Tenet Reports Results for the Third Quarter Ended September 30, 2017

  • Reported a net loss from continuing operations attributable to Tenet shareholders of $366 million or $3.63 per diluted share. Adjusted diluted loss per share from continuing operations was $0.17.
  • Adjusted EBITDA was $507 million including an estimated $30 million impact due to lower revenues and higher expenses related to Hurricanes Harvey and Irma and $10 million of lower-than-anticipated revenues from the Texas Medicaid Waiver and Florida Medicaid programs.
  • Same-hospital patient revenue decreased 2.3% and reflects a 2.2% decrease in adjusted admissions and a 0.2% decrease in revenue per adjusted admission. Hospital segment Adjusted EBITDA totaled $269 million.
  • Ambulatory Care segment revenue increased 0.9% on a same-facility system-wide basis, with cases decreasing 2.4% and revenue per case increasing 3.4%. Adjusted EBITDA for the Ambulatory segment was $159 million, a 1.3% increase, representing a margin of 34.0%.
  • Revenue from Conifer Health Solutions increased 0.8% with revenue from third parties increasing 5.4%. Conifer generated $79 million of Adjusted EBITDA, flat with the third quarter of 2016, representing a margin of 19.7%.
  • Net cash provided by operating activities in the nine months of 2017 was $709 million, a $142 million decrease when compared to $851 million in the first nine months of 2016. Free Cash Flow was $217 million in the first nine months of 2017, a $20 million decrease when compared to $237 million in the first nine months of 2016. Adjusted Free Cash Flow was $308 million in the first nine months of 2017, a $60 million decrease when compared to $368 million in the first nine months of 2016.
  • 2017 Outlook has been lowered to reflect a net loss from continuing operations attributable to Tenet common shareholders of a loss of $372 million to a loss of $367 million, Adjusted EBITDA of $2.375 billion to $2.425 billion, a diluted loss per share from continuing operations of a loss of $3.68 to a loss of $3.63 and Adjusted diluted earnings per share from continuing operations of $0.59 to $0.74.

Monday, November 6, 2017 3:20 pm CST

Dateline:

DALLAS

Public Company Information:

NYSE:
THC
"Consistent with the announcement that we made in late October, we delivered Adjusted EBITDA within our Outlook range for the quarter. Reflecting on the impact of Hurricanes Harvey and Irma and a softer volume environment, we are lowering our full year 2017 Adjusted EBITDA Outlook to $2.375 billion to $2.425 billion"

DALLAS--(BUSINESS WIRE)--Tenet Healthcare Corporation (NYSE: THC) reported a net loss from continuing operations attributable to Tenet shareholders of $366 million in the third quarter of 2017 compared to a $9 million net loss from continuing operations in the third quarter of 2016. Adjusted EBITDA was $507 million in the third quarter of 2017 compared to $582 million in the third quarter of 2016.

“Consistent with the announcement that we made in late October, we delivered Adjusted EBITDA within our Outlook range for the quarter. Reflecting on the impact of Hurricanes Harvey and Irma and a softer volume environment, we are lowering our full year 2017 Adjusted EBITDA Outlook to $2.375 billion to $2.425 billion,” said Ronald A. Rittenmeyer, executive chairman and CEO. “We are partially offsetting the volume declines with tighter cost controls, but the one-time impacts are difficult to recover in a short period of time. We are challenging ourselves to improve accountability, agility and decision making, changing how we manage our business day-to-day, and reiterating our focus on quality and service.”

The $75 million year-over-year decline in Adjusted EBITDA was primarily attributable to the following items:

(i) a $55 million decline in California Provider Fee revenue, with no revenue being recorded under the program in the third quarter of 2017 since the 2017 program has not yet been approved by the Centers for Medicare and Medicaid Services (CMS); this compares to $55 million in the third quarter of 2016;

(ii) an estimated $30 million of lower revenues and higher expenses associated with Hurricanes Harvey and Irma, prior to any insurance recoveries the Company may receive in future periods. Approximately $20 million of the $30 million impacted the Hospital Operations and other segment and the remaining $10 million impacted the Ambulatory Care segment.

(iii) approximately $20 million due to the sale of the Company’s hospitals and related assets in Houston, effective August 1, 2017.

Hospital Operations and Other Segment

Net operating revenues in the Hospital Operations and other segment was $3.856 billion, down 4.6 percent from $4.040 billion in the third quarter of 2016; in order to improve comparability, these revenue figures exclude revenue generated by the Company’s health plans in both periods since the Company is exiting this business. The decline was primarily due to: (i) a decline in adjusted admissions, including the impact of Hurricane Irma; (ii) the Company not being able to record revenue under the California Provider Fee Program in the third quarter of 2017; and (iii) the sale of our former hospitals and related assets in Houston.

On a same-hospital basis, patient revenue was $3.777 billion, down 2.3 percent from $3.867 billion in the third quarter of 2016. The decline was primarily due to a 2.2 percent decline in adjusted admissions and a 0.2 percent decline in net patient revenue per adjusted admission. The Company’s same-hospital revenue per adjusted admission was lowered by approximately 150 basis points due to the lack of CMS approval of the California Provider Fee Program. The Company estimates that Hurricane Irma lowered same-hospital admissions and adjusted admissions by approximately 50 basis points. Excluding the impact of the hurricane as well as patients that were insured by Humana in both the third quarters of 2016 and 2017, same-hospital admissions declined 1.2 percent and adjusted admissions declined 0.8 percent.

Adjusted EBITDA in Tenet’s hospital segment was $269 million, representing a decline of $77 million or 22.3 percent as compared to $346 million in the third quarter of 2016. The $77 million decline in Adjusted EBITDA in the hospital segment was primarily driven by: (i) the $55 million decline in revenue from the California Provider Fee program; (ii) an estimated $20 million of lower revenues and higher expenses associated with Hurricane Irma; and (iii) approximately $20 million due to the sale of our former hospitals and related assets in Houston. In addition, a $33 million increase in same-hospital self-pay net revenues contributed to a $26 million increase in the provision for doubtful accounts on a same hospital basis, from $308 million in the third quarter of 2016 to $334 million in the third quarter of 2017, which placed pressure on the year-over-year EBITDA comparison.

Tenet’s health plan business generated losses of $6 million in the third quarter of 2017 versus a loss of $6 million on the EBITDA line in the third quarter of 2016. The revenue and expenses associated with the Company’s health plan operations are included in Tenet’s consolidated statements of operations; however, the results are excluded from Adjusted EBITDA in both periods.

Selected operating expenses in the segment, defined as the sum of salaries, wages and benefits, supplies and other operating expenses, increased 1.7 percent on a per adjusted admission basis in the third quarter of 2017.

Exchanges

Tenet’s same-hospital exchange admissions were 4,856 in the third quarter of 2017, down 6.8 percent from the third quarter of 2016. Same-hospital exchange outpatient visits were 49,089 in the third quarter of 2017, up 4.3 percent from the third quarter of 2016.

Uncompensated Care

Tenet’s provision for doubtful accounts was $355 million in the third quarter of 2017, representing a ratio of 7.2 percent of revenues before bad debt, as compared to $367 million in the third quarter of 2016, or 7.0 percent of revenues before bad debt. The increase in the bad debt ratio was primarily attributable to a $33 million increase in same-hospital self-pay revenues.

Tenet’s uncompensated care costs, defined as the sum of the provision for doubtful accounts, charity care write-offs and uninsured discounts, were $1.361 billion and $1.318 billion in the third quarters of 2017 and 2016, respectively, including $1.006 billion and $951 million, respectively, of charity care write-offs and uninsured discounts that were offered through Tenet’s Compact with Uninsured Patients. Uncompensated care in the third quarter of 2017 represented 22.9 percent of revenue before bad debts, uninsured discounts and charity care write-offs, up from 21.4 percent in the third quarter of 2016. Nearly all of Tenet’s uncompensated care is associated with the Hospital Operations and other segment.

Uninsured plus charity admissions decreased by 210 admissions, or 2.0 percent on a same-hospital basis in the third quarter of 2017 compared to the third quarter of 2016. Uninsured plus charity outpatient visits decreased by 15,694 visits, or 11.8 percent, on a same-hospital basis.

Ambulatory Care Segment

During the third quarter of 2017, the Ambulatory segment produced net operating revenues of $468 million, representing an increase of 4.5 percent as compared to $448 million in the third quarter of 2016. In addition, the Ambulatory segment generated Adjusted EBITDA of $159 million, up 1.3 percent from $157 million in the third quarter of 2016 and Adjusted EBITDA less facility-level noncontrolling interest was $104 million, up 1.0 percent from $103 million in the third quarter of 2016. Hurricanes Harvey and Irma lowered EBITDA and EBITDA less facility-level noncontrolling interest by approximately $10 million and $4 million, respectively, during the third quarter of 2017.

The results of many of the facilities in which the Ambulatory segment has an investment are not consolidated by Tenet. To help analyze the segment’s results of operations, management uses system-wide measures which include revenues and cases of both consolidated and unconsolidated facilities. On a same-facility system-wide basis, revenue in the Ambulatory segment increased 0.9 percent, with cases decreasing 2.4 percent and revenue per case increasing 3.4 percent. Hurricanes Harvey and Irma lowered same-facility system-wide case growth by approximately 210 basis points. Also, one less surgical day in the quarter lowered case growth 100 basis points. On a same-day basis and excluding the hurricanes, same-facility system-wide revenue increased 4.0 percent and cases were up 0.7 percent.

Conifer Segment

During the third quarter of 2017, Conifer’s revenue increased 0.8 percent to $401 million, up from $398 million in the third quarter of 2016. Revenue from third party customers increased 5.4 percent to $252 million. Conifer generated $79 million of Adjusted EBITDA in both the third quarters of 2017 and 2016.

