling the size of the business of growing earnings over 20% over the past 5 years. My role is I see it is to assist this team and continuing that level of performance and ensuring an environment that has clear goals and measurements and has the tools available to help focus on the execution of those calls my job is to help this team.
To make this team as good as they can be thank you very much.
Alright, Thanks Peter.
Turning to the financial performance in the second quarter of our performance remains extremely strong highlighted by steady portfolio performance with same store NOI growth of 2.1% and continued rent collections, including honored twenty-twenty rent deferrals of which less than $700000 of Romania as of today to be paid through September.
Normalized <unk> per share of <unk> 44 cents, an increase of almost 5% versus 2020.
Recurring capital expenditures of $16.6 million or approximately 13% of NOI, which included almost $2 million spent on energy efficiency projects.
As a result of this performance our normalized <unk> grew almost 5% to $81 million and allowed us to announce our eighth annual dividend increase.
For the fourth of third quarter. We also had G&A of $10.9 million continuing our efficient overhead at less than 10 per cent of NOI from.
From an investment perspective, we remain focused on growing in our key markets through acquisitions and increasingly development, while funding our growth through the use of our Ford equity raised as well as attractively priced dispositions out of non key markets that we believe have fewer opportunities for growth over the long term.
Since our last call we have seen of significant pick up in opportunities that fit our criteria. As a result, we currently sit with $373 million in 2021 investments that we have either closed or have under exclusive contract with first year yields of over 6%. This includes roughly $100 million closed year to date as of the second quarter with the majority of the room.
<unk> is expected to close in the third quarter.
We have of $110 million of development projects on track for completion in 2021. This includes $50 million related to projects that we substantially completed in the quarter, 1 with common spirit in California, and the second with Jackson South Hospital in Miami.
We also have of $60 million project going on in HCA Medical City heart in spine campus in Dallas that we expect to be completed in the third quarter. These projects will add an incremental 3 to 4 per annum upon full stabilization.
We also see in our development pipeline built with approximately $375 million of projects that are currently in the pre leasing the stage that we expect to begin and start construction on as early as the end of 2021 and into 2022. This pipeline includes 5 projects totaling more than 850000 square feet of space located in our markets.
Houston, Orlando and Raleigh, with average stabilized yields over 7%.
This includes the $215 million 485000 square foot Horizon tower located on the Texas A&M innovation Plaza in the Texas Medical Center, the largest medical center in the World.
We're also taking advantage of competitive markets for investments by strategically selling noncore assets, including $67 million sale of the portfolio and rural East, Tennessee, and South West Virginia of very attractive pricing that will lock in double digit annual return since our original investment more than 10 years ago and generating a gain on book value of approximately $33 million.
We've also entered into agreement to sell 2 additional properties, including 1 that was subject to of tenant purchase option. Although these these sales are expected to total approximately $30 million, although it may not close until early 2022.
On these specifically related to the purchase option, we took an impairment charge of approximately $17 million.
Finally, we are currently in discussions to sell additional properties as we look to exit non key markets. As a result in total we expect our dispositions in 'twenty 1 to total as much as of $125 million with pricing between 5% up to 6 and a half attractive levels as we redeploy into our higher growth key markets.
To support this growth, we maintain a very strong balance sheet with more than 13 or $1.3 billion in liquidity and leverage of just 5.5 times and core incorporating the forward equity we have previously raised.
As a result of this performance were able to update and tightened our earnings guidance for 2021% to $1.74 to $1.78, which incorporates our view that the same store for the year, we will come back to a range of 2 to 2.5% with acquisitions that are increasing to 375% to $600 million.
While selling between 70 and $125 million of assets and funding of the remainder of which with already raised capital, which will keep our leverage between 5.5 and 6 times.
I'll now turn it to Amanda to discuss our operations.
Thanks Robert.
Team has remained committed to working with our tenants and health systems.
Now the gate, the Covid pandemic and its impact on health care delivery.
