Tenet Reports Fourth Quarter 2011 Results

Tenet Healthcare Corporation (NYSE: THC) today reported Adjusted EBITDA of $294 million for the fourth quarter ended December 31, 2011, an increase of $13 million, or 4.6 percent, compared to $281 million for the fourth quarter of 2010. The Adjusted EBITDA margin in the quarter was 13.2 percent, compared to 13.3 percent in the fourth quarter of 2010.

In the fourth quarter of 2011, the Company reported a net loss attributable to common shareholders of $76 million, or a loss of $0.17 per diluted share, compared to income of $74 million, or $0.14 per diluted share, in the fourth quarter of 2010. These results included a $117 million pre-tax loss from early extinguishment of debt incurred in relation to Tenet’s strategy to extend debt maturities and reduce future interest expense. Excluding impairment, litigation and investigation costs, loss from early extinguishment of debt, and valuation tax adjustments from both fourth quarters, income from continuing operations, net of tax, was $42 million, or $0.10 per diluted share, compared to $43 million, or $0.08 per diluted share, in the fourth quarter of 2010.

“We recorded our eighth consecutive year of growth in Adjusted EBITDA which grew to $1.145 billion in 2011, a 9.0 percent increase over 2010,” said Trevor Fetter, president and chief executive officer. “The growth would have been even stronger had we been able to close some of the favorable payer settlements we have been working on for a number of months. Because the settlements remain likely, we are raising our 2012 Outlook for Adjusted EBITDA to a new range of $1.225 billion to $1.350 billion. We also recorded our fifth consecutive quarter of growth in adjusted admissions which grew by 1.3 percent. The favorable growth in patient volumes, combined with strong pricing growth, enabled us to achieve a 5.4 percent increase in net operating revenues in the quarter.”

Discussion of Results (Percentage changes compare Q4’11 to Q4’10, unless otherwise noted.)

Adjusted admissions increased by 1.3 percent. Admissions increased by 0.3 percent, and paying admissions were flat. Emergency Departments visits increased by 3.1 percent, and there was a 3.3 percent increase in admissions through our Emergency Departments. Total surgeries increased by 3.2 percent with inpatient surgeries declining by 3.1 percent and outpatient surgeries increasing by 7.6 percent.

Net operating revenues were $2.226 billion, an increase of $115 million, or 5.4 percent, compared to net operating revenues of $2.111 billion in the fourth quarter of 2010. As a result of the Company’s early adoption of a new accounting standard, net operating revenues are now reported after a deduction for the provision for doubtful accounts. Under the Company’s prior reporting standard, net operating revenues would have been $2.411 billion, an increase of 4.8 percent, compared to $2.301 billion in the fourth quarter of 2010.

Net patient revenue per adjusted admission was $11,633, an increase of 2.3 percent, compared to $11,370 in the fourth quarter of 2010. This pricing increase reflects improved terms in our contracts with commercial managed care payers, partially offset by an adverse shift in payer mix.

Selected operating expenses, which is defined as the sum of salaries, wages and benefits, supplies and other operating expenses, increased by 6.5 percent on a per adjusted patient day basis in the fourth quarter of 2011. The increase is primarily due to annual merit increases, an increase in the number of physicians we employ, and higher health benefit costs for our employees. The comparison to last year’s fourth quarter was made more challenging by a $10 million favorable adjustment in that quarter related to the estimated recovery of payroll taxes paid in prior years on behalf of medical residents. Selected operating expenses were also adversely impacted by lower interest rates at quarter-end which contributed $14 million of increased expense between the fourth quarter of 2011 and 2010. Although claims experience for both malpractice and workers’ compensation expense continue to be favorable, lower interest rates increased the balances of these discounted liabilities. Supply costs were well-controlled, declining by $3 million, and were flat on a per adjusted patient day basis. Excluding the expenses from additional physician employment, the favorable payroll tax adjustment in the 2010 quarter, and expenses related to lower interest rates, the 6.5 percent increase in selected expenses per adjusted patient day would have been 4.4 percent.

