Tenet Reports Adjusted EBITDA of $646 Million for the Quarter Ended December 31, 2014

Monday, February 23, 2015 3:11 pm CST

Dateline:

DALLAS

Public Company Information:

NYSE:
THC
"Another quarter of robust earnings growth across our entire business capped off Tenet’s strongest year in a decade"

DALLAS--(BUSINESS WIRE)--Tenet Healthcare Corporation (NYSE:THC) reported Adjusted EBITDA of $646 million for the fourth quarter ended December 31, 2014, an increase of $202 million, or 45.5 percent, compared to $444 million in the fourth quarter of 2013.

“Another quarter of robust earnings growth across our entire business capped off Tenet’s strongest year in a decade,” said Trevor Fetter, president and chief executive officer. “Our strategies to capture incremental market share, combined with an improving economy and expanded health coverage, generated admissions growth that was among the highest in the industry. Conifer also achieved record growth and continues to gain recognition as a leading provider of revenue cycle management and value-based care services. We are well-positioned to continue driving strong performance in 2015.”

Discussion of Results (Percentage changes in operating metrics compare Q4’14 to Q4’13 on a same-hospital basis unless otherwise noted.)

Tenet generated same-hospital growth in admissions and adjusted admissions of 4.0 percent and 4.5 percent, respectively, compared to the fourth quarter of 2013. In addition, the company achieved one of the strongest quarterly percentage increases in same-hospital commercial volumes in more than a decade. We achieved an increase in paying admissions of 6.1 percent, driven in part by growth in commercial admissions. Surgeries increased 7.5 percent and emergency department visits increased 7.2 percent. The company estimates that approximately 70 percent of its volume growth in the quarter is related to investments in service line development, quality improvements, and enhanced physician alignment. This is independent of growth attributable to expanded insurance coverage under the Affordable Care Act (ACA).

Tenet increased outpatient visits by 9.6 percent. Approximately 92 percent of this growth was organic. At the end of 2014, Tenet operated 210 outpatient facilities, an increase of 27 facilities over the prior year.

Payer mix improved in the quarter. In the five states that expanded Medicaid, uninsured plus charity admissions declined by 2,547 admissions, or 62.4 percent, and Medicaid admissions increased by 4,355 admissions, or 20.5 percent. Uninsured plus charity outpatient visits decreased by 23,336 visits, or 34.3 percent, and Medicaid outpatient visits grew by 67,252 visits, or 25.2 percent, in these same five states. Across the entire company, uninsured plus charity admissions decreased by 3,109 admissions, or 21.9 percent, and Medicaid admissions increased by 4,555 admissions, or 9.0 percent. There was a decline in charity and uninsured outpatient visits of 18,917 visits, or 10.3 percent, and an increase in Medicaid outpatient visits of 86,891 visits, or 17.9 percent.

Tenet’s exchange volumes were 3,768 admissions and 32,133 outpatient visits in the fourth quarter. Compared to the third quarter of 2014, the company drove increases in exchange admissions and exchange outpatient visits of 11.0 percent and 7.4 percent, respectively.

Net operating revenues, after provision for doubtful accounts, grew by $583 million, or 15.0 percent, to $4.468 billion, compared to net operating revenues of $3.885 billion in the fourth quarter of 2013. Tenet drove revenue growth by increasing patient volumes, improving terms in commercial managed care contracts and growing the company’s Conifer services businesses. In addition, the California Provider Fee program contributed $165 million to net operating revenues in the fourth quarter of 2014, an increase of $146 million compared to $19 million in the fourth quarter of 2013, due to the 2014 program being approved in the fourth quarter of 2014. Including only the impact of the California Provider Fee program related to the fourth quarter of 2014, or $38 million on a same-hospital basis, Tenet increased patient revenue net of bad debt expense per adjusted admission by 4.9 percent. The company grew commercial managed care revenue by 6.7 percent per admission and 0.9 percent per outpatient visit. Tenet continued to increase its investments in urgent care centers, which have lower acuity and generate lower revenues and costs per patient encounter. This contributed to a smaller percentage increase in commercial outpatient pricing.

Selected operating expenses for hospital operations, defined as the sum of salaries, wages and benefits, supplies and other operating expenses, increased by 3.8 percent. The selected operating expense metric for hospital operations excludes the company’s Conifer services business, health plans, and a provider network in Southern California. Excluding incremental expenses related to increased physician employment, selected operating expenses per adjusted admission increased by 2.6 percent.

Tenet recorded $32 million in electronic health records incentives in the fourth quarter of 2014, a $16 million decrease compared to $48 million in the fourth quarter of 2013. Electronic health record incentive payments are recorded based on the timing of when the company’s hospitals achieve meaningful use criteria.

The company’s bad debt expense ratio was 7.4 percent of revenues before bad debt, a decrease of 80 basis points compared to 8.2 percent in the fourth quarter of 2013. This improvement reflects the benefits of healthcare reform.

Conifer generated an increase in Adjusted EBITDA of $28 million, or 77.8 percent, to $64 million, compared to $36 million in the fourth quarter of 2013. Conifer’s revenue increased by $63 million, or 23.9 percent, to $327 million in the fourth quarter of 2014, compared to revenues of $264 million in the fourth quarter of 2013.

