How did Tenet's revenue and profitability change in fiscal 2002?

Net operating revenues increased to $13.91 billion from $12.05 billion, and operating income increased to $2.09 billion from $1.55 billion. Net income was $785 million, compared with $643 million in fiscal 2001, after a $240 million extraordinary charge from early extinguishment of debt in fiscal 2002. Same-facility net inpatient revenue per admission rose 12.9 percent.

How much debt did Tenet reduce, and how did its balance sheet change?

Long-term debt, net of current portion, fell to $3.92 billion from $4.20 billion. The company repurchased $4.06 billion of senior and senior subordinated notes during the year, funded in part by $2.54 billion of new senior notes. Shareholders' equity increased to $5.62 billion from $5.08 billion, and total assets were $13.81 billion.

What share repurchase activity did Tenet undertake?

During fiscal 2002 the company purchased 18,180,750 shares for $715 million, at an average cost of $39.35 per share. In July 2002 the board authorized repurchase of up to an additional 20 million shares, and forward purchase agreements covering $182 million of stock were in place at May 31, 2002.

What risks does the filing identify for investors?

The filing cites concentration of hospital beds in California, Florida and Texas, rising malpractice expense, a nationwide nursing shortage that increases labor costs, and exposure to changes in Medicare and Medicaid payments. It also notes that the company will adopt SFAS 142 on June 1, 2002, ending goodwill amortization, and that a transitional goodwill impairment test had not yet been completed.

THC 10-K FY2002 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed August 14, 2002. Cited figures are marked; the original filing is the authoritative source.

Tenet Healthcare Corporation's annual report on Form 10-K for the fiscal year ended May 31, 2002 describes a company that is the second-largest investor-owned health care services company in the United States.

At May 31, 2002, its subsidiaries owned or operated 116 domestic general hospitals with 28,667 licensed beds in 17 states, and the company reports a single reportable operating segment. Fiscal 2002 net operating revenues were $13.91 billion^a, up from $12.05 billion in fiscal 2001, operating income was $2.09 billion, and net income was $785 million, after a $240 million extraordinary charge from early extinguishment of debt. Income from continuing operations was $1.03 billion, and diluted earnings per share from continuing operations were $2.04.

The Chairman's letter cites earnings per share from operations before special items of $2.17^b and cash flow from operations of $2.32 billion. The balance sheet and cash flow profile improved substantially during the year. Long-term debt, net of current portion, fell to $3.92 billion from $4.20 billion, and shareholders' equity rose to $5.62 billion.

The company repurchased 18,180,750 shares for $715 million^c, repurchased $4.06 billion of senior and senior subordinated notes, and issued $2.54 billion of new senior notes. Capital expenditures were $889 million, and the filing states that the company's senior and senior subordinated notes were upgraded to investment grade during the year. Unused borrowing capacity under its credit agreement was $931 million at May 31, 2002.

The filing also flags risks that investors should weigh. Hospital bed concentration is highest in California (29.7 percent), Florida (16.3 percent) and Texas (12.2 percent).

Malpractice expense rose to $240 million^d from $144 million, and the company expects a nursing shortage to continue to pressure labor costs. Medicare and Medicaid payments remain subject to legislative change, and the company will adopt SFAS 142 on June 1, 2002, ending goodwill amortization, with a transitional impairment test still pending.

02—Key points

Key Highlights

Net operating revenues rose to $13.91 billion in fiscal 2002 from $12.05 billion in fiscal 2001, and operating income rose to $2.09 billion from $1.55 billion.
Diluted earnings per share from continuing operations were $2.04 in fiscal 2002 versus $1.39 in fiscal 2001; before special items, earnings per share were $2.17 according to the filing.
Cash provided by operating activities was $2.32 billion, up from $1.82 billion, and capital expenditures were $889 million.
Long-term debt, net of current portion, decreased to $3.92 billion from $4.20 billion, and the company's senior notes were upgraded to investment grade during fiscal 2002.
The company repurchased 18,180,750 shares of common stock for $715 million at an average cost of $39.35 per share, and entered into forward purchase agreements for another $182 million of stock.
Hospital concentration is significant, with California (29.7 percent), Florida (16.3 percent) and Texas (12.2 percent) holding the largest shares of licensed beds.
Malpractice expense increased to $240 million in fiscal 2002 from $144 million in fiscal 2001, and the company expects the nursing shortage to continue to raise labor costs.

03—Questions

Frequently Asked Questions

How did Tenet's revenue and profitability change in fiscal 2002?
Net operating revenues increased to $13.91 billion from $12.05 billion, and operating income increased to $2.09 billion from $1.55 billion. Net income was $785 million, compared with $643 million in fiscal 2001, after a $240 million extraordinary charge from early extinguishment of debt in fiscal 2002. Same-facility net inpatient revenue per admission rose 12.9 percent.
How much debt did Tenet reduce, and how did its balance sheet change?
Long-term debt, net of current portion, fell to $3.92 billion from $4.20 billion. The company repurchased $4.06 billion of senior and senior subordinated notes during the year, funded in part by $2.54 billion of new senior notes. Shareholders' equity increased to $5.62 billion from $5.08 billion, and total assets were $13.81 billion.
What share repurchase activity did Tenet undertake?
During fiscal 2002 the company purchased 18,180,750 shares for $715 million, at an average cost of $39.35 per share. In July 2002 the board authorized repurchase of up to an additional 20 million shares, and forward purchase agreements covering $182 million of stock were in place at May 31, 2002.
What risks does the filing identify for investors?
The filing cites concentration of hospital beds in California, Florida and Texas, rising malpractice expense, a nationwide nursing shortage that increases labor costs, and exposure to changes in Medicare and Medicaid payments. It also notes that the company will adopt SFAS 142 on June 1, 2002, ending goodwill amortization, and that a transitional goodwill impairment test had not yet been completed.

04—Continue

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