Full Press Release Details
Tenet Reports Results for the First Quarter Ended March 31, 2016
2, 2016 Tenet Healthcare Corporation (NYSE:THC) reported Adjusted EBITDA of $613 million for the first quarter of 2016, an increase of $84 million, or 15.9 percent, compared to $529 million in the first quarter of 2015.
I am delighted with Tenet s very strong start to 2016. Our hospitals and outpatient centers generated strong growth, and the benefits of our
diversified strategy are becoming increasingly evident, said Trevor Fetter, chairman and chief executive officer. Adjusted EBITDA was ahead of our Outlook range for the first quarter, putting us on a solid path to deliver our 2016
Hospital Operations and Other Segment
Net operating revenue in the hospital operations and other segment increased to $4.397 billion, up 5.9 percent from $4.151 billion in the first quarter of
2015. On a same-hospital basis, patient revenue increased to $4.016 billion, up 6.0 percent from $3.790 billion in the first quarter of 2015. The increase was driven by a 2.2 percent increase in adjusted patient admissions and a 3.7
percent increase in net patient revenue per adjusted admission.
Adjusted EBITDA in Tenet s hospital segment was $414 million, representing a decline of 1.0 percent as
compared to $418 million in the first quarter of 2015. The decline was primarily driven by divestitures and a decline in electronic health record incentives, and was partially offset by acquisitions. After adjusting for these items, hospital segment
EBITDA increased approximately 8 percent.
Total hospital segment selected operating expenses, defined as the sum of salaries, wages and benefits,
supplies and other operating expenses, increased 2.5 percent per adjusted admission in the quarter.
Tenet s same-hospital exchange admissions were 5,351 in the first quarter of 2016, up 27.6 percent from the first quarter of 2015. Same-hospital exchange
outpatient visits were 46,058, up 45.9% from the first quarter of 2015.
Tenet s bad debt expense ratio was 6.9 percent of revenues before bad debt in the first quarter of 2016, down from 7.6 percent in the first quarter of
2015. Uncompensated care represented 20.6 percent of adjusted revenue in the first quarter of 2016, down from 21.8 percent in the first quarter of 2015. Tenet s uncompensated care cost was $1.309 billion and $1.236 billion in the first quarters
of 2016 and 2015, respectively, including $933 million and $873 million, respectively, of charity care write-offs and uninsured discounts that were offered through Tenet s Compact with Uninsured Patients. Nearly all of Tenet s
uncompensated care is associated with the hospital segment.
Uninsured plus charity admissions declined by 374 admissions, or 3.8 percent on a
same-hospital basis in the first quarter of 2016 compared to the first quarter of 2015. Uninsured plus charity outpatient visits increased by 2,093 visits, or 1.5 percent.
The results of many of the facilities
in which the Ambulatory segment has an investment are not consolidated by Tenet. To help analyze results of operations, management uses system-wide measures which include revenues and cases of both consolidated and unconsolidated
facilities. Tenet s acquisition of a majority interest in USPI and all of Aspen on June 16, 2015 makes the year-over-year comparisons less meaningful since they were not owned for the entire year. In order to improve comparability, Tenet
is presenting the results for the ambulatory segment on a pro forma basis, including the results of USPI and Aspen in each comparable period.
first quarter of 2016, on a pro forma basis, the ambulatory segment delivered net operating revenue of $429 million, representing an increase of 45.4 percent as compared to $295 million in the first quarter of 2015. On a pro forma same-facility
system-wide basis, revenue in the ambulatory segment increased 11.0 percent, with cases increasing 8.6 percent and revenue per case increasing 2.2 percent.
Tenet s ambulatory segment generated Adjusted EBITDA of $136 million in the first quarter of 2016, up 44.7
percent from $94 million in the first quarter of 2015 on a pro forma basis. After subtracting $46 million and $27 million of net income attributable to noncontrolling interests in the first quarters of 2016 and 2015, respectively, and prior to
subtracting noncontrolling interests expense related to minority shareholders in the Company s USPI joint venture, Adjusted EBITDA less NCI increased 34.3 percent to $90 million in the first quarter of 2016, up from $67 million in the first
quarter of 2015. After subtracting an additional $11 million of noncontrolling interests expense in the first quarter of 2016 and $7 million in the first quarter of 2015 on a pro forma basis related to minority shareholders in the USPI joint
venture, Adjusted EBITDA less NCI increased 31.7 percent to $79 million in the first quarter of 2016, up from $60 million in the first quarter of 2015. The above noncontrolling interests amounts in the first quarter of 2016 exclude $18 million of
noncontrolling interests expense recorded by USPI related to $29 million of gains on the consolidation of certain businesses and an associated $7 million favorable income tax adjustment.