Bad debt expense was $185 million, a decline of 2.6 percent, as compared to $190 million in the fourth quarter of 2010. Bad debt expense as a percent of revenues before provision for doubtful accounts declined to 7.7 percent, a decline of 60 basis points compared to 8.3 percent in the fourth quarter of 2010. The improvement in bad debt expense primarily was due to favorable adjustments related to updates to our estimates of collection rates in the fourth quarter of 2011 compared to unfavorable adjustments in the fourth quarter of 2010. The change in bad debt expense also was impacted favorably by deterioration in the age of managed care receivables in the fourth quarter of 2010 that did not occur in the fourth quarter of 2011.

Cash and cash equivalents were $113 million at December 31, 2011, a decrease of $72 million from $185 million at September 30, 2011. Cash used in the fourth quarter of 2011 included $178 million to repurchase 40.3 million shares of the Company’s common stock and $28 million for the purchase of five outpatient centers and certain assets related to acquired physician practices. Capital expenditures were $177 million in the fourth quarter of 2011, compared to $196 million in the fourth quarter of 2010. As of December 31, 2011, the Company had an outstanding balance of $80 million on its credit line.

Through December 31, 2011, the Company repurchased an aggregate total of 75.8 million shares of common stock since announcing its $400 million share repurchase program in May, 2011. These 75.8 million repurchased shares represent 15.5 percent of outstanding common shares at the time the program was initiated. The average repurchase price was $4.94 per share for a total expenditure of approximately $374 million. At December 31, 2011, there were 415 million shares of common stock outstanding. The full $400 million common stock repurchase program was completed in January 2012. In total, 81.1 million shares, or 17 percent of our outstanding shares, were repurchased at an average price of $4.94.

Outlook for Adjusted EBITDA

Tenet raised its 2012 Outlook for Adjusted EBITDA to a new range of $1.225 billion to $1.350 billion. Other than expected outpatient acquisitions, the Company’s 2012 Outlook represents purely organic growth.

Adjusted EBITDA in the first quarter of 2012 is expected to comprise approximately one-fifth of the Company’s total Adjusted EBITDA for the year. This reflects the expectation that the approximately $140 million in state provider fees will be recognized in the second half of the year. In addition, the expected ramp up of Tenet’s strategic initiatives, including cost efficiencies related to the Medicare Performance Initiative and incremental outpatient acquisitions, are expected to make more significant contributions to earnings in the second half of the year.

Tenet reconfirmed its 2013 Outlook range for Adjusted EBITDA of $1.335 billion to $1.535 billion. The 2015 Outlook range for Adjusted EBITDA, which includes the increased coverage of the uninsured pursuant to the Affordable Care Act, was reconfirmed at $1.75 billion to $2.25 billion.

Tenet’s statements on outlook constitute forward-looking information and are subject to the qualifications set forth at the end of this release.

Management’s Webcast Discussion of Fourth Quarter Results

Tenet management will discuss fourth quarter 2011 results on a webcast scheduled for 10:00 AM (ET) on February 28, 2012. This webcast may be accessed through Tenet’s website at www.tenethealth.com/investors. A set of slides that management intends to refer to on the call will be posted to the Company’s website at shortly before the start of the webcast.

Additional information regarding Tenet’s quarterly results of operations, including detailed tabular operational data, is contained in its Form 10-K report, which will be filed with the Securities and Exchange Commission and posted on the Tenet investor relations website before today’s 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, a premier health care services company, operates 50 hospitals, 99 free-standing outpatient centers and Conifer Health Solutions, a leader in business process solutions for health care providers that serves over 250 hospital and health care entities nationwide. Tenet’s hospitals and related health care facilities are committed to providing high quality care to patients in the communities they serve. For more information, please visit www.tenethealth.com.

This document 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,” “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 the factors disclosed under “Forward Looking Statements” and “Risk Factors” in our Form 10-K for the year ended December 31, 2011, our quarterly reports on Form 10-Q, periodic reports on Form 8-K and other filings with the Securities and Exchange Commission. The information contained in this earnings release and the attachments is as of February 28, 2012. The Company assumes no obligation to update forward-looking statements contained in this earnings release or the attachments as a result of new information or future events or developments.

