EX-99.1 2 d62719dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

Tenet Reports Results for the Second Quarter Ended June 30, 2015

 

  •   Generated Adjusted EBITDA of $568 million, an increase of 23.5%, and adjusted diluted EPS of $0.75

 

  •   2015 Adjusted EBITDA Outlook raised $175 million to $2.225 to $2.325 billion

 

  •   Hospital segment patient revenue increased 6.9% on a same-hospital basis, with admissions increasing 1.7%, adjusted admissions increasing 2.3%, and revenue per adjusted admission increasing 4.5%

 

  •   Ambulatory segment revenue increased 6.9% on a pro forma same-facility system-wide basis, with cases increasing 6.8% and revenue per case increasing 0.1%

 

  •   Conifer’s EBITDA increased 36% to $60 million

DALLAS – August 3, 2015 – Tenet Healthcare Corporation (NYSE:THC) reported Adjusted EBITDA of $568 million for the second quarter of 2015, an increase of $108 million, or 23.5 percent, compared to $460 million in the second quarter of 2014. The results for the second quarter of 2015 included $16 million of Adjusted EBITDA generated by United Surgical Partners International (USPI) and Aspen Healthcare, which were acquired by Tenet on June 16, 2015.

“This was another strong quarter for Tenet with EBITDA that exceeded our expectations,” said Trevor Fetter, chairman and chief executive officer. “We continued to focus on aggressive implementation of our strategy to improve care delivery and more closely align our business with key trends shaping the healthcare system. In our hospital business, we made progress on multiple strategic partnerships that will help us achieve leadership positions in our markets, as well as plans to divest facilities. We also completed our joint venture with USPI, which makes us the leader in the fast-growing ambulatory surgery sector. We continue to position Tenet as a partner of choice for not-for-profit health systems, and we remain incredibly optimistic about the many opportunities to grow with new and existing partners through our acute care business, USPI and Conifer.”

Discussion of Results (Percentage changes in operating metrics compare Q2’15 to Q2’14 on a same-facility basis unless otherwise noted.)

Tenet generated same-hospital growth in admissions and adjusted admissions of 1.7 percent and 2.3 percent, respectively, compared to the second quarter of 2014. Paying admissions increased 2.1 percent, reflecting growth in the number of newly insured patients. Surgeries performed in our hospital segment increased 1.5 percent and emergency department visits increased 2.4 percent. On a pro forma same-facility system-wide basis, including the results of USPI and Aspen in both the second quarters of 2015 and 2014, surgical and imaging cases in our Ambulatory Care segment grew by 6.8 percent.

 

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The company continues to benefit from declines in uninsured and charity volumes. In the six states in which we operate that expanded their Medicaid programs, same-hospital uninsured plus charity admissions declined by 639 admissions, or 31.5 percent, and Medicaid admissions increased by 767 admissions, or 2.6 percent. Uninsured plus charity outpatient visits decreased by 8,729 visits, or 15.8 percent, and Medicaid outpatient visits grew by 32,714 visits, or 9.2 percent. The six states are comprised of five states that expanded Medicaid in 2014 (Arizona, California, Illinois, Massachusetts and Michigan) and one state that expanded Medicaid in 2015 (Pennsylvania).

Including non-expansion states, same-hospital uninsured plus charity admissions decreased by 539 admissions, or 4.9 percent, and Medicaid admissions increased by 1,082 admissions, or 2.0 percent. There was a decline in same-hospital charity and uninsured outpatient visits of 10,225 visits, or 6.2 percent, and an increase in Medicaid outpatient visits of 38,872 visits, or 7.3 percent.

Tenet’s same-hospital exchange volumes were 5,301 admissions and 46,882 outpatient visits in the second quarter. Compared to the first quarter of 2015, the company drove increases in exchange admissions and exchange outpatient visits of 19.6 percent and 35.4 percent, respectively.

Net operating revenues, after the provision for doubtful accounts, grew by $454 million, or 11.2 percent, to $4.492 billion compared to net operating revenues of $4.038 billion in the second quarter of 2014. The majority of the company’s revenue growth was driven by a 2.3 percent increase in same-hospital adjusted patient admissions, a 4.5 percent increase in same-hospital net patient revenue per adjusted patient admission, and a $28 million increase in revenue at Conifer from non-Tenet customers, representing a growth rate of 19.0 percent. A portion of the company’s 4.5 percent growth in same-hospital net patient revenue per adjusted admission was due to the company recognizing $45 million of revenues in the second quarter of 2015 related to the California provider fee program compared to no revenues in the second quarter of 2014 since the current program was not approved until December 2014. The year-over-year revenue growth also benefitted from acquisitions, joint ventures and newly constructed facilities.

Total hospital selected operating expenses, defined as the sum of salaries, wages and benefits, supplies and other operating expenses, increased 2.1 percent per adjusted admission in the quarter.

Tenet recorded $33 million in electronic health records incentives in the second quarter of 2015, a $25 million decrease compared to $58 million in the second quarter of 2014. 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 7.3 percent of revenues before bad debt in both the second quarter of 2015 and 2014. Including $199 million and $240 million of charity care write-offs in the second quarters of 2015 and 2014, respectively, Tenet’s uncompensated care expense was $551 million and $560 million, respectively, in these periods. As a percentage of adjusted revenue, uncompensated care expense represented 10.9 percent of adjusted revenue in the second quarter of 2015, down from 12.2 percent in the second quarter of 2014.

 

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Conifer generated $60 million of Adjusted EBITDA in the quarter ended June 30, 2015, representing a 36.4 percent increase compared to $44 million in the second quarter of 2014. Including revenue from Tenet, Conifer’s revenue increased by $55 million, or 19.3 percent, to $340 million in the second quarter of 2015 compared to revenues of $285 million in the second quarter of 2014.

Tenet generated adjusted net income from continuing operations of $76 million, or $0.75 per diluted share, in the second quarter of 2015. This excludes $136 million, or $1.35 per share, in after-tax impairment charges, restructuring charges, acquisition-related costs, and litigation and investigation costs. The company generated adjusted net income from continuing operations of $17 million, or $0.17 per diluted share, in the second quarter of 2014, excluding the comparable items that totaled $27 million after-tax, or $0.28 per share.

Including the results of both continuing and discontinued operations, Tenet reported a net loss attributable to common shareholders of $61 million after-tax, or $0.61 per share in the second quarter of 2015, compared to a net loss of $26 million after-tax, or $0.27 per share, in the second quarter of 2014.

Cash and cash equivalents were $299 million at June 30, 2015 compared to $193 million at December 31, 2014. Tenet’s outstanding borrowings on its credit line were $100 million as of June 30, 2015. Accounts receivable days outstanding were 50.7 at June 30, 2015 compared to 49.5 days at December 31, 2014. On a pro forma basis, including the revenue from USPI and Aspen for the entire second quarter, accounts receivable days outstanding would have been 48.8 at June 30, 2015. Adjusted net cash provided by operating activities in the quarter ended June 30, 2015 was $467 million; after subtracting $175 million of capital expenditures, adjusted free cash flow was $292 million.

