Tenet Reports Adjusted EBITDA of $460 Million for the Quarter Ended June 30, 2014

Outlook Range for 2014 Adjusted EBITDA Raised to $1.85 Billion to $1.95 Billion

Monday, August 4, 2014 3:15 pm CDT

Dateline:

DALLAS

Public Company Information:

NYSE:
THC
"I am very pleased with Tenet’s performance in the second quarter. All growth and profitability metrics exceeded our expectations"

DALLAS--(BUSINESS WIRE)--Tenet Healthcare Corporation (NYSE:THC) reported Adjusted EBITDA for the second quarter ended June 30, 2014 of $460 million, an increase of $124 million, or 36.9 percent, as compared to $336 million in the second quarter of 2013. Excluding the effect of the California Provider Fee program from both periods would have resulted in an even greater increase of $190 million, or 70.4% in the quarter.

“I am very pleased with Tenet’s performance in the second quarter. All growth and profitability metrics exceeded our expectations,” said Trevor Fetter, president and chief executive officer. “Our success at capturing incremental market share through strategic investments, service line expansion, and successfully positioning Tenet’s hospitals to benefit from key aspects of the Affordable Care Act all contributed to a great quarter. We also continue to exceed expectations for the benefits from our 2013 acquisition of Vanguard. Tenet grew at near-record rates in commercial patient volumes, inpatient admissions, outpatient visits, surgeries and emergency department visits.”

Mr. Fetter continued, “Our multi-year strategy to transform Tenet from a regional operator of hospitals to a national diversified healthcare services company is driving significant growth in value. Our business trends are positive, and we are in the early days of a long term transformation in the delivery and financing of healthcare services. We are raising our 2014 EBITDA Outlook range, but only by the outperformance we reported in the second quarter, until we have greater visibility into the longer-term trends driving the strong growth we’ve generated in the first half of 2014.”

Discussion of Results (Percentage changes compare Q2’14 to Q2’13 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 achieved admissions and adjusted admissions growth of 2.8 percent and 4.0 percent, respectively, compared to the second quarter of 2013, on a same-hospital pro forma basis. Pro forma performance metrics include legacy Vanguard operations in both reporting periods. The growth trend in commercial admissions continued to strengthen in the second quarter achieving the best quarterly same-hospital performance in more than a decade. Paying admissions increased by 4.8 percent on a pro forma basis and 4.4 percent on a same-hospital basis.

Outpatient visits increased by 7.1 percent on a pro forma basis and 6.3 percent on a same-hospital basis. Approximately 85 percent of the company’s same-hospital outpatient growth was organic. Surgeries grew by 8.3 percent on a pro forma basis and 14.2 percent on a same-hospital basis. Emergency department visits grew by 4.8 percent on a pro forma basis and by 8.0 percent on a same-hospital basis.

In the five states that expanded Medicaid eligibility under the Affordable Care Act, Tenet achieved a decline in uninsured plus charity admissions of 2,238 admissions, or 54.3 percent, and an increase in Medicaid admissions of 4,685 admissions, or 22.9 percent. Uninsured plus charity outpatient visits declined by 19,739 visits, or 26.9 percent, and Medicaid outpatient visits grew by 62,154 visits, or 24.5 percent, in these same five states. Across the entire company, including those states that did not expand Medicaid, uninsured plus charity admissions declined by 3,030 admissions, or 21.8 percent, while Medicaid admissions increased by 5,479 admissions, or 11.3 percent.

More than 2,700 admissions and more than 24,000 outpatient visits in the second quarter were identified as patients insured by exchange products created as part of the Affordable Care Act. These exchange volumes were more than triple the exchange volumes identified in the first quarter.

Net operating revenues, after provision for doubtful accounts, were $4.042 billion, an increase of $102 million, or 2.6 percent, compared to pro forma net operating revenues of $3.940 billion in the second 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 $87 million in health plan revenue due to a reduction of covered lives under contract with the Arizona Medicaid program, and the absence of revenue from the California Provider Fee program in the second quarter of 2014 compared to $66 million in the second quarter of 2013. Excluding the impact of the California Provider Fee program, net patient revenue per adjusted admission increased by 1.5 percent on a same-hospital basis. Excluding the impact of the California Provider Fee program, patient revenue net of bad debt expense per adjusted admission increased by 2.5 percent on a same-hospital basis and 1.9 percent on a pro forma basis. Commercial managed care revenue increased 7.0 percent per admission and 2.9 percent per outpatient visit on a pro forma basis.

