Exhibit 99.1
Tenet Reports Adjusted EBITDA of $459 Million
for the Quarter Ended September 30, 2014
Raises 2014 Adjusted EBITDA Outlook to $1.90 to $1.95 Billion
DALLAS — November 3, 2014 — Tenet Healthcare Corporation (NYSE:THC) reported Adjusted EBITDA for the third quarter ended September 30, 2014 of $459 million, an increase of $171 million, or 59.4 percent, compared to $288 million as reported in the third quarter of 2013. The increase in adjusted EBITDA on a pro forma basis is $47 million, or 11.4 percent compared to pro forma adjusted EBITDA of $412 million in the third quarter of 2013. Pro forma operating metrics are defined as including both Tenet and Vanguard legacy facilities in both reporting periods. Excluding the EBITDA impact of the California Provider Fee Program, incremental Texas Medicaid supplemental revenues in the third quarter of 2013, and healthcare information technology incentives from both periods would have resulted in a pro forma adjusted EBITDA increase of $103 million, or 25.0 percent.
“We achieved another quarter of strong performance across every dimension of our business,” said Trevor Fetter, president and chief executive officer. “The growth strategies we have developed and the investments we have made drove record volume increases in inpatient admissions, commercial admissions, outpatient visits, surgeries, and emergency department visits. From a geographic standpoint, we delivered increases in adjusted admissions in every one of the 14 states in which we operate acute care hospitals. We exerted strong expense management to convert this robust volume growth into an EBITDA performance that exceeded our Outlook.”
Mr. Fetter continued, “We drove an accelerating contribution in the third quarter from healthcare reform, with sequentially higher declines in uncompensated care and increases in Medicaid volume. Importantly, more than 60 percent of our volume growth in the quarter was unrelated to reform, highlighting the impact of our growth strategies including our faster growing, higher margin, capital light businesses. Finally, we continue to be pleased with the progress of the Vanguard integration, which is exceeding our expectations.”
Discussion of Results (Percentage changes in operating metrics compare Q3’14 to Q3’13 on a same-hospital pro forma basis unless otherwise noted. Pro forma operating metrics are defined as including both Tenet and Vanguard legacy hospitals in both reporting periods.)
Tenet drove same-hospital pro forma growth in admissions and adjusted admissions of 3.9 percent and 4.9 percent, respectively, compared to the third quarter of 2013. This admissions growth was even stronger than the 2.8 percent and 4.0 percent respective growth rates for admissions and adjusted admissions achieved in the second quarter. The growth trend in commercial admissions continued to strengthen in the third quarter outperforming the strong commercial growth generated in the second quarter of this year and again achieved the strongest same-hospital commercial quarterly growth in more than a decade. Paying
1
admissions increased by 6.1 percent. Surgeries grew by 9.8 percent and emergency department visits grew by 5.1 percent. The impact of the Affordable Care Act is estimated to have contributed approximately 40 percent of this volume growth while 60 percent of the growth was related to our investments in service line development, enhanced physician alignment, incremental gains in market share, and higher healthcare utilization.
Outpatient visits increased by 8.5 percent. Approximately 90 percent of the Company’s outpatient growth was organic.
Payer mix continued to improve in the quarter. In the five states that expanded Medicaid eligibility under the Affordable Care Act, Tenet achieved a decline in uninsured plus charity admissions of 2,603 admissions, or 59.3 percent, and an increase in Medicaid admissions of 5,050 admissions, or 23.8 percent. Uninsured plus charity outpatient visits declined by 28,098 visits, or 37.2 percent, and Medicaid outpatient visits grew by 81,995 visits, or 32.3 percent, in these same five states. Across the entire company, including those states that did not expand Medicaid, uninsured plus charity admissions declined by 3,383 admissions, or 23.9 percent, while Medicaid admissions increased by 5,748 admissions, or 11.4 percent. Charity and uninsured outpatient visits declined by 30,168 visits, or 15.4 percent and Medicaid outpatient visits increased by 95,911 visits, or 20.6 percent.
Exchange volumes continued to grow rising to 3,395 admissions and 29,918 outpatient visits in the third quarter. On a sequential quarter basis, these exchange volumes were 22.8 percent and 24.5 percent higher, respectively, than the exchange admissions and outpatient visits in the second quarter of 2014.
Net operating revenues, after provision for doubtful accounts, were $4.179 billion, an increase of $238 million, or 6.0 percent, compared to pro forma net operating revenues of $3.941 billion in the third quarter of 2013. These revenue increases primarily reflect volume growth, improved terms in commercial managed care contracts, and growth in the company’s Conifer services businesses. These growth drivers were partially offset by a decline of approximately $89 million in health plan revenues primarily due to a reduction of covered lives under a contract with the Arizona Medicaid program, and the absence of revenue from the California Provider Fee program in the third quarter of 2014 compared to $19 million in the third quarter of 2013. Excluding the impact of the California Provider Fee program, patient revenue net of bad debt expense per adjusted admission increased by 2.5 percent. Commercial managed care revenue increased 6.2 percent per admission and 2.5 percent per outpatient visit. The smaller increase in outpatient pricing reflects the growth in our urgent care centers, which generate lower revenues and costs per patient encounter.
Selected operating expenses for hospital operations, defined as the sum of salaries, wages and benefits, supplies and other operating expenses, decreased by 0.5 percent per adjusted admission. The selected operating expense metric for hospital operations excludes the Company’s Conifer services business, health plans, and a provider network in Southern California. Excluding incremental expenses related to increased physician employment, selected operating expenses per adjusted admission declined by 1.4 percent. These favorable operating expense metrics reflect the realization of Vanguard cost synergies, Tenet’s innovative Performance Excellence Program, and the favorable impact of operating leverage related to
2
volume growth. Electronic health records incentives recorded in the third quarter of 2014 were $5 million, a $12 million decrease compared to the $17 million recognized in the third quarter of 2013 due to the timing of when certain of the Company’s hospitals achieved meaningful use criteria. These incentive payments are not included in the definition of selected operating expenses.
Bad debt expense declined by $166 million, or 40.0 percent, to $249 million in the third quarter of 2014 on a pro forma basis. The decrease in bad debt expense was primarily attributable to a decline in uninsured revenues. Bad debt expense was 5.6 percent of revenues before bad debts, a decrease of 390 basis points compared to 9.5 percent in the third quarter of 2013. This was an incremental sequential quarter improvement of 170 basis points as compared to the 7.3 percent bad debt ratio reported in the second quarter of 2014.
Conifer reported Adjusted EBITDA of $47 million, an increase of $11 million, or 30.6 percent, compared to $36 million in the third quarter of 2013. Conifer’s revenues were $296 million in the third quarter of 2014, an increase of $71 million, or 31.6 percent, compared to $225 million in the third quarter of 2013.
Income from continuing operations in the third quarter of 2014 was $36 million after-tax, or $0.36 per diluted share, excluding $26 million in after-tax impairments, restructuring charges, acquisition-related costs, litigation and investigation costs and loss on debt extinguishment. Income from continuing operations in the third quarter of 2013 was $46 million, or $0.45 per diluted share, excluding the comparable items which totaled $13 million after-tax.
