Tenet Healthcare Corporation (NYSE:THC):
Key Metrics (all percentage changes compare Q1’11 to
Q1’10)
- Admissions increased 0.6 percent,
second consecutive quarter with an improving trend
- Outpatient visits grew by 6.1 percent,
and adjusted admissions grew by 2.3 percent
- Adjusted EBITDA of $379 million
compares to $298 million in Q1’10, an increase of 27.2 percent
Tenet Healthcare Corporation (NYSE:THC) today reported adjusted
EBITDA of $379 million for the first quarter ended March 31, 2011,
an increase of $81 million, or 27.2 percent, compared to $298
million for the first quarter of 2010. Income from continuing
operations before income taxes was $142 million in the first
quarter of 2011, an increase of $49 million, or 52.7 percent, as
compared to $93 million in the first quarter of 2010. Net income
attributable to common shareholders was $73 million, or $0.14 per
diluted share, compared to $88 million, or $0.17 per diluted share,
for the first quarter of 2010, reflecting increased income tax
expense of $48 million.
“Our strong first quarter results reflect solid performance in
virtually every aspect of our business,” said Trevor Fetter,
president and chief executive officer. “Volume growth was a clear
highlight in the quarter. Growth in both paying admissions and
total admissions turned positive in the quarter. This is the second
consecutive quarter in which we have improved the trend in
year-over-year changes in patient volumes. We were also very
pleased with the robust performance in outpatient volumes with
outpatient visits growing by 6.1 percent. Surgeries grew by 0.9
percent. Other factors contributing to the strong quarter included
managed care pricing growth and improved performance on bad debt
expense, which declined to 7.3 percent of revenues. Earnings growth
from these factors was further enhanced by provider fees and
government healthcare information technology incentives recorded in
the quarter. Reflecting this strong start to the year, we are
raising our 2011 Outlook for Adjusted EBITDA by $25 million, to a
new range of $1.175 billion to $1.275 billion.”
Discussion of Results (Percentage changes compare Q1’11
to Q1’10, unless otherwise noted.)
Admissions increased by 0.6 percent. This increase compares very
favorably to the respective declines of 3.5 percent and 2.0 percent
in the third and fourth quarters of 2010. Outpatient visits
increased by 6.1 percent, again showing a strong improving
sequential trend compared to the increase of 2.9 percent in the
fourth quarter of 2010 and the decline of 2.0 percent for the third
quarter of 2010. Adjusted admissions increased by 2.3 percent in
the first quarter of 2011.
Net operating revenues were $2.506 billion, an increase of $167
million, or 7.1 percent, compared to net operating revenues of
$2.339 billion in the first quarter of 2010. Net operating revenues
in the first quarter of 2011 included $63 million from the
2009-2010 California Provider Fee Program and $13 million from the
2010 portion of the Pennsylvania Provider Fee Program, which
received final CMS approval in the first quarter of 2011. The first
quarter of 2011 also included Medicaid health information
technology incentives of $25 million. The favorable impact of these
items on net operating revenues were partially offset by an
unfavorable reduction in contributions from prior year cost report
settlements which added $15 million to net operating revenues in
the first quarter of 2010, but added only $1 million in the first
quarter of 2011. Net patient revenues per adjusted patient day
increased by 5.5 percent.
Total controllable operating expenses increased by $93 million,
or 5.0 percent, which is consistent with the assumptions in our
2011 Outlook. This increase is primarily related to salaries, wages
and benefits, which includes the impact of the annual salary
increases for our employees. In addition, health information
technology implementation and other related expenses increased $12
million in the first quarter of 2011 as compared to the first
quarter of 2010. Controllable operating expenses is defined as the
sum of salaries, wages and benefits, supplies, and other operating
expenses.
Bad debt expense declined to $182 million from $189 million in
the first quarter of 2010, a decline of $7 million, or 3.7 percent.
The ratio of bad debt expense to net operating revenues declined to
7.3 percent, compared to 8.1 percent in the first quarter of 2010,
a decrease of 80 basis points. Uninsured revenues declined $11
million in the first quarter.