Selected operating expenses for hospital operations, defined as the sum of salaries, wages and benefits, supplies and other operating expenses, increased by only 0.7 percent per adjusted admission on a pro forma basis. 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, same-hospital selected operating expenses per adjusted admission declined by 0.3 percent. The operating expense increases reflect volume growth in the company’s supply-intensive service lines, especially surgical volume, as well as increases in employee compensation. Electronic health records incentives recorded in the second quarter of 2014 were $58 million, a $17 million increase compared to the $41 million recognized on a pro forma basis in the second quarter of 2013. These incentive payments are not included in the definition of selected operating expenses.

Bad debt expense declined by $71 million, or 18.2 percent, to $320 million in the second quarter of 2014 on a pro forma basis. The decrease in bad debt expense was primarily attributable to a $78 million pro forma decline in uninsured revenues. Bad debt expense as a percent of revenues before bad debts was 7.3 percent, a pro forma decrease of 170 basis points compared to 9.0 percent in the second quarter of 2013. The same-hospital self-pay collection rate was 27.8 percent in the second quarter of 2014, a 90 basis point decline compared to 28.7 percent in the second quarter of 2013. The same-hospital commercial managed care collection rate was 98.3 percent in the second quarter of 2014, a 10 basis point increase compared to 98.2 percent in the second quarter of 2013.

Conifer reported Adjusted EBITDA of $44 million, an increase of $16 million, or 57.1 percent, compared to $28 million in the second quarter of 2013. Conifer’s revenues were $285 million in the second quarter of 2014, an increase of $66 million, or 30.1 percent, compared to $219 million in the second quarter of 2013.

Income from continuing operations in the second quarter of 2014 was $17 million after-tax, or $0.17 per diluted share, excluding $27 million in after-tax impairments, restructuring charges, acquisition-related costs, litigation and investigation costs and loss on debt extinguishment. The comparable after-tax exclusions were $122 million in the second quarter of 2013. Income from continuing operations, excluding these items, was $69 million, or $0.66 per diluted share in the second quarter of 2013.

Net loss attributable to common shareholders in the second quarter of 2014 was $26 million after-tax, or $0.27 per share, compared to a net loss of $50 million after-tax, or $0.49 per share, in the second quarter of 2013. The second quarter of 2014 included a $92 million increase in pre-tax interest expense compared to the second quarter of 2013. This increased interest expense is substantially due to the $4.6 billion of financing related to the Vanguard acquisition and the $300 million used to finance share repurchases since March 31, 2013.

Cash and cash equivalents were $406 million at June 30, 2014 compared to $113 million at December 31, 2013. Approximately $143 million of net revenues related to the California Provider Fee program, the Texas Medicaid disproportionate share funding, and the Texas uncompensated care 1115 Waiver program had not been received by the Company as of June 30, 2014. Accounts receivable days were 48.9 days at June 30, 2014, an improvement of 0.2 days compared to 49.1 days at March 31, 2014.

Outlook for Third Quarter and 2014 Adjusted EBITDA

The Company’s Outlook range for Adjusted EBITDA for the third quarter of 2014 is $400 million to $450 million and earnings per share in a range of a loss of $0.30 per share to income of $0.21 per share. No revenue related to the California Provider Fee program is assumed in this third quarter Outlook. Electronic health records incentives are assumed to contribute approximately $5 million to the third quarter’s Adjusted EBITDA.

The Company raised its 2014 Adjusted EBITDA Outlook range to $1.85 billion to $1.95 billion.

Management’s Webcast Discussion of Second Quarter Results

Tenet management will discuss the Company’s second quarter 2014 results on a 10:00 a.m. (ET) webcast on August 5, 2014. Investors can access the webcast through Tenet’s website at www.tenethealth.com/investors. A set of slides that will be referred to on the conference call is available on the section of the Company’s website relating to 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 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.

