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DALLAS–()–Tenet Healthcare Corporation (Tenet) (NYSE: THC) today announced its results for the quarter ended December 31, 2019 (4Q19).

Our financial results for 2019 support the sustainable changes we have made across each of our operating segments,” said Ronald A. Rittenmeyer, Executive Chairman and Chief Executive Officer. “We closed the year with a very strong fourth quarter and believe our focus on our patients, our physicians and all stakeholders — supported by underlying enhancements to technology, a renewed dedication to customer service and a keen eye on administrative expenses — are driving our growth and positioning us well for 2020 and future years.”

Tenet’s results for 4Q19 versus the quarter ended December 31, 2018 (4Q18) and the year ended December 31, 2019 (FY 2019) versus the year ended December 31, 2018 (FY 2018) were as follows:

($ in millions, except per share results)

4Q19

4Q18

FY 2019

FY 2018

Net income (loss) from continuing operations attributable to Tenet common shareholders

$2

$(5)

$(243)

$108

Net income (loss) from continuing operations attributable to Tenet common shareholders per diluted share

$0.02

$(0.05)

$(2.35)

$1.04

Adjusted EBITDA

$805

$684

$2,706

$2,560

Adjusted diluted earnings per share from continuing operations

$0.99

$0.51

$2.68

$1.86

The table above as well as tables and discussions throughout this earnings release include certain financial measures that are not in accordance with Generally Accepted Accounting Principles (GAAP). Reconciliations of GAAP measures to the Adjusted (non-GAAP) measures used are detailed in Tables #1-6 included at the end of this earnings release. Management’s reasoning for the use of these non-GAAP measures and descriptions of the various non-GAAP measures are included in the Non-GAAP Financial Measures section of this earnings release.

Results from Continuing Operations Attributable to Tenet Common Shareholders

  • Net income from continuing operations attributable to its common shareholders was $2 million, or $0.02 per diluted share, in 4Q19 versus a net loss from continuing operations of $5 million, or $0.05 per diluted share in 4Q18. The $7 million year-over-year increase was driven primarily by higher net operating revenues associated with increased patient volumes and the beneficial effect of the Company’s continuing cost reduction initiatives.
  • For FY 2019, the net loss from continuing operations attributable to the Company’s common shareholders of $243 million, or $2.35 per diluted share, was primarily driven by the $227 million pretax loss, or $2.16 per diluted share, associated with debt refinancings as well as impairment and restructuring charges and acquisition-related costs of $185 million, or $1.76 per diluted share. The debt refinancings will reduce future annual cash interest payments and retired all significant debt maturities until April 2022. Net income from continuing operations was $108 million, or $1.04 per diluted share for FY 2018.

Adjusted Results from Continuing Operations Attributable to Tenet Common Shareholders

Reconciliations of net income available (loss attributable) to Tenet common shareholders to Adjusted net income from continuing operations available to Tenet’s common shareholders are contained in Table #1 at the end of this release.

  • Tenet’s 4Q19 Adjusted net income from continuing operations available to its common shareholders rose to $105 million, or $0.99 per diluted share, compared to $53 million or $0.51 per diluted share, in 4Q18. The $52 million, or 98.1 percent, increase was primarily driven by operational improvements in each of the Company’s business segments.
  • For FY 2019, Tenet reported Adjusted net income from continuing operations available to its common shareholders of $281 million, or $2.68 per diluted share, compared to $193 million, or $1.86 per diluted share, in FY 2018 also primarily driven by operational improvements in each of the business segments, partially offset by a $35 million year-over-year increase in expense associated with the change in the U.S. Treasury rate used to discount the Company’s actuarial liabilities. FY 2019 results were achieved despite lower-than-anticipated revenue and additional expenses related to Hurricane Dorian and an increase in contract labor costs associated with a strike by union nurses at certain of the Company’s hospitals during the third quarter of 2019.

Adjusted EBITDA

Reconciliations of net income available (loss attributable) to Tenet common shareholders to Adjusted EBITDA are contained in Table #2 at the end of this release.

  • Adjusted EBITDA was $805 million in 4Q19 compared to $684 million in 4Q18, an increase of $121 million, or 17.7 percent. This year-over-year improvement was primarily due to higher patient volumes as well as the beneficial effect of savings associated with the Company’s cost reduction initiatives. Changes in the U.S. Treasury rate described above favorably impacted 4Q19 by decreasing malpractice and workers’ compensation expense by $6 million in 4Q19 versus increasing that expense by $10 million in 4Q18.
  • For FY 2019, Adjusted EBITDA was $2.706 billion compared to $2.560 billion in FY 2018, an increase of $146 million, or 5.7 percent. This growth in Adjusted EBITDA was driven primarily by the same factors impacting the 4Q19 year-over-year results noted above, partially offset by a $35 million year-over-year increase in expense associated with the change in the U.S. Treasury rate. Additionally, FY 2019 results were achieved even with the challenges associated with Hurricane Dorian and the increase in contract labor costs described above

Hospital Operations and Other Segment Results

Tenet’s Hospital Operations and other business segment is comprised of acute care and specialty hospitals, ancillary outpatient facilities, freestanding urgent care centers (nearly all which are managed by USPI and operated under the MedPost brand), micro-hospitals and physician practices.

Hospital Operations and other segment results ($ in millions)

4Q19

4Q18

FY 2019

FY 2018

Net operating revenues

$3,983

$3,843

$15,522

$15,285

Same-hospital net patient services revenues (a)

$3,673

$3,490

$14,339

$13,707

Adjusted EBITDA

$407

$352

$1,425

$1,411

Admissions growth

2.6%

(2.7)%

2.3%

(1.7)%

Adjusted Admissions growth (b)

1.9%

(0.8)%

1.9%

0.0%

(a)

Same-hospital revenues and statistical data include those for the 65 hospitals operated by the Company’s Hospital Operations and other segment continuously from January 1, 2018 through December 31, 2019. Revenues and results for any hospitals acquired or disposed of during this time frame are excluded.

(b)

Adjusted admissions are hospital admissions adjusted to include outpatient admissions by multiplying actual patient admissions by the sum of gross inpatient revenues and outpatient revenues, then dividing that result by gross inpatient revenues.

