- Net income from continuing operations attributable to common
shareholders of $94 million, or $0.89 per diluted share, in 1Q20
versus a net loss from continuing operations of $20 million, or
$0.19 per diluted share in 1Q19
- Strong operating performance through mid-March and ahead of
expectations. Impact of COVID-19 pandemic in the latter half of
March suppressed otherwise solid financial results for 1Q20
lowering net income from continuing operations attributable to
common shareholders by approximately $73 million, or $0.69 per
diluted share, and Adjusted EBITDA by approximately $125
million.
- Actively managing COVID-19 patient needs and adapting to the
rapidly evolving environment continuing to provide the highest
level of care to our patients. The Company’s hospital system is not
being overwhelmed. As of May 1, 2020, the Company had 771 active
COVID-19 patients in-house across its portfolio of 65 hospitals and
308 Patients Under Investigation (PUI) cases, many of which are
inpatients with test results pending.
- Patient volumes declined significantly in the latter half of
March due to governmental shelter-in-place orders and elimination
of elective surgery related to COVID-19.
- The Company has taken numerous actions in April 2020 to enhance
its liquidity.
- Due to the uncertainty of the current environment, projections
of volumes and earnings for the remainder of the year create
difficulty in predicting, with any precision, full year guidance.
Significant impact from the pandemic is anticipated in 2Q20 with
stabilization and recovery targeted in the second half of this
year. The Company may provide updates as events unfold over the
next several months.
Tenet Healthcare Corporation (Tenet) (NYSE: THC) today announced
its results for the quarter ended March 31, 2020 (1Q20).
“Our first quarter represents results that were trending above
our expectations through early March and then, in a virtual snap of
the finger, hit a wall created by the COVID-19 pandemic and the
quick shutdown of elective surgeries and normal patient traffic,”
said Ronald A. Rittenmeyer, Executive Chairman and Chief Executive
Officer. “Our team responded quickly, focused on the safety of our
patients and staff while ensuring we were caring for the potential
and actual surge of COVID patients. This included forward
purchasing of PPE and other supplies and equipment regardless of
price, implementation of staffing deployment plans tailored to the
unique elements of various markets, and the establishment of clear
clinical protocols and safety measures standardized across
operations.”
“We acted swiftly to mitigate the impact of significant volume
reductions in our hospitals and surgery centers, enhance our
operational and financial flexibility and redirect resources to
critical operations. Simultaneously, we took actions to increase
liquidity and defer capital spend and other costs that could be
delayed without disrupting our mission. At all times, our patients
have continued to receive excellent care with uninterrupted access
to caregivers, medication and equipment. Conifer and our Global
Business Center in Manila continued to operate and execute their
respective missions.
“We have now shifted our focus to a comprehensive recovery
effort across our entire system in compliance with state and local
orders. We have begun to resume vital elective procedures and
methodically re-open, with a detailed plan by physician, our USPI
facilities and the hospital departments that were closed as a
result of the pandemic.
“Importantly for Tenet, this recovery is led by the same team
that has navigated the turnaround of Tenet during the past two
years and through this pandemic. The team is energized and fully
engaged in executing the recovery with the same tenacity and
accountability that has served all our stakeholders well and will
enable us to return, as soon as possible, to the trajectory we had
in place in February.
“On behalf of myself and our Board, we want to thank our teams
and all healthcare providers, who have responded to this public
health emergency with strength and courage. We recognize and
applaud the sacrifices our teams and others are making every
day.”
Tenet's results for 1Q20 versus the quarter ended March 31, 2019
(1Q19) were as follows:
($ in millions, except per share
results)
1Q20
1Q19
Net income (loss) from continuing
operations attributable to Tenet common shareholders
$94
$(20)
Net income (loss) from continuing
operations attributable to Tenet common shareholders per diluted
share
$0.89
$(0.19)
Adjusted EBITDA
$585
$623
Adjusted diluted earnings per share from
continuing operations
$1.28
$0.60
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.
