Tenet Healthcare Corporation (NYSE:THC) reported a net loss from continuing operations of $9 million in the third quarter of 2016, a $19 million improvement when compared to a $28 million net loss from continuing operations in the third quarter of 2015. Adjusted EBITDA was $570 million in the third quarter of 2016, an increase of $4 million, or 0.7 percent, compared to $566 million in the third quarter of 2015.

"Our focus on high-acuity service lines continues to drive growth in our hospitals and contributed to the 5.3% increase in same-hospital patient revenues this quarter. Adjusted EBITDA in our hospital segment increased by a similar amount after adjusting for acquisitions, divestitures and electronic health record incentives," said Trevor Fetter, chairman and chief executive officer. "Conifer and USPI delivered another outstanding quarter, and our three business segments continue to work together to enhance our long-term growth."

Hospital Operations and Other Segment

Net operating revenue in the Hospital Operations and other segment was $4.162 billion, down 0.4 percent from $4.179 billion in the third quarter of 2015 due to hospitals that have been divested since that time. On a same-hospital basis, patient revenue increased to $3.768 billion, up 5.3 percent from $3.577 billion in the third quarter of 2015. The increase was driven by a 1.4 percent increase in adjusted patient admissions and a 3.9 percent increase in net patient revenue per adjusted admission.

Adjusted EBITDA in Tenet's hospital segment was $334 million, representing a decline of 12.8 percent as compared to $383 million in the third quarter of 2015. The decline was primarily driven by divestitures in 2015 and 2016 and an expected decrease in electronic health record incentives, and was partially offset by acquisitions in 2015. In addition, Tenet's health plan business lowered EBITDA in the segment by approximately $5 million.

Total hospital segment selected operating expenses, defined as the sum of salaries, wages and benefits, supplies and other operating expenses, increased 3.1 percent on a per adjusted admission basis in the quarter. Approximately one-third of the increase was attributable to an increase in expense at Tenet's health plans, which was substantially offset by an increase in health plan revenues as a result of additional covered lives in 2016.

Exchanges

Tenet's same-hospital exchange admissions were 5,465 in the third quarter of 2016, up 16.9 percent from the third quarter of 2015. Same-hospital exchange outpatient visits were 51,015, up 32.0 percent from the third quarter of 2015.

Uncompensated Care

Tenet's provision for doubtful accounts was $367 million in the third quarter of 2016, representing a ratio of 7.0 percent of revenues before bad debt, as compared to $371 million in the third quarter of 2015, or 7.3 percent of revenues before bad debt. Tenet's uncompensated care costs, defined as the sum of the provision for doubtful accounts, charity care write-offs and uninsured discounts, was $1.318 billion and $1.303 billion in the third quarters of 2016 and 2015, respectively, including $951 million and $932 million, respectively, of charity care write-offs and uninsured discounts that were offered through Tenet's Compact with Uninsured Patients. Uncompensated care represented 21.4 percent of revenue before bad debts, uninsured discounts and charity care write-offs in the third quarter of 2016, down from 21.7 percent in the third quarter of 2015. Nearly all of Tenet's uncompensated care is associated with the Hospital Operations and other segment.

Uninsured plus charity admissions increased by 985 admissions, or 10.5 percent on a same-hospital basis in the third quarter of 2016 compared to the third quarter of 2015. Uninsured plus charity outpatient visits decreased by 3,733 visits, or 2.8 percent, on a same-hospital basis.

Ambulatory Care Segment

During the third quarter of 2016, the Ambulatory segment produced net operating revenue of $448 million, representing an increase of 36.2 percent as compared to $329 million in the third quarter of 2015. In addition, the Ambulatory segment generated Adjusted EBITDA of $157 million, up 28.7 percent from $122 million in the third quarter of 2015

The results of many of the facilities in which the Ambulatory segment has an investment are not consolidated by Tenet. To help analyze the segment's results of operations, management uses system-wide measures which include revenues and cases of both consolidated and unconsolidated facilities. On a same-facility system-wide basis, revenue in the Ambulatory segment increased 9.7 percent, with cases increasing 4.0 percent and revenue per case increasing 5.5 percent.

Conifer Segment

During the third quarter of 2016, Conifer's revenue increased 14.7 percent to $398 million, up from $347 million in the third quarter of 2015, and Conifer's revenue from third party customers increased by 29.9 percent to $239 million. Conifer generated $79 million of Adjusted EBITDA in the third quarter of 2016, up 29.5 percent from $61 million in the third quarter of 2015. Conifer's results for the third quarter of 2016 included $9 million of annual customer incentives. These incentives may be achieved again in future years, but will not recur at these levels in the fourth quarter of 2016.

Net Income and Earnings Per Share

Tenet reported a net loss from continuing operations of $9 million, or $0.09 per share, in the third quarter of 2016 compared to a net loss of $28 million, or $0.28 per share, in the third quarter of 2015.

After adjusting for certain items which are listed on Table #2, Tenet generated Adjusted net income from continuing operations of $16 million, or $0.16 per diluted share, during the third quarter of 2016, as compared to Adjusted net income from continuing operations of $30 million, or $0.29 per diluted share, in the third quarter of 2015.

A reconciliation of GAAP net income available (loss attributable) to Tenet Healthcare Corporation common shareholders to Adjusted net income from continuing operations and Adjusted diluted earnings per share from continuing operations is contained in Table #2 at the end of this release.

Cash Flow and Liquidity

Cash and cash equivalents were $649 million at September 30, 2016 compared to $656 million at June 30, 2016. The Company had no outstanding borrowings on its $1 billion credit line as of September 30, 2016. Accounts receivable days outstanding were 52.9 at September 30, 2016 compared to 51.1 at June 30, 2016 and 49.5 at December 31, 2015.

Net cash provided by operating activities in the nine months ended September 30, 2016 was $851 million, representing a $16 million improvement compared to $835 million in the comparable period in 2015. After subtracting $614 million and $566 million of capital expenditures in the nine months ended September 30, 2016 and September 30, 2015, respectively, Free Cash Flow was $237 million in the nine months ended September 30, 2016, representing a $32 million decline compared to $269 million in the comparable period in 2015. Adjusted Free Cash Flow was $368 million in the nine months ended September 30, 2016, representing a $76 million decline from $444 million in the comparable period in 2015.

Net cash used in investing activities was $150 million in the nine months ended September 30, 2016 compared to $1.272 billion of net cash used in investing activities in the comparable period in 2015. Net cash used in financing activities was $408 million in the nine months ended September 30, 2016 compared to $694 million of net cash provided by financing activities in the comparable period in 2015.

Reconciliations of net cash provided by operating activities to both Free Cash Flow and Adjusted Free Cash Flow are contained in Table #3 at the end of this release.

Outlook

The Company's Outlook for 2016 includes:
  • Revenue of $19.650 billion to $19.800 billion,
  • Net loss from continuing operations ranging from a loss of $99 million to a loss of $94 million,
  • Adjusted EBITDA of $2.400 billion to $2.450 billion,
  • Net cash provided by operating activities of $1.2 billion to $1.3 billion,
  • Adjusted Free Cash Flow of $400 million to $600 million,
  • Loss per share from continuing operations ranging from a loss of $1.00 to a loss of $0.95 per basic share, and
  • Adjusted diluted earnings per share from continuing operations of $1.16 to $1.21.

The Outlook for calendar year 2016 assumes equity in earnings of unconsolidated affiliates of $120 million to $130 million, electronic health record incentives of $30 million to $35 million, net income attributable to noncontrolling interests of $340 million to $360 million (excluding an additional $19 million of noncontrolling interests recorded by USPI in the first nine months of 2016 related to gains on consolidation) and an average diluted share count of 101 million.

