Tenet Reports Second Quarter 2023 Results; Raises 2023 Outlook

Net income from continuing operations available to common shareholders in second quarter 2023 was $123 million, or $1.15 per diluted share

Adjusted diluted earnings per share from continuing operations1 was $1.44 in second quarter 2023

Consolidated Adjusted EBITDA1 in second quarter 2023 was $843 million, including $8 million of grant income

Second quarter 2023 Ambulatory Care Adjusted EBITDA of $369 million increased 16.4% over second quarter 2022 excluding grant income

Same-facility system-wide ambulatory surgical cases increased 6.6% versus second quarter 2022; Same-hospital admissions increased 3.0% versus second quarter 2022, with non-Covid admissions up 5%

FY 2023 Adjusted EBITDA Outlook increased, now expected to be in the range of $3.310 billion to $3.460 billion

Tenet Healthcare Corporation (Tenet) (NYSE: THC) today announced its results for the quarter ended June 30, 2023.

"We have continued positive momentum through the second quarter with robust same facility volume and revenue growth in our ambulatory care segment as well as continued strength in our hospital segment," said Saum Sutaria, M.D., Chief Executive of Tenet. "Our strategic growth initiatives and operating discipline helped drive these results as we expand our patient-centered care capabilities in the communities we serve."

Tenet’s results for second quarter 2023 versus second quarter 2022 are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

($ in millions, except per share results)

2023

2022

2023

2022

Net operating revenues

$5,082

$4,638

$10,103

$9,383

Net income available to Tenet common shareholders from continuing operations

$123

$38

$266

$177

Net income available to Tenet common shareholders from continuing operations per diluted share

$1.15

$0.35

$2.47

$1.63

Adjusted EBITDA1 excluding grant income

$835

$749

$1,664

$1,631

Adjusted EBITDA1

$843

$843

$1,675

$1,731

Adjusted diluted earnings per share from continuing operations1

$1.44

$1.48

$2.87

$3.33

Net income from continuing operations available to the Company’s common shareholders in the second quarter 2023 was $123 million, or $1.15 per diluted share, versus $38 million, or $0.35 per diluted share, in second quarter 2022.

Second quarter 2023 included COVID-related stimulus grant income of $8 million pre-tax ($6 million after-tax, or $0.06 per diluted share) versus $94 million pre-tax ($71 million after-tax, or $0.65 per diluted share) in second quarter 2022.

The Company recognized additional income tax expense for the three months ended June 30, 2023 of approximately $23 million, or $0.22 per diluted share, and $45 million, or $0.41 per diluted share for the three months ended June 30, 2022, as a result of interest expense limitation tax regulations.

Adjusted EBITDA1 excluding grant income in second quarter 2023 was $835 million compared to $749 million in second quarter 2022, reflecting strong volume growth in our Ambulatory Care and Hospital Operations segments, and improved contract labor costs. The Company believes this strong volume growth is due in part to patient care deferred as a result of the pandemic. Second quarter 2022 results included the adverse impacts associated with a cybersecurity incident.

Balance Sheet and Cash Flows

Cash flows provided by operating activities for the six months ended June 30, 2023 were $1.047 billion versus $347 million for the six months ended June 30, 2022 (or $822 million excluding $475 million of repayments associated with Medicare advances).

The Company produced free cash flow1 of $680 million for the six months ended June 30, 2023 versus $40 million for the six months ended June 30, 2022 (or $515 million excluding the repayment of Medicare advances).

In the three months ended June 30, 2023, the Company repurchased 579,637 shares of common stock for $40 million. In the six months ended June 30, 2023, the Company repurchased 1,485,983 shares of common stock for $90 million.

In June 2023, the Company completed a private placement of $1.350 billion in aggregate principal amount of newly issued 6.750% senior secured first lien notes maturing in 2031. The Company used the net proceeds from the sale of the notes, after payment of fees and expenses, to finance, together with cash on hand, the redemption of all $1.345 billion aggregate principal amount then outstanding of its 4.625% senior secured notes due 2024. The Company now has no significant debt maturities until 2026.

The Company’s ratio of net debt to Adjusted EBITDA1 was 4.14x at June 30, 2023 compared to 4.19x at March 31, 2023 and 4.10x at December 31, 2022.

The Company had no outstanding borrowings on its $1.5 billion line of credit as of June 30, 2023.

Ambulatory Care (Ambulatory) Segment

Tenet’s Ambulatory business segment is comprised of the operations of United Surgical Partners International (USPI). As of June 30, 2023, USPI had interests in 455 ambulatory surgery centers (312 consolidated) and 24 surgical hospitals (eight consolidated) in 35 states. For all periods prior to June 30, 2022, the Company owned 95% of the voting stock of USPI and now owns 100%.

