Tenet Reports Results for the First Quarter Ended March 31, 2019

  • Tenet reported a net loss from continuing operations attributable to Tenet common shareholders of $27 million or $0.26 per diluted share in the first quarter of 2019 due in part to a $47 million pre-tax loss from the extinguishment of debt or $0.45 per diluted share.
  • Adjusted diluted earnings per share from continuing operations were $0.54 in the first quarter of 2019, above the high end of the Company’s Outlook.
  • Adjusted EBITDA was $613 million in the first quarter of 2019, above the midpoint of the Company’s Outlook. Adjusted EBITDA consisted of $337 million in the Hospital Operations and other segment, $177 million in the Ambulatory Care segment and $99 million in the Conifer segment.
  • Hospital segment same-hospital net patient service revenues grew 1.9 percent in the first quarter of 2019: net revenue per adjusted admission increased 1.3 percent; adjusted admissions increased 0.6 percent; and admissions decreased 0.1 percent.
  • Ambulatory Care segment same-facility system-wide surgical revenue grew 4.2 percent in the first quarter of 2019, with surgical cases up 2.8 percent and surgical revenue per case up 1.4 percent. Adjusted EBITDA less facility-level noncontrolling interest increased 9.8 percent.
  • Conifer segment revenues decreased 13.6 percent in the first quarter of 2019 primarily as a result of divestitures by Tenet and other customers; Adjusted EBITDA margins increased 410 basis points to 28.4 percent reflecting the ongoing improvement in Conifer’s cost structure.
  • Updating 2019 Outlook for net income and earnings per share; reiterating previously provided 2019 Outlook for revenue, Adjusted EBITDA, Adjusted EPS and Adjusted Free Cash Flow.
Monday, April 29, 2019 3:15 pm CDT

Dateline:

DALLAS

Public Company Information:

NYSE:
THC

DALLAS--(BUSINESS WIRE)--Tenet Healthcare Corporation (NYSE: THC) reported a net loss from continuing operations attributable to Tenet common shareholders of $27 million in the first quarter of 2019 compared to net income of $98 million in the first quarter of 2018. Adjusted EBITDA was $613 million in the first quarter of 2019 above the midpoint of the Company’s Outlook range of $575 million to $625 million.

Ronald A. Rittenmeyer, Executive Chairman and CEO, said, “We had a solid start to the year, building on the many positive changes we made across the enterprise in 2018. These changes include the continued addition of new leadership as well as an infusion of fresh thinking, which are helping to transform our approach to operations and overall enterprise culture. In the first quarter, we continued to make progress in each of our business segments through rigorous implementation of our strategic initiatives, and we were pleased with our performance, both operationally and financially. As we move through the year, we remain focused on revenue growth and expense management to sharpen operations and our competitive position.”

Results for the Quarter Ended March 31, 2019

Adjusted EBITDA was $613 million in the first quarter of 2019 compared to $665 million in the first quarter of 2018. The decline was primarily attributable to: (i) a $38 million increase in malpractice expense; (ii) $11 million of losses generated by a risk-based contracting business in California in the first quarter of 2019; (iii) $7 million due to the divestiture of Aspen Healthcare, the Company’s former operations in the United Kingdom; and (iv) $10 million of contract termination fees received by Conifer in the first quarter of 2018 which did not occur again in the first quarter of 2019. These four items were substantially anticipated in the Company’s Outlook range provided in February.

Hospital Operations and Other Segment

Net operating revenues in the Hospital Operations and other segment were $3.862 billion in the first quarter of 2019, down 2.2 percent from the first quarter of 2018. The decline in revenue was due to hospital divestitures, partially offset by same-hospital revenue growth.

On a same-hospital basis, net patient service revenues were $3.559 billion in the first quarter of 2019, up 1.9 percent from the first quarter of 2018. Admissions declined 0.1 percent on a same-hospital basis, adjusted admissions increased 0.6 percent and revenue per adjusted admission increased 1.3 percent. A decline in flu cases lowered admissions and adjusted admissions by 80 basis points and 60 basis points, respectively.

Adjusted EBITDA in Tenet’s hospital segment was $337 million in the first quarter of 2019 compared to $402 million in the first quarter of 2018. The $65 million decline was primarily due to a $38 million increase in malpractice expense (comprised of a $21 million increase to settle various claims and $17 million of discount rate adjustments), $11 million of losses generated by a risk-based contracting business in California in the first quarter of 2019 and a stronger flu season in the first quarter of 2018.

Selected operating expenses in the Hospital Operations and other segment increased 4.0 percent on a per adjusted admission basis in the first quarter of 2019 and increased 2.5 percent excluding the $38 million increase in malpractice expense as well as the $11 million of losses generated by a risk-based contracting business in California. Selected operating expenses include salaries, wages and benefits, supplies and other operating expenses and exclude the costs of the Company’s health plan businesses. Salaries, wages and benefits increased 2.8 percent per adjusted admission in the first quarter of 2019 and supply expense remained substantially the same. Other operating expenses increased 9.4 percent per adjusted admission in the first quarter of 2019 and increased 3.6 percent per adjusted admission excluding the increase in malpractice expense and risk-based contracting losses in California mentioned above.

Ambulatory Care Segment

The Ambulatory Care segment produced net operating revenues of $480 million in the first quarter of 2019, a decrease of 3.6 percent compared to $498 million in the first quarter of 2018. The decline in revenue was due to the divestiture of Aspen Healthcare in the third quarter of 2018. Aspen generated $49 million of revenue and $7 million of Adjusted EBITDA and Adjusted EBITDA less facility-level noncontrolling interest in the first quarter of 2018. After normalizing for the divestiture of Aspen, the Ambulatory Care segment generated Adjusted EBITDA of $177 million in the first quarter of 2019, up 12.0 percent from $158 million in the first quarter of 2018 and Adjusted EBITDA less facility-level noncontrolling interest was $112 million, up 9.8 percent from $102 million in the first quarter of 2018.

The results of many of the facilities in which the Ambulatory Care segment has an investment are not consolidated by Tenet (of the 334 facilities at March 31, 2019, the results of 108 were accounted for under the equity method for unconsolidated affiliates). 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 Care segment increased 4.2 percent in the first quarter of 2019, with cases increasing 0.9 percent and revenue per case increasing 3.3 percent. In the surgical business, which represents the majority of the revenue in the Ambulatory segment, same-facility system-wide revenue grew 4.2 percent in the first quarter of 2019, with cases up 2.8 percent and revenue per case up 1.4 percent.

