Tenet Announces Results for Second Quarter Ended June 30, 2006.DALLAS Dallas, city (1990 pop. 1,006,877), seat of Dallas co., N Tex., on the Trinity River near the junction of its three forks; inc. 1871. The second largest Texas city, after Houston, and the eighth largest U.S. -- Tenet Healthcare Tenet Healthcare Corporation (THC) is an operating company that owns and operates 57 hospitals in the United States [1]. It is based in Dallas, Texas. Its stock ticker symbol on the New York Stock Exchange is NYSE: THC. Corporation (NYSE NYSE See: New York Stock Exchange :THC THC tetrahydrocannabinol. THC n. Tetrahydrocannabinol; a compound that is obtained from cannabis or is made synthetically; it is the primary intoxicant in marijuana and hashish. ) today reported a net loss of $398 million, or $0.85 per share, for its second quarter ended June June: see month. 30, 2006. This compares to a net loss of $33 million, or $0.07 per share, in the second quarter of 2005. The net loss for the second quarter of 2006 includes a loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $447 million, or $0.95 per share, compared to a loss of $9 million, or $0.02 per share, in the second quarter of 2005. The loss from continuing operations in the second quarter of 2006 included litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and investigation costs of $0.98 per share. Income from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. in the second quarter of 2006 was $49 million, or $0.10 per share, compared to a loss of $24 million, or $0.05 per share, in the second quarter of 2005. "Strong pricing and cost control more than offset continued weakness in admissions and increases in bad debt during the second quarter, which enabled us to exceed our expectations for the quarter," said Trevor Trev·or , William Originally William Trevor Cox. Born 1928. Irish writer noted for his darkly comedic stories and novels, including The Old Boys (1964) and The Day We Got Drunk on Cake (1967). Fetter, Tenet's president and chief executive officer. "We also succeeded in the second quarter in settling the most significant of the major legal issues facing the Company, and, most importantly Adv. 1. most importantly - above and beyond all other consideration; "above all, you must be independent" above all, most especially , we continued to make progress and receive recognition for further improvements in clinical quality and service. We believe the Company is now well positioned to grow." "We specifically targeted enhanced clinical technology and patient care improvements with our expanded capital investment program, and the initial response from our physicians has been overwhelmingly positive," said Reynold Reynold is an English masculine name derived from an Old High German personal name made up of the elements "ragin" (advice, decision) and "wald" (ruler). It is a cognate of Rögnvaldr. Jennings Jennings, city (1990 pop. 11,305), seat of Jefferson Davis parish, SW La., on the Mermentau River; inc. 1888. Cotton and rice are grown, there is a bottling plant, and drugs, machinery, apparel, and water-treatment systems are manufactured. , chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . "These investments are tangible Possessing a physical form that can be touched or felt. Tangible refers to that which can be seen, weighed, measured, or apprehended by the senses. A tangible object is something that is real and substantial. An automobile is an example of tangible Personal Property. evidence of our commitment to our hospitals and are the things our physicians have asked for. We believe they will respond by sending us an increased share of their patients." "As a result of the 6.8 percent increase in net patient revenue per equivalent patient day, or 12.0 percent on a Compact-adjusted basis, and by restraining RESTRAINING. Narrowing down, making less extensive; as, a restraining statute, by which the common law is narrowed down or made less extensive in its operation. the increase in controllable operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. per adjusted patient day to 4.4 percent, we achieved our performance targets in continuing operations for the second quarter," said Biggs Biggs is the name of several places:
Biggs may also refer to:
Continuing Operations The loss from continuing operations for the second quarter of 2006 was $447 million, or $0.95 per share, including the following items:
(1) litigation and investigation costs of $728 million pre-tax, $460
million after-tax before the impact of the valuation allowance, or
$0.98 per share, including a pre-tax charge of $711 million for a
settlement with the Department of Justice;
(2) impairment and restructuring charges, net of insurance recoveries,
of $27 million pre-tax, $27 million after-tax before the impact of
the valuation allowance (no material tax benefit due primarily to
the non-deductibility of goodwill), or $0.06 per share;
(3) hurricane insurance recoveries, net of costs of $13 million
pre-tax, $8 million after-tax before the impact of the valuation
allowance, or $0.02 per share;
(4) favorable net adjustments for prior year cost reports and prior
year cost report valuation allowances, primarily related to
Medicare and Medicaid, of $4 million pre-tax, $3 million after-tax
before the impact of the valuation allowance, or $0.01 per share;
(5) an unfavorable, non-cash adjustment to increase the company's
total valuation allowance for deferred tax assets related to
continuing operations of $2 million, or $0.00 per share; and,
(6) a favorable non-cash adjustment to reduce tax exposure reserves of
$7 million, or $0.02 per share.
In addition, the Company incurred stock compensation expense, included in salaries, wages and benefits, of $11 million pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta , $7 million after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. , or $0.02 per share in the second quarter of 2006 as compared to $13 million pre-tax, $8 million after-tax, or $0.02 per share in the second quarter of 2005. Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (a non-GAAP term defined by the Company as net income (loss) before (1) interest, (2) taxes, (3) depreciation, (4) amortization, (5) impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of long-lived long-lived adj. 1. Having a long life: a long-lived aunt. 2. Lasting a long time; persistent: a long-lived rumor. 3. assets and goodwill, and restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. net of insurance recoveries, (6) hurricane hurricane, tropical cyclone in which winds attain speeds greater than 74 mi (119 km) per hr. Wind speeds reach over 190 mi (289 km) per hr in some hurricanes. insurance recoveries net of costs, (7) costs of litigation and investigations, (8) investment earnings, (9) minority interest, and (10) discontinued operations) in the second quarter of 2006 was $209 million producing a margin of 9.5 percent an increase of $56 million, or 37 percent, from adjusted EBITDA of $153 million in the second quarter of 2005, and an increase of 240 basis points from the adjusted EBITDA margin of 7.1 percent in the second quarter of 2005. A reconciliation of adjusted EBITDA to net loss is set forth at the end of this release. Admissions, Patient Days and Surgeries
Admissions, Patient Days, and Continuing Operations
Surgeries --------------------------------
Q2'06 Q2'05 Change (%)
------------------------------------- ---------- ---------- ----------
Admissions - Total 142,976 146,946 (2.7)
------------------------------------- ---------- ---------- ----------
Uninsured Admissions 5,748 5,620 2.3
------------------------------------- ---------- ---------- ----------
Uninsured Admissions/Total Admits (%) 4.0 3.8 0.2 (1)
------------------------------------- ---------- ---------- ----------
Charity Care Admissions 2,801 2,519 11.2
------------------------------------- ---------- ---------- ----------
Charity Care Admissions as % of total 2.0 1.7 0.3 (1)
------------------------------------- ---------- ---------- ----------
Commercial Managed Care Admissions 42,031 44,725 (6.0)
------------------------------------- ---------- ---------- ----------
Admissions through Emergency Dept.