Net Income and Earnings Per Share

Tenet reported a net loss from continuing operations attributable to Tenet shareholders of $366 million, or a loss of $3.63 per diluted share, in the third quarter of 2017 compared to a net loss of $9 million, or a loss of $0.09 per diluted share, in the third quarter of 2016.

As shown on Table #2, the net loss from continuing operations attributable to Tenet shareholders of approximately $366 million included: (i) a $329 million pre-tax impairment and restructuring charge, primarily related to the write-down of assets held for sale in Philadelphia and the United Kingdom to their estimated fair value; (ii) a $104 million pre-tax gain on sale, primarily related to the sale of the Company’s former hospitals and related assets in Houston; (iii) a $138 million pre-tax loss from the early extinguishment of debt related to the Company’s refinancing transactions and debt redemption in the quarter; and (iv) other items that lowered pre-tax income by $12 million. These items collectively lowered pre-tax income by approximately $375 million, lowered after-tax income by approximately $349 million and lowered diluted earnings per share by approximately $3.46. The net loss in the third quarter of 2017 does not include the pre-tax restructuring charge of approximately $40 million related to the $150 million cost reduction initiative that was announced on October 27, 2017; this charge will be recorded in the fourth quarter of 2017.

After adjusting for the items listed on Table #2, Tenet recorded an Adjusted net loss from continuing operations attributable to Tenet shareholders of $17 million, or a loss of $0.17 per diluted share, during the third quarter of 2017, as compared to Adjusted net income from continuing operations attributable to Tenet shareholders of $20 million, or $0.20 per diluted share, in the third quarter of 2016.

A reconciliation of GAAP net income (loss) attributable to Tenet shareholders to Adjusted net income (loss) from continuing operations and Adjusted diluted earnings (loss) per share from continuing operations attributable to Tenet shareholders is contained in Table #2 at the end of this release.

Cash Flow and Liquidity

Cash and cash equivalents were $429 million at September 30, 2017 compared to $475 million at June 30, 2017. The Company had no outstanding borrowings on its $1 billion credit line as of September 30, 2017. Accounts receivable days outstanding from continuing operations were 55.6 at September 30, 2017 compared to 56.5 at December 31, 2016. The calculation of accounts receivable days outstanding from continuing operations: (i) includes the accounts receivable of the Company’s two hospitals in Philadelphia, MacNeal Hospital in the Chicago-area and the Aspen facilities in the United Kingdom, which have been classified in assets held for sale on the Condensed Consolidated Balance Sheet at September 30, 2017; (ii) excludes revenue from our former hospitals and related assets in Houston, which were divested on August 1, 2017, from the 2016 and 2017 periods; (iii) excludes health plan revenues from the 2016 and 2017 periods; and (iv) excludes California Provider Fee revenues from the 2016 period.

Net cash provided by operating activities for the nine months ended September 30, 2017 was $709 million, representing a $142 million decrease compared to $851 million in the first nine months of 2016. After subtracting $492 million and $614 million of capital expenditures in the nine months ended September 30, 2017 and September 30, 2016, respectively, Free Cash Flow was $217 million in the nine months ended September 30, 2017, representing a $20 million decline compared to $237 million in the comparable period in 2016. Adjusted Free Cash Flow was $308 million in the nine months ended September 30, 2017, representing a $60 million decline from $368 million in the comparable period in 2016. The primary reasons for the decline in cash flow from operations, Free Cash Flow and Adjusted Free Cash Flow during the nine months ended September 30, 2017 versus the comparable period in 2016 include lower earnings in the 2017 period, lower cash flows from our health plan businesses in 2017 of approximately $100 million, and the timing of other working capital items, partially offset by lower capital expenditures of $122 million.

Net cash provided by investing activities was $227 million in the nine months ended September 30, 2017 compared to $150 million of net cash used in investing activities in the comparable period in 2016. The 2017 period included $826 million of proceeds from the sales of facilities and other assets, primarily from the sale of the Company’s Houston-area hospitals effective August 1, 2017 for net pre-tax proceeds of approximately $750 million; the 2016 period included $573 million of proceeds from the sale of the Company’s hospitals and related outpatient facilities in Georgia.

Net cash used in financing activities was $1.223 billion in the nine months ended September 30, 2017 compared to $408 million of net cash used in financing activities in the comparable period in 2016. The 2017 period included: (i) $722 million related to purchases of noncontrolling interests, primarily the Company’s purchase of an additional 23.7 percent of USPI, which increased Tenet’s ownership interest in the USPI joint venture to 80.0 percent; (ii) the refinancing activities that were completed in the second and third quarters of 2017; and (iii) the redemption of $250 million aggregate principal amount of Tenet’s 8.0 percent senior unsecured notes due 2020 on September 11, 2017, which will lower future annual cash interest payments by $20 million.

Reconciliations of net cash provided by operating activities to both Free Cash Flow and Adjusted Free Cash Flow are contained in Table #3 at the end of this release.

Outlook

The Company’s revised Outlook for 2017 includes:

  • Revenue of $18.9 billion to $19.1 billion, excluding approximately $110 million of revenue from the Company’s health plans,
  • Net loss from continuing operations attributable to Tenet common shareholders ranging from a loss of $372 million to a loss of $367 million,
  • Adjusted EBITDA of $2.375 billion to $2.425 billion,
  • Net cash provided by operating activities of $1.0 billion to $1.3 billion,
  • Adjusted Free Cash Flow of $450 million to $650 million,
  • Diluted loss per share from continuing operations attributable to Tenet shareholders ranging from a loss of $3.68 to a loss of $3.63, and
  • Adjusted diluted earnings per share from continuing operations attributable to Tenet shareholders of $0.59 to $0.74.

The Company is lowering the midpoint of its 2017 Adjusted EBITDA Outlook range by $100 million to reflect: (i) approximately $60 million of lower revenues and higher expenses associated with Hurricanes Harvey and Irma, prior to any insurance recoveries the Company may receive in future periods, with approximately $30 million reflected in the Company’s results for the third quarter of 2017 and an additional $30 million included in the Company’s Outlook for the fourth quarter of 2017, primarily related to additional repair costs at facilities that were damaged by the hurricanes; (ii) approximately $15 million of lower-than-anticipated revenue from the Texas and Florida Medicaid programs, of which, $10 million was recognized in the third quarter of 2017; (iii) approximately $17 million of executive severance and related stock-based compensation expense to be recorded in the fourth quarter of 2017; and, (iv) approximately $8 million from other items, primarily lower volume growth, higher bad debt and the timing of Ambulatory acquisitions, partially offset by the Company’s cost reduction initiatives.

The Outlook for 2017 assumes equity in earnings of unconsolidated affiliates of $140 million to $150 million, electronic health record incentives of approximately $10 million, net income attributable to noncontrolling interests of $370 million to $380 million and an average diluted share count of 101 million. In addition, the Outlook assumes that CMS will approve the proposed California Provider Fee program for the 30-month period from January 2017 through June 2019 during the fourth quarter of 2017 and further assumes that the Company will record approximately $220 million to $230 million of revenue and Adjusted EBITDA during 2017 as a result of this program. In 2016, the Company recorded $232 million of revenue under the California Provider Fee program. The Company will not be able to recognize any revenue under the 2017 program until CMS approves the program. Finally, the Adjusted EBITDA Outlook excludes approximately $50 million of losses in 2017 that the Company expects to incur in its health plan business.

The Company’s Outlook for the fourth quarter of 2017 includes:

  • Revenue of $4.8 billion to $5.0 billion, excluding approximately $10 million of revenue from the Company’s health plans,
  • Net income from continuing operations attributable to Tenet shareholders ranging from $102 million to $107 million,
  • Adjusted EBITDA of $771 million to $821 million,
  • Earnings per diluted share from continuing operations attributable to Tenet shareholders ranging from $1.01 to $1.06, and
  • Adjusted earnings per diluted share from continuing operations attributable to Tenet shareholders ranging from $1.20 to $1.35.

The Outlook for the fourth quarter assumes equity in earnings of unconsolidated affiliates of approximately $50 million, $2 million of electronic health record incentives, net income attributable to noncontrolling interests of $116 million to $126 million, a pre-tax restructuring charge of approximately $40 million related to the $150 million cost reduction initiative that was announced on October 27, 2017, and an average diluted share count of 101 million. The Outlook for the fourth quarter of 2017 includes $220 million to $230 million of revenue and Adjusted EBITDA associated with the California Provider Fee program, whereas the Company’s results in the fourth quarter of 2016 included $65 million of revenue and Adjusted EBITDA associated with the program.

Additional details on Tenet’s Outlook for both the fourth quarter and calendar year 2017 are available in Tables #4 and #5 at the end of this press release and in an accompanying slide presentation that is accessible through the Company’s website at www.tenethealth.com/investors.

Management’s Webcast Discussion of Third Quarter Results

Tenet management will discuss the Company’s third quarter 2017 results on a webcast scheduled for 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on November 7, 2017. Investors can access the webcast through the Company’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 is contained in its Form 10-K report for the twelve months ended December 31, 2016 and Form 10-Q report for the period ended September 30, 2017, which will be filed with the Securities and Exchange Commission and posted on the Company’s website before the webcast.

This press release includes certain non-GAAP measures, such as Adjusted EBITDA, Adjusted net income (loss) from continuing operations attributable to Tenet shareholders, Adjusted diluted earnings (loss) per share from continuing operations attributable to Tenet shareholders, Free Cash Flow and Adjusted Free Cash Flow. Reconciliations of these measures to the most comparable GAAP measure are contained in the tables at the end of this release.