Prior period amounts have been recast to
reflect the Company's change in accounting for its medical
malpractice and workers' compensation actuarial liabilities, As
permitted by U.S. GAAP, these liabilities are now reported on an
undiscounted basis, whereas they were previously reported on a
discounted basis.
COVID-19 Pandemic
- The Company's 1Q20 operating performance was strong and ahead
of expectations through mid-March 2020, reflecting the continued
growth and operational discipline demonstrated in its results for
2019. However, since mid-March the COVID-19 pandemic (COVID-19) has
resulted in a material reduction in patient volumes associated with
governmental orders limiting non-essential procedures and mandating
“shelter in place,” plus general apprehension among the public.
Patient volumes impacted include emergency room (ER) visits,
admissions, elective surgeries and other procedures. In addition, a
substantial portion of the Company’s USPI ambulatory surgery
centers have been closed and other centers are operating with very
limited hours. The Company has an established and tested support
structure in place to protect its caregivers and patients and
manage infectious agents, including facility deep cleaning
processes and appropriate security precautions. The Company
proactively planned for COVID-19 by making additional investments
to enhance its inventory of personal protective equipment and other
supplies. The Company has encountered significantly higher prices
for such supplies, but believes it currently has adequate supplies
on hand.
- The Company has taken various actions to mitigate the impact of
COVID-19, including enhancing its liquidity by issuing $700 million
of secured notes in April 2020 and increasing its line-of-credit
borrowing capacity from $1.5 billion to $1.9 billion in April 2020,
reducing its planned capital expenditures this year by $300
million, reducing discretionary spend, and flexing down costs or
furloughing employees due to reduced patient volumes that do not
impact the ability to provide care to current patient volume
levels. The Company is extensively planning how its businesses will
ramp back up as government-imposed restrictions are lifted to
protect the safety of all of its constituents and ensure resources
are deployed appropriately for the volume levels as they
recover.
Current Liquidity and Cash
Balance
- As of May 1, 2020, the Company had $2.2 billion of excess cash
and $1.9 billion of available capacity under its line-of-credit
facility, which was recently amended to increase the Company’s
borrowing capacity to $1.900 billion. The Company had $500 million
of outstanding line-of-credit borrowings as of March 31, 2020, but
subsequently repaid those borrowings in April 2020. Through May 1,
2020, the Company has received approximately $1.5 billion of
Medicare advance payments from the Centers for Medicare and
Medicaid Services (CMS) and approximately $345 million of grant aid
under the Coronavirus Aid, Relief and Economic Security (CARES)
Act. The Medicare advances will have to be repaid by the Company
within the next year.
Results from Continuing Operations
Attributable to Tenet Common Shareholders
- Net income from continuing operations attributable to its
common shareholders was $94 million, or $0.89 per diluted share, in
1Q20 versus a net loss from continuing operations of $20 million,
or $0.19 per diluted share, in 1Q19. The $114 million, or $1.08 per
diluted share, year-over-year increase was driven primarily by
operational improvements in each of the Company's business segments
and a favorable income tax benefit of $91 million, or $0.86 per
diluted share, recorded in 1Q20 related to an increase in the
deductibility of interest expense for income tax purposes as a
result of the CARES Act, partially offset by the effects of
COVID-19.
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 1Q20 Adjusted net income from continuing operations
available to its common shareholders rose to $135 million, or $1.28
per diluted share, compared to $63 million or $0.60 per diluted
share, in 1Q19. These results reflected the same factors impacting
results from continuing operations attributable to common
shareholders noted above, with the 1Q20 tax benefit to Adjusted net
income from continuing operations associated with the increase in
deductibility of interest expense discussed above being $86
million, or $0.81 per diluted share.
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.
- The Company's Adjusted EBITDA through February 2020 was $40
million ahead of its year-to-date plan. However, due to the
COVID-19 impact in the latter half of March, Adjusted EBITDA was
$585 million in 1Q20 compared to $623 million in 1Q19, a decrease
of $38 million, or 6.1 percent. The Company estimates that COVID-19
negatively impacted its 1Q20 Adjusted EBITDA by approximately $125
million. On April 2, 2020, the Company withdrew its 1Q20 and
full-year Outlook guidance (mid-point of $650 million) due to the
COVID-19 impact.