Focused on strengthening key relationships and improving building operations and tenant quality, while increasing the long term value of our building.
During the peak of the Covid pandemic last year, many of our health system partners pushed pause on growth and expansion plans redirecting focus on the testing and care of the increased patient population affected by the by this.
This year and specifically the second quarter, we started to see a resumption in prior plans that had been put on hold as well of new plans for growth to better position ourselves to provide maximum flexibility and service to our healthcare partners. We've increased our investment in tenant space completing 185000 square feet of.
But of move in ready space over the last 12 months with another 100000 square feet anticipated in the coming 12 months.
We've added to our leasing staff building internal teams in markets like Tampa, Raleigh, Orange County in Denver core markets, where we expect to continue to grow.
From an operational performance perspective in the second quarter, we were able to achieve same store NOI growth of 2.1% with over 1.5 per cent of revenue growth. Despite a decline in year over year occupancy.
We signed 647000 square feet of leases, including 150000 square feet of new leases.
We had almost half of million square feet of renewal that resulted in 80% retention and rent growth of 2.1% solid results that are more in line with what we have historically achieved.
Our annual escalators for new leases signed in the period were 2.8% continuing our trend of increasing escalators towards 3% as we continue to rollout of leases.
<unk> remained efficient at $1.45 per square foot per year of term on renewals, but increased to $5.4 per square foot per year of term on new as we have seen some inflation country of construction cost.
1 area of success has been in the leasing of both our development and redevelopment projects. During this period, we increased our leased rate of our Cary North Carolina development to over 97%.
A sign of the strength in that market.
We are also close to completing more than 70000 square feet of redevelopment space in Denver, and Houston, which will come online in the third quarter. While these do not impact our same store performance. This lease of is critical to our bottom line performance.
As we look at the rest of the year and into 2022, we are intently focused on growing our occupancy and believe it will start to turn in the third quarter, our new leasing activity continues to be strong and over half of our portfolio of vacancy is in core markets that are same population growth, especially coming out of COVID-19.
Combined with focused improvements to our space and an expansion of our sales team. We believe we have good opportunities for occupancy growth over the coming quarters and years on.
On the expense front, we continue to show the benefit of our economies of scale and specialty service offerings for the quarter, we were able to keep expense increase is relatively limited.
Increased utilization of our properties are.
Our same store expenses increased just 2% despite experiencing significant utility pressure in certain jurisdictions and overall pressure in property taxes.
Now I'll turn the call back to Peter.
Thank you Amanda.
I will now open it up for questions.
We will now begin the question and answer session.
Ask a question press Star then 1 on day Touchtone zone.
We are using a speakerphone please pick up of your handset before pressing the keys to withdraw your question Press Star then 2.
And the first question comes from John <unk> with BMO capital markets. Please go ahead.
Hi, good afternoon.
I know you probably are limited to what you can say, but I was hoping you could speak to the whistle blower allegations.
What gives you the confidence to stay in the 8-K that you don't expect any material impact from material of adverse impact of financials for the company.
You know the previously there was allegations of smoothing on the same store results of is that involved in any way of form.
Yeah, Hey, Juan and good afternoon, and thanks for getting on the call.
We can answer that absolutely has nothing to do with it and I think as we've reviewed everything.
It certainly is in the early stages, but we are.
Able to say at this point in time, we certainly don't anticipate those type of any material financial effect on anything, but it's not related to the same store now.
Can you delve into what it is related to it in any fashion.
Okay.
Okay.
I don't believe we can at this time, it's too early in the in the process to start talking about any issues of race and we.
Just not at Liberty to do that.
And Peter for you.
Have you looked at hiring.
Uh huh.
Any outside parties to look for more permanent CEO at this point given your background isn't necessarily in real estate granted you have significant leadership experience and or have you hired any advisors in case of the company is.
Maybe has to explore other alternatives, including a day or whatnot.