Tenet Healthcare Corporation is a diversified healthcare services company with nearly 130,000 employees united around a common mission: to help people live happier, healthier lives. Through its subsidiaries, partnerships and joint ventures, including United Surgical Partners International, the Company operates general acute care and specialty hospitals, ambulatory surgery centers, urgent care centers and other outpatient facilities in the United States and the United Kingdom. Tenet’s Conifer Health Solutions subsidiary provides technology-enabled performance improvement and health management solutions to hospitals, health systems, integrated delivery networks, physician groups, self-insured organizations and health plans. 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, 2016, Form 10-Q for the quarterly period ended September 30, 2017 and other filings with the Securities and Exchange Commission.

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,
  2017   %     2016   %   Change
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 4,941 $ 5,216 (5.3 )%
Less: Provision for doubtful accounts   355     367   (3.3 )%
Net operating revenues 4,586 100.0 % 4,849 100.0 % (5.4 )%
Equity in earnings of unconsolidated affiliates 38 0.8 % 31 0.6 % 22.6 %
Operating expenses:
Salaries, wages and benefits 2,264 49.4 % 2,308 47.6 % (1.9 )%
Supplies 740 16.1 % 767 15.8 % (3.5 )%
Other operating expenses, net 1,120 24.4 % 1,231 25.4 % (9.0 )%
Electronic health record incentives (1 ) 0.0 % (2 ) 0.0 % (50.0 )%
Depreciation and amortization 219 4.8 % 205 4.2 %
Impairment and restructuring charges, and acquisition-related costs 329 7.2 % 31 0.6 %
Litigation and investigation costs 6 0.1 % 4 0.1 %
Gains on sales, consolidation and deconsolidation of facilities   (104 ) (2.3 )%   (3 ) (0.1 )%
Operating income 51 1.1 % 339 7.0 %
Interest expense (257 ) (243 )
Other non-operating expense, net (4 ) (7 )
Loss from early extinguishment of debt   (138 )    
Net income (loss) from continuing operations, before income taxes (348 ) 89
Income tax benefit (expense)   60     (10 )
Net income (loss) from continuing operations, before discontinued operations (288 ) 79
Discontinued operations:
Income (loss) from operations (1 ) 2
Income tax expense       (1 )
Net income (loss) from discontinued operations   (1 )   1  
Net income (loss) (289 ) 80
Less: Net income attributable to noncontrolling interests   78     88  
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (367 ) $ (8 )
Amounts attributable to Tenet Healthcare Corporation common shareholders
Net loss from continuing operations, net of tax $ (366 ) $ (9 )
Net income (loss) from discontinued operations, net of tax   (1 )   1  
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (367 ) $ (8 )
Earnings (loss) per share attributable to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ (3.63 ) $ (0.09 )
Discontinued operations   (0.01 )   0.01  
$ (3.64 ) $ (0.08 )
Diluted
Continuing operations $ (3.63 ) $ (0.09 )
Discontinued operations   (0.01 )   0.01  
$ (3.64 ) $ (0.08 )
Weighted average shares and dilutive securities outstanding (in thousands):
Basic 100,812 99,523
Diluted* 100,812 99,523

*Had we generated income from continuing operations in the three months ended September 30, 2017 and 2016 the effect of employee stock options, restricted stock units and deferred compensation units on the diluted shares calculation would have been an increase of 711 thousand and 1,455 thousand shares, respectively.

         
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
(Dollars in millions except per share amounts) Nine Months Ended September 30,
  2017   %     2016   %   Change
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 15,310 $ 15,856 (3.4 )%
Less: Provision for doubtful accounts   1,109     1,095   1.3 %
Net operating revenues 14,201 100.0 % 14,761 100.0 % (3.8 )%
Equity in earnings of unconsolidated affiliates 95 0.7 % 85 0.6 % 11.8 %
Operating expenses:
Salaries, wages and benefits 6,990 49.3 % 7,012 47.5 % (0.3 )%
Supplies 2,285 16.1 % 2,351 15.9 % (2.8 )%
Other operating expenses, net 3,466 24.4 % 3,686 25.0 % (6.0 )%
Electronic health record incentives (8 ) (0.1 )% (23 ) (0.2 )% (65.2 )%
Depreciation and amortization 662 4.7 % 632 4.3 %
Impairment and restructuring charges, and acquisition related costs 403 2.8 % 81 0.5 %
Litigation and investigation costs 12 0.1 % 291 2.0 %
Gains on sales, consolidation and deconsolidation of facilities   (142 ) (1.0 )%   (151 ) (1.0 )%
Operating income 628 4.4 % 967 6.6 %
Interest expense (775 ) (730 )
Other non-operating expense, net (14 ) (18 )
Loss from early extinguishment of debt   (164 )    
Net income (loss) from continuing operations, before income taxes (325 ) 219
Income tax benefit (expense)   105     (61 )
Net income (loss) from continuing operations, before discontinued operations (220 ) 158
Discontinued operations:
Loss from operations (1 ) (5 )
Income tax benefit        
Net loss from discontinued operations   (1 )   (5 )
Net income (loss) (221 ) 153
Less: Net income attributable to noncontrolling interests   254     266  
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (475 ) $ (113 )
Amounts attributable to Tenet Healthcare Corporation common shareholders
Net loss from continuing operations, net of tax $ (474 ) $ (108 )
Net loss from discontinued operations, net of tax   (1 )   (5 )
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (475 ) $ (113 )
Net loss per share attributable to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ (4.72 ) $ (1.09 )
Discontinued operations   (0.01 )   (0.05 )
$ (4.73 ) $ (1.14 )
Diluted
Continuing operations $ (4.72 ) $ (1.09 )
Discontinued operations   (0.01 )   (0.05 )
$ (4.73 ) $ (1.14 )
Weighted average shares and dilutive securities outstanding (in thousands):
Basic 100,475 99,210
Diluted* 100,475 99,210

*Had we generated income from continuing operations in the nine months ended September 30, 2017 and 2016, the effect of employee stock options, restricted stock units and deferred compensation units on the diluted shares calculation would have been an increase of 747 thousand and 1,470 thousand shares, respectively.

   
TENET HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
September 30, December 31,
(Dollars in millions)   2017     2016  
ASSETS
Current assets:
Cash and cash equivalents $ 429 $ 716
Accounts receivable, less allowance for doubtful accounts 2,567 2,897
Inventories of supplies, at cost 297 326
Income tax receivable 14 4
Assets held for sale 842 29
Other current assets   1,160     1,285  
Total current assets 5,309 5,257
Investments and other assets 1,253 1,250
Deferred income taxes 783 871
Property and equipment, at cost, less accumulated depreciation and amortization 7,077 8,053
Goodwill 7,022 7,425
Other intangible assets, at cost, less accumulated amortization   1,764     1,845  
Total assets $ 23,208   $ 24,701  
 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 140 $ 191
Accounts payable 1,100 1,329
Accrued compensation and benefits 800 872
Professional and general liability reserves 210 181
Accrued interest payable 336 210
Liabilities held for sale 407 9
Other current liabilities   1,146     1,242  
Total current liabilities 4,139 4,034
Long-term debt, net of current portion 14,741 15,064
Professional and general liability reserves 617 613
Defined benefit plan obligations 596 626
Deferred income taxes 279
Other long-term liabilities   604     610  
Total liabilities 20,697 21,226
Commitments and contingencies
Redeemable noncontrolling interests in equity of consolidated subsidiaries 1,816 2,393
Equity:
Shareholders’ equity:
Common stock 7 7
Additional paid-in capital 4,835 4,827
Accumulated other comprehensive loss (238 ) (258 )
Accumulated deficit (2,161 ) (1,742 )
Common stock in treasury, at cost   (2,419 )   (2,417 )
Total shareholders’ equity 24 417
Noncontrolling interests   671     665  
Total equity   695     1,082  
Total liabilities and equity $ 23,208   $ 24,701  
   
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
 
 
Nine Months Ended
(Dollars in millions) September 30,
  2017     2016  
Net income (loss) $ (221 ) $ 153
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 662 632
Provision for doubtful accounts 1,109 1,095
Deferred income tax expense (benefit) (145 ) 32
Stock-based compensation expense 44 51
Impairment and restructuring charges, and acquisition-related costs 403 81
Litigation and investigation costs 12 291
Gains on sales, consolidation and deconsolidation of facilities (142 ) (151 )
Loss from early extinguishment of debt 164
Equity in earnings of unconsolidated affiliates, net of distributions received (4 ) 2
Amortization of debt discount and debt issuance costs 33 33
Pre-tax loss from discontinued operations 1 5
Other items, net (19 ) (3 )
Changes in cash from operating assets and liabilities:
Accounts receivable (1,046 ) (1,156 )
Inventories and other current assets 97 (95 )
Income taxes (14 ) (1 )
Accounts payable, accrued expenses and other current liabilities (141 ) (35 )
Other long-term liabilities 7 48
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements (88 ) (132 )
Net cash provided by (used in) operating activities from discontinued operations, excluding income taxes   (3 )   1  
Net cash provided by operating activities 709 851
Cash flows from investing activities:
Purchases of property and equipment — continuing operations (492 ) (614 )
Purchases of businesses or joint venture interests, net of cash acquired (41 ) (96 )
Proceeds from sales of facilities and other assets 826 573
Proceeds from sales of marketable securities, long-term investments and other assets 20 36
Purchases of equity investments (64 ) (37 )
Other long-term assets (16 ) (15 )
Other items, net   (6 )   3  
Net cash provided by (used in) investing activities 227 (150 )
Cash flows from financing activities:
Repayments of borrowings under credit facility (850 ) (1,195 )
Proceeds from borrowings under credit facility 850 1,195
Repayments of other borrowings (4,099 ) (112 )
Proceeds from other borrowings 3,788 4
Debt issuance costs (62 ) (1 )
Distributions paid to noncontrolling interests (178 ) (151 )
Proceeds from sale of noncontrolling interests 29 19
Purchases of noncontrolling interests (722 ) (180 )
Proceeds from exercise of stock options and employee stock purchase plan 5 4
Other items, net   16     9  
Net cash used in financing activities   (1,223 )   (408 )
Net increase (decrease) in cash and cash equivalents (287 ) 293
Cash and cash equivalents at beginning of period   716     356  
Cash and cash equivalents at end of period $ 429   $ 649  
Supplemental disclosures:
Interest paid, net of capitalized interest $ (617 ) $ (596 )
Income tax payments, net $ (54 ) $ (33 )
           