(ED) 75,579 77,520 (2.5)
------------------------------------- ---------- ---------- ----------
ED Admits as % of Total 52.9 52.8 0.1 (1)
------------------------------------- ---------- ---------- ----------
Surgeries (inpatient and outpatient) 104,897 108,674 (3.5)
------------------------------------- ---------- ---------- ----------
Patient Days - Total 710,339 743,889 (4.5)
------------------------------------- ---------- ---------- ----------
Equivalent Admissions 204,640 208,608 (1.9)
------------------------------------- ---------- ---------- ----------
Equivalent Patient Days 1,008,689 1,047,509 (3.7)
------------------------------------- ---------- ---------- ----------
(1) This change is the difference between the 2006 and 2005 amounts
shown.
Admissions in continuing operations for the second quarter of 2006 were 142,976, a decline of 3,970 admissions, or 2.7 percent, compared to admissions of 146,946 in the second quarter of 2005. Approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 1,000 admissions, or more than a quarter of this decline, is admissions lost as a result of the Company's Targeted Growth Initiative ("TGI TGI Tribunal de Grande Instance TGI Target Group Index TGI Thank God It's Friday (US restaurant chain) TGI Tracheal Gas Insufflation TGI Tumor Growth Inhibition TGI Trato Gastrointestinal (Portugese) ") in which certain service lines were either de-emphasized or discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: since June 30, 2005. In addition, approximately 350 admissions were lost due to the closing of rehabilitation rehabilitation: see physical therapy. units subsequent to June 30, 2005. Commercial managed care admissions in continuing operations declined from 44,725 to 42,031, a decline of 2,694 admissions, or 6.0 percent, during the second quarter of 2006 compared to the second quarter of 2005. The closing of certain non-acute units as well as the impact of TGI contributed to this decline. Equivalent admissions declined by 3,968, or 1.9 percent, to 204,640 in the second quarter of 2006 as compared to 208,608 equivalent admissions in the second quarter of 2005. The decline in equivalent admissions was also impacted by the Company's actions to exit or de-emphasize de-em·pha·size tr.v. de-em·pha·sized, de-em·pha·siz·ing, de-em·pha·siz·es To decrease the emphasis on; minimize the importance of. de-em certain service lines which resulted in a loss of approximately 1,500 equivalent admissions. Outpatient outpatient /out·pa·tient/ (-pa-shent) a patient who comes to the hospital, clinic, or dispensary for diagnosis and/or treatment but does not occupy a bed. out·pa·tient n. Visits
Outpatient Visits Continuing Operations
--------------------------------
Q2'06 Q2'05 Change (%)
------------------------------------- ---------- ---------- ----------
Total Visits 1,083,060 1,152,609 (6.0)
------------------------------------- ---------- ---------- ----------
Uninsured Visits 113,164 111,951 1.1
------------------------------------- ---------- ---------- ----------
Uninsured/ Total Visits (%) 10.4 9.7 0.7 (1)
------------------------------------- ---------- ---------- ----------
Charity Care Visits 4,920 5,000 (1.6)
------------------------------------- ---------- ---------- ----------
Charity Care / Total Visits (%) 0.5 0.4 0.1
------------------------------------- ---------- ---------- ----------
Commercial Managed Care Outpatient
Visits 423,785 458,191 (7.5)
------------------------------------- ---------- ---------- ----------
(1) This change is the difference between the 2006 and 2005 amounts
shown.
Outpatient visits in the second quarter of 2006 were 1,083,060, a decline of 69,549, or 6.0 percent, as compared to 1,152,609 visits in the second quarter of 2005. Among the causes of this decline is the increasing competition the company is experiencing from physician-owned entities providing outpatient services outpatient services Hospital-based services Managed care Medical and other services provided, to a nonadmitted Pt, by a hospital or other qualified facility–eg, mental health clinic, rural health clinic, mobile X-ray unit, free-standing dialysis unit Examples . As part of its strategy to stem this erosion erosion (ĭrō`zhən), general term for the processes by which the surface of the earth is constantly being worn away. The principal agents are gravity, running water, near-shore waves, ice (mostly glaciers), and wind. , the Company has established a separate dedicated business line to bring additional focus to its outpatient business. Revenues
Revenues Continuing Operations
($ in Millions) ------------------------
Q2'06 Q2'05 Change (%)
--------------------------------------------- ------ ------ ----------
Net Operating Revenues 2,195 2,142 2.5
--------------------------------------------- ------ ------ ----------
Compact discounts 235 123 91.1
--------------------------------------------- ------ ------ ----------
Compact-adjusted Net Operating Revenues (1) 2,430 2,265 7.3
--------------------------------------------- ------ ------ ----------
Charity care 138 140 (1.4)
--------------------------------------------- ------ ------ ----------
Provision for Doubtful Accounts 128 140 (8.6)
--------------------------------------------- ------ ------ ----------
Total uncompensated care (1) (2) 501 403 24.3
--------------------------------------------- ------ ------ ----------
Uncompensated care/ (Net Operating Revenues +
Charity + Compact) (%) (1) (3) 19.5 16.8 2.7
--------------------------------------------- ------ ------ ----------
(1) Non-GAAP measure
(2) Defined as Compact discounts plus charity care plus provision for
doubtful accounts
(3) This percentage change is the difference between the 2006 and 2005
amounts shown
Net operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. for continuing operations were $2.195 billion in the second quarter of 2006, an increase of $53 million, or 2.5 percent, as compared to $2.142 billion in the second quarter of 2005. Patient discounts provided under the Compact with Uninsured Patients ("Compact") reduced net operating revenues for continuing operations in the second quarter of 2006 and 2005 by $235 million and $123 million, respectively. If the discounts under the Compact were added back to net operating revenues, it would have produced a non-GAAP measure of Compact-adjusted net operating revenues for the second quarter of 2006 of $2.430 billion, which would be an increase of $165 million, or 7.3 percent, compared to Compact-adjusted net operating revenues of $2.265 billion for the second quarter of 2005. (A reconciliation of net operating revenue to Compact-adjusted net operating revenue, how the company uses the measures, and why the Company believes these measures are useful, are provided in the tables below entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: "Additional Supplemental Non-GAAP Disclosures." The foregoing also applies to all non-GAAP measures described below.) Tenet initiated the implementation of the discounting provisions under the Compact in June, 2004. The Compact was fully implemented in all of the Company's hospitals with the implementation of Compact discounts in Texas on September September: see month. 