Net income attributable to common shareholders in the third quarter of 2014 was $9 million after-tax, or $0.09 per share, compared to $28 million after-tax, or $0.27 per share, in the third quarter of 2013. The third quarter of 2014 included a $95 million increase in pre-tax interest expense compared to the third quarter of 2013. This increased interest expense is substantially due to the $4.6 billion of financing related to the Vanguard acquisition and $200 million used to finance share repurchases since June 30, 2013.
Cash and cash equivalents were $200 million at September 30, 2014 compared to $406 million at June 30, 2014. Approximately $190 million of net revenues related to the California Provider Fee program, the Texas Medicaid disproportionate share funding, and the Texas uncompensated care 1115 Waiver programs had not been received by the Company as of September 30, 2014. Accounts receivable days were 49.3 days at September 30, 2014 compared to 48.9 days at June 30, 2014.
Outlook for 2014 Adjusted EBITDA
The Outlook range for 2014 Adjusted EBITDA is in a range of $1.90 to $1.95 billion, a $25 million mid-point increase as compared to the Company’s prior Outlook of $1.85 to $1.95 billion. Based on this Outlook for 2014 Adjusted EBITDA, the Outlook for 2014 earnings per share is in a range of $1.26 to $1.78 per share. This Outlook assumes the California Provider Fee Program is approved by December 31, 2014, which would result in the recognition of $140 million of revenues in the fourth quarter.
3
Management’s Webcast Discussion of Third Quarter Results
Tenet management will discuss the Company’s third quarter 2014 results on a webcast scheduled for 10:00 a.m. (ET) on November 4, 2014. Investors can access the webcast through Tenet’s website at www.tenethealth.com/investors. A set of slides, which will be referred to on the conference call, is available on the Quarterly Results section of the Company’s website.
Additional information regarding Tenet’s quarterly results of operations, including detailed tabular operational data, is contained in its Form 10-Q report, which will be filed with the Securities and Exchange Commission and posted on the Tenet website before the webcast. This press release includes certain non-GAAP measures, such as Adjusted EBITDA. A reconciliation of Adjusted EBITDA to net income attributable to Tenet common shareholders is included in the financial tables at the end of this release.
Tenet Healthcare Corporation is a national, diversified healthcare services company with more than 105,000 employees united around a common mission: to help people live happier, healthier lives. The company operates 80 hospitals, more than 200 outpatient centers, six health plans and Conifer Health Solutions, a leading provider of healthcare business process services in the areas of revenue cycle management, value based care and patient communications. For more information, please visit www.tenethealth.com.
The terms “THC”, “Tenet Healthcare Corporation”, “the company”, “we”, “us” or “our” refer to Tenet Healthcare Corporation or one or more of its subsidiaries or affiliates as applicable.
###
Corporate Communications
Steven Campanini
469-893-2640
mediarelations@tenethealth.com | Investor Relations
Thomas Rice
469-893-6992
investorrelations@tenethealth.com |
This release contains “forward-looking statements” — that is, statements that relate to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “assume,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include, but are not limited to, the factors disclosed under “Forward-Looking Statements” and “Risk Factors” in our Form 10-K for the year ended December 31, 2013, and in our quarterly reports on Form 10-Q, periodic reports on Form 8-K
4
and other filings with the Securities and Exchange Commission. The information contained in this release is as of the date hereof. The company assumes no obligation to update forward-looking statements contained in this release as a result of new information or future events or developments.
Tenet uses its company website to provide important information to investors about the company including the posting of important announcements regarding financial performance and corporate developments.
5
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | Three Months Ended September 30, | |
(Dollars in millions except per share amounts) | | 2014 | | % | | 2013 | | % | | Change | |
Net operating revenues: | | | | | | | | | | | |
Net operating revenues before provision for doubtful accounts | | $ | 4,428 | | | | $ | 2,618 | | | | 69.1 | % |
Less: Provision for doubtful accounts | | 249 | | | | 210 | | | | 18.6 | % |
Net operating revenues | | 4,179 | | 100.0 | % | 2,408 | | 100.0 | % | 73.5 | % |
Operating expenses: | | | | | | | | | | | |
Salaries, wages and benefits | | 2,028 | | 48.5 | % | 1,172 | | 48.7 | % | 73.0 | % |
Supplies | | 665 | | 15.9 | % | 387 | | 16.1 | % | 71.8 | % |
Other operating expenses, net | | 1,032 | | 24.7 | % | 575 | | 24.0 | % | 79.5 | % |
Electronic health record incentives | | (5 | ) | (0.1 | )% | (14 | ) | (0.6 | )% | (64.3 | )% |
Depreciation and amortization | | 207 | | 5.0 | % | 119 | | 4.9 | % | 73.9 | % |
Impairment and restructuring charges, and acquisition-related costs | | 37 | | 0.9 | % | 20 | | 0.8 | % | | |
Litigation and investigation costs | | 4 | | 0.1 | % | 1 | | — | % | | |
Operating income | | 211 | | 5.0 | % | 148 | | 6.1 | % | | |
Interest expense | | (186 | ) | | | (91 | ) | | | | |
Loss from early extinguishment of debt | | (24 | ) | | | — | | | | | |
Income from continuing operations, before income taxes | | 1 | | | | 57 | | | | | |
Income tax benefit (expense) | | 18 | | | | (16 | ) | | | | |
Income from continuing operations, before discontinued operations | | 19 | | | | 41 | | | | | |
Discontinued operations: | | | | | | | | | | | |
