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DALLAS–()–Tenet Healthcare Corporation (Tenet) (NYSE: THC) today announced its results for the quarter ended June 30, 2020 (2Q20).

Ronald A. Rittenmeyer, Executive Chairman and Chief Executive Officer, stated, “The second quarter was a challenge by any measure. April, May and June represented three separate stories of how we operated, with April reflecting the uncertainty of the early days of the pandemic, shutdown of elective surgery, rapid decline of flow into ERs and associated areas while remaining fully open and staffed for a potential surge of hospitalizations. In May, a staggered re-opening began with different rules, schedules and protocols dictated by each state. June represented our regaining the cadence of operating our business with greater insights, discipline, awareness, and data-driven decisions that drove much improved performance. Without a doubt, the financial support of the CARES Act provided an important bridge to minimize the financial crisis the pandemic created, allowing uninterrupted care for our patients and communities.”

Rittenmeyer continued, “Today, we and our brave front-line caregivers continue to face an even larger surge of COVID-19 cases in several markets, but we have a much better sense of how to deal with these in a more effective manner. While there is a greater negative financial impact associated with COVID-19 cases, we believe the CARES Act provided reasonable, but not complete relief from the impact of the shutdown and will help with the remaining cases with which we are now engaged. Importantly, the results in June provide clarity that we can perform at or above our expectations once the pandemic is controlled. Throughout this entire effort, and today, our caregivers and their support teams throughout our enterprise have been tirelessly providing excellence in care and support. I want to thank every employee, first responder and the many unsung heroes that continue to strive to ensure we are able to provide care to our communities.”

Tenet’s results for 2Q20 versus the quarter ended June 30, 2019 (2Q19) as well as the six months ended June 30, 2020 (YTD 2Q20) versus the six months ended June 30, 2019 (YTD 2Q19) are as follows:

($ in millions, except per share results)

2Q20

2Q19

YTD 2Q20

YTD 2Q19

Net income from continuing operations available to Tenet common shareholders

$88

$24

$182

$4

Net income from continuing operations available to Tenet common shareholders per diluted share

$0.83

$0.23

$1.72

$0.04

Adjusted EBITDA

$732

$669

$1,317

$1,292

Adjusted diluted earnings per share from continuing operations

$1.26

$0.65

$2.54

$1.25

 

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 #1-3 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.

COVID-19 Pandemic

  • As previously disclosed, in mid-March 2020, the Company began experiencing operational and financial challenges associated with the COVID-19 pandemic, which were exacerbated by the government cancellation of elective surgeries and shelter-at-home requirements coupled with the mandate for all hospitals and associated support to remain fully operational. These challenges continued into April 2020 on an accelerating trajectory with some abatement of the impact on surgeries and admissions occurring in the latter two months of the quarter. Tenet continues to experience elevated COVID volumes in certain of its markets with an expectation these will continue to be erratic until a vaccine is deployed.
  • Tenet continues to prioritize safety, building every protocol focused on the protection of its patients and employees. Operational teams monitor real-time data to ensure sufficient staffing, ICU bed capacity, testing and personal protective equipment (PPE). Outpatient facilities have safely reopened for elective procedures, and the Company’s hospitals and ambulatory platform are following all state and local guidelines concerning elective care.
  • As discussed below, Tenet took a number of actions since the onset of the pandemic to enhance its liquidity given the volatility of the environment.

Current Liquidity and Cash Balance

  • As of August 3, 2020, the Company had approximately $3.1 billion of available cash and no borrowings under its $1.9 billion line-of-credit facility. Through August 3, 2020, the Company had received approximately $1.5 billion of Medicare advance payments from the Centers for Medicare and Medicaid Services (CMS), which must be paid back by April 2021, and more than $850 million of grant aid from federal stimulus relief funds associated with the pandemic. The Company recognized approximately $523 million of grant aid as income during 2Q20 ($12 million is included in equity in earnings of unconsolidated affiliates) with the remainder of the grants received to be evaluated for income recognition in future quarters as additional lost operating revenues and COVID-related costs are incurred. The Medicare advance payments will have to be repaid by the Company beginning in August 2020 and ending no later than April 2021 for its hospitals and November 2020 for its ambulatory and other facilities to avoid the assessment of ~10.25% interest expense required by the government. Additionally, the grant income is subject to federal tax with an expectation states will follow this same path.

Results from Continuing Operations Available to Tenet Common Shareholders

  • Net income from continuing operations available to the Company’s common shareholders was $88 million, or $0.83 per diluted share, in 2Q20 versus net income from continuing operations of $24 million, or $0.23 per diluted share, in 2Q19. 2Q20 included $523 million of pre-tax grant income from stimulus relief funds associated with the COVID-19 pandemic ($380 million after tax, or $3.60 per diluted share). As noted in the Hospital and Ambulatory segment discussions below, results for 2Q20 include the recognition of grant income associated with stimulus grants and a continuation of the Company’s focus on cost efficiencies together with other necessary cost-reduction initiatives implemented to help partially offset the adverse impact of the pandemic.
  • For YTD 2Q20, income from continuing operations available to the Company’s common shareholders was $182 million, or $1.72 per diluted share, compared to net income from continuing operations of $4 million, or $0.04 per diluted share, for YTD 2Q19. The YTD 2Q20 results reflected similar comparisons to the prior year period for the Company’s business segments as experienced in 2Q20. Additionally, YTD 2Q20 results include a favorable income tax benefit of $88 million, or $0.83 per diluted share, substantially all recorded in the first quarter of 2020 due to an increase in the deductibility of interest expense for income tax purposes as a result of the Coronavirus Aid, Relief and Economic Security (CARES) Act.