About Tenet

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 190 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 June 30,
2014   %   2013   %   Change
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 4,362 $ 2,629 65.9 %
Less: Provision for doubtful accounts   320     207   54.6 %
Net operating revenues 4,042 100.0 % 2,422 100.0 % 66.9 %
Operating expenses:
Salaries, wages and benefits 1,956 48.4 % 1,166 48.1 % 67.8 %
Supplies 649 16.1 % 387 16.0 % 67.7 %
Other operating expenses, net 1,035 25.5 % 567 23.4 % 82.5 %
Electronic health record incentives (58 ) (1.4 ) % (34 ) (1.4 ) % 70.6 %
Depreciation and amortization 209 5.2 % 121 5.0 % 72.7 %
Impairment and restructuring charges, and acquisition-related costs 32 0.8 % 11 0.5 %
Litigation and investigation costs   12   0.3 %   2   0.1 %
Operating income 207 5.1 % 202 8.3 %
Interest expense (190 ) (98 )
Loss from early extinguishment of debt (171 )
Investment earnings       1  
Income (loss) from continuing operations, before income taxes 17 (66 )
Income tax benefit (expense)   (8 )   20  

Income (loss) from continuing operations, before discontinued operations

9 (46 )
Discontinued operations:
Income (loss) from operations (7 ) 6
Litigation and investigation costs (18 ) 0
Income tax benefit (expense)   9     (3 )
Income (loss) from discontinued operations   (16 )   3  
Net loss (7 ) (43 )
Less: Net income attributable to noncontrolling interests   19     7  
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (26 ) $ (50 )
Amounts attributable to Tenet Healthcare Corporation common shareholders
Loss from continuing operations, net of tax $ (10 ) $ (53 )
Income (loss) from discontinued operations, net of tax   (16 )   3  
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (26 ) $ (50 )
Earnings (loss) per share attributable to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ (0.11 ) $ (0.52 )
Discontinued operations   (0.16 )   0.03  
$ (0.27 ) $ (0.49 )
Diluted
Continuing operations $ (0.11 ) $ (0.52 )
Discontinued operations   (0.16 )   0.03  
$ (0.27 ) $ (0.49 )

Weighted average shares and dilutive securities outstanding (in thousands):

Basic 97,677 103,010
Diluted* 97,677 103,010

 

*Had we generated income from continuing operations available to shareholders in the three months ended June 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 2,123 and 2,326 shares, respectively.

 

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in millions except per share amounts)       Six Months Ended June 30,
2014   %   2013   %   Change
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 8,668 $ 5,223 66.0 %
Less: Provision for doubtful accounts   700     414   69.1 %
Net operating revenues 7,968 100.0 % 4,809 100.0 % 65.7 %
Operating expenses:
Salaries, wages and benefits 3,877 48.7 % 2,327 48.4 % 66.6 %
Supplies 1,277 16.0 % 771 16.0 % 65.6 %
Other operating expenses, net 2,034 25.5 % 1,135 23.6 % 79.2 %
Electronic health record incentives (67 ) (0.8 ) % (34 ) (0.7 ) % 97.1 %
Depreciation and amortization 402 5.0 % 235 4.9 % 71.1 %
Impairment and restructuring charges, and acquisition-related costs 53 0.7 % 25 0.5 %
Litigation and investigation costs   15   0.2 %   2   0.1 %
Operating income 377 4.7 % 348 7.2 %
Interest expense (372 ) (201 )
Loss from early extinguishment of debt (348 )
Investment earnings       1  
Income (loss) from continuing operations, before income taxes 5 (200 )
Income tax benefit (expense)   (7 )   73  

Net loss from continuing operations, before discontinued operations

(2 ) (127 )
Discontinued operations:
Income (loss) from operations (15 ) 3
Litigation and investigation costs (18 )
Income tax benefit (expense)   12     (2 )
Income (loss) from discontinued operations   (21 )   1  
Net loss (23 ) (126 )
Less: Net income attributable to noncontrolling interests   35     12  
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (58 ) $ (138 )
Amounts attributable to Tenet Healthcare Corporation common shareholders
Loss from continuing operations, net of tax $ (37 ) $ (139 )
Income (loss) from discontinued operations, net of tax   (21 )   1  
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (58 ) $ (138 )
Earnings (loss) per share attributable to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ (0.38 ) $ (1.34 )
Discontinued operations   (0.22 )   0.01  
$ (0.60 ) $ (1.33 )
Diluted
Continuing operations $ (0.38 ) $ (1.34 )
Discontinued operations   (0.22 )   0.01  
$ (0.60 ) $ (1.33 )

Weighted average shares and dilutive securities outstanding (in thousands):

Basic 97,419 103,557
Diluted* 97,419 103,557

 

*Had we generated income from continuing operations available to shareholders in the six months ended June 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 2,053 and 2,282 shares, respectively.

