DALLAS--(BUSINESS WIRE)--Tenet Healthcare Corporation (NYSE:THC) today reported adjusted EBITDA of $195 million for the third quarter ended September 30, 2011 compared to $203 million for the third quarter of 2010. Income from continuing operations, net of tax, was $8 million in the third quarter of 2011 ($0.02 per diluted share), or $16 million ($0.04 per diluted share) after excluding impairment and restructuring charges and litigation costs of $13 million pre-tax, $8 million after-tax. Income from continuing operations, net of tax in the third quarter of 2010 included the recognition of $981 million of tax benefits associated with the Company’s net operating loss carryforward, and a loss from early extinguishment of debt of $55 million pre-tax, $35 million after-tax. Except for these two items, the third quarter of 2010 would have been a loss of $14 million, or a loss of $0.01 per diluted share. Reported Income from continuing operations, net of tax, which includes these two items in the third quarter of 2010 was $932 million, or $1.68 per diluted share.
“Volume growth was very strong in our third quarter,” said Trevor Fetter, president and chief executive officer. “Adjusted admissions growth of 2.3 percent and surgery growth of 3.2 percent drove a 3.5 percent increase in net operating revenues. This top line growth was further leveraged by excellent cost control and attractive pricing increases in our new contracts with commercial managed care payers. Given this progress across our key performance metrics, we are pleased to reconfirm our 2011 EBITDA Outlook in a range of $1.175 billion to $1.275 billion.”
Discussion of Results (Percentage changes compare Q3’11 to Q3’10, unless otherwise noted.)
Adjusted EBITDA declined by 3.9 percent in the third quarter of 2011, which included adverse impacts from a less attractive payer mix, lower state Medicaid payment rates, $16 million of expense related to lower discount rates, and higher Healthcare Information Technology (“HIT”) expense. In recent quarters EBITDA has benefitted from certain favorable items including state provider fees and government HIT incentive payments which were largely absent in the third quarter. These revenue sources are expected to resume in the fourth quarter which, in conjunction with seasonal volume strength, is expected to restore EBITDA growth.
Admissions and paying admissions increased by 1.5 and 1.6 percent, respectively. Outpatient visits and paying outpatient visits both increased by 3.4 percent. Adjusted admissions increased by 2.3 percent.
Net operating revenues were $2.342 billion, an increase of $80 million, or 3.5 percent, compared to net operating revenues of $2.262 billion in the third quarter of 2010. Net patient revenue per adjusted patient day was $2,406, an increase of $36, or 1.5 percent, as compared to $2,370 in the third quarter of 2010. This pricing increase was primarily the result of improved pricing in our commercial managed care contracts.
Controllable operating expenses per adjusted patient day were $2,112, an increase of $62, or 3.0 percent, as compared to the third quarter of 2010. This increase primarily reflects annual salary increases for our broad employee population as well as our growing investments in our HIT program, which are intended to further enhance the quality and efficiency of our healthcare service capabilities. Controllable operating expense is defined as the sum of salaries, wages and benefits, supplies, and other operating expenses. The Company accelerated the implementation of certain cost efficiency measures during the third quarter, producing a favorable impact of approximately $5 million in the quarter. These actions are expected to produce an incremental benefit of approximately $20 million in the fourth quarter.
Bad debt expense was $193 million, an increase of $6 million, or 3.2 percent, as compared to the third quarter of 2010. The increase in bad debt expense is primarily related to a $9 million favorable adjustment in the third quarter of 2010 for Medicare bad debts included in our cost reports compared to a smaller favorable $2 million adjustment in the third quarter of 2011. Bad debt expense as a percent of net operating revenues declined to 8.2 percent, a decrease of 10 basis points from 8.3 percent in the third quarter of 2010.
Net cash provided by operating activities was $148 million in the third quarter of 2011 compared to $128 million in the third quarter of 2010, an increase of $20 million. Capital expenditures were $100 million in the third quarter of 2011, compared to $120 million in the third quarter of 2010. Cash and cash equivalents were $185 million at September 30, 2011, a decrease of $79 million from $264 million at June 30, 2011. Cash use in the third quarter of 2011 includes the use of $124 million to repurchase 24.0 million shares of the Company’s common stock and $14 million for the purchase of an outpatient center and certain assets related to acquired physician practices. Through October 31, the Company repurchased an aggregate total of 59.7 million shares of common stock since announcing its $400 million share repurchase program in May 2011. These 59.7 million repurchased shares represent 12 percent of outstanding common shares, repurchased at an average price of $5.03 per share, and resulting in a total expenditure of approximately $300 million. For the quarter ended September 30, 2011, there were 468.8 million weighted average basic shares outstanding and 483.6 million weighted average outstanding shares on a fully diluted basis.
