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Tenet Reports Fourth Quarter Adjusted EBITDA Of $336 Million, An Increase Of 16.7%

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

The reconciliation of net income (loss) attributable to Tenet Healthcare Corporation common shareholders, the most comparable GAAP term, to Adjusted EBITDA, is set forth in the first table below for the three and twelve months ended December 31, 2012 and 2011.

(2) Adjusted Free Cash Flow

Adjusted Free Cash Flow, a non-GAAP term, is defined by the Company as cash provided by (used in) operating activities less payments against reserves for restructuring charges and litigation costs, operating cashflows from discontinued operations, capital expenditures in continuing operations, and new hospital construction expenditures. The Company believes the use of Adjusted Free Cash Flow is meaningful as the use of this financial measure provides the Company and the users of its financial statements with supplemental information about the impact on the Company’s cash flows from the items specified above. The Company provides this information as a supplement to GAAP information to assist itself and investors in understanding the impact of various items on its cash flows, some of which are recurring. The Company uses this information in its analysis of its cash flows excluding items that it does not consider relevant to the liquidity of its hospitals in continuing operations. In addition, from time to time we use this measure to define certain performance targets under our compensation programs. Adjusted Free Cash Flow is a measure of liquidity that management uses in its business as an alternative to net cash provided by (used in) operating activities. Because Adjusted Free Cash Flow excludes many items that are included in our financial statements, it does not provide a complete measure of our liquidity. Accordingly, investors are encouraged to use GAAP measures when evaluating the Company’s financial performance or liquidity. The reconciliation of net cash provided by (used in) operating activities, the most comparable GAAP term, to Adjusted Free Cash Flow is set forth in the second table below for the three and twelve months ended December 31, 2012 and 2011.

 
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP Disclosures

Table #1 - Reconciliation of Adjusted EBITDA to Net Income Attributable to Tenet Healthcare Corporation Common Shareholders

(Unaudited)
 
(Dollars in millions)   Three Months Ended December 31,   Year Ended December 31,
2012   2011 2012   2011
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ 49 $ (76 ) $ 141 $ 58
Less: Net (income) loss attributable to noncontrolling interests (5 ) (4 ) 19 (12 )
Preferred stock dividends (6 ) (11 ) (24 )
Loss from discontinued operations, net of tax   (8 )   (16 )   (76 )   (9 )
Income (loss) from continuing operations 62 (50 ) 209 103
Income tax (benefit) expense (35 ) 12 (125 ) (61 )
Investment earnings (loss) (1 ) 0 1 3
Loss from early extinguishment of debt (4 ) (117 ) (4 ) (117 )
Interest expense   (109 )   (100 )   (412 )   (375 )
Operating income 211 155 749 653
Litigation and investigation costs (2 ) (31 ) (5 ) (55 )
Impairment of long-lived assets and goodwill, and restructuring charges, net (7 ) (2 ) (19 ) (20 )
Depreciation and amortization   (116 )   (100 )   (430 )   (398 )
Adjusted EBITDA $ 336   $ 288   $ 1,203   $ 1,126  
 
Net operating revenues $ 2,331   $ 2,172   $ 9,119   $ 8,654  
 
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) 14.4 % 13.3 % 13.2 % 13.0 %
 
 
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP Disclosures
Table #2 - Reconciliation of Adjusted Free Cash Flow
(Unaudited)
 
(Dollars in millions) Three Months Ended December 31, Year Ended December 31,
2012 2011 2012 2011
Net cash provided by operating activities $ 256 $ 173 $ 593 $ 497
Less: Payments against reserves for restructuring charges and litigation costs (7 ) (17 ) (63 ) (44 )
Net cash used in operating activities from discontinued operations   (16 )   (4 )   (35 )   (38 )
Adjusted net cash provided by operating activities – continuing operations 279 194 691 579
Purchases of property and equipment – continuing operations   (148 )   (173 )   (506 )   (467 )
Adjusted free cash flow – continuing operations $ 131   $ 21   $ 185   $ 112  
 
   
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP Disclosures
Table #3 - Reconciliation of Outlook Adjusted EBITDA to

Outlook Net Income Attributable to Tenet Healthcare Corporation Common Shareholders

for the Year Ending December 31, 2013

(Unaudited)
 
(Dollars in millions) 2013
Low High
Net income attributable to Tenet Healthcare Corporation common shareholders $ 118 $ 234

Less:

Net (income) loss attributable to noncontrolling interests

(25 ) (15 )
Loss from discontinued operations, net of tax   (5 )   0  
Income from continuing operations $ 148 $ 249
Income tax expense (a)   (87 )   (146 )
Income from continuing operations, before income taxes $ 235 $ 395
Interest expense, net (415 ) (395 )
Loss from early extinguishment of debt   (185 )   (175 )
Operating income $ 835 $ 965
Depreciation and amortization   (490 )   (460 )
Adjusted EBITDA $ 1,325   $ 1,425  
 
Net operating revenues $ 9,800   $ 10,100  
 
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) 13.5 % 14.1 %
 
(a) Uses tax rate of 37% excluding unusual adjustments
 
 
TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP Disclosures

Table #4 - Reconciliation of Outlook Adjusted EBITDA to

Outlook Normalized Income from Continuing Operations

for the Year Ending December 31, 2013

(Unaudited)
 
(Dollars in millions except per share amounts) 2013
Low High
Adjusted EBITDA (from Table #3) $ 1,325 $ 1,425

Depreciation and amortization

(490 ) (460 )
Interest expense, net   (415 )   (395 )
Normalized income from continuing operations before income taxes $ 420 $ 570
Income tax expense (a)   (155 )   (211 )

Normalized income from continuing operations

$ 265 $ 359
Net (income) loss attributable to noncontrolling interests   (25 )   (15 )
Normalized net income attributable to common shareholders $ 240   $ 344  
 
Fully Diluted weighted average share outstanding (in millions) 104 104
 
Normalized fully diluted earnings per share – continuing operations $ 2.31 $ 3.31
 
(a) Uses tax rate of 37% excluding unusual adjustments
 
 

TENET HEALTHCARE CORPORATIONAdditional Supplemental Non-GAAP Disclosures Table 5 - Reconciliation of Outlook Adjusted Free Cash Flow for the Year Ending December 31, 2013

(Unaudited)
 
(Dollars in millions)   2013
Low   High
Net cash provided by operating activities $ 725 $ 845

Less:

Payments against reserves for restructuring charges and litigation costs

(20 ) (10 )
Net cash used in operating activities from discontinued operations   (30 )   (20 )
Adjusted net cash provided by operating activities – continuing operations $ 775 $ 875
Purchases of property and equipment – continuing operations   (600 )   (550 )
Adjusted free cash flow – continuing operations $ 175   $ 325  
 




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