Tenet Healthcare Corporation (NYSE:THC) reported Adjusted EBITDA of $613 million for the fourth quarter of 2015, a decrease of $33 million, or 5.1 percent, compared to $646 million in the fourth quarter of 2014. After normalizing for timing differences related to the California Provider Fee program, Adjusted EBITDA increased $91 million or 17.4 percent.

"We delivered Adjusted EBITDA at the midpoint of our Outlook for the fourth quarter and are on a path to deliver strong growth in Adjusted EBITDA and improved Adjusted Free Cash Flow in 2016," said Trevor Fetter, chairman and chief executive officer. "Similar to our results in the third quarter, we experienced pressure on lower acuity inpatient hospital admissions and continued to drive increases in higher-acuity admissions. Our Conifer Health Solutions and United Surgical Partners subsidiaries performed well, with Conifer meeting our expectations and USPI delivering stronger-than-expected results in the fourth quarter."

Hospital Operations and Other Segment

Results for the fourth quarter of 2015 were impacted by the timing of revenue related to the California Provider Fee program as discussed further below.

During the fourth quarter of 2015, net operating revenue in the hospital operations and other segment increased 5.0 percent to $4.423 billion, up from $4.213 billion in the fourth quarter of 2014. On a same-hospital basis, net patient revenue increased 0.7 percent to $3.992 billion, up from $3.966 billion in the fourth quarter of 2014. The increase was driven by a 0.3 percent increase in adjusted patient admissions and a 0.3 percent increase in net patient revenue per adjusted admission.

The increases in both same-hospital revenue and same-hospital revenue per adjusted admission in the fourth quarter of 2015 were negatively impacted by timing differences related to the California Provider Fee program. On a same-hospital basis, during both calendar year 2014 and the fourth quarter of 2014, the hospital segment recorded $150 million of revenue related to the California Provider Fee program, of which approximately $112 million was related to the first nine months of 2014 since the program was not approved until the fourth quarter of 2014. During 2015, Tenet recorded $166 million of revenue related to the California Provider Fee program on a same-hospital basis, including $42 million in the fourth quarter of 2015. After adjusting for the approximately $112 million of out-of-period revenue related to the California Provider Fee program in the fourth quarter of 2014, same-hospital net patient revenue per adjusted admission increased 3.2 percent in the fourth quarter of 2015.

During 2015, net operating revenue in the hospital operations and other segment increased 8.0 percent to $16.928 billion, up from $15.681 billion in 2014. On a same-hospital basis, net patient revenue increased 5.5 percent to $15.709 billion, up from $14.886 billion in 2014. The increase was driven by a 2.4 percent increase in adjusted patient admissions and a 3.1 percent increase in net patient revenue per adjusted admission.

Fourth quarter Adjusted EBITDA in Tenet's hospital segment was $394 million, representing a decline of 28.8 percent as compared to $553 million in the fourth quarter of 2014. During both calendar year 2014 and the fourth quarter of 2014, the hospital segment recorded $165 million of revenue related to the California Provider Fee program, of which, $124 million was related to the first nine months of 2014 since the program was not approved until the fourth quarter of 2014. During calendar year 2015 and the fourth quarter of 2015, the hospital segment recorded $188 million and $49 million, respectively, of revenue related to the California Provider Fee program. After adjusting for timing differences related to the California Provider Fee, Adjusted EBITDA in the hospital segment during the fourth quarter of 2015 decreased 8.2 percent to $394 million.

During 2015, Adjusted EBITDA in the hospital segment increased 0.1 percent to $1.653 billion, up from $1.651 billion in 2014.

Total hospital selected operating expenses, defined as the sum of salaries, wages and benefits, supplies and other operating expenses, increased 1.4 percent per adjusted admission in the quarter. The company continued to deliver improvements in contract labor expense, with a 9.4 percent decline in same hospital contract labor per adjusted admission in the fourth quarter.

Medicaid and Exchanges

Uninsured plus charity admissions declined by 187 admissions, or 1.8 percent on a same hospital basis in the fourth quarter of 2015. Medicaid admissions decreased by 703 admissions, or 1.3 percent in the fourth quarter. Same-hospital uninsured plus charity outpatient visits declined by 5,135 visits, or 3.2 percent, and Medicaid outpatient visits increased by 4,105 visits, or 0.7 percent in the fourth quarter.

In Tenet's six Medicaid expansion states, same-hospital uninsured plus charity admissions declined by 187 admissions, or 11.1 percent, and Medicaid admissions increased by 287 admissions, or 1.0 percent in the fourth quarter of 2015. Uninsured plus charity outpatient visits decreased by 1,615 visits, or 3.5 percent, and Medicaid outpatient visits grew by 2,946 visits, or 0.8 percent in the fourth quarter. The six states are comprised of five states that expanded Medicaid in 2014 (Arizona, California, Illinois, Massachusetts and Michigan) and one state that expanded Medicaid in 2015 (Pennsylvania).

Tenet's same-hospital exchange admissions were 4,734 in the fourth quarter of 2015, up 27.0 percent from the fourth quarter of 2014. Same-hospital exchange outpatient visits were 44,616 in the fourth quarter of 2015, up 45.6 percent from the fourth quarter of 2014.

Uncompensated Care

Tenet's bad debt expense ratio was 7.2 percent of revenues before bad debt in the fourth quarter of 2015, down from 7.4 percent in the fourth quarter of 2014. Including $1.029 billion and $920 million of charity care write-offs and uninsured discounts that were offered through Tenet's Compact with Uninsured Patients in the fourth quarters of 2015 and 2014, respectively, Tenet's uncompensated care was $1.420 billion and $1.275 billion, respectively, in these periods. As a percentage of adjusted revenue, uncompensated care represented 22.0 percent of adjusted revenue in the fourth quarter of 2015, down from 22.2 percent in the fourth quarter of 2014. Nearly all of Tenet's uncompensated care is associated with the hospital segment.

Ambulatory Segment

The results of many of the facilities in which the Ambulatory segment has an investment are not consolidated by Tenet or USPI. 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. 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.

During the fourth quarter of 2015, on a pro forma basis, the ambulatory segment delivered net operating revenue of $397 million, representing an increase of 28.9 percent as compared to $308 million in the fourth quarter of 2014. During 2015, on a pro forma basis, the ambulatory segment delivered net operating revenue of $1.343 billion, representing an increase of 17.8 percent as compared to $1.140 billion of revenue in 2014.

On a pro forma same-facility system-wide basis in the fourth quarter of 2015, revenue in the ambulatory segment increased 12.5 percent, with cases increasing 6.9 percent and revenue per case increasing 5.2 percent.

