01—Abstract
Summary
Summary of the 10-K filed February 26, 2013. Cited figures are marked; the original filing is the authoritative source.
Tenet Healthcare Corporation operated 49 hospitals with 13,216 licensed beds in 10 states and 117 outpatient centers at December 31, 2012, and its Conifer subsidiary provided business process solutions to more than 600 hospital and other clients.
Net operating revenues before provision for doubtful accounts rose to $9.90 billiona in 2012 from $9.37 billion in 2011, while net income attributable to Tenet common shareholders was $141 million compared with $58 million in 2011. Income from continuing operations was $209 million, and diluted EPS from continuing operations was $1.70 versus $0.56 a year earlier. Results were helped by a $81 million favorable Medicare Rural Floor Budget Neutrality settlement and $40 million of EHR incentives, while the provision for doubtful accounts rose to 7.9% of revenues before provision from 7.7%.
Balance-sheet and capital activity were significant. Long-term debt, net of current portion, increased to $5.16 billionb from $4.29 billion, and total equity fell to $1.22 billion from $1.49 billion after $289 million of preferred stock repurchases and $126 million of common stock repurchases. Cash and cash equivalents rose to $364 million.
In February 2013 the company sold $850 millionc of 4½% senior secured notes due 2021 and tendered for about $645 million of its 10% senior secured notes due 2018, which it expects to generate a loss on early extinguishment of about $179 million. The filing highlights significant ongoing risk: managed care net patient revenues were $5.4 billion (about 57% of net patient revenues), Medicare and Medicaid together represented roughly 31.8% of net patient revenues, and the Affordable Care Act is expected to have a material effect on the business in ways the company says it cannot fully predict. Federal NOL carryforwards were approximately $1.5 billion.
02—Key points
Key Highlights
- Net operating revenues before provision for doubtful accounts were $9.90 billion in 2012, up from $9.37 billion in 2011.
- Net income attributable to Tenet common shareholders was $141 million in 2012 versus $58 million in 2011; diluted EPS from continuing operations was $1.70 versus $0.56.
- Operating income was $749 million in 2012 compared with $653 million in 2011, and Adjusted EBITDA was $1.20 billion versus $1.13 billion.
- A $81 million favorable Medicare Rural Floor Budget Neutrality Adjustment settlement and approximately $40 million of EHR incentives supported 2012 results.
- Total long-term debt was approximately $5.3 billion at year-end, and the company sold $850 million of 4½% senior secured notes due 2021 in February 2013 to refinance part of its 10% notes due 2018.
- Managed care represented about 57% of net patient revenues, and Medicare and Medicaid together represented about 31.8%.
- The company repurchased $289 million of mandatory convertible preferred stock and $126 million of common stock during 2012, and it announced a $500 million share repurchase authorization in October 2012.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 26, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Operating Income | $749.00M$653.00M | +14.7% |
| Interest Expense | $412.00M$375.00M | +9.9% |
| Net Income | $141.00M$94.00M | +50.0% |
| EPS (Basic) | $1.35$0.49 | +175.5% |
| EPS (Diluted) | $1.30$0.48 | +170.8% |
| Shares Outstanding (Basic) | 104.20M117.18M | −11.1% |
| Shares Outstanding (Diluted) | 108.93M121.30M | −10.2% |
05—Questions
Frequently Asked Questions
How did Tenet perform financially in 2012 compared with 2011?
Net income attributable to Tenet common shareholders rose to $141 million from $58 million, and net operating revenues before provision for doubtful accounts rose to $9.90 billion from $9.37 billion. Operating income increased to $749 million from $653 million.
What one-time or non-recurring items affected 2012 results?
The filing cites an $81 million favorable Medicare Rural Floor Budget Neutrality settlement recognized in net operating revenues, a $100 million impairment in discontinued operations tied to the sale of Creighton University Medical Center, and a $179 million expected loss on early extinguishment of debt related to the February 2013 tender offer.
How much debt does Tenet carry and what did it do with its debt in early 2013?
Total long-term debt was about $5.3 billion at December 31, 2012. In February 2013 Tenet sold $850 million of 4½% senior secured notes due 2021, used the proceeds to purchase about $645 million of its 10% senior secured notes due 2018 and call about $69 million more.
What are the main risks for investors identified in the filing?
Key risks include reliance on managed care contracts and their payment rates, Medicare and Medicaid reimbursement changes, uncertain effects of the Affordable Care Act, a high level of uninsured and uncollectible accounts, geographic concentration of licensed beds in Florida, Texas and California, labor costs and union activity, and the potential loss of key Conifer customers.
What is Conifer and why does it matter?
Conifer Health Solutions is Tenet's business process subsidiary, providing revenue cycle management, patient communications and management services to more than 600 hospital and other clients. It became a separate reportable segment in 2012, and its net operating revenues rose to $488 million from $340 million, with the filing noting dependence on key customers Tenet and CHI.
06—Continue