Conifer Segment

During the first quarter of 2019, Conifer’s revenue declined 13.6 percent to $349 million, primarily due to client attrition following divestitures by Tenet and other customers, down from $404 million in the first quarter of 2018. Revenue from third party customers declined 20.1 percent to $203 million in the first quarter of 2019. The year-over-year revenue and EBITDA comparisons were also impacted by $10 million of contract termination fees received by Conifer in the first quarter of 2018, which did not occur again in the first quarter of 2019.

Conifer generated $99 million of Adjusted EBITDA in the first quarter of 2019, up 1.0 percent from $98 million in the first quarter of 2018 and up 12.5 percent after adjusting for the $10 million of contract termination fees in the first quarter of 2018. Adjusted EBITDA margins increased 410 basis points to 28.4 percent, reflecting the ongoing improvement in Conifer’s cost structure.

Net Income and Earnings Per Share

Tenet reported a net loss from continuing operations attributable to Tenet common shareholders of $27 million, or $0.26 per diluted share, in the first quarter of 2019 compared to net income of $98 million, or $0.95 per diluted share, in the first quarter of 2018. The net loss in the first quarter of 2019 included a $47 million pre-tax loss from the early extinguishment of debt; net income in the first quarter of 2018 included $110 million of pre-tax gains on sales, consolidation and deconsolidation of facilities, primarily comprised of a $98 million gain from the sale of MacNeal Hospital and other operations affiliated with the hospital and a gain of $13 million from the sales of the Company’s minority interests in four North Texas hospitals.

After adjusting for the items listed on Table #2, Tenet produced Adjusted net income from continuing operations available to Tenet common shareholders of $56 million, or $0.54 per diluted share, in the first quarter of 2019, compared to $59 million, or $0.57 per diluted share, in the first quarter of 2018.

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

Cash Flow and Liquidity

Cash and cash equivalents were $252 million at March 31, 2019 compared to $411 million at December 31, 2018. The Company had $190 million of outstanding borrowings on its $1 billion credit line as of March 31, 2019. Accounts receivable days outstanding from continuing operations were 58.6 at March 31, 2019 compared to 56.5 at December 31, 2018.

Net cash provided by operating activities was $10 million in the first quarter of 2019, representing a $103 million decrease compared to $113 million in the first quarter of 2018. After subtracting $192 million and $143 million of capital expenditures in the first quarters of 2019 and 2018, respectively, Free Cash Flow was an outflow of $182 million in the first quarter of 2019, a decrease of $152 million compared to an outflow of $30 million in the first quarter of 2018. Adjusted Free Cash Flow was an outflow of $148 million in the first quarter of 2019, representing a $152 million decrease from an inflow of $4 million in the first quarter of 2018.

Net cash used in investing activities was $139 million in the first quarter of 2019 compared to $373 million of net cash provided by investing activities in the first quarter of 2018. Results in the first quarter of 2019 included $62 million of proceeds from the sales of facilities, long-term investments and other assets compared to $559 million in the first quarter of 2018.

Net cash used in financing activities was $30 million in the first quarter of 2019 compared to $123 million used in the first quarter of 2018.

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 Outlook for 2019 includes:

  • Revenue of $18.0 billion to $18.4 billion,
  • Net income from continuing operations available to Tenet common shareholders of $17 million to $117 million,
  • Adjusted EBITDA of $2.650 billion to $2.750 billion,
  • Net cash provided by operating activities of $1.070 billion to $1.375 billion,
  • Adjusted Free Cash Flow of $600 million to $800 million,
  • Diluted earnings per share from continuing operations of $0.16 to $1.10, and
  • Adjusted diluted earnings per share from continuing operations of $2.08 to $2.59.

The Outlook for 2019 assumes equity in earnings of unconsolidated affiliates of $180 million to $190 million, depreciation and amortization expense of $805 million to $825 million, interest expense of $985 million to $995 million, net income available to noncontrolling interests of $425 million to $445 million and an average diluted share count of 106 million.

The Company’s Outlook for the second quarter of 2019 includes:

  • Revenue of $4.400 billion to $4.700 billion,
  • Net income available (loss attributable) from continuing operations to Tenet common shareholders ranging from a loss of $5 million to income of $40 million,
  • Adjusted EBITDA of $625 million to $675 million,
  • Diluted earnings (loss) per share from continuing operations ranging from a loss of $0.05 per share to earnings of $0.38 per share, and
  • Adjusted diluted earnings per share from continuing operations ranging from $0.29 to $0.63.

The Outlook for the second quarter assumes equity in earnings of unconsolidated affiliates of $40 million to $45 million, depreciation and amortization expense of $200 million to $210 million, interest expense of $240 million to $250 million, net income available to noncontrolling interests of $100 million to $110 million, and an average diluted share count of 104 million.

Additional details on Tenet’s Outlook for both the second quarter and calendar year 2019 are available in Tables #4, #5 and #6 at the end of this press release and in an accompanying slide presentation that will be accessible through the Company’s website at www.tenethealth.com/investors.

Management’s Webcast Discussion of First Quarter Results

Tenet management will discuss the Company’s first quarter 2019 results on a webcast scheduled for 9:00 a.m. Eastern Time (8:00 a.m. Central Time) on April 30, 2019. 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, will be 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-Q report for the period ended March 31, 2019, which will be filed with the Securities and Exchange Commission and posted on the Company’s website.

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

Tenet Healthcare Corporation (NYSE: THC) is a national diversified healthcare services company headquartered in Dallas, TX, with 110,000 employees. Through an expansive care network that includes United Surgical Partners International, we operate 65 hospitals and approximately 500 other healthcare facilities, including surgical hospitals, ambulatory surgery centers, urgent care and imaging centers and other outpatient facilities. We also operate Conifer Health Solutions, which provides revenue cycle management and value-based care services to hospitals, health systems, physician practices, employers and other customers. At the center of everything we do is a commitment to deliver the right care, in the right place, at the right time, and to continually improve and advance the healthcare delivery system in the markets we serve. 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,” “anticipate,” “assume,” “believe,” “budget,” “estimate,” “forecast,” “intend,” “plan,” “predict,” “project,” “seek,” “see,” “target,” 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, 2018, and subsequent Form 10-Q filings 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 March 31,
2019 % 2018 % Change
Net operating revenues $ 4,545 100.0 % 4,699 100.0 % (3.3 )%
Equity in earnings of unconsolidated affiliates 34 0.7 % 25 0.5 % 36.0 %
Operating expenses:
Salaries, wages and benefits 2,153 47.3 % 2,227 47.3 % (3.3 )%
Supplies 741 16.3 % 774 16.5 % (4.3 )%
Other operating expenses, net 1,074 23.6 % 1,060 22.6 % 1.3 %
Electronic health record incentives (1 ) % (1 ) % %
Depreciation and amortization 208 4.6 % 204 4.3 %
Impairment and restructuring charges, and acquisition-related costs 19 0.4 % 47 1.0 %
Litigation and investigation costs 13 0.3 % 6 0.1 %
Net losses (gains) on sales, consolidation and deconsolidation of facilities   1   %   (110 ) (2.3 )%
Operating income 371 8.2 % 517 11.0 %
Interest expense (251 ) (255 )
Other non-operating income (expense), net 1 (1 )
Loss from early extinguishment of debt   (47 )   (1 )
Income from continuing operations, before income taxes 74 260
Income tax expense   (17 )   (70 )
Income from continuing operations, before discontinued

operations

57 190
Discontinued operations:
Income from operations 10 1
Income tax expense   (2 )    
Income from discontinued operations   8     1  
Net income 65 191
Less: Net income available to noncontrolling interests   84     92  

Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders

 

$ (19 ) $ 99  

Amounts available (attributable) to Tenet Healthcare Corporation common shareholders

 

Income (loss) from continuing operations, net of tax $ (27 ) $ 98
Income from discontinued operations, net of tax   8     1  
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ (19 ) $ 99  
Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ (0.26 ) $ 0.97
Discontinued operations   0.08     0.01  
$ (0.18 ) $ 0.98  
Diluted
Continuing operations $ (0.26 ) $ 0.95
Discontinued operations   0.08     0.01  
$ (0.18 ) $ 0.96  

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

Basic 102,788 101,392
Diluted* 102,788 102,656
 

*Had we generated income from continuing operations available to common shareholders in the three months ended March 31, 2019 the effect of employee stock options, restricted stock units and deferred compensation units on the diluted shares calculation would have been an increase of 1,753 thousand shares.

 
   

TENET HEALTHCARE CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 
March 31, December 31,
(Dollars in millions) 2019 2018
ASSETS
Current assets:
Cash and cash equivalents $ 252 $ 411
Accounts receivable, less allowance for doubtful accounts 2,744 2,595
Inventories of supplies, at cost 308 305
Income tax receivable 17 21
Assets held for sale 107
Other current assets   1,261     1,197  
Total current assets 4,582 4,636
Investments and other assets 2,331 1,456
Deferred income taxes 291 312
Property and equipment, at cost, less accumulated depreciation and amortization 6,996 6,993
Goodwill 7,283 7,281
Other intangible assets, at cost, less accumulated amortization   1,675     1,731  
Total assets $ 23,158   $ 22,409  
 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 158 $ 182
Accounts payable 1,101 1,207
Accrued compensation and benefits 707 838
Professional and general liability reserves 224 216
Accrued interest payable 323 240
Liabilities held for sale 43
Other current liabilities   1,212     1,131  
Total current liabilities 3,725 3,857
Long-term debt, net of current portion 14,814 14,644
Professional and general liability reserves 690 666
Defined benefit plan obligations 512 521
Deferred income taxes 36 36
Other long-term liabilities   1,268     578  
Total liabilities 21,045 20,302
Commitments and contingencies
Redeemable noncontrolling interests in equity of consolidated subsidiaries 1,439 1,420
Equity:
Shareholders’ equity:
Common stock 7 7
Additional paid-in capital 4,748 4,747
Accumulated other comprehensive loss (221 ) (223 )
Accumulated deficit (2,254 ) (2,236 )
Common stock in treasury, at cost   (2,414 )   (2,414 )
Total shareholders’ deficit (134 ) (119 )
Noncontrolling interests   808     806  
Total equity   674     687  
Total liabilities and equity $ 23,158   $ 22,409  
 
   

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

 
Three Months Ended
(Dollars in millions) March 31,
2019 2018
Net income $ 65 $ 191
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 208 204
Deferred income tax expense 19 70
Stock-based compensation expense 11 9
Impairment and restructuring charges, and acquisition-related costs 19 47
Litigation and investigation costs 13 6
Net losses (gains) on sales, consolidation and deconsolidation of facilities 1 (110 )
Loss from early extinguishment of debt 47 1
Equity in earnings of unconsolidated affiliates, net of distributions received 3 9
Amortization of debt discount and debt issuance costs 11 11
Pre-tax income from discontinued operations (10 ) (1 )
Other items, net (7 ) (1 )
Changes in cash from operating assets and liabilities:
Accounts receivable (158 ) (66 )
Inventories and other current assets (115 ) (41 )
Income taxes 9
Accounts payable, accrued expenses and other current liabilities (109 ) (183 )
Other long-term liabilities 37 1
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements (32 ) (33 )
Net cash used in operating activities from discontinued operations, excluding income taxes   (2 )   (1 )
Net cash provided by operating activities 10 113
Cash flows from investing activities:
Purchases of property and equipment — continuing operations (192 ) (143 )
Purchases of businesses or joint venture interests, net of cash acquired (2 ) (16 )
Proceeds from sales of facilities and other assets — continuing operations 41 425
Proceeds from sales of facilities and other assets — discontinued operations 17
Proceeds from sales of marketable securities, long-term investments and other assets 4 134
Purchases of equity investments (1 ) (30 )
Other long-term assets (2 ) 7
Other items, net   (4 )   (4 )
Net cash provided by (used in) investing activities (139 ) 373
Cash flows from financing activities:
Repayments of borrowings under credit facility (495 )
Proceeds from borrowings under credit facility 685
Repayments of other borrowings (1,620 ) (91 )
Proceeds from other borrowings 1,507 7
Debt issuance costs (18 )
Distributions paid to noncontrolling interests (74 ) (64 )
Proceeds from sales of noncontrolling interests 4 5
Purchases of noncontrolling interests (3 ) (9 )
Proceeds from exercise of stock options and employee stock purchase plan 1 9
Other items, net   (17 )   20  
Net cash used in financing activities   (30 )   (123 )
Net increase (decrease) in cash and cash equivalents (159 ) 363
Cash and cash equivalents at beginning of period   411     611  
Cash and cash equivalents at end of period $ 252   $ 974  
Supplemental disclosures:
Interest paid, net of capitalized interest $ (158 ) $ (169 )
Income tax refunds, net $ 9 $ 1
 
     

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING TOTAL HOSPITALS(1)

(Unaudited)

 
(Dollars in millions except per adjusted patient day Three Months Ended March 31,
and per adjusted patient admission amounts) 2019 2018 Change
 