Revenues and Volumes

  • Net operating revenues in the Hospital Operations and other segment were $3.983 billion in 4Q19, up 3.6 percent from $3.843 billion in 4Q18. The increase in revenue was primarily due to revenue growth on a same-hospital basis, partially offset by hospital divestitures. Revenues included $59 million from the California Provider Fee program in 4Q19 compared to $64 million in 4Q18.
  • For FY 2019, segment net operating revenues were $15.522 billion, up 1.6 percent, versus $15.285 billion in FY 2018. Revenues included $246 million from the California Provider Fee program in FY 2019 compared to $262 million in FY 2018.
  • On a same-hospital basis, net patient service revenues were $3.673 billion in 4Q19, up 5.2 percent from $3.490 billion in 4Q18. Admissions increased 2.6 percent on a same-hospital basis, adjusted admissions increased 1.9 percent and revenue per adjusted admission increased 3.2 percent. Hospital surgeries grew slightly at 0.2 percent, and increased 3.5 percent including surgeries performed at United Surgical Partners International (USPI) facilities located in the Company’s hospital markets.
  • For FY 2019, on a same-hospital basis, net patient service revenues were $14.339 billion, up 4.6 percent versus $13.707 billion in FY 2018. Admissions increased 2.3 percent on a same-hospital basis in FY 2019, adjusted admissions increased 1.9 percent and revenue per adjusted admission increased 2.7 percent. Hospital surgeries declined 0.7 percent, and increased 1.5 percent including surgeries performed at USPI facilities located in the Company’s hospital markets.

Operating Expenses

  • Selected operating expenses in the segment increased 3.2 percent on a per adjusted admission basis in 4Q19. Selected operating expenses include salaries, wages and benefits, supplies and other operating expenses.
  • For FY 2019, selected operating expenses increased 3.3 percent on a per adjusted admission basis.

Earnings

  • Adjusted EBITDA in the segment was $407 million in 4Q19, an increase of 15.6 percent compared to $352 million in 4Q18. The Adjusted EBITDA margin was 10.2 percent in 4Q19 compared to 9.2 percent in 4Q18.
  • For FY 2019, Adjusted EBITDA was $1.425 billion compared to $1.411 billion in FY 2018. The Adjusted EBITDA margin was 9.2 percent in both FY 2019 and FY 2018.

Ambulatory Care Segment Results

Tenet’s Ambulatory Care business segment is comprised of the operations of USPI. As of December 31, 2019, USPI had interests in 260 ambulatory surgery centers, 39 urgent care centers (nearly all of which operate under the CareSpot brand), 23 imaging centers and 24 surgical hospitals in 27 states. The Company owns 95 percent of USPI.

Ambulatory Care segment results

($ in millions)

4Q19

4Q18

FY 2019

FY 2018

Net operating revenues

$632

$554

$2,158

$2,085

Same-facility system-wide net patient services revenues (c)

$1,317

$1,226

$4,546

$4,286

Adjusted EBITDA

$304

$245

$895

$792

Adjusted EBITDA less facility-level NCI; excludes Aspen for FY 2018

$190

$151

$568

$488

Surgical cases growth

3.4%

1.1%

3.3%

2.1%

Total ambulatory cases growth

5.7%

0.9%

3.7%

3.4%

(c)

Same-facility system-wide revenues and statistical information include the results of many of the facilities in which the Ambulatory Care segment has an investment that are not consolidated by Tenet (of the 346 facilities at December 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.

Revenues and Volumes

  • The Ambulatory Care segment produced net operating revenues of $632 million in 4Q19, an increase of 14.1 percent compared to $554 million in 4Q18.
  • For FY 2019, segment net operating revenues of $2.158 billion increased 3.5 percent compared to $2.085 billion in FY 2018. This year-over-year increase was achieved despite the divestiture of Aspen (the Company’s former business in the United Kingdom), which was completed in the third quarter of FY 2018. Aspen generated $117 million of revenues in FY 2018.
  • On a same-facility system-wide basis, revenues increased 6.1 percent in FY 2019, with cases increasing 3.7 percent and revenue per case increasing 2.2 percent. In the surgical business, which represents the majority of segment revenues, same-facility system-wide revenues grew 6.0 percent in FY 2019, with cases up 3.3 percent and revenue per case up 2.6 percent.

Earnings

  • Segment Adjusted EBITDA of $304 million in 4Q19, was up 24.1 percent from $245 million in 4Q18; Adjusted EBITDA less facility-level non-controlling interest (NCI) was $190 million, up 25.8 percent from $151 million in 4Q18.
  • For FY 2019, the segment generated Adjusted EBITDA of $895 million in FY 2019, up 13.0 percent from $792 million in FY 2018, or growth of 15.3 percent excluding Aspen’s $16 million of Adjusted EBITDA in FY 2018. Adjusted EBITDA less facility-level NCI was $568 million, up 12.7 percent from $504 million in FY 2018, or growth of 16.4 percent excluding Aspen in FY 2018.

Conifer Segment Results

Tenet’s Conifer business segment provides healthcare business process services in the areas of hospital and physician revenue cycle management as well as value-based care solutions to healthcare systems, individual hospitals, physician practices, self-insured organizations, healthcare plans and other entities.

Conifer segment results

($ in millions)

4Q19

4Q18

FY 2019

FY 2018

Net operating revenues

$332

$372

$1,372

$1,533

Adjusted EBITDA

$94

$87

$386

$357

As previously announced, the Company anticipates a spin-off of its Conifer segment by the end of the second quarter of 2021. This transaction is expected to both enhance shareholder value and reduce the level of debt on Tenet through a tax-free debt-for-debt exchange.

Revenues

  • During 4Q19, Conifer segment revenues declined 10.8 percent to $332 million, from $372 million in 4Q18, primarily due to client attrition as a result of hospital divestitures by both Tenet and other customers. Revenues from third-party customers declined 14.0 percent to $191 million in 4Q19.
  • During FY 2019, Conifer’s revenues declined 10.5 percent to $1.372 billion, from $1.533 billion in FY 2018 primarily due to the same factor impacting 4Q19 revenues. Revenue from third-party customers declined 15.3 percent to $799 million in FY 2019.

Earnings

  • Conifer generated $94 million of Adjusted EBITDA in 4Q19, up 8.0 percent from $87 million in 4Q18. Adjusted EBITDA margins increased 490 basis points to 28.3 percent primarily due to the Company’s continuing cost-reduction initiatives.
  • Conifer generated $386 million of Adjusted EBITDA in FY 2019, up 8.1 percent from $357 million in FY 2018. Adjusted EBITDA margins increased 480 basis points to 28.1 percent.

