DALLAS--(BUSINESS WIRE)--Tenet Healthcare Corporation (NYSE: THC) today released preliminary
financial results for the third quarter ended September 30, 2017. The
Company also announced a cost reduction initiative and the appointment
of a new independent director to the Tenet board of directors.
“Despite the impact of two hurricanes, the unanticipated Medicaid cuts
in Texas and Florida, and overall volume weakness, we delivered Adjusted
EBITDA within our Outlook for the quarter,” said Ronald A. Rittenmeyer,
executive chairman and CEO. “Regardless, we must do more. We are moving
quickly and decisively to improve financial results and returns for our
shareholders. The cost reduction program we announced today includes a
number of structural changes in the way we operate, all intended to
reinforce accountability, improve agility and speed decision making. We
believe these changes will help us drive organic growth, expand margins,
and better support our hospitals and other facilities in delivering
higher levels of quality and patient satisfaction.”
Mr. Rittenmeyer added, "We have and we will continue to review, analyze
and pursue all options to enhance shareholder value."
Preliminary Results for the Third Quarter of 2017
The Company anticipates reporting net operating revenues after provision
for doubtful accounts of approximately $4.586 billion and a net loss
from continuing operations attributable to Tenet shareholders of
approximately $366 million, or $3.63 per diluted share, in the third
quarter of 2017. After adjusting for certain items, which are listed on
Table #2 at the end of this release, Tenet expects to report an Adjusted
net loss from continuing operations attributable to Tenet shareholders
of approximately $17 million, or $0.17 per diluted share.
Adjusted EBITDA in the third quarter of 2017 is expected to be
approximately $507 million and was negatively impacted by approximately
$40 million as a result of the following three items: (i) an estimated
$30 million of lower revenues and higher expenses associated with
Hurricanes Harvey and Irma, prior to any insurance recoveries the
Company may receive in future periods; (ii) $8 million of
lower-than-anticipated revenues from the Texas Medicaid Waiver program;
and, (iii) approximately $2 million of lower-than-anticipated revenues
from the Florida Medicaid program due to changes associated with the Low
Income Pool (LIP) program.
As compared to the third quarter of 2016, patient revenues in the
Hospital Operations and other segment declined 2.3 percent on a
same-hospital basis in the third quarter of 2017, with admissions
declining 2.6 percent, adjusted admissions declining 2.2 percent and net
patient revenue per adjusted admission declining 0.2 percent. The
Company’s same-hospital revenue per adjusted admission was lowered by
approximately 150 basis points due to the lack of CMS approval of the
California Provider Fee Program. The Company estimates that Hurricane
Irma lowered same-hospital admissions and adjusted admissions by
approximately 50 basis points. Excluding the impact of the hurricane as
well as patients that were insured by Humana in both the third quarters
of 2016 and 2017, same-hospital admissions declined 1.2 percent and
adjusted admissions declined 0.8 percent.
Revenues in the Ambulatory segment increased 0.9 percent on a
same-facility system-wide basis as compared to the third quarter of
2016, with cases decreasing 2.4 percent and revenue per case increasing
3.4 percent. Hurricanes Harvey and Irma lowered same-facility
system-wide case growth by approximately 210 basis points. Excluding the
hurricanes as well as patients that were insured by Humana in both the
third quarters of 2016 and 2017, same-facility system-wide cases
decreased 0.3 percent.
Tenet’s preliminary financial results for the three months ended
September 30, 2017 are subject to the completion of the Company’s
quarterly financial and accounting review process.
The Company plans to report its final financial results for the third
quarter ended September 30, 2017 after the market close on November 6,
2017 and will provide an updated Outlook for 2017 at that time. The
Company will host a conference call on November 7, 2017 at 10:00 a.m.
Eastern Time (9:00 a.m. Central Time). A live audio webcast and an
accompanying presentation will be accessible through the Company’s
website at www.tenethealth.com/investors.
Cost Reduction Initiative
Tenet has begun the implementation of an enterprise-wide cost reduction
initiative – comprised primarily of headcount reductions and the
renegotiation of contracts with suppliers and vendors – which is
intended to lower annual operating expenses by $150 million. The Company
anticipates achieving the full annualized run-rate savings by the end of
2018.
Approximately 75 percent of the savings are expected to be achieved
through actions within the Company’s Hospital Operations and other
segment, including the elimination of a regional management layer and
streamlining corporate overhead and centralized support functions. Tenet
also expects to realize savings from actions within the Company’s
Ambulatory Care and Conifer business segments.
In total, the Company anticipates eliminating approximately 1,300
positions, including contractors. In conjunction with this initiative,
Tenet expects to incur pre-tax restructuring costs of approximately
$40 million in the fourth quarter of 2017. Substantially all of these
costs relate to employee severance payments that will begin in the
fourth quarter of 2017.