Tenet generated after-tax income from continuing operations in the fourth quarter of 2014 of $104 million, or $1.03 per diluted share. This excludes $43 million, or $0.42 per share in after-tax impairments, restructuring charges, acquisition-related costs, and litigation and investigation costs. The company reported income from continuing operations in the fourth quarter of 2013 of $43 million, or $0.43 per diluted share, excluding the comparable items which totaled $60 million after-tax, or $0.60 per share.

Tenet drove net income attributable to common shareholders of $61 million after-tax, or $0.61 per share in the fourth quarter of 2014, compared to a net loss of $24 million after-tax, or $0.24 per share, in the fourth quarter of 2013.

Cash and cash equivalents were $193 million at December 31, 2014, compared to $200 million at September 30, 2014. Net revenues related to the California Provider Fee program, the Texas Medicaid disproportionate share funding, and the Texas uncompensated care 1115 Waiver programs of approximately $300 million had not been received by the company as of December 31, 2014. Tenet’s outstanding borrowings on its credit line were $220 million as of December 31, 2014. Accounts receivable days increased by 0.2 days to 49.5 days at December 31, 2014, compared to 49.3 days at September 30, 2014.

Outlook for First Quarter and Full Year 2015 Adjusted EBITDA

The company confirmed its existing 2015 Outlook for Adjusted EBITDA to be in a range of $2.05 billion to $2.15 billion. The company expects 2015 earnings per share to be in a range of $1.32 to $2.40 per share. For the first quarter ending March 31, 2015, the company expects Adjusted EBITDA of $475 million to $525 million and earnings per share of $0.05 to $0.55 per share.

Management’s Webcast Discussion of Fourth Quarter Results

Tenet management will discuss the Company’s fourth quarter 2014 results on a webcast scheduled for 9:00 a.m. (CST) / 10:00 a.m. (EST) on February 24, 2015. Investors can access the webcast through Tenet’s website at www.tenethealth.com/investors. A set of slides, which will be referred to on the conference call, is available on the Quarterly Results section of the Company’s website.

Additional information regarding Tenet’s quarterly results of operations, including detailed tabular operational data, is contained in its Form 10-K report, which will be filed with the Securities and Exchange Commission and posted on the Tenet website before the webcast. This press release includes certain non-GAAP measures, such as Adjusted EBITDA. A reconciliation of Adjusted EBITDA to net income attributable to Tenet common shareholders is included in the financial tables at the end of this release.

Tenet Healthcare Corporation is a national, diversified healthcare services company with more than 109,000 employees united around a common mission: to help people live happier, healthier lives. The company operates 80 hospitals, 214 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, 2014 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 December 31,
2014   %   2013 %   Change
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 4,824 $ 4,233 14.0 %
Less: Provision for doubtful accounts   356     348   2.3 %
Net operating revenues 4,468 100.0 % 3,885 100.0 % 15.0 %
Operating expenses:
Salaries, wages and benefits 2,118 47.4 % 1,872 48.2 % 13.1 %
Supplies 688 15.4 % 626 16.1 % 9.9 %
Other operating expenses, net 1,048 23.5 % 991 25.5 % 5.8 %
Electronic health record incentives (32 ) (0.7

)%

(48 ) (1.2

)%

(33.3

)%

Depreciation and amortization 240 5.4 % 191 4.9 % 25.7 %
Impairment and restructuring charges, and acquisition-related costs

63

1.4 % 58 1.5 %
Litigation and investigation costs   6   0.1 %   28     0.7 %
Operating income 337 7.5 % 167 4.3 %
Interest expense   (196 )   (182 )
Income (loss) from continuing operations, before income taxes 141 (15 )
Income tax benefit (expense)   (60 )   8  

Income (loss) from continuing operations, before discontinued operations

81 (7 )
Discontinued operations:
Loss from operations
Income tax expense       (7 )
Net loss from discontinued operations       (7 )
Net income (loss) 81 (14 )
Less: Net income attributable to noncontrolling interests   20     10  
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ 61   $ (24 )
 
Amounts attributable to Tenet Healthcare Corporation common shareholders
Income (loss) from continuing operations, net of tax $ 61 $ (17 )
Loss from discontinued operations, net of tax       (7 )
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ 61   $ (24 )
 
Earnings (loss) per share attributable to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ 0.62 $ (0.17 )
Discontinued operations       (0.07 )
$ 0.62   $ (0.24 )
Diluted
Continuing operations $ 0.61 $ (0.17 )
Discontinued operations       (0.07 )
$ 0.61   $ (0.24 )

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

Basic 98,331 98,586
Diluted* 101,279 98,586
 

*Had we generated income from continuing operations in the three months ended December 31, 2013, the effect of employee stock options, restricted stock units and deferred compensation units on the diluted shares calculation would have been an increase of 2,472 shares.