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING TOTAL HOSPITALS(1)

(Unaudited)
 
(Dollars in millions except per patient day,
per admission, per adjusted admission Three Months Ended September 30, Nine Months Ended September 30,
and per visit amounts)   2017     2016   Change   2017     2016   Change
 
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 73 75 (2 ) * 73 75 (2 ) *
Total admissions 185,389 194,342 (4.6 )% 572,877 600,039 (4.5 )%
Adjusted patient admissions 332,035 345,207 (3.8 )% 1,021,811 1,050,839 (2.8 )%
Paying admissions (excludes charity and uninsured) 174,803 183,042 (4.5 )% 541,526 568,017 (4.7 )%
Charity and uninsured admissions 10,586 11,300 (6.3 )% 31,351 32,022 (2.1 )%
Admissions through emergency department 120,493 120,447 % 368,773 378,786 (2.6 )%
Paying admissions as a percentage of total admissions 94.3 % 94.2 % 0.1 % * 94.5 % 94.7 % (0.2 )% *
Charity and uninsured admissions as a percentage of total admissions 5.7 % 5.8 % (0.1 )% * 5.5 % 5.3 % 0.2 % *
Emergency department admissions as a percentage of total admissions 65.0 % 62.0 % 3.0 % * 64.4 % 63.1 % 1.3 % *
Surgeries — inpatient 50,939 54,701 (6.9 )% 154,844 164,835 (6.1 )%
Surgeries — outpatient 67,321 72,646 (7.3 )% 208,291 225,296 (7.5 )%
Total surgeries 118,260 127,346 (7.1 )% 363,135 390,131 (6.9 )%
Patient days — total 853,059 894,323 (4.6 )% 2,656,277 2,802,150 (5.2 )%
Adjusted patient days 1,502,831 1,567,894 (4.1 )% 4,663,779 4,851,535 (3.9 )%
Average length of stay (days) 4.60 4.60 % 4.64 4.67 (0.6 )%
Licensed beds (at end of period) 19,433 20,340 (4.5 )% 19,433 20,340 (4.5 )%
Average licensed beds 19,783 20,367 (2.9 )% 20,218 20,757 (2.6 )%
Utilization of licensed beds 46.9 % 47.7 % (0.8 )% * 48.1 % 49.3 % (1.2 )% *
Outpatient Visits
Total visits 1,867,471 2,009,019 (7.0 )% 5,889,261 6,193,924 (4.9 )%
Paying visits (excludes charity and uninsured) 1,741,815 1,862,046 (6.5 )% 5,499,724 5,742,955 (4.2 )%
Charity and uninsured visits 125,656 146,973 (14.5 )% 389,537 450,969 (13.6 )%
Emergency department visits 685,096 707,713 (3.2 )% 2,142,932 2,213,321 (3.2 )%
Paying visits as a percentage of total visits 93.3 % 92.7 % 0.6 % * 93.4 % 92.7 % 0.7 % *
Charity and uninsured visits as a percentage of total visits 6.7 % 7.3 % (0.6 )% * 6.6 % 7.3 % (0.7 )% *
Total emergency department admissions and visits 805,589 828,160 (2.7 )% 2,511,705 2,592,107 (3.1 )%
Revenues
Net inpatient revenues $ 2,434 $ 2,644 (7.9 )% $ 7,609 $ 8,013 (5.0 )%
Net outpatient revenues $ 1,426 $ 1,417 0.6 % $ 4,418 $ 4,391 0.6 %
Total patient revenues $ 3,860 $ 4,061 (4.9 )% $ 12,027 $ 12,404 (3.0 )%
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission $ 13,129 $ 13,605 (3.5 )% $ 13,282 $ 13,354 (0.5 )%
Net inpatient revenue per patient day $ 2,853 $ 2,956 (3.5 )% $ 2,865 $ 2,860 0.2 %
Net outpatient revenue per visit $ 764 $ 705 8.4 % $ 750 $ 709 5.8 %
Net patient revenue per adjusted patient admission $ 11,625 $ 11,764 (1.2 )% $ 11,770 $ 11,804 (0.3 )%
Net patient revenue per adjusted patient day $ 2,568 $ 2,590 (0.8 )% $ 2,579 $ 2,557 0.9 %
Total selected operating expenses (salaries, wages and benefits, supplies and other operating expenses) per adjusted patient admission(2) $ 10,367 $ 10,190 1.7 % $ 10,348 $ 10,147 2.0 %
Net Patient Revenues from:
Medicare 20.0 % 19.9 % 0.1 % * 20.4 % 20.5 % (0.1 )% *
Medicaid 6.5 % 8.4 % (1.9 )% * 6.7 % 8.2 % (1.5 )% *
Managed care 62.5 % 64.0 % (1.5 )% * 62.4 % 61.5 % 0.9 % *
Indemnity, self-pay and other 11.0 % 7.7 % 3.3 % * 10.5 % 9.8 % 0.7 % *

(1) Represents the consolidated results of Tenet’s acute care hospitals and related outpatient facilities included in the Hospital Operations and other segment.

(2) Excludes operating expenses from Tenet's health plans.
* This change is the difference between the 2017 and 2016 amounts shown.

           
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS(1)

(Unaudited)
 
(Dollars in millions except per patient day,
per admission, per adjusted admission Three Months Ended September 30, Nine Months Ended September 30,
and per visit amounts)   2017     2016   Change   2017     2016   Change
 
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 72 72 * 72 72 *
Total admissions 181,970 186,765 (2.6 )% 553,651 569,112 (2.7 )%
Adjusted patient admissions 320,821 327,960 (2.2 )% 970,418 990,517 (2.0 )%
Paying admissions (excludes charity and uninsured) 171,791 176,376 (2.6 )% 524,588 540,172 (2.9 )%
Charity and uninsured admissions 10,179 10,389 (2.0 )% 29,063 28,940 0.4 %
Admissions through emergency department 118,361 116,234 1.8 % 357,078 359,694 (0.7 )%
Paying admissions as a percentage of total admissions 94.4 % 94.4 % % * 94.8 % 94.9 % (0.1 )% *
Charity and uninsured admissions as a percentage of total admissions 5.6 % 5.6 % % * 5.2 % 5.1 % 0.1 % *
Emergency department admissions as a percentage of total admissions 65.0 % 62.2 % 2.8 % * 64.5 % 63.2 % 1.3 % *
Surgeries — inpatient 50,074 52,556 (4.7 )% 149,801 156,638 (4.4 )%
Surgeries — outpatient 66,482 70,206 (5.3 )% 202,796 215,632 (6.0 )%
Total surgeries 116,556 122,762 (5.1 )% 352,597 372,270 (5.3 )%
Patient days — total 838,215 863,100 (2.9 )% 2,570,717 2,657,969 (3.3 )%
Adjusted patient days 1,466,266 1,508,217 (2.8 )% 4,478,793 4,598,669 (2.6 )%
Average length of stay (days) 4.61 4.62 (0.2 )% 4.64 4.67 (0.6 )%
Licensed beds (at end of period) 19,327 19,292 0.2 % 19,327 19,292 0.2 %
Average licensed beds 19,328 19,319 % 19,297 19,326 (0.2 )%
Utilization of licensed beds 47.1 % 48.6 % (1.5 )% * 48.8 % 50.4 % (1.6 )% *
Outpatient Visits
Total visits 1,813,595 1,917,200 (5.4 )% 5,629,973 5,843,476 (3.7 )%
Paying visits (excludes charity and uninsured) 1,696,468 1,784,379 (4.9 )% 5,281,403 5,447,091 (3.0 )%
Charity and uninsured visits 117,127 132,821 (11.8 )% 348,570 396,385 (12.1 )%
Emergency department visits 646,331 662,625 (2.5 )% 1,987,743 2,038,946 (2.5 )%
Paying visits as a percentage of total visits 93.5 % 93.1 % 0.4 % * 93.8 % 93.2 % 0.6 % *
Charity and uninsured visits as a percentage of total visits 6.5 % 6.9 % (0.4 )% * 6.2 % 6.8 % (0.6 )% *
Total emergency department admissions and visits 764,692 778,859 (1.8 )% 2,344,821 2,398,640 (2.2 )%
Revenues
Net inpatient revenues $ 2,391 $ 2,533 (5.6 )% $ 7,342 $ 7,571 (3.0 )%
Net outpatient revenues $ 1,386 $ 1,334 3.9 % $ 4,195 $ 4,081 2.8 %
Total patient revenues $ 3,777 $ 3,867 (2.3 )% $ 11,537 $ 11,652 (1.0 )%
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission $ 13,140 $ 13,562 (3.1 )% $ 13,261 $ 13,303 (0.3 )%
Net inpatient revenue per patient day $ 2,852 $ 2,935 (2.8 )% $ 2,856 $ 2,848 0.3 %
Net outpatient revenue per visit $ 764 $ 696 9.8 % $ 745 $ 698 6.7 %
Net patient revenue per adjusted patient admission $ 11,773 $ 11,791 (0.2 )% $ 11,889 $ 11,764 1.1 %
Net patient revenue per adjusted patient day $ 2,576 $ 2,564 0.5 % $ 2,576 $ 2,534 1.7 %
Net Patient Revenues from:
Medicare 20.1 % 20.5 % (0.4 )% * 20.8 % 21.1 % (0.3 )% *
Medicaid 6.6 % 8.4 % (1.8 )% * 6.7 % 8.2 % (1.5 )% *
Managed care 62.3 % 64.3 % (2.0 )% * 62.3 % 61.8 % 0.5 % *
Indemnity, self-pay and other 11.0 % 6.8 % 4.2 % * 10.2 % 8.9 % 1.3 % *

(1) Information for our Hospital Operations and other segment is presented on a same-hospital basis, which includes the results of our same 72 hospitals operated throughout the nine months ended September 30, 2017 and 2016, and associated outpatient facilities but excludes the results of hospitals that Tenet began operating, as well as hospitals Tenet divested, since January 1, 2016.
* This change is the difference between the 2017 and 2016 amounts shown.