Net cash used in operating activities was $2 million in the
first quarter of 2011 compared to a cash use of $22 million in the
first quarter of 2010, a favorable change of $20 million. This was
primarily the result of higher Adjusted EBITDA, partially offset by
net income tax payments of $24 million in the first quarter of 2011
on prior year tax settlements, compared to $17 million in net
income tax refunds in the first quarter of 2010, an adverse change
of $41 million. Capital expenditures were $116 million in the first
quarter of 2011, compared to $83 million in the first quarter of
2010, an increase of $33 million. Cash and cash equivalents were
$267 million at March 31, 2011, a decrease of $138 million from
$405 million at December 31, 2010. In addition to the above items,
the decrease in cash includes the use of $18 million to purchase
three outpatient centers and the receipt of $3 million from the
sale of a medical office building.
Management’s Webcast Discussion of First Quarter
Results
Tenet management will discuss first quarter 2011 results on a
webcast scheduled for 10:00 AM (ET) on May 3, 2011. This webcast
may be accessed through Tenet’s website at
www.tenethealth.com/investors. A set of slides, to which management
intends to refer on the call, will be posted to the Company’s
website at approximately 7:30 AM (ET).
Additional information regarding Tenet’s quarterly results of
operations, including detailed tabular operational data, is
contained in its Form 10-Q report, which will be filed with the
Securities and Exchange Commission and posted on the Tenet investor
relations website before today’s webcast. This press release
includes a non-GAAP measure, Adjusted EBITDA. A reconciliation of
this financial measure and the most directly comparable GAAP
measure is included in the financial table at the end of this
release.
Tenet Healthcare Corporation is a health care services company
whose subsidiaries and affiliates own and operate acute care
hospitals, ambulatory surgery centers and diagnostic imaging
centers. Tenet’s hospitals and related healthcare facilities are
committed to providing high quality care to patients in the
communities they serve. For more information, please visit
www.tenethealth.com.
Some of the statements in this release may constitute
forward-looking statements. Such forward-looking statements are
based on our current expectations and could be
affected by numerous factors and are subject to various
risks and uncertainties discussed
in our filings with the Securities and Exchange
Commission, including our annual report on Form 10-K for
the year ended Dec. 31, 2010, our quarterly reports on Form 10-Q,
and periodic reports on Form 8-K. Do not rely on any
forward-looking statement, as we cannot predict or control many of
the factors that ultimately may affect our ability to achieve the
results estimated. We make no promise to update any forward-looking
statement, whether as a result of changes in underlying factors,
new information, future events or otherwise.
Tenet uses its company web site to provide
important information to investors about the company including the
posting of important announcements regarding financial performance
and corporate developments.
TENET HEALTHCARE CORPORATION CONSOLIDATED OPERATIONS DATA
(Unaudited) (Dollars in millions except per share amounts)
Three Months Ended March 31, 2011
% 2010 % Change
Net operating revenues $ 2,506
100.0 % $ 2,339 100.0 %
7.1
% Operating expenses: Salaries, wages and
benefits 1,035 41.3 % 987 42.2 % 4.9 % Supplies 404 16.1 % 398 17.0
% 1.5 % Provision for doubtful accounts 182 7.3 % 189 8.1 %
(3.7
)
%
Other operating expenses, net 506 20.3 % 467 19.9 % 8.4 %
Depreciation and amortization 101 4.0 % 95 4.1 % 6.3 % Impairment
of long-lived assets and goodwill, and restructuring charges 8 0.3
% — — % Litigation and investigation costs 11 0.4 %
2 0.1 %
Operating income 259
10.3 % 201 8.6 % Interest
expense (118 ) (109 ) Investment earnings 1 1
Income from continuing operations, before income
taxes 142 93 Income tax expense (51 )
(3 )
Income from continuing operations,
before discontinued operations
91 90 Discontinued operations: Income (loss)