 
 
 
 
 
 

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
(Dollars in millions except per share amounts) Year Ended December 31,
2014 % 2013 % Change
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 17,920 $ 12,074 48.4 %
Less: Provision for doubtful accounts   1,305     972   34.3 %
Net operating revenues 16,615 100.0 % 11,102 100.0 % 49.7 %
Operating expenses:
Salaries, wages and benefits 8,023 48.3 % 5,371 48.4 % 49.4 %
Supplies 2,630 15.8 % 1,784 16.1 % 47.4 %
Other operating expenses, net 4,114 24.8 % 2,701 24.3 % 52.3 %
Electronic health record incentives (104 ) (0.7

)%

(96 ) (0.9

)%

8.3 %
Depreciation and amortization 849 5.1 % 545 4.9 % 55.8 %
Impairment and restructuring charges, and acquisition-related costs 153 0.9 % 103 0.9 %
Litigation and investigation costs   25   0.2 %   31     0.3 %
Operating income 925 5.6 % 663 6.0 %
Interest expense (754 ) (474 )
Loss from early extinguishment of debt (24 ) (348 )
Investment earnings       1  
Income (loss) from continuing operations, before income taxes 147 (158 )
Income tax benefit (expense)   (49 )   65  

Net income (loss) from continuing operations, before discontinued operations

98 (93 )
Discontinued operations:
Loss from operations (17 ) (5 )
Litigation and investigation costs (18 ) (2 )
Income tax benefit (expense)   13     (4 )
Loss from discontinued operations   (22 )   (11 )
Net income (loss) 76 (104 )
Less: Net income attributable to noncontrolling interests   64     30  
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ 12   $ (134 )
 
Amounts attributable to Tenet Healthcare Corporation common shareholders
Net income (loss) from continuing operations, net of tax $ 34 $ (123 )
Loss from discontinued operations, net of tax   (22 )   (11 )
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ 12   $ (134 )
 
Net income (loss) per share attributable to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ 0.35 $ (1.21 )
Discontinued operations   (0.23 )   (0.11 )
$ 0.12   $ (1.32 )
Diluted
Continuing operations $ 0.34 $ (1.21 )
Discontinued operations   (0.22 )   (0.11 )
$ 0.12   $ (1.32 )

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

Basic 97,801 101,648
Diluted* 100,287 101,648
 

*Had we generated income from continuing operations available to shareholders in the year ended December 31, 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 2,310 shares.

 
 
 
 
 
 
TENET HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
December 31, December 31,
(Dollars in millions) 2014 2013
ASSETS
Current assets:
Cash and cash equivalents $ 193 $ 113
Accounts receivable, less allowance for doubtful accounts 2,404 1,890
Inventories of supplies, at cost 276 260
Income tax receivable 2
Current portion of deferred income taxes 747 692
Other current assets   1,095     737  
Total current assets 4,717 3,692
Investments and other assets 384 357
Deferred income taxes, net of current portion 116 148
Property and equipment, at cost, less accumulated depreciation and amortization 7,733 7,582
Goodwill 3,913 3,566
Other intangible assets, at cost, less accumulated amortization   1,278     1,105  
Total assets $ 18,141   $ 16,450  
 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 112 $ 153
Accounts payable 1,179 1,085
Accrued compensation and benefits 852 622
Professional and general liability reserves 189 156
Accrued interest payable 194 198
Other current liabilities   1,051     879  
Total current liabilities 3,577 3,093
Long-term debt, net of current portion 11,695 10,696
Professional and general liability reserves 492 555
Defined benefit plan obligations 633 398
Other long-term liabilities   558     490  
Total liabilities 16,955 15,232
Commitments and contingencies
Redeemable noncontrolling interests in equity of consolidated subsidiaries 401 340
Equity:
Shareholders’ equity:
Common stock 7 7
Additional paid-in capital 4,614 4,572
Accumulated other comprehensive loss (182 ) (24 )
Accumulated deficit (1,410 ) (1,422 )
Common stock in treasury, at cost   (2,378 )   (2,378 )
Total shareholders’ equity 651 755
Noncontrolling interests   134     123  
Total equity   785     878  
Total liabilities and equity $ 18,141   $ 16,450  
 
 
 
 
 
 

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in millions)       Year Ended
December 31,
2014     2013
Net income (loss) $ 76 $ (104 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 849 545
Provision for doubtful accounts 1,305 972
Deferred income tax benefit 30 (67 )
Stock-based compensation expense 51 36
Impairment and restructuring charges, and acquisition-related costs 153 103
Litigation and investigation costs 25 31
Loss from early extinguishment of debt 24 348
Amortization of debt discount and debt issuance costs 28 19
Pre-tax income from discontinued operations 35 7
Other items, net (40 ) (33 )
Changes in cash from operating assets and liabilities:
Accounts receivable (1,896 ) (987 )
Inventories and other current assets (314 ) (203 )
Income taxes 3
Accounts payable, accrued expenses and other current liabilities 505 38
Other long-term liabilities 44 13
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements (168 ) (114 )
Net cash used in operating activities from discontinued operations, excluding income taxes   (23 )   (15 )
Net cash provided by operating activities 687 589
Cash flows from investing activities:
Purchases of property and equipment — continuing operations (933 ) (691 )
Purchases of businesses or joint venture interests, net of cash acquired (428 ) (1,515 )
Proceeds from sales of facilities and other assets — discontinued operations 6 16
Proceeds from sales of marketable securities, long-term investments and other assets 31 15
Other long-term assets 1 8
Other items, net   1     3  
Net cash used in investing activities (1,322 ) (2,164 )
Cash flows from financing activities:
Repayments of borrowings under credit facility (2,430 ) (1,286 )
Proceeds from borrowings under credit facility 2,245 1,691
Repayments of other borrowings (683 ) (5,133 )
Proceeds from other borrowings 1,608 6,507
Deferred debt issuance costs (27 ) (154 )
Repurchases of common stock (400 )
Distributions paid to noncontrolling interests (45 ) (27 )
Contributions from noncontrolling interests 17 99
Proceeds from exercise of stock options 26 22
Other items, net   4     5  
Net cash provided by financing activities   715     1,324  
Net increase (decrease) in cash and cash equivalents 80 (251 )
Cash and cash equivalents at beginning of period   113     364  
Cash and cash equivalents at end of period $ 193   $ 113  
Supplemental disclosures:
Interest paid, net of capitalized interest $ (726 ) $ (426 )
Income tax payments, net $ (8 ) $ (6 )
 