Revised Outlook for 2015

During 2015, Tenet expects to generate net operating revenues of $18.1 billion to $18.5 billion, Adjusted EBITDA of $2.225 billion to $2.325 billion, Adjusted free cash flow of $225 million to $425 million, and Adjusted earnings per share of $1.32 to $2.21. This includes approximately $65 million of electronic health record incentives.

In the third quarter of 2015, Tenet expects to generate net operating revenues of $4.65 billion to $4.85 billion, Adjusted EBITDA of $550 million to $600 million and Adjusted earnings per share of $0.05 to $0.49. This includes approximately $8 million of electronic health record incentives.

These Outlook amounts include the estimated impact of acquisitions, divestitures and joint ventures using either the actual completion date of transactions that have already occurred or estimated completion dates later this year. Each transaction that has not yet been completed is subject to normal closing conditions and regulatory review, and in the case of the potential

 

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hospital sales in Georgia and North Carolina, the negotiation of acceptable terms and the execution of definitive agreements. The Outlook for both calendar year 2015 and the third quarter of 2015 include the following transactions that were completed or are assumed to be completed by the end of 2015:

 

  •   Tenet’s joint venture with USPI, which was completed on June 16, 2015. Tenet is the majority owner and is now consolidating the results of USPI.

 

  •   Tenet’s acquisition of Aspen Healthcare, which was completed on June 16, 2015. Tenet owns 100% of Aspen and is now consolidating its financial results.

 

  •   Tenet’s announced joint venture with Baylor Scott & White Health in Dallas. Tenet will be a minority owner in the partnership and will de-consolidate the results of its four hospitals in Dallas. If completed, Tenet will account for its ownership in these hospitals under the equity method of accounting.

 

  •   Tenet’s announced joint venture with Baptist Health System in Birmingham, Alabama. If completed, Tenet will be the majority owner and will consolidate the financial results of this partnership.

 

  •   Tenet’s announced joint venture with Dignity Health and Ascension to own and operate the Carondelet Health Network in Tucson, Arizona. If completed, Tenet will be the majority owner and will consolidate the financial results of this partnership.

 

  •   Tenet’s acquisition via a long-term lease of Hi-Desert Medical Center in Joshua Tree, California, which was completed on July 15, 2015. Tenet will be consolidating the financial results of Hi-Desert.

 

  •   Tenet’s announced sale of Saint Louis University Hospital in St. Louis, Missouri; and,

 

  •   The potential sales of Tenet’s hospitals in Georgia and North Carolina.

Tenet expects to generate net cash proceeds of approximately $1 billion from the transactions listed above, excluding the cash payments for USPI and Aspen. Tenet’s estimate of approximately $1 billion of net cash proceeds includes the anticipated working capital proceeds and the buyers’ assumption of Tenet’s capital lease obligations at certain hospitals. The company anticipates using these net proceeds for general corporate purposes, including the potential to repay portions of Tenet’s existing debt.

Management’s Webcast Discussion of Second Quarter Results

Tenet management will discuss the Company’s second quarter 2015 results on a webcast scheduled for 10:00 a.m. ET (9:00 a.m. CT) on August 4, 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.

 

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Additional information regarding Tenet’s quarterly results of operations, including detailed tabular operational data, is contained in its Form 10-Q report for the three months ended June 30, 2015, 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 diversified healthcare services company with more than 125,000 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 (USPI), the company operates 81 general acute care hospitals, 19 short-stay surgical hospitals and over 400 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 (IDN), 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.

###

 

Corporate Communications

Donn Walker

469-893-2640

mediarelations@tenethealth.com

     

 

 

 

 Investor Relations

Brendan Strong

469-893-6992

investorrelations@tenethealth.com

   

  

  

  

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. In addition, the Company’s 2015 outlook could be materially affected if any of the acquisitions or divestiture transactions do not close within the anticipated timeframe, the terms of the transactions materially change or the closing conditions for such transactions are not satisfied. 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.

 

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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.

 

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TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

(Dollars in millions except per share amounts)    Three Months Ended June 30,  
     2015     %     2014     %     Change  

Net operating revenues:

           

Net operating revenues before provision for doubtful accounts

    $ 4,844        $ 4,358          11.2 % 

Less: Provision for doubtful accounts

      352          320          10.0 % 
  

 

 

      

 

 

      

Net operating revenues

      4,492        100.0 %      4,038        100.0 %      11.2 % 

Equity in earnings of unconsolidated affiliates

      16        0.4 %      4        0.1 %      300.0 % 

Operating expenses:

           

Salaries, wages and benefits

      2,185        48.6 %      1,956        48.4 %      11.7 % 

Supplies

      707        15.7 %      649        16.1 %      8.9 % 

Other operating expenses, net

      1,081        24.1 %      1,035        25.6 %      4.4 % 

Electronic health record incentives

      (33 )      (0.7 )%      (58 )      (1.4 )%      (43.1 )% 

Depreciation and amortization

      197        4.4 %      209        5.2 %   

Impairment and restructuring charges, and acquisition-related costs

      193        4.3 %      32        0.8 %   

Litigation and investigation costs

      14        0.3 %      12        0.3 %   
  

 

 

      

 

 

      

Operating income

      164        3.7 %      207        5.1 %   

Interest expense

      (217 )        (190 )     

Investment earnings (losses)

      (1 )        —         
  

 

 

      

 

 

      

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

      (54 )        17       

Income tax benefit (expense)

      27          (8 )     
  

 

 

      

 

 

      

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

      (27 )        9       

Discontinued operations:

           

Loss from operations

      (2 )        (7 )     

Litigation and investigation costs

      —            (18 )     

Income tax benefit

      1          9       
  

 

 

      

 

 

      

Net loss from discontinued operations

      (1 )        (16 )     
  

 

 

      

 

 

      

Net loss

      (28 )        (7 )     

Less: Net income attributable to noncontrolling interests

      33          19       
  

 

 

      

 

 

      

Net loss attributable to Tenet Healthcare Corporation common shareholders

    $ (61 )      $ (26 )     
  

 

 

      

 

 

      

Amounts attributable to Tenet Healthcare Corporation common shareholders

           

Net loss from continuing operations, net of tax

    $ (60 )      $ (10 )     

Net loss from discontinued operations, net of tax

      (1 )        (16 )     
  

 

 

      

 

 

      

Net loss attributable to Tenet Healthcare Corporation common shareholders

    $ (61 )      $ (26 )     
  

 

 

      

 

 

      

Net loss per share attributable to Tenet Healthcare Corporation common shareholders:

           

Basic

           

Continuing operations

    $ (0.60 )      $ (0.11 )     

Discontinued operations

      (0.01 )        (0.16 )     
  

 

 

      

 

 

      
   $ (0.61 )      $ (0.27 )     
  

 

 

      

 

 

      

Diluted

           

Continuing operations

    $ (0.60 )      $ (0.11 )     

Discontinued operations

      (0.01 )        (0.16 )     
  

 

 

      

 

 

      
   $ (0.61 )      $ (0.27 )     
  

 

 

      

 

 

      

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

           

Basic

      99,244          97,677       

Diluted*

      99,244          97,677       

 

* Had we generated income from continuing operations in the three months ended June 30, 2015 and 2014, the effect of employee stock options, restricted stock units and deferred compensation units on the diluted shares calculation would have been an increase of 2,673 and 2,123 shares respectively.