Three Months Ended June 30,

Six Months Ended June 30,

Ambulatory segment results ($ in millions)

2023

2022

2023

2022

Revenues

Net operating revenues

$942

$771

$1,847

$1,509

Same-facility system-wide net patient service revenues2

$1,721

$1,568

$3,358

$3,065

Volume Changes versus the Prior-Year Period

Same-facility system-wide surgical cases2

6.6%

(0.9)%

7.2%

3.3%

Same-facility system-wide surgical cases on same-business day basis2

6.6%

(0.9)%

7.2%

2.4%

Adjusted EBITDA, Margins and Noncontrolling Interest (NCI)

Adjusted EBITDA excluding grant income

$369

$317

$709

$597

Adjusted EBITDA

$370

$319

$710

$601

Adjusted EBITDA margin excluding grant income

39.2%

41.1%

38.4%

39.6%

Adjusted EBITDA margin

39.3%

41.4%

38.4%

39.8%

Adjusted EBITDA less facility-level NCI excluding grant income

$231

$209

$445

$395

Adjusted EBITDA less facility-level NCI

$231

$210

$445

$397

Adjusted EBITDA less total NCI excluding grant income

$231

$204

$445

$386

Adjusted EBITDA less total NCI

$231

$205

$445

$388

Second quarter 2023 net operating revenues increased 22.2% compared to second quarter 2022 driven by strong same-facility net surgical case growth, acquisitions and opening of new facilities, service line growth and improved pricing yield.

Surgical business same-facility system-wide net patient service revenues increased 9.8% in second quarter 2023 compared to second quarter 2022, with cases up 6.6% and net revenue per case up 2.9%.

Second quarter 2023 Adjusted EBITDA excluding grant income increased 16.4% relative to second quarter 2022, due to strong same-facility system-wide surgical case growth, contributions from acquisitions and de novo facilities, improved pricing yield, and effective expense management.

Adjusted EBITDA margin excluding grant income in the second quarter 2023 declined relative to second quarter 2022 primarily due to higher other operating expenses partially offset by improved salaries, wages and benefits.

Hospital Operations and Other (Hospital) Segment

Tenet’s Hospital business segment is primarily comprised of acute care and specialty hospitals, imaging centers, ancillary outpatient facilities, micro-hospitals and physician practices.

Three Months Ended June 30,

Six Months Ended June 30,

Hospital segment results ($ in millions)

2023

2022

2023

2022

Revenues

Net operating revenues (prior to inter-segment eliminations)

$3,922

$3,645

$7,821

$7,443

Grant income

$92

$10

$96

Same-hospital net patient service revenues3

$3,590

$3,344

$7,137

$6,851

Same-Hospital Volume Changes versus the Prior-Year Period

Admissions

3.0%

(8.1)%

3.6%

(6.4)%

Adjusted admissions4

3.2%

(5.3)%

4.9%

(3.5)%

Outpatient visits (including outpatient ER visits)

(1.3)%

(10.0)%

(0.6)%

(4.7)%

Emergency Room visits (inpatient and outpatient)

0.4%

3.8%

2.5%

8.5%

Hospital surgeries

(0.1)%

(8.0)%

1.1%

(4.3)%

Adjusted EBITDA

Adjusted EBITDA excluding grant income

$381

$339

$783

$849

Adjusted EBITDA

$388

$431

$793

$945

Adjusted EBITDA margin excluding grant income

9.7%

9.3%

10.0%

11.4%

Adjusted EBITDA margin

9.9%

11.8%

10.1%

12.7%

Second quarter 2023 net operating revenues increased 7.6% from second quarter 2022 primarily due to increased adjusted admissions, improved pricing yield, and the adverse impacts associated with a cybersecurity incident in the second quarter of 2022.

Same-hospital net patient service revenue per adjusted admission increased 4.0% year-over-year for second quarter 2023 primarily due to improved pricing yield and our focus on growing higher acuity services. COVID admissions were 2% of total admissions in the second quarter 2023 versus 3% in the second quarter 2022. Second quarter non-COVID inpatient admissions increased 5% over second quarter 2022.

Adjusted EBITDA excluding grant income in second quarter 2023 was $381 million compared to $339 million in second quarter 2022, reflecting strong adjusted admissions growth and improved contract labor costs, partially offset by higher other operating expenses. Second quarter 2022 results included the adverse impacts associated with a cybersecurity incident.

Conifer Segment

Tenet’s Conifer business segment provides comprehensive end-to-end and focused-point business process services, including hospital and physician revenue cycle management, patient communications and engagement support and value-based care solutions to hospitals, health systems, physician practices, employers, and other clients.