We have not at this point, but that would be our intention.
<unk> first day half day actually.
So certainly will go on a search for a more permanent.
Management team be it internal or external search, but we certainly will bring in some new talent.
Sure.
Okay.
Okay.
And just a question for Robert I mean are you are you comfortable with the financials, you're you've kind of signed off on or given the audit committees involved.
Can you speak to your comfort.
With historic results.
Yes, I think 1 of I think that's perfectly fair question.
And unfortunately, we do have to be of.
Very specific about what we can say on things, but no.
Youre going to see that were signed off on our financial statements as we release, our Q I think we anticipate that coming out and kind of of the normal course of activity I think everything that we do is obviously reviewed both internally with internal audit as well as external audit. It goes through a very thorough review process.
We are very comfortable with the financial statements that we have out there which is why we're able to put in the 8-K that we anticipate that there is not going to be any material financial impact.
Yeah.
And 1 last.
1 last question from me excuse me.
It's Scott entitled to any severance package given it seems like this was.
Oh God.
No there is there for growth so it's.
Not for cost.
It was not for costs.
Okay.
So he he won't get severance then.
No he resigned and he doesn't is not entitled of any severance.
Okay. Thank you.
Yeah.
In the interest of time, we ask that all people that are asking a question limit themselves to 1 question and 1 follow up.
The next question comes from Nick Joseph with Citi. Please go ahead.
Hey, it's Michael Bilerman here with Nick.
I guess, Brad or Peter of both of you. It's not every day, we see a founder of 15 years you. Scott I think he has over 3 million units. So let's call it over $100 million invested in the company voluntarily resigned.
And of Rush, you guys used to put them in.
Peter I admire.
Your dedication to step off that 77, then take this job.
Beside of every day, you see someone just walk away from the company they found and the team they founded share.
Elaborate on his decision to resign and does it have any.
The result of any of the whistleblower complaints that were made.
It's Peter.
Not a result of any whistleblower was a personal decision on Scott's part.
To resign.
We can't put any more information on at this point in time.
Hum.
I don't know what else to say, we can't comment I guess, it's just not I mean, how how does someone just step away. It wasn't the result of any disagreement on the business. The operations of the strategy of the financial conditions and internal controls the processes strategic direction of the company I mean, you have to give us.
I mean, he is the founder of with a significant stake in the company. It's not every day that you see that with of Euro explanation of it could be for personal reasons, and then just say that but that's not even set.
Well, we did say for personal reasons. It was Scott decision and I can tell you there isn't any of the things you just listed.
And so why no transition right the guy can step away and continue to help.
So that Peter do you have an easier job to do it just isn't something doesn't feel right for someone just to step away you got to accelerate your conference call. There is no transition period.
And what comfort can you provide shareholders.
Something's not larger.
Of an issue here.
Well first of all of it is not $100 million he hasnt of company, but it's a substantial amount.
His decision was a personal decision where.
Nothing we can add to that equation.
It's unusual that it would occur on such short notice we were prepared for it we have of.
Succession sort of plan that we've been working on but it was no way we can jump into that plan at this early stage with a short notice so.
I can't we're not of Liberty's talking more about it is we don't know.
Okay, well I guess.
We don't have a very good answer for you other than the same.
We stepped up to.
2 of continuation of this great company and run it we love it but we don't we don't have a good answer for you because we don't know.
Well I guess can you give some confidence that you will involve some strategic financial advisors.
You evaluate what the best of course is because perhaps investing in a new CEO, which could cost a lot of money.
A lot of people are chasing that won't be talent, maybe that's not the right direction to go perhaps the right direction could be to explore a sale of the company.
I think youre of shareholders, especially given how quickly. This has transpired should get from the board of directors. Some clarity about the process from a sea of search as well as an exploration of potential alternatives if that is something that.
You would even come to mind.
Yes, we will be expanding our communications on that as we can.
Pursued and proceed down that part of that.