1, 2005. Under the Compact, discounts are provided to uninsured patients at managed care-style rates established by each hospital. The Compact discount offered to an uninsured patient is recognized as a contractual allowance, which reduces net operating revenues at the time the account is recorded. Prior to implementing the discounting provisions under the Compact, the vast majority of these discounts was ultimately recognized to be uncollectible Adj. 1. uncollectible - not capable of being collected; "a bad (or uncollectible) debt" bad invalid - having no cogency or legal force; "invalid reasoning"; "an invalid driver's license" and, as a result, was then recorded in our provision for doubtful accounts. Disproportionate-share payments received under various state Medicaid Medicaid, national health insurance program in the United States for low-income persons; established in 1965 with passage of the Social Security Amendments and now run by the Centers for Medicare and Medicaid Services. programs and other state-funded subsidies provided revenues of approximately $54 million and $22 million in the second quarters of 2006 and 2005, respectively. The increase in revenue is related to the increase in uncompensated care uncompensated care, n health care services provided by a hospital, physician, dental professional, or other health care professional for which no charge is made and for which no payment is expected. provided by the Company and reimbursed by various states in which the Company operates. Pricing
Pricing Continuing Operations
-------------------------
Q2'06 Q2'05 Change (%)
-------------------------------------------- ------- ------ ----------
Net inpatient revenue per admission ($) 10,351 9,582 8.0
-------------------------------------------- ------- ------ ----------
Compact-adjusted net inpatient revenue per
admission (1) ($) 11,198 9,990 12.1
-------------------------------------------- ------- ------ ----------
Net inpatient revenue per patient day ($) 2,084 1,893 10.1
-------------------------------------------- ------- ------ ----------
Compact-adjusted net inpatient revenue per
patient day (1) ($) 2,254 1,973 14.2
-------------------------------------------- ------- ------ ----------
Net outpatient revenue per visit ($) 584 559 4.5
-------------------------------------------- ------- ------ ----------
Compact-adjusted net outpatient revenue per
visit (1) ($) 689 614 12.2
-------------------------------------------- ------- ------ ----------
Net patient revenue per equivalent patient
day ($) 2,094 1,960 6.8
-------------------------------------------- ------- ------ ----------
Compact-adjusted net patient revenue per
equivalent patient day (1) ($) 2,327 2,077 12.0
-------------------------------------------- ------- ------ ----------
Net patient revenue from managed care payers
($mm) 1,102 1,022 7.8
-------------------------------------------- ------- ------ ----------
Stop loss payments from managed care payers
($mm) 83 100 (17.0)
-------------------------------------------- ------- ------ ----------
(1) Non-GAAP measure
Net inpatient inpatient /in·pa·tient/ (in´pa-shent) a patient who comes to a hospital or other health care facility for diagnosis or treatment that requires an overnight stay. in·pa·tient n. revenue per admission for the second quarter of 2006 was $10,351 compared to $9,582 in the second quarter of 2005. However, this unit measurement has been reduced by the Compact. If the discounts under the Compact are added back to net inpatient revenue, it produces a non-GAAP measure of Compact-adjusted net inpatient revenue per admission of $11,198 for the second quarter of 2006, an increase of $1,208, or 12.1 percent, compared to $9,990 in the second quarter of 2005. Net outpatient revenue per visit was $584 in the second quarter of 2006 compared to $559 in the second quarter of 2005. This unit measurement is also reduced by the Compact. If the discounts under the Compact are added back to net outpatient revenue, it produces a non-GAAP measure of $689 in Compact-adjusted net outpatient revenue per visit in the second quarter of 2006, an increase of $75, or 12.2 percent, compared to $614 in the second quarter of 2005. Net patient revenue per equivalent patient day was $2,094 in the second quarter of 2006 compared to $1,960 in the second quarter of 2005, an increase of $134, or 6.8 percent. On a Compact-adjusted basis, net revenue per equivalent patient day was $2,327 in the second quarter of 2006, compared to $2,077 in the second quarter of 2005, an increase of $250, or 12.0 percent. The Company disaggregates its total managed care business into two distinct categories: commercial managed care and managed Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. and managed Medicaid. In the second quarter of 2006, approximately 80 percent of total managed care revenues are from Tenet's commercial managed care business and 20 percent are from managed Medicare and managed Medicaid. Managed care admissions in the second quarter of 2006 were 64 percent commercial and 36 percent managed Medicare and managed Medicaid. Managed care outpatient visits in the second quarter of 2006 were 76 percent commercial and 24 percent managed Medicare and managed Medicaid. Inpatient managed care base rates in the second quarter of 2006 increased by 10.7 percent for our total managed care portfolio and 9.8 percent for the commercial segment of the managed care portfolio as compared to the second quarter of 2005. Net inpatient revenue per admission achieved an increase of 15.0 percent in the commercial segment of our managed care business. This percentage increase is impacted by negative adjustments to inpatient revenue in the second quarter of 2005 of approximately $25 million related to the settlement of several large disputes with managed care payors. The increase in net inpatient revenue per admission for commercial managed care is 9.4% after adding back these adjustments to the second quarter of 2005. The adjusted percentage increase in net revenue per admission, after adding back these adjustments, is less than the percentage increase in inpatient base rates due to the reduction in the stop-loss stop-loss, n a general term referring to that category of coverage that provides insurance protection (reinsurance) to an employer for a self-funded plan. portion of our managed care reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. payments, as discussed below. On an aggregate portfolio yield basis, which includes managed Medicare and managed Medicaid in addition to our commercial managed care business, net inpatient revenue per admission increased by 7.7 percent as compared to the second quarter of 2005 after adding back to inpatient managed care revenue in 2005 the adjustments for disputed managed care claims. As a result of these pricing increases, total net patient revenue from managed care payers increased by 7.8 percent in the second quarter of 2006 compared to the second quarter of 2005 despite the decline in managed care patient volumes. Stop-loss payments were $83 million in the second quarter of 2006, a decrease of $17 million, or 17 percent, from the $100 million received in the second quarter of 2005. Stop-loss payments were received on 3.7 percent of aggregate managed care admissions in the second quarter of 2006, and on 5.0 percent of commercial managed care admissions. Stop-loss payments were received on 5.0 percent of aggregate managed care admissions in the second quarter of 2005, and on 6.1 percent of commercial managed care admissions. Stop-loss payments declined by $3 million, or 3.5 percent as compared to the $86 million in stop-loss payments received in the first quarter of 2006. Controllable Operating Expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX.