 
TENET HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
      June 30,     December 31,
(Dollars in millions) 2014 2013
ASSETS
Current assets:
Cash and cash equivalents $ 406 $ 113
Accounts receivable, less allowance for doubtful accounts 2,171 1,965
Inventories of supplies, at cost 264 262
Income tax receivable 34
Current portion of deferred income taxes 633 581
Other current assets   700     789  
Total current assets 4,208 3,710
Investments and other assets 362 405
Deferred income taxes, net of current portion 125 90
Property and equipment, at cost, less accumulated depreciation and amortization 7,771 7,691
Goodwill 3,200 3,042
Other intangible assets, at cost, less accumulated amortization   1,241     1,192  
Total assets $ 16,907   $ 16,130  
 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 622 $ 149
Accounts payable 1,015 1,075
Accrued compensation and benefits 669 631
Professional and general liability reserves 162 156
Accrued interest payable 207 198
Other current liabilities   709     719  
Total current liabilities 3,384 2,928
Long-term debt, net of current portion 10,942 10,690
Professional and general liability reserves 567 543
Defined benefit plan obligations 380 398
Other long-term liabilities   484     446  
Total liabilities 15,757 15,005
Commitments and contingencies
Redeemable noncontrolling interests in equity of consolidated subsidiaries 277 247
Equity:
Shareholders’ equity:
Common stock 7 7
Additional paid-in capital 4,594 4,572
Accumulated other comprehensive loss (20 ) (24 )
Accumulated deficit (1,480 ) (1,422 )
Common stock in treasury, at cost   (2,378 )   (2,378 )
Total shareholders’ equity 723 755
Noncontrolling interests   150     123  
Total equity   873     878  
Total liabilities and equity $ 16,907   $ 16,130  
 
 

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in millions)       Six Month Ended
June 30,
2014     2013
Net loss $ (23 ) $ (126 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 402 235
Provision for doubtful accounts 700 414
Deferred income tax benefit (7 ) (76 )
Stock-based compensation expense 26 19
Impairment and restructuring charges, and acquisition-related costs 53 25
Litigation and investigation costs 15 2
Loss from early extinguishment of debt 348
Amortization of debt discount and debt issuance costs 14 9
Pre-tax (income) loss from discontinued operations 33 (3 )
Other items, net (9 ) (18 )
Changes in cash from operating assets and liabilities:
Accounts receivable (937 ) (445 )
Inventories and other current assets 78 (166 )
Income taxes (17 ) (4 )
Accounts payable, accrued expenses and other current liabilities (32 ) (65 )
Other long-term liabilities 47 5
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements (84 ) (19 )
Net cash used in operating activities from discontinued operations, excluding income taxes   (12 )   (7 )
Net cash provided by operating activities 247 128
Cash flows from investing activities:
Purchases of property and equipment — continuing operations (523 ) (256 )
Purchases of businesses or joint venture interests, net of cash acquired (42 ) (16 )
Proceeds from sales of marketable securities, long-term investments and other assets 3 3
Other long-term assets (14 ) 6
Other items, net       3  
Net cash used in investing activities (576 ) (260 )
Cash flows from financing activities:
Repayments of borrowings under credit facility (1,300 ) (620 )
Proceeds from borrowings under credit facility 895 653
Repayments of other borrowings (68 ) (1,967 )
Proceeds from other borrowings 1,108 1,907
Repurchases of common stock (192 )
Deferred debt issuance costs (19 ) (30 )
Distributions paid to noncontrolling interests (20 ) (10 )
Contributions from noncontrolling interests 13 98
Proceeds from exercise of stock options 11 21
Other items, net   2     (2 )
Net cash provided by (used in) financing activities   622     (142 )
Net increase (decrease) in cash and cash equivalents 293 (274 )
Cash and cash equivalents at beginning of period   113     364  
Cash and cash equivalents at end of period $ 406   $ 90  
Supplemental disclosures:
Interest paid, net of capitalized interest $ (360 ) $ (226 )
Income tax payments, net $ (19 ) $ (8 )
 
 

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 June 30,     Six Months Ended June 30,
2014   2013   Change 2014   2013   Change
 
Net inpatient revenues $ 1,540 $ 1,542 (0.1

)%

$ 3,109 $ 3,078 1.0 %  
Net outpatient revenues $ 927 $ 844 9.8 % $ 1,786 $ 1,657 7.8 %
 