Loss from operations | | (2 | ) | | | (8 | ) | | | | |
Litigation and investigation costs | | — | | | | (2 | ) | | | | |
Income tax benefit | | 1 | | | | 5 | | | | | |
Net loss from discontinued operations | | (1 | ) | | | (5 | ) | | | | |
Net income | | 18 | | | | 36 | | | | | |
Less: Net income attributable to noncontrolling interests | | 9 | | | | 8 | | | | | |
Net Income attributable to Tenet Healthcare Corporation common shareholders | | $ | 9 | | | | $ | 28 | | | | | |
| | | | | | | | | | | |
Amounts attributable to Tenet Healthcare Corporation common shareholders | | | | | | | | | | | |
Income from continuing operations, net of tax | | $ | 10 | | | | $ | 33 | | | | | |
Loss from discontinued operations, net of tax | | (1 | ) | | | (5 | ) | | | | |
Net income attributable to Tenet Healthcare Corporation common shareholders | | $ | 9 | | | | $ | 28 | | | | | |
| | | | | | | | | | | |
Earnings (loss) per share attributable to Tenet Healthcare Corporation common shareholders: | | | | | | | | | | | |
Basic | | | | | | | | | | | |
Continuing operations | | $ | 0.10 | | | | $ | 0.33 | | | | | |
Discontinued operations | | (0.01 | ) | | | (0.05 | ) | | | | |
| | $ | 0.09 | | | | $ | 0.28 | | | | | |
Diluted | | | | | | | | | | | |
Continuing operations | | $ | 0.10 | | | | $ | 0.32 | | | | | |
Discontinued operations | | (0.01 | ) | | | (0.05 | ) | | | | |
| | $ | 0.09 | | | | $ | 0.27 | | | | | |
Weighted average shares and dilutive securities outstanding (in thousands): | | | | | | | | | | | |
Basic | | 98,036 | | | | 100,894 | | | | | |
Diluted | | 100,926 | | | | 103,098 | | | | | |
6
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | Nine Months Ended September 30, | |
(Dollars in millions except per share amounts) | | 2014 | | % | | 2013 | | % | | Change | |
Net operating revenues: | | | | | | | | | | | |
Net operating revenues before provision for doubtful accounts | | $ | 13,096 | | | | $ | 7,841 | | | | 67.0 | % |
Less: Provision for doubtful accounts | | 949 | | | | 624 | | | | 52.1 | % |
Net operating revenues | | 12,147 | | 100.0 | % | 7,217 | | 100.0 | % | 68.3 | % |
Operating expenses: | | | | | | | | | | | |
Salaries, wages and benefits | | 5,905 | | 48.6 | % | 3,499 | | 48.5 | % | 68.8 | % |
Supplies | | 1,942 | | 16.0 | % | 1,158 | | 16.0 | % | 67.7 | % |
Other operating expenses, net | | 3,066 | | 25.3 | % | 1,710 | | 23.8 | % | 79.3 | % |
Electronic health record incentives | | (72 | ) | (0.6 | )% | (48 | ) | (0.7 | )% | 50.0 | % |
Depreciation and amortization | | 609 | | 5.0 | % | 354 | | 4.9 | % | 72.0 | % |
Impairment and restructuring charges, and acquisition-related costs | | 90 | | 0.7 | % | 45 | | 0.6 | % | | |
Litigation and investigation costs | | 19 | | 0.2 | % | 3 | | — | % | | |
Operating income | | 588 | | 4.8 | % | 496 | | 6.9 | % | | |
Interest expense | | (558 | ) | | | (292 | ) | | | | |
Loss from early extinguishment of debt | | (24 | ) | | | (348 | ) | | | | |
Investment earnings | | — | | | | 1 | | | | | |
Income (loss) from continuing operations, before income taxes | | 6 | | | | (143 | ) | | | | |
Income tax benefit | | 11 | | | | 57 | | | | | |
Net income (loss) from continuing operations, before discontinued operations | | 17 | | | | (86 | ) | | | | |
Discontinued operations: | | | | | | | | | | | |
Loss from operations | | (17 | ) | | | (5 | ) | | | | |
Litigation and investigation costs | | (18 | ) | | | (2 | ) | | | | |
Income tax benefit | | 13 | | | | 3 | | | | | |
Loss from discontinued operations | | (22 | ) | | | (4 | ) | | | | |
Net loss | | (5 | ) | | | (90 | ) | | | | |
Less: Net income attributable to noncontrolling interests | | 44 | | | | 20 | | | | | |
Net loss attributable to Tenet Healthcare Corporation common shareholders | | $ | (49 | ) | | | $ | (110 | ) | | | | |
| | | | | | | | | | | |
Amounts attributable to Tenet Healthcare Corporation common shareholders | | | | | | | | | | | |
Loss from continuing operations, net of tax | | $ | (27 | ) | | | $ | (106 | ) | | | | |
Loss from discontinued operations, net of tax | | (22 | ) | | | (4 | ) | | | | |
Net loss attributable to Tenet Healthcare Corporation common shareholders | | $ | (49 | ) | | | $ | (110 | ) | | | | |
| | | | | | | | | | | |
Net loss per share attributable to Tenet Healthcare Corporation common shareholders: | | | | | | | | | | | |
Basic | | | | | | | | | | | |
Continuing operations | | $ | (0.27 | ) | | | $ | (1.03 | ) | | | | |
Discontinued operations | | (0.23 | ) | | | (0.04 | ) | | | | |
| | $ | (0.50 | ) | | | $ | (1.07 | ) | | | | |
Diluted | | | | | | | | | | | |
Continuing operations | | $ | (0.27 | ) | | | $ | (1.03 | ) | | | | |
Discontinued operations | | (0.23 | ) | | | (0.04 | ) | | | | |
| | $ | (0.50 | ) | | | $ | (1.07 | ) | | | | |
Weighted average shares and dilutive securities outstanding (in thousands): | | | | | | | | | | | |
Basic | | 97,625 | | | | 102,669 | | | | | |
Diluted* | | 97,625 | | | | 102,669 | | | | | |
*Had we generated income from continuing operations available to shareholders in the nine months ended September 30, 2014 and 2013, the effect (in thousands) of employee stock options, restricted stock units and deferred compensation units on the diluted shares calculation would have been an increase in shares of 2,332 and 2,256 shares, respectively.
7
TENET HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | September 30, | | December 31, | |
(Dollars in millions) | | 2014 | | 2013 | |
ASSETS | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 200 | | $ | 113 | |
Accounts receivable, less allowance for doubtful accounts | | 2,238 | | 1,890 | |
Inventories of supplies, at cost | | 270 | | 260 | |
Income tax receivable | | 22 | | — | |
Current portion of deferred income taxes | | 725 | | 692 | |
Other current assets | | 746 | | 737 | |
Total current assets | | 4,201 | | 3,692 | |
Investments and other assets | | 366 | | 357 | |