from operations (15 ) 5 Impairment of long-lived assets and
goodwill, and restructuring charges, net — 1 Income tax benefit
(expense) 6 (1 )
Income (loss) from
discontinued operations (9 )
5 Net income 82 95 Less:
Preferred stock dividends 6 6 Less: Net income attributable to
noncontrolling interests 3 1
Net
income attributable to Tenet Healthcare Corporation common
shareholders $ 73 $ 88
Amounts attributable to Tenet Healthcare
Corporation common shareholders Income from continuing
operations, net of tax $ 82 $ 83 Income (loss) from discontinued
operations, net of tax (9 ) 5
Net income
attributable to Tenet Healthcare Corporation common
shareholders $ 73 $ 88
Earnings (loss) per share attributable to Tenet
Healthcare Corporation common shareholders Basic
Continuing operations $ 0.17 $ 0.17 Discontinued operations
(0.02 ) 0.01 $ 0.15 $ 0.18
Diluted Continuing operations $ 0.16 $ 0.16 Discontinued
operations (0.02 ) 0.01 $ 0.14 $ 0.17
Weighted average shares and dilutive
securities outstanding (in thousands):
Basic 486,902 481,917 Diluted 565,181 559,228 TENET
HEALTHCARE CORPORATION CONSOLIDATED BALANCE SHEET DATA (Unaudited)
March 31, December 31, (Dollars
in millions)
2011 2010 ASSETS Current
assets: Cash and cash equivalents $ 267 $ 405 Investments in
Reserve Yield Plus Fund 2 1 Investments in marketable securities 1
— Accounts receivable, less allowance for doubtful accounts 1,237
1,143 Inventories of supplies, at cost 156 156 Income tax
receivable 22 22 Current portion of deferred income taxes 283 282
Assets held for sale 13 14 Other current assets 412
288
Total current assets 2,393
2,311 Investments and other assets 162 164 Deferred income
taxes, net of current portion 589 627 Property and equipment, at
cost, less accumulated depreciation and amortization 4,262 4,304
Goodwill 677 652 Other intangible assets, at cost, less accumulated
amortization 441 442
Total
assets $ 8,524 $ 8,500
LIABILITIES AND EQUITY Current
liabilities: Current portion of long-term debt $ 68 $ 67
Accounts payable 638 720 Accrued compensation and benefits 368 363
Professional and general liability reserves 104 84 Accrued interest
payable 116 115 Accrued legal settlement costs 13 8 Other current
liabilities 350 368
Total current
liabilities 1,657 1,725 Long-term debt, net of
current portion 4,014 3,997 Professional and general liability
reserves 373 383 Accrued legal settlement costs 22 22 Other
long-term liabilities 550 554
Total
liabilities 6,616 6,681 Commitments and
contingencies
Equity: Shareholders’ equity: Preferred
stock 334 334 Common stock 27 27 Additional paid-in capital 4,448
4,449 Accumulated other comprehensive loss (43 ) (43 ) Accumulated
deficit (1,443 ) (1,522 ) Common stock in treasury, at cost
(1,479 ) (1,479 )
Total shareholders’ equity
1,844 1,766 Noncontrolling interests
64 53 Total equity
1,908 1,819 Total liabilities
and equity $ 8,524 $ 8,500
TENET HEALTHCARE CORPORATION
CONSOLIDATED CASH FLOW DATA
(Unaudited) (Dollars in millions)
Three Months Ended
March 31,
2011 2010 Net income $ 82
$ 95 Adjustments to reconcile net income to net
cash used in operating activities: Depreciation and
amortization 101 95 Provision for doubtful accounts 182 189
Deferred income tax expense 35 5 Stock-based compensation expense 7
7 Impairment of long-lived assets and goodwill, and restructuring
charges 8 — Fair market value adjustments related to interest rate
swap and LIBOR cap agreements 19 2 Amortization of debt discount
and debt issuance costs 8 8 Litigation and investigation costs 11 2
Pre-tax (income) loss from discontinued operations 15 (6 ) Other
items, net (13 ) (2 )
Changes in cash from changes in operating
assets and liabilities: Accounts receivable (278 ) (242 )
Inventories and other current assets (113 ) 3 Income taxes (14 ) 17
Accounts payable, accrued expenses and other current liabilities
(44 ) (146 ) Other long-term liabilities 12 (27 )
Payments
against reserves for restructuring charges and litigation costs
(7 ) (24 ) Net cash provided by
(used in) operating activities from discontinued operations,
excluding income taxes (13 )
2 Net cash used in operating activities
(2 ) (22 ) Cash flows from investing