Road.
We are we're gonna look internally and externally I don't think we're going to rush to any conclusions. We've got some business at hand, we want to continue to take care of.
Need to focus on that most importantly in rips.
Place Peter in due course with the appropriate talent and we will keep you informed as we move along.
This stage.
Was that of getting here just right. So you're just going to stay the course and be a standalone company hiring of new CEO of doesn't sound like you've I mean, theres a ton of money and it won't be as why Wouldnt you take the opportunity today to at least explore when the company doesn't have a CEO in place too.
To see if a combination with another public company or a complete sale of private capital May makes more sense at this juncture versus continuing.
The state of course, Standalone public company basis, well shouldn't of course of our continuation of the business opportunities. We have that circumstance would be presented to us we would as a board have to consider all of those situations, but we don't consider ourselves in any rush to have to deal with that situation at this time.
Okay. Thank you for the time.
The next question comes from Vikram Malhotra with Morgan Stanley. Please go ahead.
Thanks for taking the question maybe just to start if you can clarify.
When did Scott actually resigned.
Yeah.
Yes, the effective date was yesterday.
The notice was about 30 days before that.
29.
Clarify the notice was win.
<unk> 29, 29, Vikram, we of the exact dates I believe in the 8-K, okay well.
When presentation was tendered undetected day.
And then I just want to make sure I heard you said there is no link between the whistleblower complaint and his resignation correct. That's.
Correct. Okay. So I guess, just you know you've obviously had a lot of questions on this topic.
And.
My sense is that.
Well, maybe just first if you can clarify this the whistleblower complaint.
Is that something that the board has been focused on you know.
Or is that just something you got to know very recently, there's been it's been a week or so you've been focused on this can you just give us a bit more color on the timeline or on the whistleblower complaint.
Then about 2 to 3 weeks now.
Okay.
And in those 2 given you have 2 to 3 weeks Youre not you cant even give us a broad sense of like what.
What aspect of it could be related to high level is it is it you know something to do with accounting is it something with some calculations of it some unit with any any broad topic could you give us a sense of like.
What aspect of it could be related to just I ask this only because of this is again going back to the prior question as it saw unprecedented and so abrupt.
Debt it would help to just give us a bit of and give investors a bit of color.
The investigation started.
But independent of attorneys 2 weeks ago.
Well last week of really was the first week.
And.
Sure.
All of this of what were complaints or non not financial.
So.
The company is in great shape.
So that's not a concern and I think I think Vikram. This is Robert I think when you look at that obviously, Peter Brad can comment around it as it goes to the board from a financial numbers perspective, there's a number of things that it can be related to.
We have the comfort to be able to sign off on our our financials I think we have complete sign off within the organization about the.
Certainty of what we're putting forth.
And be able to make the statement as something that has been of reviewed by all parties that we don't anticipate there's going to be any financial a material financial impact to this so I think that gives you at least some color as to what it might be.
Debt, we have that comfort of being able to say that.
Okay and then just last question I may have missed this but is there a.
I think you said, there's outside counsel looking into this is there a dollar amount that debt you expect will be spent and can you give us a rough timeline as to how long you think this will take.
Yeah.
I don't know that we can put a dollar amount on it but our expectations it should be 4 to 6 weeks.
Okay, great. Thanks, so much thicker pick them from a financial perspective of cost is at least as what we've been able to see here. Obviously, we've reiterated our financial guidance for the year I think we have the confidence to continue down that path I think we of the confidence to put out of range. Today I think we have the confidence knowing what.
To continue with the investment.
To continue to run the business operations. Obviously, we understand you have to ask all of these questions are related to it.
Unfortunately, there's not a lot of additional color, we can provide but we did obviously reiterate our guidance. We do continue to see the operations moving forward I think we do continue to see investments that are out there and I think what Michael said was right Mlps are of great place to the end of the asset value is very high right now I think it's a very attractive place and we've got of <unk>.