 
 
 
 
 

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS INCLUDING VANGUARD PROFORMA FOR FULL YEAR 2013
(Unaudited)
 

 

(Dollars in millions except per patient day, per admission and per visit amounts)

    Three Months Ended December 31,   Year Ended December 31,
2014   2013   Change 2014   2013   Change
 
Net inpatient revenues $ 2,669 $ 2,372 12.5 % $ 9,927 $ 9,651 2.9 %
Net outpatient revenues $ 1,495 $ 1,357 10.2 % $ 5,712 $ 5,343 6.9 %
 
Number of acute care hospitals (at end of period) 77 77 * 77 77 *
Licensed beds (at end of period) 20,407 20,293 0.6 % 20,407 20,293 0.6 %
Average licensed beds 20,398 20,294 0.5 % 20,328 20,295 0.2 %
Utilization of licensed beds 49.1 % 47.2 % 1.9 % * 49.4 % 48.1 % 1.3 % *
Patient days – total 921,926 880,737 4.7 % 3,665,814 3,562,658 2.9 %
Adjusted patient days 1,562,581 1,481,407 5.5 % 6,201,568 5,971,291 3.9 %
Net inpatient revenue per patient day $ 2,895 $ 2,693 7.5 % $ 2,708 $ 2,709 %
Total admissions 198,219 190,506 4.0 % 783,268 764,695 2.4 %
Adjusted patient admissions 340,125 325,377 4.5 % 1,340,444 1,295,720 3.5 %
Charity and uninsured admissions 11,104 14,189 (21.7

)%

45,308 55,548 (18.4

)%

Net inpatient revenue per admission $ 13,465 $ 12,451 8.1 % $ 12,674 $ 12,621 0.4 %
Average length of stay (days) 4.65 4.62 0.6 % 4.68 4.66 0.4 %
Total surgeries 181,336 168,730 7.5 % 694,272 640,960 8.3 %
Admissions through emergency department 124,600 116,592 6.9 % 490,006 472,515 3.7 %
Emergency department visits 711,351 663,114 7.3 % 2,775,281 2,664,278 4.2 %
Total emergency department admissions
and visits
835,951 779,706 7.2 % 3,265,287 3,136,793 4.1 %
Outpatient visits 2,100,683 1,916,932 9.6 % 8,198,002 7,646,969 7.2 %
Charity and uninsured outpatient visits 164,746 183,586 (10.3

)%

664,082 761,027 (12.7 ) %
Net outpatient revenue per visit $ 712 $ 708 0.6 % $ 697 $ 699 (0.3 ) %
Net patient revenue per adjusted patient admission $ 12,243 $ 11,461 6.8 % $ 11,667 $ 11,572 0.8 %
Net patient revenue per adjusted patient day $ 2,665 $ 2,517 5.9 % $ 2,522 $ 2,511 0.4 %
 
Net Patient Revenues from:
Medicare 20.9 % 21.8 % (0.9

)%

* 21.8 % 22.5 % (0.7

)%

*
Medicaid 10.9 % 9.3 % 1.6 % * 9.4 % 10.2 % (0.8

)%

*
Managed care 58.1 % 57.7 % 0.4 % * 58.6 % 56.0 % 2.6 % *
Indemnity, self-pay and other 10.1 % 11.2 % (1.1

)%

* 10.2 % 11.3 % (1.1

)%

*
 
* 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 December 31,   Year Ended December 31,
2014   2013   Change 2014     2013   Change
 
Net inpatient revenues $ 2,719 $ 2,372 14.6 % $ 10,015 $ 6,952 44.1 %
Net outpatient revenues $ 1,539 $ 1,357 13.4 % $ 5,774 $ 3,859 49.6 %
 