 

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TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

(Dollars in millions except per share amounts)    Six Months Ended June 30,  
     2015     %     2014     %     Change  

Net operating revenues:

           

Net operating revenues before provision for doubtful accounts

    $ 9,631        $ 8,663          11.2 % 

Less: Provision for doubtful accounts

      715          700          2.1 % 
  

 

 

      

 

 

      

Net operating revenues

      8,916        100.0 %      7,963        100.0 %      12.0 % 

Equity in earnings of unconsolidated affiliates

      20        0.2 %      5        0.1 %      300.0 % 

Operating expenses:

           

Salaries, wages and benefits

      4,310        48.3 %      3,877        48.7 %      11.2 % 

Supplies

      1,394        15.6 %      1,277        16.0 %      9.2 % 

Other operating expenses, net

      2,174        24.4 %      2,034        25.5 %      6.9 % 

Electronic health record incentives

      (39 )      (0.4 )%      (67 )      (0.8 )%      (41.8 )% 

Depreciation and amortization

      404        4.5 %      402        5.0 %   

Impairment and restructuring charges, and acquisition-related costs

      222        2.5 %      53        0.7 %   

Litigation and investigation costs

      17        0.2 %      15        0.2 %   
  

 

 

      

 

 

      

Operating income

      454        5.1 %      377        4.7 %   

Interest expense

      (416 )        (372 )     

Investment earnings (losses)

      (1 )        —         
  

 

 

      

 

 

      

Net income from continuing operations, before income taxes

      37          5       

Income tax benefit (expense)

      11          (7 )     
  

 

 

      

 

 

      

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

      48          (2 )     

Discontinued operations:

           

Loss from operations

      (3 )        (15 )     

Litigation and investigation costs

      3          (18 )     

Income tax benefit

      —            12       
  

 

 

      

 

 

      

Net loss from discontinued operations

      —            (21 )     
  

 

 

      

 

 

      

Net income (loss)

      48          (23 )     

Less: Net income attributable to noncontrolling interests

      62          35       
  

 

 

      

 

 

      

Net loss attributable to Tenet Healthcare Corporation common shareholders

    $ (14 )      $ (58 )     
  

 

 

      

 

 

      

Amounts attributable to Tenet Healthcare Corporation common shareholders

           

Net loss from continuing operations, net of tax

    $ (14 )      $ (37 )     

Net loss from discontinued operations, net of tax

      —            (21 )     
  

 

 

      

 

 

      

Net loss attributable to Tenet Healthcare Corporation common shareholders

    $ (14 )      $ (58 )     
  

 

 

      

 

 

      

Net loss per share attributable to Tenet Healthcare Corporation common shareholders:

           

Basic

           

Continuing operations

    $ (0.14 )      $ (0.38 )     

Discontinued operations

      —            (0.22 )     
  

 

 

      

 

 

      
   $ (0.14 )      $ (0.60 )     
  

 

 

      

 

 

      

Diluted

           

Continuing operations

    $ (0.14 )      $ (0.38 )     

Discontinued operations

      —            (0.22 )     
  

 

 

      

 

 

      
   $ (0.14 )      $ (0.60 )     
  

 

 

      

 

 

      

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

           

Basic

      98,972          97,419       

Diluted*

      98,972          97,419       

 

* Had we generated income from continuing operations in the six months ended June 30, 2015 and 2014, the effect of employee stock options, restricted stock units and deferred compensation units on the diluted shares calculation would have been an increase of 2,423 and 2,053 shares, respectively.

 

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TENET HEALTHCARE CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     June 30,     December 31,  
(Dollars in millions)    2015     2014  
ASSETS     

Current assets:

     

Cash and cash equivalents

    $ 299      $ 193   

Accounts receivable, less allowance for doubtful accounts

      2,505        2,404   

Inventories of supplies, at cost

      261        276   

Income tax receivable

      27        2   

Current portion of deferred income taxes

      637        747   

Assets held for sale

      1,170        2   

Other current assets

      1,110        1,093   
  

 

 

    

 

 

  

Total current assets

      6,009        4,717   

Investments and other assets

      1,017        384   

Deferred income taxes, net of current portion

      89        116   

Property and equipment, at cost, less accumulated depreciation and amortization

      7,135        7,733   

Goodwill

      6,602        3,913   

Other intangible assets, at cost, less accumulated amortization

      1,894        1,278   
  

 

 

    

 

 

  

Total assets

    $ 22,746      $ 18,141   
  

 

 

    

 

 

  
LIABILITIES AND EQUITY     

Current liabilities:

     

Current portion of long-term debt

    $ 117      $ 112   

Accounts payable

      1,149        1,179   

Accrued compensation and benefits

      770        852   

Professional and general liability reserves

      204        189   

Accrued interest payable

      204        194   

Liabilities held for sale

      244        —     

Other current liabilities

      1,086        1,051   
  

 

 

    

 

 

  

Total current liabilities

      3,774        3,577   

Long-term debt, net of current portion

      14,637        11,695   

Professional and general liability reserves

      546        492   

Defined benefit plan obligations

      627        633   

Other long-term liabilities

      553        558   
  

 

 

    

 

 

  

Total liabilities

      20,137        16,955   

Commitments and contingencies

     

Redeemable noncontrolling interests in equity of consolidated subsidiaries

      1,591        401   

Equity:

     

Shareholders’ equity:

     

Common stock

      7        7   

Additional paid-in capital

      4,774        4,614   

Accumulated other comprehensive loss

      (177 )      (182 ) 

Accumulated deficit

      (1,424 )      (1,410 ) 

Common stock in treasury, at cost

      (2,377 )      (2,378 ) 
  

 

 

    

 

 

  

Total shareholders’ equity

      803        651   

Noncontrolling interests

      215        134   
  

 

 

    

 

 

  

Total equity

      1,018        785   
  

 

 

    

 

 

  

Total liabilities and equity

    $ 22,746      $ 18,141   
  

 

 

    

 

 

  

 

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TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

 

     Six Months Ended  
(Dollars in millions)    June 30,  
     2015     2014  

Net income (loss)

    $ 48      $ (23 ) 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

     