Hospital Operations and Other Segment
Results
Tenet’s Hospital Operations and other business segment (Hospital
segment) is comprised of acute care and specialty hospitals,
ancillary outpatient facilities, freestanding urgent care centers
(nearly all which are managed by USPI and operated under the
MedPost brand), micro-hospitals and physician practices.
Hospital segment results ($ in
millions)
1Q20
1Q19
Net operating revenues
$3,834
$3,862
Same-hospital net patient services
revenues (a)
$3,542
$3,557
Adjusted EBITDA
$342
$347
Same-hospital admissions decline (a)
(4.5)%
(0.1)%
Same-hospital adjusted admissions
(decline) growth (a)(b)
(4.9)%
0.6%
Prior period amounts have been recast to
reflect the Company's change in accounting for its medical
malpractice and workers' compensation actuarial liabilities, As
permitted by U.S. GAAP, these liabilities are now reported on an
undiscounted basis, whereas they were previously reported on a
discounted basis.
(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 March
31, 2020. Revenues and volumes for any hospitals acquired or
disposed of during that time frame are excluded.
(b)
Adjusted patient 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 segment were $3.834
billion in 1Q20, a decline of 0.7 percent from $3.862 billion in
1Q19. The decrease in revenue was primarily due to revenue growth
on a same-hospital basis through February 2020 being offset by the
impact of COVID-19 during March 2020.
- Revenues included $58 million from the California Provider Fee
program in 1Q20 compared to $65 million in 1Q19.
- On a same-hospital basis, net patient service revenues were
$3.542 billion in 1Q20, a decline of 0.4 percent from $3.557
billion in 1Q19.
- The impact of COVID-19 on the Company's same-hospital volumes
in March 2020 versus the comparable period in 2019 follows:
Jan. - Feb. 2020
Month of March 2020
1Q20
Admissions
1.1%
(15.2)%
(4.5)%
Adjusted admissions
1.7%
(17.6)%
(4.9)%
ER visits
6.0%
(16.2)%
(1.7)%
Hospital surgeries
0.4%
(21.1)%
(6.9)%
- Admissions, ER visits and surgeries in the back half of March
2020 were lower than the comparable period last year by
approximately 25 percent, 27 percent and 38 percent, respectively,
due to COVID-19.
- Net revenue per adjusted admission increased 4.7 percent
year-over-year for 1Q20 primarily reflecting higher patient acuity
for the volumes retained, as well as negotiated rate
increases.
Operating Expenses
- Selected operating expenses in the segment increased 5.5
percent on a per-adjusted-admission basis in 1Q20 reflecting higher
supply costs for personal protective equipment, the decline in
volumes associated with COVID-19 and a higher patient length of
stay. Selected operating expenses include salaries, wages and
benefits, supplies and other operating expenses.
Earnings
- Adjusted EBITDA in the segment was $342 million in 1Q20, a
decrease of 1.4 percent compared to $347 million in 1Q19. The
Adjusted EBITDA margin was 8.9 percent in 1Q20 compared to 9.0
percent in 1Q19.
Ambulatory Care Segment
Results
Tenet’s Ambulatory Care business segment is comprised of the
operations of USPI. As of March 31, 2020, USPI had interests in 265
ambulatory surgery centers, 39 urgent care centers (nearly all of
which operate under the CareSpot brand), 23 imaging centers and 24
surgical hospitals in 27 states. The Company owns 95 percent of
USPI.
Ambulatory Care segment results ($
in millions)
1Q20
1Q19
Net operating revenues
$490
$480
Same-facility system-wide net patient
services revenues (c)
$1,019
$1,035
Adjusted EBITDA
$156
$177
Adjusted EBITDA less facility-level
NCI
$100
$112
Same-facility system-wide surgical cases
(decline) growth
(8.5)%
2.8%
Same-facility system-wide total ambulatory
cases (decline) growth
(4.3)%
0.9%
(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 351 facilities at March
31, 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 Care segment produced net operating revenues of
$490 million in 1Q20, an increase of 2.1 percent compared to $480
million in 1Q19 despite the COVID-19 impact.