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 OPERATIONS DATA
(Unaudited)
 
(Dollars in millions except per share amounts)   Three Months Ended December 31,
2011   %   2010   %   Change
 
Net operating revenues
Revenues before provision for doubtful accounts $ 2,411 $ 2,301 4.8 %
Less provision for doubtful accounts   185     190   (2.6

)%
Net operating revenues 2,226 100.0 % 2,111 100.0 % 5.4 %
Operating expenses:
Salaries, wages and benefits 1,029 46.2 % 967 45.8 % 6.4 %
Supplies 391 17.6 % 394 18.7 % (0.8

)%
Other operating expenses, net 517 23.2 % 469 22.2 % 10.2 %
Electronic Health Records Incentives (5 ) (0.2

)%
0 % %
Depreciation and amortization 105 4.7 % 101 4.8 % 4.0 %
Impairment of long-lived assets and goodwill, and restructuring charges, net 9 0.4 % 9 0.4 %
Litigation and investigation costs   31   1.4 %   6   0.3 %
Operating income 149 6.7 % 165 7.8 %
Interest expense (100 ) (101 )
Loss from early extinguishment of debt   (117 )   (2 )
Income (loss) from continuing operations, before income taxes (68 ) 62
Income tax benefit (expense)   12     (2 )

Income (loss) from continuing operations, before discontinued operations
(56 ) 60
Discontinued operations:
Income (loss) from operations (2 ) 15
Litigation and investigation costs (17 )
Income tax benefit   9     7  
Income (loss) from discontinued operations   (10 )   22  
Net income (loss) (66 ) 82
Less: Preferred stock dividends 6 6
Less: Net income attributable to noncontrolling interests   4     2  
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ (76 ) $ 74  
 
Amounts attributable to Tenet Healthcare Corporation common shareholders

Income (loss) from continuing operations, net of tax
$ (66 ) $ 52
Loss from discontinued operations, net of tax   (10 )   22  
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ (76 ) $ 74  
 
Earnings (loss) per share attributable to Tenet Healthcare Corporation common shareholders
Basic
Continuing operations $ (0.15 ) $ 0.11
Discontinued operations   (0.02 )   0.04  
$ (0.17 ) $ 0.15  
Diluted
Continuing operations $ (0.15 ) $ 0.10
Discontinued operations   (0.02 )   0.04  
$ (0.17 ) $ 0.14  

Weighted average shares and dilutive securities outstanding (in thousands):
Basic 432,454 485,549
Diluted 432,454 561,921
 
 
TENET HEALTHCARE CORPORATION
CONSOLIDATED OPERATIONS DATA
(Unaudited)
 
(Dollars in millions except per share amounts)   Year Ended December 31,
2011   %   2010   %   Change
 
Net operating revenues

Revenues before provision for doubtful accounts
$ 9,584 $ 9,205 4.1 %
Less provision for doubtful accounts   730     738   (1.1 ) %
Net operating revenues 8,854 100.0 % 8,467 100.0 % 4.6 %
Operating expenses:
Salaries, wages and benefits 4,082 46.1 % 3,900 46.1 % 4.7 %
Supplies 1,582 17.9 % 1,577 18.6 % 0.3 %
Other operating expenses, net 2,100 23.7 % 1,940 22.9 % 8.2 %
Electronic Health Record Incentives (55 ) (0.6 ) % 0 % %
Depreciation and amortization 413 4.7 % 394 4.7 % 4.8 %

Impairment of long-lived assets and goodwill, and restructuring charges, net
27 0.3 % 10 0.1 %
Litigation and investigation costs   55   0.6 %   12   0.1 %
Operating income 650 7.3 % 634 7.5 %
Interest expense (375 ) (424 )
Loss from early extinguishment of debt (117 ) (57 )
Investment earnings   3     5  

Income from continuing operations, before income taxes
161 158
Income tax benefit (expense)   (61 )   977  

Income from continuing operations, before discontinued operations
100 1,135
Discontinued operations:
Income (loss) from operations (22 ) 11
Impairment of long-lived assets and goodwill, and restructuring charges, net (1 )
Litigation and investigation costs (17 )
Income tax benefit   33     7  
Income (loss) from discontinued operations   (6 )   17  
Net income 94 1,152
Less: Preferred stock dividends 24 24
Less: Net income attributable to noncontrolling interests   12     9  

Net income attributable to Tenet Healthcare Corporation common shareholders
$ 58   $ 1,119  
 
Amounts attributable to Tenet Healthcare Corporation common shareholders
Income from continuing operations, net of tax $ 64 $ 1,102
Income (loss) from discontinued operations, net of tax   (6 )   17  
Net income attributable to Tenet Healthcare Corporation common shareholders $ 58   $ 1,119  
 