Number of acute care hospitals (at end of period) 80 77 3 * 80 77 3 *
Licensed beds (at end of period) 20,814 20,293 2.6 % 20,814 20,293 2.6 %
Average licensed beds 20,805 20,294 2.5 % 20,531 14,963 37.2 %
Utilization of licensed beds 49.0 % 47.2 % 1.8 % * 49.3 % 48.0 % 1.3 % *
Patient days – total 937,803 880,737 6.5 % 3,695,288 2,621,245 41.0 %
Adjusted patient days 1,592,166 1,481,291 7.5 % 6,255,572 4,243,334 47.4 %
Net inpatient revenue per patient day $ 2,899 $ 2,693 7.6 % $ 2,710 $ 2,652 2.2 %
Total admissions 202,337 190,506 6.2 % 791,165 558,726 41.6 %
Adjusted patient admissions 347,790 325,410 6.9 % 1,354,896 915,276 48.0 %
Charity and uninsured admissions 11,256 14,190 (20.7

)%

45,703 40,487 12.9 %
Net inpatient revenue per admission $ 13,438 $ 12,451 7.9 % $ 12,659 $ 12,443 1.7 %
Average length of stay (days) 4.63 4.62 0.2 %

4.67

4.69 (0.4 ) %
Total surgeries 183,250 168,730 8.6 % 697,635 489,867 42.4 %
Admissions through emergency department 127,361 116,592 9.2 % 495,195 347,920 42.3 %
Emergency department visits 737,680 663,114 11.2 % 2,824,526 1,865,239 51.4 %

Total emergency department admissions and visits

865,041 779,706 10.9 % 3,319,721 2,213,159 50.0 %
Outpatient visits 2,145,138 1,916,932 11.9 % 8,283,878 5,115,854 61.9 %
Charity and uninsured outpatient visits 168,284 183,587 (8.3

)%

673,320 522,781 28.8 %
Net outpatient revenue per visit $ 717 $ 708 1.3 % $ 697 $ 754 (7.6

)%

Net patient revenue per adjusted patient admission $ 12,243 $ 11,459 6.8 % $ 11,653 $ 11,812 (1.3

)%

Net patient revenue per adjusted patient day $ 2,674 $ 2,517 6.2 % $ 2,524 $ 2,548 (0.9

)%

 
Net Patient Revenues from:
Medicare 20.9 % 21.8 % (0.9

)%

* 21.9 % 21.8 % 0.1 % *
Medicaid 11.1 % 9.3 % 1.8 % * 9.4 % 9.0 % 0.4 % *
Managed care 57.9 % 57.7 % 0.2 % * 58.6 % 58.1 % 0.5 % *
Indemnity, self-pay and other 10.1 % 11.2 % (1.1

)%

* 10.1 % 11.1 % (1.0

)%

*
 
* 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     Year Ended

12/31/14

03/31/14     06/30/14     09/30/14     12/31/14
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 4,306 $ 4,362 $ 4,428 $ 4,824 $ 17,920
Less: Provision for doubtful accounts   380     320     249     356     1,305  
Net operating revenues 3,926 4,042 4,179 4,468 16,615
Operating expenses:
Salaries, wages and benefits 1,921 1,956 2,028 2,118 8,023
Supplies 628 649 665 688 2,630
Other operating expenses, net 999 1,035 1,032 1,048 4,114
Electronic health record incentives (9 ) (58 ) (5 ) (32 ) (104 )
Depreciation and amortization 193 209 207 240 849
Impairment and restructuring charges, and acquisition-related costs 21 32 37 63 153
Litigation and investigation costs   3     12     4     6     25  
Operating income 170 207 211 337 925
Interest expense (182 ) (190 ) (186 ) (196 ) (754 )
Loss from early extinguishment of debt           (24 )       (24 )
Income (loss) from continuing operations, before income taxes (12 ) 17 1 141 147
Income tax benefit (expense)   1     (8 )   18     (60 )   (49 )
Income (loss) from continuing operations, before discontinued operations (11 ) 9 19 81 98
Discontinued operations:
Loss from operations (8 ) (7 ) (2 ) (17 )
Litigation and investigation costs (18 ) (18 )
Income tax benefit   3     9     1         13  
Net loss from discontinued operations   (5 )   (16 )   (1 )       (22 )
Net income (loss) (16 ) (7 ) 18 81 76
Less: Net income attributable to noncontrolling interests   16     19     9     20     64  
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ (32 ) $ (26 ) $ 9   $ 61   $ 12  
 
Amounts attributable to Tenet Healthcare Corporation common shareholders
Income (loss) from continuing operations, net of tax $ (27 ) $ (10 ) $ 10 $ 61 $ 34
Loss from discontinued operations, net of tax   (5 )   (16 )   (1 )       (22 )
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ (32 ) $ (26 ) $ 9   $ 61   $ 12  
 
Net income (loss) per share attributable to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ (0.28 ) $ (0.11 ) $ 0.10 $ 0.61 $ 0.35
Discontinued operations   (0.05 )   (0.16 )   (0.01 )       (0.23 )
$ (0.33 ) $ (0.27 ) $ 0.09   $ 0.61   $ 0.12  
Diluted
Continuing operations $ (0.28 ) $ (0.11 ) $ 0.10 $ 0.61 $ 0.34
Discontinued operations   (0.05 )   (0.16 )   (0.01 )       (0.22 )
$ (0.33 ) $ (0.27 ) $ 0.09   $ 0.61   $ 0.12  

