Tenet Healthcare Corporation (NYSE: THC) today provided an
update to its previous financial Outlook for 2018 to reflect
changes to federal tax laws enacted as part of Tax Cuts and Jobs
Act of 2017. As a result of these changes, the Company
projects:
- Cash tax payments will be lower by $10
million to $20 million per year over the next several years due to
the repeal of the corporate alternative minimum tax.
- No material change in the Company’s
ability to utilize its federal income tax net operating loss (NOL)
carryforwards, which the Company projects will approximate $1.6
billion as of December 31, 2017.
- Due to the positive impact from 100
percent bonus depreciation, taxable income on the Company’s federal
tax return will be lower, resulting in slower utilization of the
NOL. We anticipate approximately 80 percent of capital expenditures
in 2018 should qualify for immediate expensing, which will more
than offset the impact of the interest expense limitation.
- Diluted earnings per share from
continuing operations is now expected to be $0.05 to $0.19 in 2018
compared to the previous diluted EPS Outlook of $0.63 to $0.68, and
Adjusted diluted earnings per share from continuing operations is
now expected to be $0.58 to $0.97 compared to the previous Adjusted
EPS Outlook of $1.07 to $1.36 due to the Company not being able to
currently recognize for accounting purposes the future benefit
related to the excess interest expense limitation carryforward, net
of the benefit derived from the lower tax rate.
- The Company is reiterating its 2018
Outlook for revenue, Adjusted EBITDA and Adjusted free cash flow,
which were originally provided on December 19, 2017.
“The change in the tax law is positive for Tenet from an
economic perspective,” said Ron Rittenmeyer, executive chairman and
CEO. “Our cash tax payments will be approximately $10 million to
$20 million lower each year over the next several years, which will
be additive to free cash flow. In addition, the new law does not
change our ability to utilize our substantial NOL. While EPS will
be lower due to the limitation on interest expense deductibility,
this does not impact free cash flow, and over the next two to three
years, we expect these changes will positively affect EPS due to
the lower tax rate.”
In addition to the implications described above, the Company
will recognize in the fourth quarter ended December 31, 2017 a
non-cash partial write-down of its net deferred tax assets of
approximately $275 million (estimate based on September 30,
2017 balances) due to the reduction in the corporate federal income
tax rate from 35% to 21%.
About Tenet Healthcare
Tenet Healthcare Corporation is a diversified healthcare
services company with nearly 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 general acute care and specialty hospitals, ambulatory
surgery centers, urgent care centers and other outpatient
facilities in the United States and 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,” “project,” “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, 2016 and other filings with the Securities and
Exchange Commission.
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 development.
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) other non-operating income (expense), net,
(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, (11) depreciation and amortization
and (12) income (loss) from divested operations and closed
businesses (i.e., the Company’s health plan businesses). Litigation
and investigation costs do not include ordinary course of business
malpractice and other litigation and related expense.
Adjusted net income (loss) from continuing operations
attributable to Tenet Healthcare Corporation common shareholders, 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) gain (loss) from early extinguishment of
debt, (5) income (loss) from divested operations and closed
businesses, (6) the associated impact of these five items on
taxes and noncontrolling interests, and (7) net income (loss)
from discontinued operations. Adjusted diluted earnings (loss) per
share from continuing operations, a non-GAAP term, is defined by
the Company as Adjusted net income (loss) from continuing
operations attributable to Tenet Healthcare Corporation common
shareholders divided by the weighted average primary or 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 include 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 Outlook Adjusted EBITDA to Outlook net
income (loss) attributable to Tenet Healthcare Corporation common
shareholders, the most comparable GAAP measure, is set forth in
Table #1 below for the twelve months ending
December 31, 2018. A reconciliation of Outlook Adjusted
net income from continuing operations attributable to Tenet
Healthcare Corporation common shareholders to Outlook net income
(loss) attributable to Tenet Healthcare Corporation common
shareholders, the most comparable GAAP measure, is set forth in
Table #1 below for the twelve months ending
December 31, 2018. A reconciliation of Outlook Adjusted
Free Cash Flow to Outlook net cash provided by (used in) operating
activities, the most comparable GAAP measure, is set forth in Table
#2 below for the twelve months ending
December 31, 2018.