Earnings (loss) per share attributable to Tenet Healthcare Corporation common shareholders
Basic
Continuing operations $ 0.13 $ 2.28
Discontinued operations   (0.01 )   0.03  
$ 0.12   $ 2.31  
Diluted
Continuing operations $ 0.13 $ 2.01
Discontinued operations   (0.01 )   0.03  
$ 0.12   $ 2.04  

Weighted average shares and dilutive securities outstanding (in thousands):
Basic 468,726 484,321
Diluted 485,181 560,631
 
 
TENET HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEET DATA
(Unaudited)
 
  December 31,   December 31,
(Dollars in millions) 2011 2010
ASSETS
Current assets:
Cash and cash equivalents $ 113 $ 405
Accounts receivable, less allowance for doubtful accounts 1,278 1,143
Inventories of supplies, at cost 161 156
Income tax receivable 7 22
Current portion of deferred income taxes 418 282
Assets held for sale 2 14
Other current assets   378     289  
Total current assets 2,357 2,311
Investments and other assets 156 164
Deferred income taxes, net of current portion 374 627
Property and equipment, at cost, less accumulated depreciation and amortization 4,350 4,304
Goodwill 736 652
Other intangible assets, at cost, less accumulated amortization   489     442  
Total assets $ 8,462   $ 8,500  
 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 66 $ 67
Accounts payable 760 720
Accrued compensation and benefits 376 363
Professional and general liability reserves 75 84
Accrued interest payable 112 115
Accrued legal settlement costs 64 8
Other current liabilities   362     368  
Total current liabilities 1,815 1,725
Long-term debt, net of current portion 4,294 3,997
Professional and general liability reserves 337 383
Accrued legal settlement costs 2 22
Other long-term liabilities   506     554  
Total liabilities 6,954 6,681
Commitments and contingencies

Redeemable noncontrolling interests in equity of consolidated subsidiaries
16
Equity:
Shareholders’ equity:
Preferred stock 334 334
Common stock 27 27
Additional paid-in capital 4,407 4,449
Accumulated other comprehensive loss (52 ) (43 )
Accumulated deficit (1,440 ) (1,522 )
Common stock in treasury, at cost   (1,853 )   (1,479 )
Total shareholders’ equity 1,423 1,766
Noncontrolling interests   69     53  
Total equity   1,492     1,819  
Total liabilities and equity $ 8,462   $ 8,500  
 
 

TENET HEALTHCARE CORPORATION
CONSOLIDATED CASH FLOW DATA
(Unaudited)
(Dollars in millions)   Year EndedDecember 31,
2011   2010
Net income $ 94 $ 1,152
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 413 394
Provision for doubtful accounts 730 740
Deferred income tax expense 81 (952 )
Stock-based compensation expense 24 22
Impairment of long-lived assets and goodwill, and restructuring charges, net 27 10
Fair market value adjustments related to interest rate swap and LIBOR cap agreements 3
Amortization of debt discount and debt issuance costs 30 31
Litigation and investigation costs 55 12
Loss from early extinguishment of debt 117 57
Pre-tax loss from discontinued operations 39 (10 )
Other items, net (15 ) (4 )
Changes in cash from operating assets and liabilities:
Accounts receivable (865 ) (744 )
Inventories and other current assets (38 ) (17 )
Income taxes (63 ) 3
Accounts payable, accrued expenses and other current liabilities (35 ) (84 )
Other long-term liabilities (6 ) (58 )
Payments against reserves for restructuring charges and litigation costs (44 ) (83 )
Net cash used in operating activities from discontinued operations, excluding income taxes   (47 )    
Net cash provided by operating activities 497 472
Cash flows from investing activities:
Purchases of property and equipment—continuing operations (475 ) (450 )
Construction of new and replacement hospitals (13 )
Purchase of property and equipment—discontinued operations (13 )
Purchases of businesses or joint venture interests (84 ) (65 )
Proceeds from sales of facilities and other assets — discontinued operations 19
Proceeds from sales of marketable securities, long-term investments and other assets 59 84
Release of escrow funds 15
Other items, net   (3 )   3  
Net cash used in investing activities (503 ) (420 )
Cash flows from financing activities:
Repayments of borrowings under credit facility (365 )
Proceeds from borrowings under credit facility 445
Repayments of borrowings (843 ) (886 )
Proceeds from borrowings 900 601
Deferred debt issuance costs (21 ) (27 )
Repurchases of common stock (374 )
Cash dividends on preferred stock (24 ) (24 )
Distributions paid to noncontrolling interests (11 ) (8 )
Other items, net   7     7  
Net cash used in financing activities   (286 )   (337 )
Net decrease in cash and cash equivalents (292 ) (285 )
Cash and cash equivalents at beginning of period   405     690  
Cash and cash equivalents at end of period $ 113   $ 405  
Supplemental disclosures:
Interest paid, net of capitalized interest $ (347 ) $ (402 )
Proceeds from interest rate swap agreement $ 30 $ 0
Income tax (payments) refunds, net $ (10 ) $ 34
 