Cash Flows and Liquidity

Balance Sheet

  • Cash and cash equivalents were $262 million at December 31, 2019 compared to $314 million at September 30, 2019.
  • Accounts receivable days outstanding from continuing operations were 58.4 at December 31, 2019 a decrease of 1.2 days from 59.6 at September 30, 2019.
  • The Company had no outstanding borrowings on its $1.5 billion credit line as of December 31, 2019.
  • Total debt at December 31, 2019 of $14.751 billion was down from both December 31, 2018 ($14.826 billion) and September 30, 2019 ($15.023 billion). Similarly, the Company’s ratio of net debt (debt less cash and cash equivalents) to Adjusted EBITDA declined to 5.35x at December 31, 2019 versus 5.63x at December 31, 2018 and 5.69x at September 30, 2019.

Cash flows

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.

  • Net cash provided by operating activities was $1.233 billion in FY 2019, an increase of 17.5 percent, compared to $1.049 billion in FY 2018.
  • After subtracting $670 million and $617 million of capital expenditures in FY 2019 and FY 2018, respectively, Free Cash Flow was $563 million in FY 2019, an increase of 30.3 percent, compared to Free Cash Flow of $432 million in FY 2018.
  • Adjusted Free Cash Flow was $760 million in FY 2019, representing an increase of 26.7 percent, from $600 million of Adjusted Free Cash Flow in FY 2018.
  • Net cash used in investing activities was $619 million in FY 2019 compared to $115 million of net cash used in FY 2018. Results in FY 2019 included $162 million of proceeds from the sales of facilities, marketable securities, long-term investments and other assets compared to $742 million in FY 2018.
  • Net cash used in financing activities was $763 million in FY 2019 compared to $1.134 billion used in financing activities in FY 2018. The Company invested $630 million in cash to increase its ownership in USPI from 80 percent to 95 percent during FY 2018.

Company Outlook

  • Reconciliations of Outlook net income available (loss attributable) to Tenet common shareholders to Outlook Adjusted EBITDA for the year ending December 31, 2020 (FY 2020) and the quarter ending March 31, 2020 (1Q20) are contained in Table #4 at the end of this release.
  • Reconciliations of Outlook net income available (loss attributable) to Tenet common shareholders to Outlook Adjusted net income from continuing operations to common shareholders for FY 2020 and 1Q20 are contained in Table #5 at the end of this release.
  • Reconciliations of Outlook net cash provided by operating activities to Outlook Adjusted free cash flow from continuing operations for FY 2020 and 1Q20 are contained in Table #6 at the end of this release.

Tenet’s Outlook for FY 2020 and for 1Q20 on a consolidated basis and by segment follows:

CONSOLIDATED ($ in millions except per share amounts)

FY 2020 Outlook

1Q20 Outlook

Net operating revenues; includes CA Provider Fee revenues of approx. $239 million for FY 2020 and approx. $60 million for 1Q20

$19,100 to $19,500

$4,600 to $4,800

Net income (loss) from continuing operations attributable to Tenet common stockholders

$130 to $245

$(7) to $37

Adjusted EBITDA

$2,785 to $2,885

$625 to $675

Adjusted EBITDA margin

14.6% to 14.8%

13.6% to 14.1%

Diluted income (loss) per common share from continuing operations

$1.23 to $2.31

$(0.07) to $0.35

Adjusted net income from continuing operations

$285 to $355

$45 to $80

Adjusted diluted earnings per share from continuing operations

$2.69 to $3.35

$0.42 to $0.75

Equity in earnings of unconsolidated affiliates

$180 to $200

$30 to $40

Depreciation and amortization

$845 to $865

$205 to $215

Interest expense

$975 to $985

$240 to $250

Net income available to NCI

$450 to $470

$90 to $100

Weighted average diluted common shares

~ 106 million

~106 million

Effective tax rate (d)

22% to 23%

 

Net cash provided by operating activities

$1,250 to $1,525

 

Adjusted net cash provided by operating activities

$1,475 to $1,725

 

Capital expenditures

$700 to $750

 

Adjusted free cash flow

$775 to $975

 

NCI cash distributions

$350 to $370

 

(d)

The effective tax rate is calculated as income tax expense divided by the adjusted pretax income. Income tax expense is calculated by multiplying the corporate tax rate by the sum of: adjusted pretax income less GAAP NCI expense plus permanent differences, non-deductible interest, and non-cash NCI expense related to portion of USPI the Company does not own.

Hospital Operations and Other Segment ($ in millions)

FY 2020 Outlook

Comments

Net operating revenues

$15,965 to $16,215

Prior to intercompany eliminations of approx. $565 million for Conifer

Adjusted EBITDA

$1,430 to $1,490

 

NCI

~$10

Based on GAAP NCI expense

Net revenues growth

2.9% to 4.5%

 

Adjusted EBITDA growth

0.4% to 4.6%

 

Admissions growth

1.5% to 2.5%

On a same-hospital basis

Adjusted admissions growth

1.5% to 2.5%

On a same-hospital basis

Net revenues per adjusted admission growth

1.5% to 2.5%

On a same-hospital basis

Total costs per adjusted admission growth

2.5% to 3.5%

 

Ambulatory Care Segment ($ in millions)

FY 2020 Outlook

Comments

Net operating revenues

$2,350 to $2,450

 

Net revenues growth

8.9% to 13.5%

 

Adjusted EBITDA

$970 to $1,000

 

Adjusted EBITDA growth

8.4% to 11.7%

 

NCI

$365 to $385

Based on GAAP NCI expense

Adjusted EBITDA less NCI growth

9.2% to 10.9%

Facility-level NCI expense

Surgical cases growth

3.0% to 3.5%

On a same-facility system-wide basis; excludes non-surgical services

Net revenues per surgical case growth

2.0% to 2.5%

On a same-facility system-wide basis; excludes non-surgical services

Conifer Segment ($ in millions)

FY 2020 Outlook

Comments

Net operating revenues

$1,350 to $1,400

 

Adjusted EBITDA

$385 to $395

 

NCI

~$75

Based on GAAP NCI expense; no cash distributions to be made

Net revenues growth

(1.6%) to 2.0%

 

Adjusted EBITDA growth

(0.3%) to 2.3%

 

Management’s Webcast Discussion of Results and Outlook

Tenet management will discuss the Company’s 4Q19 and FY 2019 results, as well as the Company’s Outlook for FY 2020, on a webcast scheduled for 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on February 25, 2020. Investors can access the webcast through the Company’s website at www.tenethealth.com/investors.

