01—Abstract
Summary
Summary of the 10-K filed February 19, 2021. Cited figures are marked; the original filing is the authoritative source.
Tenet Healthcare Corporation (THC) reported net operating revenues of $17.64 billiona for 2020, down from $18.48 billion in 2019, while operating income rose to $1.989 billion from $1.537 billion.
Net income available to Tenet common shareholders was $399 millionb, compared with a loss of $215 million in 2019. Results were shaped by the COVID-19 pandemic, which reduced patient volumes, and by $882 million of grant income, largely from the Provider Relief Fund. Adjusted EBITDA was $3.146 billion, versus $2.730 billion in 2019, and the company reported an Adjusted EBITDA margin of 17.9%.
The company operates 65 hospitals, USPI's ambulatory surgery network of 308 ASCs as of year-end, and Conifer, a revenue cycle management business that Tenet has been pursuing to spin off tax-free. Operating cash flow rose to $3.407 billionc, aided by about $1.4 billion of Medicare accelerated payment advances that must be repaid. Long-term debt was $15.7 billion at year-end, and interest expense was $1.003 billion.
In December 2020 the company acquired 45 ASCs for approximately $1.1 billiond and agreed to sell most of its urgent care centers. For investors, the key trade-offs are a sharp improvement in profitability and cash flow that was supported by one-time government relief, against a heavy debt load, high interest costs, and continued exposure to pandemic-related volume declines, payer mix shifts, and the uncertain outcome of the Conifer spin-off.
02—Key points
Key Highlights
- Net operating revenues fell 4.5% to $17.64 billion, driven by lower patient volumes from COVID-19 and partly offset by higher acuity and improved managed care terms.
- Operating income increased to $1.989 billion from $1.537 billion, helped by $882 million of grant income recognized in 2020.
- Net income available to Tenet common shareholders was $399 million, or $3.75 per diluted share, compared with a loss of $215 million in 2019.
- Adjusted EBITDA rose to $3.146 billion from $2.730 billion, with an Adjusted EBITDA margin of 17.9% versus 14.8% in 2019.
- Net cash provided by operating activities was $3.407 billion, including about $1.4 billion of Medicare accelerated payment advances that the company expects to repay.
- Long-term debt totaled $15.7 billion at December 31, 2020, and interest expense was $1.003 billion, which the filing notes offsets a substantial portion of operating income.
- The company acquired 45 ambulatory surgery centers in December 2020 for about $1.1 billion and agreed to sell most of its urgent care centers, while the Conifer spin-off remains subject to conditions and has no assured timing.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 19, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $17.64B$18.48B | −4.5% |
| Operating Income | $1.99B$1.54B | +29.4% |
| Interest Expense | $1.00B$985.00M | +1.8% |
| Net Income | $399.00M-$215.00M | +285.6% |
| EPS (Basic) | $3.80$-2.08 | +282.7% |
| EPS (Diluted) | $3.75$-2.08 | +280.3% |
| Shares Outstanding (Basic) | 105.01M103.40M | +1.6% |
| Shares Outstanding (Diluted) | 106.26M103.40M | +2.8% |
05—Questions
Frequently Asked Questions
Why did operating income improve despite lower revenues?
Operating income rose to $1.989 billion from $1.537 billion, mainly because the company recognized $882 million of grant income in 2020, which is reported outside net operating revenues. Net operating revenues declined $839 million, or 4.5%, due to COVID-19 volume reductions.
How much debt does Tenet carry and what are the near-term maturities?
Total long-term debt was $15.7 billion at December 31, 2020. The filing shows $145 million due in 2021, $100 million in 2022 and $1.925 billion in 2023, and it states that 2020 refinancing transactions eliminated significant maturities until June 2023.
What is the status of the Conifer spin-off?
Tenet announced in July 2019 its intention to pursue a tax-free spin-off of Conifer. The filing states that completion is subject to conditions, including a restructured long-term services agreement and final board approval, and that there can be no assurance on timing or whether it will be completed.
Are the pandemic-related government payments a lasting source of earnings?
No. The filing describes the Provider Relief Fund payments and the Medicare accelerated payments as temporary relief. It states that the company expects to repay the accelerated advances within the allocated recoupment period, and that the company cannot provide assurances about future grant income.
06—Continue