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 13,196 13,180 0.1 % 13,187 13,180 0.1 %
Utilization of licensed beds 48.7 % 47.3 % 1.4 % * 49.8 % 49.1 % 0.7 % *
Patient days – total 584,251 567,390 3.0 % 1,189,293 1,170,675 1.6 %
Adjusted patient days 948,144 909,720 4.2 % 1,897,547 1,849,560 2.6 %
Net inpatient revenue per patient day $ 2,636 $ 2,718 (3.0

)%

$ 2,614 $ 2,629 (0.6

)%

Total admissions 124,720 120,722 3.3 % 249,171 246,651 1.0 %
Adjusted patient admissions 204,637 195,440 4.7 % 401,492 393,105 2.1 %
Charity and uninsured admissions 7,919 8,831 (10.3

)%

16,306 17,434 (6.5

)%

Net inpatient revenue per admission $ 12,348 $ 12,773 (3.3

)%

$ 12,477 $ 12,479 %
Average length of stay (days) 4.68 4.70 (0.4

)%

4.77 4.75 0.4 %
Total surgeries 124,152 108,669 14.2 % 238,886 210,082 13.7 %
Admissions through emergency department 80,529 75,608 6.5 % 161,439 155,816 3.6 %
Emergency department visits 432,858 399,702 8.3 % 847,051 801,780 5.6 %

Total emergency department admissions and visits

513,387 475,310 8.0 % 1,008,490 957,596 5.3 %
Outpatient visits 1,140,595 1,072,712 6.3 % 2,221,269 2,127,501 4.4 %
Charity and uninsured outpatient visits 108,675 114,333 (4.9

)%

220,532 224,573 (1.8

)%

Net outpatient revenue per visit $ 813 $ 787 3.3 % $ 804 $ 779 3.2 %
Net patient revenue per adjusted patient admission $ 12,055 $ 12,208 (1.3

)%

$ 12,192 $ 12,045 1.2 %
 
Net Patient Revenues from:
Medicare 21.3 % 21.0 % 0.3 % * 21.6 % 22.0 % (0.4

)%

*
Medicaid 7.2 % 9.9 % (2.7

)%

* 7.3 % 9.0 % (1.7

)%

*
Managed care 61.7 % 58.1 % 3.6 % * 60.6 % 58.0 % 2.6 % *
Indemnity, self-pay and other 9.8 % 11.0 % (1.2

)%

* 10.5 % 11.0 % (0.5

)%

*
 
* 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 June 30,     Six Months Ended June 30,
2014   2013   Change 2014   2013   Change
 
Net inpatient revenues $ 2,393 $ 1,542 55.2 % $ 4,833 $ 3,078 57.0 %  
Net outpatient revenues $ 1,448 $ 844 71.6 % $ 2,794 $ 1,657 68.6 %
 
Number of acute care hospitals (at end of period) 79 49 30 * 79 49 30 *
Licensed beds (at end of period) 20,553 13,180 55.9 % 20,553 13,180 55.9 %
Average licensed beds 20,370 13,180 54.6 % 20,313 13,180 54.1 %
Utilization of licensed beds 48.9 % 47.3 % 1.6 % * 49.9 % 49.1 % 0.8 % *
Patient days – total 907,093 567,390 59.9 % 1,836,257 1,170,675 56.9 %
Adjusted patient days 1,563,681 909,720 71.9 % 3,089,060 1,849,560 67.0 %
Net inpatient revenue per patient day $ 2,638 $ 2,718 (2.9

)%

$ 2,632 $ 2,629 0.1 %
Total admissions 194,641 120,722 61.2 % 388,914 246,651 57.7 %
Adjusted patient admissions 337,509 195,440 72.7 % 661,319 393,105 68.2 %
Charity and uninsured admissions 10,927 8,831 23.7 % 23,457 17,434 34.5 %
Net inpatient revenue per admission $ 12,294 $ 12,773 (3.8

)%

$ 12,427 $ 12,479 (0.4

)%

Average length of stay (days) 4.66 4.70 (0.9

)%

4.72 4.75 (0.6

)%

Total surgeries 173,664 108,669 59.8 % 335,946 210,082 59.9 %
Admissions through emergency department 122,086 75,608 61.5 % 244,687 155,816 57.0 %
Emergency department visits 702,009 399,702 75.6 % 1,367,011 801,780 70.5 %