The slide presentation associated with the webcast referenced above, a copy of this earnings press release and a supplemental financial disclosure document will be available on the Company’s Investor Relations website.

Cautionary Statement

This release contains “forward-looking statements” – that is, statements that relate to future, not past, events. In this context, forward-looking statements often address the Company’s 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 the Company’s actual results to be materially different than those expressed in the Company’s 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, 2019 and other filings with the Securities and Exchange Commission.

About Tenet Healthcare

Tenet Healthcare Corporation (NYSE: THC) is a diversified healthcare services company headquartered in Dallas with 113,000 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 care sites and clinics. 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. Across the Tenet enterprise, we are united by our mission to deliver quality, compassionate care in the communities we serve. For more information, please visit www.tenethealth.com.

Non-GAAP Financial Measures

  • Adjusted EBITDA, a non-GAAP measure, is defined by the Company as net income available (loss attributable) to Tenet common shareholders before (1) the cumulative effect of changes in accounting principles, (2) net loss attributable (income available) to noncontrolling interests, (3) income (loss) from discontinued operations, (4) income tax expense (benefit), (5) gain (loss) from early extinguishment of debt, (6) other non-operating income (expense), net, (7) interest expense, (8) litigation and investigation (costs) benefits, net of reinsurance 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 and closed businesses. Litigation and investigation costs excluded do not include ordinary course of business malpractice and other litigation and related expenses.
  • Adjusted diluted earnings (loss) per share from continuing operations per share, a non-GAAP measure, is defined by the Company as Adjusted net income available (loss attributable) from continuing operations to Tenet common shareholders, divided by the weighted average primary or diluted shares outstanding in the reporting period.
  • Adjusted net income (loss attributable) from continuing operations to Tenet common shareholders, a non-GAAP measure, is defined by the Company as net income available (loss attributable) to Tenet common shareholders before (1) income (loss) from discontinued operations, (2) gain (loss) from early extinguishment of debt, (3) litigation and investigation (costs) benefits, net of reinsurance recoveries, (4) net gains (losses) on sales, consolidation and deconsolidation of facilities, (5) impairment and restructuring charges and acquisition-related costs, (6) income (loss) from divested and closed businesses and (7) the associated impact of these items on taxes and noncontrolling interests. Litigation and investigation costs excluded do not include ordinary course of business malpractice and other litigation and related expenses.
  • 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 for 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 settlement, and (2) net cash provided (used in) operating activities for 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 use similar non-GAAP financial measures in their presentations and earnings releases. 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.

The Company uses, and believes investors use, Free Cash Flow and Adjusted Free Cash Flow as supplemental non-GAAP measures to analyze cash flows generated from the Company’s operations. The Company believes these measures are useful to investors in evaluating its ability to fund distributions paid to noncontrolling interests or for 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 the Company’s financial statements, they do not provide a complete measure of the Company’s 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.

 

Tenet Healthcare Corporation

Financial Statements and Reconciliations

4Q19 Earnings Release

 

Table of Contents

Description

Page

Consolidated Statements of Operations – quarters

13

Consolidated Statements of Operations – years

14

Consolidated Balance Sheets

15

Consolidated Statements of Cash Flows

16

Segment Reporting

17

Table #1 – Reconciliations of Net Income to Adjusted Net Income

18

Table #2 – Reconciliations of Net Income to Adjusted EBITDA

20

Table #3 – Reconciliations of Net Cash Provided by Operating Activities to Free Cash Flow and Adjusted Free Cash Flow

22

Table #4 – Reconciliations of Outlook Net Income to Outlook Adjusted EBITDA

23

Table #5 – Reconciliations of Outlook Net Income to Outlook Adjusted Net Income

24

Table #6 – Reconciliations of Outlook Net Cash Provided by Operating Activities to Outlook Free Cash Flow and Outlook Adjusted Free Cash Flow

24

 

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

(Dollars in millions except per share amounts)

 

Three Months Ended December 31,

 

 

2019

 

%

 

2018

 

%

 

Change

Net operating revenues

 

$

4,806

 

 

100.0

%

 

$

4,619

 

 

100.0

%

 

4.0

%

Equity in earnings of unconsolidated affiliates

 

61

 

 

1.3

%

 

53

 

 

1.1

%

 

15.1

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

2,229

 

 

46.4

%

 

2,156

 

 

46.7

%

 

3.4

%

Supplies

 

803

 

 

16.7

%

 

756

 

 

16.4

%

 

6.2

%

Other operating expenses, net

 

1,030

 

 

21.5

%

 

1,076

 

 

23.3

%

 

(4.3

)%

Depreciation and amortization

 

223

 

 

4.6

%

 

200

 

 

4.3

%

 

 

Impairment and restructuring charges, and acquisition-related costs

 

84

 

 

1.7

%

 

86

 

 

1.9

%

 

 

Litigation and investigation costs

 

26

 

 

0.5

%

 

10

 

 

0.2

%

 

 

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

 

12

 

 

0.3

%

 

(16

)

 

(0.4

)%

 

 

Operating income

 

460

 

 

9.6

%

 

404

 

 

8.7

%

 

 

Interest expense

 

(243

)

 

 

 

(246

)

 

 

 

 

Other non-operating expense, net

 

(2

)

 

 

 

(3

)

 

 

 

 

Gain from early extinguishment of debt

 

 

 

 

 

3

 

 

 

 

 

Income from continuing operations, before income taxes

 

215

 

 

 

 

158

 

 

 

 

 

Income tax expense

 

(86

)

 

 

 

(56

)

 

 

 

 

Income from continuing operations, before discontinued operations

 

129

 

 

 

 

102

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

Income from operations

 

2

 

 

 

 

1

 

 

 

 

 

Income tax expense

 

(2

)

 

 

 

(1

)

 

 

 

 

Income (loss) from discontinued operations

 

 

 

 

 

 

 

 

 

 

Net income

 

129

 

 

 

 

102

 

 

 

 

 

Less: Net income available to noncontrolling interests

 