       
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
(Dollars in millions except per share amounts) Three Months Ended

Nine
Months
Ended

  3/31/2017     6/30/2017     9/30/2017     9/30/2017  
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 5,196 $ 5,173 $ 4,941 $ 15,310
Less: Provision for doubtful accounts   383     371     355     1,109  
Net operating revenues 4,813 4,802 4,586 14,201
Equity in earnings of unconsolidated affiliates 29 28 38 95
Operating expenses:
Salaries, wages and benefits 2,380 2,346 2,264 6,990
Supplies 765 780 740 2,285
Other operating expenses, net 1,187 1,159 1,120 3,466
Electronic health record incentives (1 ) (6 ) (1 ) (8 )
Depreciation and amortization 221 222 219 662
Impairment and restructuring charges, and acquisition-related costs 33 41 329 403
Litigation and investigation costs 5 1 6 12
Gains on sales, consolidation and deconsolidation of facilities   (15 )   (23 )   (104 )   (142 )
Operating income 267 310 51 628
Interest expense (258 ) (260 ) (257 ) (775 )
Other non-operating expense, net (5 ) (5 ) (4 ) (14 )
Loss from early extinguishment of debt       (26 )   (138 )   (164 )
Net income (loss) from continuing operations, before income taxes 4 19 (348 ) (325 )
Income tax benefit   33     12     60     105  
Net income (loss) from continuing operations, before discontinued operations 37 31 (288 ) (220 )
Discontinued operations:
Income (loss) from operations (2 ) 2 (1 ) (1 )
Income tax benefit (expense)   1     (1 )        
Net income (loss) from discontinued operations   (1 )   1     (1 )   (1 )
Net income (loss) 36 32 (289 ) (221 )
Less: Net income attributable to noncontrolling interests   89     87     78     254  
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (53 ) $ (55 ) $ (367 ) $ (475 )
Amounts attributable to Tenet Healthcare Corporation common shareholders
Net loss from continuing operations, net of tax $ (52 ) $ (56 ) $ (366 ) $ (474 )
Net income (loss) from discontinued operations, net of tax   (1 )   1     (1 )   (1 )
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (53 ) $ (55 ) $ (367 ) $ (475 )
Net earnings (loss) per share attributable to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ (0.52 ) $ (0.56 ) $ (3.63 ) $ (4.72 )
Discontinued operations   (0.01 )   0.01     (0.01 )   (0.01 )
$ (0.53 ) $ (0.55 ) $ (3.64 ) $ (4.73 )
Diluted
Continuing operations $ (0.52 ) $ (0.56 ) $ (3.63 ) $ (4.72 )
Discontinued operations   (0.01 )   0.01     (0.01 )   (0.01 )
$ (0.53 ) $ (0.55 ) $ (3.64 ) $ (4.73 )
Weighted average shares and dilutive securities outstanding (in thousands):
Basic 100,000 100,612 100,812 100,475
Diluted 100,000 100,612 100,812 100,475
       
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING TOTAL HOSPITALS(1)

(Unaudited)
 
(Dollars in millions except per patient day,

per admission, per adjusted admission and

per visit amounts)

Three Months Ended

Nine
Months
Ended

  3/31/2017     6/30/2017     9/30/2017     09/30/2017  
 
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 76 76 73 73
Total admissions 196,907 190,394 185,389 572,877
Adjusted patient admissions 347,150 342,439 332,035 1,021,811
Paying admissions (excludes charity and uninsured) 186,648 179,889 174,803 541,526
Charity and uninsured admissions 10,259 10,505 10,586 31,351
Admissions through emergency department 126,473 121,807 120,493 368,773
Paying admissions as a percentage of total admissions 94.8 % 94.5 % 94.3 % 94.5 %
Charity and uninsured admissions as a percentage of total admissions 5.2 % 5.5 % 5.7 % 5.5 %
Emergency department admissions as a percentage of total admissions 64.2 % 64.0 % 65.0 % 64.4 %
Surgeries — inpatient 51,800 52,083 50,939 154,844
Surgeries — outpatient 69,604 71,366 67,321 208,291
Total surgeries 121,404 123,449 118,260 363,135
Patient days — total 923,339 874,930 853,059 2,656,277
Adjusted patient days 1,603,698 1,552,302 1,502,831 4,663,779
Average length of stay (days) 4.69 4.60 4.60 4.64
Licensed beds (at end of period) 20,439 20,435 19,433 19,433
Average licensed beds 20,440 20,435 19,783 20,218
Utilization of licensed beds 50.2 % 47.0 % 46.9 % 48.1 %
Outpatient Visits
Total visits 2,039,942 1,981,848 1,867,471 5,889,261
Paying visits (excludes charity and uninsured) 1,908,212 1,849,697 1,741,815 5,499,724
Charity and uninsured visits 131,730 132,151 125,656 389,537
Emergency department visits 733,051 724,785 685,096 2,142,932
Paying visits as a percentage of total visits 93.5 % 93.3 % 93.3 % 93.4 %
Charity and uninsured visits as a percentage of total visits 6.5 % 6.7 % 6.7 % 6.6 %
Total emergency department admissions and visits 859,524 846,592 805,589 2,511,705
Revenues
Net inpatient revenues $ 2,609 $ 2,555 $ 2,434 $ 7,609
Net outpatient revenues $ 1,482 $ 1,511 $ 1,426 $ 4,418
Total patient revenues $ 4,091 $ 4,066 $ 3,860 $ 12,027
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission $ 13,250 $ 13,420 $ 13,129 $ 13,282
Net inpatient revenue per patient day $ 2,826 $ 2,920 $ 2,853 $ 2,865
Net outpatient revenue per visit $ 726 $ 762 $ 764 $ 750
Net patient revenue per adjusted patient admission $ 11,785 $ 11,874 $ 11,625 $ 11,770
Net patient revenue per adjusted patient day $ 2,551 $ 2,619 $ 2,568 $ 2,579
Total selected operating expenses (salaries, wages and benefits, supplies and other operating expenses) per adjusted patient admission(2) $ 10,290 $ 10,394 $ 10,367 $ 10,348
Net Patient Revenues from:
Medicare 21.0 % 20.1 % 20.0 % 20.4 %
Medicaid 6.7 % 6.9 % 6.5 % 6.7 %
Managed care 62.3 % 62.5 % 62.5 % 62.4 %
Indemnity, self-pay and other 10.0 % 10.5 % 11.0 % 10.5 %

(1) Represents the consolidated results of Tenet’s acute care hospitals and related outpatient facilities included in the Hospital Operations and other segment.

(2) Excludes operating expenses from Tenet's health plans.

       
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS(1)

(Unaudited)
 
(Dollars in millions except per patient day,

per admission, per adjusted admission and

per visit amounts)

Three Months Ended

Nine
Months
Ended

  3/31/2017     6/30/2017     9/30/2017     9/30/2017  
 
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 72 72 72 72
Total admissions 189,071 182,610 181,970 553,651
Adjusted patient admissions 326,533 323,064 320,821 970,418
Paying admissions (excludes charity and uninsured) 179,763 173,034 171,791 524,588
Charity and uninsured admissions 9,308 9,576 10,179 29,063
Admissions through emergency department 121,749 116,968 118,361 357,078
Paying admissions as a percentage of total admissions 95.1 % 94.8 % 94.4 % 94.8 %
Charity and uninsured admissions as a percentage of total admissions 4.9 % 5.2 % 5.6 % 5.2 %
Emergency department admissions as a percentage of total admissions 64.4 % 64.1 % 65.0 % 64.5 %
Surgeries — inpatient 49,735 49,992 50,074 149,801
Surgeries — outpatient 67,375 68,939 66,482 202,796
Total surgeries 117,110 118,931 116,556 352,597
Patient days — total 889,667 842,835 838,215 2,570,717
Adjusted patient days 1,527,316 1,485,211 1,466,266 4,478,793
Average length of stay (days) 4.71 4.62 4.61 4.64
Licensed beds (at end of period) 19,285 19,281 19,327 19,327
Average licensed beds 19,286 19,281 19,328 19,297
Utilization of licensed beds 51.3 % 48.0 % 47.1 % 48.8 %
Outpatient Visits
Total visits 1,937,168 1,879,210 1,813,595 5,629,973
Paying visits (excludes charity and uninsured) 1,821,837 1,763,098 1,696,468 5,281,403
Charity and uninsured visits 115,331 116,112 117,127 348,570
Emergency department visits 674,547 666,865 646,331 1,987,743
Paying visits as a percentage of total visits 94.0 % 93.8 % 93.5 % 93.8 %
Charity and uninsured visits as a percentage of total visits 6.0 % 6.2 % 6.5 % 6.2 %
Total emergency department admissions and visits 796,296 783,833 764,692 2,344,821
Revenues
Net inpatient revenues $ 2,505 $ 2,446 $ 2,391 $ 7,342
Net outpatient revenues $ 1,390 $ 1,419 $ 1,386 $ 4,195
Total patient revenues $ 3,895 $ 3,865 $ 3,777 $ 11,537
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission $ 13,249 $ 13,395 $ 13,140 $ 13,261
Net inpatient revenue per patient day $ 2,816 $ 2,902 $ 2,852 $ 2,856
Net outpatient revenue per visit $ 718 $ 755 $ 764 $ 745
Net patient revenue per adjusted patient admission $ 11,928 $ 11,964 $ 11,773 $ 11,889
Net patient revenue per adjusted patient day $ 2,550 $ 2,602 $ 2,576 $ 2,576
Net Patient Revenues from:
Medicare 21.6 % 20.6 % 20.1 % 20.8 %
Medicaid 6.8 % 6.8 % 6.6 % 6.7 %
Managed care 62.2 % 62.6 % 62.3 % 62.3 %
Indemnity, self-pay and other 9.4 % 10.0 % 11.0 % 10.2 %