During the fourth quarter of 2015, on a pro forma basis, Tenet's ambulatory segment delivered Adjusted EBITDA of $158 million, up 17.9 percent from $134 million in the fourth quarter of 2014. After subtracting $48 million and $33 million of net income attributable to noncontrolling interests in the fourth quarters of 2015 and 2014, respectively, and prior to subtracting additional noncontrolling interest related to Welsh Carson's and other pre-existing USPI shareholders 49.9 percent ownership interest in the USPI joint venture, Adjusted EBITDA less NCI increased 8.9 percent to $110 million in the fourth quarter of 2015, up from $101 million in the fourth quarter of 2014. After subtracting $69 million and $49 million of Adjusted net income attributable to noncontrolling interests in the fourth quarters of 2015 and 2014, respectively, Adjusted EBITDA less NCI increased 4.7 percent to $89 million in the fourth quarter of 2015, up from $85 million in the fourth quarter of 2014. The Adjusted net income attributable to noncontrolling interests in the fourth quarter of 2015 excludes $16 million of net income attributable to noncontrolling interests recorded during the quarter related to $32 million of gains on the consolidation and deconsolidation of certain businesses.

During 2015, on a pro forma basis, the ambulatory segment delivered Adjusted EBITDA of $489 million, up 14.5 percent from $427 million in 2014. After subtracting $137 million and $112 million of net income attributable to noncontrolling interests in 2015 and 2014, respectively, and prior to subtracting additional noncontrolling interest related to Welsh Carson's and other pre-existing USPI shareholders 49.9 percent ownership interest in the USPI joint venture, Adjusted EBITDA less NCI increased 11.7 percent to $352 million in 2015, up from $315 million in 2014. After subtracting $206 million and $150 million of net income attributable to noncontrolling interests in 2015 and 2014, respectively, Adjusted EBITDA less NCI increased 2.2 percent to $283 million in 2015, up from $277 million in 2014. After adjusting for the additional $16 million of net income attributable to noncontrolling interests that was recorded in the fourth quarter of 2015, Adjusted EBITDA Less NCI in the ambulatory segment increased 7.9 percent in 2015.

Conifer Segment

During the fourth quarter of 2015, Conifer's revenue increased 17.4 percent to $384 million, up from $327 million. Conifer's revenue increased 18.4 percent during 2015 to $1.413 billion, up from $1.193 billion in 2014. Excluding revenue from Tenet, Conifer's revenue from other third party customers increased by 27.2 percent to $206 million in the fourth quarter of 2015 and by 24.1 percent to $747 million in 2015.

In the fourth quarter of 2015, Conifer generated $61 million of Adjusted EBITDA, down 4.7 percent versus $64 million in the fourth quarter of 2014. During 2015, Conifer delivered Adjusted EBITDA of $265 million, up 30.5 percent from $203 million in 2014.

Net Income and Earnings Per Diluted Share

During the fourth quarter of 2015, Tenet generated Adjusted net income from continuing operations of $35 million, or $0.35 per diluted share. This excludes $135 million, or $1.36 per diluted share, in after-tax items such as impairment charges, restructuring charges, acquisition-related costs, litigation and investigation costs, the loss from the early extinguishment of debt, and gains on sales, consolidation and deconsolidation of facilities. During the fourth quarter of 2014, the company generated adjusted net income from continuing operations of $104 million, or $1.03 per diluted share, excluding the comparable items that totaled $43 million after-tax, or $0.42 per diluted share.

During 2015, Tenet generated Adjusted net income from continuing operations of $208 million, or $2.05 per diluted share. This excludes $350 million, or $3.48 per diluted share, in after-tax items such as impairment charges, restructuring charges, acquisition-related costs, litigation and investigation costs, the loss from the early extinguishment of debt, and gains on sales, consolidation and deconsolidation of facilities. During 2014, the company generated adjusted net income from continuing operations of $145 million, or $1.45 per diluted share, excluding the comparable items that totaled $111 million after-tax, or $1.11 per diluted share.

On a GAAP basis in the fourth quarter of 2015, including the results of both continuing and discontinued operations, Tenet reported a net loss attributable to common shareholders of $97 million, or $0.98 per diluted share, compared to net income of $61 million, or $0.61 per diluted share, in the fourth quarter of 2014. On a GAAP basis in 2015, including the results of both continuing and discontinued operations, Tenet reported a net loss attributable to common shareholders of $140 million, or $1.41 per diluted share, compared to net income of $12 million, or $0.12 per diluted share, in 2014.

Cash Flow and Liquidity

Cash and cash equivalents were $356 million at December 31, 2015 compared to $193 million at December 31, 2014. Tenet's cash and debt balances as of December 31, 2015 reflect the cash proceeds that the company received from the sale of two hospitals in North Carolina, the sale of a majority position in four hospitals in Dallas, and the related changes that these transactions had on Tenet's balance sheet. The company ended 2015 with no outstanding borrowings on its $1 billion credit line.

Accounts receivable days outstanding were 49.5 at December 31, 2015, representing no change from September 30, 2015 or December 31, 2014. Adjusted net cash provided by operating activities in 2015 was $1.247 billion, representing a 42.0 percent increase compared to $878 million in 2014. After subtracting $842 million and $933 million of capital expenditures in 2015 and 2014, respectively, Adjusted Free Cash Flow was $405 million in 2015, up from an outflow of $55 million in 2014.

Tenet repurchased $40 million of stock during the fourth quarter. As of December 31, 2015, the company had $460 million of remaining authorization under the previously announced $500 million share repurchase program. The repurchase program will expire on December 31, 2016 and may be suspended for periods or discontinued at any time.

Increase in Litigation Reserves

In the three months ended December 31, 2015, the Company increased its aggregate reserve for the Clinica de la Mama criminal investigation and civil litigation from $20 million to $238 million to reflect an offer it made in February 2016 to resolve the matter. This amount is reflected in the consolidated balance sheet as of December 31, 2015 as accrued legal settlement costs. The $218 million reserve increase lowered net income by approximately $184 million or $1.86 per diluted share during the fourth quarter of 2015. 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 these matters. For additional information, see Note 15 to the Consolidated Financial Statements included in the Company's Form 10-K for the year ended December 31, 2015.

Outlook

During 2016, Tenet expects to deliver revenue of $18.8 billion to $19.2 billion, Adjusted EBITDA of $2.4 billion to $2.5 billion, and Adjusted earnings per diluted share of $1.18 to $2.25. The Outlook for EPS in calendar year 2016 assumes net income attributable to noncontrolling interests of $310 million to $330 million and an average diluted share count of 102 million.

During 2016, Tenet expects to deliver Adjusted Free Cash Flow of $400 million to $600 million, compared to $405 million in 2015, and anticipates additional improvement in Adjusted Free Cash Flow in 2017. The Outlook for Adjusted Free Cash Flow in 2016 is based on an Outlook of $1.300 billion to $1.450 billion of Adjusted Net Cash Provided by Operating Activities less $850 million to $900 million of capital expenditures. In addition, the company anticipates making cash distributions to noncontrolling interests of $220 million to $240 million in 2016.

During the first quarter of 2016, Tenet expects to deliver revenue of $4.7 billion to $4.9 billion, Adjusted EBITDA of $550 million to $600 million and Adjusted earnings per diluted share of $0.05 to $0.54 assuming an average diluted share count of 101 million.