Board Appoints New Independent Director
The Company’s board of directors appointed James Bierman to the board,
effective immediately. Tenet’s board now consists of 10 directors, nine
of whom are independent.
“I am pleased to announce the appointment of Jim to our board, in
furtherance of our commitment to ongoing board refreshment and strong
governance,” said Mr. Rittenmeyer. “Jim is highly qualified with
significant operational and financial experience in the healthcare
sector, and we look forward to benefitting from his valuable insights
and perspective. We are committed to continuing to refresh the board
with highly talented and engaging individuals in the coming months.”
Biographical Information
Mr. Bierman served as President and Chief Executive Officer of Owens &
Minor, Inc., a Fortune 500 company and a leading distributor of medical
and surgical supplies, from September 2014 to June 2015. Previously, he
served in various other senior roles at Owens & Minor, including
President and Chief Operating Officer from August 2013 to September
2014, Executive Vice President and Chief Operating Officer from March
2012 to August 2013, Executive Vice President and Chief Financial
Officer from April 2011 to March 2012, and as Senior Vice President and
Chief Financial Officer from June 2007 to April 2011. From 2001 to 2004,
Mr. Bierman served as Executive Vice President and Chief Financial
Officer at Quintiles Transnational Corp. Prior to joining Quintiles
Transnational, Mr. Bierman was a partner at Arthur Andersen LLP. Mr.
Bierman earned his B.A. from Dickinson College and his MBA at Cornell
University’s Johnson Graduate School of Management. He formerly served
as a director of Owens & Minor and Team Health Holdings, Inc.
Non-GAAP Financial Information
This press release includes certain non-GAAP measures, such as Adjusted
EBITDA, Adjusted net income (loss) from continuing operations
attributable to Tenet shareholders, and Adjusted diluted earnings (loss)
per share from continuing operations attributable to Tenet shareholders.
Reconciliations of these measures to the most comparable GAAP measure
are contained in the tables at the end of this release.
The results of many of the facilities in which the Ambulatory segment
has an investment are not consolidated by Tenet. To help analyze the
segment’s results of operations, management uses system-wide measures,
which include revenues and cases of both consolidated and unconsolidated
facilities.
About Tenet Healthcare
Tenet Healthcare Corporation is a diversified healthcare services
company with nearly 130,000 employees united around a common mission: to
help people live happier, healthier lives. Through its subsidiaries,
partnerships and joint ventures, including United Surgical Partners
International, the Company operates 77 general acute care hospitals, 20
short-stay surgical hospitals and approximately 460 outpatient centers
in the United States, as well as nine facilities in the United Kingdom.
Tenet’s Conifer Health Solutions subsidiary provides technology-enabled
performance improvement and health management solutions to hospitals,
health systems, integrated delivery networks, physician groups,
self-insured organizations and health plans. For more information,
please visit www.tenethealth.com.
The terms "THC", "Tenet Healthcare Corporation", "the Company", "we",
"us" or "our" refer to Tenet Healthcare Corporation or one or more of
its subsidiaries or affiliates as applicable.
This release contains “forward-looking statements” – that is, statements
that relate to future, not past, events. In this context,
forward-looking statements often address our expected future business
and financial performance and financial condition, and often contain
words such as “expect,” “assume,” “anticipate,” “intend,” “plan,”
“believe,” “seek,” “see,” or “will.” Forward-looking statements by their
nature address matters that are, to different degrees, uncertain.
Particular uncertainties that could cause our actual results to be
materially different than those expressed in our forward-looking
statements include, but are not limited to, the factors disclosed under
“Forward-Looking Statements” and “Risk Factors” in our Form 10-K for the
year ended December 31, 2016 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.
Non-GAAP Financial Measures
Adjusted EBITDA, a non-GAAP measure, is defined by the Company as net
income (loss) attributable to Tenet Healthcare Corporation common
shareholders before (1) the cumulative effect of changes in accounting
principle, (2) net loss (income) attributable to noncontrolling
interests, (3) income (loss) from discontinued operations, (4) income
tax benefit (expense), (5) other non-operating income (expense), net,
(6) gain (loss) from early extinguishment of debt, (7) interest expense,
(8) litigation and investigation (costs) benefit, net of insurance
recoveries, (9) net gains (losses) on sales, consolidation and
deconsolidation of facilities, (10) impairment and restructuring charges
and acquisition-related costs, (11) depreciation and amortization and
(12) income (loss) from divested operations and closed businesses (i.e.,
the Company’s health plan businesses). Litigation and investigation
costs do not include ordinary course of business malpractice and other
litigation and related expense.
