Tenet Reports $274 Million of Adjusted EBITDA for First Quarter

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Tenet Reports $274 Million of Adjusted EBITDA for First Quarter

Adjusted EBITDA Exceeded the Mid-Point of Outlook Range

16.6% Increase in Adjusted EBITDA, Excluding a 2012 Non-Recurring Item


7.5% Increase in Revenues, Excluding a 2012 Non-Recurring Item

DALLAS--(BUSINESS WIRE)-- Tenet Healthcare Corporation (NYS: THC) today reported Adjusted EBITDA of $274 million for the first quarter ended March 31, 2013, a decrease of $36 million as compared to Adjusted EBITDA of $310 million in the first quarter of 2012. Adjusted EBITDA in the first quarter of 2012 included $75 million from an industry-wide Medicare inpatient prospective payment settlement ("Rural Floor settlement"). Excluding this non-recurring item, Adjusted EBITDA increased by 16.6 percent. Income from continuing operations, excluding impairments, restructuring charges, acquisition-related costs and the loss on early extinguishment of debt, was $34 million after-tax, or $0.33 per diluted share, in the first quarter of 2013. In the first quarter of 2012, income from continuing operations was $13 million after-tax, or $0.15 per diluted share, excluding the Rural Floor settlement, litigation and investigation costs, impairments, restructuring charges, and acquisition-related costs. Net loss attributable to common shareholders in the first quarter of 2013 was $88 million after-tax, or $0.85 per share, compared to net income of $58 million after-tax, or $0.53 per diluted share, in the first quarter of 2012.

"Tenet generated strong earnings growth by rapidly adjusting costs in a soft volume environment in the first quarter," said Trevor Fetter, president and chief executive officer. "Adjusted EBITDA grew by almost 17 percent, after excluding a non-recurring item which contributed to last year's first quarter, and exceeded the mid-point of our Outlook range. After making adjustments for non-recurring items, earnings per share more than doubled. Our Conifer subsidiary continues to achieve its performance milestones and grew its EBITDA by 28 percent over last year's first quarter."

Discussion of Results(Percentage changes compare Q1'13 to Q1'12, unless otherwise noted.)

Adjusted admissions declined 2.5 percent in the first quarter reflecting 2.2 percent growth in outpatient visits offset by a 4.0 percent decline in inpatient admissions. The growth in outpatient visits was primarily driven by our successful outpatient center acquisition program. About half of the admissions decline was related to the loss of a Leap Year day and the observance of the Easter and Passover holidays in this year's first quarter. The admissions decline also included a 2.8 percent decline in uninsured and charity admissions. Total emergency department visits increased 3.1 percent.

Net operating revenues were $2.387 billion, an increase of $85 million, or 3.7 percent, compared to net operating revenues of $2.302 billion in the first quarter of 2012. The increase in net operating revenues was 7.5 percent excluding the Rural Floor settlement from the first quarter of 2012.

Total net patient revenue per adjusted admission was $11,884, an increase of 1.6 percent, or 5.1 percent excluding the 2012 Rural Floor settlement. These pricing increases primarily reflect improved terms in our contracts with commercial managed care payers and higher Medicare reimbursement rates. Commercial managed care revenue increased 7.6 percent per admission, 4.7 percent per patient day, and 4.1 percent per outpatient visit.

Selected operating expenses of our hospital operations, defined as the sum of salaries, wages and benefits, supplies and other operating expenses excluding the Company's Conifer services business, increased by 3.9 percent on a per adjusted admission basis. Excluding the incremental expenses related to increased physician employment, this growth was 2.1 percent. As a result of an increase in our patient length of stay, primarily related to a 1.6 percent increase in acuity, this cost metric increased only 2.0 percent on a per adjusted patient day basis, or 0.3 percent excluding incremental physician employment expenses. Supplies expense per adjusted admission decreased 1.2 percent, the seventh consecutive quarter this cost metric declined. No Health Information Technology ("HIT") incentives were recorded in the first quarter of 2013.

Bad debt expense as a percent of revenues was 8.0 percent, an increase of 40 basis points compared to 7.6 percent in the first quarter of 2012. The first quarter 2012 percentage is 7.8 percent excluding the 2012 Rural Floor settlement. Our self-pay collection rate improved to 28.8 percent in the first quarter of 2013, as compared to 27.9 percent in the first quarter of 2012.

Conifer reported a 28 percent increase in EBITDA from $25 million in the first quarter of 2012 to $32 million. Conifer's revenues essentially doubled from $107 million in the first quarter of 2012 to $211 million in this year's first quarter. The growth in both metrics reflects the integration of Catholic Health Initiatives ("CHI") revenue cycle operations and other new business. The profitability of the CHI integration is expected to produce incremental growth as the cost efficiencies related to this integration are captured over time.

Cash and cash equivalents were $95 million at March 31, 2013 compared to $364 million at December 31, 2012. The Company had a $20 million balance on its bank line at March 31, 2013. Accounts receivable days improved by one day to 52 days down from 53 days at December 31, 2012.

In the first quarter Tenet invested an additional $100 million to repurchase approximately 2.5 million shares. Under the current Board Authorized Repurchase Program of $500 million, the company has invested $200 million in the last two quarters to repurchase 5.86 million shares. Since 2011, Tenet has invested $892 million to repurchase almost 30 percent, or 38.9 million of its fully diluted shares, at a weighted average share price of $22.93, spending $892 million.