Three Months Ended June 30,

Six Months Ended June 30,

Conifer segment results ($ in millions)

2023

2022

2023

2022

Net operating revenues

$323

$333

$647

$657

Adjusted EBITDA

$85

$93

$172

$185

Adjusted EBITDA margin

26.3%

27.9%

26.6%

28.2%

Second quarter 2023 net operating revenues declined 3.0% compared to second quarter 2022 reflecting previously announced contract changes with Tenet hospitals.

Second quarter 2023 Adjusted EBITDA and Adjusted EBITDA margin declined compared to second quarter 2022 reflecting the aforementioned contract changes.

2023 Outlook1

Tenet’s Outlook for full year 2023 (consolidated and by segment) and third quarter 2023 follows:

CONSOLIDATED ($ in millions, except per share amounts)

FY 2023 Outlook

Third Quarter 2023 Outlook

Net operating revenues

$20,100 to $20,500

$4,900 to $5,100

Income from continuing operations available to Tenet common stockholders

$447 to $582

$75 to $120

Adjusted EBITDA

$3,310 to $3,460

$775 to $825

Adjusted EBITDA margin

16.5% to 16.9%

15.8% to 16.2%

Diluted income per common share from continuing operations

$4.19 to $5.48

$0.71 to $1.13

Adjusted net income from continuing operations

$550 to $640

$100 to $135

Adjusted diluted earnings per share from continuing operations

$5.18 to $6.03

$0.94 to $1.28

Equity in earnings of unconsolidated affiliates

$200 to $220

$45 to $55

Depreciation and amortization

$850 to $875

$210 to $220

Interest expense

$895 to $905

$220 to $230

Income tax expense5

$315 to $335

$65 to $75

Net income available to NCI

$660 to $700

$160 to $170

Weighted average diluted common shares

~105 million

~105 million

NCI cash distributions

$565 to $605

Net cash provided by operating activities

$1,775 to $2,075

Adjusted net cash provided by operating activities

$1,925 to $2,175

Capital expenditures

$675 to $725

Free cash flow

$1,100 to $1,350

Adjusted free cash flow – continuing operations

$1,250 to $1,450

Ambulatory Segment ($ in millions)

FY 2023 Outlook

Net operating revenues

$3,725 to $3,825

Adjusted EBITDA

$1,490 to $1,530

Total NCI (Facility level)

$545 to $565

Adjusted EBITDA less total NCI

$945 to $965

Changes versus prior year6:

Surgical cases volumes

Up 5.0% to 6.0%

Net revenues per surgical case

Up 2.0% to 3.0%

Hospital Segment ($ in millions)

FY 2023 Outlook

Net operating revenues (prior to inter-segment eliminations)

$15,540 to $15,790

Adjusted EBITDA

$1,490 to $1,590

NCI

$25 to $40

Changes versus prior year6:

Inpatient admissions

Up 2.0% to 4.0%

Adjusted admissions

Up 2.5% to 4.5%

Conifer Segment ($ in millions)

FY 2023 Outlook

Net operating revenues

$1,285 to $1,335

Adjusted EBITDA

$330 to $340

NCI

$90 to $95

Management’s Webcast Discussion of Results

Tenet management will discuss the Company’s second quarter 2023 results in a webcast scheduled for 5:00 p.m. Eastern Time (4:00 p.m. Central Time) on July 31, 2023. Investors can access the webcast through the Company’s website at www.tenethealth.com/investors.

The slide presentation associated with the webcast referenced above, a copy of this earnings press release, and a related supplemental financial disclosures document will be available on the Company’s Investor Relations website on July 31, 2023.

Cautionary Statement

This release contains “forward-looking statements” - that is, statements that relate to future, not past, events. In this context, forward-looking statements often address the Company’s expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “assume,” “believe,” “budget,” “estimate,” “forecast,” “intend,” “plan,” “predict,” “project,” “seek,” “see,” “target,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain, especially with regards to developments related to COVID-19. Particular uncertainties that could cause the Company’s actual results to be materially different than those expressed in the Company’s forward-looking statements include, but are not limited to the impact of the COVID-19 pandemic, and other factors disclosed under “Forward-Looking Statements” and “Risk Factors” in our Form 10-K for the year ended December 31, 2022 and other filings with the Securities and Exchange Commission.