Adjusted Results from Continuing Operations Available to Tenet Common Shareholders

Reconciliations of net income available 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 2Q20 Adjusted net income from continuing operations available to its common shareholders rose to $133 million, or $1.26 per diluted share, compared to $68 million, or $0.65 per diluted share, in 2Q19. These results reflect the same factors impacting results from continuing operations available to common shareholders noted above.
  • For YTD 2Q20, Tenet reported Adjusted net income from continuing operations available to its common shareholders of $268 million, or $2.54 per diluted share, compared to $131 million, or $1.25 per diluted share, in YTD 2Q19 also primarily driven by the same factors impacting the 2Q20 comparisons to the prior year discussed above.

Adjusted EBITDA

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

  • Adjusted EBITDA was $732 million in 2Q20 compared to $669 million in 2Q19, an increase of $63 million, or 9.4 percent.
  • For YTD 2Q20, Adjusted EBITDA was $1.317 billion compared to $1.292 billion in YTD 2Q19, an increase of $25 million, or 1.9 percent.

Outlook

  • On April 2, 2020, Tenet withdrew its 2020 Financial Outlook due to the impact of the COVID-19 pandemic upon the Company’s ability to forecast its results with precision in the near term.

Hospital Operations and Other Segment Results

Tenet’s Hospital Operations and other business segment (Hospital 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 segment results ($ in millions)

2Q20

2Q19

YTD 2Q20

YTD 2Q19

Net operating revenues

$3,088

$3,827

$6,922

$7,689

Grant income

$474

$0

$474

$0

Same-hospital net patient services revenues (a)

$2,830

$3,547

$6,372

$7,104

Adjusted EBITDA

$492

$359

$834

$706

Same-hospital admissions (decline) growth (a)

(20.3)%

3.3%

(12.3)%

1.6%

Same-hospital adjusted admissions (decline) growth (a)(b)

(27.3)%

2.2%

(16.0)%

1.4%

(a)

Same-hospital revenues and statistical data include those for the 65 hospitals operated by the Company’s Hospital segment continuously from January 1, 2019 through June 30, 2020. Revenues and volumes for any hospitals acquired or disposed of during that time frame are excluded.

(b)

Adjusted admissions represents actual patient admissions adjusted to include outpatient services provided by facilities in our Hospital segment 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 segment were $3.088 billion in 2Q20, a decline of 19.3 percent from $3.827 billion in 2Q19. The decrease in revenues was due to lower patient volumes as a result of the COVID-19 pandemic.
  • Net operating revenues also included $59 million from the California Provider Fee program in 2Q20 compared to $64 million in 2Q19.
  • Grant income for each of the 2Q20 and YTD 2Q20 periods included the recognition of $474 million in stimulus grants for lost operating revenues and COVID-related costs.
  • On a same-hospital basis, net patient service revenues were $2.830 billion in 2Q20, a decline of 20.2 percent from $3.547 billion in 2Q19.
  • Net operating revenues in the Hospital segment were $6.922 billion in YTD 2Q20, a decline of 10.0 percent from $7.689 billion in YTD 2Q19. The decrease in revenues was due to lower patient volumes associated with the COVID-19 pandemic, partially offset by pre-pandemic admissions growth in January and February 2020.
  • On a same-hospital basis, net patient service revenues were $6.372 billion in YTD 2Q20, a decline of 10.3 percent from $7.104 billion in YTD 2Q19.
  • The impact of COVID-19 on the Company’s same-hospital volumes during the quarter as a percent of the comparable period in 2019 on a same business-day basis was as follows:
 

Hospital Segment

Volume Statistics

April 2020

May 2020

June 2020

July 2020

Admissions

~67%

~80%

~90%

~90%

Outpatient visits

~39%

~60%

~77%

~80%

ER visits

~52%

~65%

~77%

~79%

Hospital surgeries

~45%

~80%

~90%

~87%

 
  • Net revenue per adjusted admission increased 9.7 percent year-over-year for 2Q20 primarily reflecting higher patient acuity for the volumes retained, as well as negotiated rate increases.

Operating Expenses

  • Selected operating expenses in the segment in 2Q20 declined $377 million, or 11.3 percent, as a result of continuing cost efficiency initiatives, as well as necessary cost reductions due to the decline in patient volumes associated with the pandemic. These actions were partially offset by higher supply costs for PPE. Selected operating expenses include salaries, wages and benefits, supplies and other operating expenses.

Earnings

  • Adjusted EBITDA in the segment was $492 million in 2Q20, an increase of 37.0 percent compared to $359 million in 2Q19. The Adjusted EBITDA margin was 15.9 percent in 2Q20 (13.8 percent when $474 million of grant income is added to net operating revenues) compared to 9.4 percent in 2Q19. These increases reflect the benefit of grant income as well as necessary cost-reduction initiatives during the pandemic.
  • For YTD 2Q20, Adjusted EBITDA was $834 million compared to $706 million in YTD 2Q19. The Adjusted EBITDA margin was 12.0 percent in YTD 2Q20 (11.3 percent when $474 million of grant income is added to net operating revenues) and 9.2 percent in YTD 2Q19.