Outlook for 2013 and Q2'13 Adjusted EBITDA

For the second quarter of 2013, the Outlook range for Adjusted EBITDA is $325 million to $375 million. This second quarter Outlook includes expected contributions to EBITDA of $54 million related to the anticipated approval of the managed care portion of the 30-month California Provider Fee program and $31 million from the recognition of HIT incentives. The Company is confirming the $1.325 billion to $1.425 billion Outlook range for 2013 Adjusted EBITDA.

Management's Webcast Discussion of First Quarter Results

Tenet management will discuss the Company's first quarter 2013 results on an 11:30 a.m. (ET) webcast on April 30, 2013. This webcast may be accessed through Tenet's website at www.tenethealth.com/investors.

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 the webcast. This press release includes certain non-GAAP measures, such as Adjusted EBITDA. A reconciliation of Adjusted EBITDA to net income attributable to Tenet common shareholders is included in the financial tables at the end of this release.

Tenet Healthcare Corporation, a leading health care services company, through its subsidiaries operates 49 hospitals, 122 free-standing outpatient centers and Conifer Health Solutions, a leader in business process solutions for health care providers that serves over 600 hospital and other clients nationwide. Tenet's hospitals and related health care facilities are committed to providing high quality care to patients in the communities they serve. For more information, please visit www.tenethealth.com.

This document contains "forward-looking statements" - that is, statements relating to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include the factors disclosed under "Forward-Looking Statements" and "Risk Factors" in our Form 10-K for the year ended Dec. 31, 2012, our quarterly reports on Form 10-Q, periodic reports on Form 8-K and other filings with the Securities and Exchange Commission. The Company assumes no obligation to update forward-looking statements contained in this press release as a result of new information or future events or developments.

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 STATEMENTS OF OPERATIONS
(Unaudited)
 
(Dollars in millions except per share amounts)  Three Months Ended March 31,
2013  %  2012  %  Change
 
Net operating revenues:
Net operating revenues before provision for doubtful accounts$2,594$2,4914.1%
Less: Provision for doubtful accounts 207  189 9.5%
Net operating revenues2,387100.0%2,302100.0%3.7%
Operating expenses:
Salaries, wages and benefits1,16148.6%1,06246.1%9.3%
Supplies38416.1%39917.3%(3.8) %
Other operating expenses, net56823.8%53123.2%7.0%
Depreciation and amortization1144.8%1004.3%14.0%
Impairment and restructuring charges, and acquisition-related costs140.6%30.1%
Litigation and investigation costs  % 2 0.1%
Operating income1466.1%2058.9%
Interest expense(103)(98)
Loss from early extinguishment of debt(177)
Investment earnings   1 
Income (loss) from continuing operations, before income taxes(134)108
Income tax benefit (expense) 53  (42)

Income (loss) from continuing operations, before discontinued operations

(81)66
Discontinued operations:
Income (loss) from operations(3)2
Income tax benefit (expense) 1  (1)
Income (loss) from discontinued operations (2) 1 
Net income (loss)(83)67
Less: Preferred stock dividends6
Less: Net income attributable to noncontrolling interests 5  3 
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders$(88)$58 
Amounts attributable to Tenet Healthcare Corporation common shareholders
Income (loss) from continuing operations, net of tax$(86)$57
Income (loss) from discontinued operations, net of tax (2) 1 
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders$(88)$58 
Earnings (loss) per share attributable to Tenet Healthcare Corporation common shareholders
Basic
Continuing operations$(0.83)$0.55
Discontinued operations (0.02) 0.01 
$(0.85)$0.56 
Diluted
Continuing operations$(0.83)$0.52
Discontinued operations (0.02) 0.01 
$(0.85)$0.53 

Weighted average shares and dilutive securities outstanding (in thousands):

Basic104,103102,843
Diluted104,103121,218
 
 
TENET HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
  March 31,  December 31,
(Dollars in millions) 2013  2012 
ASSETS
Current assets:
Cash and cash equivalents$95$364
Accounts receivable, less allowance for doubtful accounts1,3831,345
Inventories of supplies, at cost152153
Income tax receivable47
Current portion of deferred income taxes354354
Other current assets 455  458 
Total current assets2,4432,681
Investments and other assets163162
Deferred income taxes, net of current portion395342
Property and equipment, at cost, less accumulated depreciation and amortization4,2964,293
Goodwill948916
Other intangible assets, at cost, less accumulated amortization 670  650 
Total assets$8,915 $9,044 
 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt$52$94
Accounts payable625722
Accrued compensation and benefits373415
Professional and general liability reserves4964
Accrued interest payable99125
Other current liabilities 351  343 
Total current liabilities1,5491,763
Long-term debt, net of current portion5,3755,158
Professional and general liability reserves298292
Other long-term liabilities 611  597 
Total liabilities7,8337,810
Commitments and contingencies
Redeemable noncontrolling interests in equity of consolidated subsidiaries3616
Equity:
Shareholders' equity:
Common stock77
Additional paid-in capital4,4844,471
Accumulated other comprehensive loss(68)(68)
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