Footnotes

Tables and discussions throughout this earnings release include certain financial measures, including those related to our second quarter and full year 2023 Outlook, that are not in accordance with accounting principles generally accepted in the United States of America (GAAP). Reconciliations of GAAP measures to the Adjusted (non-GAAP) measures used are detailed in Tables #1-6 included at the end of this earnings release. Management’s reasoning for the use of these non-GAAP measures and descriptions of the various non-GAAP measures are included in the Non-GAAP Financial Measures section of this earnings release.
Same-facility system-wide revenues and statistical information include the results of the facilities in which the Ambulatory segment has an investment that 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.
For 2023, same-hospital revenues and statistical data include those for hospitals and hospital-affiliated outpatient centers operated by the Company’s Hospital segment continuously from January 1, 2022 through June 30, 2023. Amounts associated with physician practices are excluded.
Adjusted admissions represent actual patient admissions adjusted to include outpatient services provided by facilities in our Hospital segment by multiplying actual patient admissions by the sum of gross inpatient revenues and outpatient revenues, then dividing that result by gross inpatient revenues.
Income tax expense is calculated by multiplying 24% (the federal corporate tax rate of 21% plus an estimate of state taxes) by the sum of: pretax income less GAAP facility level NCI expense plus permanent differences, and non-deductible interest expense.
Change versus prior year is presented on a same-facility system-wide basis for USPI Ambulatory surgical cases and on a same-hospital basis for hospital statistics.

About Tenet Healthcare

Tenet Healthcare Corporation (NYSE: THC) is a diversified healthcare services company headquartered in Dallas. Our care delivery network includes United Surgical Partners International, the largest ambulatory platform in the country, which operates or has ownership interests in more than 475 ambulatory surgery centers and surgical hospitals. We also operate 61 acute care and specialty hospitals, approximately 110 other outpatient facilities, a network of leading employed physicians and a global business center in Manila, Philippines. Our Conifer Health Solutions subsidiary provides revenue cycle management and value-based care services to hospitals, health systems, physician practices, employers and other clients. Across the Tenet enterprise, we are united by our mission to deliver quality, compassionate care in the communities we serve. For more information, please visit www.tenethealth.com.

Non-GAAP Financial Measures

The Company believes the non-GAAP measures described below 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 use similar non-GAAP financial measures in their presentations and earnings releases. 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.

Adjusted EBITDA is defined by the Company as net income available (loss attributable) to Tenet common shareholders before (1) the cumulative effect of changes in accounting principles, (2) net loss attributable (income available) to noncontrolling interests, (3) income (loss) from discontinued operations, net of tax, (4) income tax benefit (expense), (5) gain (loss) from early extinguishment of debt, (6) other non-operating income (expense), net, (7) interest expense, (8) litigation and investigation benefit (costs), 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 and closed businesses (i.e., health plan businesses). Litigation and investigation costs excluded do not include ordinary course of business malpractice and other litigation and related expenses.

Adjusted diluted earnings (loss) per share from continuing operations is defined by the Company as Adjusted net income available (loss attributable) from continuing operations to Tenet common shareholders, divided by the weighted average diluted shares outstanding in the reporting period.

Adjusted net income available (loss attributable) from continuing operations to Tenet common shareholders is defined by the Company as net income available (loss attributable) to Tenet common shareholders before (1) income (loss) from discontinued operations, net of tax, (2) gain (loss) from early extinguishment of debt, (3) litigation and investigation benefit (costs), net of insurance recoveries, (4) net gains (losses) on sales, consolidation and deconsolidation of facilities, (5) impairment and restructuring charges and acquisition-related costs, (6) income (loss) from divested and closed businesses (i.e., health plan businesses) and (7) the associated impact of these items on taxes and noncontrolling interests. Litigation and investigation costs excluded do not include ordinary course of business malpractice and other litigation and related expenses.

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

Adjusted Free Cash Flow 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 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 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.

The Company uses, and believes investors use, Free Cash Flow and Adjusted Free Cash Flow as supplemental non-GAAP measures to analyze cash flows generated from the Company’s operations. The Company believes these measures are useful to investors in evaluating its ability to fund distributions paid to noncontrolling interests or for 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 the Company’s financial statements, they do not provide a complete measure of the Company’s 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, or (ii) distributions paid to noncontrolling interests. Accordingly, investors are encouraged to use GAAP measures when evaluating the Company’s financial performance.

See corresponding reconciliations of the non-GAAP financial measures referred to above to the most comparable GAAP financial measures in Tables #1 - 6 below.