Total emergency department admissions and visits

824,095 475,310 73.4 % 1,611,698 957,596 68.3 %
Outpatient visits 2,066,051 1,072,712 92.6 % 4,013,738 2,127,501 88.7 %
Charity and uninsured outpatient visits 169,766 114,333 48.5 % 335,014 224,573 49.2 %
Net outpatient revenue per visit $ 701 $ 787 (10.9

)%

$ 696 $ 779 (10.7

)%

Net patient revenue per adjusted patient admission $ 11,380 $ 12,208 (6.8

)%

$ 11,533 $ 12,045 (4.3

)%

 
Net Patient Revenues from:
Medicare 22.5 % 21.0 % 1.5 % * 22.6 % 22.0 % 0.6 % *
Medicaid 9.9 % 9.9 % % * 8.8 % 9.0 % (0.2

)%

*
Managed care 58.0 % 58.1 % (0.1

)%

* 57.9 % 58.0 % (0.1

)%

*
Indemnity, self-pay and other 9.6 % 11.0 % (1.4

)%

* 10.7 % 11.0 % (0.3

)%

*
 
* 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    

Six Months Ended

03/31/14     06/30/14 06/30/14
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 4,306 $ 4,362 $ 8,668
Less: Provision for doubtful accounts   380     320     700  
Net operating revenues 3,926 4,042 7,968
Operating expenses:
Salaries, wages and benefits 1,921 1,956 3,877
Supplies 628 649 1,277
Other operating expenses, net 999 1,035 2,034
Electronic health record incentives (9 ) (58 ) (67 )
Depreciation and amortization 193 209 402
Impairment and restructuring charges, and acquisition-related costs 21 32 53
Litigation and investigation costs   3     12     15  
Operating income 170 207 377
Interest expense   (182 )   (190 )   (372 )
Income (loss) from continuing operations, before income taxes (12 ) 17 5
Income tax benefit (expense)   1     (8 )   (7 )
Income (loss) from continuing operations, before discontinued operations (11 ) 9 (2 )
Discontinued operations:
Loss from operations (8 ) (7 ) (15 )
Litigation and investigation costs (18 ) (18 )
Income tax benefit   3     9     12  
Net loss from discontinued operations   (5 )   (16 )   (21 )
Net loss (16 ) (7 ) (23 )
Less: Net income attributable to noncontrolling interests   16     19     35  
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (32 ) $ (26 ) $ (58 )
Amounts attributable to Tenet Healthcare Corporation common shareholders
Loss from continuing operations, net of tax $ (27 ) $ (10 ) $ (37 )
Loss from discontinued operations, net of tax   (5 )   (16 )   (21 )
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (32 ) $ (26 ) $ (58 )
Net loss per share attributable to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ (0.28 ) $ (0.11 ) $ (0.38 )
Discontinued operations   (0.05 )   (0.16 )   (0.22 )
$ (0.33 ) $ (0.27 ) $ (0.60 )
Diluted
Continuing operations $ (0.28 ) $ (0.11 ) $ (0.38 )
Discontinued operations   (0.05 )   (0.16 )   (0.22 )
$ (0.33 ) $ (0.27 ) $ (0.60 )

Weighted average shares and dilutive securities outstanding (in thousands):

Basic 97,161 97,677 97,419
Diluted 97,161 97,677 97,419
 
 

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     Six Months Ended
03/31/14     06/30/14 06/30/14
 
Net inpatient revenues $ 1,569 $ 1,540 $ 3,109
Net outpatient revenues $ 859 $ 927 $ 1,786
 
Number of acute care hospitals (at end of period) 49 49 49
Licensed beds (at end of period) 13,178 13,231 13,231
Average licensed beds 13,178 13,196 13,187
Utilization of licensed beds 51.0 % 48.7 % 49.8 %
Patient days – total 605,042 584,251 1,189,293
Adjusted patient days 949,403 948,144 1,897,547
Net inpatient revenue per patient day $ 2,593 $ 2,636 $ 2,614
Total admissions 124,451 124,720 249,171
Adjusted patient admissions 196,855 204,637 401,492
Charity and uninsured admissions 8,387 7,919 16,306
Net inpatient revenue per admission $ 12,607 $ 12,348 $ 12,477
Average length of stay (days) 4.86 4.68 4.77
Total surgeries 114,734 124,152 238,886
Admissions through emergency department 80,910 80,529 161,439
Emergency department visits 414,193 432,858 847,051
Total emergency department admissions and visits 495,103 513,387 1,008,490
Outpatient visits 1,080,674 1,140,595 2,221,269
Charity and uninsured outpatient visits 111,857 108,675 220,532
Net outpatient revenue per visit $ 795 $ 813 $ 804
Net patient revenue per adjusted patient admission $ 12,334 $ 12,055 $ 12,192
 
