01—Abstract
Summary
Summary of the 10-K filed February 23, 2010. Cited figures are marked; the original filing is the authoritative source.
Tenet Healthcare Corporation is an investor-owned health care services company that operates 50 general hospitals and a critical access hospital with 13,601 licensed beds in 12 states at December 31, 2009.
Net operating revenues rose to $9.01 billiona in 2009 from $8.59 billion in 2008, and operating income increased to $538 million from $311 million. Income from continuing operations before discontinued operations was $228 million, and net income attributable to Tenet common shareholders was $181 million, compared with $25 million in 2008. Diluted earnings per share were $0.37 on a net basis, and operating cash flow was $425 million versus $208 million a year earlier.
The company's balance sheet improved in 2009 through debt refinancing and a mandatory convertible preferred stock issuance. Total long-term debt net of current portion was $4.27 billionb at year-end, and the company reported a long-term target ratio of net debt to Adjusted EBITDA of 4.0x or below, with a ratio of 3.7x at December 31, 2009. Total shareholders' equity rose to $646 million from $103 million.
The company also disclosed that it had a valuation allowance of approximately $1.1 billionc against deferred tax assets, and federal net operating loss carryforwards of approximately $2.0 billion. The filing highlights ongoing challenges, including declining patient volumes over several years, a high level of uninsured and underinsured patients, rising union activity, nurse shortages, and dependence on Florida, Texas and California, which account for large shares of licensed beds.
Pending matters include government reviews by the OIG and DOJ, California wage and hour litigation, Hurricane Katrina class actions, and IRS disputes. Management stated that these matters could have a material adverse effect, though it could not predict their outcomes.
02—Key points
Key Highlights
- Net operating revenues were $9.01 billion in 2009, up from $8.59 billion in 2008; operating income was $538 million versus $311 million.
- Net income attributable to Tenet common shareholders was $181 million in 2009, compared with $25 million in 2008.
- Net cash provided by operating activities was $425 million in 2009, up from $208 million in 2008.
- Long-term debt net of current portion was $4.27 billion at December 31, 2009, down from $4.78 billion a year earlier; the debt-to-Adjusted EBITDA ratio was 3.7x against a target of 4.0x or below.
- In 2009 the company refinanced about $2.3 billion of debt through tender and exchange offers and sold 345,000 shares of 7% mandatory convertible preferred stock for net proceeds of about $334 million.
- Same-hospital commercial managed care admissions declined 4.7% in 2009, while managed care pricing improved and net inpatient revenue per admission rose 3.5%.
- The company has not paid cash dividends on common stock since the first quarter of fiscal 1994 and does not intend to pay them in the foreseeable future.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 23, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Operating Income | $538.00M$311.00M | +73.0% |
| Interest Expense | $445.00M$418.00M | +6.5% |
| Net Income | $181.00M$25.00M | +624.0% |
| EPS (Basic) | $0.38$0.05 | +660.0% |
| EPS (Diluted) | $0.37$0.05 | +640.0% |
| Shares Outstanding (Basic) | 480.24M476.35M | +0.8% |
| Shares Outstanding (Diluted) | 507.28M478.61M | +6.0% |
05—Questions
Frequently Asked Questions
How did Tenet's profitability change in 2009?
Net operating revenues rose to $9.01 billion from $8.59 billion, and operating income increased to $538 million from $311 million. Net income attributable to Tenet common shareholders was $181 million, compared with $25 million in 2008. The filing attributes part of the 2009 results to a $97 million gain from early extinguishment of debt and a $23 million income tax benefit.
What is the company's debt position?
Long-term debt, net of current portion, was $4.27 billion at December 31, 2009. The company reported a ratio of total long-term debt, net of cash, to Adjusted EBITDA of 3.7x, below its long-term target of 4.0x or below. It had $185 million in letters of credit outstanding and no cash borrowings under its $800 million revolving credit facility.
What are the main risks facing Tenet's hospital operations?
The filing cites declining patient volumes over several years, a high level of uninsured and underinsured patients, rising commercial managed care pressure, union activity, and a shortage of experienced nurses. It also notes geographic concentration, with the largest shares of licensed beds in Florida (25.6%), Texas (19.3%) and California (17.0%). Changes in Medicare and Medicaid funding and state budget pressures could also affect revenues.
What significant legal matters are pending?
The filing describes government reviews involving South Fulton Medical Center's inpatient rehabilitation admissions and a DOJ/OIG kyphoplasty inquiry, California wage and hour class actions, and Hurricane Katrina class actions in New Orleans. The company states it cannot predict the timing or outcome of these matters and that they could have a material adverse effect on its business, financial condition or cash flows.
06—Continue