Deferred income taxes, net of current portion | | 100 | | 148 | |
Property and equipment, at cost, less accumulated depreciation and amortization | | 7,749 | | 7,582 | |
Goodwill | | 3,705 | | 3,566 | |
Other intangible assets, at cost, less accumulated amortization | | 1,191 | | 1,105 | |
Total assets | | $ | 17,312 | | $ | 16,450 | |
| | | | | |
LIABILITIES AND EQUITY | | | | | |
Current liabilities: | | | | | |
Current portion of long-term debt | | $ | 98 | | $ | 153 | |
Accounts payable | | 1,068 | | 1,085 | |
Accrued compensation and benefits | | 735 | | 622 | |
Professional and general liability reserves | | 175 | | 156 | |
Accrued interest payable | | 265 | | 198 | |
Other current liabilities | | 804 | | 879 | |
Total current liabilities | | 3,145 | | 3,093 | |
Long-term debt, net of current portion | | 11,455 | | 10,696 | |
Professional and general liability reserves | | 525 | | 555 | |
Defined benefit plan obligations | | 381 | | 398 | |
Other long-term liabilities | | 544 | | 490 | |
Total liabilities | | 16,050 | | 15,232 | |
Commitments and contingencies | | | | | |
Redeemable noncontrolling interests in equity of consolidated subsidiaries | | 396 | | 340 | |
Equity: | | | | | |
Shareholders’ equity: | | | | | |
Common stock | | 7 | | 7 | |
Additional paid-in capital | | 4,597 | | 4,572 | |
Accumulated other comprehensive loss | | (20 | ) | (24 | ) |
Accumulated deficit | | (1,471 | ) | (1,422 | ) |
Common stock in treasury, at cost | | (2,378 | ) | (2,378 | ) |
Total shareholders’ equity | | 735 | | 755 | |
Noncontrolling interests | | 131 | | 123 | |
Total equity | | 866 | | 878 | |
Total liabilities and equity | | $ | 17,312 | | $ | 16,450 | |
8
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | Nine Month Ended
September 30, | |
(Dollars in millions) | | 2014 | | 2013 | |
Net loss | | $ | (5 | ) | $ | (90 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | |
Depreciation and amortization | | 609 | | 354 | |
Provision for doubtful accounts | | 949 | | 624 | |
Deferred income tax benefit | | (22 | ) | (60 | ) |
Stock-based compensation expense | | 41 | | 26 | |
Impairment and restructuring charges, and acquisition-related costs | | 90 | | 45 | |
Litigation and investigation costs | | 19 | | 3 | |
Loss from early extinguishment of debt | | 24 | | 348 | |
Amortization of debt discount and debt issuance costs | | 21 | | 12 | |
Pre-tax income from discontinued operations | | 35 | | 7 | |
Other items, net | | (16 | ) | (19 | ) |
Changes in cash from operating assets and liabilities: | | | | | |
Accounts receivable | | (1,309 | ) | (662 | ) |
Inventories and other current assets | | 12 | | (159 | ) |
Income taxes | | (7 | ) | (5 | ) |
Accounts payable, accrued expenses and other current liabilities | | 120 | | (44 | ) |
Other long-term liabilities | | 38 | | (5 | ) |
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements | | (115 | ) | (36 | ) |
Net cash used in operating activities from discontinued operations, excluding income taxes | | (16 | ) | (5 | ) |
Net cash provided by operating activities | | 468 | | 334 | |
Cash flows from investing activities: | | | | | |
Purchases of property and equipment — continuing operations | | (734 | ) | (398 | ) |
Purchases of businesses or joint venture interests, net of cash acquired | | (185 | ) | (142 | ) |
Proceeds from sales of facilities and other assets — discontinued operations | | 4 | | 11 | |
Proceeds from sales of marketable securities, long-term investments and other assets | | 2 | | 6 | |
Other long-term assets | | (4 | ) | 11 | |
Other items, net | | 3 | | 3 | |
Net cash used in investing activities | | (914 | ) | (509 | ) |
Cash flows from financing activities: | | | | | |
Repayments of borrowings under credit facility | | (1,965 | ) | (1,001 | ) |
Proceeds from borrowings under credit facility | | 1,560 | | 1,211 | |
Repayments of other borrowings | | (655 | ) | (1,987 | ) |
Proceeds from other borrowings | | 1,608 | | 1,907 | |
Deferred debt issuance costs | | (26 | ) | (31 | ) |
Repurchases of common stock | | — | | (300 | ) |
Distributions paid to noncontrolling interests | | (30 | ) | (18 | ) |
Contributions from noncontrolling interests | | 15 | | 98 | |
Proceeds from exercise of stock options | | 23 | | 22 | |
Other items, net | | 3 | | (8 | ) |
Net cash provided by (used in) financing activities | | 533 | | (107 | ) |
Net increase (decrease) in cash and cash equivalents | | 87 | | (282 | ) |
Cash and cash equivalents at beginning of period | | 113 | | 364 | |
Cash and cash equivalents at end of period | | $ | 200 | | $ | 82 | |
Supplemental disclosures: | | | | | |
Interest paid, net of capitalized interest | | $ | (487 | ) | $ | (295 | ) |
Income tax payments, net | | $ | (5 | ) | $ | (5 | ) |
9
TENET HEALTHCARE CORPORATION
SELECTED STATISTICS — CONTINUING SAME HOSPITALS
(Unaudited)
(Dollars in millions except per patient day, | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
per admission and per visit amounts) | | 2014 | | 2013 | | Change | | 2014 | | 2013 | | Change | |
| | | | | | | | | | | | | |
Net inpatient revenues | | $ | 1,602 | | $ | 1,502 | | 6.7 | % | $ | 4,711 | | $ | 4,580 | | 2.9 | % |
Net outpatient revenues | | $ | 924 | | $ | 845 | | 9.3 | % | $ | 2,710 | | $ | 2,502 | | 8.3 | % |
| | | | | | | | | | | | | |
Number of acute care hospitals (at end of period) | | 49 | | 49 | | — | * | 49 | | 49 | | — | * |
Licensed beds (at end of period) | | 13,231 | | 13,180 | | 0.4 | % | 13,231 | | 13,180 | | 0.4 | % |
Average licensed beds | | 13,231 | | 13,180 | | 0.4 | % | 13,202 | | 13,180 | | 0.2 | % |
Utilization of licensed beds | | 48.9 | % | 47.0 | % | 1.9 | %* | 49.5 | % | 48.4 | % | 1.1 | %* |
Patient days — total | | 594,664 | | 569,833 | | 4.4 | % | 1,783,957 | | 1,740,508 | | 2.5 | % |
Adjusted patient days | | 962,054 | | 912,483 | | 5.4 | % | 2,859,601 | | 2,762,043 | | 3.5 | % |