Ambulatory Care Segment Results

Tenet’s Ambulatory Care business segment (Ambulatory segment) is comprised of the operations of United Surgical Partners International (USPI). As of June 30, 2020, USPI had interests in 264 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 segment results

($ in millions)

2Q20

2Q19

YTD 2Q20

YTD 2Q19

Net operating revenues

$368

$524

$858

$1,004

Grant income ($12 million in equity earnings)

$49

$0

$49

$0

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

$808

$1,125

$1,827

$2,160

Adjusted EBITDA

$167

$207

$323

$384

Adjusted EBITDA less facility-level NCI

$106

$132

$206

$244

Same-facility system-wide surgical cases (decline) growth

(41.6)%

2.6%

(25.7)%

2.7%

Same-facility system-wide total ambulatory cases (decline) growth

(33.7)%

3.2%

(19.3)%

2.1%

 

(c)

Same-facility system-wide revenues and statistical information include the results of many of the facilities in which the Ambulatory segment has an investment that are not consolidated by Tenet (of the 350 facilities at June 30, 2020, the results of 107 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 segment produced net operating revenues of $368 million in 2Q20, a decrease of 29.8 percent compared to $524 million in 2Q19 reflecting the impact of the COVID-19 pandemic.
  • Segment grant income for each of the 2Q20 and YTD 2Q20 periods included the recognition of $49 million in stimulus grant income for lost operating revenues and COVID-related costs. Approximately $12 million of that grant income is included in equity in earnings of unconsolidated affiliates.
  • For YTD 2Q20, segment net operating revenues of $858 million decreased 14.5 percent compared to $1.004 billion in YTD 2Q19.
  • On a same-facility system-wide basis, net operating revenues decreased 28.2 percent in 2Q20, with cases decreasing 33.7 percent and revenue per case increasing 8.2 percent. On a same-facility system-wide basis, YTD 2Q20 revenues decreased 15.4 percent, with cases decreasing 19.3 percent and revenue per case increasing 4.8 percent.
  • In the surgical business, which represents the majority of segment net operating revenues, same-facility system-wide revenues declined 28.2 percent in 2Q20, with cases down 41.6 percent and revenue per case up 22.9 percent reflecting the shift to higher acuity cases — as less critical elective cases were deferred due to COVID-19 — and higher negotiated rate increases. YTD 2Q20 same-facility system-wide surgical business revenues declined 15.5 percent, with cases down 25.7 percent and revenue per case up 13.8 percent reflecting the same factors noted in 2Q20.
  • The monthly impact of COVID-19 on the segment’s same-facility system-wide surgical cases during the quarter as a percent of the comparable period in 2019 on a same business-day basis were as follows:
 

Ambulatory Segment

April 2020

May 2020

June 2020

July 2020

Surgical cases

~20%

~70%

~90%

~94%

 

Earnings

  • Segment Adjusted EBITDA of $167 million in 2Q20, was down 19.3 percent from $207 million in 2Q19 as a result of the pandemic. Adjusted EBITDA less facility-level noncontrolling interest (NCI) was $106 million, down 19.7 percent from $132 million in 2Q19.
  • For YTD 2Q20, the segment generated Adjusted EBITDA of $323 million in YTD 2Q20, a decrease of 15.9 percent from $384 million in YTD 2Q19. Adjusted EBITDA less facility-level NCI was $206 million, a decline of 15.6 percent from $244 million in YTD 2Q19.
  • Adjusted EBITDA for each of the 2Q20 and YTD 2Q20 periods included the recognition of $49 million in stimulus grant income for lost operating revenues and COVID-19 related costs, as noted above. The Adjusted EBITDA less facility-level NCI impact of the grant income was $28 million.

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)

2Q20

2Q19

YTD 2Q20

YTD 2Q19

Net operating revenues

$305

$355

$637

$704

Adjusted EBITDA

$73

$103

$160

$202

 

The Company continues to work on spinning off its Conifer segment. 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 2Q20, Conifer segment revenues declined 14.1 percent to $305 million, from $355 million in 2Q19, primarily due to the downstream impact of COVID-19 volume declines of its clients, as well as attrition due to planned hospital divestitures by both Tenet and other clients.
  • During YTD 2Q20, Conifer’s revenues declined 9.5 percent to $637 million, from $704 million in YTD 2Q19 primarily due to the same factors impacting 2Q20 revenues.

Earnings

  • Conifer generated $73 million of Adjusted EBITDA in 2Q20, down 29.1 percent from $103 million in 2Q19. Adjusted EBITDA margins were 23.9 percent in 2Q20 compared to 29.0 percent in 2Q19.
  • Conifer generated $160 million of Adjusted EBITDA in YTD 2Q20, down 20.8 percent from $202 million in YTD 2Q19. Adjusted EBITDA margins were 25.1 percent in YTD 2Q20 compared to 28.7 percent in YTD 2Q19.

Balance Sheet, Cash Flows and Liquidity

Balance Sheet Highlights

($ in millions)

June 30, 2020

December 31, 2019

Cash and cash equivalents

$3,514

$262

Accounts receivable days outstanding (d)

68.4

58.4

Line-of-credit borrowings outstanding

$0

$0

Ratio of net debt & Medicare advances liability to Adjusted EBITDA (e)

5.03

5.31

(d)

The increase in accounts receivable days outstanding since December 31, 2019 is due to the significant decrease in the Company’s average daily revenues in 2Q20 as a result of the pandemic.

(e)

Net debt is total debt less cash and cash equivalents

 
  • Cash and cash equivalents at June 30, 2020 were $3.252 billion higher than at December 31, 2019 as the Company maintained available cash to ensure sufficient liquidity given the COVID-19 operational pressures.
  • The Company had no outstanding borrowings on its $1.9 billion credit line as of June 30, 2020.
  • The Company’s ratio of net debt and the Medicare advances liability to Adjusted EBITDA of 5.03x declined sequentially from 5.44x at March 31, 2020.
  • In June and July 2020, the Company repurchased approximately $239 million of its 8.125% senior unsecured notes due in 2022; $135 million of these repurchases occurred in 2Q20.

Cash flows and liquidity

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.