(1) Information for our Hospital Operations and other segment is presented on a same-hospital basis, which includes the results of our same 72 hospitals operated throughout the nine months ended September 30, 2017 and 2016, and associated outpatient facilities but excludes the results of hospitals that Tenet began operating, as well as hospitals Tenet divested, since January 1, 2016.

   
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS(1)

(Unaudited)
 
(Dollars in millions except per patient day, per

admission, per adjusted admission and per

visit amounts)

Three Months Ended Year Ended
  3/31/2016       6/30/2016       9/30/2016       12/31/2016     12/31/2016  
 
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 72 72 72 72 72
Total admissions 195,679 186,668 186,765 184,561 753,673
Adjusted patient admissions 335,006 327,551 327,960 320,445 1,310,962
Paying admissions (excludes charity and uninsured) 186,706 177,090 176,376 175,026 715,198
Charity and uninsured admissions 8,973 9,578 10,389 9,535 38,475
Admissions through emergency department 125,406 118,054 116,234 116,374 476,068
Paying admissions as a percentage of total admissions 95.4 % 94.9 % 94.4 % 94.8 % 94.9 %
Charity and uninsured admissions as a percentage of total admissions 4.6 % 5.1 % 5.6 % 5.2 % 5.1 %
Emergency department admissions as a percentage of total admissions 64.1 % 63.2 % 62.2 % 63.1 % 63.2 %
Surgeries - inpatient 51,719 52,363 52,556 50,971 207,609
Surgeries - outpatient 72,054 73,372 70,206 71,129 286,761
Total surgeries 123,773 125,735 122,762 122,100 494,370
Patient days - total 929,061 865,808 863,100 857,118 3,515,087
Adjusted patient days 1,579,483 1,510,969 1,508,217 1,481,786 6,080,455
Average length of stay (days) 4.75 4.64 4.62 4.64 4.66
Licensed beds (at end of period) 19,332 19,332 19,292 19,306 19,306
Average licensed beds 19,327 19,332 19,319 19,278 19,315
Utilization of licensed beds 53.4 % 49.2 % 48.6 % 48.3 % 49.9 %
Outpatient Visits
Total visits 1,975,304 1,950,972 1,917,200 1,853,826 7,697,302
Paying visits (excludes charity and uninsured) 1,842,217 1,820,495 1,784,379 1,753,362 7,200,453
Charity and uninsured visits 133,087 130,477 132,821 100,464 496,849
Emergency department visits 702,777 673,544 662,625 650,573 2,689,519
Paying visits as a percentage of total visits 93.3 % 93.3 % 93.1 % 94.6 % 93.5 %
Charity and uninsured visits as a percentage of total visits 6.7 % 6.7 % 6.9 % 5.4 % 6.5 %
Total emergency department admissions and visits 828,183 791,598 778,859 766,947 3,165,587
Revenues
Net inpatient revenues $ 2,568 $ 2,470 $ 2,533 $ 2,518 $ 10,089
Net outpatient revenues $ 1,370 $ 1,377 $ 1,334 $ 1,371 $ 5,452
Total patient revenues $ 3,938 $ 3,847 $ 3,867 $ 3,889 $ 15,541
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission $ 13,124 $ 13,232 $ 13,562 $ 13,643 $ 13,386
Net inpatient revenue per patient day $ 2,764 $ 2,853 $ 2,935 $ 2,938 $ 2,870
Net outpatient revenue per visit $ 694 $ 706 $ 696 $ 740 $ 708
Net patient revenue per adjusted patient admission $ 11,755 $ 11,745 $ 11,791 $ 12,136 $ 11,855
Net patient revenue per adjusted patient day $ 2,493 $ 2,546 $ 2,564 $ 2,625 $ 2,556
Net Patient Revenues from:
Medicare 20.4 % 22.3 % 20.5 % 20.8 % 21.0 %
Medicaid 8.7 % 7.6 % 8.4 % 8.2 % 8.2 %
Managed care 61.7 % 59.5 % 64.3 % 61.2 % 61.6 %
Indemnity, self-pay and other 9.2 % 10.6 % 6.8 % 9.8 % 9.2 %

(1) Information for our Hospital Operations and other segment is presented on a same-hospital basis, which includes the results of our same 72 hospitals operated throughout the nine months ended September 30, 2017 and 2016, and associated outpatient facilities but excludes the results of hospitals that Tenet began operating, as well as hospitals Tenet divested, since January 1, 2016.

       
TENET HEALTHCARE CORPORATION
SEGMENT REPORTING
(Unaudited)
 
(Dollars in millions) September 30, December 31,
  2017     2016  
Assets
Hospital Operations and other $ 16,249 $ 17,871
Ambulatory Care 5,847 5,722
Conifer   1,112     1,108  
Total $ 23,208   $ 24,701  
 
Three Months Ended Nine Months Ended
September 30, September 30,
  2017     2016     2017     2016  
Capital expenditures:
Hospital Operations and other $ 122 $ 182 $ 441 $ 557
Ambulatory Care 16 14 37 42
Conifer   6     5     14     15  
Total $ 144   $ 201   $ 492   $ 614  
 
Net operating revenues:
Hospital Operations and other total prior to inter-segment eliminations(1) $ 3,866 $ 4,162 $ 12,066 $ 12,761
Ambulatory Care 468 448 1,395 1,319
Conifer
Tenet 149 159 463 488
Other customers   252     239     740     681  
Total Conifer revenues 401 398 1,203 1,169
Inter-segment eliminations   (149 )   (159 )   (463 )   (488 )
Total $ 4,586   $ 4,849   $ 14,201   $ 14,761  
 
Equity in earnings of unconsolidated affiliates:
Hospital Operations and other $ 4 $ 3 $ 4 $ 6
Ambulatory Care   34     28     91     79  
Total $ 38   $ 31   $ 95   $ 85  
 
Adjusted EBITDA:
Hospital Operations and other(2) $ 269 $ 346 $ 924 $ 1,191
Ambulatory Care 159 157 476 432
Conifer   79     79     204     205  
Total $ 507   $ 582   $ 1,604   $ 1,828  
 
Depreciation and amortization:
Hospital Operations and other $ 185 $ 170 $ 560 $ 525
Ambulatory Care 22 22 66 69
Conifer   12     13     36     38  
Total $ 219   $ 205   $ 662   $ 632  
 

(1) Hospital Operations and other revenues includes health plan revenues of $10 million and $100 million for the three and nine ended September 30, 2017, respectively and $122 million and $385 million for the three and nine months ended September 30, 2016, respectively.

(2) Hospital Operations and other Adjusted EBITDA excludes health plan EBITDA of $(6) million and $(41) million for the three and nine months ended September 30, 2017, respectively and $(6) million and $(8) million for the three and nine ended September 30, 2016, respectively.

       
TENET HEALTHCARE CORPORATION
STATEMENT OF OPERATIONS – AMBULATORY CARE SEGMENT
(Unaudited)
 
 
(Dollars in millions) Three Months Ended September 30,
2017   2016  
 

Ambulatory
Care as
Reported
Under
GAAP

Unconsolidated
Affiliates

Ambulatory
Care as
Reported
Under
GAAP

Unconsolidated
Affiliates

Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 477 $ 518 $ 457 $ 507
Less: Provision for doubtful accounts   (9 )   (11 )   (9 )   (13 )
Net operating revenues (1) 468 507 448 494
Equity in earnings of unconsolidated affiliates (2) 34 28
Operating expenses:
Salaries, wages and benefits 155 122 144 119
Supplies 95 133 89 124
Other operating expenses, net 93 93 86 99
Electronic health record incentives
Depreciation and amortization 22 17 22 16
Impairment and restructuring charges, and acquisition-related costs 62 5
Gains on sales, consolidation and deconsolidation of facilities           (3 )   3  
Operating income 75 142 133 133
Interest expense (35 ) (6 ) (35 ) (6 )
Other   2             5  
Net income from continuing operations, before income taxes 42 136 98 132
Income tax expense   (20 )   (2 )   (18 )   (2 )
Net income 22 $ 134   80 $ 130  
Less: Net income attributable to noncontrolling interests   61     69  
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ (39 ) $ 11  
Equity in earnings of unconsolidated affiliates $ 34 $ 28
 

(1) On a same-facility system-wide basis, net revenue in Tenet’s Ambulatory Care segment increased 0.9% during the three months ended September 30, 2017, with cases decreasing 2.4% and revenue per case increasing 3.4%.