Tenet Healthcare Corporation

Financial Statements and Reconciliations

Second Quarter Earnings Release

Table of Contents

Description

Page

Consolidated Statements of Operations

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Segment Reporting

Table #1 – Reconciliations of Net Income to Adjusted Net Income

Table #2 – Reconciliations of Net Income to Adjusted EBITDA

Table #3 – Reconciliations of Net Cash Provided by Operating Activities to Free Cash Flow and Adjusted Free Cash Flow

Table #4 – Reconciliations of Outlook Net Income to Outlook Adjusted Net Income

Table #5 – Reconciliations of Outlook Net Income to Outlook Adjusted EBITDA

Table #6 – Reconciliations of Outlook Net Cash Provided by Operating Activities to Outlook Free Cash Flow and Outlook Adjusted Free Cash Flow

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in millions, except per share amounts)

Three Months Ended June 30,

2023

2022

Change

Net operating revenues

5,082

100.0

4,638

100.0

9.6

Grant income

0.2

2.0

(91.5

Equity in earnings of unconsolidated affiliates

1.1

1.2

—

Operating expenses:

Salaries, wages and benefits

2,285

45.0

2,126

45.8

7.5

Supplies

891

17.5

811

17.5

9.9

Other operating expenses, net

1,125

22.1

1,006

21.7

11.8

Depreciation and amortization

213

4.3

216

4.7

Impairment and restructuring charges, and acquisition-related costs

0.3

1.2

Litigation and investigation costs

0.2

0.4

Net gains on sales, consolidation and deconsolidation of facilities

—

)

—

Operating income

604

11.9

553

11.9

Interest expense

(226

)

(222

)

Other non-operating income, net

—

Loss from early extinguishment of debt

(11

)

(66

)

Income from continuing operations, before income taxes

373

265

Income tax expense

(80

)

(86

)

Net income

293

179

Less: Net income available to noncontrolling interests

170

141

Net income available to Tenet Healthcare Corporation common shareholders

123

Earnings per share available to Tenet Healthcare Corporation common shareholders:

Basic

Continuing operations

1.21

0.35

Diluted

Continuing operations

1.15

0.35

Weighted average shares and dilutive securities outstanding

(in thousands):

Basic

101,766

107,790

Diluted

104,778

108,750

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in millions, except per share amounts)

Six Months Ended June 30,

2023

2022

Change

Net operating revenues

10,103

100.0

9,383

100.0

7.7

Grant income

0.1

100

1.1

(89.0

Equity in earnings of unconsolidated affiliates

104

1.0

100

1.1

4.0

Operating expenses:

Salaries, wages and benefits

4,543

45.0

4,308

45.9

5.5

Supplies

1,782

17.6

1,596

17.0

11.7

Other operating expenses, net

2,218

22.0

1,948

20.8

13.9

Depreciation and amortization

430

4.2

419

4.5

Impairment and restructuring charges, and acquisition-related costs

0.4

0.8

Litigation and investigation costs

0.1

0.4

Net gains on sales, consolidation and deconsolidation of facilities

(13

)

(0.1

—

Operating income

1,207

11.9

1,201

12.8

Interest expense

(447

)

(449

)

Other non-operating income, net

—

Loss from early extinguishment of debt

(11

)

(109

)

Income from continuing operations, before income taxes

753

643

Income tax expense

(164

)

(185

)

Income from continuing operations, before discontinued operations

589

458

Income from discontinued operations

—

Net income

589

459

Less: Net income available to noncontrolling interests

323

281

Net income available to Tenet Healthcare Corporation common shareholders

266

178

Amounts available to Tenet Healthcare Corporation common shareholders

Income from continuing operations, net of tax

266

177

Income from discontinued operations, net of tax

—

Net income available to Tenet Healthcare Corporation common shareholders

266

178

Earnings per share available to Tenet Healthcare Corporation common shareholders:

Basic

Continuing operations

2.61

1.64

Discontinued operations

—

0.01

2.61

1.65

Diluted

Continuing operations

2.47

1.63

Discontinued operations

—

0.01

2.47

1.64

Weighted average shares and dilutive securities outstanding

(in thousands):

Basic

102,028

107,636

Diluted

105,354

114,054

TENET HEALTHCARE CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in millions)

June 30,

December 31,

2023

2022

ASSETS

Current assets:

Cash and cash equivalents

934

858

Accounts receivable

2,914

2,943

Inventories of supplies, at cost

404

405

Assets held for sale

141

—

Other current assets

1,602

1,775

Total current assets

5,995

5,981

Investments and other assets

3,130

3,147

Deferred income taxes

Property and equipment, at cost, less accumulated depreciation and amortization

6,268

6,462

Goodwill

10,350

10,123

Other intangible assets, at cost, less accumulated amortization

1,406

1,424

Total assets

27,157

27,156

LIABILITIES AND EQUITY

Current liabilities:

Current portion of long-term debt

141

145

Accounts payable

1,246

1,504

Accrued compensation and benefits

718

778

Professional and general liability reserves

257

255

Accrued interest payable

199

213

Liabilities held for sale

—

Contract liabilities

110

Other current liabilities

1,498

1,471

Total current liabilities

4,152

4,476

Long-term debt, net of current portion

14,907

14,934

Professional and general liability reserves

793

790

Defined benefit plan obligations

329

331

Deferred income taxes

243

217

Other long-term liabilities

1,732

1,800

Total liabilities

22,156

22,548

Commitments and contingencies

Redeemable noncontrolling interests in equity of consolidated subsidiaries

2,277

2,149

Equity:

Shareholders’ equity:

Common stock

Additional paid-in capital

4,800

4,778

Accumulated other comprehensive loss

(178

)

(181

)

Accumulated deficit

(537

)

(803

)

Common stock in treasury, at cost

(2,750

)

(2,660

)

Total shareholders’ equity

1,343

1,142

Noncontrolling interests

1,381

1,317

Total equity

2,724

2,459

Total liabilities and equity

27,157

27,156

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in millions)

Six Months Ended

June 30,

2023

2022

Net income

589

459

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

430

419

Deferred income tax expense

132

Stock-based compensation expense

Impairment and restructuring charges, and acquisition-related costs

Litigation and investigation costs

Net gains on sales, consolidation and deconsolidation of facilities

(13

)

—

Loss from early extinguishment of debt

109

Equity in earnings of unconsolidated affiliates, net of distributions received

Amortization of debt discount and debt issuance costs

Pre-tax income from discontinued operations

—

)

Net gains from the sale of investments and long-lived assets

(15

)

(71

)

Other items, net

)

Changes in cash from operating assets and liabilities:

Accounts receivable

(74

)

Inventories and other current assets

160

173

Income taxes

(31

)

(86

)

Accounts payable, accrued expenses, contract liabilities and other current liabilities

(168

)

(764

)

Other long-term liabilities

(41

)

Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements

(78

)

(98

)

Net cash provided by operating activities

1,047

347

Cash flows from investing activities:

Purchases of property and equipment

(367

)

(307

)

Purchases of businesses or joint venture interests, net of cash acquired

(96

)

(66

)

Proceeds from sales of facilities and other assets

209

Proceeds from sales of marketable securities, long-term investments and other assets

Purchases of marketable securities and equity investments

(37

)

(41

)

Other items, net

)

Net cash used in investing activities

(467

)

(200

)

Cash flows from financing activities:

Repayments of borrowings

(1,437

)

(2,744

)

Proceeds from borrowings

1,362

2,013

Repurchases of common stock

(90

)

—

Debt issuance costs

(15

)

(24

)

Distributions paid to noncontrolling interests

(270

)

(310

)

Proceeds from the sale of noncontrolling interests

Purchases of noncontrolling interests

(79

)

(29

)

Other items, net

)

(75

)

Net cash used in financing activities

(504

)

(1,160

)

Net increase (decrease) in cash and cash equivalents

(1,013

)

Cash and cash equivalents at beginning of period

858

2,364

Cash and cash equivalents at end of period

934

1,351

Supplemental disclosures:

Interest paid, net of capitalized interest

(445

)

(416

)

Income tax payments, net

(158

)

(140

)

TENET HEALTHCARE CORPORATION

SEGMENT REPORTING

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

(Dollars in millions)

2023

2022

2023

2022

Net operating revenues:

Ambulatory Care

942

771

1,847

1,509

Hospital Operations and other (prior to inter-segment eliminations)

3,922

3,645

7,821

7,443

Conifer

Tenet

105

111

212

226

Other clients

218

222

435

431

Total Conifer revenues

323

333

647

657

Inter-segment eliminations

(105

)

(111

)

(212

)

(226

)

Total

5,082

4,638

10,103

9,383

Equity in earnings of unconsolidated affiliates:

Ambulatory Care

Hospital Operations and other

Total

104

100

Adjusted EBITDA (including grant income):

Ambulatory Care

370

319

710

601

Hospital Operations and other

388

431

793

945

Conifer

172

185

Total

843

1,675

1,731

Adjusted EBITDA margins (including grant income):

Ambulatory Care

39.3

41.4

38.4

39.8

Hospital Operations and other

9.9

11.8

10.1

12.7

Conifer

26.3

27.9

26.6

28.2

Total

16.6

18.2

16.6

18.4

Adjusted EBITDA margins (excluding grant income):

Ambulatory Care

39.2

41.1

38.4

39.6

Hospital Operations and other

9.7

9.3

10.0

11.4

Conifer

26.3

27.9

26.6

28.2

Total

16.4

16.1

16.5

17.4

Capital expenditures:

Ambulatory Care

Hospital Operations and other

109

130

324

262

Conifer

Total

132

152

367

307

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #1 – Reconciliations of Net Income Available to Tenet Healthcare Corporation Common Shareholders to Adjusted Net Income Available from Continuing Operations to Common Shareholders

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

(Dollars in millions, except per share amounts)

2023

2022

2023

2022

Net income available to Tenet Healthcare Corporation common shareholders

123

266

178

Net income from discontinued operations

—

Net income from continuing operations

123

266

177

Less: Impairment and restructuring charges, and acquisition-related costs

(16

)

(57

)

(37

)

(73

)

Litigation and investigation costs

(10

)

(18

)

(14

)

(38

)

Net gains on sales, consolidation and deconsolidation of facilities

—

Loss from early extinguishment of debt

(11

)

(66

)

(11

)

(109

)

Tax and noncontrolling interests impact of above items

Adjusted net income available from continuing operations to common shareholders

154

161

308

371

Diluted earnings per share from continuing operations

1.15

0.35

2.47

1.63

Less: Impairment and restructuring charges, and acquisition-related costs

(0.15

)

(0.52

)

(0.35

)

(0.64

)

Litigation and investigation costs

(0.10

)

(0.17

)

(0.13

)

(0.33

)

Net gains on sales, consolidation and deconsolidation of facilities

—

0.01

0.12

—

Loss from early extinguishment of debt

(0.10

)

(0.61

)

(0.10

)

(0.96

)

Tax and noncontrolling interests impact of above items

0.06

0.16

0.06

0.23

Adjusted diluted earnings per share from continuing operations

1.44

1.48

2.87

3.33

Weighted average basic shares outstanding (in thousands)

101,766

107,790

102,028

107,636

Weighted average dilutive shares outstanding (in thousands)

104,778

108,750

105,354

114,054

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #2 – Reconciliations of Net Income Available to Tenet Healthcare Corporation Common Shareholders to Adjusted EBITDA

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

(Dollars in millions)

2023

2022

2023

2022

Net income available to Tenet Healthcare Corporation common shareholders

123

266

178

Less: Net income available to noncontrolling interests

(170

)

(141

)

(323

)

(281

)

Income from discontinued operations, net of tax

—

Income from continuing operations

293

179

589

458

Income tax expense

(80

)

(86

)

(164

)

(185

)

Loss from early extinguishment of debt

(11

)

(66

)

(11

)

(109

)

Other non-operating income, net

—

Interest expense

(226

)

(222

)

(447

)

(449

)

Operating income

604

553

1,207

1,201

Litigation and investigation costs

(10

)

(18

)

(14

)

(38

)

Net gains on sales, consolidation and deconsolidation of facilities

—

Impairment and restructuring charges, and acquisition-related costs

(16

)

(57

)

(37

)

(73

)

Depreciation and amortization

(213

)

(216

)

(430

)

(419

)

Adjusted EBITDA

843

1,675

1,731

Net operating revenues

5,082

4,638

10,103

9,383

Net income available to Tenet Healthcare Corporation common shareholders as a % of net operating revenues

2.4

0.8

2.6

1.9

Adjusted EBITDA as a % of net operating revenues (Adjusted EBITDA margin)

16.6

18.2

16.6

18.4

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #3 – Reconciliations of Net Cash Provided by Operating Activities to Free Cash Flow and Adjusted Free Cash Flow from Continuing Operations

(Unaudited)

(Dollars in millions)

2023

YTD

Net cash provided by operating activities

598

1,047

Purchases of property and equipment

(132

)

(367

)

Free cash flow – continuing operations

466

680

Net cash used in investing activities

(181

)

(467

)

Net cash used in financing activities

(249

)

(504

)

Net cash provided by operating activities

598

1,047

Less: Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements

(54

)

(78

)

Adjusted net cash provided by operating activities from continuing operations

652

1,125

Purchases of property and equipment

(132

)

(367

)

Adjusted free cash flow – continuing operations

520

758

(Dollars in millions)

2022

YTD

Net cash provided by operating activities

119

347

Purchases of property and equipment

(152

)

(307

)

Free cash flow

(33

)

Add back: Medicare Advance Repayments

281

475

Free cash flow – continuing operations, excluding repayments of Medicare Advances

248

515

Net cash used in investing activities

(140

)

(200

)

Net cash used in financing activities

(33

)

(1,160

)

Net cash provided by operating activities

119

347

Less: Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements

(42

)

(98

)

Adjusted net cash provided by operating activities from continuing operations

161

445

Purchases of property and equipment

(152

)

(307

)