 

($ in millions)

YTD 2Q20

YTD 2Q19

Net cash provided by (used in) operating activities

$2,368

$294

Capital expenditures

$(288)

$(336)

Free cash flow

$2,080

$(42)

Adjusted free cash flow

$2,194

$43

Net cash used in investing activities

$(289)

$(303)

Net cash provided by (used in) financing activities

$1,173

$(153)

 
  • Cash and cash equivalents increased $2.901 billion during 2Q20 to $3.514 billion at June 30, 2020 compared to $613 million at March 31, 2020.
  • Important sources and (uses) of cash during the quarter included:

    • Approximately $1.482 billion of Medicare advances
    • $600 million of 4.625 percent Notes issued in June 2020
    • $700 million of 7.50 percent Notes issued in April 2020
    • Approximately $712 million of grant stimulus funds
    • Approximately $89 million deferral of the Company’s payroll tax match under COVID stimulus legislation
    • $(500) million of repayment in April 2020 of outstanding line-of-credit borrowings as of March 31, 2020
    • Approximately $(144) million in June 2020 for the repurchase of the Company’s unsecured notes due in 2022, including accrued interest
    • Approximately $(79) million for the Company’s 401(k) match to employees that was deferred from the first quarter of 2020 due to the pandemic
    • Approximately $(21) million of transaction costs associated with the Notes transactions discussed and a line-of-credit amendment

Management’s Webcast Discussion of Results

Tenet management will discuss the Company’s 2Q20 results in a webcast scheduled for 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on August 4, 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 related supplemental financial disclosures document will be available on the Company’s Investor Relations website on August 3, 2020.

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, especially with regards to developments related to COVID-19. 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 impact of the COVID-19 pandemic and the other factors disclosed under “Forward-Looking Statements” and “Risk Factors” in our Form 10-K for the year ended December 31, 2019, subsequent Form 10-Q filings 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 112,000 employees. Through an expansive care network that includes United Surgical Partners International, we operate 65 hospitals and approximately 510 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 clients. 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 by (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

2Q20 Earnings Release

Table of Contents

 

Description

Page

Consolidated Statements of Operations

15

Consolidated Balance Sheets

17

Consolidated Statements of Cash Flows

18

Segment Reporting

19

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

20

Table #2 – Reconciliations of Net Income to Adjusted EBITDA

22

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

24

 
 

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

(Dollars in millions except per share amounts)

 

Three Months Ended June 30,

 

 

2020

 

%

 

2019

 

%

 

Change

Net operating revenues

 

$

3,648

 

 

 

100.0

%

 

$

4,560

 

 

 

100.0

%

 

(20.0

)%

Grant income

 

511

 

 

 

14.0

%

 

 

 

 

%

 

n/a

Equity in earnings of unconsolidated affiliates

 

31

 

 

 

0.8

%

 

42

 

 

 

0.9

%

 

(26.2

)%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

1,864

 

 

 

51.1

%

 

2,145

 

 

 

47.0

%

 

(13.1

)%

Supplies

 

611

 

 

 

16.7

%

 

753

 

 

 

16.5

%

 

(18.9

)%

Other operating expenses, net

 

983

 

 

 

26.9

%

 

1,035

 

 

 

22.7

%

 

(5.0

)%

Depreciation and amortization

 

206

 

 

 

5.6

%

 

214

 

 

 

4.7

%

 

 

Impairment and restructuring charges, and acquisition-related costs

 

54

 

 

 

1.5

%

 

36

 

 

 

0.8

%

 

 

Litigation and investigation costs

 

2

 

 

 

0.1

%

 

18

 

 

 

0.4

%

 

 

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

 

(1

)

 

 

%

 

1

 

 

 

%

 

 

Operating income

 

471

 

 

 

12.9

%

 

400

 

 

 

8.8

%

 

 

Interest expense

 

(255

)

 

 

 

 

(247

)

 

 

 

 

 

Other non-operating income (expense), net

 

2

 

 

 

 

 

(1

)

 

 

 

 

 

Loss from early extinguishment of debt

 

(4

)

 

 

 

 

 

 

 

 

 

 

Income from continuing operations, before income taxes

 

214

 

 

 

 

 

152

 

 

 

 

 

 

Income tax expense

 

(45

)

 

 

 

 

(33

)

 

 

 

 

 

Income from continuing operations, before discontinued operations

 

169

 

 

 

 

 

119

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

 

 

 

 

2

 

 

 

 

 

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations

 

 

 

 

 

 

2

 

 

 

 

 

 

Net income

 

169

 

 

 

 

 

121

 

 

 

 

 

 

Less: Net income available to noncontrolling interests

 

81

 

 

 

 

 

95

 

 

 

 

 

 

Net income available to Tenet Healthcare Corporation common shareholders

 

$

88

 

 

 

 

 

$

26

 

 

 

 

 

 

Amounts available to Tenet Healthcare Corporation common shareholders

 

 

 

 

 

 

 

 

 

 

Income from continuing operations, net of tax

 

$

88

 

 

 

 

 

$

24

 

 

 

 

 

 

Income from discontinued operations, net of tax

 

 

 

 

 

 

2

 

 

 

 

 

 

Net income available to Tenet Healthcare Corporation common

shareholders

 

$

88

 

 

 

 

 

$

26

 

 

 

 

 

 

Earnings per share available to Tenet Healthcare Corporation common shareholders:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.84

 

 

 

 

 

$

0.23

 

 

 

 

 

 

Discontinued operations

 

 

 

 

 

 

0.02

 

 

 

 

 

 

 

 

$

0.84

 

 

 

 

 

$

0.25

 

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.83

 

 

 

 

 

$

0.23

 