Attractive platform.
Of that we've been able to put together so.
Okay. That's helpful. I guess, Robert while I have you want to just ask you a quick numbers question the same store NOI guide.
I think it was modestly lower now at the midpoint can you just highlight what drove that.
Yeah, I think as we've been looking at out of it.
Our <unk>.
Same store growth for the year, we've come into it with slightly lower occupancy coming into the year I think we've seen extremely strong leasing activity as the health systems come out of Covid and focus more on growth as Amanda talked about I think some of the timing of actually getting leases signed and move in and thus, resulting in occupancy has been a bit delayed I think everybody's talked.
Bouts of shortage of materials I think as we look of contractors, it's been a very tough market in order to get them in order. So there's been some construction delay on things but.
I think it's a modest change down 2 to 2.5%.
Came in at 1.6% of the first quarter driven by higher snow removal of higher utility cost of theirs expense. Some expenses in there and I think now that we're 6 months of the year, it's just prudent to take it.
To that area that we think we're gonna be which I think it's still a very good number I think when you look at our performance over the last 2 years, we've been able to continue to grow I think it was able to continue to move the portfolio performance up and so.
Against the backdrop of every other REIT I think.
Performance has been quite strong.
Okay, great. Thanks, so much.
Thank you.
The next question comes from Rich Anderson with S. M. D. C. You can please go ahead I've got 2 questions I promise.
So you you said the whistleblower.
Is not financial but then you say staying in the 8-K that Theres no financial.
Is it or is it not financial impact because you are of a financial matter. Because you you kind of throw out the disclaimer that you don't expect material financial impact, but not zero financial impact.
I'm just trying to frame what this whistleblower.
<unk> is if you could say it in general terms personal financial.
Anything like that.
Rich. This is Robert I think I'll say, just a little bit about it and I do think you're right.
As appropriate youre looking at sort of specific text and everything that we do within the business, obviously because of a financial impact to it. So I think as we look at things.
Everybody has been able to sign off that we don't anticipate this habit of material topic at hand, we don't anticipate of having any sort of material financial impact to the to the company.
Okay.
Second question.
Hum.
Curious why the acceleration of of the release from the call you are supposed to report on Thursday night call on Friday.
He gave notice of the 29th and resigned especially in the second well why.
It brings frantic to me.
Why not just.
If you if you went away from the 29 to the to the third why not wait from the 29 since of the fifth what was the reason for accelerating yes.
Thanks, Paul Yeah, No that's rich it really comes down to disclosure date. It comes from the date of notice upon receipt. We are of specific FCC requirement, obviously to put out information of this timely.
Of of manner as possible, but as I believe this is.
Days of.
So I think when we received the notice on Thursday that stock started the clock ticking and I think obviously given the questions that are out there. If we wanted to make sure that we could.
Again put it in the context of of business, that's continuing to perform a business that continue to have opportunities of business that continues to have.
Various investment opportunities, including development that is better than we've seen in continues to put out of range. So I think we the clock was ticking based on the day of the notice period.
That's I guess that I'm, just wondering why Scott wouldn't time, it a little bit differently I understand disclosure issues, but it doesn't seem like there's a whole lot of cooperation here.
Just an observation.
That's all I got thanks.
Thanks Rich.
The next question comes from Lukas <unk> with Green Street. Please go ahead.
Thanks, well of a process for a CEO successor be conducted in tandem with the investigation or does the investigation need to be completed first.
No. It can be conducted in tandem with that Theres no theres no pecking order.
Okay.
And then are there any other employee subject to the investigation.
Our former employees I guess.
Just to clarify I don't think we put out any any notice of any particular person being subject to the whistleblower I think the specific disclosure and this is an important factor I think the specific disclosure was just that there was something out there and it's been investigated but that does not imply that it's related to anybody or anything.
And specific any specific manner.
Okay.
Great. Thank you.