activities: Purchases of property and equipment—continuing
operations (116 ) (78 ) Construction of new and replacement
hospitals — (5 ) Purchases of businesses or joint venture interest
(18 ) — Proceeds from sales of marketable securities, long-term
investments and other assets 5 12 Other items, net —
3
Net cash used in investing activities
(129 ) (68 ) Cash flows from
financing activities: Repayments of borrowings (1 ) (7 )
Proceeds from borrowings — 1 Cash dividends on preferred stock (6 )
(6 ) Distributions paid to noncontrolling interests (2 ) (1 ) Other
items, net 2 2
Net cash used in
financing activities (7 )
(11 ) Net decrease in cash and cash equivalents (138
) (101 ) Cash and cash equivalents at beginning of period
405 690
Cash and cash equivalents at end of
period $ 267 $ 589
Supplemental disclosures: Interest paid, net of capitalized
interest $ (97 ) $ (112 ) Income tax (payments) refunds, net $ (24
) $ 17
TENET HEALTHCARE CORPORATION
SELECTED STATISTICS – CONTINUING HOSPITALS (Unaudited)
(Dollars in millions except per patient
day, per
admission and per visit amounts)
Three Months Ended March 31,
2011 2010 Change Net
inpatient revenues $ 1,653 $ 1,544 7.1 % Net outpatient revenues $
733 $ 706 3.8 % Number of acute care hospitals (at end of
period) 49 49 — * Licensed beds (at end of period) 13,457 13,430
0.2 % Average licensed beds 13,457 13,431 0.2 % Utilization
of licensed beds 53.3 % 54.0 % (0.7 %) * Patient days
645,166 652,952 (1.2 %) Adjusted patient days 963,039 958,248 0.5 %
Net inpatient revenue per patient day $ 2,562 $ 2,365 8.3 %
Admissions 133,349 132,599 0.6 % Adjusted patient admissions
200,353 195,909 2.3 % Net inpatient revenue per admission $ 12,396
$ 11,644 6.5 % Average length of stay (days) 4.8 4.9 (0.1 ) *
Surgeries 88,754 87,998 0.9 % Net outpatient revenue per
visit $ 725 $ 741 (2.2 %) Outpatient visits 1,010,848 952,915 6.1 %
Sources of net patient revenue Medicare 23.2 %
25.1 % (1.9 %) * Medicaid 11.6 % 8.7 % 2.9 % * Managed care
54.4 % 55.3 % (0.9 %) * Indemnity, self-pay and other 10.8 %
10.9 % (0.1 %) * * This change is the difference between the
2011 and 2010 amounts shown
(1) Reconciliation of Adjusted EBITDA
Adjusted EBITDA, a non-GAAP term, is defined by the Company as
net income (loss) attributable to Tenet Healthcare Corporation
common shareholders before (1) cumulative effect of changes in
accounting principle, net of tax, (2) net income attributable to
noncontrolling interests, (3) preferred stock dividends, (4) income
(loss) from discontinued operations, net of tax, (5) income tax
(expense) benefit, (6) investment earnings (loss), (7) gain (loss)
from early extinguishment of debt, (8) net gain (loss) on sales of
investments, (9) interest expense, (10) litigation and
investigation (costs) benefit, net of insurance recoveries, (11)
hurricane insurance recoveries, net of costs, (12) impairment of
long-lived assets and goodwill and restructuring charges, net of
insurance recoveries, and (13) depreciation and amortization. The
Company’s Adjusted EBITDA may not be comparable to EBITDA reported
by other companies.
The Company provides this information as a supplement to GAAP
information to assist itself and investors in understanding the
impact of various items on its financial statements, some of which
are recurring or involve cash payments. The Company uses this
information in its analysis of the performance of its business
excluding items that it does not consider as relevant in the
performance of its hospitals in continuing operations. In addition,
from time to time we use this measure to define certain performance
targets under our compensation programs. Adjusted EBITDA is not a
measure of liquidity, but is a measure of operating performance
that management uses in its business as an alternative to net
income (loss) attributable to Tenet Healthcare Corporation common
shareholders. Because Adjusted EBITDA excludes many items that are
included in our financial statements, it does not provide a
complete measure of our operating performance. Accordingly,
investors are encouraged to use GAAP measures when evaluating the
Company’s financial performance.