Management’s Webcast Discussion of Third Quarter Results on November 1
Tenet management will discuss third quarter 2011 results on a webcast scheduled for 10:00 AM (ET) on November 1, 2011. This webcast may be accessed through Tenet’s website at www.tenethealth.com/investors. A set of slides, to which management intends to refer on the call, will be posted to the Company’s website at approximately the start time of the webcast.
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 investor relations website before today’s 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 health care services company whose subsidiaries and affiliates own and operate acute care hospitals, ambulatory surgery centers and diagnostic imaging centers. Tenet’s hospitals and related healthcare facilities are committed to providing high quality care to patients in the communities they serve. For more information, please visit www.tenethealth.com.
Some of the statements in this release may constitute forward-looking statements. Such forward-looking statements are based on our current expectations and could be affected by numerous factors and are subject to various risks and uncertainties discussed in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended Dec. 31, 2010, our quarterly reports on Form 10-Q, and periodic reports on Form 8-K. Do not rely on any forward-looking statement, as we cannot predict or control many of the factors that ultimately may affect our ability to achieve the results estimated. We make no promise to update any forward-looking statement, whether as a result of changes in underlying factors, new information, future events or otherwise.
Tenet uses its company web site to provide important information to investors about the company including the posting of important announcements regarding financial performance and corporate developments.
| TENET HEALTHCARE CORPORATION | |||||||||||||||||
| CONSOLIDATED OPERATIONS DATA | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| (Dollars in millions except per share amounts) | Three Months Ended September 30, | ||||||||||||||||
| 2011 | % | 2010 | % | Change | |||||||||||||
| Net operating revenues | $ | 2,342 | 100.0 | % | $ | 2,262 | 100.0 | % | 3.5 | % | |||||||
| Operating expenses: | |||||||||||||||||
| Salaries, wages and benefits | 1,019 | 43.5 | % | 977 | 43.2 | % | 4.3 | % | |||||||||
| Supplies | 388 | 16.6 | % | 390 | 17.2 | % | (0.5 |
)% |
|||||||||
| Provision for doubtful accounts | 193 | 8.2 | % | 187 | 8.3 | % | 3.2 | % | |||||||||
| Other operating expenses, net | 547 | 23.4 | % | 505 | 22.3 | % | 8.3 | % | |||||||||
| Depreciation and amortization | 103 | 4.4 | % | 101 | 4.5 | % | 2.0 | % | |||||||||
| Impairment of long-lived assets and goodwill, and restructuring charges, net | 8 | 0.3 | % | 3 | 0.1 | % | |||||||||||
| Litigation and investigation costs | 5 | 0.2 | % | 2 | 0.1 | % | |||||||||||
| Operating income | 79 | 3.4 | % | 97 | 4.3 | % | |||||||||||
| Interest expense | (59 | ) | (107 | ) | |||||||||||||
| Loss from early extinguishment of debt | — | (55 | ) | ||||||||||||||
| Investment earnings | 1 | 3 | |||||||||||||||
| Income (loss) from continuing operations, before income taxes | 21 | (62 | ) | ||||||||||||||
| Income tax benefit (expense) | (4 | ) | 1,002 | ||||||||||||||
|
Income from continuing operations, before discontinued operations |
17 | 940 | |||||||||||||||
| Discontinued operations: | |||||||||||||||||
| Loss from operations | (2 | ) | (4 | ) | |||||||||||||
| Impairment of long-lived assets and goodwill, and restructuring charges, net | — | 1 | |||||||||||||||
| Income tax benefit | — | 3 | |||||||||||||||
| Loss from discontinued operations | (2 | ) | — | ||||||||||||||
| Net income | 15 | 940 | |||||||||||||||