Adjusted free cash flow – continuing operations

138

Add back: Medicare Advance Repayments

281

475

Adjusted free cash flow – continuing operations, excluding repayments of Medicare Advances

290

613

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #4 – Reconciliations of Outlook Net Income Available to Tenet Healthcare Corporation Common Shareholders to Outlook Adjusted Net Income Available from Continuing Operations to Common Shareholders

(Unaudited)

Third Quarter 2023

FY 2023

(Dollars in millions, except per share amounts)

Low

High

Low

High

Net income available to Tenet Healthcare Corporation common shareholders

120

447

582

Less: Impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements(1)

(30

)

(20

)

(125

)

(75

)

Net gains on sales, consolidation and deconsolidation of facilities

—

Loss from early extinguishment of debt(2)

—

(11

)

(11

)

Tax and noncontrolling interests impact of above items

Adjusted net income available from continuing operations to common shareholders

100

135

550

640

Diluted earnings per share from continuing operations

0.71

1.13

4.19

5.48

Less: Impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements

(0.28

)

(0.20

)

(1.20

)

(0.71

)

Net gains on sales, consolidation and deconsolidation of facilities

—

0.12

Loss from early extinguishment of debt

—

(0.10

)

(0.10

)

Tax and noncontrolling interests impact of above items

0.05

0.19

0.14

Adjusted diluted earnings per share from continuing operations

0.94

1.28

5.18

6.03

Weighted average basic shares outstanding (in thousands)

102,000

Weighted average dilutive shares outstanding (in thousands)

105,000

(1)

The figures shown represent the Company's estimate for restructuring charges plus the actual year-to-date results for impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements. The Company does not generally forecast impairment charges, acquisition-related costs, and litigation costs and settlements because it 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.

(2)

The Company does not generally forecast losses from the early extinguishment of debt because the Company does not believe that it can forecast this item with sufficient accuracy since it is indeterminable at the time the Company provides its financial Outlook. The figures shown relate to the debt repurchased or refinanced by the Company in 2023.

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #5 – Reconciliations of Outlook Net Income Available to Tenet Healthcare Corporation Common Shareholders to Outlook Adjusted EBITDA

(Unaudited)

Third Quarter 2023

FY 2023

(Dollars in millions)

Low

High

Low

High

Net income available to Tenet Healthcare Corporation common shareholders

120

447

582

Less: Net income available to noncontrolling interests

(160

)

(170

)

(660

)

(700

)

Income tax expense

(65

)

(75

)

(315

)

(335

)

Interest expense

(230

)

(220

)

(905

)

(895

)

Loss from early extinguishment of debt(2)

—

(11

)

(11

)

Other non-operating income (expense), net

)

—

(10

)

—

Net gains on sales, consolidation and deconsolidation of facilities

—

Impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements(1)

(30

)

(20

)

(125

)

(75

)

Depreciation and amortization

(210

)

(220

)

(850

)

(875

)

Adjusted EBITDA

775

825

3,310

3,460

Income from continuing operations

120

447

582

Net operating revenues

4,900

5,100

20,100

20,500

Net income available to Tenet Healthcare Corporation common shareholders as a % of net operating revenues

1.5

2.4

2.2

2.8

Adjusted EBITDA as a % of net operating revenues (Adjusted EBITDA margin)

15.8

16.2

16.5

16.9

(1)

(2)

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #6 – Reconciliations of Outlook Net Cash Provided by Operating Activities

to Outlook Free Cash Flow – Continuing Operations and Outlook Adjusted Free Cash

Flow – Continuing Operations

(Unaudited)

(Dollars in millions)

FY 2023

Low

High

Net cash provided by operating activities

1,775

2,075

Purchases of property and equipment

(675

)

(725

)

Free cash flow – continuing operations

1,100

1,350

Net cash provided by operating activities

1,775

2,075

Less: Payments for restructuring charges, acquisition-related costs and litigation costs and settlements(1)

(150

)

(100

)

Adjusted net cash provided by operating activities – continuing operations

1,925

2,175

Purchases of property and equipment

(675

)

(725

)

Adjusted free cash flow – continuing operations(2)

1,250

1,450

(1)

The figures shown represent the Company's estimate for restructuring payments plus the actual year-to-date payments for restructuring charges, acquisition-related costs, and litigation costs and settlements. The Company does not generally forecast payments for acquisition-related costs, and litigation costs and settlements because it 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.

(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, and (ii) distributions paid to noncontrolling interests.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230730228072/en/

Investor Contact Will McDowell 469-893-2387 william.mcdowell@tenethealth.com

Media Contact Robert Dyer 469-893-2640 mediarelations@tenethealth.com

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