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

Basic 97,161 97,677 98,036 98,331 97,801
Diluted 97,161 97,677 100,926 101,279 100,287
 
 
 
 
 
 

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS INCLUDING VANGUARD
(Unaudited)
 

(Dollars in millions except per patient days, per admission and per visit amounts)

    Three Months Ended     Year

Ended

03/31/14     06/30/14     09/30/14     12/31/14 12/31/14
 
Net inpatient revenues $ 2,440 $ 2,400 $ 2,418 $ 2,669 $ 9,927
Net outpatient revenues $ 1,346 $ 1,436 $ 1,435 $ 1,495 $ 5,712
 
Number of acute care hospitals (at end of period) 77 77 77 77 77
Licensed beds (at end of period) 20,255 20,355 20,355 20,407 20,407
Average licensed beds 20,255 20,304 20,355 20,398 20,328
Utilization of licensed beds 51.0 % 49.0 % 48.5 % 49.1 % 49.4 %
Patient days – total 929,164 905,839 908,885 921,926 3,665,814
Adjusted patient days 1,535,545 1,551,263 1,552,179 1,562,581 6,201,568
Net inpatient revenue per patient day $ 2,626 $ 2,649 $ 2,660 $ 2,895 $ 2,708
Total admissions 194,273 194,167 196,609 198,219 783,268
Adjusted patient admissions 324,475 335,991 339,853 340,125 1,340,444
Charity and uninsured admissions 12,530 10,900 10,774 11,104 45,308
Net inpatient revenue per admission $ 12,560 $ 12,360 $ 12,299 $ 13,465 $ 12,674
Average length of stay (days) 4.78 4.67 4.62 4.65 4.68
Total surgeries 162,282 173,463 177,191 181,336 694,272
Admissions through emergency department 122,601 121,872 120,933 124,600 490,006
Emergency department visits 665,002 699,423 699,505 711,351 2,775,281
Total emergency department admissions and visits 787,603 821,295 820,438 835,951 3,265,287
Outpatient visits 1,947,687 2,063,026 2,086,606 2,100,683 8,198,002
Charity and uninsured outpatient visits 165,248 168,967 165,121 164,746 664,082
Net outpatient revenue per visit $ 691 $ 696 $ 688 $ 712 $ 697
Net patient revenue per adjusted patient admission $ 11,668 $ 11,417 $ 11,337 $ 12,243 $ 11,667
Net patient revenue per adjusted patient day $ 2,466 $ 2,473 $ 2,482 $ 2,665 $ 2,522
 
Net Patient Revenues from:
Medicare 22.6 % 22.5 % 21.3 % 20.9 % 21.8 %
Medicaid 7.7 % 9.9 % 8.8 % 10.9 % 9.4 %
Managed care 57.8 % 58.0 % 60.8 % 58.1 % 58.6 %
Indemnity, self-pay and other 11.9 % 9.6 % 9.1 % 10.1 % 10.2 %
 
 
 
 
 
 

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS INCLUDING VANGUARD PROFORMA FOR FULL YEAR 2013
(Unaudited)
 

(Dollars in millions except per patient days, per admission and per visit amounts)

    Three Months Ended     Year

Ended

03/31/13     06/30/13     09/30/13     12/31/13 12/31/13
 
Net inpatient revenues $ 2,404 $ 2,436 $ 2,439 $ 2,372 $ 9,651
Net outpatient revenues $ 1,295 $ 1,346 $ 1,345 $ 1,357 $ 5,343
 
Number of acute care hospitals (at end of period) 77 77 77 77 77
Licensed beds (at end of period) 20,295 20,295 20,295 20,293 20,293
Average licensed beds 20,295 20,295 20,295 20,294 14,963
Utilization of licensed beds 51.0 % 47.3 % 47.0 % 47.2 % 48.0 %
Patient days – total 931,291 873,643 876,987 880,737 3,562,658
Adjusted patient days 1,525,151 1,479,667 1,485,066 1,481,407 5,971,291
Net inpatient revenue per patient day $ 2,581 $ 2,788 $ 2,781 $ 2,693 $ 2,709
Total admissions 196,102 188,789 189,298 190,506 764,695
Adjusted patient admissions 323,496 323,000 323,847 325,377 1,295,720
Charity and uninsured admissions 13,217 13,931 14,211 14,189 55,548
Net inpatient revenue per admission $ 12,259 $ 12,903 $ 12,884 $ 12,451 $ 12,621
Average length of stay (days) 4.75 4.63 4.63 4.62 4.66
Total surgeries 150,716 160,192 161,322 168,730 640,960
Admissions through emergency department 123,063 117,194 115,666 116,592 472,515
Emergency department visits 669,774 666,261 665,129 663,114 2,664,278
Total emergency department admissions and visits 792,837 783,455 780,795 779,706 3,136,793
Outpatient visits 1,880,002 1,926,196 1,923,839 1,916,932 7,646,969
Charity and uninsured outpatient visits 188,112 193,974 195,354 183,586 761,027
Net outpatient revenue per visit $ 689 $ 699 $ 699 $ 708 $ 699
Net patient revenue per adjusted patient admission $ 11,434 $ 11,709 $ 11,685 $ 11,461 $ 11,572
Net patient revenue per adjusted patient day $ 2,425 $ 2,556 $ 2,548 $ 2,517 $ 2,511
 