Additional details on Tenet's Outlook for both the first quarter and calendar year 2016 are available in Tables 3, 4 and 5 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 Fourth Quarter Results

Tenet management will discuss the Company's fourth quarter 2015 results on a webcast scheduled for 10:00 a.m. EST (9:00 a.m. CST) on February 23, 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-K report for the year ended December 31, 2015, 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 more than 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 84 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 www.tenethealth.com.

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 15 to the Consolidated Financial Statements included in our Form 10-K for the year ended December 31, 2015. 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
(Unaudited)
 
 
(Dollars in millions except per share amounts) Three Months Ended December 31,
  2015   %     2014   %   Change
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 5,417 $ 4,821 12.4 %
Less: Provision for doubtful accounts   391     356   9.8 %
Net operating revenues 5,026 100.0 % 4,465 100.0 % 12.6 %
Equity in earnings of unconsolidated affiliates 51 1.0 % 3 0.1 % 1,600.0 %
Operating expenses:
Salaries, wages and benefits 2,443 48.6 % 2,118 47.5 % 15.3 %
Supplies 817 16.3 % 688 15.4 % 18.8 %
Other operating expenses, net 1,230 24.5 % 1,048 23.5 % 17.4 %
Electronic health record incentives (26 ) (0.5 )% (32 ) (0.7 )% (18.8 ) %
Depreciation and amortization 208 4.1 % 240 5.4 %
Impairment and restructuring charges, and acquisition-related costs 52 1.0 % 63 1.4 %
Litigation and investigation costs 224 4.5 % 6 0.1 %
Gains on sales, consolidation and deconsolidation of facilities   (186 ) (3.7 )%    
Operating income 315 6.3 % 337 7.5 %
Interest expense (248 ) (196 )
Loss from early extinguishment of debt (1 )
Investment earnings   1      
Net income from continuing operations, before income taxes 67 141
Income tax expense   (68 )   (60 )
Net income (loss) from continuing operations, before discontinued operations (1 ) 81
Discontinued operations:
Loss from operations (1 )
Litigation and investigation costs 5
Income tax expense   (1 )    
Net income from discontinued operations   3      
Net income 2 81
Less: Net income attributable to noncontrolling interests   99     20  
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ (97 ) $ 61  
Amounts available (attributable) to Tenet Healthcare Corporation common shareholders
Net income (loss) from continuing operations, net of tax $ (100 ) $ 61
Net income from discontinued operations, net of tax   3      
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ (97 ) $ 61  
Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:
Basic $ (1.01 ) $ 0.62
Continuing operations   0.03      
$ (0.98 ) $ 0.62  
Diluted
Continuing operations $ (1.01 ) $ 0.61
Discontinued operations   0.03      
$ (0.98 ) $ 0.61  
Weighted average shares and dilutive securities outstanding (in thousands):
Basic 99,188 98,331
Diluted* 99,188 101,279

*Had we generated income from continuing operations in the three months ended December 31, 2015 the effect of employee stock options, restricted stock units and deferred compensation units on the diluted shares calculation would have been an increase of 2,173 shares.
         
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
(Dollars in millions except per share amounts) Years Ended December 31,
  2015   %     2014   %   Change
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 20,111 $ 17,908 12.3 %
Less: Provision for doubtful accounts   1,477     1,305   13.2 %
Net operating revenues 18,634 100.0 % 16,603 100.0 % 12.2 %
Equity in earnings of unconsolidated affiliates 99 0.5 % 12 0.1 % 725.0 %
Operating expenses:
Salaries, wages and benefits 9,011 48.4 % 8,023 48.3 % 12.3 %
Supplies 2,963 15.9 % 2,630 15.8 % 12.7 %
Other operating expenses, net 4,555 24.4 % 4,114 24.8 % 10.7 %
Electronic health record incentives (72 ) (0.4 )% (104 ) (0.6 )% (30.8 )%
Depreciation and amortization 797 4.3 % 849 5.1 %
Impairment and restructuring charges, and acquisition-related costs 318 1.7 % 153 0.9 %
Litigation and investigation costs 291 1.6 % 25 0.2 %
Gains on sales, consolidation and deconsolidation of facilities   (186 ) (1.0 )%     %
Operating income 1,056 5.7 % 925 5.6 %
Interest expense (912 ) (754 )
Loss from early extinguishment of debt (1 ) (24 )
Investment earnings   1      
Net income from continuing operations, before income taxes 144 147
Income tax expense   (68 )   (49 )
Net income from continuing operations, before discontinued operations 76 98
Discontinued operations:
Loss from operations (5 ) (17 )
Litigation and investigation costs 8 (18 )
Income tax benefit (expense)   (1 )   13  
Net income (loss) from discontinued operations   2     (22 )
Net income 78 76
Less: Net income attributable to noncontrolling interests   218     64  
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ (140 ) $ 12  
Amounts available (attributable) to Tenet Healthcare Corporation common shareholders
Net income (loss) from continuing operations, net of tax $ (142 ) $ 34
Net income (loss) from discontinued operations, net of tax   2     (22 )
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ (140 ) $ 12  
Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ (1.43 ) $ 0.35
Discontinued operations   0.02     (0.23 )
$ (1.41 ) $ 0.12  
Diluted
Continuing operations $ (1.43 ) $ 0.34
Discontinued operations   0.02     (0.22 )
$ (1.41 ) $ 0.12  
Weighted average shares and dilutive securities outstanding (in thousands):
Basic 99,167 97,801
Diluted* 99,167 100,287

*Had we generated income from continuing operations in the twelve months ended December 31, 2015 the effect of employee stock options, restricted stock units and deferred compensation units on the diluted shares calculation would have been an increase of 2,380 shares.
   
TENET HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
December 31, December 31,
(Dollars in millions)   2015     2014  
ASSETS
Current assets:
Cash and cash equivalents $ 356 $ 193
Accounts receivable, less allowance for doubtful accounts 2,704 2,404
Inventories of supplies, at cost 309 276
Income tax receivable 7 2
Assets held for sale 550 2
Other current assets   1,245     1,093  
Total current assets 5,171 3,970
Investments and other assets 1,175 384
Deferred income taxes 776 863
Property and equipment, at cost, less accumulated depreciation and amortization 7,915 7,733
Goodwill 6,970 3,913
Other intangible assets, at cost, less accumulated amortization   1,675     1,088  
Total assets $ 23,682   $ 17,951  
 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 127 $ 112
Accounts payable 1,380 1,179
Accrued compensation and benefits 880 852
Professional and general liability reserves 177 189
Accrued interest payable 205 194
Liabilities held for sale 101
Accrued legal settlement costs 294 45
Other current liabilities   1,144     1,006  
Total current liabilities 4,308 3,577
Long-term debt, net of current portion 14,383 11,505
Professional and general liability reserves 578 492
Defined benefit plan obligations 595 633
Other long-term liabilities   594     558  
Total liabilities 20,458 16,765
Commitments and contingencies
Redeemable noncontrolling interests in equity of consolidated subsidiaries 2,266 401
Equity:
Shareholders' equity:
Common stock 7 7
Additional paid-in capital 4,815 4,614
Accumulated other comprehensive loss (164 ) (182 )
Accumulated deficit (1,550 ) (1,410 )
Common stock in treasury, at cost   (2,417 )   (2,378 )
Total shareholders' equity 691 651
Noncontrolling interests   267     134  
Total equity   958     785  
Total liabilities and equity $ 23,682   $ 17,951  
   