During the first quarter of 2016,
Conifer s revenue increased 12.6 percent to $385 million, up from $342 million in the first quarter of 2015. Excluding revenue from Tenet, Conifer s revenue from third party customers increased by 19.8 percent to $218 million. Conifer
generated $63 million of Adjusted EBITDA in the first quarter of 2016, representing an EBITDA margin of 16.4%. In the first quarter of 2015, Conifer generated $82 million of Adjusted EBITDA which included a non-recurring benefit from the extended
and expanded contract with Catholic Health Initiatives.
Net Income and Earnings Per Share
During the first quarter of 2016, Tenet generated Adjusted net income from continuing operations of $45 million, or $0.45 per diluted share. This excludes
$100 in after-tax expense for items such as impairment charges, restructuring charges, acquisition-related costs, litigation and investigation costs, gains on sales, consolidation and deconsolidation of facilities, and the related impact on
noncontrolling interests. During the first quarter of 2015, the company generated Adjusted net income from continuing operations of $67 million, or $0.67 per diluted share, excluding $21 million of after-tax expense for comparable items.
On a GAAP basis in the first quarter of 2016, including the results of both continuing and discontinued operations, Tenet reported a net loss of $59 million,
or $0.60 per share, compared to net income of $47 million, or $0.47 per diluted share, in the first quarter of 2015.
A reconciliation of GAAP net income
available (loss attributable) to Tenet Healthcare Corporation common shareholders to Adjusted net income and Adjusted diluted EPS is contained in Table #2.
Cash Flow and Liquidity
Cash and cash equivalents were $728 million at March 31, 2016 compared to $356 million at December 31, 2015. Tenet s cash and debt balances as of March
31, 2016 reflect the $575 million in cash proceeds that the company received from the sale of our Atlanta-area hospitals which was completed on March 31, 2016. The company had no outstanding borrowings on its $1 billion credit line as of March 31,
Accounts receivable days outstanding were 50.6 at March 31, 2016 compared to 49.5 at December 31, 2015. The increase in accounts receivable
days outstanding is primarily attributable to receivables that were retained from divested hospitals, including the transactions in Atlanta, North Carolina and St. Louis. Adjusted net cash provided by operating activities in the first quarter
of 2016 was $219 million, representing a $239 million improvement compared to a $20 million outflow in the first quarter of 2015. After subtracting $208 million and $184 million of capital expenditures in the first quarters of 2016 and 2015,
respectively, Adjusted Free Cash Flow was $11 million in the first quarter of 2016, representing a $215 million improvement compared to a $204 million outflow in the first quarter of 2015.
A reconciliation of net cash provided by (used in) operating activities to Adjusted Free Cash Flow from continuing operations is contained in Table #3.
Increase in Litigation Reserves
As previously disclosed,
the Company commenced discussions in January 2016 with the U.S. Department of Justice and the State of Georgia regarding potential resolution of the Clinica de la Mama criminal investigation and civil litigation. While these matters remain
unresolved, the Company now believes that it has made significant progress toward reaching an agreement in principle on the monetary terms of a global resolution. In the three months ended March 31, 2016, the Company increased its aggregate
reserve for the Clinica de la Mama criminal investigation and civil litigation from $238 million to $407 million to reflect an offer made to resolve the matters. This amount is reflected in the consolidated balance sheet as of March 31, 2016 as
accrued legal settlement costs. The increase in the reserve and other litigation costs lowered net income by approximately $135 million during the first quarter of 2016. For additional information, see Note 10 to the Consolidated Financial
Statements included in the Company s Form 10-Q for the quarter ended March 31, 2016.
The company confirmed its existing Outlook for 2016, including:
The Outlook for calendar year 2016 assumes equity in earnings of unconsolidated affiliates of $150 million to
$170 million, electronic health record incentives of $25 million to $35 million, net income attributable to noncontrolling interests of $320 million to $340 million (excluding the additional $18 million of noncontrolling interests recorded by USPI
in the first quarter of 2016, as discussed above) and an average diluted share count of 102 million.
During the second quarter of 2016, Tenet expects to
The Outlook for the second quarter assumes equity in
earnings of unconsolidated affiliates of approximately $30 million, electronic health record incentives of approximately $15 million, net income attributable to noncontrolling interests of $80 million to $90 million and an average diluted share
count of 102 million.
Additional details on Tenet s Outlook for both the second quarter and calendar year 2016 are available in Tables 4, 5 and 6 at
the end of this press release and in an accompanying slide presentation that is accessible through the company s website at www.tenethealth.com/investors.