 

TENET HEALTHCARE CORPORATION
SELECTED STATISTICS – CONTINUING HOSPITALS
(Unaudited)

 

(Dollars in millions except per patient day, per admission and per visit amounts)
  Three Months Ended December 31,   Year Ended December 31,
2011   2010   Change 2011   2010   Change
 
Net inpatient revenues $ 1,536 $ 1,477 4.0 % $ 6,163 $ 5,929 3.9 %
Net outpatient revenues $ 751 $ 730 2.9 % $ 2,984 $ 2,903 2.8 %
 
Number of acute care hospitals (at end of period) (1) 50 50 50 50 *
Licensed beds (at end of period) 13,453 13,428 0.2 % 13,453 13,428 0.2 %
Average licensed beds 13,453 13,429 0.2 % 13,449 13,430 0.1 %
Utilization of licensed beds 48.5 % 49.3 % (0.8 ) 50.0 % 50.4 % (0.4 ) *
Patient days 599,859 608,890 (1.5 ) % 2,452,156 2,473,017 (0.8 ) %
Adjusted patient days 917,798 923,219 (0.6 ) % 3,732,330 3,723,702 0.2 %

Net inpatient revenue per patient day
$ 2,561 $ 2,426 5.6 % $ 2,513 $ 2,397 4.8 %
Admissions 127,321 126,977 0.3 % 515,693 512,972 0.5 %
Adjusted patient admissions 196,594 194,098 1.3 % 791,919 778,505 1.7 %

Net inpatient revenue per admission
$ 12,064 $ 11,632 3.7 % $ 11,951 $ 11,558 3.4 %
Average length of stay (days) 4.7 4.8 (0.1 ) 4.8 4.8 *
Surgeries 92,691 89,859 3.2 % 367,638 360,206 2.1 %
Net outpatient revenue per visit $ 749 $ 730 2.6 % $ 739 $ 741 (0.3 ) %
Outpatient visits 1,002,842 999,827 0.3 % 4,039,456 3,917,758 3.1 %
 
Sources of net patient revenue
Medicare 23.3 % 23.5 % (0.2 ) 23.2 % 23.9 % (0.7 ) *
Medicaid 8.8 % 8.6 % 0.2 9.0 % 8.7 % 0.3 *
Managed care 57.8 % 56.9 % 0.9 57.0 % 56.5 % 0.6 *
Indemnity, self-pay and other 10.1 % 11.0 % (0.9 ) 10.8 % 10.9 % (0.2 ) *
 
 

* This change is the difference between the 2011 and 2010 amounts shown(1) Number of hospitals includes the 49 general hospitals and our critical access facility
 

TENET HEALTHCARE CORPORATION
CONSOLIDATED OPERATIONS DATA
Fiscal 2011 by Calendar Quarter
(Unaudited)
        Year Ended
(Dollars in millions except per share amounts) Three Months Ended Ended
3/31/11   6/30/11 9/30/11 12/31/11 12/31/11
 
Net operating revenues
Revenues before provision for doubtful accounts $ 2,481 $ 2,349 $ 2,343 $ 2,411 $ 9,584
Less provision for doubtful accounts   182     170     193     185     730  
Net operating revenues 2,299 2,179 2,150 2,226 8,854
Operating expenses:
Salaries, wages and benefits 1,035 999 1,019 1,029 4,082
Supplies 404 399 388 391 1,582
Other operating expenses, net 506 529 548 517 2,100
Electronic Health Record Incentives (25 ) (25 ) (5 ) (55 )
Depreciation and amortization 101 104 103 105 413