Controllable Operating Expenses Continuing Operations
($mm) ------------------------
Q2'06 Q2'05 Change (%)
--------------------------------------------- ------ ------ ----------
Salaries, Wages & Benefits 963 986 (2.3)
--------------------------------------------- ------ ------ ----------
Supplies 398 388 2.6
--------------------------------------------- ------ ------ ----------
Other Operating Expenses 497 475 4.6
--------------------------------------------- ------ ------ ----------
Total Controllable Operating Expenses 1,858 1,849 0.5
--------------------------------------------- ------ ------ ----------
Controllable operating expenses (consisting of salaries, wages and benefits, supplies, and other operating expenses) were $1,858 million and $1,849 million in the second quarters of 2006 and 2005, respectively. Controllable operating expenses per equivalent patient day were $1,842 in the second quarter of 2006 compared to $1,765 in the second quarter of 2005, an increase of $77 or 4.4 percent. Rent expense, which is included in "Other Operating Expenses," decreased by 4.8 percent to $40 million in the second quarter of 2006, from $42 million in the second quarter of 2005. Other Operating Expenses also includes malpractice malpractice, failure to provide professional services with the skill usually exhibited by responsible and careful members of the profession, resulting in injury, loss, or damage to the party contracting those services. expense of $49 million and $58 million for the second quarters of 2006 and 2005, respectively. Provision for Doubtful Accounts
Bad Debt Continuing Operations
----------------------
Q2'06 Q2'05 Change (%)
----------------------------------------------- ----- ----- ----------
Provision for Doubtful Accounts ("Bad Debt")
($mm) 128 140 (8.6)
----------------------------------------------- ----- ----- ----------
Bad Debt / Net Operating Revenues (%) 5.8 6.5 (0.7) (2)
----------------------------------------------- ----- ----- ----------
Compact-related reduction in bad debt ($mm) 216 112 92.9
----------------------------------------------- ----- ----- ----------
Bad Debt + Compact-related Reduction (1) ($mm) 344 252 36.5
----------------------------------------------- ----- ----- ----------
Compact Adjusted Bad Debt / (Net operating
revenues + Compact discounts) (%) (1) 14.2 11.1 3.1 (2)
----------------------------------------------- ----- ----- ----------
(1) Non-GAAP measure
(2) This change is the difference between the 2006 and 2005 amounts
shown
Provision for doubtful accounts, or bad debt expense, was $128 million for continuing operations in the second quarter of 2006, a decrease of $12 million, or 8.6 percent, from the provision for doubtful accounts of $140 million in the second quarter of 2005. Bad debt expense was 5.8 percent of net operating revenues in the second quarter of 2006, compared to 6.5 percent of net operating revenues in the second quarter of 2005. After adding back the Compact-related reduction to bad debt expense and Compact discounts to net operating revenues in both quarters, it produces a non-GAAP measure of 14.2 percent for Compact-adjusted bad debt expense to Compact-adjusted net operating revenue for the second quarter of 2006 as compared to 11.1 percent for the second quarter of 2005. In the second quarter of 2005, bad debt expense was reduced by approximately $33 million related to the settlement of several large disputes with managed care payors. A related adjustment was recorded to contractual allowances, which reduced net operating revenues by $29 million. These two adjustments had a net favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impact of $4 million. In the second quarter of 2006, the company reclassified certain accounts previously recorded as pending charity accounts to self-pay. This had no impact on the amount of aggregate uncompensated care provided by the company, but gave rise to additional bad debt of approximately $10 million. Accounts Receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying Accounts receivable were $1.484 billion at June 30, 2006, and $1.584 billion at March 31, 2006. Accounts receivable days outstanding for continuing operations decreased to 54 days at June 30, 2006 from 56 days at March 31, 2006 and 58 days at December December: see month. 31, 2005. Cash Flow Unrestricted cash was $568 million at June 30, 2006, down $407 million from $975 million at March 31, 2006. This decrease was primarily due to the first installment Regular, partial portion of the same debt, paid at successive periods as agreed by a debtor and creditor. An installment loan is designed to be repaid in certain specified, ordinarily equal amounts over a designated period, such as a year or a number of months. of the Department of Justice settlement payment of $470 million on June 30, 2006. Unrestricted cash at June 30, 2006, as well as at March 31, 2006, excludes $263 million of cash restricted as collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although for standby standby Medtalk adjective Referring to the immediate availability of a certain specialist–anesthesiologist, surgeon, who can be deployed in a medical emergency. Cf Concurrent. letters of credit under the letter of credit facility that we entered into in December, 2004. Net cash used in operating activities was $320 million in the second quarter of 2006. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting , this cash flow figure excludes capital expenditures, proceeds of asset sales, and certain other items. Excluding cash used in discontinued operations of $35 million, our cash used in operating activities would have been $285 million for the second quarter of 2006. Capital expenditures in the second quarter of 2006 were $126 million, including $118 million related to continuing operations. Free cash flow in the second quarter was a negative $446 million which includes payments of $489 million, substantially all of which was related to the settlement of certain government litigation and investigations. "Adjusted free cash flow," a non-GAAP term defined by the Company as cash flow from continuing operations less capital expenditures in continuing operations and before settlement payments was $86 million in the second quarter of 2006. Liquidity Total debt was $4.8 billion at June 30, 2006, unchanged from total debt on March 31, 2006. Net debt, a non-GAAP measure defined as total debt less cash and cash equivalents, was $4.2 billion at June 30, 2006, as compared to $3.8 billion at March 31, 2006. Income Taxes The income tax benefit of $252 million in the second quarter of 2006 on a pre-tax loss of $699 million from continuing operations includes $2 million of income tax expense to increase the valuation allowance for deferred tax assets associated with deferred tax assets established as a result of the tax effect of our losses that could not be recognized for financial reporting purposes. The income tax benefit of $252 million in the second quarter of 2006 also includes a positive non-cash adjustment to tax exposure reserves of $7 million. Discontinued Operations Income from discontinued operations for the second quarter of 2006 was $49 million after-tax, or $0.10 per share, and includes the following items:
(1) litigation and investigation costs of $21 million pre-tax, $17
million after-tax before the impact of valuation allowance, or
$0.04 per share, to settle the Alvarado litigation;
(2) impairment and restructuring charges, net of insurance recoveries,
of $101 million pre-tax, $67 million after-tax before the impact
of valuation allowance, or $0.14 per share;
(3) hurricane insurance recoveries, net of costs, of $194 million
pre-tax, $123 million after-tax before the impact of valuation
allowance, or $0.26 per share;
(4) favorable net adjustments for prior year cost reports and prior
year cost report valuation allowances, primarily related to
Medicare and Medicaid, of $8 million pre-tax, $5 million after-tax
before the impact of valuation allowance, or $0.01 per share;
(5) an unfavorable adjustment to physician relocation receivables of
$6 million pre-tax, $4 million after-tax before the impact of
valuation allowance, or $0.01 per share;
(6) a favorable, non-cash adjustment to decrease the company's total
valuation allowance for deferred tax assets related to
discontinued operations of $27 million, or $0.06 per share; and,
(7) a favorable non-cash adjustment to reduce income tax exposure
reserves of $2 million, or $0.00 per share.