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 65 69 (4 ) *
Total admissions 174,726 182,306 (4.2 )%
Adjusted patient admissions 308,133 320,868 (4.0 )%
Paying admissions (excludes charity and uninsured) 164,793 172,490 (4.5 )%
Charity and uninsured admissions 9,933 9,816 1.2 %
Admissions through emergency department 126,079 125,076 0.8 %
Paying admissions as a percentage of total admissions 94.3 % 94.6 % (0.3 )% *
Charity and uninsured admissions as a percentage of total admissions 5.7 % 5.4 % 0.3 % *
Emergency department admissions as a percentage of total admissions 72.2 % 68.6 % 3.6 % *
Surgeries — inpatient 44,795 47,223 (5.1 )%
Surgeries — outpatient 58,218 63,008 (7.6 )%
Total surgeries 103,013 110,231 (6.5 )%
Patient days — total 822,079 858,648 (4.3 )%
Adjusted patient days 1,420,170 1,486,139 (4.4 )%
Average length of stay (days) 4.70 4.71 (0.2 )%
Licensed beds (at end of period) 17,221 18,457 (6.7 )%
Average licensed beds 17,455 18,685 (6.6 )%
Utilization of licensed beds 52.3 % 51.1 % 1.2 % *
Outpatient Visits
Total visits 1,714,392 1,842,539 (7.0 )%
Paying visits (excludes charity and uninsured) 1,603,712 1,725,976 (7.1 )%
Charity and uninsured visits 110,680 116,563 (5.0 )%
Emergency department visits 657,449 697,001 (5.7 )%
Paying visits as a percentage of total visits 93.5 % 93.7 % (0.2 )% *
Charity and uninsured visits as a percentage of total visits 6.5 % 6.3 % 0.2 % *
Total emergency department admissions and visits 783,528 822,077 (4.7 )%
Revenues
Net patient service revenues(3) $ 3,582 $ 3,643 (1.7 )%
Revenues on a Per Adjusted Patient Admission and Per Adjusted Patient Day
Net patient service revenue(3) per adjusted patient admission $ 11,625 $ 11,354 2.4 %
Net patient service revenue(3) per adjusted patient day $ 2,522 $ 2,451 2.9 %
Total selected operating expenses (salaries, wages and benefits, supplies and other operating expenses) per adjusted patient admission(2) $ 10,979 $ 10,561 4.0 %
Net patient service revenues (3) from:
Medicare 21.2 % 21.5 % (0.3 )% *
Medicaid 8.8 % 8.8 % % *
Managed care 65.7 % 65.0 % 0.7 % *
Uninsured % 1.0 % (1.0 )% *
Indemnity and other 4.3 % 3.7 % 0.6 % *
 

(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.

(3) Less implicit price concessions.

* This change is the difference between the 2019 and 2018 amounts shown.

 
     

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS(1)

(Unaudited)

 
(Dollars in millions except per adjusted patient day Three Months Ended March 31,
and per adjusted patient admission amounts) 2019 2018 Change
 
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 65 65 *
Total admissions 173,470 173,684 (0.1 )%
Adjusted patient admissions 305,871 304,145 0.6 %
Paying admissions (excludes charity and uninsured) 163,632 164,239 (0.4 )%
Charity and uninsured admissions 9,838 9,445 4.2 %
Admissions through emergency department 125,228 119,957 4.4 %
Paying admissions as a percentage of total admissions 94.3 % 94.6 % (0.3 )% *
Charity and uninsured admissions as a percentage of total admissions 5.7 % 5.4 % 0.3 % *
Emergency department admissions as a percentage of total admissions 72.2 % 69.1 % 3.1 % *
Surgeries — inpatient 44,553 45,052 (1.1 )%
Surgeries — outpatient 57,896 59,720 (3.1 )%
Total surgeries 102,449 104,772 (2.2 )%
Patient days — total 815,329 817,000 (0.2 )%
Adjusted patient days 1,408,053 1,405,568 0.2 %
Average length of stay (days) 4.70 4.70 %
Licensed beds (at end of period) 17,221 17,246 (0.1 )%
Average licensed beds 17,221 17,246 (0.1 )%
Utilization of licensed beds 52.6 % 52.6 % % *
Outpatient Visits
Total visits 1,696,094 1,730,018 (2.0 )%
Paying visits (excludes charity and uninsured) 1,586,627 1,619,950 (2.1 )%
Charity and uninsured visits 109,467 110,068 (0.5 )%
Emergency department visits 651,852 663,722 (1.8 )%
Paying visits as a percentage of total visits 93.5 % 93.6 % (0.1 )% *
Charity and uninsured visits as a percentage of total visits 6.5 % 6.4 % 0.1 % *
Total emergency department admissions and visits 777,080 783,679 (0.8 )%
Revenues
Net patient service revenues(2) $ 3,559 $ 3,494 1.9 %
Revenues on a Per Adjusted Patient Admission and Per Adjusted Patient Day
Net patient service revenue(2) per adjusted patient admission $ 11,636 $ 11,488 1.3 %
Net patient service revenue(2) per adjusted patient day $ 2,528 $ 2,486 1.7 %
Net patient service revenues (2) from:
Medicare 21.0 % 20.9 % 0.1 % *
Medicaid 8.8 % 8.7 % 0.1 % *
Managed care 65.9 % 65.3 % 0.6 % *
Uninsured % 1.3 % (1.3 )% *
Indemnity and other 4.3 % 3.8 % 0.5 % *
 

(1) Information for our Hospital Operations and other segment is presented on a same-hospital basis, which includes the results of our same 65 hospitals operated throughout the three months ended March 31, 2019 and 2018 and associated outpatient facilities, but excludes the results of hospitals Tenet divested since January 1, 2018.

(2) Less implicit price concessions.

* This change is the difference between the 2019 and 2018 amounts shown.

 
           

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 
(Dollars in millions except per share amounts) Three Months Ended Year Ended Three Months Ended
3/31/2018 6/30/2018 9/30/2018 12/31/2018 12/31/2018 3/31/2019
Net operating revenues $ 4,699 $ 4,506 $ 4,489 $ 4,619 $ 18,313 $ 4,545
Equity in earnings of unconsolidated affiliates 25 39 33 53 150 34
Operating expenses:
Salaries, wages and benefits 2,227 2,135 2,116 2,156 8,634 2,153
Supplies 774 748 726 756 3,004 741
Other operating expenses, net 1,060 1,027 1,094 1,078 4,259 1,074
Electronic health record incentives (1 ) (2 ) (3 ) (1 )
Depreciation and amortization 204 194 204 200 802 208
Impairment and restructuring charges, and acquisition-related costs 47 30 46 86 209 19
Litigation and investigation costs 6 13 9 10 38 13

Net losses (gains) on sales, consolidation and deconsolidation of facilities

 