Net Patient Revenues from:
Medicare 24.0 % 22.1 % 22.0 % 21.8 % 22.5 %
Medicaid 9.3 % 11.7 % 10.7 % 9.3 % 10.2 %
Managed care 55.9 % 55.0 % 55.5 % 57.7 % 56.0 %
Indemnity, self-pay and other 10.8 % 11.2 % 11.8 % 11.2 % 11.3 %
 
 
 
 
 
 

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     Year

Ended

03/31/14     06/30/14     09/30/14     12/30/14 12/31/14
 
Net inpatient revenues $ 2,440

$

2,393

$

2,463

$ 2,719 $ 10,015
Net outpatient revenues $ 1,346 $ 1,448

$

1,441

$ 1,539 $ 5,774
 
Number of acute care hospitals (at end of period) 77 79 80 80 80
Licensed beds (at end of period) 20,279 20,553 20,762 20,814 20,814
Average licensed beds 20,263 20,370 20,692 20,805 20,531
Utilization of licensed beds 51.0 % 48.9 % 48.4 % 49.0 % 49.3 %
Patient days – total 929,164 907,093 921,228 937,803 3,695,288
Adjusted patient days 1,535,545 1,553,515 1,574,346 1,592,166 6,255,572
Net inpatient revenue per patient day $ 2,626 $ 2,638

$

2,674

$ 2,899 $ 2,710
Total admissions 194,273 194,641 199,914 202,337 791,165
Adjusted patient admissions 324,475 336,844 345,787 347,790 1,354,896
Charity and uninsured admissions 12,530 10,927 10,990 11,256 45,703
Net inpatient revenue per admission $ 12,560 $ 12,294

$

12,320

$ 13,438 $ 12,659
Average length of stay (days) 4.78 4.66 4.61 4.63

4.67

Total surgeries 162,282 173,664 178,439 183,250 697,635
Admissions through emergency department 122,601 122,086 123,147 127,361 495,195
Emergency department visits 665,002 702,009 719,835 737,680 2,824,526
Total emergency department admissions and visits 787,603 824,095 842,982 865,041 3,319,721
Outpatient visits 1,947,687 2,066,051 2,125,002 2,145,138 8,283,878
Charity and uninsured outpatient visits 165,248 169,766 170,022 168,284 673,320
Net outpatient revenue per visit $ 691 $ 701

$

678

$ 717 $ 697
Net patient revenue per adjusted patient admission $ 11,692 $ 11,380

$

11,290

$ 12,243 $ 11,653
Net patient revenue per adjusted patient day $ 2,482 $ 2,456

$

2,480

$ 2,674 $ 2,524
 
Net Patient Revenues from:
Medicare 22.6 % 22.5 % 21.5 % 20.9 % 21.9 %
Medicaid 7.7 % 9.9 % 8.7 % 11.1 % 9.4 %
Managed care 57.8 % 58.0 % 60.7 % 57.9 % 58.6 %
Indemnity, self-pay and other 11.9 % 9.6 % 9.1 % 10.1 % 10.1 %
 
 
 
 
 
 
TENET HEALTHCARE CORPORATION

SEGMENT REPORTING

(Unaudited)

   
December 31,   December 31,
2014 2013
Assets
Hospital Operations and other $ 17,212 $ 15,865
Conifer   929     585  
Total $ 18,141   $ 16,450  
 
 
    Three Months Ended

December 31,

Year Ended

December 31,

2014   2013 2014 2013
Capital expenditures:
Hospital Operations and other $ 191 $ 283 $ 908 $ 670
Conifer   8   10     25     21  
Total $ 199   $ 293   $ 933   $ 691  
 
Net operating revenues:
Hospital Operations and other $ 4,306 $ 3,747 $ 16,013 $ 10,587
Conifer
Tenet 165 126 591 404
Other customers   162   138     602     515  
4,633 4,011 17,206 11,506
Intercompany eliminations   (165 ) (126 )   (591 )   (404 )
Total $ 4,468   $ 3,885   $ 16,615   $ 11,102  
 
Adjusted EBITDA:
Hospital Operations and other $ 582 $ 408 $ 1,749 $ 1,210
Conifer   64   36     203     132  
Total $ 646   $ 444   $ 1,952   $ 1,342  
 
Depreciation and amortization:
Hospital Operations and other $ 230 $ 187 $ 824 $ 526
Conifer   10   4     25     19  
Total $ 240   $ 191   $ 849   $ 545  
 
Adjusted EBITDA $ 646 $ 444 $ 1,952 $ 1,342
Depreciation and amortization (240 ) (191 ) (849 ) (545 )

Impairments and restructuring charges, and acquisition-related costs

(63 ) (58 ) (153 ) (103 )
Litigation and investigation costs (6 ) (28 ) (25 ) (31 )
Interest expense (196 ) (182 ) (754 ) (474 )
Loss from early extinguishment of debt (24 ) (348 )
Investment earnings             1  
Income (loss) from continuing operations before income taxes $ 141   $ (15 ) $ 147   $ (158 )
 
 
 
 
 

(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 twelve months ended December 31, 2014 and 2013.