 

 

 

 

 

Discontinued operations

 

 

 

 

 

 

0.02

 

 

 

 

 

 

 

 

$

0.83

 

 

 

 

 

$

0.25

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

Basic

 

104,794

 

 

 

 

 

103,198

 

 

 

 

 

Diluted*

 

105,578

 

 

 

 

 

104,629

 

 

 

 

 

 

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

(Dollars in millions except per share amounts)

 

Six Months Ended June 30,

 

 

2020

 

%

 

2019

 

%

 

Change

Net operating revenues

 

$

8,168

 

 

 

100.0

%

 

$

9,105

 

 

 

100.0

%

 

(10.3

)%

Grant income

 

511

 

 

 

6.2

%

 

 

 

 

%

 

n/a

Equity in earnings of unconsolidated affiliates

 

59

 

 

 

0.7

%

 

76

 

 

 

0.8

%

 

(22.4

)%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

4,051

 

 

 

49.6

%

 

4,296

 

 

 

47.2

%

 

(5.7

)%

Supplies

 

1,374

 

 

 

16.8

%

 

1,494

 

 

 

16.4

%

 

(8.0

)%

Other operating expenses, net

 

1,996

 

 

 

24.4

%

 

2,100

 

 

 

23.1

%

 

(5.0

)%

Depreciation and amortization

 

409

 

 

 

5.0

%

 

422

 

 

 

4.6

%

 

 

Impairment and restructuring charges, and acquisition-related costs

 

109

 

 

 

1.3

%

 

55

 

 

 

0.6

%

 

 

Litigation and investigation costs

 

4

 

 

 

%

 

31

 

 

 

0.3

%

 

 

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

 

(3

)

 

 

%

 

2

 

 

 

%

 

 

Operating income

 

798

 

 

 

9.8

%

 

781

 

 

 

8.6

%

 

 

Interest expense

 

(498

)

 

 

 

 

(498

)

 

 

 

 

 

Other non-operating income, net

 

3

 

 

 

 

 

 

 

 

 

 

 

Loss from early extinguishment of debt

 

(4

)

 

 

 

 

(47

)

 

 

 

 

 

Income from continuing operations, before income taxes

 

299

 

 

 

 

 

236

 

 

 

 

 

 

Income tax benefit (expense)

 

30

 

 

 

 

 

(53

)

 

 

 

 

 

Income from continuing operations, before discontinued operations

 

329

 

 

 

 

 

183

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

(Loss) income from operations

 

(1

)

 

 

 

 

12

 

 

 

 

 

 

Income tax expense

 

 

 

 

 

 

(2

)

 

 

 

 

 

(Loss) income from discontinued operations

 

(1

)

 

 

 

 

10

 

 

 

 

 

 

Net income

 

328

 

 

 

 

 

193

 

 

 

 

 

 

Less: Net income available to noncontrolling interests

 

147

 

 

 

 

 

179

 

 

 

 

 

 

Net income available to Tenet Healthcare Corporation common shareholders

 

$

181

 

 

 

 

 

$

14

 

 

 

 

 

 

Amounts available (attributable) to Tenet Healthcare Corporation common shareholders

 

 

 

 

 

 

 

 

 

 

Income from continuing operations, net of tax

 

$

182

 

 

 

 

 

$

4

 

 

 

 

 

 

(Loss) income from discontinued operations, net of tax

 

(1

)

 

 

 

 

10

 

 

 

 

 

 

Net income available to Tenet Healthcare Corporation common shareholders

 

$

181

 

 

 

 

 

$

14

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

1.74

 

 

 

 

 

$

0.04

 

 

 

 

 

 

Discontinued operations

 

(0.01

)

 

 

 

 

0.10

 

 

 

 

 

 

 

 

$

1.73

 

 

 

 

 

$

0.14

 

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

1.72

 

 

 

 

 

$

0.04

 

 

 

 

 

 

Discontinued operations

 

(0.01

)

 

 

 

 

0.10

 

 

 

 

 

 

 

 

$

1.71

 

 

 

 

 

$

0.14

 

 

 

 

 

 

Weighted average shares and dilutive securities outstanding

(in thousands):

 

 

 

 

 

 

 

 

 

 

Basic

 

104,574

 

 

 

 

 

102,993

 

 

 

 

 

Diluted*

 

105,656

 

 

 

 

 

104,585

 

 

 

 

 

 

TENET HEALTHCARE CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

June 30,

 

December 31,

(Dollars in millions)

 

2020

 

2019

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

3,514

 

 

 

$

262

 

 

Accounts receivable

 

2,435

 

 

 

2,743

 

 

Inventories of supplies, at cost

 

337

 

 

 

310

 

 

Income tax receivable

 

18

 

 

 

10

 

 

Assets held for sale

 

378

 

 

 

387

 

 

Other current assets

 

1,265

 

 

 

1,369

 

 

Total current assets

 

7,947

 

 

 

5,081

 

 

Investments and other assets

 

2,464

 

 

 

2,369

 

 

Deferred income taxes

 

232

 

 

 

183

 

 

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

 

6,703

 

 

 

6,878

 

 

Goodwill

 

7,301

 

 

 

7,252

 

 

Other intangible assets, at cost, less accumulated amortization

 

1,603

 

 

 

1,602

 

 

Total assets

 

$

26,250

 

 

 

$

23,365

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt

 

$

160

 

 

 

$

171

 

 

Accounts payable

 

1,018

 

 

 

1,204

 

 

Accrued compensation and benefits

 

699

 

 

 

877

 

 

Professional and general liability reserves

 

292

 

 

 

330

 

 

Accrued interest payable

 

257

 

 

 

245

 