Adjusted net income (loss) from continuing operations attributable to
Tenet Healthcare Corporation common shareholders, a non-GAAP measure, is
defined by the Company as net income (loss) attributable to Tenet
Healthcare Corporation common shareholders before (1) impairment and
restructuring charges, and acquisition-related costs, (2) litigation and
investigation costs, (3) gains on sales, consolidation and
deconsolidation of facilities, (4) gain (loss) from early extinguishment
of debt, (5) income (loss) from divested operations and closed
businesses (6) the associated impact of these five items on taxes and
noncontrolling interests, and (7) net income (loss) from discontinued
operations. Adjusted diluted earnings (loss) per share from continuing
operations, a non-GAAP term, is defined by the Company as Adjusted net
income (loss) from continuing operations attributable to Tenet
Healthcare Corporation common shareholders divided by the weighted
average primary or diluted shares outstanding in the reporting period.
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.
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. Accordingly,
investors are encouraged to use GAAP measures when evaluating the
Company’s financial performance.
A reconciliation of Adjusted EBITDA to net income (loss) attributable to
Tenet Healthcare Corporation common shareholders, the most comparable
GAAP measure, is set forth in Table #1 below for the three and nine
months ended September 30, 2017 and 2016. A reconciliation of Adjusted
net income from continuing operations attributable to Tenet Healthcare
Corporation common shareholders to net income (loss) attributable to
Tenet Healthcare Corporation common shareholders, the most comparable
GAAP measure, is set forth in Table #2 below for the three and nine
months ended September 30, 2017 and 2016.
|
|
|
|
|
|
|
|
|
|
|
|
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP disclosures
Table #1 – Reconciliation of Adjusted EBITDA to Net Income
(Loss)
Attributable to Tenet Healthcare Corporation Common Shareholders
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
2016
|
|
|
2017
|
|
2016
|
|
Net loss attributable to Tenet Healthcare Corporation common
shareholders
|
|
$
|
(367
|
)
|
|
$
|
(8
|
)
|
|
|
$
|
(475
|
)
|
|
$
|
(113
|
)
|
|
Less: Net income attributable to noncontrolling interests
|
|
(78
|
)
|
|
(88
|
)
|
|
|
(254
|
)
|
|
(266
|
)
|
|
Net income (loss) from discontinued operations, net of tax
|
|
(1
|
)
|
|
1
|
|
|
|
(1
|
)
|
|
(5
|
)
|
|
Net income (loss) from continuing operations
|
|
(288
|
)
|
|
79
|
|
|
|
(220
|
)
|
|
158
|
|
|
Income tax benefit (expense)
|
|
60
|
|
|
(10
|
)
|
|
|
105
|
|
|
(61
|
)
|
|
Loss from early extinguishment of debt
|
|
(138
|
)
|
|
—
|
|
|
|
(164
|
)
|
|
—
|
|
|
Other non-operating expense, net
|
|
(4
|
)
|
|
(7
|
)
|
|
|
(14
|
)
|
|
(18
|
)
|
|
Interest expense
|
|
(257
|
)
|
|
(243
|
)
|
|
|
(775
|
)
|
|
(730
|
)
|
|
Operating income
|
|
51
|
|
|
339
|
|
|
|
628
|
|
|
967
|
|
|
Litigation and investigation costs
|
|
(6
|
)
|
|
(4
|
)
|
|
|
(12
|
)
|
|
(291
|
)
|
|
Gains on sales, consolidation and deconsolidation of facilities
|
|
104
|
|
|
3
|
|
|
|
142
|
|
|
151
|
|
|
Impairment and restructuring charges, and acquisition-related costs
|
|
(329
|
)
|
|
(31
|
)
|
|
|
(403
|
)
|
|
(81
|
)
|
|
Depreciation and amortization
|
|
(219
|
)
|
|
(205
|
)
|
|
|
(662
|
)
|
|
(632
|
)
|
|
Loss from divested and closed businesses
|
|
(6
|
)
|
|
(6
|
)
|
|
|
(41
|
)
|
|
(8
|
)
|
|
Adjusted EBITDA
|
|
$
|
507
|
|
|
$
|
582
|
|
|
|
$
|
1,604
|
|
|
$
|
1,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenues
|
|
$
|
4,586
|
|
|
$
|
4,849
|
|
|
|
$
|
14,201
|
|
|
$
|
14,761
|
|
|
Less: Net operating revenues from health plans
|
|
10
|
|
|
122
|
|
|
|
100
|
|
|
385
|
|
|
Adjusted net operating revenues
|
|
$
|