For certain pro financial information of the Company as if the Vanguard acquisition had occurred at January 1, 2013, see Note 19 of the notes to the consolidated financial statements in the Company’s Form 10-K for the year ended December 31, 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
December 31,
    Year Ended
December 31,
2014   2013 2014   2013
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ 61 $ (24 ) $ 12 $ (134 )
Less: Net (income) attributable to noncontrolling interests (20 ) (10 ) (64 ) (30 )
Loss from discontinued operations, net of tax       (7 )   (22 )   (11 )
Income (loss) from continuing operations 81 (7 ) 98 (93 )
Income tax benefit (expense) (60 ) 8 (49 ) 65
Investment earnings 1
Loss from early extinguishment of debt (24 ) (348 )
Interest expense   (196 )   (182 )   (754 )   (474 )
Operating income 337 167 925 663
Litigation and investigation costs (6 ) (28 ) (25 ) (31 )
Impairment and restructuring charges, and acquisition-related costs (63 ) (58 ) (153 ) (103 )
Depreciation and amortization   (240 )   (191 )   (849 )   (545 )
Adjusted EBITDA $ 646   $ 444   $ 1,952   $ 1,342  
 
Net operating revenues $ 4,468   $ 3,885   $ 16,615   $ 11,102  
 
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) 14.5 % 11.4 % 11.7 % 12.1 %
 
 
 
 
 
TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP Disclosures

Table #2 - Reconciliation of Adjusted Free Cash Flow

(Unaudited)
 
(Dollars in millions) Three Months Ended
December 31,
Year Ended
December 31,
2014 2013 2014 2013
Net cash provided by operating activities $ 219 $ 255 $ 687 $ 589
Less:

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

(53 ) (78 ) (168 ) (114 )
Net cash provided by (used in) operating activities from discontinued operations   (7 )   (10 )   (23 )   (15 )
Adjusted net cash provided by operating activities – continuing operations 279 343 878 718
Purchases of property and equipment – continuing operations   (199 )   (293 )   (933 )   (691 )
Adjusted free cash flow – continuing operations $ 80   $ 50   $ (55 ) $ (27 )
 
 
 
 
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, 2015

(Unaudited)
 
(Dollars in millions)     Q1 2015     2015
Low   High Low   High
Net income attributable to Tenet Healthcare Corporation common shareholders $ 3 $ 55 $ 130 $ 245
Less: Net (income) attributable to noncontrolling interests (30 ) (25 ) (120 ) (100 )
Loss from discontinued operations, net of tax   (2 )   0     (5 )   0  
Income from continuing operations $ 35 $ 80 $ 255 $ 345
Income tax (expense)   (10 )   (45 )   (95 )   (175 )
Income from continuing operations, before income taxes $ 45 $ 125 $ 350 $ 520
Interest expense, net   (200 )   (190 )   (800 )   (770 )
Operating income $ 245 $ 315 $ 1,150 $ 1,290
Impairment and restructuring charges, acquisition-related costs and litigation costs and settlements(a) 0 0 0 0
Depreciation and amortization   (230 )   (210 )   (900 )   (860 )
Adjusted EBITDA $ 475   $ 525   $ 2,050   $ 2,150  
 
Net operating revenues $ 4,300   $ 4,500   $ 17,400   $ 17,700  
 
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) 11.0 % 11.7 % 11.8 % 12.1 %
 

(a) 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, 2015

(Unaudited)
 
(Dollars in millions)     Q1 2015     2015
Low   High   Low   High
Adjusted EBITDA $ 475 $ 525 $ 2,050 $ 2,150
Depreciation and amortization (230 ) (210 ) (900 ) (860 )
Interest expense, net   (200 )   (190 )   (800 )   (770 )
Income from continuing operations before income taxes $ 45 $ 125 $ 350 $ 520
Income tax (expense)   (10 )   (45 )   (95 )   (175 )
Normalized income from continuing operations $ 35 $ 80 $ 255 $ 345
Net (income) attributable to noncontrolling interests   (30 )   (25 )   (120 )   (100 )
Net income attributable to common shareholders   5     55     135     245  
 
Fully diluted weighted average share outstanding (in millions) 100 100 102 102
 
Normalized fully diluted earnings per share – continuing operations $ 0.05 $ 0.55 $ 1.32 $ 2.40
 
 
 
 
TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP Disclosures

Table #5 - Reconciliation of Outlook Adjusted Free Cash Flow

for the Year Ending December 31, 2015

(Unaudited)
 
(Dollars in millions)     2015
Low   High
Net cash provided by operating activities $ 1,130 $ 1,240
Less:

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

0 0
Net cash used in operating activities from discontinued operations   (20 )   (10 )
Adjusted net cash provided by operating activities – continuing operations $ 1,150 $ 1,250
Purchases of property and equipment – continuing operations   (1,000 )   (900 )
Adjusted free cash flow – continuing operations $ 150 $ 350
 

(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