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
 
 
Years Ended
(Dollars in millions) December 31,
  2015     2014  
Net Income $ 78 $ 76
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 797 849
Provision for doubtful accounts 1,477 1,305
Deferred income tax expense 42 30
Stock-based compensation expense 69 51
Impairment and restructuring charges, and acquisition-related costs 318 153
Litigation and investigation costs 291 25
Loss from early extinguishment of debt 1 24
Gains on sales, consolidation and deconsolidation of facilities (186 )
Undistributed earnings from affiliates (99 ) (10 )
Amortization of debt discount and debt issuance costs 41 28
Pre-tax loss (income) from discontinued operations (3 ) 35
Other items, net 59 (30 )
Changes in cash from operating assets and liabilities:
Accounts receivable (1,632 ) (1,896 )
Inventories and other current assets (130 ) (314 )
Income taxes 18 3
Accounts payable, accrued expenses and other current liabilities 68 505
Other long-term liabilities 38 44
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements (200 ) (168 )
Net cash used in operating activities from discontinued operations, excluding income taxes   (21 )   (23 )
Net cash provided by operating activities 1,026 687
Cash flows from investing activities:
Purchases of property and equipment — continuing operations (842 ) (933 )
Purchases of businesses or joint venture interests, net of cash acquired (940 ) (428 )
Proceeds from sales of facilities and other assets 549 6
Proceeds from sales of marketable securities, long-term investments and other assets 60 13
Purchases of equity investments (134 ) (12 )
Other long-term assets (4 ) 31
Other items, net   (6 )   1  
Net cash used in investing activities (1,317 ) (1,322 )
Cash flows from financing activities:
Repayments of borrowings under credit facility (2,815 ) (2,430 )
Proceeds from borrowings under credit facility 2,595 2,245
Repayments of other borrowings (2,049 ) (683 )
Proceeds from other borrowings 3,158 1,608
Repurchases of common stock (40 )
Debt issuance costs (80 ) (27 )
Distributions paid to noncontrolling interests (110 ) (45 )
Contributions from noncontrolling interests 4 18
Purchase of noncontrolling interests (254 )
Proceeds from exercise of stock options 15 26
Other items, net   30     3  
Net cash provided by financing activities   454     715  
Net increase in cash and cash equivalents 163 80
Cash and cash equivalents at beginning of period   193     113  
Cash and cash equivalents at end of period $ 356   $ 193  
Supplemental disclosures:
Interest paid, net of capitalized interest $ (859 ) $ (726 )
Income tax payments, net $ (7 ) $ (8 )
         
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS - CONTINUING TOTAL HOSPITALS (1)
(Unaudited)
 
 
(Dollars in millions except per patient day,
per admission, per adjusted admission Three Months Ended December 31, Years Ended December 31,
and per visit amounts)   2015    

2014 (2)

 
Change  

2015 (2)

 
 

2014 (2)

 
Change
 
Net inpatient revenues $ 2,736 $ 2,719 0.6 % $ 10,652 $ 10,015 6.4 %
Net outpatient revenues $ 1,616 $ 1,448 11.6 % $ 6,027 $ 5,449 10.6 %
 
Number of acute care hospitals (at end of period) 86 80 6 * 86 80 *
Licensed beds (at end of period) 22,525 20,814 8.2 % 22,525 20,814 8.2 %
Average licensed beds 22,549 20,805 8.4 % 21,092 20,531 2.7 %
Utilization of licensed beds 47.4 % 49.0 % (1.6 )% * 49.6 % 49.3 % 0.3 % *
Patient days - total 983,856 937,803 4.9 % 3,817,572 3,695,288 3.3 %
Adjusted patient days 1,710,620 1,578,854 8.3 % 6,520,289 6,203,383 5.1 %
Net inpatient revenue per patient day $ 2,781 $ 2,899 (4.1 )% $ 2,790 $ 2,710 3.0 %
Total admissions 211,991 202,337 4.8 % 824,102 791,165 4.2 %
Adjusted patient admissions 371,994 344,857 7.9 % 1,422,588 1,343,511 5.9 %
Charity and uninsured admissions 11,529 11,232 2.6 % 44,336 45,679 (2.9 )%
Net inpatient revenue per admission $ 12,906 $ 13,438 (4.0 )% $ 12,926 $ 12,659 2.1 %
Average length of stay (days) 4.64 4.63 0.2 % 4.63 4.67 (0.9 )%
Total surgeries 138,264 128,050 8.0 % 517,127 495,980 4.3 %
Admissions through emergency department 133,108 127,361 4.5 % 521,272 495,195 5.3 %
Emergency department visits 778,148 737,680 5.5 % 3,010,625 2,824,526 6.6 %
Total emergency department admissions and visits 911,256 865,041 5.3 % 3,531,897 3,319,721 6.4 %
Outpatient visits 2,198,005 1,995,237 10.2 % 8,332,139 7,720,886 7.9 %
Charity and uninsured outpatient visits 173,280 165,365 4.8 % 662,168 660,924 0.2 %
Net outpatient revenue per visit $ 735 $ 726 1.2 % $ 723 $ 706 2.4 %
Net patient revenue per adjusted patient admission $ 11,699 $ 12,083 (3.2 )% $ 11,724 $ 11,510 1.9 %
Net patient revenue per adjusted patient day $ 2,544 $ 2,639 (3.6 )% $ 2,558 $ 2,493 2.6 %
 
Net Patient Revenues from:
Medicare 19.3 % 21.1 % (1.8 )% * 20.4 % 22.0 % (1.6 )% *
Medicaid 8.2 % 11.3 % (3.1 )% * 8.7 % 9.6 % (0.9 )% *
Managed care 61.6 % 57.5 % 4.1 % * 60.6 % 58.4 % 2.2 % *
Indemnity, self-pay and other 10.9 % 10.1 % 0.8 % * 10.3 % 10.0 % 0.3 % *
(1)   Represents the results of Tenet's Hospital Operations and other segment.
(2) The results for 2014 and the quarter ended March 31, 2015 have been restated to exclude the results of the surgery and imaging centers that Tenet contributed to the joint venture with United Surgical Partners International. The results for these surgery and imaging centers are now reported in Tenet's Ambulatory Care segment.
* This change is the difference between the 2015 and 2014 amounts shown.
           