Net Patient Revenues from:
Medicare 22.0 % 21.3 % 21.6 %
Medicaid 7.4 % 7.2 % 7.3 %
Managed care 59.5 % 61.7 % 60.6 %
Indemnity, self-pay and other 11.1 % 9.8 % 10.5 %
 
 

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     Six Months Ended
03/31/14     06/30/14 06/30/14
 
Net inpatient revenues $ 2,440 $ 2,393 $ 4,833
Net outpatient revenues $ 1,346 $ 1,448 $ 2,794
 
Number of acute care hospitals (at end of period) 77 79 79
Licensed beds (at end of period) 20,279 20,553 20,553
Average licensed beds 20,263 20,370 20,313
Utilization of licensed beds 51.0 % 48.9 % 49.9 %
Patient days – total 929,164 907,093 1,836,257
Adjusted patient days 1,525,379 1,563,681 3,089,060
Net inpatient revenue per patient day $ 2,626 $ 2,638 $ 2,632
Total admissions 194,273 194,641 388,914
Adjusted patient admissions 323,810 337,509 661,319
Charity and uninsured admissions 12,530 10,927 23,457
Net inpatient revenue per admission $ 12,560 $ 12,294 $ 12,427
Average length of stay (days) 4.78 4.66 4.72
Total surgeries 162,282 173,664 335,946
Admissions through emergency department 122,601 122,086 244,687
Emergency department visits 665,002 702,009 1,367,011
Total emergency department admissions and visits 787,603 824,095 1,611,698
Outpatient visits 1,947,687 2,066,051 4,013,738
Charity and uninsured outpatient visits 165,248 169,766 335,014
Net outpatient revenue per visit $ 691 $ 701 $ 696
Net patient revenue per adjusted patient admission $ 11,692 $ 11,380 $ 11,533
 
Net Patient Revenues from:
Medicare 22.6 % 22.5 % 22.6 %
Medicaid 7.7 % 9.9 % 8.8 %
Managed care 57.8 % 58.0 % 57.9 %
Indemnity, self-pay and other 11.9 % 9.6 % 10.7 %
 
 
TENET HEALTHCARE CORPORATION
SEGMENT REPORTING
(Unaudited)
         
June 30,   December 31,
  2014 2013
Assets
Hospital Operations and other $ 16,577 $ 15,874
Conifer   330     256  
Total $ 16,907   $ 16,130  
 
Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
Capital expenditures:
Hospital Operations and other $ 237 $ 117 $ 510 $ 248
Conifer   5     6     13     8  
Total $ 242   $ 123   $ 523   $ 256  
 
Net operating revenues:
Hospital Operations and other $ 3,895 $ 2,297 $ 7,676 $ 4,565
Conifer
Tenet 138 94 278 186
Other customers   147     125     292     244  
4,180 2,516 8,246 4,995
Intercompany eliminations   (138 )   (94 )   (278 )   (186 )
Total $ 4,042   $ 2,422   $ 7,968   $ 4,809  
 
Adjusted EBITDA:
Hospital Operations and other $ 416 $ 308 $ 755 $ 550
Conifer   44     28     92     60  
Total $ 460   $ 336   $ 847   $ 610  
 
Depreciation and amortization:
Hospital Operations and other $ 204 $ 115 $ 392 $ 225
Conifer   5     6     10     10  
Total $ 209   $ 121   $ 402   $ 235  
 
Adjusted EBITDA $ 460 $ 336 $ 847 $ 610
Depreciation and amortization (209 ) (121 ) (402 ) (235 )
Impairments and restructuring charges,
and acquisition-related costs
(32 ) (11 ) (53 ) (25 )
Litigation and investigation costs (12 ) (2 ) (15 ) (2 )
Interest expense (190 ) (98 ) (372 ) (201 )
Loss from early extinguishment of debt (171 ) (348 )
Investment earnings       1         1  
Income (loss) from continuing operations before income taxes $ 17   $ (66 ) $ 5   $ (200 )
 