Impairment of long-lived assets and goodwill, and restructuring charges
8 2 8 9 27
Litigation and investigation costs   11     8     5     31     55  
Operating income 259 163 79 149 650
Interest expense (118 ) (98 ) (59 ) (100 ) (375 )
Loss from early extinguishment of debt (117 ) (117 )
Investment earnings   1     1     1         3  
Income (loss) from continuing operations, before income taxes 142 66 21 (68 ) 161
Income tax expense   (51 )   (18 )   (4 )   12     (61 )

Income (loss) from continuing operations, before discontinued operations
91 48 17 (56 ) 100
Discontinued operations:
Loss from operations (15 ) (3 ) (2 ) (2 ) (22 )
Litigation and investigation costs (17 ) (17 )
Income tax benefit   6     18         9     33  
Income (loss) from discontinued operations   (9 )   15     (2 )   (10 )   (6 )
Net income (loss) 82 63 15 (66 ) 94
Less: Preferred stock dividends 6 6 6 6 24
Less: Net income attributable to noncontrolling interests   3     2     3     4     12  
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ 73   $ 55   $ 6   $ (76 ) $ 58  

 

 
Amounts attributable to Tenet Healthcare Corporation common shareholders
Income (loss) from continuing operations, net of tax $ 82 $ 40 $ 8 $ (66 ) $ 64
Income (loss) from discontinued operations, net of tax   (9 )   15     (2 )   (10 )   (6 )
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ 73   $ 55   $ 6   $ (76 ) $ 58  
 

Earnings (loss) per share attributable to Tenet Healthcare Corporation common shareholders
Basic
Continuing operations $ 0.17 $ 0.08 $ 0.02 $ (0.15 ) $ 0.13
Discontinued operations   (0.02 )   0.03         (0.02 )   (0.01 )
$ 0.15   $ 0.11   $ 0.02   $ (0.17 ) $ 0.12  
Diluted
Continuing operations $ 0.16 $ 0.08 $ 0.02 $ (0.15 ) $ 0.13
Discontinued operations   (0.02 )   0.03         (0.02 )   (0.01 )
$ 0.14   $ 0.11   $ 0.02   $ (0.17 ) $ 0.12  

Weighted average shares and dilutive securities outstanding (in thousands):
Basic 486,902 486,794 468,753 432,454 468,726
Diluted 565,181 503,748 483,632 432,454 485,181
 
 

TENET HEALTHCARE CORPORATION
CONSOLIDATED OPERATIONS DATA
Fiscal 2010 by Calendar Quarter
(Unaudited)
        Year
(Dollars in millions except per share amounts) Three Months Ended Ended
3/31/10   6/30/10 9/30/10 12/31/10

12/31/10
 
Net operating revenues
Revenues before provision for doubtful accounts $ 2,339 $ 2,303 $ 2,262 $ 2,301 $ 9,205
Less provision for doubtful accounts   188     173     187     190     738  
Net operating revenues $ 2,151 $ 2,130 $ 2,075 $ 2,111 $ 8,467
Operating expenses:
Salaries, wages and benefits 987 969 977 967 3,900
Supplies 398 395 390 394 1,577
Other operating expenses, net 468 498 505 469 1,940
Depreciation and amortization 95 97 101 101 394

Impairment of long-lived assets and goodwill, and restructuring charges
(2 ) 3 9 10
Litigation and investigation costs   2     2     2     6     12  
Operating income 201 171 97 165 634
Interest expense (109 ) (107 ) (107 ) (101 ) (424 )
Loss from early extinguishment of debt (55 ) (2 ) (57 )
Investment earnings   1     1     3         5  

Income (loss) from continuing operations, before income taxes
93 65 (62 ) 62 158
Income tax (expense) benefit   (3 )   (20 )   1,002     (2 )   977  

Income from continuing operations, before discontinued operations
90 45 940 60 1,135
Discontinued operations:
Income (loss) from operations 5 (5 ) (4 ) 15 11

Impairment of long-lived assets and goodwill, and restructuring charges, net
1 (3 ) 1 (1 )
Income tax (expense) benefit   (1 )   (2 )   3     7     7  
Income (loss) from discontinued operations   5     (10 )       22     17  
Net income 95 35 940 82 1,152
Less: Preferred stock dividends 6 6 6 6 24
Less: Net income attributable to noncontrolling interests   1     4     2     2     9  
Net income attributable to Tenet Healthcare Corporation common shareholders $ 88   $ 25   $ 932   $ 74   $ 1,119  
 