- On a same-facility system-wide basis, revenues decreased 1.5
percent in 1Q20, with cases decreasing 4.3 percent and revenue per
case increasing 2.9 percent.
- In the surgical business, which represents the majority of
segment revenues, same-facility system-wide revenues declined 1.6
percent in 1Q20, with cases down 8.5 percent and revenue per case
up 7.6 percent reflecting the shift to higher acuity cases as less
critical elective cases were deferred due to COVID-19, as well as
negotiated rate increases.
- The impact of COVID-19 on the Company's same-facility
system-wide volumes are shown in March versus the comparable period
in 2019 as follows:
Jan. - Feb. 2020
Month of March 2020
1Q20
Surgical cases growth (decline)
2.0%
(28.6)%
(8.5)%
- Same-facility system-wide surgical cases in the back half of
March 2020 were lower than the comparable period last year by
approximately 53 percent due to COVID-19.
Earnings
- Segment Adjusted EBITDA of $156 million in 1Q20, was down 11.9
percent from $177 million in 1Q19; Adjusted EBITDA less
facility-level noncontrolling interest (NCI) was $100 million, down
10.7 percent from $112 million in 1Q19.
Conifer Segment Results
Tenet’s Conifer business segment provides healthcare business
process services in the areas of hospital and physician revenue
cycle management as well as value-based care solutions to
healthcare systems, individual hospitals, physician practices,
self-insured organizations, healthcare plans and other
entities.
Conifer segment results ($ in
millions)
1Q20
1Q19
Net operating revenues
$332
$349
Adjusted EBITDA
$87
$99
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 1Q20, as anticipated, Conifer segment revenues declined
4.9 percent to $332 million, from $349 million in 1Q19, primarily
due to client attrition as a result of hospital divestitures by
both Tenet and other clients. Revenues from third-party clients
declined 3.4 percent to $196 million in 1Q20 from $203 million in
1Q19.
Earnings
- Conifer generated $87 million of Adjusted EBITDA in 1Q20, down
12.1 percent from $99 million in 1Q19, but in line with the
Company's expectation for the quarter. Adjusted EBITDA margins were
26.2 percent in 1Q20 compared to 28.4 percent in 1Q19.
Balance Sheet, Cash Flows and
Liquidity
Balance Sheet Highlights
($ in millions)
March 31, 2020
December 31, 2019
Cash and cash equivalents
$613
$262
Accounts receivable days outstanding
60.7
58.4
Line-of-credit borrowings outstanding
$500
$0
Ratio of net debt to Adjusted EBITDA
(d)
5.44
5.35
(d) Net debt is total debt less cash and
cash equivalents
- Cash and cash equivalents at March 31, 2020 were $351 million
higher than at December 31, 2019 as the Company maintained excess
cash to ensure sufficient liquidity given the COVID-19 operational
pressures. As of May 1, 2020, the Company had approximately $2.2
billion of excess cash available.
- The Company had $500 million in outstanding borrowings on its
$1.5 billion credit line as of March 31, 2020. However, in April
2020 the Company repaid those outstanding borrowings and announced
that it amended its line-of-credit agreement to increase the
borrowing capacity from $1.5 billion to $1.9 billion.
Cash flows and liquidity
Reconciliations of net cash provided by operating activities to
both Free Cash Flow and Adjusted Free Cash Flow are contained in
Table #3 at the end of this release.
($ in millions)
1Q20
1Q19
Net cash provided by operating
activities
$129
$10
Capital expenditures
$(182)
$(192)
Free cash flow
$(53)
$(182)
Adjusted free cash flow
$15
$(148)
Net cash used in investing activities
$(204)
$(139)
Net cash provided by (used in) financing
activities
$426
$(30)
- Net cash provided by operating activities for 1Q20 increased
$119 million compared to 1Q19 primarily driven by a $74 million
decrease in the Company's 401(k) match funding, a $36 million
increase in payments for restructuring charges, acquisition-related
costs and litigation and settlements, as well as the timing of
other working capital changes.