(2) At September 30, 2017, 109 of the 329 facilities in the Company’s Ambulatory segment were not consolidated based on the nature of the segment’s joint venture relationships with physicians and prominent healthcare systems. Although revenues of the segment’s unconsolidated facilities are not recorded as revenues by the Company, equity in earnings of unconsolidated affiliates is nonetheless a significant portion of the Company’s overall earnings. To help analyze results of operations, management also uses system-wide operating measures such as system-wide revenue growth, which includes revenues of both consolidated and unconsolidated facilities. We control our remaining 220 facilities and account for these investments as consolidated subsidiaries.

       
TENET HEALTHCARE CORPORATION
STATEMENT OF OPERATIONS – AMBULATORY CARE SEGMENT
(Unaudited)
 
 
(Dollars in millions) Nine Months Ended September 30,
2017   2016  
 

Ambulatory
Care as
Reported
Under
GAAP

Unconsolidated
Affiliates

Ambulatory
Care as
Reported
Under
GAAP

Unconsolidated
Affiliates

Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 1,422 $ 1,492 $ 1,346 $ 1,491
Less: Provision for doubtful accounts   (27 )   (31 )   (27 )   (41 )
Net operating revenues (1) 1,395 1,461 1,319 1,450
Equity in earnings of unconsolidated affiliates (2) 91 79
Operating expenses:
Salaries, wages and benefits 458 352 437 353
Supplies 285 383 266 375
Other operating expenses, net 267 290 263 303
Electronic health record incentives
Depreciation and amortization 66 49 69 51
Impairment and restructuring charges, and acquisition-related costs 70 1 9 1
Gains on sales, consolidation and deconsolidation of facilities   (7 )       (33 )   3  
Operating income 347 386 387 364
Interest expense (109 ) (17 ) (105 ) (18 )
Other   5             6  
Net income from continuing operations, before income taxes 243 369 282 352
Income tax expense   (58 )   (6 )   (37 )   (5 )
Net Income 185 $ 363   245 $ 347  
Less: Net income attributable to noncontrolling interests(3)   193     204  
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ (8 ) $ 41  
Equity in earnings of unconsolidated affiliates $ 91 $ 79
 

(1) On a same-facility system-wide basis, net revenue in Tenet’s Ambulatory Care segment increased 3.5% during the nine months ended September 30, 2017, with cases decreasing 0.8% and revenue per case increasing 4.3%.

(2) At September 30, 2017, 109 of the 329 facilities in the Company’s Ambulatory segment were not consolidated based on the nature of the segment’s joint venture relationships with physicians and prominent healthcare systems. Although revenues of the segment’s unconsolidated facilities are not recorded as revenues by the Company, equity in earnings of unconsolidated affiliates is nonetheless a significant portion of the Company’s overall earnings. To help analyze results of operations, management also uses system-wide operating measures such as system-wide revenue growth, which includes revenues of both consolidated and unconsolidated facilities. We control our remaining 220 facilities and account for these investments as consolidated subsidiaries.

(3) During the nine months ended September 30, 2016, the Company recorded $19 million of noncontrolling interests expense related to a $33 million gain on the consolidation of facilities (the gain is not included in Adjusted EBITDA) and an associated $7 million income tax benefit.

Non-GAAP Financial Measures

Adjusted EBITDA, a non-GAAP measure, 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, (2) net loss (income) attributable to noncontrolling interests, (3) income (loss) from discontinued operations, (4) income tax benefit (expense), (5) other non-operating income (expense), net, (6) gain (loss) from early extinguishment of debt, (7) interest expense, (8) litigation and investigation (costs) benefit, net of insurance recoveries, (9) net gains (losses) on sales, consolidation and deconsolidation of facilities, (10) impairment and restructuring charges and acquisition-related costs, (11) depreciation and amortization and (12) income (loss) from divested operations and closed businesses (i.e., the Company’s health plan businesses). Litigation and investigation costs do not include ordinary course of business malpractice and other litigation and related expense.

Adjusted net income (loss) from continuing operations attributable to Tenet Healthcare Corporation common shareholders, a non-GAAP measure, is defined by the Company as net income (loss) attributable to Tenet Healthcare Corporation common shareholders before (1) impairment and restructuring charges, and acquisition-related costs, (2) litigation and investigation costs, (3) gains on sales, consolidation and deconsolidation of facilities, (4) gain (loss) from early extinguishment of debt, (5) income (loss) from divested operations and closed businesses, (6) the associated impact of these five items on taxes and noncontrolling interests, and (7) net income (loss) from discontinued operations. Adjusted diluted earnings (loss) per share from continuing operations, a non-GAAP term, is defined by the Company as Adjusted net income (loss) from continuing operations attributable to Tenet Healthcare Corporation common shareholders divided by the weighted average primary or diluted shares outstanding in the reporting period.

Free Cash Flow, a non-GAAP measure, is defined by the Company as (1) net cash provided by (used in) operating activities, less (2) purchases of property and equipment from continuing operations.

Adjusted Free Cash Flow, a non-GAAP measure, is defined by the Company as (1) Adjusted net cash provided by (used in) operating activities from continuing operations, less (2) purchases of property and equipment from continuing operations. Adjusted net cash provided by (used in) operating activities, a non-GAAP measure, is defined by the Company as cash provided by (used in) operating activities prior to (1) payments for restructuring charges, acquisition-related costs and litigation costs and settlements, and (2) net cash provided by (used in) operating activities from discontinued operations.

The Company believes the foregoing non-GAAP measures are useful to investors and analysts because they present additional information on the Company’s financial performance. Investors, analysts, Company management and the Company’s Board of Directors utilize these non-GAAP measures, in addition to GAAP measures, to track the Company’s financial and operating performance and compare the Company’s performance to its peer companies, which utilize similar non-GAAP measures in their presentations. The Human Resources Committee of the Company’s Board of Directors also uses certain of these measures to evaluate management’s performance for the purpose of determining incentive compensation. Additional information regarding the purpose and utility of specific non-GAAP measures used in this release is set forth below.

The Company believes that Adjusted EBITDA is a useful measure, in part, because certain investors and analysts use both historical and projected Adjusted EBITDA, in addition to other GAAP and non-GAAP measures, as factors in determining the estimated fair value of shares of the Company’s common stock. Company management also regularly reviews the Adjusted EBITDA performance for each operating segment. The Company does not use Adjusted EBITDA to measure liquidity, but instead to measure operating performance.

We use, and we believe investors and analysts use, Free Cash Flow and Adjusted Free Cash Flow as supplemental measures to analyze cash flows generated from our operations because we believe it is useful to investors in evaluating our ability to fund distributions paid to noncontrolling interests, acquisitions, purchasing equity interests in joint ventures or repaying debt.

These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Because these measures exclude many items that are included in our financial statements, they do not provide a complete measure of our operating performance. For example, the Company’s definitions of Free Cash Flow and Adjusted Free Cash Flow do not include other important uses of cash including (1) cash used to purchase businesses or joint venture interests, or (2) any items that are classified as Cash Flows From Financing Activities on the Company’s Consolidated Statement of Cash Flows, including items such as (i) cash used to repay borrowings, (ii) distributions paid to noncontrolling interests, or (iii) payments under the Put/Call Agreement for USPI redeemable noncontrolling interest, which are recorded on the Statement of Cash Flows as the purchase of noncontrolling interest. Accordingly, investors are encouraged to use GAAP measures when evaluating the Company’s financial performance.

A reconciliation of Adjusted EBITDA to net income (loss) attributable to Tenet Healthcare Corporation common shareholders, the most comparable GAAP measure, is set forth in Table #1 below for the three and nine months ended September 30, 2017 and 2016. A reconciliation of Adjusted net income from continuing operations attributable to Tenet Healthcare Corporation common shareholders to net income (loss) attributable to Tenet Healthcare Corporation common shareholders, the most comparable GAAP measure, is set forth in Table #2 below for the three and nine months ended September 30, 2017 and 2016. A reconciliation of Free Cash Flow and Adjusted Free Cash Flow to net cash provided by (used in) operating activities, the most comparable GAAP measure, is set forth in Table #3 below for the three and nine months ended September 30, 2017 and 2016.