(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 six months ended June 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 June 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
June 30,
    Six Months Ended
June 30,
2014   2013 2014   2013
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (26 ) $ (50 ) $ (58 ) $ (138 )
Less: Net income attributable to noncontrolling interests (19 ) (7 ) (35 ) (12 )
Income (loss) from discontinued operations, net of tax   (16 )   3     (21 )   1  
Income (loss) from continuing operations 9 (46 ) (2 ) (127 )
Income tax benefit (expense) (8 ) 20 (7 ) 73
Investment earnings 1 1
Loss from early extinguishment of debt (171 ) (348 )
Interest expense   (190 )   (98 )   (372 )   (201 )
Operating income 207 202 377 348
Litigation and investigation costs (12 ) (2 ) (15 ) (2 )
Impairment and restructuring charges, and acquisition-related costs (32 ) (11 ) (53 ) (25 )
Depreciation and amortization   (209 )   (121 )   (402 )   (235 )
Adjusted EBITDA $ 460   $ 336   $ 847   $ 610  
 
Net operating revenues $ 4,042   $ 2,422   $ 7,968   $ 4,809  
 
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) 11.4 % 13.9 % 10.6 % 12.7 %
 
 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP Disclosures

Table #2 - Reconciliation of Adjusted Free Cash Flow
(Unaudited)
(Dollars in millions)       Three Months Ended
June 30,
    Six Months Ended
June 30,
2014   2013 2014   2013
Net cash provided by operating activities $ 266 $ 160 $ 247 $ 128
Less:

Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements

(54 ) (12 ) (84 ) (19 )
Net cash provided by (used in) operating activities from discontinued operations   2     (2 )   (12 )   (7 )
Adjusted net cash provided by operating activities – continuing operations 318 174 343 154
Purchases of property and equipment – continuing operations   (242 )   (123 )   (523 )   (256 )
Adjusted free cash flow – continuing operations $ 76   $ 51   $ (180 ) $ (102 )
 
 
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)       Q3 2014     2014
Low   High Low   High
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ (48 ) $ 7

$

(21

)

$ 112
Less: Net (income) attributable to noncontrolling interests (20 ) (15 ) (75 ) (65 )
Loss from discontinued operations, net of tax   (5 )   0     (30 )   (15 )
Income (loss) from continuing operations $ (23 ) $ 22 $ 84 $ 192
Income tax (expense) benefit(a)   16     (14 )   (64 )   (136 )
Income (loss) from continuing operations, before income taxes $ (39 ) $ 36 $ 148 $ 328
Loss from early extinguishment of debt (24 ) (24 ) (24 ) (24 )
Interest expense, net   (195 )   (185 )   (760 )   (730 )
Operating income $ 180 $ 245 $ 932 $ 1,082
Impairment and restructuring charges, acquisition-related costs and litigation costs and settlements(b) 0 0 (68 ) (68 )
Depreciation and amortization   (220 )   (205 )   (850 )   (800 )
Adjusted EBITDA $ 400   $ 450   $ 1,850   $ 1,950  
 
Net operating revenues $ 3,800   $ 4,000   $ 16,000   $ 16,250  
 
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) 10.5 % 11.3 % 11.6 % 12.0 %

(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 except per share amounts) Q3 2014     2014
Low   High Low   High
Adjusted EBITDA     $ 400 $ 450 $ 1,850 $ 1,950

Depreciation and amortization

(220 ) (205 ) (850 ) (800 )
Interest expense, net   (195 )   (185 )   (760 )   (730 )
Income (loss) from continuing operations before income taxes $ (15 ) $ 60 $ 240 $ 420
Income tax (expense) benefit (a)   6     (24 )   (100 )   (172 )
Normalized income (loss) from continuing operations $ (9 ) $ 36 $ 140 $ 248
Net (income) attributable to noncontrolling interests   (20 )   (15 )   (75 )   (65 )
Net income (loss) attributable to common shareholders $ (29 ) $ 21   $ 65   $ 183  
 
Fully diluted weighted average share outstanding (in millions) 98 101 100 100
 
Normalized fully diluted earnings per share – continuing operations $ (0.30 ) $ 0.21 $ 0.65 $ 1.83
 
(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 31, 2014
(Unaudited)
   
(Dollars in millions)     2014
Low     High
Net cash provided by operating activities $ 951 $ 1,011
Less:

Payments for restructuring charges, acquisition-related costs and litigation costs and settlements(a)

(84 ) (84 )
Net cash used in operating activities from discontinued operations   (15 )   (5 )
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