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS - CONTINUING SAME HOSPITALS (1)
(Unaudited)
 
 
(Dollars in millions except per patient day,
per admission, per adjusted admission Three Months Ended December 31, Years Ended December 31,
and per visit amounts)   2015    

2014 (2)

 

Change
 

2015 (2)

 
 

2014 (2)

 
Change
 
Net inpatient revenues $ 2,546 $ 2,591 (1.7 )% $ 10,079 $ 9,615 4.8 %
Net outpatient revenues $ 1,446 $ 1,375 5.2 % $ 5,630 $ 5,271 6.8 %
 
Number of acute care hospitals (at end of period) 75 75 * 75 75 *
Licensed beds (at end of period) 19,882 19,984 (0.5 )% 19,882 19,984 (0.5 )%
Average licensed beds 19,906 19,975 (0.3 )% 19,969 19,905 0.3 %
Utilization of licensed beds 47.8 % 48.9 % (1.1 )% * 49.0 % 49.1 % (0.1 )% *
Patient days - total 875,226 898,353 (2.6 )% 3,573,155 3,566,694 0.2 %
Adjusted patient days 1,508,868 1,512,531 (0.2 )% 6,083,749 5,993,861 1.5 %
Net inpatient revenue per patient day $ 2,909 $ 2,884 0.9 % $ 2,821 $ 2,696 4.6 %
Total admissions 190,642 194,169 (1.8 )% 774,480 765,951 1.1 %
Adjusted patient admissions 332,037 330,884 0.3 % 1,333,227 1,301,936 2.4 %
Charity and uninsured admissions 10,386 10,573 (1.8 )% 41,325 43,496 (5.0 )%
Net inpatient revenue per admission $ 13,355 $ 13,344 0.1 % $ 13,014 $ 12,553 3.7 %
Average length of stay (days) 4.59 4.63 (0.9 )% 4.61 4.66 (1.1 )%
Total surgeries 123,761 123,854 (0.1 )% 487,953 482,633 1.1 %
Admissions through emergency department 119,814 122,089 (1.9 )% 489,401 479,805 2.0 %
Emergency department visits 700,837 703,265 (0.3 )% 2,816,943 2,738,233 2.9 %
Total emergency department admissions and visits 820,651 825,354 (0.6 )% 3,306,344 3,218,038 2.7 %
Outpatient visits 1,974,943 1,917,935 3.0 % 7,831,785 7,496,243 4.5 %
Charity and uninsured outpatient visits 153,357 158,492 (3.2 )% 618,571 636,712 (2.8 )%
Net outpatient revenue per visit $ 732 $ 717 2.1 % $ 719 $ 703 2.3 %
Net patient revenue per adjusted patient admission $ 12,023 $ 11,986 0.3 % $ 11,783 $ 11,434 3.1 %
Net patient revenue per adjusted patient day $ 2,646 $ 2,622 0.9 % $ 2,582 $ 2,484 3.9 %
 
Net Patient Revenues from:
Medicare 19.6 % 20.7 % (1.1 )% * 19.6 % 21.7 % (2.1 )% *
Medicaid 8.3 % 11.1 % (2.8 )% * 8.3 % 9.4 % (1.1 )% *
Managed care 61.6 % 58.3 % 3.3 % * 61.6 % 59.0 % 2.6 % *
Indemnity, self-pay and other 10.5 % 9.9 % 0.6 % * 10.5 % 9.9 % 0.6 % *
(1)   Represents the results of Tenet's Hospital Operations and other segment.
(2) The results for 2014 and the quarter ended March 31, 2015 have been restated to exclude the results of the surgery and imaging centers that Tenet contributed to the joint venture with United Surgical Partners International. The results for these surgery and imaging centers are now reported in Tenet's Ambulatory Care segment.

* This change is the difference between the 2015 and 2014 amounts shown.
         
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
(Dollars in millions except per share amounts) Three Months Ended Year Ended
  03/31/15     6/30/2015     9/30/2015     12/31/2015     12/31/2015  
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 4,787 $ 4,844 $ 5,063 $ 5,417 $ 20,111
Less: Provision for doubtful accounts   363     352     371     391     1,477  
Net operating revenues 4,424 4,492 4,692 5,026 18,634
Equity in earnings of unconsolidated affiliates 4 16 28 51 99
Operating expenses:
Salaries, wages and benefits 2,125 2,185 2,258 2,443 9,011
Supplies 687 707 752 817 2,963
Other operating expenses, net 1,093 1,081 1,151 1,230 4,555
Electronic health record incentives (6 ) (33 ) (7 ) (26 ) (72 )
Depreciation and amortization 207 197 185 208 797
Impairment and restructuring charges, and acquisition-related costs 29 193 44 52 318
Litigation and investigation costs 3 14 50 224 291
Gains on sales, consolidation and deconsolidation of facilities               (186 )   (186 )
Operating income 290 164 287 315 1,056
Interest expense (199 ) (217 ) (248 ) (248 ) (912 )
Loss from early extinguishment of debt (1 ) (1 )
Investment earnings (loss)       (1 )   1     1     1  
Net income (loss) from continuing operations, before income taxes 91 (54 ) 40 67 144
Income tax benefit (expense)   (16 )   27     (11 )   (68 )   (68 )
Net income (loss) from continuing operations, before discontinued operations 75 (27 ) 29 (1 ) 76
Discontinued operations:
Loss from operations (1 ) (2 ) (1 ) (1 ) (5 )
Litigation and investigation costs 3 5 8
Income tax benefit (expense)   (1 )   1         (1 )   (1 )
Net income (loss) from discontinued operations   1     (1 )   (1 )   3     2  
Net income (loss) 76 (28 ) 28 2 78
Less: Net income attributable to noncontrolling interests   29     33     57     99     218  
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ 47   $ (61 ) $ (29 ) $ (97 ) $ (140 )
Amounts available (attributable) to Tenet Healthcare Corporation common shareholders
Net income (loss) from continuing operations, net of tax $ 46 $ (60 ) $ (28 ) $ (100 ) $ (142 )
Net income (loss) from discontinued operations, net of tax   1     (1 )   (1 )   3     2  
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ 47   $ (61 ) $ (29 ) $ (97 ) $ (140 )
Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ 0.47 $ (0.60 ) $ (0.28 ) $ (1.01 ) $ (1.43 )
Discontinued operations   0.01     (0.01 )   (0.01 )   0.03     0.02  
$ 0.48   $ (0.61 ) $ (0.29 ) $ (0.98 ) $ (1.41 )
Diluted
Continuing operations $ 0.46 $ (0.60 ) $ (0.28 ) $ (1.01 ) $ (1.43 )
Discontinued operations   0.01     (0.01 )   (0.01 )   0.03     0.02  
$ 0.47   $ (0.61 ) $ (0.29 ) $ (0.98 ) $ (1.41 )
Weighted average shares and dilutive securities outstanding (in thousands):
Basic 98,699 99,244 99,537 99,188 99,167
Diluted 100,872 99,244 99,537 99,188 99,167
                   
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS - CONTINUING TOTAL HOSPITALS (1)
(Unaudited)
 
 
(Dollars in millions except per patient day,
per admission, per adjusted admission Three Months Ended Year Ended
and per visit amounts)

03/31/15 (2)

 
06/30/15     9/30/2015     12/31/2015     12/31/2015  
   
Net inpatient revenues $2,691 $2,622 $2,603 $2,736 $ 10,652
Net outpatient revenues $1,412 $1,484 $1,515 $1,616 $ 6,027
 