Depreciation and amortization

      404        402   

Provision for doubtful accounts

      715        700   

Deferred income tax benefit

      (27 )      (7 ) 

Stock-based compensation expense

      33        26   

Impairment and restructuring charges, and acquisition-related costs

      222        53   

Litigation and investigation costs

      17        15   

Amortization of debt discount and debt issuance costs

      21        14   

Pre-tax loss from discontinued operations

      —          33   

Other items, net

      (25 )      (9 ) 

Changes in cash from operating assets and liabilities:

     

Accounts receivable

      (779 )      (937 ) 

Inventories and other current assets

      36        78   

Income taxes

      9        (17 ) 

Accounts payable, accrued expenses and other current liabilities

      (267 )      (32 ) 

Other long-term liabilities

      40        47   

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

      (86 )      (84 ) 

Net cash used in operating activities from discontinued operations, excluding income taxes

      (8 )      (12 ) 
  

 

 

    

 

 

  

Net cash provided by operating activities

      353        247   

Cash flows from investing activities:

     

Purchases of property and equipment — continuing operations

      (359 )      (523 ) 

Purchases of businesses or joint venture interests, net of cash acquired

      (636 )      (42 ) 

Proceeds from sales of marketable securities, long-term investments and other assets

      9        3   

Other long-term assets

      —          (14 ) 

Other items, net

      1        —     
  

 

 

    

 

 

  

Net cash used in investing activities

      (985 )      (576 ) 

Cash flows from financing activities:

     

Repayments of borrowings under credit facility

      (1,315 )      (1,300 ) 

Proceeds from borrowings under credit facility

      1,195        895   

Repayments of other borrowings

      (1,992 )      (68 ) 

Proceeds from other borrowings

      3,187        1,108   

Deferred debt issuance costs

      (72 )      (19 ) 

Distributions paid to noncontrolling interests

      (23 )      (20 ) 

Contributions from noncontrolling interests

      3        13   

Purchase of noncontrolling interests

      (254 )      —     

Proceeds from exercise of stock options

      9        11   

Other items, net

      —          2   
  

 

 

    

 

 

  

Net cash provided by financing activities

      738        622   
  

 

 

    

 

 

  

Net increase in cash and cash equivalents

      106        293   

Cash and cash equivalents at beginning of period

      193        113   
  

 

 

    

 

 

  

Cash and cash equivalents at end of period

    $ 299      $ 406   
  

 

 

    

 

 

  

Supplemental disclosures:

     

Interest paid, net of capitalized interest

    $ (385 )    $ (360 ) 

Income tax refunds (payments), net

    $ (8 )    $ (19 ) 

 

Page 10

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING TOTAL HOSPITALS(1)

(Unaudited)

 

(Dollars in millions except per patient day,       
per admission and per visit amounts)    Three Months Ended June 30,     Six Months Ended June 30,  
     2015     2014(2)     Change     2015(2)     2014(2)     Change  

Net inpatient revenues

    $ 2,623      $ 2,393        9.6 %   $ 5,313      $ 4,834        9.9 %

Net outpatient revenues

    $ 1,484      $ 1,367        8.6 %   $ 2,896      $ 2,643        9.6 %

Number of acute care hospitals (at end of period)

      80        79        1 *      80        79        1 * 

Licensed beds (at end of period)

      20,826        20,553        1.3 %     20,826        20,553        1.3 %

Average licensed beds

      20,826        20,370        2.2 %     20,823        20,313        2.5 %

Utilization of licensed beds

      49.1 %      48.9 %      0.2 % *      50.6 %      49.9 %      0.7 % * 

Patient days - total

      929,840        907,093        2.5 %     1,905,752        1,836,257        3.8 %

Adjusted patient days

      1,589,567        1,540,290        3.2 %     3,207,969        3,063,611        4.7 %

Net inpatient revenue per patient day

    $ 2,821      $ 2,638        6.9 %   $ 2,788      $ 2,633        5.9 %

Total admissions

      201,908        194,641        3.7 %     410,241        388,914        5.5 %

Adjusted patient admissions

      349,122        333,927        4.6 %     698,191        655,841        6.5 %

Charity and uninsured admissions

      10,535        10,927        (3.6 )%     21,485        23,457        (8.4 )%

Net inpatient revenue per admission

    $ 12,991      $ 12,294        5.7 %   $ 12,951      $ 12,429        4.2 %

Average length of stay (days)

      4.61        4.66        (1.1 )%     4.65        4.72        (1.5 )%

Total surgeries

      127,523        123,660        3.1 %     248,926        241,503        3.1 %

Admissions through emergency department

      128,570        122,086        5.3 %     262,114        244,687        7.1 %

Emergency department visits

      742,951        702,009        5.8 %     1,484,484        1,367,011        8.6 %

Total emergency department admissions and visits

      871,521        824,095        5.8 %     1,746,598        1,611,698        8.4 %

Outpatient visits

      2,063,037        1,927,597        7.0 %     4,057,610        3,747,229        8.3 %

Charity and uninsured outpatient visits

      159,634        166,725        (4.3 )%     316,831        328,850        (3.7 )%

Net outpatient revenue per visit

    $ 719      $ 709        1.4 %   $ 714      $ 705        1.3 %

Net patient revenue per adjusted patient admission

    $ 11,764      $ 11,260        4.5 %   $ 11,758      $ 11,401        3.1 %

Net patient revenue per adjusted patient day

    $ 2,584      $ 2,441        5.9 %   $ 2,559      $ 2,441        4.8 %

Net Patient Revenues from:

             

Medicare

      20.7 %     22.6 %     (1.9 )% *      21.3 %     22.6 %     (1.3 )% * 

Medicaid

      8.5 %     10.1 %     (1.6 )% *      9.0 %     9.0 %     —   % * 

Managed care

      60.8 %     57.8 %     3.0 % *      59.9 %     58.0 %     1.9 % * 

Indemnity, self-pay and other

      10.0 %     9.5 %     0.5 % *      9.8 %     10.4 %     (0.6 )% * 

 

(1) Represents the results of Tenet’s Hospital Operations and other segment.
(2) The results for 2014 and the quarter ended March 31, 2015 have been restated to exclude the results of the surgery and imaging centers that Tenet contributed to the joint venture with United Surgical Partners International. The results for these surgery and imaging centers are now reported in Tenet’s Ambulatory Care segment.
* This change is the difference between the 2015 and 2014 amounts shown

 

Page 11

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS(1)

(Unaudited)

 

(Dollars in millions except per patient day,       
per admission and per visit amounts)    Three Months Ended June 30,     Six Months Ended June 30,  
     2015     2014(2)     Change     2015(2)     2014(2)     Change  

Net inpatient revenues

    $ 2,576      $ 2,400        7.3 %   $ 5,224      $ 4,840        7.9 %

Net outpatient revenues

    $ 1,438      $ 1,355        6.1 %   $ 2,815      $ 2,632        7.0 %

Number of acute care hospitals (at end of period)