The next question comes from Mike Mueller with JP Morgan. Please go ahead.
Yeah, Hi, so what's the whistleblower.
Directly related to the Scott because I know you said Scott departed departed.
But.
Is there a separate issue or is this type of Scott I guess, that's the first question and the second question is is this I.
I guess whistleblower complaint tied to operations or tenant relationships or any in any way.
You know, Mike I think we've got to be specific to what we put out in the 8-K.
It's just you know every every company has a whistleblower hotline that was put in place every public company certainly does.
These things do come in from time to time the board does take everything seriously as is their obligation to do that and then 2.2 again investigate it with the appropriate.
Mount of.
Due course, so I think we put that out is from a specific matter I think as we look at the disclosures.
Debt that we put out of related to that.
We just are able to note that don't anticipate of tablet of cigarettes.
Material financial impact.
Yeah, I mean, not the whistle blowers are random, but it just seems like this was a random event it wouldn't necessarily be in the same AK with Scott's departure.
Well I think it's just a matter of disclosure that you have to put out any time that there is of significant material event, such as an officer of leaving I think it is incumbent upon companies to disclose anything else that is going on so I think it's for the specific reason that that's why the 2 work together.
And I think specifically in the 8-K tie them together right.
So I don't think that's that's what we specifically said stated.
Okay. Thank you.
Okay.
Yeah.
The next question comes from Nick <unk> with Scotiabank. Please go ahead.
Thanks, I just wanted to go back to the topic of of severance and be clear on this I think you said that there is a there's no payments whatsoever going to Scott related to the resignation of is that correct.
I think Nick.
And Brett and Pierre will opine.
Scott employment contract, obviously has a number of provisions in it.
This is Brian Peters said this was a resignation of by Scott for personal reasons.
Debt.
That is what that is what we know.
I think in due course of the rest of it. We just came out of the last couple of days in due course, it's going to play out and so we don't have a specific estimate if theres going to be a payout of ore.
Okay.
Okay, Yeah, that's what I want I just wanted to be clear on of Robert because if you read through the proxy you know there's there's a resignation without good reason and then Theres a resignation for good reason and you know the resignation for good recent entitled Scott potentially you know of $14 million. According to the proxy.
Whereas the resignation without good reason, it's only of potential $2 million payment. If you decided to enforce the noncompete. So just to be clear the board hasn't determined yet which are its tissues a resignation.
For good reason or not.
Well the letter we received had no condition. It was just the resignation of without good reason.
Without a reason you just period didn't answer that question.
Okay. I appreciate that thank you and then I guess just to follow up on that is are you going to enforce of noncompete.
Those are judges, who make here shortly but I would imagine we would.
Sorry, you imagine you would yes, we I imagine we would.
Okay Alright.
Alright. Thank you I appreciate it thank you.
Okay.
As a reminder, if you have a question press Star then 1 to join the queue. The next question comes from Michael Gorman from BTG. Please go ahead.
Yeah. Thanks, good afternoon.
And I apologize to beat a dead horse here, but Robert I wanted to go back to 1 of the questions, Mike asked and I understand the sensitivity, but you did file of 3.8 case today. So I'm just I just want to make sure I understand it.
If there's no relationship between the 2.
It does just look a little bit odd that.
Of the 3.8 cases this was put into that 1 rather than the disclosure of your financial results are the dividend or anything like that.
Is there some technical reason that I'm missing that it was in that specific 8-K instead of the other 2.
You know.
Mike I think is that it's a good question and I think from from an 8-K perspective, we just had them kind of all in line together I think the earnings release covers specifically the earnings release as we've always had I think the dividend is consistent with everything else that we put and then from just an 8-K perspective, we put the rest of them.
Matters into into that 1 as opposed to just doing an omnibus type of 8-K that would include all sorts of stuff I think we were trying to just aimed for transparency of.