127

 

 

 

 

107

 

 

 

 

 

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

 

$

2

 

 

 

 

$

(5

)

 

 

 

 

Amounts available (attributable) to Tenet Healthcare Corporation common shareholders

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

$

2

 

 

 

 

$

(5

)

 

 

 

 

Income (loss) from discontinued operations, net of tax

 

 

 

 

 

 

 

 

 

 

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

 

$

2

 

 

 

 

$

(5

)

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.02

 

 

 

 

$

(0.05

)

 

 

 

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

$

0.02

 

 

 

 

$

(0.05

)

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.02

 

 

 

 

$

(0.05

)

 

 

 

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

$

0.02

 

 

 

 

$

(0.05

)

 

 

 

 

Weighted average shares and dilutive securities outstanding

(in thousands):

 

 

 

 

 

 

 

 

 

 

Basic

 

104,048

 

 

 

 

102,501

 

 

 

 

Diluted*

 

105,666

 

 

 

 

102,501

 

 

 

 

*

Had the Company generated income from continuing operations in the three months ended December 31, 2018, the effect of employee stock options, restricted stock units and deferred compensation units on the diluted shares calculation would have been an increase of 1,617 thousand shares.

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

(Dollars in millions except per share amounts)

 

Years Ended December 31,

 

 

2019

 

%

 

2018

 

%

 

Change

Net operating revenues

 

$

18,479

 

 

100.0

%

 

$

18,313

 

 

100.0

%

 

0.9

%

Equity in earnings of unconsolidated affiliates

 

175

 

 

0.9

%

 

150

 

 

0.8

%

 

16.7

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

8,704

 

 

47.1

%

 

8,634

 

 

47.1

%

 

0.8

%

Supplies

 

3,057

 

 

16.5

%

 

3,004

 

 

16.4

%

 

1.8

%

Other operating expenses, net

 

4,189

 

 

22.6

%

 

4,256

 

 

23.3

%

 

(1.6

)%

Depreciation and amortization

 

850

 

 

4.6

%

 

802

 

 

4.4

%

 

 

Impairment and restructuring charges, and acquisition-related costs

 

185

 

 

1.0

%

 

209

 

 

1.1

%

 

 

Litigation and investigation costs

 

141

 

 

0.8

%

 

38

 

 

0.2

%

 

 

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

 

15

 

 

0.1

%

 

(127

)

 

(0.7

)%

 

 

Operating income

 

1,513

 

 

8.2

%

 

1,647

 

 

9.0

%

 

 

Interest expense

 

(985

)

 

 

 

(1,004

)

 

 

 

 

Other non-operating expense, net

 

(5

)

 

 

 

(5

)

 

 

 

 

Gain (loss) from early extinguishment of debt

 

(227

)

 

 

 

1

 

 

 

 

 

Income from continuing operations, before income taxes

 

296

 

 

 

 

639

 

 

 

 

 

Income tax expense

 

(153

)

 

 

 

(176

)

 

 

 

 

Income from continuing operations, before discontinued operations

 

143

 

 

 

 

463

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

Income from operations

 

15

 

 

 

 

4

 

 

 

 

 

Income tax expense

 

(4

)

 

 

 

(1

)

 

 

 

 

Income from discontinued operations

 

11

 

 

 

 

3

 

 

 

 

 

Net income

 

154

 

 

 

 

466

 

 

 

 

 

Less: Net income available to noncontrolling interests

 

386

 

 

 

 

355

 

 

 

 

 

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

 

$

(232

)

 

 

 

$

111

 

 

 

 

 

Amounts available (attributable) to Tenet Healthcare Corporation common shareholders

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

$

(243

)

 

 

 

$

108

 

 

 

 

 

Income from discontinued operations, net of tax

 

11

 

 

 

 

3

 

 

 

 

 

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

 

$

(232

)

 

 

 

$

111

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(2.35

)

 

 

 

$

1.06

 

 

 

 

 

Discontinued operations

 

0.11

 

 

 

 

0.03

 

 

 

 

 

 

 

$

(2.24

)

 

 

 

$

1.09

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(2.35

)

 

 

 

$

1.04

 

 

 

 

 

Discontinued operations

 

0.11

 

 

 

 

0.03

 

 

 

 

 

 

 

$

(2.24

)

 

 

 

$

1.07

 

 

 

 

 

Weighted average shares and dilutive securities outstanding

(in thousands):

 

 

 

 

 

 

 

 

 

 

Basic

 

103,398

 

 

 

 

102,110

 

 

 

 

Diluted*

 

103,398

 

 

 

 

103,881

 

 

 

 

*

Had the Company generated income from continuing operations in the twelve months ended December 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 1,457 thousand shares.

TENET HEALTHCARE CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

December 31,

 

December 31,

(Dollars in millions)

 

2019

 

2018

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

262

 

 

$

411

 

Accounts receivable

 

2,743

 

 

2,595

 

Inventories of supplies, at cost

 

310

 

 

305

 

Income tax receivable

 

10

 

 

21

 

Assets held for sale

 

387

 

 

107

 

Other current assets

 

1,369

 

 

1,197

 

Total current assets

 

5,081

 

 

4,636

 

Investments and other assets

 

2,369

 

 

1,456

 

Deferred income taxes

 

169

 

 

312

 

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

 

6,878

 

 

6,993

 

Goodwill

 

7,252

 

 

7,281

 

Other intangible assets, at cost, less accumulated amortization

 

1,602

 

 

1,731

 

Total assets

 

$

23,351

 

 

$

22,409

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt

 

$

171

 

 

$

182

 

Accounts payable

 

1,204

 

 

1,207

 

Accrued compensation and benefits

 

877

 

 

838

 

Professional and general liability reserves

 

330

 

 

216

 

Accrued interest payable

 

245

 

 

240

 

Liabilities held for sale

 

44

 

 

43

 

Other current liabilities

 

1,334

 

 

1,131

 

Total current liabilities

 

4,205

 

 

3,857

 

Long-term debt, net of current portion

 

14,580

 

 

14,644

 

Professional and general liability reserves

 

585

 

 

666

 

Defined benefit plan obligations

 

560

 

 

521

 

Deferred income taxes

 

27

 

 

36

 

Other long-term liabilities

 

1,405

 

 

578

 

Total liabilities

 

21,362

 

 

20,302

 