Number of acute care hospitals (at end of period) 80 80 83 86 86
Licensed beds (at end of period) 20,826 20,826 21,527 22,525 22,525
Average licensed beds 20,823 20,826 21,122 22,549 21,092
Utilization of licensed beds 52.1 % 49.1 % 47.8 % 47.4 % 49.6 %
Patient days - total 975,912 929,840 927,964 983,856 3,817,572
Adjusted patient days 1,618,516 1,589,659 1,601,494 1,710,620 6,520,289
Net inpatient revenue per patient day $2,756 $2,821 $2,805 $2,781 $ 2,790
Total admissions 208,333 201,908 201,870 211,991 824,102
Adjusted patient admissions 349,097 349,145 352,352 371,994 1,422,588
Charity and uninsured admissions 10,950 10,535 11,322 11,529 44,336
Net inpatient revenue per admission $12,912 $12,991 $12,894 $12,906 $ 12,926
Average length of stay (days) 4.68 4.61 4.60 4.64 4.63
Total surgeries 121,403 127,523 129,937 138,264 517,127
Admissions through emergency department 133,544 128,570 126,050 133,108 521,272
Emergency department visits 741,533 742,951 747,993 778,148 3,010,625
Total emergency department admissions and visits 875,077 871,521 874,043 911,256 3,531,897
Outpatient visits 1,994,573 2,063,037 2,076,524 2,198,005 8,332,139
Charity and uninsured outpatient visits 157,197 159,634 172,057 173,280 662,168
Net outpatient revenue per visit $708 $719 $730 $735 $ 723
Net patient revenue per adjusted patient admission $11,750 $11,764 $11,688 $11,699 $ 11,724
Net patient revenue per adjusted patient day $2,534 $2,584 $2,571 $2,544 $ 2,558
 
Net Patient Revenues from:
Medicare 21.9 % 20.7 % 19.8 % 19.3 % 20.4 %
Medicaid 9.4 % 8.5 % 8.8 % 8.2 % 8.7 %
Managed care 58.6 % 60.8 % 61.1 % 61.6 % 60.6 %
Indemnity, self-pay and other 10.2 % 10.0 % 10.3 % 10.9 % 10.3 %
(1)   Represents the results of Tenet's Hospital Operations and other segment.
(2) The results for the quarter ended March 31, 2015 have been restated to exclude the results of the surgery and imaging centers that Tenet contributed to the joint venture with United Surgical Partners International. The results for these surgery and imaging centers are now reported in Tenet's Ambulatory Care segment.
                   
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS - CONTINUING SAME HOSPITALS (1)
(Unaudited)
 
 
(Dollars in millions except per patient day,
per admission, per adjusted admission Three Months Ended Year Ended
and per visit amounts)

03/31/15 (2)

 
06/30/15   9/30/2015     12/31/2015       12/31/2015  
 
Net inpatient revenues $2,568 $2,493 $2,472 $ 2,546 $ 10,079
Net outpatient revenues $1,350 $1,407 $1,427 $ 1,446 $ 5,630
 
Number of acute care hospitals (at end of period) 75 75 75 75 75
Licensed beds (at end of period) 19,996 19,996 19,953 19,882 19,882
Average licensed beds 19,993 19,996 19,985 19,906 19,969
Utilization of licensed beds 51.9 % 48.9 % 47.6 % 47.8 % 49.0 %
Patient days - total 934,521 888,952 874,456 875,226 3,573,155
Adjusted patient days 1,550,217 1,520,937 1,503,727 1,508,868 6,083,749
Net inpatient revenue per patient day $2,748 $2,804 $2,827 $ 2,909 $ 2,821
Total admissions 199,460 193,324 191,054 190,642 774,480
Adjusted patient admissions 334,218 334,451 332,521 332,037 1,333,227
Charity and uninsured admissions 10,291 9,947 10,701 10,386 41,325
Net inpatient revenue per admission $12,875 $12,895 $12,939 $ 13,355 $ 13,014
Average length of stay (days) 4.69 4.60 4.58 4.59 4.61
Total surgeries 117,412 123,015 123,765 123,761 487,953
Admissions through emergency department 127,497 122,826 119,264 119,814 489,401
Emergency department visits 706,433 707,425 702,248 700,837 2,816,943
Total emergency department admissions and visits 833,930 830,251 821,512 820,651 3,306,344
Outpatient visits 1,912,749 1,980,927 1,963,166 1,974,943 7,831,785
Charity and uninsured outpatient visits 150,324 152,449 162,441 153,357 618,571
Net outpatient revenue per visit $706 $710 $727 $ 732 $ 719
Net patient revenue per adjusted patient admission $11,723 $11,661 $11,726 $ 12,023 $ 11,783
Net patient revenue per adjusted patient day $2,527 $2,564 $2,593 $ 2,646 $ 2,582
 
Net Patient Revenues from:
Medicare 21.6 % 20.4 % 20.0 % 19.6 % 19.6 %
Medicaid 9.2 % 8.2 % 8.6 % 8.3 % 8.3 %
Managed care 59.2 % 61.6 % 61.5 % 61.6 % 61.6 %
Indemnity, self-pay and other 10.0 % 9.8 % 9.9 % 10.5 % 10.5 %
(1)   Represents the results of Tenet's Hospital Operations and other segment.
(2) The results for the quarter ended March 31, 2015 have been restated to exclude the results of the surgery and imaging centers that Tenet contributed to the joint venture with United Surgical Partners International. The results for these surgery and imaging centers are now reported in Tenet's Ambulatory Care segment.
         
TENET HEALTHCARE CORPORATION
SELECTED STATISTICS - CONTINUING SAME HOSPITALS((1))
(Unaudited)
 
 
(Dollars in millions except per patient day,
per admission, per adjusted admission Three Months Ended Year Ended
and per visit amounts)   03/31/14     06/30/14     9/30/2014     12/31/2014     12/31/2014  
 
Net inpatient revenues $ 2,364 $ 2,324 $ 2,336 $ 2,591 $ 9,615
Net outpatient revenues $ 1,250 $ 1,323 $ 1,323 $ 1,375 $ 5,271
 
Number of acute care hospitals (at end of period) 75 75 75 75 75
Licensed beds (at end of period) 19,832 19,932 19,932 19,984 19,984
Average licensed beds 19,832 19,881 19,932 19,975 19,905
Utilization of licensed beds 50.7 % 48.7 % 48.2 % 48.9 % 49.1 %
Patient days - total 904,400 880,198 883,743 898,353 3,566,694
Adjusted patient days 1,485,264 1,496,763 1,499,303 1,512,531 5,993,861
Net inpatient revenue per patient day $ 2,614 $ 2,640 $ 2,643 $ 2,884 $ 2,696
Total admissions 190,021 189,642 192,119 194,169 765,951
Adjusted patient admissions 315,397 325,810 329,845 330,884 1,301,936
Charity and uninsured admissions 12,094 10,510 10,319 10,573 43,496
Net inpatient revenue per admission $ 12,441 $ 12,255 $ 12,159 $ 13,344 $ 12,553
Average length of stay (days) 4.76 4.64 4.60 4.63 4.66
Total surgeries 115,391 120,778 122,610 123,854 482,633
Admissions through emergency department 120,160 119,269 118,287 122,089 479,805
Emergency department visits 655,714 689,083 690,171 703,265 2,738,233
Total emergency department admissions and visits 775,874 808,352 808,458 825,354 3,218,038
Outpatient visits 1,787,262 1,887,541 1,903,505 1,917,935 7,496,243
Charity and uninsured outpatient visits 158,356 161,773 158,091 158,492 636,712
Net outpatient revenue per visit $ 699 $ 701 $ 695 $ 717 $ 703
Net patient revenue per adjusted patient admission $ 11,459 $ 11,194 $ 11,093 $ 11,986 $ 11,434
Net patient revenue per adjusted patient day $ 2,433 $ 2,437 $ 2,440 $ 2,622 $ 2,484
 