 

Liabilities held for sale

 

93

 

 

 

44

 

 

Contract liabilities

 

1,496

 

 

 

61

 

 

Other current liabilities

 

1,570

 

 

 

1,273

 

 

Total current liabilities

 

5,585

 

 

 

4,205

 

 

Long-term debt, net of current portion

 

15,728

 

 

 

14,580

 

 

Professional and general liability reserves

 

649

 

 

 

635

 

 

Defined benefit plan obligations

 

541

 

 

 

560

 

 

Deferred income taxes

 

27

 

 

 

27

 

 

Other long-term liabilities

 

1,526

 

 

 

1,415

 

 

Total liabilities

 

24,056

 

 

 

21,422

 

 

Commitments and contingencies

 

 

 

 

Redeemable noncontrolling interests in equity of consolidated subsidiaries

 

1,561

 

 

 

1,506

 

 

Equity:

 

 

 

 

Shareholders’ equity:

 

 

 

 

Common stock

 

7

 

 

 

7

 

 

Additional paid-in capital

 

4,751

 

 

 

4,760

 

 

Accumulated other comprehensive loss

 

(255

)

 

 

(257

)

 

Accumulated deficit

 

(2,346

)

 

 

(2,513

)

 

Common stock in treasury, at cost

 

(2,414

)

 

 

(2,414

)

 

Total shareholders’ deficit

 

(257

)

 

 

(417

)

 

Noncontrolling interests

 

890

 

 

 

854

 

 

Total equity

 

633

 

 

 

437

 

 

Total liabilities and equity

 

$

26,250

 

 

 

$

23,365

 

 

 

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

 

 

 

Six Months Ended

(Dollars in millions)

 

June 30,

 

 

2020

 

2019

Net income

 

$

328

 

 

 

$

193

 

 

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

 

 

 

 

Depreciation and amortization

 

409

 

 

 

422

 

 

Deferred income tax (benefit) expense

 

(49

)

 

 

48

 

 

Stock-based compensation expense

 

27

 

 

 

23

 

 

Impairment and restructuring charges, and acquisition-related costs

 

109

 

 

 

55

 

 

Litigation and investigation costs

 

4

 

 

 

31

 

 

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

 

(3

)

 

 

2

 

 

Loss from early extinguishment of debt

 

4

 

 

 

47

 

 

Equity in earnings of unconsolidated affiliates, net of distributions received

 

(39

)

 

 

(2

)

 

Amortization of debt discount and debt issuance costs

 

20

 

 

 

21

 

 

Pre-tax loss (income) from discontinued operations

 

1

 

 

 

(12

)

 

Other items, net

 

(3

)

 

 

(10

)

 

Changes in cash from operating assets and liabilities:

 

 

 

 

Accounts receivable

 

317

 

 

 

(138

)

 

Inventories and other current assets

 

44

 

 

 

(64

)

 

Income taxes

 

14

 

 

 

(2

)

 

Accounts payable, accrued expenses and other current liabilities

 

1,209

 

 

 

(239

)

 

Other long-term liabilities

 

90

 

 

 

4

 

 

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

 

(114

)

 

 

(80

)

 

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

 

 

 

 

(5

)

 

Net cash provided by operating activities

 

2,368

 

 

 

294

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment — continuing operations

 

(288

)

 

 

(336

)

 

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

 

(56

)

 

 

(13

)

 

Proceeds from sales of facilities and other assets — continuing operations

 

12

 

 

 

40

 

 

Proceeds from sales of facilities and other assets — discontinued operations

 

 

 

 

17

 

 

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

 

35

 

 

 

9

 

 

Purchases of marketable securities and equity investments

 

(10

)

 

 

(14

)

 

Other long-term assets

 

 

 

 

(4

)

 

Other items, net

 

18

 

 

 

(2

)

 

Net cash used in investing activities

 

(289

)

 

 

(303

)

 

Cash flows from financing activities:

 

 

 

 

Repayments of borrowings under credit facility

 

(740

)

 

 

(1,095

)

 

Proceeds from borrowings under credit facility

 

740

 

 

 

1,285

 

 

Repayments of other borrowings

 

(229

)

 

 

(1,668

)

 

Proceeds from other borrowings

 

1,312

 

 

 

1,516

 

 

Debt issuance costs

 

(22

)

 

 

(18

)

 

Distributions paid to noncontrolling interests

 

(100

)

 

 

(144

)

 

Proceeds from sale of noncontrolling interests

 

5

 

 

 

9

 

 

Purchases of noncontrolling interests

 

 

 

 

(6

)

 

Proceeds from exercise of stock options and employee stock purchase plan

 

5

 

 

 

3

 

 

Other items, net

 

202

 

 

 

(35

)

 

Net cash provided by (used in) financing activities

 

1,173

 

 

 

(153

)

 

Net increase (decrease) in cash and cash equivalents

 

3,252

 

 

 

(162

)

 

Cash and cash equivalents at beginning of period

 

262

 

 

 

411

 

 

Cash and cash equivalents at end of period

 

$

3,514

 

 

 

$

249

 

 

Supplemental disclosures:

 

 

 

 

Interest paid, net of capitalized interest

 

$

(465

)

 

 

$

(484

)

 

Income tax payments, net

 

$

(5

)

 

 

$

(13

)

 

 
 

TENET HEALTHCARE CORPORATION

SEGMENT REPORTING

(Unaudited)

 

(Dollars in millions)

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2020

 

2019

 

2020

 

2019

Net operating revenues:

 

 

 

 

 

 

 

 

Hospital Operations and other total prior to inter-segment eliminations

 

$

3,088

 

 

 

$

3,827

 

 

 