The Company's Outlook for the fourth quarter of 2016 includes:
  • Revenue of $4.9 billion to $5.0 billion,
  • Net income from continuing operations of $9 million to $14 million,
  • Adjusted EBITDA of $600 million to $650 million,
  • Earnings per diluted share from continuing operations of $0.09 to $0.14, and
  • Adjusted diluted earnings per share from continuing operations of $0.17 to $0.22.

The Outlook for the fourth quarter assumes equity in earnings of unconsolidated affiliates of approximately $40 million, electronic health record incentives of approximately $10 million, net income attributable to noncontrolling interests of $94 million to $114 million and an average diluted share count of 102 million.

Additional details on Tenet's Outlook for both the fourth quarter and calendar year 2016 are available in Tables 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 Third Quarter Results

Tenet management will discuss the Company's third quarter 2016 results on a webcast scheduled for 10:00 a.m. EDT (9:00 a.m. CDT) on November 1, 2016. Investors can access the webcast through Tenet's website at www.tenethealth.com/investors. A set of slides, which will be referred to on the conference call, is available on the Quarterly Results section of the Company's website.

Additional information regarding Tenet's quarterly results of operations is contained in its Form 10-Q report for the three months ended September 30, 2016, which will be filed with the Securities and Exchange Commission and posted on the Tenet website before the webcast. This press release includes certain non-GAAP measures, such as Adjusted EBITDA, Adjusted net income from continuing operations, Adjusted diluted earnings per share from continuing operations, Free Cash Flow and Adjusted Free Cash Flow. Reconciliations of these measures to the most comparable GAAP measure are contained in the tables at the end of this release.

Tenet Healthcare Corporation is a diversified healthcare services company with 130,000 employees united around a common mission: to help people live happier, healthier lives. Through its subsidiaries, partnerships and joint ventures, including United Surgical Partners International, the Company operates 79 general acute care hospitals, 20 short-stay surgical hospitals and approximately 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, Form 10-Q for the quarterly period ended September 30, 2016 and other filings with the Securities and Exchange Commission. Among other things, these factors include adverse regulatory developments, government investigations or litigation.

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 September 30,
2016 % 2015 % Change
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 5,216 $ 5,063 3.0 %
Less: Provision for doubtful accounts   367     371   (1.1 ) %
Net operating revenues 4,849 100.0 % 4,692 100.0 % 3.3 %
Equity in earnings of unconsolidated affiliates 31 0.6 % 28 0.6 % 10.7 %
Operating expenses:
Salaries, wages and benefits 2,314 47.7 % 2,258 48.2 % 2.5 %
Supplies 767 15.8 % 752 16.0 % 2.0 %
Other operating expenses, net 1,231 25.4 % 1,151 24.5 % 7.0 %
Electronic health record incentives (2 ) % (7 ) (0.1 )% (71.4 ) %
Depreciation and amortization 205 4.2 % 185 3.9 %
Impairment and restructuring charges, and acquisition-related costs 31 0.6 % 44 0.9 %
Litigation and investigation costs 4 0.1 % 50 1.1 %
Gains on sales, consolidation and deconsolidation of facilities   (3 ) (0.1 )%     %
Operating income 333 6.9 % 287 6.1 %
Interest expense (243 ) (248 )
Investment earnings (losses)   (1 )   1  
Net income from continuing operations, before income taxes 89 40
Income tax expense   (10 )   (11 )
Net income from continuing operations, before discontinued operations 79 29
Discontinued operations:
Income (loss) from operations 2 (1 )
Income tax expense   (1 )    
Net income (loss) from discontinued operations   1     (1 )
Net income 80 28
Less: Net income attributable to noncontrolling interests   88     57  
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (8 ) $ (29 )
Amounts available (attributable) to Tenet Healthcare Corporation common shareholders
Net loss from continuing operations, net of tax $ (9 ) $ (28 )
Net income (loss) from discontinued operations, net of tax   1     (1 )
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (8 ) $ (29 )
Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ (0.09 ) $ (0.28 )
Discontinued operations   0.01     (0.01 )
$ (0.08 ) $ (0.29 )
Diluted
Continuing operations $ (0.09 ) $ (0.28 )
Discontinued operations   0.01     (0.01 )
$ (0.08 ) $ (0.29 )
Weighted average shares and dilutive securities outstanding (in thousands):
Basic 99,523 99,537
Diluted* 99,523 99,537
 

*Had we generated income from continuing operations in the three months ended September 30, 2016 and 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 1,455 shares and 2,500 shares, respectively.
 
         

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
(Dollars in millions except per share amounts) Nine Months Ended September 30,
2016 % 2015 % Change
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 15,856 $ 14,694 7.9 %
Less: Provision for doubtful accounts   1,095     1,086   0.8 %
Net operating revenues 14,761 100.0 % 13,608 100.0 % 8.5 %
Equity in earnings of unconsolidated affiliates 85 0.6 % 48 0.4 % 77.1 %
Operating expenses:
Salaries, wages and benefits 7,032 47.6 % 6,568 48.3 % 7.1 %
Supplies 2,351 15.9 % 2,146 15.8 % 9.6 %
Other operating expenses, net 3,686 25.0 % 3,325 24.4 % 10.9 %
Electronic health record incentives (23 ) (0.2 )% (46 ) (0.3 )% (50.0 )%
Depreciation and amortization 632 4.3 % 589 4.3 %
Impairment and restructuring charges, and acquisition-related costs 81 0.6 % 266 2.0 %
Litigation and investigation costs 291 2.0 % 67 0.5 %
Gains on sales, consolidation and deconsolidation of facilities   (151 ) (1.0 )%     %
Operating income 947 6.4 % 741 5.4 %
Interest expense (730 ) (664 )
Investment earnings (losses)   2      
Net income from continuing operations, before income taxes 219 77
Income tax expense   (61 )    
Net income from continuing operations, before discontinued operations 158 77
Discontinued operations:
Loss from operations (5 ) (1 )
Income tax expense        
Net loss from discontinued operations   (5 )   (1 )
Net income 153 76
Less: Net income attributable to noncontrolling interests   266     119  
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (113 ) $ (43 )
Amounts attributable to Tenet Healthcare Corporation common shareholders
Net loss from continuing operations, net of tax $ (108 ) $ (42 )
Net loss from discontinued operations, net of tax   (5 )   (1 )
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (113 ) $ (43 )
Net loss per share attributable to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ (1.09 ) $ (0.42 )
Discontinued operations   (0.05 )   (0.01 )
$ (1.14 ) $ (0.43 )
Diluted
Continuing operations $ (1.09 ) $ (0.42 )
Discontinued operations   (0.05 )   (0.01 )
$ (1.14 ) $ (0.43 )
Weighted average shares and dilutive securities outstanding (in thousands):
Basic 99,210 99,160
Diluted* 99,210 99,160
 

*Had we generated income from continuing operations in the nine months ended September 30, 2016 and 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 1,470 shares and 2,449 shares, respectively.
 