| Less: Preferred stock dividends | 6 | 6 | |||||||||||||||
| Less: Net income attributable to noncontrolling interests | 3 | 2 | |||||||||||||||
| Net income attributable to Tenet Healthcare Corporation common shareholders | $ | 6 | $ | 932 | |||||||||||||
| Amounts attributable to Tenet Healthcare Corporation common shareholders | |||||||||||||||||
| Income from continuing operations, net of tax | $ | 8 | $ | 932 | |||||||||||||
| Loss from discontinued operations, net of tax | (2 | ) | — | ||||||||||||||
| Net income attributable to Tenet Healthcare Corporation common shareholders | $ | 6 | $ | 932 | |||||||||||||
| Earnings per share attributable to Tenet Healthcare Corporation common shareholders | |||||||||||||||||
| Basic | |||||||||||||||||
| Continuing operations | $ | 0.02 | $ | 1.92 | |||||||||||||
| Discontinued operations | — | — | |||||||||||||||
| $ | 0.02 | $ | 1.92 | ||||||||||||||
| Diluted | |||||||||||||||||
| Continuing operations | $ | 0.02 | $ | 1.68 | |||||||||||||
| Discontinued operations | — | — | |||||||||||||||
| $ | 0.02 | $ | 1.68 | ||||||||||||||
|
Weighted average shares and dilutive securities outstanding (in thousands): |
|||||||||||||||||
| Basic | 468,753 | 485,210 | |||||||||||||||
| Diluted | 483,632 | 559,850 | |||||||||||||||
| TENET HEALTHCARE CORPORATION | |||||||||||||||||
| CONSOLIDATED OPERATIONS DATA | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| (Dollars in millions except per share amounts) | Nine Months Ended September 30, | ||||||||||||||||
| 2011 | % | 2010 | % | Change | |||||||||||||
| Net operating revenues | $ | 7,222 | 100.0 | % | $ | 6,904 | 100.0 | % | 4.6 | % | |||||||
| Operating expenses: | |||||||||||||||||
| Salaries, wages and benefits | 3,053 | 42.3 | % | 2,933 | 42.5 | % | 4.1 | % | |||||||||
| Supplies | 1,191 | 16.5 | % | 1,183 | 17.1 | % | 0.7 | % | |||||||||
| Provision for doubtful accounts | 546 | 7.6 | % | 549 | 8.0 | % | (0.5 |
)% |
|||||||||
| Other operating expenses, net | 1,581 | 21.9 | % | 1,470 | 21.3 | % | 7.6 | % | |||||||||
| Depreciation and amortization | 308 | 4.3 | % | 293 | 4.2 | % | 5.1 | % | |||||||||
| Impairment of long-lived assets and goodwill, and restructuring charges, net | 18 | 0.2 | % | 1 | — | % | |||||||||||
| Litigation and investigation costs | 24 | 0.3 | % | 6 | 0.1 | % | |||||||||||
| Operating income | 501 | 6.9 | % | 469 | 6.8 | % | |||||||||||
| Interest expense | (275 | ) | (323 | ) | |||||||||||||
| Loss from early extinguishment of debt | — | (55 | ) | ||||||||||||||
| Investment earnings | 3 | 5 | |||||||||||||||
| Income from continuing operations, before income taxes | 229 | 96 | |||||||||||||||
| Income tax benefit (expense) | (73 | ) | 979 | ||||||||||||||
|
Income from continuing operations, before discontinued operations |
156 | 1,075 | |||||||||||||||
| Discontinued operations: | |||||||||||||||||
| Loss from operations | (20 | ) | (4 | ) | |||||||||||||
| Impairment of long-lived assets and goodwill, and restructuring charges, net | — | (1 | ) | ||||||||||||||
| Income tax benefit | 24 | — | |||||||||||||||
| Income (loss) from discontinued operations | 4 | (5 | ) | ||||||||||||||
| Net income | 160 | 1,070 | |||||||||||||||
| Less: Preferred stock dividends | 18 | 18 | |||||||||||||||
| Less: Net income attributable to noncontrolling interests | 8 | 7 | |||||||||||||||
| Net income attributable to Tenet Healthcare Corporation common shareholders | $ | 134 | $ | 1,045 | |||||||||||||
| Amounts attributable to Tenet Healthcare Corporation common shareholders | |||||||||||||||||
| Income from continuing operations, net of tax | $ | 130 | $ | 1,050 | |||||||||||||
| Income (loss) from discontinued operations, net of tax | 4 | (5 | ) | ||||||||||||||