Amounts attributable to Tenet Healthcare Corporation common shareholders
Income from continuing operations, net of tax $ 83 $ 35 $ 932 $ 52 $ 1,102
Income (loss) from discontinued operations, net of tax   5     (10 )       22     17  
Net income attributable to Tenet Healthcare Corporation common shareholders $ 88   $ 25   $ 932   $ 74   $ 1,119  
 

Earnings (loss) per share attributable to Tenet Healthcare Corporation common shareholders
Basic
Continuing operations $ 0.17 $ 0.07 $ 1.92 $ 0.11 $ 2.28
Discontinued operations   0.01     (0.02 )       0.04     0.03  
$ 0.18   $ 0.05   $ 1.92   $ 0.15   $ 2.31  
Diluted
Continuing operations $ 0.16 $ 0.07 $ 1.68 $ 0.10 $ 2.01
Discontinued operations   0.01     (0.02 )       0.04     0.03  
$ 0.17   $ 0.05   $ 1.68   $ 0.14   $ 2.04  

Weighted average shares and dilutive securities outstanding (in thousands):
Basic 481,917 484,610 485,210 485,549 484,321
Diluted 559,228 502,549 559,850 561,921 560,631
 
 
TENET HEALTHCARE CORPORATION
SELECTED STATISTICS – CONTINUING HOSPITALS
Fiscal 2011 by Calendar Quarter
(Unaudited)
       

 
Year Ended

(Dollars in millions except per patient day, per admission and per visit amounts)
Three Months Ended Ended
03/31/11   06/30/11 9/300/11 12/31/11 12/31/11
 
Net inpatient revenues $ 1,653 $ 1,497 $ 1,477 $ 1,536 $ 6,163
Net outpatient revenues $ 733 $ 751 $ 749 $ 751 $ 2,984
 

Number of acute care hospitals (at end of period) (1)
50 50 50 50 50
Licensed beds (at end of period) 13,457 13,420 13,453 13,453 13,453
Average licensed beds 13,457 13,445 13,440 13,453 13,449
Utilization of licensed beds 53.3 % 49.5 % 48.7 % 48.5 % 50.0 %
Patient days 645,166 605,216 601,915 599,859 2,452,156
Adjusted patient days 963,039 926,328 925,165 917,798 3,732,330
Net inpatient revenue per patient day $ 2,562 $ 2,473 $ 2,454 $ 2,561 $ 2,513
Admissions 133,349 127,503 127,520 127,321 515,693
Adjusted patient admissions 200,353 196,862 198,110 196,594 791,919
Net inpatient revenue per admission $ 12,396 $ 11,741 $ 11,582 $ 12,064 $ 11,951
Average length of stay (days) 4.8 4.7 4.7 4.7 4.8
Surgeries 88,754 92,250 93,943 92,691 367,638
Net outpatient revenue per visit $ 725 $ 739 $ 742 $ 749 $ 739
Outpatient visits 1,010,848 1,015,830 1,009,936 1,002,842 4,039,456
 
Sources of net patient revenue
Medicare 23.2 % 23.6 % 22.7 % 23.3 % 23.2 %
Medicaid 11.6 % 7.5 % 8.0 % 8.8 % 9.0 %
Managed care 54.4 % 58.0 % 58.0 % 57.8 % 57.0 %
Indemnity, self-pay and other 10.8 % 10.9 % 11.3 % 10.1 % 10.8 %
 
(1) Number of hospitals includes the 49 general hospitals and our critical access facility
 

(1) Reconciliation of Adjusted EBITDA

Adjusted EBITDA, a non-GAAP term, is defined by the Company as net income (loss) attributable to Tenet Healthcare Corporation common shareholders before (1) cumulative effect of changes in accounting principle, net of tax, (2) net income attributable to noncontrolling interests, (3) preferred stock dividends, (4) income (loss) from discontinued operations, net of tax, (5) income tax (expense) benefit, (6) investment earnings (loss), (7) gain (loss) from early extinguishment of debt, (8) net gain (loss) on sales of investments, (9) interest expense, (10) litigation and investigation (costs) benefit, net of insurance recoveries, (11) hurricane insurance recoveries, net of costs, (12) impairment of long-lived assets and goodwill and restructuring charges, net of insurance recoveries, and (13) depreciation and amortization. The Company’s Adjusted EBITDA may not be comparable to EBITDA reported by other companies.