   
TENET HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS

(Unaudited)
 
September 30, December 31,
(Dollars in millions) 2016 2015
ASSETS
Current assets:
Cash and cash equivalents $ 649 $ 356
Accounts receivable, less allowance for doubtful accounts 2,786 2,704
Inventories of supplies, at cost 322 309
Income tax receivable 11 7
Assets held for sale 17 550
Other current assets   1,331     1,245  
Total current assets 5,116 5,171
Investments and other assets 1,324 1,175
Deferred income taxes 840 776
Property and equipment, at cost, less accumulated depreciation and amortization 7,965 7,915
Goodwill 7,376 6,970
Other intangible assets, at cost, less accumulated amortization   1,853     1,675  
Total assets $ 24,474   $ 23,682  
 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 184 $ 127
Accounts payable 1,228 1,380
Accrued compensation and benefits 809 880
Professional and general liability reserves 185 177
Accrued interest payable 308 205
Liabilities held for sale 13 101
Accrued legal settlement costs 527 294
Other current liabilities   1,293     1,144  
Total current liabilities 4,547 4,308
Long-term debt, net of current portion 14,323 14,383
Professional and general liability reserves 620 578
Defined benefit plan obligations 586 595
Deferred income taxes 320 37
Other long-term liabilities   606     557  
Total liabilities 21,002 20,458
Commitments and contingencies
Redeemable noncontrolling interests in equity of consolidated subsidiaries 2,307 2,266
Equity:
Shareholders' equity:
Common stock 7 7
Additional paid-in capital 4,801 4,815
Accumulated other comprehensive loss (200 ) (164 )
Accumulated deficit (1,663 ) (1,550 )
Common stock in treasury, at cost   (2,417 )   (2,417 )
Total shareholders' equity 528 691
Noncontrolling interests   637     267  
Total equity   1,165     958  
Total liabilities and equity $ 24,474   $ 23,682  
 
   
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)
 
Nine Months Ended
(Dollars in millions) September 30,
2016 2015
Net Income $ 153 $ 76
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 632 589
Provision for doubtful accounts 1,095 1,086
Deferred income tax expense (benefit) 32 (10 )
Stock-based compensation expense 51 50
Impairment and restructuring charges, and acquisition-related costs 81 266
Litigation and investigation costs 291 67
Gains on sales, consolidation and deconsolidation of facilities (151 )
Equity in earnings of unconsolidated affiliates, net of distributions received 2 (48 )
Amortization of debt discount and debt issuance costs 33 32
Pre-tax loss from discontinued operations 5 1
Other items, net (3 ) 22
Changes in cash from operating assets and liabilities:
Accounts receivable (1,156 ) (1,124 )
Inventories and other current assets (95 ) (62 )
Income taxes (1 ) (5 )
Accounts payable, accrued expenses and other current liabilities (35 ) 39
Other long-term liabilities 48 31
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements (132 ) (157 )
Net cash provided by (used in) operating activities from discontinued operations, excluding income taxes   1     (18 )
Net cash provided by operating activities 851 835
Cash flows from investing activities:
Purchases of property and equipment — continuing operations (614 ) (566 )
Purchases of businesses or joint venture interests, net of cash acquired (96 ) (720 )
Proceeds from sales of facilities and other assets 573 28
Proceeds from sales of marketable securities, long-term investments and other assets 36 18
Purchases of equity investments (37 ) (18 )
Other long-term assets (15 ) (6 )
Other items, net   3     (8 )
Net cash used in investing activities (150 ) (1,272 )
Cash flows from financing activities:
Repayments of borrowings under credit facility (1,195 ) (1,880 )
Proceeds from borrowings under credit facility 1,195 1,770
Repayments of other borrowings (112 ) (2,011 )
Proceeds from other borrowings 4 3,208
Debt issuance costs (1 ) (76 )
Distributions paid to noncontrolling interests (151 ) (65 )
Proceeds from sale of noncontrolling interests 19 4
Purchase of noncontrolling interests (180 ) (254 )
Proceeds from exercise of stock options 4 15
Other items, net   9     (17 )
Net cash provided by (used in) financing activities   (408 )   694  
Net increase in cash and cash equivalents 293 257
Cash and cash equivalents at beginning of period   356     193  
Cash and cash equivalents at end of period $ 649   $ 450  
Supplemental disclosures:
Interest paid, net of capitalized interest $ (596 ) $ (519 )
Income tax payments, net $ (33 ) $ (6 )
 
           
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS - CONTINUING TOTAL HOSPITALS (1)

(Unaudited)
 

(Dollars in millions except per patient day, per admission, per adjusted admission and per visit amounts)

 
Three Months Ended September 30,

Nine Months Ended September 30,

 
2016 2015 Change 2016 2015 Change
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 75 83 (8 ) * 75 83 (8 ) *
Total admissions 194,342 201,870 (3.7 )% 600,039 612,111 (2.0 )%
Adjusted patient admissions 345,207 352,352 (2.0 )% 1,050,839 1,050,594 %
Paying admissions (excludes charity and uninsured) 183,042 190,548 (3.9 )% 568,017 579,304 (1.9 )%
Charity and uninsured admissions 11,300 11,322 (0.2 )% 32,022 32,807 (2.4 )%
Admissions through emergency department 120,447 126,050 (4.4 )% 378,786 388,164 (2.4 )%
Paying admissions as a percentage of total admissions 94.2 % 94.4 % (0.2 )% * 94.7 % 94.6 % 0.1 % *
Charity and uninsured admissions as a percentage of total admissions 5.8 % 5.6 % 0.2 % * 5.3 % 5.4 % (0.1 )% *
Emergency department admissions as a percentage of total admissions 62.0 % 62.4 % (0.4 )% * 63.1 % 63.4 % (0.3 )% *
Surgeries — inpatient 54,701 55,977 (2.3 )% 164,835 164,969 (0.1 )%
Surgeries — outpatient 72,646 73,960 (1.8 )% 225,296 213,894 5.3 %
Total surgeries 127,346 129,937 (2.0 )% 390,131 378,863 3.0 %
Patient days — total 894,323 927,964 (3.6 )% 2,802,150 2,833,716 (1.1 )%
Adjusted patient days 1,567,894 1,601,494 (2.1 )% 4,851,535 4,809,669 0.9 %
Average length of stay (days) 4.60 4.60 % 4.67 4.63 0.9 %
Licensed beds (at end of period) 20,340 21,527 (5.5 )% 20,340 21,527 (5.5 )%
Average licensed beds 20,367 21,122 (3.6 )% 20,757 20,924 (0.8 )%
Utilization of licensed beds 47.7 % 47.8 % (0.1 )% * 49.3 % 49.6 % (0.3 )% *
Outpatient Visits
Total visits 2,009,019 2,076,524 (3.3 )% 6,193,924 6,134,134 1.0 %
Paying visits (excludes charity and uninsured) 1,862,046 1,904,467 (2.2 )% 5,742,955 5,645,246 1.7 %
Charity and uninsured visits 146,973 172,057 (14.6 )% 450,969 488,888 (7.8 )%
Emergency department visits 707,713 747,993 (5.4 )% 2,213,321 2,232,477 (0.9 )%
Paying visits as a percentage of total visits 92.7 % 91.7 % 1.0 % * 92.7 % 92.0 % 0.7 % *
Charity and uninsured visits as a percentage of total visits 7.3 % 8.3 % (1.0 )% * 7.3 % 8.0 % (0.7 )% *
Revenues
Net inpatient revenues $ 2,644 $ 2,603 1.6 % $ 8,013 $ 7,917 1.2 %
Net outpatient revenues $ 1,417 $ 1,515 (6.5 )% $ 4,391 $ 4,411 (0.5 )%
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission $ 13,605 $ 12,894 5.5 % $ 13,354 $ 12,934 3.2 %
Net inpatient revenue per patient day $ 2,956 $ 2,805 5.4 % $ 2,860 $ 2,794 2.4 %
Net outpatient revenue per visit $ 705 $ 730 (3.4 )% $ 709 $ 719 (1.4 )%
Net patient revenue per adjusted patient admission $ 11,764 $ 11,688 0.7 % $ 11,804 $ 11,734 0.6 %
Net patient revenue per adjusted patient day $ 2,590 $ 2,571 0.7 % $ 2,557 $ 2,563 (0.2 )%
Total selected operating expenses (salaries, wages and benefits, supplies and other operating expenses) per adjusted patient admission $ 10,666 $ 10,348 3.1 % $ 10,621 $ 10,315 3.0 %
 