  (110 )   (8 )   7     (16 )   (127 )   1  
Operating income 517 406 320 404 1,647 371
Interest expense (255 ) (254 ) (249 ) (246 ) (1,004 ) (251 )
Other non-operating income (expense), net (1 ) (1 ) (3 ) (5 ) 1
Gain (loss) from early extinguishment of debt   (1 )   (1 )       3     1     (47 )
Income from continuing operations, before income taxes 260 150 71 158 639 74
Income tax expense   (70 )   (44 )   (6 )   (56 )   (176 )   (17 )

Income from continuing operations, before discontinued operations

190 106 65 102 463 57
Discontinued operations:
Income (loss) from operations 1 2 1 4 10
Income tax benefit (expense)               (1 )   (1 )   (2 )
Income (loss) from discontinued operations   1     2             3     8  
Net income 191 108 65 102 466 65
Less: Net income available to noncontrolling interests   92     82     74     107     355     84  

Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders

$ 99   $ 26   $ (9 ) $ (5 ) $ 111   $ (19 )

Amounts available (attributable) to Tenet Healthcare Corporation common shareholders

Income (loss) from continuing operations, net of tax $ 98 $ 24 $ (9 ) $ (5 ) $ 108 $ (27 )
Income (loss) from discontinued operations, net of tax   1     2             3     8  

Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders

$ 99   $ 26   $ (9 ) $ (5 ) $ 111   $ (19 )

Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:

Basic
Continuing operations $ 0.97 $ 0.23 $ (0.09 ) $ (0.05 ) $ 1.06 $ (0.26 )
Discontinued operations   0.01     0.02       $     0.03     0.08  
$ 0.98   $ 0.25   $ (0.09 ) $ (0.05 ) $ 1.09   $ (0.18 )
Diluted
Continuing operations $ 0.95 $ 0.23 $ (0.09 ) $ (0.05 ) $ 1.04 $ (0.26 )
Discontinued operations   0.01     0.02     0.00     0.00     0.03     0.08  
$ 0.96   $ 0.25   $ (0.09 ) $ (0.05 ) $ 1.07   $ (0.18 )

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

Basic 101,392 102,147 102,402 102,501 102,110 102,788
Diluted 102,656 104,177 102,402 102,501 103,881 102,788
 
 

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING TOTAL HOSPITALS(1)

(Unaudited)

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

           
Three Months Ended Year Ended Three Months Ended
3/31/2018 6/30/2018 9/30/2018 12/31/2018 12/31/2018 3/31/2019
 
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 69 68 68 68 68 65
Total admissions 182,306 168,453 168,201 170,407 689,367 174,726
Adjusted patient admissions 320,868 306,063 306,197 308,113 1,241,241 308,133
Paying admissions (excludes charity and uninsured) 172,490 158,216 157,193 160,172 648,071 164,793
Charity and uninsured admissions 9,816 10,237 11,008 10,235 41,296 9,933
Admissions through emergency department 125,076 115,036 116,727 120,012 476,851 126,079
Paying admissions as a percentage of total admissions 94.6 % 93.9 % 93.5 % 94.0 % 94.0 % 94.3 %
Charity and uninsured admissions as a percentage of total admissions 5.4 % 6.1 % 6.5 % 6.0 % 6.0 % 5.7 %
Emergency department admissions as a percentage of total admissions 68.6 % 68.3 % 69.4 % 70.4 % 69.2 % 72.2 %
Surgeries — inpatient 47,223 46,274 45,626 45,897 185,020 44,795
Surgeries — outpatient 63,008 63,805 61,468 62,638 250,919 58,218
Total surgeries 110,231 110,079 107,094 108,535 435,939 103,013
Patient days — total 858,648 766,519 761,920 779,728 3,166,815 822,079
Adjusted patient days 1,486,139 1,373,480 1,365,662 1,383,372 5,608,653 1,420,170
Average length of stay (days) 4.71 4.55 4.53 4.58 4.59 4.70
Licensed beds (at end of period) 18,457 18,314 18,302 17,937 17,937 17,221
Average licensed beds 18,685 18,362 18,302 17,935 18,321 17,455
Utilization of licensed beds 51.1 % 45.9 % 45.3 % 47.3 % 47.4 % 52.3 %
Outpatient Visits
Total visits 1,842,539 1,749,847 1,722,292 1,734,523 7,049,201 1,714,392
Paying visits (excludes charity and uninsured) 1,725,976 1,633,372 1,607,184 1,617,970 6,584,502 1,603,712
Charity and uninsured visits 116,563 116,475 115,108 116,553 464,699 110,680
Emergency department visits 697,001 643,036 638,248 649,544 2,627,829 657,449
Paying visits as a percentage of total visits 93.7 % 93.3 % 93.3 % 93.3 % 93.4 % 93.5 %
Charity and uninsured visits as a percentage of total visits 6.3 % 6.7 % 6.7 % 6.7 % 6.6 % 6.5 %
Total emergency department admissions and visits 822,077 758,072 754,975 769,556 3,104,680 783,528
Revenues
Net patient service revenues(3) $ 3,643 $ 3,443 $ 3,434 $ 3,561 $ 14,081 $ 3,582
Revenues on a Per Adjusted Patient Admission and Per Adjusted Patient Day

Net patient service revenue(3) per adjusted patient admission

$ 11,354 $ 11,249 $ 11,215 $ 11,557 $ 11,344 $ 11,625
Net patient service revenue(3) per adjusted patient day $ 2,451 $ 2,507 $ 2,515 $ 2,574 $ 2,511 $ 2,522
Total selected operating expenses (salaries, wages and benefits, supplies and other operating expenses) per adjusted patient admission(2) $ 10,561 $ 10,619 $ 10,771 $ 10,861 $ 10,701 $ 10,979
Net patient service revenues (3) from:
Medicare 21.5 % 20.4 % 19.8 % 20.1 % 20.5 % 21.2 %
Medicaid 8.8 % 9.1 % 9.8 % 9.1 % 9.2 % 8.8 %
Managed care 65.0 % 66.0 % 64.9 % 65.8 % 65.4 % 65.7 %
Uninsured 1.0 % 0.2 % 0.9 % 0.5 % 0.7 % %
Indemnity and other 3.7 % 4.3 % 4.6 % 4.5 % 4.2 % 4.3 %
 

(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.

(3) Less implicit price concessions.