Putting them out there so I think in the 8-K, we did not tie them together, but I do think it is important to note that we are following the obligations that we have just from a disclosure perspective and again.
I think both Brian and Peter of said it was of personal resignation for personal reasons.
It's a disclosure of several just reviews, taking place of which at this point, we don't anticipate to have any material financial impact so.
I remember that.
The resignation of event.
Required an 8-K filing within them of a 4 day period, So we prepared and filed it as a separate 8-K.
Okay, and then I guess, maybe if we could.
Back for just a second can you maybe walk us through obviously, Scott was founder CEO Chairman, what what are the internal whistleblower procedures at HCA right of what what determines when it rises to the level of who determines that it rises to the level that it requires outside counsel.
When would the chairman and CEO you know it sounds like this investigation started a couple of weeks before the resignation day went when in the normal course of a whistleblower does it.
As to the chairman and CEO in terms of them being looped in.
Well, Mike I think that from a company set up perspective, and since the company sets it up under Sarbanes Oxley.
Every company has a whistleblower.
Specifically it gets routed I think as we disclosed in our whistleblower policy of gets routed to the chair of the audit Committee on the lead independent director, that's what happens every single time.
I think that it's determined the direction that it goes from there again these are put in place so that people.
Every every public company has it so I think thats procedure I think we publish it and it's consistent with most other public companies.
Okay, great. Thank you for the time.
Okay.
This concludes our question and answer session.
I'll now turn the conference back over to Peter Foss for any closing remarks.
Thank you very much and thanks for all of you for joining us today.
And I'm asking questions.
Operator, do we have any other questions in the queue.
But we can still take 1 or 2 more questions. If they are still in there.
We do we have people who had already asked questions as well.
We will take the.
Yeah, we'll take them sure.
We have jumped 10 of them from BMO capital markets. Please go ahead.
Hi, just 1 follow up question for me.
Curious on why or the strategy or the.
The policy behind involving the audit Committee.
The whistleblower complaint from Scott's departure was not tied to financial issues.
Well all of whistleblower complaints go through the audit Committee.
Chair of the audit Committee is responsible for managing those.
And they don't know they don't relate to financial matters as the standard policy of how those how the the hotline is set up and the administrative procedures as that's where it goes for proper routing to make sure. It gets the proper attention, but certainly not all matters relate to financial matters at all.
Okay. Thank you.
Yeah.
Okay.
Again, it is star 1 to join the question queue.
Next question is from Lukas <unk> with Green Street. Please go ahead.
Thanks appreciate you taking the follow up.
Can you comment on whether the whistleblower complaint is related to conduct at the company or outside of the company.
I don't think we can.
We're not trying to evade it I just don't think we can we can answer that question.
Fair enough. Thank you.
Okay.
The next question is from Nick Joseph with Citi. Please go ahead.
Hey, great, it's Mike Bilerman, considering Nick and I. Both on the first question is for next questions I had a couple of follow ups.
Just in terms of the.
Just sticking on the list of work complaint where those are external to the company I E did external parties make a call of the whistleblower hotline or process or whether they be internal matters.
Internal people.
Well.
Michael I think of those are very.
Very fair questions I think of many of these things can be anonymous nature I think of just a general setup of a whistleblower floor of hotline NYSE requirements things like that.
The opportunity for people to both the name of themselves towards be anonymous.
The point of the program of from a transparency perspective, so I don't I.
I don't think day, we might not even know and allow Brad Peter Robert at the company I. Just we just helped to set it up from a Sox perspective, we don't actually receive them or see them, but from just a purely set of perspective, it can be anybody internal or external to the company and it can also be very well anonymous so.
Well I just didn't notice of it it sounds like you've already made some determination in terms of the severity of at least in accounts of the financial it just wasn't clear to me whether.
You had sort of gone through some of the identification process.
And it wasn't clear you mentioned that there were several items and so I wasn't sure. If we were dealing with multiple whistleblower complaint or is it multiple to 1 issue to which.