Net Patient Revenues from:
Medicare 19.9 % 19.8 % 0.1 % * 20.5 % 20.8 % (0.3 )% *
Medicaid 8.4 % 8.8 % (0.4 )% * 8.2 % 8.9 % (0.7 )% *
Managed care 64.0 % 61.1 % 2.9 % * 61.5 % 60.2 % 1.3 % *
Indemnity, self-pay and other 7.7 % 10.3 % (2.6 )% * 9.8 % 10.1 % (0.3 )% *
 
(1) Represents the consolidated results of Tenet's Hospital Operations and other segment.
* This change is the difference between the 2016 and 2015 amounts shown
 
           
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS - CONTINUING SAME HOSPITALS (1)

(Unaudited)
 

(Dollars in millions except per patient day, per admission, per adjusted admission and per visit amounts)

 
Three Months Ended September 30,

Nine Months Ended September 30,

 
2016 2015 Change

2016
2015 Change
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 67 67 * 67 67 *
Total admissions 177,626 176,885 0.4 % 539,830 541,167 (0.2 )%
Adjusted patient admissions 310,253 305,916 1.4 % 935,412 922,603 1.4 %
Paying admissions (excludes charity and uninsured) 167,219 167,463 (0.1 )% 511,222 513,875 (0.5 )%
Charity and uninsured admissions 10,407 9,422 10.5 % 28,608 27,292 4.8 %
Admissions through emergency department 110,539 110,235 0.3 % 341,111 342,302 (0.3 )%
Paying admissions as a percentage of total admissions 94.1 % 94.7 % (0.6 )% * 94.7 % 95.0 % (0.3 )% *
Charity and uninsured admissions as a percentage of total admissions 5.9 % 5.3 % 0.6 % * 5.3 % 5.0 % 0.3 % *
Emergency department admissions as a percentage of total admissions 62.2 % 62.3 % (0.1 )% * 63.2 % 63.3 % (0.1 )% *
Surgeries — inpatient 49,608 49,527 0.2 % 147,377 147,113 0.2 %
Surgeries — outpatient 62,571 64,985 (3.7 )% 192,248 189,886 1.2 %
Total surgeries 112,179 114,512 (2.0 )% 339,625 336,999 0.8 %
Patient days — total 803,553 804,181 (0.1 )% 2,471,353 2,482,989 (0.5 )%
Adjusted patient days 1,390,214 1,374,619 1.1 % 4,241,280 4,187,429 1.3 %
Average length of stay (days) 4.52 4.55 (0.7 )% 4.58 4.59 (0.2 )%
Licensed beds (at end of period) 18,104 18,201 (0.5 )% 18,104 18,201 (0.5 )%
Average licensed beds 18,131 18,233 (0.6 )% 18,138 18,240 (0.6 )%
Utilization of licensed beds 48.2 % 47.9 % 0.3 % * 49.9 % 49.9 % % *
Outpatient Visits
Total visits 1,805,800 1,792,264 0.8 % 5,491,057 5,370,525 2.2 %
Paying visits (excludes charity and uninsured) 1,676,686 1,659,417 1.0 % 5,112,745 4,990,102 2.5 %
Charity and uninsured visits 129,114 132,847 (2.8 )% 378,312 380,423 (0.6 )%
Emergency department visits 628,234 624,871 0.5 % 1,939,686 1,894,201 2.4 %
Paying visits as a percentage of total visits 92.9 % 92.6 % 0.3 % * 93.1 % 92.9 % 0.2 % *
Charity and uninsured visits as a percentage of total visits 7.1 % 7.4 % (0.3 )% * 6.9 % 7.1 % (0.2 )% *
Revenues
Net inpatient revenues $ 2,435 $ 2,289 6.4 % $ 7,334 $ 6,976 5.1 %
Net outpatient revenues $ 1,333 $ 1,288 3.5 % $ 4,007 $ 3,795 5.6 %
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission $ 13,709 $ 12,941 5.9 % $ 13,586 $ 12,891 5.4 %
Net inpatient revenue per patient day $ 3,030 $ 2,846 6.5 % $ 2,968 $ 2,810 5.6 %
Net outpatient revenue per visit $ 738 $ 719 2.6 % $ 730 $ 707 3.3 %
Net patient revenue per adjusted patient admission $ 12,145 $ 11,693 3.9 % $ 12,124 $ 11,675 3.8 %
Net patient revenue per adjusted patient day $ 2,710 $ 2,602 4.2 % $ 2,674 $ 2,572 4.0 %
 
Net Patient Revenues from:
Medicare 19.7 % 20.2 % (0.5 )% * 20.2 % 21.0 % (0.8 )% *
Medicaid 8.5 % 8.8 % (0.3 )% * 8.3 % 8.8 % (0.5 )% *
Managed care 62.1 % 61.6 % 0.5 % * 61.8 % 60.8 % 1.0 % *
Indemnity, self-pay and other 10.1 % 9.3 % 0.8 % * 9.7 % 9.4 % 0.3 % *
 

(1) Information for our Hospital Operations and other segment is presented on a same-hospital basis, which includes the results of our same 67 hospitals operated throughout the nine months ended September 30, 2016 and 2015, associated outpatient facilities and excludes the results of eight hospitals that Tenet acquired, as well as hospitals that Tenet divested, since January 1, 2015.
* This change is the difference between the 2016 and 2015 amounts shown
 
       

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
(Dollars in millions except per share amounts) Three Months Ended Nine Months Ended
3/31/2016 6/30/2016 9/30/2016 9/30/2016
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 5,420 $ 5,220 $ 5,216 $ 15,856
Less: Provision for doubtful accounts   376     352     367     1,095  
Net operating revenues 5,044 4,868 4,849 14,761
Equity in earnings of unconsolidated affiliates 24 30 31 85
Operating expenses:
Salaries, wages and benefits 2,402 2,316 2,314 7,032
Supplies 811 773 767 2,351
Other operating expenses, net 1,242 1,213 1,231 3,686
Electronic health record incentives (21 ) (2 ) (23 )
Depreciation and amortization 212 215 205 632
Impairment and restructuring charges, and acquisition-related costs 28 22 31 81
Litigation and investigation costs 173 114 4 291
Gains on sales, consolidation and deconsolidation of facilities   (147 )   (1 )   (3 )   (151 )
Operating income 347 267 333 947
Interest expense (243 ) (244 ) (243 ) (730 )
Investment earnings (losses)   1     2     (1 )   2  
Net income from continuing operations, before income taxes 105 25 89 219
Income tax benefit (expense)   (67 )   16     (10 )   (61 )
Net income from continuing operations, before discontinued operations 38 41 79 158
Discontinued operations:
Income (loss) from operations (5 ) (2 ) 2 (5 )
Income tax benefit (expense)   1         (1 )    
Net Income (loss) from discontinued operations   (4 )   (2 )   1     (5 )
Net income 34 39 80 153
Less: Net income attributable to noncontrolling interests   93     85     88     266  
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (59 ) $ (46 ) $ (8 ) $ (113 )
Amounts available (attributable) to Tenet Healthcare Corporation common shareholders
Net loss from continuing operations, net of tax $ (55 ) $ (44 ) $ (9 ) $ (108 )
Net income (loss) from discontinued operations, net of tax   (4 )   (2 )   1     (5 )
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (59 ) $ (46 ) $ (8 ) $ (113 )
Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ (0.56 ) $ (0.44 ) $ (0.09 ) $ (1.09 )
Discontinued operations   (0.04 )   (0.02 )   0.01     (0.05 )
$ (0.60 ) $ (0.46 ) $ (0.08 ) $ (1.14 )
Diluted
Continuing operations $ (0.56 ) $ (0.44 ) $ (0.09 ) $ (1.09 )
Discontinued operations   (0.04 )   (0.02 )   0.01     (0.05 )
$ (0.60 ) $ (0.46 ) $ (0.08 ) $ (1.14 )
Weighted average shares and dilutive securities outstanding (in thousands):
Basic 98,768 99,341 99,523 99,210
Diluted 98,768 99,341 99,523 99,210
 