Net inpatient revenue per patient day | | $ | 2,694 | | $ | 2,636 | | 2.2 | % | $ | 2,641 | | $ | 2,631 | | 0.4.% | |
Total admissions | | 127,118 | | 121,569 | | 4.6 | % | 376,289 | | 368,220 | | 2.2 | % |
Adjusted patient admissions | | 208,229 | | 196,761 | | 5.8 | % | 609,721 | | 589,866 | | 3.4 | % |
Charity and uninsured admissions | | 8,538 | | 8,809 | | (3.1 | )% | 24,844 | | 26,243 | | (5.3 | )% |
Net inpatient revenue per admission | | $ | 12,602 | | $ | 12,355 | | 2.0 | % | $ | 12,520 | | $ | 12,438 | | 0.7 | % |
Average length of stay (days) | | 4.68 | | 4.69 | | (0.2 | )% | 4.74 | | 4.73 | | 0.2 | % |
Total surgeries | | 127,042 | | 111,055 | | 14.4 | % | 365,928 | | 321,137 | | 13.9 | % |
Admissions through emergency department | | 80,328 | | 75,512 | | 6.4 | % | 241,767 | | 231,328 | | 4.5 | % |
Emergency department visits | | 433,174 | | 400,345 | | 8.2 | % | 1,280,225 | | 1,202,125 | | 6.5 | % |
Total emergency department admissions and visits | | 513,502 | | 475,857 | | 7.9 | % | 1,521,992 | | 1,433,453 | | 6.2 | % |
Outpatient visits | | 1,155,852 | | 1,071,421 | | 7.9 | % | 3,377,121 | | 3,198,922 | | 5.6 | % |
Charity and uninsured outpatient visits | | 113,216 | | 114,550 | | (1.2 | )% | 333,748 | | 339,123 | | (1.6 | )% |
Net outpatient revenue per visit | | $ | 799 | | $ | 789 | | 1.3 | % | $ | 802 | | $ | 782 | | 2.6 | % |
Net patient revenue per adjusted patient admission | | $ | 12,131 | | $ | 11,928 | | 1.7 | % | $ | 12,171 | | $ | 12,006 | | 1.4 | % |
| | | | | | | | | | | | | |
Net Patient Revenues from: | | | | | | | | | | | | | |
Medicare | | 20.3 | % | 21.3 | % | (1.0 | )%* | 21.2 | % | 21.8 | % | (0.6 | )%* |
Medicaid | | 7.4 | % | 8.8 | % | (1.4 | )%* | 7.3 | % | 8.9 | % | (1.6 | )%* |
Managed care | | 63.1 | % | 58.8 | % | 4.3 | %* | 61.4 | % | 58.2 | % | 3.2 | %* |
Indemnity, self-pay and other | | 9.2 | % | 11.1 | % | (1.9 | )%* | 10.1 | % | 11.1 | % | (1.0 | )%* |
* This change is the difference between the 2014 and 2013 amounts shown
10
TENET HEALTHCARE CORPORATION
SELECTED STATISTICS — CONTINUING TOTAL HOSPITALS
(Unaudited)
(Dollars in millions except per patient day, | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
per admission and per visit amounts) | | 2014 | | 2013 | | Change | | 2014 | | 2013 | | Change | |
| | | | | | | | | | | | | |
Net inpatient revenues | | $ | 2,463 | | $ | 1,502 | | 64.0 | % | $ | 7,296 | | $ | 4,580 | | 59.3 | % |
Net outpatient revenues | | $ | 1,441 | | $ | 845 | | 70.5 | % | $ | 4,235 | | $ | 2,502 | | 69.3 | % |
| | | | | | | | | | | | | |
Number of acute care hospitals (at end of period) | | 80 | | 49 | | 31 | * | 80 | | 49 | | 31 | * |
Licensed beds (at end of period) | | 20,762 | | 13,180 | | 57.5 | % | 20,762 | | 13,180 | | 57.5 | % |
Average licensed beds | | 20,692 | | 13,180 | | 57.0 | % | 20,439 | | 13,180 | | 55.1 | % |
Utilization of licensed beds | | 48.4 | % | 47.0 | % | 1.4 | %* | 49.4 | % | 48.4 | % | 1.0 | %* |
Patient days — total | | 921,228 | | 569,833 | | 61.7 | % | 2,757,485 | | 1,740,508 | | 58.4 | % |
Adjusted patient days | | 1,574,346 | | 912,483 | | 72.5 | % | 4,663,406 | | 2,762,043 | | 68.8 | % |
Net inpatient revenue per patient day | | $ | 2,674 | | $ | 2,636 | | 1.4 | % | $ | 2,646 | | $ | 2,631 | | 0.6 | % |
Total admissions | | 199,914 | | 121,569 | | 64.4 | % | 588,828 | | 368,220 | | 59.9 | % |
Adjusted patient admissions | | 345,787 | | 196,761 | | 75.7 | % | 1,007,106 | | 589,866 | | 70.7 | % |
Charity and uninsured admissions | | 10,990 | | 8,809 | | 24.8 | % | 34,447 | | 26,243 | | 31.3 | % |
Net inpatient revenue per admission | | $ | 12,320 | | $ | 12,355 | | (0.3 | )% | $ | 12,391 | | $ | 12,438 | | (0.4 | )% |
Average length of stay (days) | | 4.61 | | 4.69 | | (1.7 | )% | 4.68 | | 4.73 | | (1.1 | )% |
Total surgeries | | 178,439 | | 111,055 | | 60.7 | % | 514,385 | | 321,137 | | 60.2 | % |
Admissions through emergency department | | 123,147 | | 75,512 | | 63.1 | % | 367,834 | | 231,328 | | 59.0 | % |
Emergency department visits | | 719,835 | | 400,345 | | 79.8 | % | 2,086,846 | | 1,202,125 | | 73.6 | % |
Total emergency department admissions and visits | | 842,982 | | 475,857 | | 77.2 | % | 2,454,680 | | 1,433,453 | | 71.2 | % |
Outpatient visits | | 2,125,002 | | 1,071,421 | | 98.3 | % | 6,138,740 | | 3,198,922 | | 91.9 | % |
Charity and uninsured outpatient visits | | 170,022 | | 114,550 | | 48.4 | % | 505,036 | | 339,123 | | 48.9 | % |
Net outpatient revenue per visit | | $ | 678 | | $ | 789 | | (14.1 | )% | $ | 690 | | $ | 782 | | (11.2 | )% |
Net patient revenue per adjusted patient admission | | $ | 11,290 | | $ | 11,928 | | (5.3 | )% | $ | 11,450 | | $ | 12,006 | | (4.6 | )% |
| | | | | | | | | | | | | |
Net Patient Revenues from: | | | | | | | | | | | | | |
Medicare | | 21.5 | % | 21.3 | % | 0.2 | %* | 22.2 | % | 21.8 | % | 0.4 | %* |
Medicaid | | 8.7 | % | 8.8 | % | (0.1 | )%* | 8.8 | % | 8.9 | % | (0.1 | )%* |
Managed care | | 60.7 | % | 58.8 | % | 1.9 | %* | 58.8 | % | 58.2 | % | 0.6 | %* |
Indemnity, self-pay and other | | 9.1 | % | 11.1 | % | (2.0 | )%* | 10.2 | % | 11.1 | % | (0.9 | )%* |
* This change is the difference between the 2014 and 2013 amounts shown
11
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | Three Months Ended | | Nine Months
Ended | |
(Dollars in millions except per share amounts) | | 03/31/14 | | 06/30/14 | | 09/30/14 | | 09/30/14 | |
Net operating revenues: | | | | | | | | | |
Net operating revenues before provision for doubtful accounts | | $ | 4,306 | | $ | 4,362 | | $ | 4,428 | | $ | 13,096 | |
Less: Provision for doubtful accounts | | 380 | | 320 | | 249 | | 949 | |
Net operating revenues | | 3,926 | | 4,042 | | 4,179 | | 12,147 | |
Operating expenses: | | | | | | | | | |
Salaries, wages and benefits | | 1,921 | | 1,956 | | 2,028 | | 5,905 | |
Supplies | | 628 | | 649 | | 665 | | 1,942 | |