$

6,922

 

 

 

$

7,689

 

 

Ambulatory Care

 

368

 

 

 

524

 

 

 

858

 

 

 

1,004

 

 

Conifer

 

 

 

 

 

 

 

 

Tenet

 

113

 

 

 

146

 

 

 

249

 

 

 

292

 

 

Other clients

 

192

 

 

 

209

 

 

 

388

 

 

 

412

 

 

Total Conifer revenues

 

305

 

 

 

355

 

 

 

637

 

 

 

704

 

 

Inter-segment eliminations

 

(113

)

 

 

(146

)

 

 

(249

)

 

 

(292

)

 

Total

 

$

3,648

 

 

 

$

4,560

 

 

 

$

8,168

 

 

 

$

9,105

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates:

 

 

 

 

 

 

 

 

Hospital Operations and other

 

$

(4

)

 

 

$

8

 

 

 

$

(2

)

 

 

$

11

 

 

Ambulatory Care

 

35

 

 

 

34

 

 

 

61

 

 

 

65

 

 

Total

 

$

31

 

 

 

$

42

 

 

 

$

59

 

 

 

$

76

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA:

 

 

 

 

 

 

 

 

Hospital Operations and other

 

$

492

 

 

 

$

359

 

 

 

$

834

 

 

 

$

706

 

 

Ambulatory Care

 

167

 

 

 

207

 

 

 

323

 

 

 

384

 

 

Conifer

 

73

 

 

 

103

 

 

 

160

 

 

 

202

 

 

Total

 

$

732

 

 

 

$

669

 

 

 

$

1,317

 

 

 

$

1,292

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures:

 

 

 

 

 

 

 

 

Hospital Operations and other

 

$

90

 

 

 

$

118

 

 

 

$

257

 

 

 

$

288

 

 

Ambulatory Care

 

10

 

 

 

21

 

 

 

21

 

 

 

41

 

 

Conifer

 

6

 

 

 

5

 

 

 

10

 

 

 

7

 

 

Total

 

$

106

 

 

 

$

144

 

 

 

$

288

 

 

 

$

336

 

 

 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #1 – Reconciliation of Net Income Available to Tenet Healthcare Corporation

Common Shareholders to Adjusted Net Income Available from Continuing Operations

to Common Shareholders for 2020

(Unaudited)

 

(Dollars in millions except per share amounts)

 

2020

 

 

2nd Qtr

 

YTD

Net income available to Tenet Healthcare Corporation common shareholders

 

$

88

 

 

 

$

181

 

 

Net loss from discontinued operations

 

 

 

 

(1

)

 

Net income from continuing operations

 

88

 

 

 

182

 

 

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

 

(54

)

 

 

(109

)

 

Litigation and investigation costs

 

(2

)

 

 

(4

)

 

Net gains on sales, consolidation and deconsolidation of facilities

 

1

 

 

 

3

 

 

Loss from early extinguishment of debt

 

(4

)

 

 

(4

)

 

Loss from divested and closed businesses

 

 

 

 

 

 

Noncontrolling interest impact

 

 

 

 

 

 

Tax impact of above items

 

14

 

 

 

28

 

 

Adjusted net income available from continuing operations to common shareholders

 

$

133

 

 

 

$

268

 

 

 

 

 

 

 

Diluted earnings (loss) per share from continuing operations

 

$

0.83

 

 

 

$

1.72

 

 

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

 

(0.51

)

 

 

(1.03

)

 

Litigation and investigation costs

 

(0.02

)

 

 

(0.04

)

 

Net gains on sales, consolidation and deconsolidation of facilities

 

0.01

 

 

 

0.03

 

 

Loss from early extinguishment of debt

 

(0.04

)

 

 

(0.04

)

 

Loss from divested and closed businesses

 

 

 

 

 

 

Noncontrolling interest impact

 

 

 

 

 

 

Tax impact of above items

 

0.13

 

 

 

0.26

 

 

Adjusted diluted earnings per share from continuing operations

 

$

1.26

 

 

 

$

2.54

 

 

 

 

 

 

 

Weighted average basic shares outstanding (in thousands)

 

104,794

 

 

 

104,574

 

 

Weighted average dilutive shares outstanding (in thousands)

 

105,578

 

 

 

105,656

 

 

 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #1 – Reconciliation of Net Income Available 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

 

 

2nd Qtr

 

YTD

Net income available to Tenet Healthcare Corporation common shareholders

 

$

26

 

 

 

$

14

 

 

Net income from discontinued operations

 

2

 

 

 

10

 

 

Net income from continuing operations

 

24

 

 

 

4

 

 

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

 

(36

)

 

 

(55

)

 

Litigation and investigation costs

 

(18

)

 

 

(31

)

 

Net losses on sales, consolidation and deconsolidation of facilities

 

(1

)

 

 

(2

)

 

Loss from early extinguishment of debt

 

 

 

 

(47

)

 

Loss from divested and closed businesses

 

 

 

 

(1

)

 

Noncontrolling interest impact

 

 

 

 

 

 

Tax impact of above items

 

11

 

 

 

9

 

 

Adjusted net income available from continuing operations to common shareholders

 

$

68

 

 

 

$

131

 

 

 

 

 

 

 

Diluted earnings (loss) per share from continuing operations

 

$

0.23

 

 

 

$

0.04

 

 

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

 

(0.34

)

 

 

(0.52

)

 

Litigation and investigation costs

 

(0.17

)

 

 

(0.30

)

 

Net losses on sales, consolidation and deconsolidation of facilities

 

(0.01

)

 

 

(0.02

)

 

Loss from early extinguishment of debt

 

 

 

 

(0.45

)