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, 2011 and 2010.
 
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 EndedDecember 31,   Year EndedDecember 31,
2011   2010 2011   2010

Net income (loss) attributable to Tenet Healthcare Corporation common shareholders
$ (76 ) $ 74 $ 58 $ 1,119
Less: Net income attributable to noncontrolling interests (4 ) (2 ) (12 ) (9 )
Preferred stock dividends (6 ) (6 ) (24 ) (24 )
Income (loss) from discontinued operations, net of tax   (10 )   22     (6 )   17  
Income (loss) from continuing operations (56 ) 60 100 1,135
Income tax benefit (expense) 12 (2 ) (61 ) 977
Investment earnings 3 5
Loss from early extinguishment of debt (117 ) (2 ) (117 ) (57 )
Interest expense   (100 )   (101 )   (375 )   (424 )
Operating income 149 165 650 634
Litigation and investigation costs (31 ) (6 ) (55 ) (12 )

Impairment of long-lived assets and goodwill, and restructuring charges, net
(9 ) (9 ) (27 ) (10 )
Depreciation and amortization   (105 )   (101 )   (413 )   (394 )
Adjusted EBITDA $ 294   $ 281   $ 1,145   $ 1,050  
 
Net operating revenues $ 2,226   $ 2,111   $ 8,854   $ 8,467  
 

Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin)
13.2 % 13.3 % 12.9 % 12.4 %
 
Table #2 - Reconciliation of Outlook Adjusted EBITDA to
Outlook Net Income Attributable to Tenet Healthcare Corporation Common Shareholders
for Years Ending December 31, 2012, 2013 and 2015
(Unaudited)
 
(Dollars in Millions)   2012   2013   2015
Low   High   Low   High Low   High
Net income attributable to common shareholders $ 216 $ 302 $ 306 $ 451 $ 578 $ 911
Less:
 

Net income attributable to noncontrolling interests
(15 ) (10 ) (15 ) (10 ) (15 ) (10 )
Preferred stock dividends (18 ) (18 ) 0 0 0 0

Loss from discontinued operations, net of tax
  (10 )   (5 )   (5 )   0     (5 )   0  
Income from continuing operations 259 335 326 461 598 921
Income tax expense   (166 )   (215 )   (209 )   (294 )   (382 )   (589 )

Income from continuing operations, before income taxes
425 550 535 755 980 1,510
Interest expense   (390 )   (370 )   (390 )   (340 )   (360 )   (280 )
Operating income 815 920 925 1,095 1,340 1,790
Depreciation and amortization   (410 )   (430 )   (410 )   (440 )   (410 )   (460 )
Adjusted EBITDA $ 1,225   $ 1,350   $ 1,335   $ 1,535   $ 1,750   $ 2,250  
 
Table #3 - Reconciliation of Outlook Adjusted EBITDA to
Outlook Income From Continuing Operations
for Years Ending December 31, 2012, 2013 and 2015
(Unaudited)
         
(Dollars in Millions except per share amounts)   2012 2013 2015
Low High Low High Low High
Adjusted EBITDA (from Table #2) $ 1,225 $ 1,350 $ 1,335 $ 1,535 $ 1,750 $ 2,250
 
Depreciation and amortization (410 ) (430 ) (410 ) (440 ) (410 ) (460 )
Interest expense   (390 )   (370 )   (390 )   (340 )   (360 )   (280 )

Income from continuing operations, before income taxes

 
425 550 535 755 980 1,510
Income tax expense (a)   (166 )   (215 )   (209 )   (294 )   (382 )   (589 )

Income from continuing operations (a)
259 335 326 461 598 921
Preferred stock dividends (18 ) (18 ) 0 0 0 0

Net income attributable to noncontrolling interests

 
  (15 )   (10 )   (15 )   (10 )   (15 )   (10 )
Income from continuing operations, net of tax (a) $ 226   $ 307   $ 311   $ 451   $ 583   $ 911  
 

Weighted average shares outstanding (in millions)
489 489 491 491 503 503
Diluted EPS - continuing operations (a)

$

0.46

$

0.63

$

0.63

$

0.92

$

1.16

$

1.81
 
(a) Uses tax rate of 39 percent
 

Copyright Business Wire 2010

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