      77        77        —   *      77        77        —   * 

Licensed beds (at end of period)

      20,419        20,355        0.3 %     20,419        20,355        0.3 %

Average licensed beds

      20,419        20,304        0.6 %     20,416        20,280        0.7 %

Utilization of licensed beds

      49.1 %      49.0 %      0.1 % *      50.6 %      50.0 %      0.6 % * 

Patient days - total

      913,127        905,839        0.8 %     1,871,492        1,835,003        2.0 %

Adjusted patient days

      1,558,637        1,538,038        1.3 %     3,145,127        3,061,358        2.7 %

Net inpatient revenue per patient day

    $ 2,821      $ 2,649        6.5 %   $ 2,791      $ 2,638        5.8 %

Total admissions

      197,390        194,167        1.7 %     401,205        388,440        3.3 %

Adjusted patient admissions

      340,791        333,073        2.3 %     681,626        654,988        4.1 %

Charity and uninsured admissions

      10,361        10,900        (4.9 )%     21,148        23,430        (9.7 )%

Net inpatient revenue per admission

    $ 13,050      $ 12,360        5.6 %   $ 13,021      $ 12,460        4.5 %

Average length of stay (days)

      4.63        4.67        (0.9 )%     4.66        4.72        (1.3 )%

Total surgeries

      125,347        123,459        1.5 %     244,977        241,302        1.5 %

Admissions through emergency department

      125,468        121,872        3.0 %     255,709        244,473        4.6 %

Emergency department visits

      715,897        699,423        2.4 %     1,429,931        1,364,425        4.8 %

Total emergency department admissions and visits

      841,365        821,295        2.4 %     1,685,640        1,608,898        4.8 %

Outpatient visits

      2,013,926        1,924,572        4.6 %     3,958,900        3,744,204        5.7 %

Charity and uninsured outpatient visits

      155,701        165,926        (6.2 )%     309,115        328,051        (5.8 )%

Net outpatient revenue per visit

    $ 714      $ 704        1.4 %   $ 711      $ 703        1.1 %

Net patient revenue per adjusted patient admission

    $ 11,778      $ 11,274        4.5 %   $ 11,794      $ 11,408        3.4 %

Net patient revenue per adjusted patient day

    $ 2,575      $ 2,441        5.5 %   $ 2,556      $ 2,441        4.7 %

Net Patient Revenues from:

             

Medicare

      20.6 %     22.6 %     (2.0 )% *      21.2 %     22.7 %     (1.5 )% * 

Medicaid

      8.5 %     10.1 %     (1.6 )% *      8.9 %     9.0 %     (0.1 )% * 

Managed care

      61.0 %     57.9 %     3.1 % *      59.8 %     57.9 %     1.9 % * 

Indemnity, self-pay and other

      9.9 %     9.4 %     0.5 % *      10.1 %     10.4 %     (0.3 )% * 

 

(1) Represents the results of Tenet’s Hospital Operations and other segment.
(2) The results for 2014 and the quarter ended March 31, 2015 have been restated to exclude the results of the surgery and imaging centers that Tenet contributed to the joint venture with United Surgical Partners International. The results for these surgery and imaging centers are now reported in Tenet’s Ambulatory Care segment.
* This change is the difference between the 2015 and 2014 amounts shown

 

Page 12

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

(Dollars in millions except per share amounts)    Three Months Ended     Six Months Ended  
     03/31/15     06/30/15     06/30/15  

Net operating revenues:

       

Net operating revenues before provision for doubtful accounts

    $ 4,787      $ 4,844      $ 9,631   

Less: Provision for doubtful accounts

      363        352        715   
  

 

 

    

 

 

    

 

 

  

Net operating revenues

      4,424        4,492        8,916   

Equity in earnings of unconsolidated affiliates

      4        16        20   

Operating expenses:

       

Salaries, wages and benefits

      2,125        2,185        4,310   

Supplies

      687        707        1,394   

Other operating expenses, net

      1,093        1,081        2,174   

Electronic health record incentives

      (6 )      (33 )      (39 ) 

Depreciation and amortization

      207        197        404   

Impairment and restructuring charges, and acquisition-related costs

      29        193        222   

Litigation and investigation costs

      3        14        17   
  

 

 

    

 

 

    

 

 

  

Operating income

      290        164        454   

Interest expense

      (199 )      (217 )      (416 ) 

Investment earnings (losses)

      —          (1 )      (1 ) 
  

 

 

    

 

 

    

 

 

  

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

      91        (54 )      37   

Income tax benefit (expense)

      (16 )      27        11   
  

 

 

    

 

 

    

 

 

  

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

      75        (27 )      48   

Discontinued operations:

       

Loss from operations

      (1 )      (2 )      (3 ) 

Litigation and investigation costs

      3        —          3   

Income tax benefit (expense)

      (1 )      1        —     
  

 

 

    

 

 

    

 

 

  

Net income (loss) from discontinued operations

      1        (1 )      —     
  

 

 

    

 

 

    

 

 

  

Net income (loss)

      76        (28 )      48   

Less: Net income attributable to noncontrolling interests

      29        33        62   
  

 

 

    

 

 

    

 

 

  

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

    $ 47      $ (61 )    $ (14 ) 
  

 

 

    

 

 

    

 

 

  

Amounts attributable to Tenet Healthcare Corporation common shareholders

       

Net income (loss) from continuing operations, net of tax

    $ 46      $ (60 )    $ (14 ) 

Net income (loss) from discontinued operations, net of tax

      1        (1 )      —     
  

 

 

    

 

 

    

 

 

  

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

    $ 47      $ (61 )    $ (14 ) 
  

 

 

    

 

 

    

 

 

  

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

       

Basic

       

Continuing operations

    $ 0.47      $ (0.60 )    $ (0.14 ) 

Discontinued operations

      0.01        (0.01 )      —     
  

 

 

    

 

 

    

 

 

  
   $ 0.48      $ (0.61 )    $ (0.14 ) 
  

 

 

    

 

 

    

 

 

  

Diluted

       

Continuing operations

    $ 0.46      $ (0.60 )    $ (0.14 ) 

Discontinued operations

      0.01        (0.01 )      —     
  

 

 

    

 

 

    

 

 

  
   $ 0.47      $ (0.61 )    $ (0.14 ) 
  

 

 

    

 

 

    

 

 

  

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

       

Basic

      98,699        99,244        98,972   

Diluted

      100,872        99,244        98,972   

 

Page 13

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING TOTAL HOSPITALS(1)

(Unaudited)

 

(Dollars in millions except per patient day,       
per admission and per visit amounts)    Three Months Ended     Six Months Ended  
     03/31/15(2)     06/30/15     06/30/15  