Management's Webcast Discussion of Second Quarter Results Tenet management will discuss second quarter 2006 results on a webcast event scheduled to begin at 11:00 a.m. (ET) on August 10, 2006. This webcast may be accessed through Tenet's website at www.tenethealth.com. Tenet Healthcare Corporation, through its subsidiaries, owns and operates acute care hospitals and related health care services. Tenet's hospitals aim to provide the best possible care to every patient who comes through their doors, with a clear focus on quality and service. Tenet can be found on the World Wide Web at www.tenethealth.com. Some of the statements in this release may constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . Such 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended Dec. 31, 2005, our quarterly reports on Form 10-Q Form 10-Q See 10-Q. and periodic reports on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 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 HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS DATA
(Unaudited)
----------------------------------------------------------------------
(Dollars in millions except
per share amounts) Three Months Ended June 30,
----------------------------------------
2006 % 2005 % Change
-------- ------- -------- ------- ------
Net operating revenues $2,195 100.0% $2,142 100.0% 2.5%
Operating expenses:
Salaries, wages and benefits (963) (43.9%) (986) (46.0%) (2.3%)
Supplies (398) (18.1%) (388) (18.1%) 2.6%
Provision for doubtful
accounts (128) (5.8%) (140) (6.5%) (8.6%)
Other operating expenses (497) (22.6%) (475) (22.2%) 4.6%
Depreciation (76) (3.5%) (74) (3.5%) 2.7%
Amortization (6) (0.3%) (5) (0.3%) 20.0%
Impairment of long-lived
assets and restructuring
charges, net of insurance
recoveries (27) (1.2%) 4 0.2%
Hurricane insurance
recoveries (costs), net 13 0.6% -- --
Costs of litigation and
investigations (728) (33.4%) (11) (0.5%)
----------------------------- -------- ------- -------- ------- ------
Operating income (loss) (615) (28.0%) 67 3.1%
----------------------------- -------- ------- -------- ------- ------
Interest expense (101) (102)
Investment earnings 17 15
Minority interests -- (1)
Net gains on sales of
investments -- --
----------------------------- -------- ------- -------- ------- ------
Loss from continuing
operations, before income
taxes (699) (21)
----------------------------- -------- ------- -------- ------- ------
Income tax benefit 252 12
----------------------------- -------- ------- -------- ------- ------
Loss from continuing
operations, before
discontinued operations (447) (9)
----------------------------- -------- ------- -------- ------- ------
Discontinued operations:
Income (loss) from
operations of asset group (21) (29)
Hurricane insurance
recoveries (costs), net 194 --
Impairment of long-lived
assets and goodwill, and
restructuring charges, net
of insurance recoveries (101) (1)
Litigation settlements, net
of insurance recoveries (21) --
Net loss on sales of asset
group (1) --
Income tax (expense) benefit (1) 6
----------------------------- -------- ------- -------- ------- ------
Income (loss) from
discontinued operations 49 (24)
----------------------------- -------- ------- -------- ------- ------
----------------------------- -------- ------- -------- ------- ------
Net loss $(398) $(33)
----------------------------- -------- ------- -------- ------- ------
Diluted earnings (loss) per
common share and common
equivalent share:
Continuing operations $(0.95) $(0.02)
Discontinued operations 0.10 (0.05)
-------- --------
$(0.85) $(0.07)
======== ========
----------------------------- -------- ------- -------- ------- ------
Weighted average shares and
dilutive securities (if
applicable) outstanding (in
thousands): 470,608 468,758
----------------------------- -------- ------- -------- ------- ------
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS DATA
(Unaudited)
----------------------------------------------------------------------
(Dollars in millions except
per share amounts) Six Months Ended June 30,
-----------------------------------------
2006 % 2005 % Change
-------- ------- -------- ------- -------
Net operating revenues $4,405 100.0% $4,341 100.0% 1.5%
Operating expenses:
Salaries, wages and
benefits (1,944) (44.1%) (1,979) (45.6%) (1.8%)
Supplies (809) (18.3%) (786) (18.1%) 2.9%
Provision for doubtful
accounts (249) (5.7%) (294) (6.8%) (15.3%)
Other operating expenses (977) (22.1%) (931) (21.5%) 4.9%
Depreciation (152) (3.5%) (151) (3.5%) 0.7%
Amortization (12) (0.3%) (9) (0.2%) 33.3%
Impairment of long-lived
assets and goodwill, and
restructuring charges, net
of insurance recoveries (56) (1.3%) (5) (0.1%)
Hurricane insurance
recoveries (costs), net 10 0.2% -- --
Costs of litigation and
investigations (744) (16.9%) (19) (0.4%)
Loss from early
extinguishment of debt -- -- (15) (0.3%)
---------------------------- -------- ------- -------- ------- -------
Operating income (loss) (528) (12.0%) 152 3.5%
---------------------------- -------- ------- -------- ------- -------
Interest expense (203) (203)
Investment earnings 34 24
Minority interests (1) (1)
Net gains on sales of
investments 2 --
---------------------------- -------- ------- -------- ------- -------
Loss from continuing
operations, before income
taxes (696) (28)
---------------------------- -------- ------- -------- ------- -------
Income tax benefit 248 30
---------------------------- -------- ------- -------- ------- -------
Income (loss) from
continuing operations,
before discontinued
operations and accumulative
effect of change in
accounting principle (448) 2
---------------------------- -------- ------- -------- ------- -------
Discontinued operations:
Income (loss) from
operations of asset group (18) (58)
Hurricane insurance
recoveries, net of costs 193 --
Impairment of long-lived
assets and goodwill, and
restructuring charges, net
of insurance recoveries (76) (8)
Litigation settlements, net
of insurance recoveries 24 --
Net gain (loss) on sales of
asset group (1) 22
Income tax (expense)
benefit (4) 5
---------------------------- -------- ------- -------- ------- -------
Income (loss) from
discontinued operations 118 (39)
---------------------------- -------- ------- -------- ------- -------
---------------------------- -------- ------- -------- ------- -------
Loss before cumulative
effect of
change in accounting
principle (330) (37)
---------------------------- -------- ------- -------- ------- -------
---------------------------- -------- ------- -------- ------- -------
Cumulative effect of change
in accounting principle,
net of tax 2 --
---------------------------- -------- ------- -------- ------- -------
---------------------------- -------- ------- -------- ------- -------
Net loss $(328) $(37)
---------------------------- -------- ------- -------- ------- -------
Diluted earnings (loss) per
common share and common
equivalent share:
Continuing operations $(0.95) --
Discontinued operations 0.25 (0.08)
Cumulative effect of
change in accounting
principle, net of tax -- --
-------- --------
$(0.70) $(0.08)
======== ========
---------------------------- -------- ------- -------- ------- -------
Weighted average shares and
dilutive securities (if
applicable) outstanding
(in thousands): 470,338 469,635
---------------------------- -------- ------- -------- ------- -------
TENET HEALTHCARE CORPORATION
BALANCE SHEET DATA
Dollars in Millions
(Unaudited)
----------------------------------------------------------------------
June 30, December 31,
2006 2005
----------- ------------
Cash and cash equivalents $568 $1,373
Accounts receivable, less allowance for