Other operating expenses, net | | 999 | | 1,035 | | 1,032 | | 3,066 | |
Electronic health record incentives | | (9 | ) | (58 | ) | (5 | ) | (72 | ) |
Depreciation and amortization | | 193 | | 209 | | 207 | | 609 | |
Impairment and restructuring charges, and acquisition-related costs | | 21 | | 32 | | 37 | | 90 | |
Litigation and investigation costs | | 3 | | 12 | | 4 | | 19 | |
Operating income | | 170 | | 207 | | 211 | | 588 | |
Interest expense | | (182 | ) | (190 | ) | (186 | ) | (558 | ) |
Loss from early extinguishment of debt | | — | | — | | (24 | ) | (24 | ) |
Income (loss) from continuing operations, before income taxes | | (12 | ) | 17 | | 1 | | 6 | |
Income tax benefit (expense) | | 1 | | (8 | ) | 18 | | 11 | |
Income (loss) from continuing operations, before discontinued operations | | (11 | ) | 9 | | 19 | | 17 | |
Discontinued operations: | | | | | | | | | |
Loss from operations | | (8 | ) | (7 | ) | (2 | ) | (17 | ) |
Litigation and investigation costs | | — | | (18 | ) | — | | (18 | ) |
Income tax benefit | | 3 | | 9 | | 1 | | 13 | |
Net loss from discontinued operations | | (5 | ) | (16 | ) | (1 | ) | (22 | ) |
Net income (loss) | | (16 | ) | (7 | ) | 18 | | (5 | ) |
Less: Net income attributable to noncontrolling interests | | 16 | | 19 | | 9 | | 44 | |
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders | | $ | (32 | ) | $ | (26 | ) | $ | 9 | | $ | (49 | ) |
| | | | | | | | | |
Amounts attributable to Tenet Healthcare Corporation common shareholders | | | | | | | | | |
Loss from continuing operations, net of tax | | $ | (27 | ) | $ | (10 | ) | $ | 10 | | $ | (27 | ) |
Loss from discontinued operations, net of tax | | (5 | ) | (16 | ) | (1 | ) | (22 | ) |
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders | | $ | (32 | ) | $ | (26 | ) | $ | 9 | | $ | (49 | ) |
| | | | | | | | | |
Net income (loss) per share attributable to Tenet Healthcare Corporation common shareholders: | | | | | | | | | |
Basic | | | | | | | | | |
Continuing operations | | $ | (0.28 | ) | $ | (0.11 | ) | $ | 0.10 | | $ | (0.27 | ) |
Discontinued operations | | (0.05 | ) | (0.16 | ) | (0.01 | ) | (0.23 | ) |
| | $ | (0.33 | ) | $ | (0.27 | ) | $ | 0.09 | | $ | (0.50 | ) |
Diluted | | | | | | | | | |
Continuing operations | | $ | (0.28 | ) | $ | (0.11 | ) | $ | 0.10 | | $ | (0.27 | ) |
Discontinued operations | | (0.05 | ) | (0.16 | ) | (0.01 | ) | (0.23 | ) |
| | $ | (0.33 | ) | $ | (0.27 | ) | $ | 0.09 | | $ | (0.50 | ) |
Weighted average shares and dilutive securities outstanding (in thousands): | | | | | | | | | |
Basic | | 97,161 | | 97,677 | | 98,036 | | 97,625 | |
Diluted | | 97,161 | | 97,677 | | 100,926 | | 97,625 | |
12
TENET HEALTHCARE CORPORATION
SELECTED STATISTICS — CONTINUING SAME HOSPITALS
(Unaudited)
(Dollars in millions except per patient days, | | Three Months Ended | | Nine Months
Ended | |
per admission and per visit amounts) | | 03/31/14 | | 06/30/14 | | 09/30/14 | | 09/30/14 | |
| | | | | | | | | |
Net inpatient revenues | | $ | 1,569 | | $ | 1,540 | | $ | 1,602 | | $ | 4,711 | |
Net outpatient revenues | | $ | 859 | | $ | 927 | | $ | 924 | | $ | 2,710 | |
| | | | | | | | | |
Number of acute care hospitals (at end of period) | | 49 | | 49 | | 49 | | 49 | |
Licensed beds (at end of period) | | 13,178 | | 13,231 | | 13,231 | | 13,231 | |
Average licensed beds | | 13,178 | | 13,196 | | 13,231 | | 13,202 | |
Utilization of licensed beds | | 51.0 | % | 48.7 | % | 48.9 | % | 49.5 | % |
Patient days — total | | 605,042 | | 584,251 | | 594,664 | | 1,783,957 | |
Adjusted patient days | | 949,403 | | 948,144 | | 962,054 | | 2,859,601 | |
Net inpatient revenue per patient day | | $ | 2,593 | | $ | 2,636 | | $ | 2,694 | | $ | 2,641 | |
Total admissions | | 124,451 | | 124,720 | | 127,118 | | 376,289 | |
Adjusted patient admissions | | 196,855 | | 204,637 | | 208,229 | | 609,721 | |
Charity and uninsured admissions | | 8,387 | | 7,919 | | 8,538 | | 24,844 | |
Net inpatient revenue per admission | | $ | 12,607 | | $ | 12,348 | | $ | 12,602 | | $ | 12,520 | |
Average length of stay (days) | | 4.86 | | 4.68 | | 4.68 | | 4.74 | |
Total surgeries | | 114,734 | | 124,152 | | 127,042 | | 365,928 | |
Admissions through emergency department | | 80,910 | | 80,529 | | 80,328 | | 241,767 | |
Emergency department visits | | 414,193 | | 432,858 | | 433,174 | | 1,280,225 | |
Total emergency department admissions and visits | | 495,103 | | 513,387 | | 513,502 | | 1,521,992 | |
Outpatient visits | | 1,080,674 | | 1,140,595 | | 1,155,852 | | 3,377,121 | |
Charity and uninsured outpatient visits | | 111,857 | | 108,675 | | 113,216 | | 333,748 | |
Net outpatient revenue per visit | | $ | 795 | | $ | 813 | | $ | 799 | | $ | 802 | |
Net patient revenue per adjusted patient admission | | $ | 12,334 | | $ | 12,055 | | $ | 12,131 | | $ | 12,171 | |
| | | | | | | | | |
Net Patient Revenues from: | | | | | | | | | |
Medicare | | 22.0 | % | 21.3 | % | 20.3 | % | 21.2 | % |
Medicaid | | 7.4 | % | 7.2 | % | 7.4 | % | 7.3 | % |
Managed care | | 59.5 | % | 61.7 | % | 63.1 | % | 61.4 | % |
Indemnity, self-pay and other | | 11.1 | % | 9.8 | % | 9.2 | % | 10.1 | % |
13
TENET HEALTHCARE CORPORATION
SELECTED STATISTICS — CONTINUING TOTAL HOSPITALS
(Unaudited)
(Dollars in millions except per patient days, | | Three Months Ended | | Nine Months
Ended | |
per admission and per visit amounts) | | 03/31/14 | | 06/30/14 | | 09/30/14 | | 09/30/14 | |
| | | | | | | | | |
Net inpatient revenues | | $ | 2,440 | | $ | 2,393 | | $ | 2,463 | | $ | 7,296 | |
Net outpatient revenues | | $ | 1,346 | | $ | 1,448 | | $ | 1,441 | | $ | 4,235 | |
| | | | | | | | | |
Number of acute care hospitals (at end of period) | | 77 | | 79 | | 80 | | 80 | |
Licensed beds (at end of period) | | 20,279 | | 20,553 | | 20,762 | | 20,762 | |
Average licensed beds | | 20,263 | | 20,370 | | 20,692 | | 20,439 | |
Utilization of licensed beds | | 51.0 | % | 48.9 | % | 48.4 | % | 49.4 | % |