4,576
|
|
|
$
|
4,727
|
|
|
|
$
|
14,101
|
|
|
$
|
14,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Tenet Healthcare Corporation common
shareholders as a % of net operating revenues
|
|
(8.0
|
)%
|
|
(0.2
|
)%
|
|
|
(3.3
|
)%
|
|
(0.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as % of adjusted net operating revenues (Adjusted
EBITDA margin)
|
|
11.1
|
%
|
|
12.3
|
%
|
|
|
11.4
|
%
|
|
12.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP disclosures
Table #2 – Pre-Tax, After-Tax and Earnings (Loss) Per Share
Impact of Certain Items
on Continuing Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
(Dollars in millions except per share amounts)
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
2016
|
|
|
2017
|
|
2016
|
|
Adjustments to calculate Adjusted Diluted EPS
|
|
|
Impairment and restructuring charges, and acquisition-related costs1
|
|
$
|
(329
|
)
|
|
$
|
(31
|
)
|
|
|
$
|
(403
|
)
|
|
$
|
(81
|
)
|
|
Litigation and investigation costs
|
|
(6
|
)
|
|
(4
|
)
|
|
|
(12
|
)
|
|
(291
|
)
|
|
Gain on sales, consolidation and deconsolidation of facilities2
|
|
104
|
|
|
3
|
|
|
|
142
|
|
|
151
|
|
|
Loss from early extinguishment of debt3
|
|
(138
|
)
|
|
—
|
|
|
|
(164
|
)
|
|
—
|
|
|
Loss from divested and closed businesses
|
|
(6
|
)
|
|
(6
|
)
|
|
|
(41
|
)
|
|
(11
|
)
|
|
Pre-tax impact
|
|
(375
|
)
|
|
(38
|
)
|
|
|
(478
|
)
|
|
(232
|
)
|
|
Tax impact of above items
|
|
26
|
|
|
10
|
|
|
|
65
|
|
|
37
|
|
|
Total after-tax impact
|
|
(349
|
)
|
|
(28
|
)
|
|
|
(413
|
)
|
|
(195
|
)
|
|
Noncontrolling interests impact
|
|
—
|
|
|
(1
|
)
|
|
|
—
|
|
|
(19
|
)
|
|
Total loss from items above
|
|
$
|
(349
|
)
|
|
$
|
(29
|
)
|
|
|
$
|
(413
|
)
|
|
$
|
(214
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common shareholders
|
|
$
|
(367
|
)
|
|
$
|
(8
|
)
|
|
|
$
|
(475
|
)
|
|
$
|
(113
|
)
|
|
Less net income (loss) from discontinued operations, net of tax
|
|
(1
|
)
|
|
1
|
|
|
|
(1
|
)
|
|
(5
|
)
|
|
Net loss from continuing operations, net of tax
|
|
(366
|
)
|
|
(9
|
)
|
|
|
(474
|
)
|
|
(108
|
)
|
|
Net loss from adjustments above
|
|
349
|
|
|
29
|
|
|
|
413
|
|
|
214
|
|
|
Adjusted net income (loss) from continuing operations
attributable to common shareholders
|
|
$
|
(17
|
)
|
|
$
|
20
|
|
|
|
$
|
(61
|
)
|
|
$
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average dilutive shares outstanding (in thousands)
|
|
100,812
|
|
|
100,978
|
|
|
|
100,475
|
|
|
100,680
|
|
|
Diluted earnings (loss) per share from continuing operations
|
|
$
|
(3.63
|
)
|
|
$
|
(0.09
|
)
|
|
|
$
|
(4.72
|
)
|
|
$
|
(1.09
|
)
|
|
Adjusted diluted earnings (loss) per share from continuing
operations
|
|
$
|
(0.17
|
)
|
|
$
|
0.20
|
|
|
|
$
|
(0.61
|
)
|
|
$
|
1.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Impairment and restructuring charges, and acquisition-related
costs of $329 million in the three months ended September 30, 2017
were primarily related to the write-down of assets held for sale
in Philadelphia and the United Kingdom to their estimated fair
value less the estimated costs to sell. The Company’s results in
the three months ended September 30, 2017 do not include
impairment and restructuring charges related to the Company’s $150
million cost reduction initiative; these charges will be recorded
in the three months ending December 31, 2017.
|
|
2
|
|
Gain on sales, consolidation and deconsolidation of facilities of
$104 million in the three months ended September 30, 2017 was
primarily related to a gain on sale of the Company’s former
hospitals, physician practices and related assets in Houston,
Texas and the surrounding area.
|
|
3
|
|
Loss from early extinguishment of debt of $138 million in the
three months ended September 30, 2017 was primarily related to the
Company’s refinancing transactions and debt redemption in the
quarter.
|