doubtful accounts 1,484 1,525
Income tax receivable 172 --
Receivable for insurance recoveries 285 75
Assets held for sale 303 11
Other current assets 537 524
----------- ------------
Current assets 3,349 3,508
Current liabilities (1,783) (2,292)
Net working capital 1,566 1,216
Investments and other assets 365 380
Restricted cash 263 263
Property and equipment, net 4,276 4,620
Goodwill 753 800
Net intangible assets 194 241
Long-term debt, net of current portion (4,787) (4,784)
Other long-term liabilities and minority
interests (1,923) (1,715)
Total shareholders' equity (707) (1,021)
CASH FLOW DATA
Dollars in Millions
(Unaudited)
----------------------------------------------------------------------
Six Months Six Months
Ended June 30, Ended June 30,
2006 2005
--------------- ---------------
Net cash provided by (used in)
operating activities $(641) $700
Cash flows from investing activities:
Purchases of property and equipment (243) (224)
Proceeds from sales of facilities,
investments and other assets 30 117
Insurance recoveries for property
damage 36 8
Other items 11 (11)
Cash flows from financing activities
Payments of borrowings (1) (22)
Sale of new senior notes -- 773
Repurchases of senior notes -- (413)
Other items 3 11
--------------- ---------------
Net increase (decrease) in cash and
cash equivalents $(805) $898
=============== ===============
Supplemental disclosures:
Interest paid, net of capitalized
interest $(189) $(161)
Income tax refunds received (payments
made), net $(3) $535
TENET HEALTHCARE CORPORATION
SELECTED STATISTICS - CONTINUING HOSPITALS
Quarter Ended June 30, 2006
(Unaudited)
----------------------------------------------------------------------
Three Months Ended June 30,
-------------------------------
2006 2005 Change
---------- ---------- ---------
Net inpatient revenues $1,480 $1,408 5.1%
Net outpatient revenues $632 $645 (2.0%)
Number of general hospitals (at end of (a)
period) 57 57 --
Licensed beds (at end of period) 15,047 15,154 (0.7%)
Average licensed beds 15,069 15,154 (0.6%)
Utilization of licensed beds 51.8% 53.9% (2.1%)(a)
Patient days 710,339 743,889 (4.5%)
Equivalent patient days 1,008,689 1,047,509 (3.7%)
Net inpatient revenue per patient day $2,084 $1,893 10.1%
Admissions 142,976 146,946 (2.7%)
Equivalent admissions 204,640 208,608 (1.9%)
Net inpatient revenue per admission $10,351 $9,582 8.0%
Average length of stay (days) 5.0 5.1 (0.1)(a)
Surgeries 104,897 108,674 (3.5%)
Net outpatient revenue per visit $584 $559 4.5%
Outpatient visits 1,083,060 1,152,609 (6.0%)
Sources of net patient revenue
Medicare 26.8% 27.3% (0.5%)(a)
Medicaid 9.5% 8.5% 1.0%(a)
Managed care 52.2% 49.8% 2.4%(a)
Indemnity, self-pay and other 11.5% 14.4% (2.9%)(a)
(a) This change is the difference between the 2006 and 2005 amounts
shown
TENET HEALTHCARE CORPORATION
SELECTED STATISTICS - CONTINUING HOSPITALS
Quarter Ended June 30, 2006
(Unaudited)
----------------------------------------------------------------------
Six Months Ended June 30,
-------------------------------
2006 2005 Change
---------- ---------- ---------
Net inpatient revenues $3,016 $2,902 3.9%
Net outpatient revenues $1,238 $1,267 (2.3%)
Number of general hospitals (at end of (a)
period) 57 57 --
Licensed beds (at end of period) 15,047 15,154 (0.7%)
Average licensed beds 15,092 15,147 (0.4%)
Utilization of licensed beds 54.2% 56.4% (2.2%)(a)
Patient days 1,480,478 1,546,934 (4.3%)
Equivalent patient days 2,078,536 2,155,681 (3.6%)
Net inpatient revenue per patient day $2,037 $1,876 8.7%
Admissions 293,855 302,238 (2.8%)
Equivalent admissions 415,743 424,372 (2.0%)
Net inpatient revenue per admission $10,264 $9,602 6.9%
Average length of stay (days) 5.0 5.1 (0.1)(a)
Surgeries 210,595 214,826 (2.0%)
Net outpatient revenue per visit $568 $542 4.8%
Outpatient visits 2,179,106 2,336,976 (6.8%)
Sources of net patient revenue
Medicare 27.5% 27.6% (0.1%)(a)
Medicaid 9.0% 8.3% 0.7%(a)
Managed care 51.7% 50.1% 1.6%(a)
Indemnity, self-pay and other 11.8% 14.0% (2.2%)(a)
(a) This change is the difference between the 2006 and 2005 amounts
shown
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS DATA
Fiscal 2006 by Calendar Quarter
(Unaudited)
----------------------------------------------------------------------
(Dollars in millions except per share Three Months Six Months
amounts) Ended Ended
----------------- ----------
3/31/06 6/30/06 6/30/06
-------- -------- ----------
Net operating revenues $2,210 $2,195 $4,405
Operating expenses:
Salaries, wages and benefits (981) (963) (1,944)
Supplies (411) (398) (809)
Provision for doubtful accounts (121) (128) (249)
Other operating expenses (480) (497) (977)
Depreciation (76) (76) (152)
Amortization (6) (6) (12)
Impairment of long-lived assets and
goodwill, and restructuring charges,
net of insurance recoveries (29) (27) (56)
Hurricane insurance recoveries (costs),
net (3) 13 10
Costs of litigation and investigations (16) (728) (744)
----------------------------------------- -------- -------- ----------
Operating income (loss) 87 (615) (528)
----------------------------------------- -------- -------- ----------
Interest expense (102) (101) (203)
Investment earnings 17 17 34
Minority interests (1) -- (1)
Net gains on sales of investments 2 -- 2
----------------------------------------- -------- -------- ----------
Income (loss) from continuing operations,
before income taxes 3 (699) (696)
----------------------------------------- -------- -------- ----------
Income tax (expense) benefit (4) 252 248
----------------------------------------- -------- -------- ----------
Loss from continuing operations, before
discontinued operations and cumulative
effect of change in accounting principle (1) (447) (448)
----------------------------------------- -------- -------- ----------
Discontinued operations:
Income (loss) from operations of asset
group 3 (21) (18)
Hurricane insurance recoveries (costs),
net (1) 194 193
Impairment of long-lived assets and
goodwill, and restructuring charges 25 (101) (76)
Litigation settlements, net of insurance
recoveries 45 (21) 24
Net loss on sale of asset group -- (1) (1)
Income tax expense (3) (1) (4)
----------------------------------------- -------- -------- ----------
Income from discontinued operations 69 49 118
----------------------------------------- -------- -------- ----------
----------------------------------------- -------- -------- ----------
Income (loss) before cumulative effect of
change in accounting principle 68 (398) (330)
----------------------------------------- -------- -------- ----------
----------------------------------------- -------- -------- ----------
Cumulative effect of change in accounting
principle, net of tax 2 -- 2
----------------------------------------- -------- -------- ----------
----------------------------------------- -------- -------- ----------
Net income (loss) $70 $(398) $(328)
----------------------------------------- -------- -------- ----------
Diluted earnings (loss) per common share
and common equivalent share:
Continuing operations $-- $(0.95) $(0.95)
Discontinued operations 0.15 0.10 0.25
Cumulative effect of change in
accounting principle, net of tax -- -- --
-------- -------- ----------
$0.15 $(0.85) $(0.70)
======== ======== ==========
----------------------------------------- -------- -------- ----------
Weighted average shares and dilutive
securities (if applicable) outstanding
(in thousands): 470,069 470,608 470,338
----------------------------------------- -------- -------- ----------
TENET HEALTHCARE CORPORATION
SELECTED STATISTICS - CONTINUING HOSPITALS
Fiscal 2006 by Calendar Quarter
(Unaudited)