Net inpatient revenues

    $ 2,690      $ 2,623      $ 5,313   

Net outpatient revenues

    $ 1,412      $ 1,484      $ 2,896   

Number of acute care hospitals (at end of period)

      80        80        80   

Licensed beds (at end of period)

      20,826        20,826        20,826   

Average licensed beds

      20,823        20,826        20,823   

Utilization of licensed beds

      52.1 %      49.1 %      50.6 % 

Patient days - total

      975,912        929,840        1,905,752   

Adjusted patient days

      1,618,402        1,589,567        3,207,969   

Net inpatient revenue per patient day

    $ 2,755      $ 2,821      $ 2,788   

Total admissions

      208,333        201,908        410,241   

Adjusted patient admissions

      349,069        349,122        698,191   

Charity and uninsured admissions

      10,950        10,535        21,485   

Net inpatient revenue per admission

    $ 12,907      $ 12,991      $ 12,951   

Average length of stay (days)

      4.68        4.61        4.65   

Total surgeries

      121,403        127,523        248,926   

Admissions through emergency department

      133,544        128,570        262,114   

Emergency department visits

      741,533        742,951        1,484,484   

Total emergency department admissions and visits

      875,077        871,521        1,746,598   

Outpatient visits

      1,994,573        2,063,037        4,057,610   

Charity and uninsured outpatient visits

      157,197        159,634        316,831   

Net outpatient revenue per visit

    $ 708      $ 719      $ 714   

Net patient revenue per adjusted patient admission

    $ 11,748      $ 11,764      $ 11,758   

Net patient revenue per adjusted patient day

    $ 2,534      $ 2,584      $ 2,559   

Net Patient Revenues from:

       

Medicare

      21.9 %     20.7 %     21.3 %

Medicaid

      9.4 %     8.5 %     9.0 %

Managed care

      58.6 %     60.8 %     59.9 %

Indemnity, self-pay and other

      10.2 %     10.0 %     9.8 %

 

(1) Represents the results of Tenet’s Hospital Operations and other segment.
(2) The results for the quarter ended March 31, 2015 have been restated to exclude the results of the surgery and imaging centers that Tenet contributed to the joint venture with United Surgical Partners International. The results for these surgery and imaging centers are now reported in Tenet’s Ambulatory Care segment.

 

Page 14

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS(1)

(Unaudited)

 

(Dollars in millions except per patient day,       
per admission and per visit amounts)    Three Months Ended     Six Months Ended  
     03/31/15(2)     06/30/15     06/30/15  

Net inpatient revenues

    $ 2,648      $ 2,576      $ 5,224   

Net outpatient revenues

    $ 1,377      $ 1,438      $ 2,815   

Number of acute care hospitals (at end of period)

      77        77        77   

Licensed beds (at end of period)

      20,419        20,419        20,419   

Average licensed beds

      20,416        20,419        20,416   

Utilization of licensed beds

      52.2 %      49.1 %      50.6 % 

Patient days - total

      958,365        913,127        1,871,492   

Adjusted patient days

      1,586,490        1,558,637        3,145,127   

Net inpatient revenue per patient day

    $ 2,763      $ 2,821      $ 2,791   

Total admissions

      203,815        197,390        401,205   

Adjusted patient admissions

      340,835        340,791        681,626   

Charity and uninsured admissions

      10,787        10,361        21,148   

Net inpatient revenue per admission

    $ 12,992      $ 13,050      $ 13,021   

Average length of stay (days)

      4.70        4.63        4.66   

Total surgeries

      119,630        125,347        244,977   

Admissions through emergency department

      130,241        125,468        255,709   

Emergency department visits

      714,034        715,897        1,429,931   

Total emergency department admissions and visits

      844,275        841,365        1,685,640   

Outpatient visits

      1,944,974        2,013,926        3,958,900   

Charity and uninsured outpatient visits

      153,414        155,701        309,115   

Net outpatient revenue per visit

    $ 708      $ 714      $ 711   

Net patient revenue per adjusted patient admission

    $ 11,809      $ 11,778      $ 11,794   

Net patient revenue per adjusted patient day

    $ 2,537      $ 2,575      $ 2,556   

Net Patient Revenues from:

       

Medicare

      21.8 %     20.6 %     21.2 %

Medicaid

      9.4 %     8.5 %     8.9 %

Managed care

      58.7 %     61.0 %     59.8 %

Indemnity, self-pay and other

      10.1 %     9.9 %     10.1 %

 

(1) Represents the results of Tenet’s Hospital Operations and other segment.
(2) The results for the quarter ended March 31, 2015 have been restated to exclude the results of the surgery and imaging centers that Tenet contributed to the joint venture with United Surgical Partners International. The results for these surgery and imaging centers are now reported in Tenet’s Ambulatory Care segment.

 

Page 15

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS(1)

(Unaudited)

 

(Dollars in millions except per patient day,       
per admission and per visit amounts)    Three Months Ended     Year Ended  
     03/31/14     06/30/14     9/30/2014     12/31/2014     12/31/2014  

Net inpatient revenues

    $ 2,440      $ 2,400      $ 2,418      $ 2,670      $ 9,928   

Net outpatient revenues

    $ 1,277      $ 1,355      $ 1,350      $ 1,406      $ 5,388   

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

      1,523,320        1,538,038        1,538,618        1,549,184        6,149,160   

Net inpatient revenue per patient day

    $ 2,626      $ 2,649      $ 2,660      $ 2,896      $ 2,708   

Total admissions

      194,273        194,167        196,609        198,219        783,268   

Adjusted patient admissions

      321,915        333,073        336,848        337,170        1,329,006   

Charity and uninsured admissions

      12,530        10,900        10,774        11,080        45,284   

Net inpatient revenue per admission

    $ 12,560      $ 12,360      $ 12,299      $ 13,470      $ 12,675   

Average length of stay (days)

      4.78        4.67        4.62        4.65        4.68   

Total surgeries

      117,843        123,459        125,179        126,136        492,617   

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

      1,819,632        1,924,572        1,940,024        1,950,782        7,635,010   

Charity and uninsured outpatient visits

      162,125        165,926        161,808        161,827        651,686   

Net outpatient revenue per visit

    $ 702      $ 704      $ 696      $ 721      $ 706   

Net patient revenue per adjusted patient admission

    $ 11,547      $ 11,274      $ 11,186      $ 12,089      $ 11,524   

Net patient revenue per adjusted patient day

    $ 2,440      $ 2,441      $ 2,449      $ 2,631      $ 2,491   

Net Patient Revenues from:

           

Medicare

      22.7 %     22.6 %     21.5 %     21.0 %     21.9 %

Medicaid

      7.8 %     10.1 %     8.9 %     11.2 %     9.5 %

Managed care

      57.8 %     57.9 %     60.4 %     57.7 %     58.5 %

Indemnity, self-pay and other

      11.7 %     9.4 %     9.2 %     10.1 %     10.1 %

 

(1) Represents the results of Tenet’s Hospital Operations and other segment. The results for 2014 have been restated to exclude the results of the surgery and imaging centers that Tenet contributed to the joint venture with United Surgical Partners International. The results for these surgery and imaging centers are now reported in Tenet’s Ambulatory Care segment.