Commitments and contingencies

 

 

 

 

Redeemable noncontrolling interests in equity of consolidated subsidiaries

 

1,506

 

 

1,420

 

Equity:

 

 

 

 

Shareholders’ equity:

 

 

 

 

Common stock

 

7

 

 

7

 

Additional paid-in capital

 

4,760

 

 

4,747

 

Accumulated other comprehensive loss

 

(257

)

 

(223

)

Accumulated deficit

 

(2,467

)

 

(2,236

)

Common stock in treasury, at cost

 

(2,414

)

 

(2,414

)

Total shareholders’ deficit

 

(371

)

 

(119

)

Noncontrolling interests

 

854

 

 

806

 

Total equity

 

483

 

 

687

 

Total liabilities and equity

 

$

23,351

 

 

$

22,409

 

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

 

 

 

Years Ended

(Dollars in millions)

 

December 31,

 

 

2019

 

2018

Net income

 

$

154

 

 

$

466

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

850

 

 

802

 

Deferred income tax expense

 

137

 

 

150

 

Stock-based compensation expense

 

42

 

 

46

 

Impairment and restructuring charges, and acquisition-related costs

 

185

 

 

209

 

Litigation and investigation costs

 

141

 

 

38

 

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

 

15

 

 

(127

)

Loss (gain) from early extinguishment of debt

 

227

 

 

(1

)

Equity in earnings of unconsolidated affiliates, net of distributions received

 

(32

)

 

(12

)

Amortization of debt discount and debt issuance costs

 

35

 

 

45

 

Pre-tax income from discontinued operations

 

(15

)

 

(4

)

Other items, net

 

(15

)

 

(21

)

Changes in cash from operating assets and liabilities:

 

 

 

 

Accounts receivable

 

(247

)

 

(134

)

Inventories and other current assets

 

(94

)

 

17

 

Income taxes

 

8

 

 

(3

)

Accounts payable, accrued expenses and other current liabilities

 

36

 

 

(152

)

Other long-term liabilities

 

3

 

 

(102

)

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

 

(192

)

 

(163

)

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

 

(5

)

 

(5

)

Net cash provided by operating activities

 

1,233

 

 

1,049

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment — continuing operations

 

(670

)

 

(617

)

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

 

(25

)

 

(113

)

Proceeds from sales of facilities and other assets — continuing operations

 

63

 

 

543

 

Proceeds from sales of facilities and other assets — discontinued operations

 

17

 

 

 

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

 

82

 

 

199

 

Purchases of marketable securities and equity investments

 

(62

)

 

(148

)

Other long-term assets

 

(24

)

 

15

 

Other items, net

 

 

 

6

 

Net cash used in investing activities

 

(619

)

 

(115

)

Cash flows from financing activities:

 

 

 

 

Repayments of borrowings under credit facility

 

(2,640

)

 

(950

)

Proceeds from borrowings under credit facility

 

2,640

 

 

950

 

Repayments of other borrowings

 

(6,131

)

 

(312

)

Proceeds from other borrowings

 

5,719

 

 

23

 

Debt issuance costs

 

(70

)

 

 

Distributions paid to noncontrolling interests

 

(307

)

 

(288

)

Proceeds from sale of noncontrolling interests

 

21

 

 

20

 

Purchases of noncontrolling interests

 

(11

)

 

(647

)

Proceeds from exercise of stock options and employee stock purchase plan

 

12

 

 

16

 

Other items, net

 

4

 

 

54

 

Net cash used in financing activities

 

(763

)

 

(1,134

)

Net decrease in cash and cash equivalents

 

(149

)

 

(200

)

Cash and cash equivalents at beginning of period

 

411

 

 

611

 

Cash and cash equivalents at end of period

 

$

262

 

 

$

411

 

Supplemental disclosures:

 

 

 

 

Interest paid, net of capitalized interest

 

$

(946

)

 

$

(976

)

Income tax payments, net

 

$

(12

)

 

$

(25

)

TENET HEALTHCARE CORPORATION

SEGMENT REPORTING

(Unaudited)

 

(Dollars in millions)

 

Three Months Ended

 

Years Ended

 

 

December 31,

 

December 31,

 

 

2019

 

2018

 

2019

 

2018

Net operating revenues:

 

 

 

 

 

 

 

 

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

 

$

3,983

 

 

$

3,843

 

 

$

15,522

 

 

$

15,285

 

Ambulatory Care

 

632

 

 

554

 

 

2,158

 

 

2,085

 

Conifer

 

 

 

 

 

 

 

 

Tenet

 

141

 

 

150

 

 

573

 

 

590

 

Other clients

 

191

 

 

222

 

 

799

 

 

943

 

Total Conifer revenues

 

332

 

 

372

 

 

1,372

 

 

1,533

 

Inter-segment eliminations

 

(141

)

 

(150

)

 

(573

)

 

(590

)

Total

 

$

4,806

 

 

$

4,619

 

 

$

18,479

 

 

$

18,313

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates:

 

 

 

 

 

 

 

 

Hospital Operations and other

 

$

3

 

 

$

4

 

 

$

15

 

 

$

10

 

Ambulatory Care

 

58

 

 

49

 

 

160

 

 

140

 

Total

 

$

61

 

 

$

53

 

 

$

175

 

 

$

150

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA:

 

 

 

 

 

 

 

 

Hospital Operations and other(2)

 

$

407

 

 

$

352

 

 

$

1,425

 

 

$

1,411

 

Ambulatory Care

 

304

 

 

245

 

 

895

 

 

792

 

Conifer

 

94

 

 

87

 

 

386

 

 

357

 

Total

 

$

805

 

 

$

684

 

 

$

2,706

 

 

$

2,560

 

 

 

 

 

 

 

 

 

 

Capital expenditures:

 

 

 

 

 

 

 

 

Hospital Operations and other

 

$

149

 

 

$

184

 

 

$

572

 

 

$

527

 

Ambulatory Care

 

18

 

 

22

 

 

75

 

 

68

 

Conifer

 

11

 

 

7

 

 

23

 

 

22

 

Total

 

$

178

 

 

$

213

 

 

$

670

 

 

$

617

 

(1)

Hospital Operations and other revenues includes health plan revenues of $1 million and $14 million for the twelve months ended December 31, 2019 and 2018, respectively.