| Net income attributable to Tenet Healthcare Corporation common shareholders | $ | 134 | $ | 1,045 | |||||||||||||
| Earnings (loss) per share attributable to Tenet Healthcare Corporation common shareholders | |||||||||||||||||
| Basic | |||||||||||||||||
| Continuing operations | $ | 0.27 | $ | 2.17 | |||||||||||||
| Discontinued operations | 0.01 | (0.01 | ) | ||||||||||||||
| $ | 0.28 | $ | 2.16 | ||||||||||||||
| Diluted | |||||||||||||||||
| Continuing operations | $ | 0.26 | $ | 1.91 | |||||||||||||
| Discontinued operations | 0.01 | (0.01 | ) | ||||||||||||||
| $ | 0.27 | $ | 1.90 | ||||||||||||||
|
Weighted average shares and dilutive securities outstanding (in thousands): |
|||||||||||||||||
| Basic | 480,817 | 483,912 | |||||||||||||||
| Diluted | 497,862 | 560,200 | |||||||||||||||
| TENET HEALTHCARE CORPORATION | ||||||||
| CONSOLIDATED BALANCE SHEET DATA | ||||||||
| (Unaudited) | ||||||||
| September 30, | December 31, | |||||||
| (Dollars in millions) | 2011 | 2010 | ||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 185 | $ | 405 | ||||
| Accounts receivable, less allowance for doubtful accounts | 1,221 | 1,143 | ||||||
| Inventories of supplies, at cost | 157 | 156 | ||||||
| Income tax receivable | 7 | 22 | ||||||
| Current portion of deferred income taxes | 247 | 282 | ||||||
| Assets held for sale | 2 | 14 | ||||||
| Other current assets | 357 | 289 | ||||||
| Total current assets | 2,176 | 2,311 | ||||||
| Investments and other assets | 159 | 164 | ||||||
| Deferred income taxes, net of current portion | 533 | 627 | ||||||
| Property and equipment, at cost, less accumulated depreciation and amortization | 4,201 | 4,304 | ||||||
| Goodwill | 724 | 652 | ||||||
| Other intangible assets, at cost, less accumulated amortization | 500 | 442 | ||||||
| Total assets | $ | 8,293 | $ | 8,500 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term debt | $ | 129 | $ | 67 | ||||
| Accounts payable | 629 | 720 | ||||||
| Accrued compensation and benefits | 349 | 363 | ||||||
| Professional and general liability reserves | 79 | 84 | ||||||
| Accrued interest payable | 111 | 115 | ||||||
| Accrued legal settlement costs | 10 | 8 | ||||||
| Other current liabilities | 372 | 368 | ||||||
| Total current liabilities | 1,679 | 1,725 | ||||||
| Long-term debt, net of current portion | 3,966 | 3,997 | ||||||
| Professional and general liability reserves | 347 | 383 | ||||||
| Accrued legal settlement costs | 22 | 22 | ||||||
| Other long-term liabilities | 502 | 554 | ||||||
| Total liabilities | 6,516 | 6,681 | ||||||
| Commitments and contingencies | ||||||||
| Redeemable noncontrolling interests in equity of consolidated subsidiaries | 16 | — | ||||||
| Equity: | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred stock | 334 | 334 | ||||||
| Common stock | 27 | 27 | ||||||
| Additional paid-in capital | 4,425 | 4,449 | ||||||
| Accumulated other comprehensive loss | (43 | ) | (43 | ) | ||||
| Accumulated deficit | (1,370 | ) | (1,522 | ) | ||||
| Common stock in treasury, at cost | (1,675 | ) | (1,479 | ) | ||||
| Total shareholders’ equity | 1,698 | 1,766 | ||||||
| Noncontrolling interests | 63 | 53 | ||||||
| Total equity | 1,761 | 1,819 | ||||||
| Total liabilities and equity | $ | 8,293 | $ | 8,500 | ||||
|
TENET HEALTHCARE CORPORATION |
||||||||
| CONSOLIDATED CASH FLOW DATA | ||||||||
| (Unaudited) | ||||||||
| (Dollars in millions) |
Nine Months Ended September 30, |
|||||||
| 2011 | 2010 | |||||||
| Net income | $ | 160 | $ | 1,070 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 308 | 293 | ||||||
| Provision for doubtful accounts | 546 | 549 | ||||||
| Deferred income tax expense | 102 | (984 | ) | |||||
| Stock-based compensation expense | 17 | 18 | ||||||
| Impairment of long-lived assets and goodwill, and restructuring charges, net | 18 | 1 | ||||||