 

Page 16

TENET HEALTHCARE CORPORATION

SEGMENT REPORTING

(Unaudited)

 

                 June 30,     December 31,  
                 2015     2014  

Assets

         

Hospital Operations and other

        $ 16,678      $ 17,008   

Conifer

          1,151        929   

Ambulatory Care

          4,917        204   
      

 

 

    

 

 

  

Total

        $ 22,746      $ 18,141   
      

 

 

    

 

 

  
     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2015     2014     2015     2014  

Capital expenditures:

         

Hospital Operations and other

    $ 166      $ 235      $ 341      $ 506   

Conifer

      6        5        11        13   

Ambulatory Care

      3        2        7        4   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ 175      $ 242      $ 359      $ 523   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net operating revenues:

         

Hospital Operations and other

    $ 4,175      $ 3,811      $ 8,326      $ 7,523   

Conifer

         

Tenet

      165        138        325        278   

Other customers

      175        147        357        292   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Conifer revenues

      340        285        682        570   
  

 

 

    

 

 

    

 

 

    

 

 

  

Ambulatory Care

      142        80        233        148   

Intercompany eliminations

      (165 )      (138 )      (325 )      (278 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ 4,492      $ 4,038      $ 8,916      $ 7,963   
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA:

         

Hospital Operations and other

    $ 459      $ 390      $ 877      $ 711   

Conifer

      60        44        142        92   

Ambulatory Care

      49        26        78        44   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ 568      $ 460      $ 1,097      $ 847   
  

 

 

    

 

 

    

 

 

    

 

 

  

Depreciation and amortization:

         

Hospital Operations and other

    $ 178      $ 200      $ 369      $ 385   

Conifer

      12        5        24        10   

Ambulatory Care

      7        4        11        7   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ 197      $ 209      $ 404      $ 402   
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA

    $ 568      $ 460      $ 1,097      $ 847   

Depreciation and amortization

      (197 )      (209 )      (404 )      (402 ) 

Impairments and restructuring charges, and acquisition-related costs

      (193 )      (32 )      (222 )      (53 ) 

Litigation and investigation costs

      (14 )      (12 )      (17 )      (15 ) 

Interest expense

      (217 )      (190 )      (416 )      (372 ) 

Investment Expense

      (1 )      —          (1 )      —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from continuing operations before income taxes

    $ (54 )    $ 17      $ 37      $ 5   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

Page 17

TENET HEALTHCARE CORPORATION

STATEMENT OF OPERATIONS – AMBULATORY CARE SEGMENT

INCLUDING PRO FORMA USPI AND ASPEN FOR ALL PERIODS

(Unaudited)

 

     Three Months Ended June 30,  
     2015     2014  
     Ambulatory
Care as
Reported
Under
GAAP		     Unconsolidated
Affiliates		     Ambulatory
Care as
Reported
Under
GAAP		     Unconsolidated
Affiliates		  

Net operating revenues:

         

Net operating revenues before provision for doubtful accounts

    $ 327      $ 534      $ 290      $ 469   

Less: Provision for doubtful accounts

      (5 )      (14 )      (4 )      (11 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net operating revenues(1)

      322        520        286        458   

Equity in earnings of unconsolidated affiliates(2)

      28        —          28        —     

Operating expenses:

         

Salaries, wages and benefits

      104        127        91        110   

Supplies

      59        133        49        113   

Other operating expenses, net

      72        112        64        97   

Depreciation and amortization

      16        20        15        18   

Impairment and restructuring charges, and acquisition-related costs

      —          3        —          (4 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

      99        125        95        124   

Interest expense

      (34 )      (7 )      (30 )      (7 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income from continuing operations, before income taxes

      65        118        65        117   

Income tax benefit (expense)

      (13 )      (1 )      (13 )      (1 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income

      52      $ 117        52      $ 116   
    

 

 

      

 

 

  

Less: Net income attributable to noncontrolling interests

      41          39     
  

 

 

      

 

 

    

Net income attributable to Tenet Healthcare Corporation common shareholders

    $ 11        $ 13     
  

 

 

      

 

 

    

Equity in earnings of unconsolidated affiliates

      $ 28        $ 28   

 

(1) On a pro forma same-facility system-wide basis, net revenue in Tenet’s Ambulatory Care segment increased 6.9% during the three months ended June 30, 2015, with cases increasing 6.8% and revenue per case increasing 0.1%.
(2) At June 30, 2015, 155 of the 296 facilities in the Company’s newly formed 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 141 facilities and account for these investments as consolidated subsidiaries.

 

Page 18

TENET HEALTHCARE CORPORATION

STATEMENT OF OPERATIONS – AMBULATORY CARE SEGMENT

INCLUDING PRO FORMA USPI AND ASPEN FOR ALL PERIODS

(Unaudited)

 

     Six Months Ended June 30,  
     2015     2014  
     Ambulatory
Care as
Reported
Under
GAAP		     Unconsolidated
Affiliates		     Ambulatory
Care as
Reported
Under
GAAP		     Unconsolidated
Affiliates		  

Net operating revenues:

         

Net operating revenues before provision for doubtful accounts

    $ 627      $ 1,020      $ 552      $ 887   

Less: Provision for doubtful accounts

      (10 )      (26 )      (7 )      (22 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net operating revenues(1)

      617        994        545        865   

Equity in earnings of unconsolidated affiliates(2)

      49        —          46        —     

Operating expenses:

         

Salaries, wages and benefits

      202        247        178        216   

Supplies

      110        256        95        217   

Other operating expenses, net

      145        220        129        189   

Depreciation and amortization

      29        40        28        37   

Impairment and restructuring charges, and acquisition-related costs

      —          3        1        (6 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

      180        228        160        212   

Interest expense

      (68 )      (14 )      (60 )      (14 ) 

Other

      —          —          —          1   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income from continuing operations, before income taxes

      112        214        100        199   

Income tax expense

      (22 )      (3 )      (19 )      (4 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net Income

      90      $ 211        81      $ 195   
    

 

 

      

 

 

  

Less: Net income attributable to noncontrolling interests

      75          63     
  

 

 

      

 

 

    

Net income attributable to Tenet Healthcare Corporation common shareholders

    $ 15          18     
  

 

 

      

 

 

    

Equity in earnings of unconsolidated affiliates

      $ 49        $ 46   

 

(1) On a pro forma same-facility system-wide basis, net revenue in Tenet’s Ambulatory Care segment increased 8.2% during the six months ended June 30, 2015, with cases increasing 7.3% and revenue per case increasing 0.8%.
(2) At June 30, 2015, 155 of the 296 facilities in the Company’s newly formed 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 141 facilities and account for these investments as consolidated subsidiaries.