Management s Webcast Discussion of First Quarter Results
Tenet management will discuss the Company s first quarter 2016 results on a webcast scheduled for 10:00 a.m. EDT (9:00 a.m. CDT) on May 3, 2016. Investors
can access the webcast through Tenet s website at www.tenethealth.com/investors. A set of slides, which will be referred to on the conference call, is available on the Quarterly Results section of the Company s website.
Additional information regarding Tenet s quarterly results of operations is contained in its Form 10-Q report for the three months ended March 31, 2016,
which will be filed with the Securities and Exchange Commission and posted on the Tenet website before the webcast. This press release includes certain non-GAAP measures, such as Adjusted EBITDA. A reconciliation of Adjusted EBITDA to net income
attributable to Tenet common shareholders is included in the financial tables at the end of this release.
Tenet Healthcare Corporation is a diversified
healthcare services company with 130,000 employees united around a common mission: to help people live happier, healthier lives. Through its subsidiaries, partnerships and joint ventures, including United Surgical Partners International, the
company operates 79 general acute care hospitals, 20 short-stay surgical hospitals and over 470 outpatient centers in the United States, as well as nine facilities in the United Kingdom. Tenet s Conifer Health Solutions subsidiary provides
technology-enabled performance improvement and health management solutions to hospitals, health systems, integrated delivery networks, physician groups, self-insured organizations and health plans. For more information, please visit
The terms THC , Tenet Healthcare Corporation , the company , we ,
us or our refer to Tenet Healthcare Corporation or one or more of its subsidiaries or affiliates as applicable.
This release contains forward-looking statements that is, statements that relate to future, not past,
events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as expect, assume, anticipate,
intend, plan, believe, seek, see, or will. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Particular uncertainties that
could cause our actual results to be materially different than those expressed in our forward-looking statements include, but are not limited to, the factors disclosed under Forward-Looking Statements and Risk Factors in our
Form 10-K for the year ended December 31, 2015 and other filings with the Securities and Exchange Commission. Among other things, these factors include adverse regulatory developments, government investigations or litigation, including any
significant monetary resolution or other undesirable consequences of the Clinica de la Mama qui tam action and criminal investigation described in Note 10 to the Consolidated Financial Statements included in our Form 10-Q for the three months
ended March 31, 2016. The terms of a final resolution, if any, of the Clinica de la Mama matter may require us to pay significant fines and penalties and give rise to other costs or adverse consequences that materially exceed the reserve we
have established and could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Tenet uses its company website to provide important information to investors about the company including the posting of important
announcements regarding financial performance and corporate developments.
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
| (Dollars in millions except per share amounts) | Three Months Ended March 31, | |||||||||||||||||||
| 2016 | % | 2015 | % | Change | ||||||||||||||||
| Net operating revenues: | ||||||||||||||||||||
| Net operating revenues before provision for doubtful accounts | $ | 5,420 | $ | 4,787 | 13.2 | % | ||||||||||||||
| Less: Provision for doubtful accounts | 376 | 363 | 3.6 | % | ||||||||||||||||
| Net operating revenues | 5,044 | 100.0 | % | 4,424 | 100.0 | % | 14.0 | % | ||||||||||||
| Equity in earnings of unconsolidated affiliates | 24 | 0.5 | % | 4 | 0.1 | % | 500.0 | % | ||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Salaries, wages and benefits | 2,402 | 47.6 | % | 2,125 | 48.0 | % | 13.0 | % | ||||||||||||
| Supplies | 811 | 16.1 | % | 687 | 15.5 | % | 18.0 | % | ||||||||||||
| Other operating expenses, net | 1,242 | 24.6 | % | 1,093 | 24.7 | % | 13.6 | % | ||||||||||||
| Electronic health record incentives | % | (6 | ) | (0.2 | )% | (100.0 | )% | |||||||||||||
| Depreciation and amortization | 212 | 4.2 | % | 207 | 4.7 | % | ||||||||||||||
| Impairment and restructuring charges, and acquisition-related costs | 28 | 0.6 | % | 29 | 0.7 | % | ||||||||||||||