Net Patient Revenues from:
Medicare 22.4 % 22.4 % 21.2 % 20.7 % 21.7 %
Medicaid 7.7 % 9.9 % 8.7 % 11.1 % 9.4 %
Managed care 58.2 % 58.4 % 61.1 % 58.3 % 59.0 %
Indemnity, self-pay and other 11.7 % 9.3 % 9.1 % 9.9 % 9.9 %
(1)   Represents the results of Tenet's Hospital Operations and other segment. The results for 2014 have been restated to exclude the results of the surgery and imaging centers that Tenet contributed to the joint venture with United Surgical Partners International. The results for these surgery and imaging centers are now reported in Tenet's Ambulatory Care segment.
       
TENET HEALTHCARE CORPORATION
SEGMENT REPORTING
(Unaudited)
 
 
December 31, December 31,
  2015     2014  
Assets
Hospital Operations and other $ 17,353 $ 16,810
Ambulatory Care 5,159 212
Conifer   1,170     929  
Total $ 23,682   $ 17,951  
 
Three Months Ended Years Ended
December 31, December 31,
  2015     2014     2015     2014  
Capital expenditures:
Hospital Operations and other $ 250 $ 188 $ 786 $ 899
Ambulatory Care 14 3 28 9
Conifer   12     8     28     25  
Total $ 276   $ 199   $ 842   $ 933  
 
Net operating revenues:
Hospital Operations and other $ 4,423 $ 4,213 $ 16,928 $ 15,681
Ambulatory Care 397 90 959 320
Conifer
Tenet 178 165 666 591
Other customers   206     162     747     602  
Total Conifer revenues   384     327     1,413     1,193  
Intercompany eliminations   (178 )   (165 )   (666 )   (591 )
Total $ 5,026   $ 4,465   $ 18,634   $ 16,603  
 
Adjusted EBITDA:
Hospital Operations and other $ 394 $ 553 $ 1,653 $ 1,651
Ambulatory Care 158 29 358 98
Conifer   61     64     265     203  
Total $ 613   $ 646   $ 2,276   $ 1,952  
 
Depreciation and amortization:
Hospital Operations and other $ 177 $ 227 $ 702 $ 810
Ambulatory Care 18 3 46 14
Conifer   13     10     49     25  
Total $ 208   $ 240   $ 797   $ 849  
 
Adjusted EBITDA $ 613 $ 646 $ 2,276 $ 1,952
Depreciation and amortization (208 ) (240 ) (797 ) (849 )
Impairments and restructuring charges, and acquisition-related costs (52 ) (63 ) (318 ) (153 )
Litigation and investigation costs (224 ) (6 ) (291 ) (25 )
Interest expense (248 ) (196 ) (912 ) (754 )
Loss from early extinguishment of debt (1 ) (1 ) (24 )
Gains on sales, consolidation and deconsolidation of facilities 186 186
Investment Earnings   1         1      
Income from continuing operations before income taxes $ 67   $ 141   $ 144   $ 147  
       
TENET HEALTHCARE CORPORATION
STATEMENT OF OPERATIONS - AMBULATORY CARE SEGMENT
INCLUDING PRO FORMA USPI AND ASPEN FOR ALL PERIODS
(Unaudited)
 
 
Three Months Ended December 31,
2015   2014  
 

Ambulatory Care as Reported Under GAAP

Unconsolidated Affiliates

Ambulatory Care as Reported Under GAAP

Unconsolidated Affiliates
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 404 $ 637 $ 313 $ 587
Less: Provision for doubtful accounts   (7 )   (13 )   (5 )   (14 )
Net operating revenues (1) 397 624 308 573
Equity in earnings of unconsolidated affiliates (2) 47 43
Operating expenses:
Salaries, wages and benefits 130 135 97 130
Supplies 79 148 57 142
Other operating expenses, net 78 111 65 106
Electronic health record incentives (1 ) (2 )
Depreciation and amortization 18 20 14 20
Impairment and restructuring charges, and acquisition-related costs 3 (2 ) 7
Gains on sales, consolidation and deconsolidation of facilities   (32 )            
Operating income 169 212 113 175
Interest expense   (35 )   (7 )   (31 )   (7 )
Net income from continuing operations, before income taxes 134 205 82 168
Income tax expense   (16 )   (3 )   (19 )   (2 )
Net income 118 $ 202   63 $ 166  
Less: Net income attributable to noncontrolling interests   85     49  
Net income attributable to Tenet Healthcare Corporation common shareholders $ 33   $ 14  
Equity in earnings of unconsolidated affiliates $ 47 $ 43
(1)   On a same-facility system-wide basis, net revenue in Tenet's Ambulatory Care segment increased 12.5% during the three months ended December 31, 2015, with cases increasing 6.9% and revenue per case increasing 5.2%.
(2) At December 31, 2015, 139 of the 333 facilities in the Company's newly formed Ambulatory segment were not consolidated based on the nature of the segment's joint venture relationships with physicians and prominent healthcare systems. Although revenues of the segment's unconsolidated facilities are not recorded as revenues by the Company, equity in earnings of unconsolidated affiliates is nonetheless a significant portion of the Company's overall earnings. To help analyze results of operations, management also uses system-wide operating measures such as system-wide revenue growth, which includes revenues of both consolidated and unconsolidated facilities. We control our remaining 194 facilities and account for these investments as consolidated subsidiaries.
       