       
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS - CONTINUING TOTAL HOSPITALS (1)

(Unaudited)
 

(Dollars in millions except per patient day, per admission, per adjusted admission and per visit amounts)

 
Three Months Ended Nine Months Ended

 
3/31/2016 6/30/2016 9/30/2016 9/30/2016
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 80 75 75 75
Total admissions 211,799 193,898 194,342 600,039
Adjusted patient admissions 362,819 342,813 345,207 1,050,839
Paying admissions (excludes charity and uninsured) 201,436 183,539 183,042 568,017
Charity and uninsured admissions 10,363 10,359 11,300 32,022
Admissions through emergency department 136,056 122,283 120,447 378,786
Paying admissions as a percentage of total admissions 95.1 % 94.7 % 94.2 % 94.7 %
Charity and uninsured admissions as a percentage of total admissions 4.9 % 5.3 % 5.8 % 5.3 %
Emergency department admissions as a percentage of total admissions 64.2 % 63.1 % 62.0 % 63.1 %
Surgeries — inpatient 55,755 54,379 54,701 164,835
Surgeries — outpatient 76,829 75,821 72,646 225,296
Total surgeries 132,584 130,201 127,346 390,131
Patient days — total 1,010,514 897,313 894,323 2,802,150
Adjusted patient days 1,714,369 1,569,272 1,567,894 4,851,535
Average length of stay (days) 4.77 4.63 4.60 4.67
Licensed beds (at end of period) 21,529 20,380 20,340 20,340
Average licensed beds 21,524 20,380 20,367 20,757
Utilization of licensed beds 51.6 % 48.4 % 47.7 % 49.3 %
Outpatient Visits
Total visits 2,146,618 2,038,287 2,009,019 6,193,924
Paying visits (excludes charity and uninsured) 1,984,515 1,896,394 1,862,046 5,742,955
Charity and uninsured visits 162,103 141,893 146,973 450,969
Emergency department visits 789,916 715,692 707,713 2,213,321
Paying visits as a percentage of total visits 92.4 % 93.0 % 92.7 % 92.7 %
Charity and uninsured visits as a percentage of total visits 7.6 % 7.0 % 7.3 % 7.3 %
Revenues
Net inpatient revenues $ 2,781 $ 2,588 $ 2,644 $ 8,013
Net outpatient revenues $ 1,514 $ 1,460 $ 1,417 $ 4,391
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission $ 13,130 $ 13,347 $ 13,605 $ 13,354
Net inpatient revenue per patient day $ 2,752 $ 2,884 $ 2,956 $ 2,860
Net outpatient revenue per visit $ 705 $ 716 $ 705 $ 709
Net patient revenue per adjusted patient admission $ 11,838 $ 11,808 $ 11,764 $ 11,804
Net patient revenue per adjusted patient day $ 2,505 $ 2,580 $ 2,590 $ 2,557
Total selected operating expenses (salaries, wages and benefits, supplies and other operating expenses) per adjusted patient admission $ 10,537 $ 10,668 $ 10,666 $ 10,621
 
Net Patient Revenues from:
Medicare 20.0 % 21.7 % 19.9 % 20.5 %
Medicaid 8.7 % 7.4 % 8.4 % 8.2 %
Managed care 61.1 % 59.4 % 64.0 % 61.5 %
Indemnity, self-pay and other 10.2 % 11.5 % 7.7 % 9.8 %
 

(1) Represents the consolidated results of Tenet's Hospital Operations and other segment.
 
       
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS - CONTINUING SAME HOSPITALS (1)

(Unaudited)
 

(Dollars in millions except per patient day, per admission, per adjusted admission and per visit amounts)

 
Three Months Ended Nine Months Ended

 
3/31/2016 6/30/2016 9/30/2016 9/30/2016
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 67 67 67 67
Total admissions 185,053 177,151 177,626 539,830
Adjusted patient admissions 315,787 309,372 310,253 935,412
Paying admissions (excludes charity and uninsured) 176,286 167,717 167,219 511,222
Charity and uninsured admissions 8,767 9,434 10,407 28,608
Admissions through emergency department 118,578 111,994 110,539 341,111
Paying admissions as a percentage of total admissions 95.3 % 94.7 % 94.1 % 94.7 %
Charity and uninsured admissions as a percentage of total admissions 4.7 % 5.3 % 5.9 % 5.3 %
Emergency department admissions as a percentage of total admissions 64.1 % 63.2 % 62.2 % 63.2 %
Surgeries — inpatient 48,547 49,222 49,608 147,377
Surgeries — outpatient 63,999 65,678 62,571 192,248
Total surgeries 112,546 114,900 112,179 339,625
Patient days — total 862,138 805,662 803,553 2,471,353
Adjusted patient days 1,456,580 1,394,486 1,390,214 4,241,280
Average length of stay (days) 4.66 4.55 4.52 4.58
Licensed beds (at end of period) 18,144 18,144 18,104 18,104
Average licensed beds 18,139 18,144 18,131 18,138
Utilization of licensed beds 52.8 % 48.8 % 48.2 % 49.9 %
Outpatient Visits
Total visits 1,854,735 1,830,522 1,805,800 5,491,057
Paying visits (excludes charity and uninsured) 1,728,684 1,707,375 1,676,686 5,112,745
Charity and uninsured visits 126,051 123,147 129,114 378,312
Emergency department visits 670,678 640,774 628,234 1,939,686
Paying visits as a percentage of total visits 93.2 % 93.3 % 92.9 % 93.1 %
Charity and uninsured visits as a percentage of total visits 6.8 % 6.7 % 7.1 % 6.9 %
Revenues
Net inpatient revenues $ 2,499 $ 2,400 $ 2,435 $ 7,334
Net outpatient revenues $ 1,331 $ 1,343 $ 1,333 $ 4,007
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission $ 13,504 $ 13,548 $ 13,709 $ 13,586
Net inpatient revenue per patient day $ 2,899 $ 2,979 $ 3,030 $ 2,968
Net outpatient revenue per visit $ 718 $ 734 $ 738 $ 730
Net patient revenue per adjusted patient admission $ 12,128 $ 12,099 $ 12,145 $ 12,124
Net patient revenue per adjusted patient day $ 2,629 $ 2,684 $ 2,710 $ 2,674
 
Net Patient Revenues from:
Medicare 20.6 % 20.1 % 19.7 % 20.2 %
Medicaid 8.5 % 7.8 % 8.5 % 8.3 %
Managed care 61.5 % 62.1 % 61.7 % 61.8 %
Indemnity, self-pay and other 9.4 % 10.0 % 10.1 % 9.7 %
 

(1) Information for our Hospital Operations and other segment is presented on a same-hospital basis, which includes the results of our same 67 hospitals operated throughout the nine months ended September 30, 2016 and 2015, associated outpatient facilities and excludes the results of eight hospitals that Tenet acquired, as well as hospitals that Tenet divested, since January 1, 2015.
 