| Fair market value adjustments related to interest rate swap and LIBOR cap agreements | — | 3 | ||||||
| Amortization of debt discount and debt issuance costs | 23 | 23 | ||||||
| Litigation and investigation costs | 24 | 6 | ||||||
| Loss from early extinguishment of debt | — | 55 | ||||||
| Pre-tax loss from discontinued operations | 20 | 5 | ||||||
| Other items, net | (12 | ) | — | |||||
| Changes in cash from operating assets and liabilities: | ||||||||
| Accounts receivable | (625 | ) | (537 | ) | ||||
| Inventories and other current assets | (36 | ) | 2 | |||||
| Income taxes | (44 | ) | 40 | |||||
| Accounts payable, accrued expenses and other current liabilities | (98 | ) | (146 | ) | ||||
| Other long-term liabilities | (11 | ) | (23 | ) | ||||
| Payments against reserves for restructuring charges and litigation costs | (27 | ) | (76 | ) | ||||
| Net cash used in operating activities from discontinued operations, excluding income taxes | (41 | ) | (2 | ) | ||||
| Net cash provided by operating activities | 324 | 297 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment—continuing operations | (298 | ) | (254 | ) | ||||
| Construction of new and replacement hospitals | — | (13 | ) | |||||
| Purchase of property and equipment—discontinued operations | — | (13 | ) | |||||
| Purchases of businesses or joint venture interests | (56 | ) | (44 | ) | ||||
| Proceeds from sales of facilities and other assets — discontinued operations | — | 19 | ||||||
| Proceeds from sales of marketable securities, long-term investments and other assets | 31 | 31 | ||||||
| Other items, net | (1 | ) | 3 | |||||
| Net cash used in investing activities | (324 | ) | (271 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Repayments of borrowings | (4 | ) | (886 | ) | ||||
| Proceeds from borrowings | — | 601 | ||||||
| Deferred debt issuance costs | — | (15 | ) | |||||
| Repurchases of common stock | (196 | ) | — | |||||
| Cash dividends on preferred stock | (18 | ) | (18 | ) | ||||
| Distributions paid to noncontrolling interests | (8 | ) | (6 | ) | ||||
| Other items, net | 6 | 6 | ||||||
| Net cash used in financing activities | (220 | ) | (318 | ) | ||||
| Net decrease in cash and cash equivalents | (220 | ) | (292 | ) | ||||
| Cash and cash equivalents at beginning of period | 405 | 690 | ||||||
| Cash and cash equivalents at end of period | $ | 185 | $ | 398 | ||||
| Supplemental disclosures: | ||||||||
| Interest paid, net of capitalized interest | $ | (255 | ) | $ | (313 | ) | ||
| Income tax refunds, net | $ | 9 | $ | 34 | ||||
|
TENET HEALTHCARE CORPORATION |
||||||||||||||||||||||||
| SELECTED STATISTICS – CONTINUING HOSPITALS | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| (Dollars in millions except per patient day, per | ||||||||||||||||||||||||
| admission and per visit amounts) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
| Net inpatient revenues | $ | 1,477 | $ | 1,430 | 3.3 | % | $ | 4,627 | $ | 4,452 | 3.9 | % | ||||||||||||
| Net outpatient revenues | $ | 749 | $ | 734 | 2.0 | % | $ | 2,233 | $ | 2,173 | 2.8 | % | ||||||||||||
| Number of acute care hospitals (at end of period) | 49 | 49 | — | 49 | 49 | — | * | |||||||||||||||||
| Licensed beds (at end of period) | 13,453 | 13,430 | 0.2 | % | 13,453 | 13,430 | 0.2 | % | ||||||||||||||||
| Average licensed beds | 13,440 | 13,423 | 0.1 | % | 13,447 | 13,430 | 0.1 | % | ||||||||||||||||
| Utilization of licensed beds | 48.7 | % | 48.3 | % | 0.4 |
|
50.5 | % | 50.8 | % | (0.3 | ) | * | |||||||||||
| Patient days | 601,915 | 596,810 | 0.9 | % | 1,852,297 | 1,864,127 | (0.6 |
)% |
||||||||||||||||
| Adjusted patient days | 925,165 | 913,049 | 1.3 | % | 2,814,532 | 2,800,483 | 0.5 | % | ||||||||||||||||