 
 

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS(1)

(Unaudited)

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

           
Three Months Ended Year Ended Three Months Ended
3/31/2018 6/30/2018 9/30/2018 12/31/2018 12/31/2018 3/31/2019
 
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 65 65 65 65 65 65
Total admissions 173,684 163,903 164,075 166,458 668,120 173,470
Adjusted patient admissions 304,145 297,460 298,221 300,562 1,200,388 305,871
Paying admissions (excludes charity and uninsured) 164,239 153,816 153,227 156,392 627,674 163,632
Charity and uninsured admissions 9,445 10,087 10,848 10,066 40,446 9,838
Admissions through emergency department 119,957 111,902 113,833 117,229 462,921 125,228
Paying admissions as a percentage of total admissions 94.6 % 93.8 % 93.4 % 94.0 % 93.9 % 94.3 %
Charity and uninsured admissions as a percentage of total admissions 5.4 % 6.2 % 6.6 % 6.0 % 6.1 % 5.7 %
Emergency department admissions as a percentage of total admissions 69.1 % 68.3 % 69.4 % 70.4 % 69.3 % 72.2 %
Surgeries — inpatient 45,052 45,191 44,783 45,012 180,038 44,553
Surgeries — outpatient 59,720 62,205 60,080 61,151 243,156 57,896
Total surgeries 104,772 107,396 104,863 106,163 423,194 102,449
Patient days — total 817,000 743,442 740,870 758,359 3,059,671 815,329
Adjusted patient days 1,405,568 1,329,915 1,325,229 1,342,745 5,403,457 1,408,053
Average length of stay (days) 4.70 4.54 4.52 4.56 4.58 4.70
Licensed beds (at end of period) 17,246 17,246 17,234 17,237 17,237 17,221
Average licensed beds 17,246 17,246 17,234 17,235 17,240 17,221
Utilization of licensed beds 52.6 % 47.4 % 46.7 % 47.8 % 48.6 % 52.6 %
Outpatient Visits
Total visits 1,730,018 1,683,879 1,658,292 1,670,272 6,742,461 1,696,094
Paying visits (excludes charity and uninsured) 1,619,950 1,571,574 1,547,384 1,558,357 6,297,265 1,586,627
Charity and uninsured visits 110,068 112,305 110,908 111,915 445,196 109,467
Emergency department visits 663,722 622,898 617,925 630,557 2,535,102 651,852
Paying visits as a percentage of total visits 93.6 % 93.3 % 93.3 % 93.3 % 93.4 % 93.5 %
Charity and uninsured visits as a percentage of total visits 6.4 % 6.7 % 6.7 % 6.7 % 6.6 % 6.5 %
Total emergency department admissions and visits 783,679 734,800 731,758 747,786 2,998,023 777,080
Revenues
Net patient service revenues(2) $ 3,494 $ 3,358 $ 3,369 $ 3,492 $ 13,713 $ 3,559
Revenues on a Per Adjusted Patient Admission and Per Adjusted Patient Day

Net patient service revenue(2) per adjusted patient admission

$ 11,488 $ 11,289 $ 11,297 $ 11,618 $ 11,424 $ 11,636
Net patient service revenue(2) per adjusted patient day $ 2,486 $ 2,525 $ 2,542 $ 2,601 $ 2,538 $ 2,528
Net patient service revenues (2) from:
Medicare 20.9 % 20.1 % 19.5 % 19.8 % 20.1 % 21.0 %
Medicaid 8.7 % 8.9 % 9.8 % 9.1 % 9.1 % 8.8 %
Managed care 65.3 % 66.4 % 65.2 % 66.1 % 65.8 % 65.9 %
Uninsured 1.3 % 0.2 % 0.9 % 0.5 % 0.7 % %
Indemnity and other 3.8 % 4.4 % 4.6 % 4.5 % 4.3 % 4.3 %
 

(1) Information for our Hospital Operations and other segment is presented on a same-hospital basis, which includes the results of our same 65 hospitals operated throughout the three months ended March 31, 2019 and 2018 and associated outpatient facilities, but excludes the results of hospitals Tenet divested since January 1, 2018.

(2) Less implicit price concessions.

 
   

TENET HEALTHCARE CORPORATION

SEGMENT REPORTING

(Unaudited)

 
(Dollars in millions) March 31, December 31,
2019 2018
Assets
Hospital Operations and other $ 16,070 $ 15,684
Ambulatory Care 6,014 5,711
Conifer   1,074     1,014  
Total $ 23,158   $ 22,409  
 
Three Months Ended
March 31,
2019 2018
Capital expenditures:
Hospital Operations and other $ 170 $ 120
Ambulatory Care 20 15
Conifer   2     8  
Total $ 192   $ 143  
 
Net operating revenues:

Hospital Operations and other total prior to inter-segment eliminations(1)

$ 3,862 $ 3,947
Ambulatory Care 480 498
Conifer
Tenet 146 150
Other customers   203     254  
Total Conifer revenues 349 404
Inter-segment eliminations   (146 )   (150 )
Total $ 4,545   $ 4,699  
 
Equity in earnings of unconsolidated affiliates:
Hospital Operations and other $ 3 $ (2 )
Ambulatory Care   31     27  
Total $ 34   $ 25  
 
Adjusted EBITDA:
Hospital Operations and other(2) $ 337 $ 402
Ambulatory Care 177 165
Conifer   99     98  
Total $ 613   $ 665  
 
Depreciation and amortization:
Hospital Operations and other $ 179 $ 175
Ambulatory Care 18 17
Conifer   11     12  
Total $ 208   $ 204  
 

(1) Hospital Operations and other revenues includes health plan revenues of less than $1 million and $6 million for the three months ended March 31, 2019 and 2018, respectively.

(2) Hospital Operations and other Adjusted EBITDA excludes health plan EBITDA of $(1) million for both the three months ended March 31, 2019 and 2018.

 
       

TENET HEALTHCARE CORPORATION

STATEMENTS OF OPERATIONS – AMBULATORY CARE SEGMENT

(Unaudited)

 

(Dollars in millions)

Three Months Ended March 31,
2019 2018
 
Ambulatory Care as Reported Under GAAP Unconsolidated Affiliates Ambulatory Care as Reported Under GAAP Unconsolidated Affiliates
Net operating revenues (1) $ 480 $ 568 $ 498 $ 493
Equity in earnings of unconsolidated affiliates (2) 31 27
Operating expenses:
Salaries, wages and benefits 153 147 162 120
Supplies 99 149 106 130
Other operating expenses, net 82 126 92 105
Depreciation and amortization 18 20 17 16

Impairment and restructuring charges, and acquisition-related costs

3 1

Net gains on sales, consolidation and deconsolidation of facilities

  (5 )   (26 )   (1 )    
Operating income 161 152 148 122
Interest expense (31 ) (7 ) (36 ) (5 )
Other   3     6     2      
Net income from continuing operations, before income taxes 133 151 114 117
Income tax expense   (15 )   (2 )   (15 )   (2 )
Net income 118 $ 149   99 $ 115  
Less: Net income available to noncontrolling interests   68     64  
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ 50   $ 35  
Equity in earnings of unconsolidated affiliates $ 31 $ 27
 

(1) On a same-facility system-wide basis, net revenue in Tenet’s Ambulatory Care segment increased 4.2% during the three months ended March 31, 2019, with cases increasing 0.9% and revenue per case increasing 3.3%.