         
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS - CONTINUING SAME HOSPITALS (1)

(Unaudited)
 

(Dollars in millions except per patient day, per admission, per adjusted admission and per visit amounts)

 
Three Months Ended Year Ended

 
03/31/15 06/30/15 9/30/2015 12/31/2015 12/31/2015
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 67 67 67 67 67
Total admissions 185,147 179,135 176,885 176,051 717,218
Adjusted patient admissions 308,729 307,958 305,916 305,436 1,228,039
Paying admissions (excludes charity and uninsured) 176,023 170,389 167,463 166,962 680,837
Charity and uninsured admissions 9,124 8,746 9,422 9,089 36,381
Admissions through emergency department 118,326 113,741 110,235 110,291 452,593
Paying admissions as a percentage of total admissions 95.1 % 95.1 % 94.7 % 94.8 % 94.9 %
Charity and uninsured admissions as a percentage of total admissions 4.9 % 4.9 % 5.3 % 5.2 % 5.1 %
Emergency department admissions as a percentage of total admissions 63.9 % 63.5 % 62.3 % 62.6 % 63.1 %
Surgeries — inpatient 48,295 49,291 49,527 49,239 196,352
Surgeries — outpatient 60,494 64,407 64,985 65,046 254,932
Total surgeries 108,789 113,698 114,512 114,285 451,284
Patient days — total 860,927 817,881 804,181 803,037 3,286,026
Adjusted patient days 1,421,505 1,391,305 1,374,619 1,379,612 5,567,041
Average length of stay (days) 4.65 4.57 4.55 4.56 4.58
Licensed beds (at end of period) 18,244 18,244 18,201 18,130 18,130
Average licensed beds 18,241 18,244 18,233 18,154 18,217
Utilization of licensed beds 52.4 % 49.3 % 47.9 % 48.1 % 49.4 %
Outpatient Visits
Total visits 1,762,868 1,815,393 1,792,264 1,806,125 7,176,650
Paying visits (excludes charity and uninsured) 1,639,131 1,691,554 1,659,417 1,680,609 6,670,711
Charity and uninsured visits 123,737 123,839 132,847 125,516 505,939
Emergency department visits 636,860 632,470 624,871 626,280 2,520,481
Paying visits as a percentage of total visits 93.0 % 93.2 % 92.6 % 93.1 % 93.0 %
Charity and uninsured visits as a percentage of total visits 7.0 % 6.8 % 7.4 % 6.9 % 7.0 %
Revenues
Net inpatient revenues $ 2,382 $ 2,305 $ 2,289 $ 2,358 $ 9,334
Net outpatient revenues $ 1,226 $ 1,281 $ 1,288 $ 1,308 $ 5,103
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission $ 12,865 $ 12,867 $ 12,941 $ 13,394 $ 13,014
Net inpatient revenue per patient day $ 2,767 $ 2,818 $ 2,846 $ 2,936 $ 2,841
Net outpatient revenue per visit $ 695 $ 706 $ 719 $ 724 $ 711
Net patient revenue per adjusted patient admission $ 11,687 $ 11,644 $ 11,693 $ 12,003 $ 11,756
Net patient revenue per adjusted patient day $ 2,538 $ 2,577 $ 2,602 $ 2,657 $ 2,593
 
Net Patient Revenues from:
Medicare 21.9 % 20.7 % 20.2 % 19.9 % 20.7 %
Medicaid 9.4 % 8.3 % 8.8 % 8.3 % 8.7 %
Managed care 59.1 % 61.6 % 61.7 % 61.8 % 61.1 %
Indemnity, self-pay and other 9.6 % 9.4 % 9.3 % 10.0 % 9.5 %
 

(1) Information for our Hospital Operations and other segment is presented on a same-hospital basis, which includes the results of our same 67 hospitals operated throughout the nine months ended September 30, 2016 and 2015, associated outpatient facilities and excludes the results of eight hospitals that Tenet acquired, as well as hospitals that Tenet divested, since January 1, 2015.
 
       
TENET HEALTHCARE CORPORATION
SEGMENT REPORTING

(Unaudited)
 
September 30, December 31,
2016 2015
Assets
Hospital Operations and other $ 17,627 $ 17,353
Ambulatory Care 5,729 5,159
Conifer   1,118     1,170  
Total $ 24,474   $ 23,682  
 
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Capital expenditures:
Hospital Operations and other $ 182 $ 194 $ 557 $ 536
Ambulatory Care 14 7 42 14
Conifer   5     6     15     16  
Total $ 201   $ 207   $ 614   $ 566  
 
Net operating revenues:
Hospital Operations and other $ 4,162 $ 4,179 $ 12,761 $ 12,505
Ambulatory Care 448 329 1,319 562
Conifer
Tenet 159 163 488 488
Other customers   239     184     681     541  
Total Conifer revenues   398     347     1,169     1,029  
Intercompany eliminations   (159 )   (163 )   (488 )   (488 )
Total $ 4,849   $ 4,692   $ 14,761   $ 13,608  
 
Equity in earnings of unconsolidated affiliates:
Hospital Operations and other $ 3 $ (2 ) $ 6 $ 12
Ambulatory Care   28     30     79     36  
Total $ 31   $ 28   $ 85   $ 48  
 
Adjusted EBITDA:
Hospital Operations and other $ 334 $ 383 $ 1,163 $ 1,259
Ambulatory Care 157 122 432 200
Conifer   79     61     205     204  
Total $ 570   $ 566   $ 1,800   $ 1,663  
 
Depreciation and amortization:
Hospital Operations and other $ 170 $ 156 $ 525 $ 525
Ambulatory Care 22 17 69 28
Conifer   13     12     38     36  
Total $ 205   $ 185   $ 632   $ 589  
 
       
TENET HEALTHCARE CORPORATION
STATEMENT OF OPERATIONS - AMBULATORY CARE SEGMENT

(Unaudited)
 
(Dollars in millions) Three Months Ended September 30,
2016 2015
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 $ 457 $ 507 $ 335 $ 556
Less: Provision for doubtful accounts   (9 )   (13 )   (6 )   (14 )
Net operating revenues (1) 448 494 329 542
Equity in earnings of unconsolidated affiliates (2) 28 30
Operating expenses:
Salaries, wages and benefits 144 119 106 132
Supplies 89 124 64 138
Other operating expenses, net 86 99 67 117
Depreciation and amortization 22 16 17 20
Impairment and restructuring charges, and acquisition-related costs 5 2
(Gains) loss on sales, consolidation and deconsolidation of facilities   (3 )   3          
Operating income 133 133 103 135
Interest expense (35 ) (6 ) (34 ) (7 )
Other       5         (2 )
Net income from continuing operations, before income taxes 98 132 69 126
Income tax expense   (18 )   (2 )   (14 )   (2 )
Net income

$
80

$
130  

$
55

$
124  

Less: Net income attributable to noncontrolling interests (3)
  69     51  
Net income attributable to Tenet Healthcare Corporation common shareholders

$
11  

$
4  
Equity in earnings of unconsolidated affiliates

$
28

$
30
 

(1) On a same-facility system-wide basis, net revenue in Tenet's Ambulatory Care segment increased 9.7% during the three months ended September 30, 2016, with cases increasing 4.0% and revenue per case increasing 5.5%.