(2)

Hospital Operations and other Adjusted EBITDA excludes health plan EBITDA of $(2) million and $9 million for the twelve months ended December 31, 2019 and 2018, respectively.

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 Net Income Available from Continuing Operations to Common Shareholders for 2019

(Unaudited)

 

(Dollars in millions except per share amounts)

 

2019

 

 

 

4th Qtr

 

Full Year

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

 

 

$

2

 

 

$

(232

)

Net income from discontinued operations

 

 

 

 

11

 

Net income (loss) from continuing operations

 

 

2

 

 

(243

)

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

 

 

(84

)

 

(185

)

Litigation and investigation costs

 

 

(26

)

 

(141

)

Net losses on sales, consolidation and deconsolidation of facilities

 

 

(12

)

 

(15

)

Loss from early extinguishment of debt

 

 

 

 

(227

)

Loss from divested and closed businesses

 

 

 

 

(2

)

Noncontrolling interest impact

 

 

 

 

4

 

Tax impact of above items

 

 

19

 

 

42

 

Adjusted net income available from continuing operations to common shareholders

 

 

$

105

 

 

$

281

 

 

 

 

 

 

 

Diluted earnings (loss) per share from continuing operations

 

 

$

0.02

 

 

$

(2.35

)

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

 

 

(0.79

)

 

(1.76

)

Litigation and investigation costs

 

 

(0.25

)

 

(1.34

)

Net losses on sales, consolidation and deconsolidation of facilities

 

 

(0.11

)

 

(0.14

)

Loss from early extinguishment of debt

 

 

 

 

(2.16

)

Loss from divested and closed businesses

 

 

 

 

(0.02

)

Noncontrolling interest impact

 

 

 

 

0.04

 

Tax impact of above items

 

 

0.18

 

 

0.40

 

Adjusted diluted earnings per share from continuing operations

 

 

$

0.99

 

 

$

2.68

 

 

 

 

 

 

 

Weighted average basic shares outstanding (in thousands)

 

 

104,048

 

 

103,398

 

Weighted average dilutive shares outstanding (in thousands)

 

 

105,666

 

 

104,855

 

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 Net Income Available from Continuing Operations to Common Shareholders for 2018

(Unaudited)

 

(Dollars in millions except per share amounts)

 

2018

 

 

4th Qtr

 

Full Year

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

 

$

(5

)

 

$

111

 

Net income from discontinued operations

 

 

 

3

 

Net income (loss) from continuing operations

 

(5

)

 

108

 

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

 

(86

)

 

(209

)

Litigation and investigation costs

 

(10

)

 

(38

)

Net gains on sales, consolidation and deconsolidation of facilities

 

16

 

 

127

 

Gain from early extinguishment of debt

 

3

 

 

1

 

Income from divested and closed businesses

 

 

 

9

 

Tax impact of above items

 

19

 

 

25

 

Adjusted net income available from continuing operations to common shareholders

 

$

53

 

 

$

193

 

 

 

 

 

 

Diluted earnings (loss) per share from continuing operations

 

$

(0.05

)

 

$

1.04

 

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

 

(0.83

)

 

(2.01

)

Litigation and investigation costs

 

(0.10

)

 

(0.37

)

Net gains on sales, consolidation and deconsolidation of facilities

 

0.15

 

 

1.22

 

Gain from early extinguishment of debt

 

0.03

 

 

0.01

 

Income from divested and closed businesses

 

 

 

0.09

 

Tax impact of above items

 

0.18

 

 

0.24

 

Adjusted diluted earnings per share from continuing operations

 

$

0.51

 

 

$

1.86

 

 

 

 

 

 

Weighted average basic shares outstanding (in thousands)

 

102,501

 

 

102,110

 

Weighted average dilutive shares outstanding (in thousands)

 

104,118

 

 

103,881

 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #2 – Reconciliation of Net Income Available (Loss Attributable) to Tenet Healthcare Corporation Common Shareholders to Adjusted EBITDA for 2019

(Unaudited)

 

(Dollars in millions)

 

2019

 

 

4th Qtr

 

Full Year

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

 

$

2

 

 

(232

)

Less: Net income available to noncontrolling interests

 

(127

)

 

(386

)

Income from discontinued operations, net of tax

 

 

 

11

 

Income from continuing operations

 

129

 

 

143

 

Income tax expense

 

(86

)

 

(153

)

Loss from early extinguishment of debt

 

 

 

(227

)

Other non-operating expense, net

 

(2

)

 

(5

)

Interest expense

 

(243

)

 

(985

)

Operating income

 

460

 

 

1,513

 

Litigation and investigation costs

 

(26

)

 

(141

)

Net losses on sales, consolidation and deconsolidation of facilities

 

(12

)

 

(15

)

Impairment and restructuring charges, and acquisition-related costs

 

(84

)

 

(185

)

Depreciation and amortization

 

(223

)

 

(850

)

Loss from divested and closed businesses

 

 

 

(2

)

Adjusted EBITDA

 

$

805

 

 

$

2,706

 

 

 

 

 

 

Net operating revenues

 

$

4,806

 

 

$

18,479

 

Less: Net operating revenues from health plans

 

 

 

1

 

Adjusted net operating revenues

 

$

4,806

 

 

$

18,478

 

 

 

 

 

 

Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders as a % of net operating revenues

 

%

 

(1.3

)%

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

 

16.7

%

 

14.6

%

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #2 – Reconciliation of Net Income Available (Loss Attributable) to Tenet Healthcare Corporation Common Shareholders to Adjusted EBITDA for 2018

(Unaudited)

 

(Dollars in millions)

 

2018

 

 

4th Qtr

 

Full Year

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

 

$

(5

)

 

$

111

 

Less: Net income available to noncontrolling interests

 

(107

)

 

(355

)

Income from discontinued operations, net of tax

 

 

 

3

 

Income from continuing operations

 

102

 

 

463

 

Income tax expense

 

(56

)

 

(176

)

Gain from early extinguishment of debt

 

3

 

 

1

 

Other non-operating expense, net

 

(3

)

 

(5

)

Interest expense

 

(246

)

 

(1,004

)

Operating income

 

404

 

 

1,647

 

Litigation and investigation costs

 

(10

)

 

(38

)

Net gains on sales, consolidation and deconsolidation of facilities

 

16

 

 

127

 

Impairment and restructuring charges, and acquisition-related costs

 