| Litigation and investigation costs | 173 | 3.4 | % | 3 | 0.1 | % | ||||||||||||||
| Gains on sales, consolidation and deconsolidation of facilities | (147 | ) | (2.9 | )% | % | |||||||||||||||
| Operating income | 347 | 6.9 | % | 290 | 6.6 | % | ||||||||||||||
| Interest expense | (243 | ) | (199 | ) | ||||||||||||||||
| Investment earnings | 1 | |||||||||||||||||||
| Net income from continuing operations, before income taxes | 105 | 91 | ||||||||||||||||||
| Income tax expense | (67 | ) | (16 | ) | ||||||||||||||||
| Net income from continuing operations, before discontinued operations | 38 | 75 | ||||||||||||||||||
| Discontinued operations: | ||||||||||||||||||||
| Loss from operations | (5 | ) | (1 | ) | ||||||||||||||||
| Litigation and investigation costs | 3 | |||||||||||||||||||
| Income tax benefit (expense) | 1 | (1 | ) | |||||||||||||||||
| Net income (loss) from discontinued operations | (4 | ) | 1 | |||||||||||||||||
| Net income | 34 | 76 | ||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | 93 | 29 | ||||||||||||||||||
| Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders | $ | (59 | ) | $ | 47 | |||||||||||||||
| Amounts available (attributable) to Tenet Healthcare Corporation common shareholders | ||||||||||||||||||||
| Net income (loss) from continuing operations, net of tax | $ | (55 | ) | $ | 46 | |||||||||||||||
| Net income (loss) from discontinued operations, net of tax | (4 | ) | 1 | |||||||||||||||||
| Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders | $ | (59 | ) | $ | 47 | |||||||||||||||
| Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders: | ||||||||||||||||||||
| Basic | ||||||||||||||||||||
| Continuing operations | $ | (0.56 | ) | $ | 0.47 | |||||||||||||||
| Discontinued operations | (0.04 | ) | 0.01 | |||||||||||||||||
| $ | (0.60 | ) | $ | 0.48 | ||||||||||||||||
| Diluted | ||||||||||||||||||||
| Continuing operations | $ | (0.56 | ) | $ | 0.46 | |||||||||||||||
| Discontinued operations | (0.04 | ) | 0.01 | |||||||||||||||||
| $ | (0.60 | ) | $ | 0.47 | ||||||||||||||||
| Weighted average shares and dilutive securities outstanding (in thousands): | ||||||||||||||||||||
| Basic | 98,768 | 98,699 | ||||||||||||||||||
| Diluted* | 98,768 | 100,872 |
TENET HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
| (Dollars in millions) | March 31, 2016 | December 31, 2015 | ||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 728 | $ | 356 | ||||
| Accounts receivable, less allowance for doubtful accounts | 2,807 | 2,704 | ||||||
| Inventories of supplies, at cost | 312 | 309 | ||||||
| Income tax receivable | 7 | |||||||
| Assets held for sale | 2 | 550 | ||||||
| Other current assets | 1,280 | 1,245 | ||||||
| Total current assets | 5,129 | 5,171 | ||||||
| Investments and other assets | 1,142 | 1,175 | ||||||
| Deferred income taxes | 726 | 776 | ||||||
| Property and equipment, at cost, less accumulated depreciation and amortization | 7,961 | 7,915 | ||||||
| Goodwill | 7,122 | 6,970 | ||||||
| Other intangible assets, at cost, less accumulated amortization | 1,686 | 1,675 | ||||||
| Total assets | $ | 23,766 | $ | 23,682 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term debt | $ | 172 | $ | 127 | ||||
| Accounts payable | 1,228 | 1,380 | ||||||
| Accrued compensation and benefits | 772 | 880 | ||||||
| Professional and general liability reserves | 161 | 177 | ||||||
| Accrued interest payable | 307 | 205 | ||||||
| Liabilities held for sale | 101 | |||||||
| Accrued legal settlement costs | 423 | 294 | ||||||
| Other current liabilities | 1,205 | 1,144 | ||||||
| Total current liabilities | 4,268 | 4,308 | ||||||
| Long-term debt, net of current portion | 14,350 | 14,383 | ||||||
| Professional and general liability reserves | 623 | 578 | ||||||
| Defined benefit plan obligations | 593 | 595 | ||||||
| Other long-term liabilities | 625 | 594 | ||||||
| Total liabilities | 20,459 | 20,458 | ||||||
| Commitments and contingencies | ||||||||
| Redeemable noncontrolling interests in equity of consolidated subsidiaries | 2,381 | 2,266 | ||||||
| Equity: | ||||||||
| Shareholders equity: | ||||||||
| Common stock | 7 | 7 | ||||||
| Additional paid-in capital | 4,804 | 4,815 | ||||||
| Accumulated other comprehensive loss | (160 | ) | (164 | ) | ||||
| Accumulated deficit | (1,609 | ) | (1,550 | ) | ||||
| Common stock in treasury, at cost | (2,417 | ) | (2,417 | ) | ||||
| Total shareholders equity | 625 | 691 | ||||||
| Noncontrolling interests | 301 | 267 | ||||||
| Total equity | 926 | 958 | ||||||
| Total liabilities and equity | $ | 23,766 | $ | 23,682 |
TENET HEALTHCARE CORPORATION