| Net inpatient revenue per patient day | $ | 2,454 | $ | 2,396 | 2.4 | % | $ | 2,498 | $ | 2,388 | 4.6 | % | ||||||||||||
| Admissions | 127,520 | 125,645 | 1.5 | % | 388,372 | 385,995 | 0.6 | % | ||||||||||||||||
| Adjusted patient admissions | 198,110 | 193,670 | 2.3 | % | 595,325 | 584,407 | 1.9 | % | ||||||||||||||||
| Net inpatient revenue per admission | $ | 11,582 | $ | 11,381 | 1.8 |
% |
$ | 11,914 | $ | 11,534 | 3.3 | % | ||||||||||||
| Average length of stay (days) | 4.7 | 4.7 | — | 4.8 | 4.8 | — | * | |||||||||||||||||
| Surgeries | 93,943 | 91,064 | 3.2 | % | 274,947 | 270,347 | 1.7 | % | ||||||||||||||||
| Net outpatient revenue per visit | $ | 742 | $ | 752 | (1.3 |
)% |
$ | 735 | $ | 745 | (1.3 |
)% |
||||||||||||
| Outpatient visits | 1,009,936 | 976,310 | 3.4 | % | 3,036,614 | 2,917,931 | 4.1 | % | ||||||||||||||||
| Sources of net patient revenue | ||||||||||||||||||||||||
| Medicare | 22.7 | % | 23.7 | % | (1.0 | ) | 23.2 | % | 24.0 | % | (0.8 | ) | * | |||||||||||
| Medicaid | 8.0 | % | 8.0 | % | — | 9.1 | % | 8.7 | % | 0.4 | * | |||||||||||||
| Managed care | 58.0 | % | 57.0 | % | 1.0 | 56.8 | % | 56.2 | % | 0.6 | * | |||||||||||||
| Indemnity, self-pay and other | 11.3 | % | 11.3 | % | — | 10.9 | % | 11.1 | % | (0.2 | ) | * | ||||||||||||
| * This change is the difference between the 2011 and 2010 amounts shown | ||||||||||||||||||||||||
|
TENET HEALTHCARE CORPORATION |
|||||||||||||||||||
| CONSOLIDATED OPERATIONS DATA | |||||||||||||||||||
| Fiscal 2011 by Calendar Quarter | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| Nine Months | |||||||||||||||||||
| (Dollars in millions except per share amounts) | Three Months Ended | Ended | |||||||||||||||||
| 3/31/11 | 6/30/11 | 9/30/11 | 09/30/11 | ||||||||||||||||
| Net operating revenues | $ | 2,506 | $ | 2,374 | $ | 2,342 | $ | 7,222 | |||||||||||
| Operating expenses: | |||||||||||||||||||
| Salaries, wages and benefits | 1,035 | 999 | 1,019 | 3,053 | |||||||||||||||
| Supplies | 404 | 399 | 388 | 1,191 | |||||||||||||||
| Provision for doubtful accounts | 182 | 171 | 193 | 546 | |||||||||||||||
| Other operating expenses, net | 506 | 528 | 547 | 1,581 | |||||||||||||||
| Depreciation and amortization | 101 | 104 | 103 | 308 | |||||||||||||||
| Impairment of long-lived assets and goodwill, and restructuring charges | 8 | 2 | 8 | 18 | |||||||||||||||
| Litigation and investigation costs | 11 | 8 | 5 | 24 | |||||||||||||||
| Operating income | 259 | 163 | 79 | 501 | |||||||||||||||
| Interest expense | (118 | ) | (98 | ) | (59 | ) | (275 | ) | |||||||||||
| Investment earnings | 1 | 1 | 1 | 3 | |||||||||||||||
| Income from continuing operations, before income taxes | 142 | 66 | 21 | 229 | |||||||||||||||
| Income tax expense | (51 | ) | (18 | ) | (4 | ) | (73 | ) | |||||||||||
| Income from continuing operations, before discontinued operations | 91 | 48 | 17 | 156 | |||||||||||||||
| Discontinued operations: | |||||||||||||||||||
| Loss from operations | (15 | ) | (3 | ) | (2 | ) | (20 | ) | |||||||||||
| Income tax benefit | 6 | 18 | — | 24 | |||||||||||||||
| Income (loss) from discontinued operations | (9 | ) | 15 | (2 | ) | 4 | |||||||||||||
| Net income | 82 | 63 | 15 | 160 | |||||||||||||||
| Less: Preferred stock dividends | 6 | 6 | 6 | 18 | |||||||||||||||
| Less: Net income attributable to noncontrolling interests | 3 | 2 | 3 | 8 | |||||||||||||||
| Net income attributable to Tenet Healthcare Corporation common shareholders | $ | 73 | $ | 55 | $ | 6 | $ | 134 | |||||||||||
| Amounts attributable to Tenet Healthcare Corporation common shareholders | |||||||||||||||||||
| Income from continuing operations, net of tax | $ | 82 | $ | 40 | $ | 8 | $ | 130 | |||||||||||
| Income (loss) from discontinued operations, net of tax | (9 | ) | 15 | (2 | ) | 4 | |||||||||||||