 

Page 19

(1) Reconciliation of Adjusted EBITDA

Adjusted EBITDA, a non-GAAP term, is defined by the Company as net income (loss) attributable to Tenet Healthcare Corporation common shareholders before (1) the cumulative effect of changes in accounting principle, net of tax; (2) net loss (income) attributable to noncontrolling interests; (3) preferred stock dividends; (4) income (loss) from discontinued operations, net of tax; (5) income tax benefit (expense); (6) investment earnings (loss); (7) gain (loss) from early extinguishment of debt; (8) net gain (loss) on sales of investments; (9) interest expense; (10) litigation and investigation benefit (costs), net of insurance recoveries; (11) hurricane insurance recoveries, net of costs; (12) impairment and restructuring charges and acquisition-related costs; and (13) depreciation and amortization. The Company’s Adjusted EBITDA may not be comparable to EBITDA reported by other companies.

The Company provides this information as a supplement to GAAP information to assist itself and investors in understanding the impact of various items on its financial statements, some of which are recurring or involve cash payments. The Company uses this information in its analysis of the performance of its business excluding items that it does not consider as relevant in the performance of its hospitals in continuing operations. In addition, from time to time we use this measure to define certain performance targets under our compensation programs. Adjusted EBITDA is not a measure of liquidity, but is a measure of operating performance that management uses in its business as an alternative to net income (loss) attributable to Tenet Healthcare Corporation common shareholders. Because Adjusted EBITDA excludes many items that are included in our financial statements, it does not provide a complete measure of our operating performance. Accordingly, investors are encouraged to use GAAP measures when evaluating the Company’s financial performance.

The reconciliation of net income (loss) attributable to Tenet Healthcare Corporation common shareholders, the most comparable GAAP term, to Adjusted EBITDA, is set forth in the first table below for the three and six months ended June 30, 2015 and 2014.

 

Page 20

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #1 – Reconciliation of Adjusted EBITDA to Net Loss Attributable to

Tenet Healthcare Corporation Common Shares

(Unaudited)

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2015     2014     2015     2014  

Net loss attributable to Tenet Healthcare Corporation common shareholders

    $ (61 )    $ (26 )    $ (14 )    $ (58 ) 

Less: Net loss attributable to noncontrolling interests

      (33 )      (19 )      (62 )      (35 ) 

Net loss from discontinued operations, net of tax

      (1 )      (16 )      —          (21 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from continuing operations

      (27 )      9        48        (2 ) 

Income tax benefit (expense)

      27        (8 )      11        (7 ) 

Investment expense

      (1 )      —          (1 )      —     

Interest expense

      (217 )      (190 )      (416 )      (372 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

      164        207        454        377   

Litigation and investigation costs

      (14 )      (12 )      (17 )      (15 ) 

Impairment and restructuring charges, and acquisition-related costs

      (193 )      (32 )      (222 )      (53 ) 

Depreciation and amortization

      (197 )      (209 )      (404 )      (402 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA

    $ 568      $ 460      $ 1,097      $ 847   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net operating revenues

    $ 4,492      $ 4,038      $ 8,916      $ 7,963   
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin)

      12.6 %      11.4 %      12.3 %      10.6 % 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #2 – Reconciliation of Adjusted Free Cash Flow

(Unaudited)

 

     Three Months Ended     Six Months Ended  
(Dollars in millions)    June 30,     June 30,  
     2015     2014     2015     2014  

Net cash provided by operating activities

    $ 410      $ 266      $ 353      $ 247   

Less:

         

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

      (53 )      (54 )      (86 )      (84 ) 

Net cash used in operating activities from discontinued operations

      (4 )      2        (8 )      (12 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted net cash provided by (used in) operating activities – continuing operations

      467        318        447        343   

Purchases of property and equipment – continuing operations

      (175 )      (242 )      (359 )      (523 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted free cash flow – continuing operations

    $ 292      $ 76      $ 88      $ (180 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

Page 21

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)    Q3 2015     2015  
     Low     High     Low     High  

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

    $ 3      $ 50      $ (14 )    $ 81   

Less: Net (income) attributable to noncontrolling interests

      (55 )      (65 )      (190 )      (210 ) 

Loss from discontinued operations, net of tax

      (2 )      —          (5 )      —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Income from continuing operations

      60      $ 115      $ 181      $ 291   

Income tax expense

      (25 )      (50 )      (40 )      (90 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income from continuing operations, before income taxes

      85      $ 165      $ 221      $ 381   

Interest expense, net

      (245 )      (235 )      (900 )      (880 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

      330      $ 400      $ 1,121      $ 1,261   

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

      —          —          (239 )      (239 ) 

Depreciation and amortization

      (220 )      (200 )      (865 )      (825 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA

    $ 550      $ 600      $ 2,225      $ 2,325   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net operating revenues

    $ 4,650      $ 4,850      $ 18,100      $ 18,500   
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin)

      11.8 %      12.4 %      12.3 %      12.6 % 

 

(a)  Company does not forecast impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements

 

Page 22

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)    Q3 2015     2015  
     Low     High     Low     High  

Adjusted EBITDA

    $ 550      $ 600      $ 2,225      $ 2,325   

Depreciation and amortization

      (220 )      (200 )      (865 )      (825 ) 

Interest expense, net

      (245 )      (235 )      (900 )      (880 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from continuing operations before income taxes

      85      $ 165      $ 460      $ 620   

Income tax (expense) benefit

      (25 )      (50 )      (135 )      (185 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Normalized income (loss) from continuing operations

      60      $ 115      $ 325      $ 435   

Net (income) attributable to noncontrolling interests

      (55 )      (65 )      (190 )      (210 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss) attributable to common shareholders

    $ 5      $ 50      $ 135      $ 225   
  

 

 

    

 

 

    

 

 

    

 

 

  

Fully diluted weighted average shares outstanding (in millions)

      102        102        102        102   

Normalized fully diluted earnings per share – continuing operations

    $ 0.05      $ 0.49      $ 1.32      $ 2.21   

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #5 – Reconciliation of Outlook Adjusted Free Cash Flow

for the Year Ending December 31, 2015

 

(Dollars in millions)    2015  
     Low     High  

Net cash provided by operating activities

    $ 1,119      $ 1,229   

Less:

     

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

      (86 )      (86 ) 

Net cash used in operating activities from discontinued operations

      (20 )      (10 ) 
  

 

 

    

 

 

  

Adjusted net cash provided by operating activities – continuing operations

    $ 1,225      $ 1,325   

Purchases of property and equipment – continuing operations

      (1,000 )      (900 ) 
  

 

 

    

 

 

  

Adjusted free cash flow – continuing operations

    $ 225      $ 425   
  

 

 

    

 

 

  

 

(a)  Company does not forecast impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements

 

Page 23