Patient days — total | | 929,164 | | 907,093 | | 921,228 | | 2,757,485 | |
Adjusted patient days | | 1,525,379 | | 1,563,681 | | 1,574,346 | | 4,663,406 | |
Net inpatient revenue per patient day | | $ | 2,626 | | $ | 2,638 | | $ | 2,674 | | $ | 2,646 | |
Total admissions | | 194,273 | | 194,641 | | 199,914 | | 588,828 | |
Adjusted patient admissions | | 323,810 | | 337,509 | | 345,787 | | 1,007,106 | |
Charity and uninsured admissions | | 12,530 | | 10,927 | | 10,990 | | 34,447 | |
Net inpatient revenue per admission | | $ | 12,560 | | $ | 12,294 | | $ | 12,320 | | $ | 12,391 | |
Average length of stay (days) | | 4.78 | | 4.66 | | 4.61 | | 4.68 | |
Total surgeries | | 162,282 | | 173,664 | | 178,439 | | 514,385 | |
Admissions through emergency department | | 122,601 | | 122,086 | | 123,147 | | 367,834 | |
Emergency department visits | | 665,002 | | 702,009 | | 719,835 | | 2,086,846 | |
Total emergency department admissions and visits | | 787,603 | | 824,095 | | 842,982 | | 2,454,680 | |
Outpatient visits | | 1,947,687 | | 2,066,051 | | 2,125,002 | | 6,138,740 | |
Charity and uninsured outpatient visits | | 165,248 | | 169,766 | | 170,022 | | 505,036 | |
Net outpatient revenue per visit | | $ | 691 | | $ | 701 | | $ | 678 | | $ | 690 | |
Net patient revenue per adjusted patient admission | | $ | 11,692 | | $ | 11,380 | | $ | 11,290 | | $ | 11,450 | |
| | | | | | | | | |
Net Patient Revenues from: | | | | | | | | | |
Medicare | | 22.6 | % | 22.5 | % | 21.5 | % | 22.2 | % |
Medicaid | | 7.7 | % | 9.9 | % | 8.7 | % | 8.8 | % |
Managed care | | 57.8 | % | 58.0 | % | 60.7 | % | 58.8 | % |
Indemnity, self-pay and other | | 11.9 | % | 9.6 | % | 9.1 | % | 10.2 | % |
14
TENET HEALTHCARE CORPORATION
SEGMENT REPORTING
(Unaudited)
| | September 30, | | December 31, | |
| | 2014 | | 2013 | |
Assets | | | | | |
Hospital Operations and other | | $ | 16,988 | | $ | 16,194 | |
Conifer | | 324 | | 256 | |
Total | | $ | 17,312 | | $ | 16,450 | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| | 2014 | | 2013 | | 2014 | | 2013 | |
Capital expenditures: | | | | | | | | | |
Hospital Operations and other | | $ | 207 | | $ | 139 | | $ | 717 | | $ | 387 | |
Conifer | | 4 | | 3 | | 17 | | 11 | |
Total | | $ | 211 | | $ | 142 | | $ | 734 | | $ | 398 | |
| | | | | | | | | |
Net operating revenues: | | | | | | | | | |
Hospital Operations and other | | $ | 4,031 | | $ | 2,275 | | $ | 11,707 | | $ | 6,840 | |
Conifer | | | | | | | | | |
Tenet | | 148 | | 92 | | 426 | | 278 | |
Other customers | | 148 | | 133 | | 440 | | 377 | |
| | 4,327 | | 2,500 | | 12,573 | | 7,495 | |
Intercompany eliminations | | (148 | ) | (92 | ) | (426 | ) | (278 | ) |
Total | | $ | 4,179 | | $ | 2,408 | | $ | 12,147 | | $ | 7,217 | |
| | | | | | | | | |
Adjusted EBITDA: | | | | | | | | | |
Hospital Operations and other | | $ | 412 | | $ | 252 | | $ | 1,167 | | $ | 802 | |
Conifer | | 47 | | 36 | | 139 | | 96 | |
Total | | $ | 459 | | $ | 288 | | $ | 1,306 | | $ | 898 | |
| | | | | | | | | |
Depreciation and amortization: | | | | | | | | | |
Hospital Operations and other | | $ | 202 | | $ | 114 | | $ | 594 | | $ | 339 | |
Conifer | | 5 | | 5 | | 15 | | 15 | |
Total | | $ | 207 | | $ | 119 | | $ | 609 | | $ | 354 | |
| | | | | | | | | |
Adjusted EBITDA | | $ | 459 | | $ | 288 | | $ | 1,306 | | $ | 898 | |
Depreciation and amortization | | (207 | ) | (119 | ) | (609 | ) | (354 | ) |
Impairments and restructuring charges, and acquisition-related costs | | (37 | ) | (20 | ) | (90 | ) | (45 | ) |
Litigation and investigation costs | | (4 | ) | (1 | ) | (19 | ) | (3 | ) |
Interest expense | | (186 | ) | (91 | ) | (558 | ) | (292 | ) |
Loss from early extinguishment of debt | | (24 | ) | — | | (24 | ) | (348 | ) |
Investment earnings | | — | | — | | — | | 1 | |
Income (loss) from continuing operations before income taxes | | $ | 1 | | $ | 57 | | $ | 6 | | $ | (143 | ) |
15
(1) Reconciliation of Adjusted EBITDA
Adjusted EBITDA, a non-GAAP term, is defined by the Company as net income (loss) attributable to Tenet Healthcare Corporation common shareholders before (1) the cumulative effect of changes in accounting principle, net of tax; (2) net loss (income) attributable to noncontrolling interests; (3) preferred stock dividends; (4) income (loss) from discontinued operations, net of tax; (5) income tax benefit (expense); (6) investment earnings (loss); (7) gain (loss) from early extinguishment of debt; (8) net gain (loss) on sales of investments; (9) interest expense; (10) litigation and investigation benefit (costs), net of insurance recoveries; (11) hurricane insurance recoveries, net of costs; (12) impairment and restructuring charges and acquisition-related costs; and (13) depreciation and amortization. The Company’s Adjusted EBITDA may not be comparable to EBITDA reported by other companies.
The Company provides this information as a supplement to GAAP information to assist itself and investors in understanding the impact of various items on its financial statements, some of which are recurring or involve cash payments. The Company uses this information in its analysis of the performance of its business excluding items that it does not consider as relevant in the performance of its hospitals in continuing operations. In addition, from time to time we use this measure to define certain performance targets under our compensation programs. Adjusted EBITDA is not a measure of liquidity, but is a measure of operating performance that management uses in its business as an alternative to net income (loss) attributable to Tenet Healthcare Corporation common shareholders. Because Adjusted EBITDA excludes many items that are included in our financial statements, it does not provide a complete measure of our operating performance. Accordingly, investors are encouraged to use GAAP measures when evaluating the Company’s financial performance.