- Free Cash Flow in 1Q20, increased $129 million compared to
1Q19.
- Adjusted Free Cash Flow in 1Q20 improved $163 million compared
to 1Q19.
- Net cash used in investing activities increased $65 million
compared to 1Q19 primarily due to $53 million of additional
investments to acquire interests in various ambulatory surgery
centers.
- Net cash provided by financing activities increased $456
million in 1Q20 versus the 1Q19 use of cash primarily due to
borrowings under the Company's line-of-credit facility.
- During April 2020, the Company took a number of steps to
enhance its liquidity given the challenges associated with the
COVID-19 environment, including:
- Completing a $700 million first-lien secured notes offering in
early April 2020.
- The Company applying for Medicare accelerated advance payments
and receiving approximately $1.5 billion of such payments in April.
These advances will have to be repaid within the next year.
- The receipt of grant funds authorized by stimulus legislation,
including the CARES Act, which was enacted at the end of March
2020. In April 2020, the Company received approximately $345
million of grant aid associated with the $50 billion distributed to
providers across the country from the $175 billion of grant aid
earmarked for health care providers under the stimulus legislation.
The Company does not have to repay the grant aid as long as the
terms and conditions of the grants are met.
- The CARES Act also included other provisions that will enhance
the Company’s liquidity in the near term, including:
- Suspension of the 2 percent Medicare sequestration revenue
reductions through the end of 2020. This change will result in
additional revenue and cash flow for the Company in 2020 of
approximately $67 million, which the Company does not have to
repay. The 2 percent sequestration revenue reduction resumes again
in 2021.
- Suspension of the previously scheduled Medicaid
disproportionate share (DSH) revenue reductions mandated under the
Affordable Care Act until December 2020 are estimated to add
approximately $60 million in revenue and cash flow for the Company
in 2020, which the Company does not have to repay.
- Deferral of the 6.2 percent social security payroll tax match.
The Company expects that this will result in it not having to fund
approximately $250 million of payroll taxes in 2020. The Company
will have to repay half of this amount (~$125 million) in December
2021 and the other half in December 2022.
- An increase in Medicare inpatient payment rates of 20 percent
for treating COVID-19 patients.
- Federal match funding of traditional state Medicaid programs
(FMAP match) has been increased 6.2 percent, which should result in
additional Medicaid payment rates to providers.
- Other tax-related changes that are expected to increase the
Company's net operating loss (NOL) carryforwards for tax purposes
since the interest expense deduction limitation has been reduced
for 2019 and 2020.
- There was no impact on the Company’s financial statements for
the three-month period ended March 31, 2020 related to funds
received in April 2020 under the CARES Act.
Management’s Webcast Discussion of
Results and Outlook
Tenet management will discuss the Company’s 1Q20 results in a
webcast scheduled for 10:00 a.m. Eastern Time (9:00 a.m. Central
Time) on May 5, 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 May 4, 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 recent outbreak 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 113,000
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 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 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
1Q20 Earnings Release
Table of Contents
Description
Page
Consolidated Statements of Operations -
quarters
13
Consolidated Balance Sheets
14
Consolidated Statements of Cash Flows
15
Segment Reporting
16
Table #1 - Reconciliations of Net Income
to Adjusted Net Income
17
Table #2 - Reconciliations of Net Income
to Adjusted EBITDA
18
Table #3 - Reconciliations of Net Cash
Provided by Operating Activities to Free Cash Flow and Adjusted
Free Cash Flows
19
TENET HEALTHCARE
CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(Dollars in millions except per share
amounts)
Three Months Ended March
31,
2020
%
2019
%
Change
Net operating revenues
$
4,520
100.0
%
$
4,545
100.0
%
(0.6
)%
Equity in earnings of unconsolidated
affiliates
28
0.6
%
34
0.7
%
(17.6
)%
Operating expenses:
Salaries, wages and benefits
2,187
48.4
%
2,151
47.3
%
1.7
%
Supplies
763
16.9
%
741
16.3
%
3.0
%
Other operating expenses, net
1,013
22.4
%
1,065
23.4
%
(4.9
)%
Depreciation and amortization
203
4.5
%
208
4.6
%
Impairment and restructuring charges, and
acquisition-related costs
55
1.2
%
19
0.4
%
Litigation and investigation costs
2
—
%
13
0.3
%
Net (gains) losses on sales, consolidation
and deconsolidation of facilities
(2
)
—
%
1
—
%
Operating income
327
7.2
%
381
8.4
%
Interest expense
(243
)
(251
)
Other non-operating income, net
1
1
Loss from early extinguishment of debt
—
(47
)
Income from continuing operations,
before income taxes
85
84
Income tax benefit (expense)
75
(20
)
Income from continuing operations,
before discontinued operations
160
64
Discontinued operations:
(Loss) income from operations
(1
)
10
Income tax expense
—
(2
)
(Loss) income from discontinued
operations
(1
)
8
Net income
159
72
Less: Net income available to
noncontrolling interests
66
84
Net income available (loss
attributable) to Tenet Healthcare Corporation common
shareholders
$
93
$
(12
)
Amounts available (attributable) to
Tenet Healthcare Corporation common shareholders
Income (loss) from continuing operations,
net of tax
$
94
$
(20
)
(Loss) income from discontinued
operations, net of tax
(1
)
8
Net income available (loss
attributable) to Tenet Healthcare
Corporation common shareholders
$
93
$
(12
)
Earnings (loss) per share available
(attributable) to Tenet Healthcare Corporation common
shareholders:
Basic
Continuing operations
$
0.90
$
(0.19
)
Discontinued operations
(0.01
)
0.08
$
0.89
$
(0.11
)
Diluted
Continuing operations
$
0.89
$
(0.19
)
Discontinued operations
(0.01
)
0.08
$
0.88
$
(0.11
)
Weighted average shares and dilutive
securities outstanding
(in thousands):
Basic
104,353
102,788
Diluted*
105,733
102,788
*Had the Company generated income from
continuing operations in the three months ended March 31, 2019, the
effect of employee stock options, restricted stock units and
deferred compensation units on the diluted shares calculation would
have been an increase of 1,753 thousand shares.
Prior period amounts have been recast to
reflect the Company's change in accounting for its medical
malpractice and workers' compensation actuarial liabilities, As
permitted by U.S. GAAP, these liabilities are now reported on an
undiscounted basis, whereas they were previously reported on a
discounted basis.
TENET HEALTHCARE
CORPORATION
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
March 31,
December 31,
(Dollars in millions)
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
$
613
$
262
Accounts receivable
2,722
2,743
Inventories of supplies, at cost
324
310
Income tax receivable
18
10
Assets held for sale
394
387
Other current assets
1,317
1,369
Total current assets
5,388
5,081
Investments and other assets
2,467
2,369
Deferred income taxes
263
183
Property and equipment, at cost, less
accumulated depreciation and amortization
6,786
6,878
Goodwill
7,308
7,252
Other intangible assets, at cost, less
accumulated amortization
1,611
1,602
Total assets
$
23,823
$
23,365
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt
$
165
$
171
Accounts payable
1,079
1,204
Accrued compensation and benefits
788
877
Professional and general liability
reserves
279
330
Accrued interest payable
306
245
Liabilities held for sale
49
44
Other current liabilities
1,429
1,334
Total current liabilities
4,095
4,205
Long-term debt, net of current portion
15,082
14,580
Professional and general liability
reserves
638
635
Defined benefit plan obligations
547
560
Deferred income taxes
27
27
Other long-term liabilities
1,405
1,415
Total liabilities
21,794
21,422
Commitments and contingencies
Redeemable noncontrolling interests in
equity of consolidated subsidiaries
1,526
1,506
Equity:
Shareholders’ equity:
Common stock
7
7
Additional paid-in capital
4,739
4,760