 

Loss from divested and closed businesses

 

 

 

 

(0.01

)

 

Noncontrolling interest impact

 

 

 

 

 

 

Tax impact of above items

 

0.10

 

 

 

0.09

 

 

Adjusted diluted earnings per share from continuing operations

 

$

0.65

 

 

 

$

1.25

 

 

 

 

 

 

 

Weighted average basic shares outstanding (in thousands)

 

103,198

 

 

 

102,993

 

 

Weighted average dilutive shares outstanding (in thousands)

 

104,629

 

 

 

104,585

 

 

 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #2 – Reconciliation of Net Income Available to Tenet Healthcare Corporation

Common Shareholders to Adjusted EBITDA for 2020

(Unaudited)

 

(Dollars in millions)

 

2020

 

 

2nd Qtr

 

YTD

Net income available to Tenet Healthcare Corporation common shareholders

 

$

88

 

 

181

 

Less: Net income available to noncontrolling interests

 

(81

)

 

(147

)

(Loss) income from discontinued operations, net of tax

 

 

 

(1

)

Income from continuing operations

 

169

 

 

329

 

Income tax benefit (expense)

 

(45

)

 

30

 

Loss from early extinguishment of debt

 

(4

)

 

(4

)

Other non-operating income, net

 

2

 

 

3

 

Interest expense

 

(255

)

 

(498

)

Operating income

 

471

 

 

798

 

Litigation and investigation costs

 

(2

)

 

(4

)

Net gains on sales, consolidation and deconsolidation of facilities

 

1

 

 

3

 

Impairment and restructuring charges, and acquisition-related costs

 

(54

)

 

(109

)

Depreciation and amortization

 

(206

)

 

(409

)

Loss from divested and closed businesses

 

 

 

 

Adjusted EBITDA

 

$

732

 

 

$

1,317

 

 

 

 

 

 

Net operating revenues

 

$

3,648

 

 

$

8,168

 

 

 

 

 

 

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

 

2.4

%

 

2.2

%

 

 

 

 

 

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

 

20.1

%

 

16.1

%

 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #2 – Reconciliation of Net Income Available to Tenet Healthcare Corporation

Common Shareholders to Adjusted EBITDA for 2019

(Unaudited)

 

(Dollars in millions)

 

2019

 

 

2nd Qtr

 

YTD

Net income available to Tenet Healthcare Corporation common shareholders

 

$

26

 

 

$

14

 

Less: Net income available to noncontrolling interests

 

(95

)

 

(179

)

Income from discontinued operations, net of tax

 

2

 

 

10

 

Income from continuing operations

 

119

 

 

183

 

Income tax expense

 

(33

)

 

(53

)

Loss from early extinguishment of debt

 

 

 

(47

)

Other non-operating expense, net

 

(1

)

 

 

Interest expense

 

(247

)

 

(498

)

Operating income

 

400

 

 

781

 

Litigation and investigation costs

 

(18

)

 

(31

)

Net losses on sales, consolidation and deconsolidation of facilities

 

(1

)

 

(2

)

Impairment and restructuring charges, and acquisition-related costs

 

(36

)

 

(55

)

Depreciation and amortization

 

(214

)

 

(422

)

Loss from divested and closed businesses

 

 

 

(1

)

Adjusted EBITDA

 

$

669

 

 

$

1,292

 

 

 

 

 

 

Net operating revenues

 

$

4,560

 

 

$

9,105

 

Less: Net operating revenues from health plans

 

1

 

 

1

 

Adjusted net operating revenues

 

$

4,559

 

 

$

9,104

 

 

 

 

 

 

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

 

0.6

%

 

0.2

%

 

 

 

 

 

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

 

14.7

%

 

14.2

%

 

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)

 

2020

 

 

2nd Qtr

 

YTD

Net cash provided by operating activities

 

$

2,239

 

 

 

$

2,368

 

 

Purchases of property and equipment

 

(106

)

 

 

(288

)

 

Free cash flow

 

$

2,133

 

 

 

$

2,080

 

 

 

 

 

 

 

Net cash used in investing activities

 

$

(85

)

 

 

$

(289

)

 

Net cash provided by financing activities

 

$

747

 

 

 

$

1,173

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

2,239

 

 

 

$

2,368

 

 

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

 

(46

)

 

 

(114

)

 

Net cash used in operating activities from discontinued operations

 

 

 

 

 

 

Adjusted net cash provided by operating activities from continuing operations

 

2,285

 

 

 

2,482

 

 

Purchases of property and equipment

 

(106

)

 

 

(288

)

 

Adjusted free cash flow – continuing operations

 

$

2,179

 

 

 

$

2,194

 

 

 

(Dollars in millions)

 

2019

 

 

2nd Qtr

 

YTD

Net cash provided by operating activities

 

$

284

 

 

 

$

294

 

 

Purchases of property and equipment

 

(144

)

 

 

(336

)

 

Free cash flow

 

$

140

 

 

 

$

(42

)

 

 

 

 

 

 

Net cash used in investing activities

 

$

(164

)

 

 

$

(303

)

 

Net cash used in financing activities

 

$

(123

)

 

 

$

(153

)

 

 

 

 

 

 

Net cash provided by operating activities

 

$

284

 

 

 

$

294

 

 

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

 

(48

)

 

 

(80

)

 

Net cash used in operating activities from discontinued operations

 

(3

)

 

 

(5

)

 

Adjusted net cash provided by operating activities from continuing operations

 

335

 

 

 

379

 

 

Purchases of property and equipment

 

(144

)

 

 

(336

)

 

Adjusted free cash flow – continuing operations

 

$

191

 

 

 

$

43

 

 

 

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