(2) At September 30, 2016, 114 of the 330 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 212 facilities and account for these investments as consolidated subsidiaries.

(3) During the three months ended September 30, 2016, the Company recorded $1 million of noncontrolling interests expense related to a $3 million gain on the consolidation of facilities (the gain is not included in Adjusted EBITDA).
 
       

TENET HEALTHCARE CORPORATION

STATEMENT OF OPERATIONS - AMBULATORY CARE SEGMENT

INCLUDING PRO FORMA USPI AND ASPEN FOR ALL PERIODS

(Unaudited)
 
Nine Months Ended September 30,
2016 2015
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 $ 1,346 $ 1,491 $ 962 $ 1,576
Less: Provision for doubtful accounts   (27 )   (41 )   (16 )   (40 )
Net operating revenues (1) 1,319 1,450 946 1,536
Equity in earnings of unconsolidated affiliates (2) 79 79
Operating expenses:
Salaries, wages and benefits 437 353 308 379
Supplies 266 375 174 394
Other operating expenses, net 263 303 212 337
Depreciation and amortization 69 51 46 60
Impairment and restructuring charges, and acquisition-related costs 9 1 2 3
(Gains) loss on sales, consolidation and deconsolidation of facilities   (33 )   3          
Operating income 387 364 283 363
Interest expense (105 ) (18 ) (102 ) (21 )
Other       6         (2 )
Net income from continuing operations, before income taxes 282 352 181 340
Income tax expense   (37 )   (5 )   (36 )   (5 )
Net Income

$
245

$
347  

$
145

$
335  
Less: Net income attributable to noncontrolling interests (3)   204     126  
Net income attributable to Tenet Healthcare Corporation common shareholders $ 41   $ 19  
Equity in earnings of unconsolidated affiliates $ 79 $ 79
 

(1) On a same-facility system-wide basis, net revenue in Tenet's Ambulatory Care segment increased 10.9% during the nine months ended September 30, 2016, with cases increasing 6.0% and revenue per case increasing 4.6%.

(2) At September 30, 2016, 114 of the 330 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 212 facilities and account for these investments as consolidated subsidiaries.

(3) During the nine months ended September 30, 2016, the Company recorded $19 million of noncontrolling interests expense related to a $33 million gain on the consolidation of facilities (the gain is not included in Adjusted EBITDA) and an associated $7 million income tax benefit.
 

Non-GAAP Financial Measures

Adjusted EBITDA, a non-GAAP measure, 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, (2) net loss (income) attributable to noncontrolling interests, (3) income (loss) from discontinued operations, (4) income tax benefit (expense), (5) investment earnings (losses), (6) gain (loss) from early extinguishment of debt, (7) interest expense, (8) litigation and investigation (costs) benefit, net of insurance recoveries, (9) net gains (losses) on sales, consolidation and deconsolidation of facilities, (10) impairment and restructuring charges and acquisition-related costs, and (11) depreciation and amortization. Litigation and investigation costs do not include ordinary course of business malpractice and other litigation and related expense.

Adjusted net income from continuing operations, a non-GAAP measure, is defined by the Company as net income (loss) attributable to Tenet Healthcare Corporation common shareholders before (1) impairment and restructuring charges, and acquisition-related costs, (2) litigation and investigation costs, (3) gains on sales, consolidation and deconsolidation of facilities, (4) the associated impact of these three items on taxes and noncontrolling interests, and (5) net income (loss) from discontinued operations. Adjusted diluted earnings per share from continuing operations, a non-GAAP term, is defined by the Company as Adjusted net income from continuing operations divided by the weighted average diluted shares outstanding in the reporting period.

Free Cash Flow, a non-GAAP measure, is defined by the Company as (1) net cash provided by (used in) operating activities, less (2) purchases of property and equipment from continuing operations.

Adjusted Free Cash Flow, a non-GAAP measure, is defined by the Company as (1) Adjusted net cash provided by (used in) operating activities from continuing operations, less (2) purchases of property and equipment from continuing operations. Adjusted net cash provided by (used in) operating activities, a non-GAAP measure, is defined by the Company as cash provided by (used in) operating activities prior to (1) payments for restructuring charges, acquisition-related costs and litigation costs and settlements, and, (2) net cash provided by (used in) operating activities from discontinued operations.

The Company believes the foregoing non-GAAP measures are useful to investors and analysts because they present additional information on the Company's financial performance. Investors, analysts, Company management and the Company's Board of Directors utilize these non-GAAP measures, in addition to GAAP measures, to track the company's financial and operating performance and compare the Company's performance to its peer companies, which utilize similar non-GAAP measures in their presentations. The Human Resources Committee of the Company's Board of Directors also uses certain of these measures to evaluate management's performance for the purpose of determining incentive compensation. Additional information regarding the purpose and utility of specific non-GAAP measures used in this release is set forth below.

The Company believes that Adjusted EBITDA is a useful measure, in part, because certain investors and analysts use both historical and projected Adjusted EBITDA, in addition to other GAAP and non-GAAP measures, as factors in determining the estimated fair value of shares of the Company's common stock. Company management also regularly reviews the Adjusted EBITDA performance for each operating segment. The Company does not use Adjusted EBITDA to measure liquidity, but instead to measure operating performance.

We use, and we believe investors and analysts use, Free Cash Flow and Adjusted Free Cash Flow as supplemental measures to analyze cash flows generated from our operations because we believe it is useful to investors in evaluating our ability to fund distributions paid to noncontrolling interests, acquisitions, purchasing equity interests in joint ventures or repaying debt.

These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Because these measures exclude many items that are included in our financial statements, they do not provide a complete measure of our operating performance. For example, the Company's definitions of Free Cash Flow and Adjusted Free Cash Flow do not account for other important uses of cash including (1) cash used to purchase businesses or joint venture interests, or (2) any items that are classified as Cash Flows From Financing Activities on the Company's Consolidated Statement of Cash Flows, including items such as (i) cash used to repay borrowings, (ii) distributions paid to noncontrolling interests, or (iii) payments under the Put/Call Agreement for USPI redeemable noncontrolling interest, which are recorded on the Statement of Cash Flows as the purchase of noncontrolling interest. Accordingly, investors are encouraged to use GAAP measures when evaluating the Company's financial performance.

A reconciliation of Adjusted EBITDA to net income (loss) attributable to Tenet Healthcare Corporation common shareholders, the most comparable GAAP measure, is set forth in Table #1 below for the three and nine months ended September 30, 2016 and 2015. A reconciliation of Adjusted net income from continuing operations to net income (loss) attributable to Tenet Healthcare Corporation common shareholders, the most comparable GAAP measure, is set forth in Table #2 below for the three and nine months ended September 30, 2016 and 2015. A reconciliation of Free Cash Flow and Adjusted Free Cash Flow to net cash provided by (used in) operating activities, the most comparable GAAP measure, is set forth in Table #3 below for the three and nine months ended September 30, 2016 and 2015.
       

