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

Monday, November 3, 2014 3:05 pm CST

Dateline:

DALLAS

Public Company Information:

NYSE:
THC
"We achieved another quarter of strong performance across every dimension of our business"

DALLAS--(BUSINESS WIRE)--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 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 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.

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.

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 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.

 

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
(Dollars in millions except per share amounts)     Three Months Ended September 30,
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
 
 

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
(Dollars in millions except per share amounts)     Nine Months Ended September 30,
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.

 
 
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  
 
 

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in millions)     Nine Month Ended
September 30,
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 )
 
 

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME 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,  
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
 
 

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING TOTAL 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,
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
 
 
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
(Dollars in millions except per share amounts)     Three Months Ended      

Nine Months
Ended
09/30/14

03/31/14     06/30/14     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
 
 

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS
(Unaudited)
 
(Dollars in millions except per patient days,

per admission and per visit amounts)

    Three Months Ended      

Nine Months
Ended

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 %
 
 

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING TOTAL HOSPITALS
(Unaudited)
 
(Dollars in millions except per patient days,

per admission and per visit amounts)

    Three Months Ended      

Nine Months
Ended

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 %
 
 
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 )
 

(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)
 
(Dollars in millions)    

Three Months Ended
September 30,

     

Nine Months Ended
September 30,

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 %
 
 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP Disclosure

Table #2 - Reconciliation of Adjusted Free Cash Flow
(Unaudited)
 
(Dollars in millions)     Three Months Ended
September 30,
      Nine Months Ended
September 30,
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)
 
(Dollars in millions)     2014
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

 

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)
 
(Dollars in millions)     2014
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
 
(Dollars in millions)     2014
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

Contact:

Tenet Healthcare Corporation
Corporate Communications
Steven Campanini, 469-893-2640
mediarelations@tenethealth.com
or
Investor Relations
Thomas Rice, 469-893-6992
investorrelations@tenethealth.com