| Net income attributable to Tenet Healthcare Corporation common shareholders | $ | 73 | $ | 55 | $ | 6 | $ | 134 | |||||||||||
| Earnings (loss) per share attributable to Tenet Healthcare Corporation common shareholders | |||||||||||||||||||
| Basic | |||||||||||||||||||
| Continuing operations | $ | 0.17 | $ | 0.08 | $ | 0.02 | $ | 0.27 | |||||||||||
| Discontinued operations | (0.02 | ) | 0.03 | — | 0.01 | ||||||||||||||
| $ | 0.15 | $ | 0.11 | $ | 0.02 | $ | 0.28 | ||||||||||||
| Diluted | |||||||||||||||||||
| Continuing operations | $ | 0.16 | $ | 0.08 | $ | 0.02 | $ | 0.26 | |||||||||||
| Discontinued operations | (0.02 | ) | 0.03 | — | 0.01 | ||||||||||||||
| $ | 0.14 | $ | 0.11 | $ | 0.02 | $ | 0.27 | ||||||||||||
|
Weighted average shares and dilutive securities outstanding (in thousands): |
|||||||||||||||||||
| Basic | 486,902 | 486,794 | 468,753 | 480,817 | |||||||||||||||
| Diluted | 565,181 | 503,748 | 483,632 | 497,862 | |||||||||||||||
| TENET HEALTHCARE CORPORATION | |||||||||||||||||||
| SELECTED STATISTICS – CONTINUING HOSPITALS | |||||||||||||||||||
| Fiscal 2011 by Calendar Quarter | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| (Dollars in millions except per patient day, per | Nine Months | ||||||||||||||||||
| admission and per visit amounts) | Three Months Ended | Ended | |||||||||||||||||
| 03/31/11 | 06/30/11 | 09/30/11 | 09/30/11 | ||||||||||||||||
| Net inpatient revenues | $ | 1,653 | $ | 1,497 | $ | 1,477 | $ | 4,627 | |||||||||||
| Net outpatient revenues | $ | 733 | $ | 751 | $ | 749 | $ | 2,233 | |||||||||||
| Number of acute care hospitals (at end of period) | 49 | 49 | 49 | 49 | |||||||||||||||
| Licensed beds (at end of period) | 13,457 | 13,420 | 13,453 | 13,453 | |||||||||||||||
| Average licensed beds | 13,457 | 13,445 | 13,440 | 13,447 | |||||||||||||||
| Utilization of licensed beds | 53.3 | % | 49.5 | % | 48.7 | % | 50.5 | % | |||||||||||
| Patient days | 645,166 | 605,216 | 601,915 | 1,852,297 | |||||||||||||||
| Adjusted patient days | 963,039 | 926,328 | 925,165 | 2,814,532 | |||||||||||||||
| Net inpatient revenue per patient day | $ | 2,562 | $ | 2,473 | $ | 2,454 | $ | 2,498 | |||||||||||
| Admissions | 133,349 | 127,503 | 127,520 | 388,372 | |||||||||||||||
| Adjusted patient admissions | 200,353 | 196,862 | 198,110 | 595,325 | |||||||||||||||
| Net inpatient revenue per admission | $ | 12,396 | $ | 11,741 | $ | 11,582 | $ | 11,914 | |||||||||||
| Average length of stay (days) | 4.8 | 4.7 | 4.7 | 4.8 | |||||||||||||||
| Surgeries | 88,754 | 92,250 | 93,943 | 274,947 | |||||||||||||||
| Net outpatient revenue per visit | $ | 725 | $ | 739 | $ | 742 | $ | 735 | |||||||||||
| Outpatient visits | 1,010,848 | 1,015,830 | 1,009,936 | 3,036,614 | |||||||||||||||
| Sources of net patient revenue | |||||||||||||||||||
| Medicare | 23.2 | % | 23.6 | % | 22.7 | % | 23.2 | % | |||||||||||
| Medicaid | 11.6 | % | 7.5 | % | 8.0 | % | 9.1 | % | |||||||||||
| Managed care | 54.4 | % | 58.0 | % | 58.0 | % | 56.8 | % | |||||||||||
| Indemnity, self-pay and other | 10.8 | % | 10.9 | % | 11.3 | % | 10.9 | % | |||||||||||
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) cumulative effect of changes in accounting principle, net of tax, (2) net income attributable to noncontrolling interests, (3) preferred stock dividends, (4) income (loss) from discontinued operations, net of tax, (5) income tax (expense) benefit, (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 (costs) benefit, net of insurance recoveries, (11) hurricane insurance recoveries, net of costs, (12) impairment of long-lived assets and goodwill and restructuring charges, net of insurance recoveries, 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, 2011 and 2010.