(2) At March 31, 2019, 108 of the 334 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 226 facilities and account for these investments as consolidated subsidiaries.

 

Non-GAAP Financial Measures

Adjusted EBITDA, a non-GAAP measure, is defined by the Company as net income available (loss attributable) to Tenet Healthcare Corporation common shareholders before (1) the cumulative effect of changes in accounting principle, (2) net loss attributable (income available) to noncontrolling interests, (3) income (loss) from discontinued operations, (4) income tax benefit (expense), (5) gain (loss) from early extinguishment of debt, (6) other non-operating income (expense), net, (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 available (loss attributable) from continuing operations to Tenet Healthcare Corporation common shareholders, a non-GAAP measure, is defined by the Company as net income available (loss attributable) to Tenet Healthcare Corporation common shareholders before (1) net income (loss) from discontinued operations, (2) impairment and restructuring charges, and acquisition-related costs, (3) litigation and investigation costs, (4) net gains (losses) on sales, consolidation and deconsolidation of facilities, (5) gain (loss) from early extinguishment of debt, (6) income (loss) from divested operations and closed businesses, and (7) the associated impact of these items on taxes and noncontrolling interests. Adjusted diluted earnings (loss) per share from continuing operations, a non-GAAP term, is defined by the Company as Adjusted net income available (loss attributable) from continuing operations 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 net income available (loss attributable) to Tenet Healthcare Corporation common shareholders, the most comparable GAAP measure, to Adjusted EBITDA is set forth in Table #1 below for each quarter in 2018 and 2019. A reconciliation of net income available (loss attributable) to Tenet Healthcare Corporation common shareholders, the most comparable GAAP measure, to Adjusted net income available (loss attributable) from continuing operations to Tenet Healthcare Corporation common shareholders is set forth in Table #2 below for each quarter in 2018 and 2019. A reconciliation of net cash provided by operating activities, the most comparable GAAP measure, to Free Cash Flow and Adjusted Free Cash Flow is set forth in Table #3 below for each quarter in 2018 and 2019.

           

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #1 – Reconciliation of Net Income Available (Loss Attributable) to Tenet Healthcare Corporation Common Shareholders to Adjusted EBITDA

(Unaudited)

 
(Dollars in millions) 2018 2019
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 1st Qtr
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ 99 $ 26 $ (9 ) $ (5 ) $ 111 $ (19 )
Less: Net income available to noncontrolling interests (92 ) (82 ) (74 ) (107 ) (355 ) (84 )
Income from discontinued operations, net of tax   1     2             3     8  
Income from continuing operations 190 106 65 102 463 57
Income tax expense (70 ) (44 ) (6 ) (56 ) (176 ) (17 )
Gain (loss) from early extinguishment of debt (1 ) (1 ) 3 1 (47 )
Other non-operating income (expense), net (1 ) (1 ) (3 ) (5 ) 1
Interest expense   (255 )   (254 )   (249 )   (246 )   (1,004 )   (251 )
Operating income 517 406 320 404 1,647 371
Litigation and investigation costs (6 ) (13 ) (9 ) (10 ) (38 ) (13 )
Net gains (losses) on sales, consolidation and deconsolidation of facilities 110 8 (7 ) 16 127 (1 )
Impairment and restructuring charges, and acquisition-related costs (47 ) (30 ) (46 ) (86 ) (209 ) (19 )
Depreciation and amortization (204 ) (194 ) (204 ) (200 ) (802 ) (208 )
Income (loss) from divested and closed businesses   (1 )   1     9         9     (1 )
Adjusted EBITDA $ 665   $ 634   $ 577   $ 684   $ 2,560   $ 613  
 
Net operating revenues $ 4,699 $ 4,506 $ 4,489 $ 4,619 $ 18,313 $ 4,545
Less: Net operating revenues from health plans   6         8         14      
Adjusted net operating revenues $ 4,693   $ 4,506   $ 4,481   $ 4,619   $ 18,299   $ 4,545  
 
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders as a % of net operating revenues 2.1 % 0.6 % (0.2 )% (0.1 )% 0.6 % (0.4 )%
Adjusted EBITDA as a % of adjusted net operating revenues (Adjusted EBITDA margin) 14.2 % 14.1 % 12.9 % 14.8 % 14.0 % 13.5 %
 
 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #2 – Reconciliations of Net Income Available (Loss Attributable) to

Tenet Healthcare Corporation Common Shareholders to Adjusted Net Income Available from Continuing Operations to Common Shareholders

(Unaudited)

           
(Dollars in millions except per share amounts) 2018 2019
1st Qtr 2nd Qtr 3rd Qtr   4th Qtr   Total 1st Qtr
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ 99 $ 26 $ (9 ) $ (5 ) $ 111 $ (19 )
Net income from discontinued operations   1   $ 2             3     8  
Net income (loss) from continuing operations 98 24 (9 ) (5 ) 108 (27 )

Less: Impairment and restructuring charges, and acquisition-related costs

(47 ) (30 ) (46 ) (86 ) (209 ) (19 )
Litigation and investigation costs (6 ) (13 ) (9 ) (10 ) (38 ) (13 )
Net gains (losses) on sales, consolidation and deconsolidation of facilities 110 8 (7 ) 16 127 (1 )
Gain (loss) from early extinguishment of debt (1 ) (1 ) 3 1 (47 )
Income (loss) from divested and closed businesses (1 ) 1 9 9 (1 )
Tax impact of above items   (16 )   8     14     19     25     (2 )
Adjusted net income available from continuing operations to common shareholders $ 59   $ 51   $ 30   $ 53   $ 193   $ 56  
 
Diluted earnings (loss) per share from continuing operations $ 0.95 $ 0.23 $ (0.09 ) $ (0.05 ) $ 1.04 $ (0.26 )

Less: Impairment and restructuring charges, and acquisition-related costs

(0.46 ) (0.29 ) (0.44 ) (0.83 ) (2.01 ) (0.18 )
Litigation and investigation costs (0.06 ) (0.12 ) (0.09 ) (0.10 ) (0.37 ) (0.12 )
Net gains (losses) on sales, consolidation and deconsolidation of facilities 1.08 0.07 (0.07 ) 0.15 1.22 (0.01 )
Gain (loss) from early extinguishment of debt (0.01 ) (0.01 ) 0.03 0.01 (0.45 )
Income (loss) from divested and closed businesses (0.01 ) 0.01 0.09 0.09 (0.01 )
Tax impact of above items   (0.16 )   0.08     0.13     0.18     0.24     (0.02 )
Adjusted diluted earnings per share from continuing operations $ 0.57   $ 0.49   $ 0.29   $ 0.51   $ 1.86   $ 0.54  
 