TENET HEALTHCARE CORPORATION
STATEMENT OF OPERATIONS - AMBULATORY CARE SEGMENT
INCLUDING PRO FORMA USPI AND ASPEN FOR ALL PERIODS
(Unaudited)
 
 
Years Ended December 31,
2015   2014  
 

Ambulatory Care as Reported Under GAAP

Unconsolidated Affiliates

Ambulatory Care as Reported Under GAAP

Unconsolidated Affiliates
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 1,366 $ 2,213 $ 1,156 $ 1,967
Less: Provision for doubtful accounts   (23 )   (53 )   (16 )   (48 )
Net operating revenues (1) 1,343 2,160 1,140 1,919
Equity in earnings of unconsolidated affiliates (2) 126 116
Operating expenses:
Salaries, wages and benefits 438 514 368 463
Supplies 253 542 203 478
Other operating expenses, net 290 448 260 397
Electronic health record incentives (1 ) (2 )
Depreciation and amortization 64 80 56 76
Impairment and restructuring charges, and acquisition-related costs 5 1 9 (6 )
Gains on sales, consolidation and deconsolidation of facilities   (32 )            
Operating income 452 575 362 511
Interest expense (137 ) (28 ) (123 ) (28 )
Other       (2 )       1  
Net income from continuing operations, before income taxes 315 545 239 484
Income tax expense   (52 )   (8 )   (49 )   (8 )
Net Income 263 $ 537   190 $ 476  
Less: Net income attributable to noncontrolling interests   206     150  
Net income attributable to Tenet Healthcare Corporation common shareholders $ 57   $ 40  
Equity in earnings of unconsolidated affiliates $ 126 $ 116
(1)   On a pro forma same-facility system-wide basis, net revenue in Tenet's Ambulatory Care segment increased 11.7% during the twelve months ended December 31, 2015, with cases increasing 7.9% and revenue per case increasing 3.6%.
(2) At December 31, 2015, 139 of the 333 facilities in the Company's newly formed Ambulatory segment were not consolidated based on the nature of the segment's joint venture relationships with physicians and prominent healthcare systems. Although revenues of the segment's unconsolidated facilities are not recorded as revenues by the Company, equity in earnings of unconsolidated affiliates is nonetheless a significant portion of the Company's overall earnings. To help analyze results of operations, management also uses system-wide operating measures such as system-wide revenue growth, which includes revenues of both consolidated and unconsolidated facilities. We control our remaining 194 facilities and account for these investments as consolidated subsidiaries.
 

(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) the cumulative effect of changes in accounting principle, net of tax; (2) net loss (income) attributable to noncontrolling interests; (3) preferred stock dividends; (4) income (loss) from discontinued operations, net of tax; (5) income tax benefit (expense); (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 benefit (costs), net of insurance recoveries; (11) hurricane insurance recoveries, net of costs; (12) net gains (losses) on sales, consolidation and deconsolidation of facilities: (13) impairment and restructuring charges and acquisition-related costs; and (14) 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, 2015 and 2014.
       

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures
Table #1 - Reconciliation of Adjusted EBITDA to Net Loss Attributable to
Tenet Healthcare Corporation Common Shares

(Unaudited)
 
 
Three Months Ended Years Ended
December 31, December 31,
  2015     2014     2015     2014  
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ (97 ) $ 61 $ (140 ) $ 12
Less: Net income attributable to noncontrolling interests (99 ) (20 ) (218 ) (64 )
Net income (loss) from discontinued operations, net of tax   3         2     (22 )
Income from continuing operations (1 ) 81 76 98
Income tax expense (68 ) (60 ) (68 ) (49 )
Investment earnings 1 1
Loss from early extinguishment of debt (1 ) (1 ) (24 )
Interest expense   (248 )   (196 )   (912 )   (754 )
Operating income 315 337 1,056 925
Litigation and investigation costs (224 ) (6 ) (291 ) (25 )
Gains on sales, consolidation and deconsolidation of facilities 186 186
Impairment and restructuring charges, acquisition-related costs and litigation costs and settlements (52 ) (63 ) (318 ) (153 )
Depreciation and amortization   (208 )   (240 )   (797 )   (849 )
Adjusted EBITDA $ 613   $ 646   $ 2,276   $ 1,952  
 
Net operating revenues $ 5,026   $ 4,465   $ 18,634   $ 16,603  
 
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) 12.2 % 14.5 % 12.2 % 11.8 %
       

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures
Table #2 - Reconciliation of Adjusted Free Cash Flow

(Unaudited)
 
 
Three Months Ended Years Ended
(Dollars in millions) December 31, December 31,
  2015     2014     2015     2014  
Net cash provided by operating activities $ 191 $ 219 $ 1,026 $ 687
Less:
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements (43 ) (53 ) (200 ) (168 )
Net cash used in operating activities from discontinued operations   (3 )   (7 )   (21 )   (23 )
Adjusted net cash provided by operating activities - continuing operations 237 279 1,247 878
Purchases of property and equipment - continuing operations   (276 )   (199 )   (842 )   (933 )
Adjusted free cash flow - continuing operations $ (39 ) $ 80   $ 405   $ (55 )
       

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, 2016

(Unaudited)
 
 
(Dollars in millions) Q1 2016 2016  
Low High Low High
Net income attributable to Tenet Healthcare Corporation common shareholders $ 3 $ 55 $ 115 $ 230
Less: Net income attributable to noncontrolling interests (70 ) (60 ) (330 ) (310 )
Net Loss from discontinued operations, net of tax   (2 )   -     (5 )   -  
Income from continuing operations 75 115 450 540
Income tax expense   (10 )   (50 )   (130 )   (200 )
Income from continuing operations, before income taxes 85 165 580 740
Interest expense, net   (245 )   (235 )   (970 )   (950 )
Operating income 330 400 1,550 1,690
Gains on sales, consolidation and deconsolidation of facilities - - - -
Impairment and restructuring charges, acquisition-related costs
and litigation costs and settlements (a) - - - -
Depreciation and amortization   (220 )   (200 )   (850 )   (810 )
Adjusted EBITDA $ 550   $ 600   $ 2,400   $ 2,500  
     
Net operating revenues $

4,700
  $

4,900
  $ 18,800   $ 19,200  
 
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin)

11.7
%

12.2
% 12.8 % 13.0 %
(a)   Company does not forecast impairment and restructuring charges, acquisition-related costs, litigation costs and settlements, and gains on sales, consolidation and deconsolidation of facilities.
       

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, 2016

(Unaudited)
 
 
(Dollars in millions) Q1 2016 2016  
Low High Low High
Adjusted EBITDA $ 550 $ 600 $ 2,400 $ 2,500
Depreciation and amortization (220 ) (200 ) (850 ) (810 )
Interest expense   (245 )   (235 )   (970 )   (950 )
Normalized income from continuing operations before income taxes 85 165 580 740
Income tax expense   (10 )   (50 )   (130 )   (200 )
Normalized income from continuing operations 75 115 450 540
Net income attributable to noncontrolling interests   (70 )   (60 )   (330 )   (310 )
Normalized net income attributable to common shares $ 5   $ 55   $ 120   $ 230  
 
Fully diluted weighted average share outstanding (in millions) 101 101 102 102
 
Normalized fully diluted earnings per share - continuing operations $ 0.05 $ 0.54 $ 1.18 $ 2.25
               

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures
Table #5 - Reconciliation of Outlook Adjusted Free Cash Flow

for the Year Ending December 31, 2016
 
 
(Dollars in millions) 2016  
Low High
Net cash provided by operating activities $ 1,275 $ 1,435
Less:
Payments for restructuring charges, acquisition-related costs and litigation costs and settlements (a) - -
Net cash used in operating activities from discontinued operations   (25 )   (15 )
Adjusted net cash provided by operating activities - continuing operations $ 1,300 $ 1,450
Purchases of property and equipment - continuing operations   (900 )   (850 )
Adjusted free cash flow - continuing operations $ 400   $ 600  

(a) Company does not forecast impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements.

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