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP
disclosures
Table #1 – Reconciliation of Outlook Adjusted EBITDA to
Outlook Net Income Attributable to Tenet Healthcare Corporation
Common Shareholders For the Year Ending December 31, 2018
(Unaudited)
(Dollars in millions, except per share amounts)
2018 Low High Net income attributable to
Tenet Healthcare Corporation common shareholders $
— $ 20 Less: Net income attributable to
noncontrolling interests (415 ) (435 ) Net loss from discontinued
operations, net of tax (5 ) — Income from
continuing operations 420 455 Income tax expense (180 )
(160 ) Income from continuing operations, before income
taxes 600 615 Interest expense (1,000 ) (1,010 ) Loss on early
extinguishment of debt (5 ) — Other non-operating expense, net
(20 ) (25 ) Operating income 1,625 1,650 Gains on
sales, consolidation and deconsolidation of facilities(1) — —
Impairment and restructuring charges, acquisition-related costs and
litigation costs and settlements(1) (50 ) (100 ) Depreciation and
amortization (790 ) (810 ) Loss from divested and closed businesses
(10 ) (15 )
Adjusted EBITDA $
2,475 $ 2,575 Net income from
continuing operations $ 5 $ 20
Net income from continuing operations as a % of operating
revenues 0.0 % 0.1 % Net
operating revenues $ 17,800 $
18,200 Adjusted EBITDA as % of net operating revenues
(Adjusted EBITDA margin) 13.9 % 14.1
% Adjusted EBITDA $ 2,475 $
2,575 Depreciation and amortization (790 ) (810 ) Interest
expense (1,000 ) (1,010 ) Other non-operating expense, net
(20 ) (25 ) Adjusted income from continuing operations
before income taxes 665 730 Income tax expense (190 )
(195 ) Adjusted income from continuing operations 475 535 Net
income attributable to noncontrolling interests (415 )
(435 )
Adjusted net income from continuing operations
attributable to common shareholders $ 60
$ 100 Basic weighted average shares
outstanding (in millions) 102 102 Fully
diluted weighted average shares outstanding (in millions)
103 103 Diluted earnings per share from continuing
operations $ 0.05 $ 0.19
Adjusted diluted earnings per share from continuing
operations $ 0.58 $ 0.97 (1)
The Company has provided an estimate of restructuring
charges that it anticipates in 2018. The Company does not forecast
impairment charges, acquisition-related costs and litigation costs
and settlements and gains (losses) on sales, and 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 #2 – Reconciliation of Outlook Adjusted Free Cash Flow
for the Year Ending December 31, 2018 (Dollars in
millions)
2018 Low High Net cash provided
by operating activities $ 1,245 $
1,450 Less: Payments for restructuring charges,
acquisition-related costs and litigation costs and settlements(1)
(50 ) (100 ) Net cash used in operating activities from
discontinued operations (5 ) —
Adjusted net
cash provided by operating activities – continuing operations
1,300 1,550 Purchases of property and equipment –
continuing operations (625 ) (675 )
Adjusted free
cash flow – continuing operations(2) $ 675
$ 875 (1) The Company has
provided an estimate of payments that it anticipates in 2018
related to restructuring charges. The Company does not forecast
payments related to 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. (2) The Company's definition of Adjusted
Free Cash Flow does not include 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 interests, which are recorded on the Statement of
Cash Flows as the purchase of noncontrolling interests.
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version on businesswire.com: http://www.businesswire.com/news/home/20180105005880/en/
Tenet Healthcare CorporationInvestor Contact:Brendan
Strong, 469-893-6992investorrelations@tenethealth.comorMedia
Contact:Daniel Waldmann,
469-893-2640mediarelations@tenethealth.com
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