| TENET HEALTHCARE CORPORATION | ||||||||||||||||
| Additional Supplemental Non-GAAP Disclosures | ||||||||||||||||
|
Table #1 - Reconciliation of Adjusted EBITDA to Net Income Attributable to Tenet Healthcare |
||||||||||||||||
|
Corporation Common Shareholders |
||||||||||||||||
| (Unaudited) | ||||||||||||||||
| (Dollars in millions) |
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Net income attributable to Tenet Healthcare Corporation common shareholders | $ | 6 | $ | 932 | $ | 134 | $ | 1,045 | ||||||||
| Less: Net income attributable to noncontrolling interests | (3 | ) | (2 | ) | (8 | ) | (7 | ) | ||||||||
| Preferred stock dividends | (6 | ) | (6 | ) | (18 | ) | (18 | ) | ||||||||
| Income (loss) from discontinued operations, net of tax | (2 | ) | — | 4 | (5 | ) | ||||||||||
| Income (loss) from continuing operations | 17 | 940 | 156 | 1,075 | ||||||||||||
| Income tax benefit (expense) | (4 | ) | 1,002 | (73 | ) | 979 | ||||||||||
| Investment earnings | 1 | 3 | 3 | 5 | ||||||||||||
| Loss from early extinguishment of debt | — | (55 | ) | — | (55 | ) | ||||||||||
| Interest expense | (59 | ) | (107 | ) | (275 | ) | (323 | ) | ||||||||
| Operating income | 79 | 97 | 501 | 469 | ||||||||||||
| Litigation and investigation costs | (5 | ) | (2 | ) | (24 | ) | (6 | ) | ||||||||
| Impairment of long-lived assets and goodwill, and restructuring charges, net | (8 | ) | (3 | ) | (18 | ) | (1 | ) | ||||||||
| Depreciation and amortization | (103 | ) | (101 | ) | (308 | ) | (293 | ) | ||||||||
| Adjusted EBITDA | $ | 195 | $ | 203 | $ | 851 | $ | 769 | ||||||||
| Net operating revenues | $ | 2,342 | $ | 2,262 | $ | 7,222 | $ | 6,904 | ||||||||
| Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) | 8.3 | % | 9.0 | % | 11.8 | % | 11.1 | % | ||||||||
| TENET HEALTHCARE CORPORATION | ||||||||
| Additional Supplemental Non-GAAP Disclosures | ||||||||
| Table #2 - Reconciliation of Outlook Adjusted EBITDA to | ||||||||
|
Outlook Net Income Attributable to Tenet Healthcare Corporation Common Shareholders |
||||||||
| for Year Ending December 31, 2011 | ||||||||
| (Unaudited) | ||||||||
| (Dollars in millions) | Low | High | ||||||
| Net income attributable to Tenet Healthcare Corporation common shareholders | $ | 166 | $ | 249 | ||||
| Less: | ||||||||
| Net income attributable to noncontrolling interests | (15 | ) | (10 | ) | ||||
| Preferred stock dividends | (24 | ) | (24 | ) | ||||
| Loss from discontinued operations, net of tax | (10 | ) | (5 | ) | ||||
| Income from continuing operations | 215 | 288 | ||||||
| Income tax expense | (110 | ) | (157 | ) | ||||
| Income from continuing operations, before income taxes | 325 | 445 | ||||||
| Loss from early extinguishment of debt | 0 | 0 | ||||||
| Interest expense, net | (395 | ) | (375 | ) | ||||
| Operating income | 720 | 820 | ||||||
| Litigation and investigation costs | (30 | ) | (25 | ) | ||||
| Impairment of long-lived assets and goodwill, and restructuring charges | (25 | ) | (20 | ) | ||||
| Depreciation and amortization | (400 | ) | (410 | ) | ||||
| Adjusted EBITDA | $ | 1,175 | $ | 1,275 | ||||
| Net operating revenues | $ | 9,700 | $ | 9,900 | ||||
| Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) | 12.1 | % | 12.9 | % | ||||
| Table #3 - Reconciliation of Outlook Adjusted EBITDA to | ||||||||
|
Outlook Normalized Net Income Attributable to Tenet Healthcare Corporation |
||||||||
| Common Shareholders for Year Ending December 31, 2011 | ||||||||
|
(Unaudited) |
||||||||
| (Dollars in millions except per share amounts) | Low | High | ||||||
| Adjusted EBITDA (from Table # 2, above) | $ | 1,175 | $ | 1,275 | ||||
| Depreciation and amortization | (400 | ) | (410 | ) | ||||
| Interest expense, net | (395 | ) | (375 | ) | ||||
| Normalized income from continuing operations before income taxes | 380 | 490 | ||||||
| Income tax expense (a) | (148 | ) | (191 | ) | ||||
| Normalized income from continuing operations (a) | 232 | 299 | ||||||
| Preferred stock dividends | (24 | ) | (24 | ) | ||||
| Net income attributable to noncontrolling interests | (15 | ) | (10 | ) | ||||
| Normalized net income attributable to Tenet Healthcare Corporation common shareholders (a) | 193 | 265 | ||||||
| Weighted average shares outstanding (in millions) | 487 |
546 |
(b) |
|||||
| Normalized earnings per share – continuing operations (a) | $ | 0.40 | $ | 0.53 | ||||
(a) Uses tax rate of 39 percent excluding unusual
adjustments.
(b) An additional 59 million shares are
included as our mandatory convertible preferred stock is
dilutive at this level of earnings and the $24 million of preferred
stock dividends are excluded for earnings per share computation purposes.