       

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 Nine Months Ended
September 30, September 30,
  2017     2016     2017     2016  
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (367 ) $ (8 ) $ (475 ) $ (113 )
Less: Net income attributable to noncontrolling interests (78 ) (88 ) (254 ) (266 )
Net income (loss) from discontinued operations, net of tax   (1 )   1     (1 )   (5 )
Net income (loss) from continuing operations (288 ) 79 (220 ) 158
Income tax benefit (expense) 60 (10 ) 105 (61 )
Loss from early extinguishment of debt (138 ) (164 )
Other non-operating expense, net (4 ) (7 ) (14 ) (18 )
Interest expense   (257 )   (243 )   (775 )   (730 )
Operating income 51 339 628 967
Litigation and investigation costs (6 ) (4 ) (12 ) (291 )
Gains on sales, consolidation and deconsolidation of facilities 104 3 142 151
Impairment and restructuring charges, and acquisition-related costs (329 ) (31 ) (403 ) (81 )
Depreciation and amortization (219 ) (205 ) (662 ) (632 )
Loss from divested and closed businesses   (6 )   (6 )   (41 )   (8 )
Adjusted EBITDA $ 507   $ 582   $ 1,604   $ 1,828  
 
Net operating revenues $ 4,586 $ 4,849 $ 14,201 $ 14,761
Less: Net operating revenues from health plans   10     122     100     385  
Adjusted net operating revenues $ 4,576   $ 4,727   $ 14,101   $ 14,376  
 
Net loss attributable to Tenet Healthcare Corporation common shareholders as a % of net operating revenues (8.0 )% (0.2 )% (3.3 )% (0.8 )%
 
Adjusted EBITDA as % of adjusted net operating revenues (Adjusted EBITDA margin) 11.1 % 12.3 % 11.4 % 12.7 %
       

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #2 – Pre-Tax, After-Tax and Earnings (Loss) Per Share Impact of Certain Items
on Continuing Operations

(Unaudited)

 
 
Three Months Ended Nine Months Ended
(Dollars in millions except per share amounts) September 30, September 30,
  2017     2016     2017     2016  
Adjustments to calculate Adjusted Diluted EPS
Impairment and restructuring charges, and acquisition-related costs(1) $ (329 ) $ (31 ) $ (403 ) $ (81 )
Litigation and investigation costs (6 ) (4 ) (12 ) (291 )
Gain on sales, consolidation and deconsolidation of facilities(2) 104 3 142 151
Loss from early extinguishment of debt(3) (138 ) (164 )
Loss from divested and closed businesses   (6 )   (6 )   (41 )   (11 )
Pre-tax impact (375 ) (38 ) (478 ) (232 )
Tax impact of above items   26     10     65     37  
Total after-tax impact (349 ) (28 ) (413 ) (195 )
Noncontrolling interests impact       (1 )       (19 )
Total loss from items above $ (349 ) $ (29 ) $ (413 ) $ (214 )
 
Net loss attributable to common shareholders $ (367 ) $ (8 ) $ (475 ) $ (113 )
Less net income (loss) from discontinued operations, net of tax   (1 )   1     (1 )   (5 )
Net loss from continuing operations, net of tax (366 ) (9 ) (474 ) (108 )
Net loss from adjustments above   349     29     413     214  
Adjusted net income (loss) from continuing operations attributable to common shareholders $ (17 ) $ 20   $ (61 ) $ 106  
 
Weighted average dilutive shares outstanding (in thousands) 100,812 100,978 100,475 100,680
Diluted earnings (loss) per share from continuing operations $ (3.63 ) $ (0.09 ) $ (4.72 ) $ (1.09 )
Adjusted diluted earnings (loss) per share from continuing operations $ (0.17 ) $ 0.20 $ (0.61 ) $ 1.05
 

(1) Impairment and restructuring charges, and acquisition-related costs of $329 million in the three months ended September 30, 2017 were primarily related to the write-down of assets held for sale in Philadelphia and the United Kingdom to their estimated fair value less the estimated costs to sell. The Company’s results in the three months ended September 30, 2017 do not include restructuring charges related to the Company’s $150 million cost reduction initiative; these charges will be recorded in the three months ending December 31, 2017.

(2) Gain on sales, consolidation and deconsolidation of facilities of $104 million in the three months ended September 30, 2017 was primarily related to a gain on sale of the Company’s former hospitals, physician practices and related assets in Houston, Texas and the surrounding area.

(3) Loss from early extinguishment of debt of $138 million in the three months ended September 30, 2017 was related to the Company’s refinancing transactions and debt redemption in the quarter.

       

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #3 – Reconciliations of Free Cash Flow and Adjusted Free Cash Flow

(Unaudited)

 
 

 

Three Months Ended Nine Months Ended
(Dollars in millions) September 30, September 30,
  2017     2016     2017     2016  
Net cash provided by operating activities $ 308 $ 269 $ 709 $ 851
Purchases of property and equipment   (144 )   (201 )   (492 )   (614 )
Free cash flow $ 164   $ 68   $ 217   $ 237  
 
Net cash provided by (used in) investing activities $ 535 $ (204 ) $ 227 $ (150 )
Net cash used in financing activities $ (889 ) $ (72 ) $ (1,223 ) $ (408 )
 
Net cash provided by operating activities $ 308 $ 269 $ 709 $ 851
Less: Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements (26 ) (33 ) (88 ) (132 )
Net cash (used in) provided by operating activities from discontinued operations   (1 )   1     (3 )   1  
Adjusted net cash provided by operating activities – continuing operations 335 301 800 982
Purchases of property and equipment – continuing operations   (144 )   (201 )   (492 )   (614 )
Adjusted free cash flow – continuing operations $ 191   $ 100   $ 308   $ 368  
       

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #4 – Reconciliation of Outlook Adjusted EBITDA to
Outlook Net Income Attributable to Tenet Healthcare Corporation Common Shareholders

(Unaudited)

 
(Dollars in millions, except per share amounts) Q4 2017 2017  
Low High Low High
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ 98 $ 108 $ (377 ) $ (367 )
Less: Net income attributable to noncontrolling interests (116 ) (126 ) (370 ) (380 )
Net income (loss) from discontinued operations, net of tax   (4 )   1     (5 )    
Income (loss) from continuing operations 218 233 (2 ) 13
Income tax (expense) benefit   (65 )   (60 )   40     45  
Income (loss) from continuing operations, before income taxes 283 293 (42 ) (32 )
Interest expense (245 ) (255 ) (1,020 ) (1,030 )
Loss on early extinguishment of debt (164 ) (164 )
Other non-operating expense, net   (6 )   (6 )   (20 )   (20 )
Operating income 534 554 1,162 1,182
Gains on sales, consolidation and deconsolidation of facilities(1) 142 142
Impairment and restructuring charges, acquisition-related costs and litigation costs and settlements(2) (35 ) (45 ) (450 ) (460 )
Depreciation and amortization (198 ) (208 ) (860 ) (870 )
Loss from divested and closed businesses   (4 )   (14 )   (45 )   (55 )
Adjusted EBITDA $ 771   $ 821   $ 2,375   $ 2,425  
Net income (loss) from continuing operations $ 102 $ 107 $ (372 ) $ (367 )
Net income (loss) from continuing operations as a % of operating revenues 2.1 % 2.1 % (2.0 )% (1.9 )%
Net operating revenues $ 4,804 $ 5,014 $ 19,005 $ 19,215
Less: Net operating revenues from health plans   5     15     105     115  
Adjusted net operating revenues $ 4,799 $ 4,999 $ 18,900 $ 19,100
Adjusted EBITDA as % of adjusted net operating revenues (Adjusted EBITDA margin) 16.1 % 16.4 % 12.6 % 12.7 %
Adjusted EBITDA $ 771 $ 821 $ 2,375 $ 2,425
Depreciation and amortization (198 ) (208 ) (860 ) (870 )
Interest expense (245 ) (255 ) (1,020 ) (1,030 )
Other non-operating expense, net   (6 )   (6 )   (20 )   (20 )
Adjusted income from continuing operations before income taxes 322 352 475 505
Income tax benefit (expense)   (85 )   (90 )   (45 )   (50 )
Adjusted income from continuing operations 237 262 430 455
Net income attributable to noncontrolling interests   (116 )   (126 )   (370 )   (380 )
Adjusted net income from continuing operations attributable to common shareholders $ 121   $ 136   $ 60   $ 75  
Basic weighted average shares outstanding (in millions) 101 101 101 101
Fully diluted weighted average shares outstanding (in millions) 101 101 101 101
Diluted earnings (loss) per share from continuing operations $ 1.01 $ 1.06 $ (3.68 ) $ (3.63 )
Adjusted diluted earnings (loss) per share from continuing operations $ 1.20 $ 1.35 $ 0.59 $ 0.74
 

(1) The Company does not forecast impairment and restructuring charges, acquisition-related costs and litigation costs and settlements and gains on sales, consolidation and deconsolidation of facilities because the Company does not believe that it can forecast these items with sufficient accuracy since some of these items are indeterminable at the time the Company provides its financial Outlook.

(2) In conjunction with the Company's recently announced $150 million cost reduction initiative, the Company expects to recognize a pre-tax restructuring charge of approximately $40 million in the fourth quarter of 2017. Substantially all of these costs relate to employee severance.

               

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #5 – Reconciliation of Outlook Adjusted Free Cash Flow
for the Year Ending December 31, 2017
 
 
(Dollars in millions) 2017  
Low High
Net cash provided by operating activities $ 1,017 $ 1,267
Less: Payments for restructuring charges, acquisition-related costs and litigation costs and settlements(1) (103 ) (108 )
Net cash used in operating activities from discontinued operations   (5 )    
Adjusted net cash provided by operating activities – continuing operations 1,125 1,375
Purchases of property and equipment – continuing operations   (675 )   (725 )
Adjusted free cash flow – continuing operations (2) $ 450   $ 650  
 

(1) Company does not forecast impairment and restructuring charges, acquisition-related costs and litigation costs and settlements because the Company does not believe that it can forecast these items with sufficient accuracy since some of these items may be indeterminable at the time the Company provides its financial Outlook. In conjunction with the Company's recently announced $150 million cost reduction initiative, the Company expects to recognize payments of approximately $15 million to $20 million in the fourth quarter of 2017. Substantially all of these payments relate to employee severance.

(2) The Company's definition of Adjusted Free Cash Flow does not include other important uses of cash including (1) cash used to purchase businesses or joint venture interests, or (2) any items that are classified as Cash Flows From Financing Activities on the Company's Consolidated Statement of Cash Flows, including items such as (i) cash used to repay borrowings, (ii) distributions paid to noncontrolling interests, or (iii) payments under the Put/Call Agreement for USPI redeemable noncontrolling interests, which are recorded on the Statement of Cash Flows as the purchase of noncontrolling interests.

Contact:

Tenet Healthcare Corporation
Investor Relations
Brendan Strong, 469-893-6992
investorrelations@tenethealth.com
or
Corporate Communications
Lesley Bogdanow, 469-893-2640
mediarelations@tenethealth.com