----------------------------------------------------------------------
(Dollars in millions except per
patient day, per admission and per Six Months
visit amounts) Three Months Ended Ended
--------------------- ----------
3/31/06 6/30/06 6/30/06
---------- ---------------------
Net inpatient revenues $1,536 $1,480 $3,016
Net outpatient revenues $606 $632 $1,238
Number of general hospitals (at end of
period) 57 57 57
Licensed beds (at end of period) 15,114 15,047 15,047
Average licensed beds 15,114 15,069 15,092
Utilization of licensed beds 56.6% 51.8% 54.2%
Patient days 770,139 710,339 1,480,478
Equivalent patient days 1,069,847 1,008,689 2,078,536
Net inpatient revenue per patient day $1,994 $2,084 $2,037
Admissions 150,879 142,976 293,855
Equivalent admissions 211,103 204,640 415,743
Net inpatient revenue per admission $10,180 $10,351 $10,264
Average length of stay (days) 5.1 5.0 5.0
Surgeries 105,698 104,897 210,595
Net outpatient revenue per visit $553 $584 $568
Outpatient visits 1,096,046 1,083,060 2,179,106
Sources of net patient revenue
Medicare 28.3% 26.8% 27.5%
Medicaid 8.5% 9.5% 9.0%
Managed care 51.3% 52.2% 51.7%
Indemnity, self-pay and other 11.9% 11.5% 11.8%
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS DATA
Fiscal 2005 by Calendar Quarter
(Unaudited)
----------------------------------------------------------------------
(Dollars in millions
except per share Year
amounts) Three Months Ended Ended
------------------------------------ ---------
3/31/05 6/30/05 9/30/05 12/31/05 12/31/05
-------- -------- -------- --------- ---------
Net operating revenues $2,199 $2,142 $2,150 $2,123 $8,614
Operating expenses:
Salaries, wages and
benefits (993) (986) (985) (958) (3,922)
Supplies (398) (388) (398) (390) (1,574)
Provision for doubtful
accounts (154) (140) (183) (148) (625)
Other operating
expenses (456) (475) (486) (504) (1,921)
Depreciation (77) (74) (82) (73) (306)
Amortization (4) (5) (10) (7) (26)
Impairment of long-
lived assets and
restructuring charges (9) 4 (9) (32) (46)
Loss from hurricanes -- -- (9) (4) (13)
Costs of litigation
and investigations (8) (11) (28) (165) (212)
Loss from early
extinguishment of
debt (15) -- -- -- (15)
----------------------- -------- -------- -------- --------- ---------
Operating income (loss) 85 67 (40) (158) (46)
----------------------- -------- -------- -------- --------- ---------
Interest expense (101) (102) (101) (100) (404)
Investment earnings 9 15 17 18 59
Minority interests -- (1) (1) (1) (3)
Net gains on sales of
investments -- -- -- 4 4
----------------------- -------- -------- -------- --------- ---------
Loss from continuing
operations, before
income taxes (7) (21) (125) (237) (390)
----------------------- -------- -------- -------- --------- ---------
Income tax (expense)
benefit 18 12 (3) 57 84
----------------------- -------- -------- -------- --------- ---------
Income (loss) from
continuing operations,
before discontinued
operations and
cumulative effect of
change in accounting
principle 11 (9) (128) (180) (306)
----------------------- -------- -------- -------- --------- ---------
Discontinued
operations:
Loss from operations
of asset group (29) (29) (14) (30) (102)
Loss from hurricanes -- -- (32) (11) (43)
Impairment of long-
lived assets and
restructuring
charges, net of
insurance recoveries (7) (1) (223) (45) (276)
Net gain (loss) on
sales of asset group 22 -- (2) (1) 19
Income tax (expense)
benefit (1) 6 (2) (3) --
----------------------- -------- -------- -------- --------- ---------
Loss from discontinued
operations (15) (24) (273) (90) (402)
----------------------- -------- -------- -------- --------- ---------
----------------------- -------- -------- -------- --------- ---------
Loss before cumulative
effect of change in
accounting principle (4) (33) (401) (270) (708)
----------------------- -------- -------- -------- --------- ---------
----------------------- -------- -------- -------- --------- ---------
Cumulative effect of
change in accounting
principle, net of tax -- -- -- (16) (16)
----------------------- -------- -------- -------- --------- ---------
----------------------- -------- -------- -------- --------- ---------
Net loss $(4) $(33) $(401) $(286) $(724)
----------------------- -------- -------- -------- --------- ---------
Diluted earnings (loss)
per common share and
common equivalent
share:
Continuing operations $0.02 $(0.02) $(0.27) $(0.39) $( 0.65)
Discontinued
operations (0.03) (0.05) (0.58) (0.19) (0.86)
Cumulative effect of
change in accounting
principle, net of
tax -- -- -- (0.03) (0.03)
-------- -------- -------- --------- ---------
$(0.01) $(0.07) $(0.85) $(0.61) $(1.54)
======== ======== ======== ========= =========
----------------------- -------- -------- -------- --------- ---------
Weighted average
shares and dilutive
securities (if
applicable)
outstanding (in
thousands): 468,947 468,758 469,179 469,607 468,898
----------------------- -------- -------- -------- --------- ---------
TENET HEALTHCARE CORPORATION
SELECTED STATISTICS - CONTINUING HOSPITALS
Fiscal 2005 by Calendar Quarter
(Unaudited)
----------------------------------------------------------------------
(Dollars in
millions except
per patient
day, per
admission and
per visit
amounts) Three Months Ended Year Ended
------------------------------------------- ----------
3/31/05 6/30/05 9/30/05 12/31/05 12/31/05
---------- ---------- ---------- ---------- ----------
Net inpatient
revenues $1,494 $1,408 $1,437 $1,469 $5,808
Net outpatient
revenues $622 $645 $636 $591 $2,494
Number of
general
hospitals (at
end of period) 57 57 57 57 57
Licensed beds
(at end of
period) 15,154 15,154 15,117 15,121 15,121
Average licensed
beds 15,139 15,154 15,117 15,100 15,128
Utilization of
licensed beds 58.9% 53.9% 52.8% 53.0% 54.6%
Patient days 803,045 743,889 733,782 736,638 3,017,354
Equivalent
patient days 1,108,173 1,047,509 1,034,842 1,029,551 4,220,075
Net inpatient
revenue per
patient day $1,860 $1,893 $1,958 $1,994 $1,925
Admissions 155,292 146,946 145,978 144,482 592,698
Equivalent
admissions 215,764 208,608 207,800 203,722 835,894
Net inpatient
revenue per
admission $9,621 $9,582 $9,843 $10,170 $9,800
Average length
of stay (days) 5.2 5.1 5.0 5.1 5.1
Surgeries 106,152 108,674 107,065 103,715 425,606
Net outpatient
revenue per
visit $525 $559 $581 $545 $552
Outpatient
visits 1,184,367 1,152,609 1,095,718 1,084,425 4,517,119
Sources of net
patient revenue
Medicare 28.0% 27.3% 26.1% 28.1% 27.4%
Medicaid 8.2% 8.5% 8.8% 8.0% 8.4%
Managed care 50.4% 49.8% 51.3% 51.4% 50.7%
Indemnity,
self-pay and
other 13.4% 14.4% 13.8% 12.5% 13.5%
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP Disclosures