Accumulated other comprehensive loss
(256
)
(257
)
Accumulated deficit
(2,434
)
(2,513
)
Common stock in treasury, at cost
(2,414
)
(2,414
)
Total shareholders’ deficit
(358
)
(417
)
Noncontrolling interests
861
854
Total equity
503
437
Total liabilities and equity
$
23,823
$
23,365
TENET HEALTHCARE
CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOW
(Unaudited)
Quarters Ended
(Dollars in millions)
March 31,
2020
2019
Net income
$
159
$
72
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization
203
208
Deferred income tax (benefit) expense
(79
)
22
Stock-based compensation expense
13
11
Impairment and restructuring charges, and
acquisition-related costs
55
19
Litigation and investigation costs
2
13
Net losses (gains) on sales, consolidation
and deconsolidation of facilities
(2
)
1
Loss from early extinguishment of debt
—
47
Equity in earnings of unconsolidated
affiliates, net of distributions received
(11
)
3
Amortization of debt discount and debt
issuance costs
10
11
Pre-tax loss (income) from discontinued
operations
1
(10
)
Other items, net
2
(7
)
Changes in cash from operating assets
and liabilities:
Accounts receivable
14
(158
)
Inventories and other current assets
23
(115
)
Income taxes
2
9
Accounts payable, accrued expenses and
other current liabilities
(144
)
(119
)
Other long-term liabilities
(51
)
37
Payments for restructuring charges,
acquisition-related costs, and litigation costs and
settlements
(68
)
(32
)
Net cash used in operating activities
from discontinued operations, excluding income taxes
—
(2
)
Net cash provided by operating
activities
129
10
Cash flows from investing
activities:
Purchases of property and equipment —
continuing operations
(182
)
(192
)
Purchases of businesses or joint venture
interests, net of cash acquired
(55
)
(2
)
Proceeds from sales of facilities and
other assets — continuing operations
11
41
Proceeds from sales of facilities and
other assets — discontinued operations
—
17
Proceeds from sales of marketable
securities, long-term investments and other assets
10
4
Purchases of marketable securities and
equity investments
(4
)
(4
)
Other long-term assets
(2
)
(2
)
Other items, net
18
(1
)
Net cash used in investing
activities
(204
)
(139
)
Cash flows from financing
activities:
Repayments of borrowings under credit
facility
(240
)
(495
)
Proceeds from borrowings under credit
facility
740
685
Repayments of other borrowings
(48
)
(1,620
)
Proceeds from other borrowings
7
1,507
Debt issuance costs
(1
)
(18
)
Distributions paid to noncontrolling
interests
(76
)
(74
)
Proceeds from sale of noncontrolling
interests
2
4
Purchases of noncontrolling interests
—
(3
)
Proceeds from exercise of stock options
and employee stock purchase plan
2
1
Other items, net
40
(17
)
Net cash provided by (used in)
financing activities
426
(30
)
Net increase (decrease) in cash and cash
equivalents
351
(159
)
Cash and cash equivalents at beginning of
period
262
411
Cash and cash equivalents at end of
period
$
613
$
252
Supplemental disclosures:
Interest paid, net of capitalized
interest
$
(172
)
$
(158
)
Income tax (payments) refunds, net
$
(3
)
$
9
TENET HEALTHCARE
CORPORATION
SEGMENT REPORTING
(Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
2020
2019
Net operating revenues:
Hospital Operations and other total prior
to inter-segment eliminations
$
3,834
$
3,862
Ambulatory Care
490
480
Conifer
Tenet
136
146
Other clients
196
203
Total Conifer revenues
332
349
Inter-segment eliminations
(136
)
(146
)
Total
$
4,520
$
4,545
Equity in earnings of unconsolidated
affiliates:
Hospital Operations and other
$
2
$
3
Ambulatory Care
26
31
Total
$
28
$
34
Adjusted EBITDA:
Hospital Operations and other
$
342
$
347
Ambulatory Care
156
177
Conifer
87
99
Total
$
585
$
623
Capital expenditures:
Hospital Operations and other
$
167
$
170
Ambulatory Care
11
20
Conifer
4
2
Total
$
182
$
192
Prior period amounts have been recast to
reflect the Company's change in accounting for its medical
malpractice and workers' compensation actuarial liabilities, As
permitted by U.S. GAAP, these liabilities are now reported on an
undiscounted basis, whereas they were previously reported on a
discounted basis.