Weighted average basic shares outstanding (in thousands)

101,392 102,147 102,402 102,501 102,110 102,788

Weighted average dilutive shares outstanding (in thousands)

102,656 104,177 104,575 104,118 103,881 104,541
 
           

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #3 – Reconciliations of Net Cash Provided By Operating Activities to Free Cash Flow and Adjusted Free Cash Flow from Continuing Operations

(Unaudited)

 
(Dollars in millions) 2018 2019
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 1st Qtr
Net cash provided by operating activities $ 113 $ 348 $ 338 $ 250 $ 1,049 $ 10
Purchases of property and equipment   (143 )   (125 )   (136 )   (213 )   (617 )   (192 )
Free cash flow $ (30 ) $ 223   $ 202   $ 37   $ 432   $ (182 )
 
Net cash provided by (used in) investing activities $ 373 $ (148 ) $ (105 ) $ (235 ) $ (115 ) $ (139 )
Net cash used in financing activities $ (123 ) $ (771 ) $ (136 ) $ (104 ) $ (1,134 ) $ (30 )
 
Net cash provided by operating activities $ 113 $ 348 $ 338 $ 250 $ 1,049 $ 10

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

(33 ) (30 ) (50 ) (50 ) (163 ) (32 )

Net cash used in operating activities from discontinued operations

  (1 )   (2 )   (1 )   (1 )   (5 )   (2 )
Adjusted net cash provided by operating activities from continuing operations 147 380 389 301 1,217 44
Purchases of property and equipment   (143 )   (125 )   (136 )   (213 )   (617 )   (192 )
Adjusted free cash flow – continuing operations $ 4   $ 255   $ 253   $ 88   $ 600   $ (148 )
 
 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

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

(Unaudited)

       
(Dollars in millions) Q2 2019 2019
Low High Low High
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ (10 ) $ 40 $ 17 $ 122
Less: Net income available to noncontrolling interests (100 ) (110 ) (425 ) (445 )
Net income (loss) from discontinued operations, net of tax (5 ) 5
Income tax expense (30 ) (40 ) (165 ) (185 )
Interest expense (250 ) (240 ) (995 ) (985 )
Loss from early extinguishment of debt(1) (47 ) (47 )
Other non-operating expense, net (5 ) (5 ) (10 ) (15 )
Net gains (losses) on sales, consolidation and deconsolidation of facilities(1) (1 ) (1 )
Impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements(2) (40 ) (30 ) (175 ) (125 )
Depreciation and amortization (200 ) (210 ) (805 ) (825 )
Income (loss) from divested and closed businesses   (5 )       (10 )   (5 )
Adjusted EBITDA $ 625   $ 675   $ 2,650   $ 2,750  
 
Income (loss) from continuing operations $ (5 ) $ 40 $ 17 $ 117
Net operating revenues $ 4,400 $ 4,700 $ 18,000 $ 18,400
Income (loss) from continuing operations as a % of operating revenues (0.1 )% 0.9 % 0.1 % 0.6 %
Adjusted EBITDA as a % of net operating revenues (Adjusted EBITDA margin) 14.2 % 14.4 % 14.7 % 14.9 %
 

(1)The Company does not generally forecast losses from the early extinguishment of debt or net gains (losses) 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. The figures shown represent the Company's actual year-to-date results for these items.

(2) The Company has provided an estimate of restructuring charges and related payments that it anticipates in 2019. The figures shown represent the Company's estimate for restructuring charges plus the actual year-to-date results for impairment charges, acquisition-related costs, and litigation costs and settlements. The Company does not generally forecast impairment charges, acquisition-related costs, litigation costs and settlements 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.

 
 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #5 – Reconciliations of Outlook Net Income Available (Loss Attributable) to Tenet Healthcare Corporation Common Shareholders to Outlook Adjusted Net Income Available from Continuing Operations to Common Shareholders

(Unaudited)

       
(Dollars in millions except per share amounts) Q2 2019 2019
Low High Low High
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ (10 ) $ 40 $ 17 $ 122
Net income (loss) from discontinued operations, net of tax   (5 )           5  
Net income (loss) from continuing operations (5 ) 40 17 117

Less: Impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements

(40 ) (30 ) (175 ) (125 )
Net gains (losses) on sales, consolidation and deconsolidation of facilities (1 ) (1 )
Loss from early extinguishment of debt (47 ) (47 )
Income (loss) from divested and closed businesses (5 ) (10 ) (5 )
Tax impact of above items   10     5     30     20  
Adjusted net income available from continuing operations to common shareholders $ 30   $ 65   $ 220   $ 275  
 
Diluted earnings (loss) per share from continuing operations $ (0.05 ) $ 0.38 $ 0.16 $ 1.10

Less: Impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements

(0.38 ) (0.29 ) (1.65 ) (1.18 )
Net gains (losses) on sales, consolidation and deconsolidation of facilities (0.01 ) (0.01 )
Loss from early extinguishment of debt (0.44 ) (0.44 )
Income (loss) from divested and closed businesses (0.05 ) (0.09 ) (0.05 )
Tax impact of above items   0.10     0.05     0.27     0.19  
Adjusted diluted earnings per share from continuing operations $ 0.29   $ 0.63   $ 2.08   $ 2.59  
 
Weighted average basic shares outstanding (in thousands) 103,000 103,000 104,000 104,000
Weighted average dilutive shares outstanding (in thousands) 104,000 104,000 106,000 106,000
 
   

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #6 – Reconciliation of Outlook Net Cash Provided by Operating Activities to Outlook Adjusted Free Cash Flow from Continuing Operations

 
(Dollars in millions) 2019
Low High
Net cash provided by operating activities $ 1,070 $ 1,375

Less: Payments for restructuring charges, acquisition-related costs and litigation costs and settlements(1)

(175 ) (125 )

Net cash used in operating activities from discontinued operations

  (5 )    
Adjusted net cash provided by operating activities – continuing operations 1,250 1,500
Purchases of property and equipment – continuing operations   (650 )   (700 )
Adjusted free cash flow – continuing operations (2) $ 600   $ 800  
 

(1)The Company has provided an estimate of payments that it anticipates in 2019 related to restructuring charges. The Company does not generally forecast payments related to 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.

(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:

Investor Contact
Brendan Strong
469-893-6992
investorrelations@tenethealth.com

Media Contact
Lesley Bogdanow
469-893-2640
mediarelations@tenethealth.com