The reconciliation of net income (loss) attributable to Tenet Healthcare Corporation common shareholders, the most comparable GAAP term, to Adjusted EBITDA, is set forth in the first table below for the three and nine months ended September 30, 2014 and 2013.
For certain pro financial information of the Company as if the Vanguard acquisition had occurred at January 1, 2013, see Note 14 of the notes to the condensed consolidated financial statements in the Company’s Form 10-Q for the quarterly period ended September 30, 2014.
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP Disclosures
Table #1 - Reconciliation of Adjusted EBITDA to Net Income (Loss) Attributable to Tenet Healthcare Corporation Common Shareholders
(Unaudited)
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
(Dollars in millions) | | 2014 | | 2013 | | 2014 | | 2013 | |
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders | | $ | 9 | | $ | 28 | | $ | (49 | ) | $ | (110 | ) |
Less: Net (income) attributable to noncontrolling interests | | (9 | ) | (8 | ) | (44 | ) | (20 | ) |
Loss from discontinued operations, net of tax | | (1 | ) | (5 | ) | (22 | ) | (4 | ) |
Income (loss) from continuing operations | | 19 | | 41 | | 17 | | (86 | ) |
Income tax benefit (expense) | | 18 | | (16 | ) | 11 | | 57 | |
Investment earnings | | — | | — | | — | | 1 | |
Loss from early extinguishment of debt | | (24 | ) | — | | (24 | ) | (348 | ) |
Interest expense | | (186 | ) | (91 | ) | (558 | ) | (292 | ) |
Operating income | | 211 | | 148 | | 588 | | 496 | |
Litigation and investigation costs | | (4 | ) | (1 | ) | (19 | ) | (3 | ) |
Impairment and restructuring charges, and acquisition-related costs | | (37 | ) | (20 | ) | (90 | ) | (45 | ) |
Depreciation and amortization | | (207 | ) | (119 | ) | (609 | ) | (354 | ) |
Adjusted EBITDA | | $ | 459 | | $ | 288 | | $ | 1,306 | | $ | 898 | |
| | | | | | | | | |
Net operating revenues | | $ | 4,179 | | $ | 2,408 | | $ | 12,147 | | $ | 7,217 | |
| | | | | | | | | |
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) | | 11.0 | % | 12.0 | % | 10.8 | % | 12.4 | % |
16
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP Disclosures
Table #2 - Reconciliation of Adjusted Free Cash Flow
(Unaudited)
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
(Dollars in millions) | | 2014 | | 2013 | | 2014 | | 2013 | |
Net cash provided by operating activities | | $ | 221 | | $ | 206 | | $ | 468 | | $ | 334 | |
Less: | | | | | | | | | |
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements | | (31 | ) | (17 | ) | (115 | ) | (36 | ) |
Net cash provided by (used in) operating activities from discontinued operations | | (4 | ) | 2 | | (16 | ) | (5 | ) |
Adjusted net cash provided by operating activities — continuing operations | | 256 | | 221 | | 599 | | 375 | |
Purchases of property and equipment — continuing operations | | (211 | ) | (142 | ) | (734 | ) | (398 | ) |
Adjusted free cash flow — continuing operations | | $ | 45 | | $ | 79 | | $ | (135 | ) | $ | (23 | ) |
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP Disclosures
Table #3 - Reconciliation of Outlook Adjusted EBITDA to
Outlook Net Income Attributable to Tenet Healthcare Corporation Common Shareholders
for the Year Ending December 31, 2014
(Unaudited)
| | 2014 | |
(Dollars in millions) | | Low | | High | |
Net income attributable to Tenet Healthcare Corporation common shareholders | | $ | 23 | | $ | 85 | |
Less: Net (income) attributable to noncontrolling interests | | (65 | ) | (55 | ) |
Loss from discontinued operations, net of tax | | (35 | ) | (25 | ) |
Income from continuing operations | | $ | 123 | | $ | 165 | ) |
Income tax (expense) (a) | | (59 | ) | (87 | ) |
Income from continuing operations, before income taxes | | $ | 182 | | $ | 252 | |
Loss from early extinguishment of debt | | (24 | ) | (24 | ) |
Interest expense, net | | (755 | ) | (745 | ) |
Operating income | | $ | 961 | | $ | 1,021 | |
Impairment and restructuring charges, acquisition-related costs and litigation costs and settlements(b) | | (109 | ) | (109 | ) |
Depreciation and amortization | | (830 | ) | (820 | ) |
Adjusted EBITDA | | $ | 1,900 | | $ | 1,950 | |
| | | | | |
Net operating revenues | | $ | 16,400 | | $ | 16,600 | |
| | | | | |
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) | | 11.6 | % | 11.7 | % |
(a) Uses a tax rate of 40% excluding unusual adjustments for unreported periods
(b) Company does not forecast impairment and restructuring charges, acquisition-related and litigation costs and settlements
17
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP Disclosures
Table #4 - Reconciliation of Outlook Adjusted EBITDA to
Outlook Normalized Income from Continuing Operations
for the Year Ending December 31, 2014
(Unaudited)
| | 2014 | |
(Dollars in millions) | | Low | | High | |
Adjusted EBITDA | | $ | 1,900 | | $ | 1,950 | |
Depreciation and amortization | | (830 | ) | (820 | ) |
Interest expense, net | | (755 | ) | (745 | ) |
Income from continuing operations before income taxes | | $ | 315 | | $ | 385 | |
Income tax expense (a) | | (124 | ) | (152 | ) |
Normalized income (loss) from continuing operations | | $ | 191 | | $ | 233 | |
Net (income) attributable to noncontrolling interests | | (65 | ) | (55 | ) |
Net income (loss) attributable to common shareholders | | $ | 126 | | $ | 178 | |
| | | | | |
Fully diluted weighted average share outstanding (in millions) | | 100 | | 100 | |
| | | | | |
Normalized fully diluted earnings per share — continuing operations | | $ | 1.26 | | $ | 1.78 | |
(a) Uses a tax rate of 40% excluding unusual adjustments for unreported periods
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP Disclosures
Table #5 - Reconciliation of Outlook Adjusted Free Cash Flow
for the Year Ending December
| | 2014 | |
(Dollars in millions) | | Low | | High | |
Net cash provided by operating activities | | $ | 910 | | $ | 970 | |
Less: | | | | | |
Payments for restructuring charges, acquisition-related costs and litigation costs and settlements(a) | | (115 | ) | (115 | ) |
Net cash used in operating activities from discontinued operations | | (25 | ) | (15 | ) |
Adjusted net cash provided by operating activities — continuing operations | | $ | 1,050 | | $ | 1,100 | |
Purchases of property and equipment — continuing operations | | (1,000 | ) | (900 | ) |
Adjusted free cash flow — continuing operations | | $ | 50 | | $ | 200 | |
(a) Company does not forecast impairment and restructuring charges, acquisition-related and litigation costs and settlements
18