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
(Unaudited)
(Dollars in millions except per share
amounts)
1Q20
1Q19
Net income available (loss
attributable) to Tenet Healthcare Corporation common
shareholders
$
93
$
(12
)
Net (loss) income from discontinued
operations
(1
)
8
Net income (loss) from continuing
operations
94
(20
)
Less: Impairment and restructuring
charges, and acquisition-related costs
(55
)
(19
)
Litigation and investigation costs
(2
)
(13
)
Net gains (losses) on sales, consolidation
and deconsolidation of facilities
2
(1
)
Loss from early extinguishment of debt
—
(47
)
Loss from divested and closed
businesses
—
(1
)
Noncontrolling interest impact
—
—
Tax impact of above items
14
(2
)
Adjusted net income available from
continuing operations to common shareholders
$
135
$
63
Diluted earnings (loss) per share from
continuing operations
$
0.89
$
(0.19
)
Less: Impairment and restructuring
charges, and acquisition-related costs
(0.52
)
(0.18
)
Litigation and investigation costs
(0.02
)
(0.12
)
Net gains (losses) on sales, consolidation
and deconsolidation of facilities
0.02
(0.01
)
Loss from early extinguishment of debt
—
(0.45
)
Loss from divested and closed
businesses
—
(0.01
)
Noncontrolling interest impact
—
—
Tax impact of above items
0.13
(0.02
)
Adjusted diluted earnings per share
from continuing operations
$
1.28
$
0.60
Weighted average basic shares
outstanding (in thousands)
104,353
102,788
Weighted average dilutive shares
outstanding (in thousands)
105,733
104,541
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
(Unaudited)
(Dollars in millions)
1Q20
1Q19
Net income available (loss
attributable) to Tenet Healthcare Corporation common
shareholders
$
93
$
(12
)
Less: Net income available to
noncontrolling interests
(66
)
(84
)
(Loss) income from discontinued
operations, net of tax
(1
)
8
Income from continuing operations
160
64
Income tax benefit (expense)
75
(20
)
Loss from early extinguishment of debt
—
(47
)
Other non-operating income, net
1
1
Interest expense
(243
)
(251
)
Operating income
327
381
Litigation and investigation costs
(2
)
(13
)
Net gains (losses) on sales, consolidation
and deconsolidation of facilities
2
(1
)
Impairment and restructuring charges, and
acquisition-related costs
(55
)
(19
)
Depreciation and amortization
(203
)
(208
)
Loss from divested and closed
businesses
—
(1
)
Adjusted EBITDA
$
585
$
623
Net operating revenues
$
4,520
$
4,545
Net income available (loss
attributable) to Tenet Healthcare Corporation common shareholders
as a % of net operating revenues
2.1
%
(0.3
)%
Adjusted EBITDA as a % of net operating
revenues (Adjusted EBITDA margin)
12.9
%
13.7
%
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)
1Q20
1Q19
Net cash provided by operating
activities
$
129
$
10
Purchases of property and equipment
(182
)
(192
)
Free cash flow
$
(53
)
$
(182
)
Net cash used in investing
activities
$
(204
)
$
(139
)
Net cash provided by (used in)
financing activities
$
426
$
(30
)
Net cash provided by operating
activities
$
129
$
10
Less: Payments for restructuring charges,
acquisition-related costs, and litigation costs and settlements
(68
)
(32
)
Net cash used in operating activities from
discontinued operations
—
(2
)
Adjusted net cash provided by operating
activities from continuing operations
197
44
Purchases of property and equipment
(182
)
(192
)
Adjusted free cash flow – continuing
operations
$
15
$
(148
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200504005703/en/
Investor Contact Regina Nethery 469-893-2387
regina.nethery@tenethealth.com
Media Contact Lesley Bogdanow 469-893-2640
mediarelations@tenethealth.com
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