(86

)

 

(209

)

Depreciation and amortization

 

(200

)

 

(802

)

Income from divested and closed businesses

 

 

 

9

 

Adjusted EBITDA

 

$

684

 

 

$

2,560

 

 

 

 

 

 

Net operating revenues

 

$

4,619

 

 

$

18,313

 

Less: Net operating revenues from health plans

 

 

 

14

 

Adjusted net operating revenues

 

$

4,619

 

 

$

18,299

 

 

 

 

 

 

Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders as a % of net operating revenues

 

(0.1

)%

 

0.6

%

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

 

14.8

%

 

14.0

%

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)

 

2019

 

 

4th Qtr

 

Full Year

Net cash provided by operating activities

 

$

520

 

 

$

1,233

 

Purchases of property and equipment

 

(178

)

 

(670

)

Free cash flow

 

$

342

 

 

$

563

 

 

 

 

 

 

Net cash used in investing activities

 

$

(193

)

 

$

(619

)

Net cash used in financing activities

 

$

(379

)

 

$

(763

)

 

 

 

 

 

Net cash provided by operating activities

 

$

520

 

 

$

1,233

 

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

 

(56

)

 

(192

)

Net cash used in operating activities from discontinued operations

 

(1

)

 

(5

)

Adjusted net cash provided by operating activities from continuing operations

 

577

 

 

1,430

 

Purchases of property and equipment

 

(178

)

 

(670

)

Adjusted free cash flow – continuing operations

 

$

399

 

 

$

760

 

 
 

(Dollars in millions)

 

2018

 

 

4th Qtr

 

Full Year

Net cash provided by operating activities

 

$

250

 

 

$

1,049

 

Purchases of property and equipment

 

(213

)

 

(617

)

Free cash flow

 

$

37

 

 

$

432

 

 

 

 

 

 

Net cash used in investing activities

 

$

(235

)

 

$

(115

)

Net cash used in financing activities

 

$

(104

)

 

$

(1,134

)

 

 

 

 

 

Net cash provided by operating activities

 

$

250

 

 

$

1,049

 

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

 

(50

)

 

(163

)

Net cash used in operating activities from discontinued operations

 

(1

)

 

(5

)

Adjusted net cash provided by operating activities from continuing operations

 

301

 

 

1,217

 

Purchases of property and equipment

 

(213

)

 

(617

)

Adjusted free cash flow – continuing operations

 

$

88

 

 

$

600

 

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)

 

Q1 2020

 

2020

 

 

Low

 

High

 

Low

 

High

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

 

$

(7

)

 

$

37

 

 

$

130

 

 

$

245

 

Less: Net income available to noncontrolling interests

 

(90

)

 

(100

)

 

(450

)

 

(470

)

Income tax expense

 

(17

)

 

(33

)

 

(190

)

 

(210

)

Interest expense

 

(250

)

 

(240

)

 

(985

)

 

(975

)

Other non-operating expense, net

 

(5

)

 

 

 

(5

)

 

5

 

Impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements(1)

 

(60

)

 

(50

)

 

(175

)

 

(125

)

Depreciation and amortization

 

(205

)

 

(215

)

 

(845

)

 

(865

)

Loss from divested and closed businesses

 

(5

)

 

 

 

(5

)

 

 

Adjusted EBITDA

 

$

625

 

 

$

675

 

 

$

2,785

 

 

$

2,885

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

(7

)

 

$

37

 

 

$

130

 

 

$

245

 

Net operating revenues

 

$

4,600

 

 

$

4,800

 

 

$

19,100

 

 

$

19,500

 

Income from continuing operations as a % of operating revenues

 

(0.2

)%

 

0.8

%

 

0.7

%

 

1.3

%

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

 

13.6

%

 

14.1

%

 

14.6

%

 

14.8

%

(1)

The Company has provided an estimate of restructuring charges it anticipates in 2020. The Company does not generally forecast impairment charges, acquisition-related costs, litigation costs and settlements because it 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 – Reconciliation 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)

 

Q1 2020

 

2020

 

 

Low

 

High

 

Low

 

High

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

 

$

(7

)

 

$

37

 

 

$

130

 

 

$

245

 

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

 

(60

)

 

(50

)

 

(175

)

 

(125

)

Loss from divested and closed businesses

 

(5

)

 

 

 

(5

)

 

 

Tax impact of above items

 

13

 

 

7

 

 

25

 

 

15

 

Noncontrolling interests impact of above items

 

 

 

 

 

 

 

 

Adjusted net income available from continuing operations to common shareholders

 

$

45

 

 

$

80

 

 

$

285

 

 

$

355

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share from continuing operations

 

$

(0.07

)

 

$

0.35

 

 

$

1.23

 

 

$

2.31

 

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

 

(0.57

)

 

(0.47

)

 

(1.65

)

 

(1.18

)

Loss from divested and closed businesses

 

(0.05

)

 

 

 

(0.05

)

 

 

Tax impact of above items

 

0.12

 

 

0.07

 

 

0.24

 

 

0.14

 

Noncontrolling interests impact of above items

 

 

 

 

 

 

 

 

Adjusted diluted earnings per share from continuing operations

 

$

0.42

 

 

$

0.75

 

 

$

2.69

 

 

$

3.35

 

 

 

 

 

 

 

 

 

 

Weighted average basic shares outstanding (in thousands)

 

104,000

 

 

104,000

 

 

105,000

 

 

105,000

 

Weighted average dilutive shares outstanding (in thousands)

 

106,000

 

 

106,000

 

 

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)

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

Low

 

High

Net cash provided by operating activities

 

 

 

 

 

 

 

$

1,250

 

 

$

1,525

 

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

 

 

 

 

 

 

 

(225

)

 

(200

)

Adjusted net cash provided by operating activities – continuing operations

 

 

 

 

 

 

 

1,475

 

 

1,725

 

Purchases of property and equipment – continuing operations

 

 

 

 

 

 

 

(700

)

 

(750

)

Adjusted free cash flow – continuing operations(2)

 

 

 

 

 

 

 

$

775

 

 

$

975

 

(1)

The Company has provided an estimate of payments that it anticipates in 2020 related to restructuring charges as well as litigation costs and settlements. The Company does not generally forecast payments related to acquisition-related costs and litigation costs and settlements because it 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, and (ii) distributions paid to noncontrolling interests.

 

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