01—Abstract
Summary
Summary of the 10-K filed February 28, 2012. Cited figures are marked; the original filing is the authoritative source.
Tenet Healthcare Corporation, an investor-owned health care services company, operated 50 hospitals with 13,453 licensed beds in 11 states at December 31, 2011, plus 98 diagnostic imaging, ambulatory surgery and urgent care centers in 12 states.
Net operating revenues before provision for doubtful accounts rose to $9.58 billiona in 2011 from $9.21 billion in 2010, while net operating revenues after the provision for doubtful accounts were $8.85 billion. Operating income increased to $650 million from $634 million, but income from continuing operations before income taxes was $161 million compared with $158 million, and net income attributable to Tenet common shareholders fell to $58 million from $1.119 billion in 2010, which included a $977 million income tax benefit from a reduced valuation allowance. Loss from early extinguishment of debt of $117 million and litigation and investigation costs of $55 million weighed on 2011 results.
Management highlighted improving managed care pricing, a gradual rise in patient volumes, growth in outpatient services (about 31% of revenues before provision for doubtful accounts) and expansion of its Conifer Health Solutions revenue cycle business, which served more than 300 hospitals and organizations at year-end. Cash flow from operations was $497 millionb in 2011 versus $472 million in 2010. Long-term debt, net of current portion, was $4.29 billion, and the company completed a $400 million share repurchase program in January 2012 after buying 81,073,864 shares at an average of $4.94.
The filing flags significant risks, including the Affordable Care Act's Medicare and Medicaid reductions, the pending U.S. Supreme Court review, a 2012 Medicare physician fee cut that was deferred, high uninsured and self-pay volumes, nurse shortages, union activity, and government investigations with about $50 millionc in reserves. The self-pay collection rate declined to 27.8% from 28.3%, and the company reported that its adjusted EBITDA rose to $1.145 billion from $1.050 billion.
02—Key points
Key Highlights
- Net operating revenues before provision for doubtful accounts were $9.58 billion in 2011, up from $9.21 billion in 2010; net operating revenues were $8.85 billion.
- Net income attributable to Tenet common shareholders was $58 million in 2011, down from $1.119 billion in 2010, which benefited from a $977 million income tax benefit.
- Operating income rose to $650 million from $634 million, while loss from early extinguishment of debt of $117 million and litigation and investigation costs of $55 million reduced pre-tax income to $161 million.
- Adjusted EBITDA was $1.145 billion in 2011 versus $1.050 billion in 2010, an Adjusted EBITDA margin of 12.9% versus 12.4%.
- Net cash provided by operating activities was $497 million in 2011 compared with $472 million in 2010.
- Total long-term debt was approximately $4.3 billion, and the company issued $900 million of 6 1/4% senior secured notes due 2018 to repurchase $713 million of 9% senior secured notes due 2015.
- The $400 million share repurchase program was completed in January 2012 after repurchasing 81,073,864 shares at an average of $4.94 per share.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 28, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Operating Income | $653.00M$634.00M | +3.0% |
| Interest Expense | $375.00M$424.00M | −11.6% |
| Net Income | $94.00M$1.15B | −91.8% |
| EPS (Basic) | $0.49$9.24 | −94.7% |
| EPS (Diluted) | $0.48$8.16 | −94.1% |
| Shares Outstanding (Basic) | 117.18M121.08M | −3.2% |
| Shares Outstanding (Diluted) | 121.30M140.16M | −13.5% |
05—Questions
Frequently Asked Questions
How did Tenet's profitability change in 2011?
Operating income increased to $650 million from $634 million, but net income attributable to Tenet common shareholders fell to $58 million from $1.119 billion. The 2010 result was boosted by a $977 million income tax benefit from reducing the deferred tax valuation allowance, while 2011 included a $117 million loss on early debt extinguishment and $55 million of litigation and investigation costs.
What is driving revenue growth?
Net operating revenues before provision for doubtful accounts increased $379 million to $9.58 billion. Net patient revenues rose 3.6%, primarily from pricing, including improved managed care contract terms, while outpatient visits rose 3.1%. Outpatient services accounted for approximately 31% of revenues before provision for doubtful accounts.
What are the main risks highlighted for investors?
Key risks include the Affordable Care Act's reductions to Medicare and Medicaid spending and disproportionate share payments, the pending U.S. Supreme Court review of the law, high levels of uninsured and underinsured patients with a self-pay collection rate of 27.8%, nurse shortages and union activity affecting about 25% of employees, and concentration of licensed beds in Florida (25.9%), Texas (19.5%) and California (17.4%).
How leveraged is the company and how is it managing its debt?
At December 31, 2011, the company reported total long-term debt of approximately $4.3 billion and a ratio of total long-term debt, net of cash, to Adjusted EBITDA of 3.7x. It refinanced by issuing $900 million of 6 1/4% senior secured notes due 2018 and repurchasing approximately $713 million of 9% senior secured notes due 2015, and its revolving credit facility had $527 million of borrowing availability.
Did Tenet return capital to shareholders?
Tenet did not pay common dividends and does not intend to in the foreseeable future. Instead, it completed a $400 million share repurchase program, buying 75,765,585 shares for $374 million during 2011 and a further 5,308,179 shares for about $26 million in January 2012, bringing the program total to 81,073,864 shares.
06—Continue