The reconciliation of net income (loss) attributable to Tenet
Healthcare Corporation common shareholders, the most comparable
GAAP term, to Adjusted EBITDA, is set forth in the first table
below for the three months ended March 31, 2011 and 2010.
TENET HEALTHCARE CORPORATION Additional Supplemental Non-GAAP
Disclosures
Table #1 - Reconciliation of Adjusted EBITDA to Net
Income Attributable to Tenet
Healthcare Corporation Common
Shareholders
(Unaudited) (Dollars in millions)
Three Months Ended
March 31,
2011 2010 Net income attributable to
Tenet Healthcare Corporation common shareholders $ 73 $ 88 Less:
Net income attributable to noncontrolling interests (3 ) (1 )
Preferred stock dividends (6 ) (6 ) Income (loss) from discontinued
operations, net of tax (9 ) 5 Income from
continuing operations 91 90 Income tax expense (51 ) (3 )
Investment earnings 1 1 Interest expense (118 ) (109
) Operating income 259 201 Litigation and investigation costs (11 )
(2 ) Impairment of long-lived assets and goodwill, and
restructuring charges (8 ) — Depreciation and amortization
(101 ) (95 )
Adjusted EBITDA $ 379
$ 298 Net operating
revenues $ 2,506 $ 2,339
Adjusted EBITDA as % of net operating revenues
(Adjusted EBITDA margin) 15.1 % 12.7
% TENET HEALTHCARE CORPORATION Additional
Supplemental Non-GAAP Disclosures
Table #2 - Reconciliation of
Outlook Adjusted EBITDA to Outlook Net Income Attributable
to Tenet Healthcare Corporation Common Shareholders for Year
Ending December 31, 2011 (Unaudited) (Dollars in
millions)
Low High Net income
attributable to Tenet Healthcare Corporation common shareholders $
156 $ 246 Less: Net income attributable to noncontrolling interests
(15 ) (10 ) Preferred stock dividends (24 ) (24 ) Loss from
discontinued operations, net of tax (15 ) (10 )
Income from continuing operations 210 290 Income tax expense
(128 ) (179 ) Income from continuing operations, before
income taxes 338 469 Interest expense, net (405 )
(385 ) Operating income 743 854 Litigation and investigation costs
(22 ) (11 ) Impairment of long-lived assets and goodwill, and
restructuring charges (20 ) (10 ) Depreciation and amortization
(390 ) (400 )
Adjusted EBITDA $
1,175 $ 1,275 Net
operating revenues $ 9,700 $ 9,900
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA
margin) 12.1 % 12.9 %
Table #3 - Reconciliation of Outlook Adjusted EBITDA to
Outlook Normalized Net Income Attributable to Tenet Healthcare
Corporation Common Shareholders for Year Ending December 31,
2011
(Unaudited)
(Dollars in millions except per share amounts)
Low High Adjusted EBITDA
(from Table # 3, above) $ 1,175 $ 1,275 Depreciation and
amortization (390 ) (400 ) Interest expense, net (405 )
(385 ) Normalized income from continuing operations before
income taxes 380 490 Normalized income tax expense (a) (148
) (191 )
Normalized income from continuing
operations (a)
232 299 Preferred stock dividends (24 ) (24 ) Net income
attributable to noncontrolling interests (15 ) (10 )
Normalized net income attributable to Tenet Healthcare Corporation
common shareholders (a) $ 193 $ 265 Weighted
average shares outstanding (in millions) 508
567
(b)
Normalized earnings per share – continuing operations (a) $
0.38 $
0.51
(b)
(a) Uses normalized tax rate of 39
percent.
(b) An additional 59 million shares are
included as our mandatory convertible preferred stock is dilutive
at this level of earnings and the $24 million of preferred stock
dividends are excluded for earnings per share computation
purposes.
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