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures
Table #1 - Reconciliation of Adjusted EBITDA to Net Income Available
(Loss Attributable) to Tenet Healthcare Corporation Common Shareholders

(Unaudited)
 
(Dollars in millions) Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (8 ) $ (29 ) $ (113 ) $ (43 )
Less: Net income attributable to noncontrolling interests (88 ) (57 ) (266 ) (119 )
Net income (loss) from discontinued operations, net of tax   1     (1 )   (5 )   (1 )
Net income (loss) from continuing operations 79 29 158 77
Income tax benefit (expense) (10 ) (11 ) (61 )
Investment earnings (losses) (1 ) 1 2
Interest expense   (243 )   (248 )   (730 )   (664 )
Operating income 333 287 947 741
Litigation and investigation costs (4 ) (50 ) (291 ) (67 )
Gains on sales, consolidation and deconsolidation of facilities 3 151
Impairment and restructuring charges, and acquisition-related costs (31 ) (44 ) (81 ) (266 )
Depreciation and amortization   (205 )   (185 )   (632 )   (589 )
Adjusted EBITDA $ 570   $ 566   $ 1,800   $ 1,663  
 
Net operating revenues $ 4,849   $ 4,692   $ 14,761   $ 13,608  
 
Net loss from continuing operations as a % of operating revenues (0.2 )% (0.6 )% (0.7 )% (0.3 )%
 
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) 11.8 % 12.1 % 12.2 % 12.2 %
 
       
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP disclosures

Table #2 - Pre-Tax, After-Tax and Earnings Per Share Impact of Certain Items on Continuing Operations
(Unaudited)
 
Three Months Ended Nine Months Ended
(Dollars in millions except per share amounts) September 30, September 30,
2016 2015 2016 2015
Adjustments to calculate Adjusted Diluted EPS (Expense) Income
Impairment and restructuring charges, and acquisition-related costs $ (31 ) $ (44 ) $ (81 ) $ (266 )
Litigation and investigation costs (4 ) (50 ) (291 ) (67 )
Gain on sales, consolidation and deconsolidation of facilities   3         151      
Pre-tax impact $ (32 ) $ (94 ) $ (221 ) $ (333 )
Tax impact of above items $ 8   $ 36   $ 33   $ 118  
Total after-tax impact $ (24 ) $ (58 ) $ (188 ) $ (215 )
Noncontrolling interests impact   (1 )     (19 )  
Total income (loss) from items above $ (25 ) $ (58 ) $ (207 ) $ (215 )
 
Net income available (loss attributable) to common shareholders $ (8 ) $ (29 ) $ (113 ) $ (43 )
Less net income (loss) discontinued operations, net of tax   1     (1 )   (5 )   (1 )
Net income (loss) from continuing operations, net of tax $ (9 ) $ (28 ) $ (108 ) $ (42 )
Net loss (income) from adjustments above   25     58     207     215  
Adjusted net income (loss) from continuing operations $ 16   $ 30   $ 99   $ 173  
 
Weighted average dilutive shares outstanding (in thousands) 100,978 102,037 100,680 101,609
Diluted earnings per share from continuing operations $ (0.09 ) $ (0.28 ) $ (1.09 ) $ (0.42 )
Adjusted diluted EPS from continuing operations $ 0.16 $ 0.29 $ 0.98 $ 1.70
 
       
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP disclosures

Table #3 - Reconciliations of Free Cash Flow and Adjusted Free Cash Flow
(Unaudited)
 
Three Months Ended Nine Months Ended
(Dollars in millions) September 30, September 30,
2016 2015 2016 2015
Net cash provided by (used in) operating activities $ 269 $ 482 $ 851 $ 835
Purchases of property and equipment   (201 )   (207 )   (614 )   (566 )
Free cash flow $ 68   $ 275   $ 237   $ 269  
 
Net cash provided by (used in) investing activities $ (204 ) $ (287 ) $ (150 ) $ (1,272 )
Net cash provided by (used in) financing activities $ (72 ) $ (44 ) $ (408 ) $ 694
 
Net cash provided by (used in) operating activities $ 269 $ 482 $ 851 $ 835
Less:
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements (33 ) (71 ) (132 ) (157 )
Net cash provided by (used in) operating activities from discontinued operations   1     (10 )   1     (18 )
Adjusted net cash provided by operating activities - continuing operations 301 563 982 1,010
Purchases of property and equipment - continuing operations   (201 )  

(207

)
  (614 )   (566 )
Adjusted free cash flow - continuing operations $ 100   $ 356   $ 368   $ 444  
 
       
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP disclosures

Table #4 - Reconciliation of Outlook Adjusted EBITDA to Outlook Net Income Attributable to Tenet Healthcare Corporation Common Shareholders
(Unaudited)
 
(Dollars in millions) Q4 2016 2016
Low High Low High
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders $ 4 $ 14 $ (109 ) $ (99 )
Less: Net (income) loss attributable to noncontrolling interests (94 ) (114 ) (360 ) (380 )
Net loss from discontinued operations, net of tax   (5 )   -     (10 )   (5 )
Income from continuing operations 103 128 261 286
Income tax expense   (49 )   (54 )   (110 )   (115 )
Income from continuing operations, before income taxes 152 182 371 401
Investment earnings - - 2 2
Interest expense   (240 )   (250 )   (970 )   (980 )
Operating income 392 432 1,339 1,379
Gains on sales, consolidation and deconsolidation of facilities (a) - - 151 151

Impairment and restructuring charges, acquisition-related costs and litigation costs and settlements (a)
- - (372 ) (372 )
Depreciation and amortization   (208 )   (218 )   (840 )   (850 )
Adjusted EBITDA $ 600   $ 650   $ 2,400   $ 2,450  
 
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) 12.3 % 12.9 % 12.2 % 12.4 %
 
Net income (loss) from continuing operations $ 9 $ 14 $ (99 ) $ (94 )
 
Net income (loss) from continuing operations as a % of operating revenues 0.2 % 0.3 % (0.5 )% (0.5 )%
                       
Net operating revenues $ 4,889   $ 5,039   $ 19,650   $ 19,800  
 
Adjusted EBITDA $ 600 $ 650 $ 2,400 $ 2,450
Depreciation and amortization (208 ) (218 ) (840 ) (850 )
Investment Earnings - - - 2 2
Interest expense   (240 )   (250 )   (970 )   (980 )
Adjusted income from continuing operations before income taxes 152 182 592 622
Income tax expense   (41 )   (46 )   (135 )   (140 )
Adjusted income from continuing operations 111 136 457 482
Net income attributable to noncontrolling interests   (94 )   (114 )   (340 )   (360 )
Adjusted net income attributable to common shareholders $ 17 $ 22 $ 117 $ 122  
 
Basic weighted average shares outstanding 100 100 99 99
 
Fully diluted weighted average shares outstanding (in millions) 102 102 101 101
 
Diluted earnings per share from continuing operations $ 0.09 $ 0.14 $ (1.00 ) $ (0.95 )
 
Adjusted diluted earnings per share from continuing operations $ 0.17 $ 0.22 $ 1.16 $ 1.21
 

(a) Company does not forecast impairment and restructuring charges, acquisition-related costs and litigation costs and settlements and gains on sales, consolidation and deconsolidation of facilities because the Company does not believe that it can forecast these items with sufficient accuracy since some of these items are indeterminable at the time the Company provides its financial Outlook.
 
   
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 $ 1,163 $ 1,323
Less:
Payments for restructuring charges, acquisition-related costs and litigation costs and settlements (a) (132 ) (132 )
Net cash provided by (used in) operating activities from discontinued operations, excluding income taxes   (5 )   5  
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 restructuring charges, acquisition-related costs and litigation costs and settlements because the Company does not believe that it can forecast these items with sufficient accuracy since some of these items may be indeterminable at the time the Company provides its financial Outlook.

View source version on businesswire.com: http://www.businesswire.com/news/home/20161031006187/en/

Copyright Business Wire 2010