The company and the audit committee have their independent legal counsel of review Inc.
Okay.
Yes.
Yes, there are multiple kind.
Planes.
They don't they don't necessarily tie together now and we don't know encase necessary.
With a complaint Atlas so.
Profit researching at an investigator.
Alright, and then last question I have just goes back to Scott So it sounds like he tendered his resignation.
<unk>.
To the board I guess.
Last week on Thursday.
Prior to that had there been any conversations with Scott about potential changes in his role he obviously as chairman CEO and president.
Was he at all involved in any of these investigations as as time of CEO, just anything that press free data that Thursday.
In terms of just discussion.
And then if you can just say is he did he completely leave I E was completely cut off on Thursday and.
There's been no communications between the parties since I just wanted to get clarification on that.
Yeah.
Okay.
And no communication sensors notice correct.
And then on the first part in terms of what happened what predated.
And I'm, giving you a notice of just trying to get a little bit of color about.
What type of relationship there was between the founder Chairman President and CEO and the rest of the board.
Prior to giving notice.
He was walking out the door with.
Yeah.
What does that basically.
Well this is Peter.
I think Brad would agree we had no.
You know of free.
Knowledge of anything was going to happen.
He has been of great friend and.
We were really surprised I mean in fact, we were here last week and worked with Scott for 2 days, that's going over some business.
Fans and so on and it was a good discussions.
We left here Wednesday, and Theres notice came on a Thursday.
So.
Yes.
And then just it doesn't help me much of it doesn't help but none of them and look I look I appreciate the candor.
You've had a few days to process. We all of that we've had we've had a few hours and so there's multiple stages of grief and as you know.
And so I don't know what stage, we were at now after 15 minutes, but.
It is.
Just you don't see it.
And I don't want that.
All of US are wondering what the next chapter could be.
Both for the company for Scott individually.
And how it all sort of plays out and I know, we sort of beaten this hole trying to tie.
The whistleblower complaints, which I recognize are quite.
First of all the time at all public companies and in most all of us.
In many cases, you know they're investigated they're dealt with and it doesn't rise.
But that's the point of these hotlines to be able to provide opportunities for anybody.
Who feels that they want of something.
Something just looked into that they don't and cause right had Scott does it had just gotten from Scott's desk I E with Scott involved in any of these complaints.
By the time you know.
So you shouldn't be like he was business as usual last Wednesday.
Was he involved in these links.
No no.
He says he can't be involved in the investigation of these in Oregon, who receive them or know who they're from.
So, let's see aware of them.
None of us.
But would be aware that there was I guess.
That's what we're just trying to find out what are you worried that there was processes from you.
I know what it was but he NAV no I guess, what point that he no debt.
There was a whistleblower complaints of the company has retained independent counsel that the audit Committee had retained independent counsel that this was going to have to be disclosed to the market because it had reached to that point, where you've engaged counsel and guidance.
You wouldn't disclose it otherwise.
Well I think Theres I think Theres, 1 thing just a clarification around disclosure on it I think if you go through things and.
As you pointed out these things coming all of it all the time.
Various level of series of various levels of who knows what just because it is open to everybody by design as you pointed out and so I think many most times. They go through just the normal review process and to the point that.
Hugh.
You get through it whether it's right wrong or indifferent theyre generally not disclosed of all and I think that's where we said we don't anticipate that at this time there would have been anything from a financial perspective that would be material enough to disclose however, unfortunately, given the timing of these things.
As important and required that we disclose if anything else that's going on so.
That's where we say we don't anticipate there would've been a financial disclosure on this but that's.
That's what we've got.
I think it's true.
All of the.
Terminate the call we appreciate the questions.
And that's 1 of them.
And I want to make sure we reiterate what Robert had said before that we are still keeping our guidance of business plan is fully intact and we just raised our dividend. So we're moving forward.
Look forward to continued growth and great results.
Thank you all.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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