(1) Operating Measures Adjusted for the Impact of the Compact In March 2004, we announced that we would be implementing managed care-style pricing for most of our uninsured patients under our Compact with Uninsured Patients ("Compact"). The discounts for uninsured patients began to be phased in during the second quarter of 2004 and were in effect at 29 of our hospitals in continuing operations by December 31, 2004, at 45 of our hospitals on June 30, 2005, and at all 57 of our hospitals by December 31, 2005. Our Compact is designed to offer managed care-style discounts to most uninsured patients, which enables us to offer lower rates to those patients who historically have been charged standard gross charges. A significant portion of those accounts had often been written down as provision for doubtful accounts if the accounts were not collected. Under the Compact, the discount offered to uninsured patients is recognized as a contractual allowance, which reduces net operating revenues at the time the self-pay accounts are recorded and also reduces our provision for doubtful accounts. In light of the phase-in phase-in n. A gradual introduction: a phase-in of new personal policies. of the discounts for uninsured patients under the Compact, the Company is providing supplemental data in addition to data required in accordance with generally accepted accounting principles ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). It does so to show the effect that the discounts under the Compact have had on the Company's historical results of operations, without estimating or suggesting the effect on future results of operations. This supplemental information has inherent limitations because discounts under the Compact during the periods presented are not indicative indicative: see mood. of future periods. In spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite the limitations, the Company finds the information useful to the extent it better enables it and users of its financial statements to evaluate net operating revenue trends and measure certain operating expense categories, which are largely influenced by volumes and generally are analyzed an·a·lyze tr.v. an·a·lyzed, an·a·lyz·ing, an·a·lyz·es 1. To examine methodically by separating into parts and studying their interrelations. 2. Chemistry To make a chemical analysis of. 3. as a percent of net operating revenues. The tables below illustrate certain operating expense categories as a percent of net operating revenues excluding discounts under the Compact, as described above, for the three-month periods ended June 30, 2006 and June 30, 2005. The tables also illustrate same-hospital net inpatient revenue per admission and same-hospital net outpatient revenue per visit excluding the discounts under the Compact, as described above, for the three-month periods ended June 30, 2006 and June 30, 2005. For all non-GAAP measures provided, the tables below present the comparable GAAP measures and a reconciliation of the different measures. The Company believes the consistent use of this supplemental information provides it and users of its financial statements with reliable period-to-period comparisons. Investors are encouraged, however, to use GAAP measures when evaluating the Company's financial performance. (2) Reconciliation of Adjusted EBITDA Adjusted EBITDA as calculated in the table below represents net income (loss) before income taxes, minority interests, investment earnings, interest expense, costs of litigation and investigations, hurricane insurance recoveries, net of costs, impairment of long-lived assets and goodwill and restructuring charges, net of insurance recoveries, amortization and depreciation and discontinued operations. Adjusted EBITDA is a non-GAAP financial measure commonly used in our industry. The Company believes the consistent use of adjusted EBITDA provides it and users of its financial statements with reliable period-to-period comparisons. Investors are encouraged, however, to use GAAP measures when evaluating the Company's financial performance. (3) Adjusted Free Cash Flow Adjusted free cash flow as calculated in the table below represents cash flow provided by (used in) operating activities less capital expenditures in continuing operations less litigation settlement payments and less cash flows provided by (used in) discontinued operations. The Company believes the use of adjusted free cash flow is meaningful as this financial measure is commonly used in our industry and the use of this financial measure provides the Company and the users of its financial statements with relevant cash flows from operations data. Investors are encouraged, however, to use GAAP measures when evaluating the Company's financial performance.
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP Disclosures
(1) Operating Measures Adjusted for the Impact of the Compact
(Unaudited)
----------------------------------------------------------------------
Fiscal 2006 - Quarter Ended June 30
-------------------------------------------------------
(Dollars in Non-GAAP %
millions of
except per GAAP % of Adjusted
admission and Actual Non-GAAP Net Net
per visit GAAP Compact Adjusted Operating Operating
amounts) Amounts Adjustments Amounts Revenue Revenue
---------- ----------- ---------- ---------- ----------
Net operating
revenues $2,195 $235 $2,430 100.0% 100.0%
Operating
expenses:
Salaries,
wages and
benefits (963) (963) 43.9% 39.6%
Supplies (398) (398) 18.1% 16.4%
Provision for
doubtful
accounts (128) (216) (344) 5.8% 14.2%
Other
operating
expenses (497) (497) 22.6% 20.4%
Net inpatient
revenues $1,480 $121 $1,601
Net outpatient
revenues $632 $114 $746
Net patient
revenues $2,112 $235 $2,347
Admissions 142,976 142,976
Patient days 710,339 710,339
Outpatient
visits 1,083,060 1,083,060
Equivalent
patient days 1,008,689 1,008,689
Net inpatient
revenue per
admission $10,351 $11,198
Net inpatient
revenue per
patient day $2,084 $2,254
Net outpatient
revenue per
visit $584 $689
Net patient
revenue per
equivalent
patient day $2,094 $2,327
Fiscal 2005 - Quarter Ended June 30
-------------------------------------------------------
(Dollars in Non-GAAP %
millions of
except per GAAP % of Adjusted
admission and Actual Non-GAAP Net Net
per visit GAAP Compact Adjusted Operating Operating
amounts) Amounts Adjustments Amounts Revenue Revenue
---------- ----------- ---------- ---------- ----------
Net operating
revenues $2,142 $123 $2,265 100.0% 100.0%
Operating
expenses:
Salaries,
wages and
benefits (986) -- (986) 46.0% 43.5%
Supplies (388) -- (388) 18.1% 17.1%
Provision for
doubtful
accounts (140) (112) (252) 6.5% 11.1%
Other
operating
expenses (475) -- (475) 22.2% 21.0%
Net inpatient
revenues $1,408 $60 $1,468
Net outpatient
revenues $645 $63 $708
Net patient
revenues $2,053 $123 $2,176
Admissions 146,946 146,946
Patient days 743,889 743,889
Outpatient
visits 1,152,609 1,152,609
Equivalent
patient days 1,047,509 1,047,509
Net inpatient
revenue per
admission $9,582 $9,990
Net inpatient
revenue per
patient day $1,893 $1,973
Net outpatient
revenue per
visit $559 $614
Net patient
revenue per
equivalent
patient day $1,960 $2,077
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP Disclosures
(2) Reconciliation of Adjusted EBITDA
(unaudited)
(Dollars in millions) Three Months
Ended
June 30,
2006 2005
------- -------
Net loss $(398) $(33)
Less: income (loss) from discontinued operations 49 (24)
Loss from continuing operations (447) (9)
Income tax benefit 252 12
Minority interests -- (1)
Investment earnings 17 15
Interest expense (101) (102)
Operating income (loss) (615) 67
Costs of litigation and investigations (728) (11)
Hurricane insurance recoveries (costs), net 13 --
Impairment of long-lived assets and goodwill and
restructuring charges, net of insurance recoveries (27) 4
Depreciation (76) (74)
Amortization (6) (5)
------- -------
Adjusted EBITDA $209 $153
------- -------
Net operating revenues $2,195 $2,142
------- -------
Adjusted EBITDA as % of net operating revenues
(Adjusted EBITDA margin) 9.5% 7.1%
Additional Supplemental Non-GAAP Disclosures
(3) Reconciliation of Free Cash Flow
(unaudited)
(Dollars in millions) Three Months
Ended
June 30,
2006 2005
------- -------
Cash flow provided by (used in) operating activities $(320) $184
Less:
Purchases of property and equipment - continuing
operations 118 118
Free Cash Flow (438) 66
Litigation settlements and payments against
restructuring reserves 489 28
Cash used in (provided by) operating activities
from discontinued operations 35 (31)
Adjusted free cash flow $86 $63
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