01—Abstract
Summary
Summary of the 10-K filed February 21, 2023. Cited figures are marked; the original filing is the authoritative source.
Tenet Healthcare Corporation (THC) reported net operating revenues of $19.174 billiona for 2022, down from $19.485 billion in 2021, while operating income fell to $2.333 billion from $2.871 billion.
Net income available to Tenet common shareholders was $411 millionb, compared with $914 million in 2021. Adjusted EBITDA was $3.469 billion (18.1% of net operating revenues) versus $3.483 billion in 2021. The filing attributes the decline in Hospital Operations to lower COVID-related volumes and acuity, the loss of the Miami Hospitals sold in August 2021, and an estimated approximately $100 million pre-tax impact from an April 2022 cybersecurity incident.
Ambulatory Care was the growth driver, with net operating revenues rising $530 millionc (19.5%) on acquisitions and same-facility growth, and the company ended the year with 442 ASCs and 24 surgical hospitals held in USPI. Balance sheet and capital allocation remained central themes. Long-term debt was $15.079 billion at year-end, and the company reported a ratio of total long-term debt, net of cash, to Adjusted EBITDA of 4.1x.
Tenet redeemed or repurchased $2.597 billiond of senior notes during the year, financed largely by a $2.000 billion issuance of 6.125% senior secured first lien notes due 2030, and recorded a $109 million loss on early extinguishment of debt. Cash and cash equivalents fell to $858 million from $2.364 billion, and net cash provided by operating activities declined to $1.083 billion from $1.568 billion. The board authorized a $1 billion share repurchase program in October 2022; about $250 million was used to buy 5,888,841 shares through year-end.
Subsequent events include a January 2023 agreement to sell the 51% interest in San Ramon Regional Medical Center to John Muir Health, and a January 2023 settlement in principle with the Department of Justice related to the Detroit Medical Center investigation, which the company stated was fully reserved at December 31, 2022. The auditor, Deloitte & Touche LLP, issued an unqualified opinion on both the financial statements and internal control over financial reporting.
02—Key points
Key Highlights
- Net operating revenues were $19.174 billion in 2022, down $311 million (1.6%) from $19.485 billion in 2021.
- Operating income declined to $2.333 billion from $2.871 billion, and net income available to Tenet common shareholders fell to $411 million from $914 million.
- Adjusted EBITDA was $3.469 billion, or 18.1% of net operating revenues, compared with $3.483 billion (17.9%) in 2021.
- Ambulatory Care net operating revenues grew $530 million (19.5%) to $3.248 billion, driven by acquisitions and same-facility growth.
- Long-term debt totaled $15.079 billion at year-end, with a debt-to-Adjusted EBITDA ratio of 4.1x; $2.597 billion of senior notes were redeemed or repurchased in 2022.
- Operating cash flow fell to $1.083 billion from $1.568 billion, and cash on hand dropped to $858 million from $2.364 billion.
- The April 2022 cybersecurity incident had an estimated adverse pre-tax impact of approximately $100 million, and the company has filed an insurance claim within policy limits.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 21, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $19.17B$19.48B | −1.6% |
| Operating Income | $2.33B$2.87B | −18.7% |
| Interest Expense | $890.00M$923.00M | −3.6% |
| Net Income | $411.00M$914.00M | −55.0% |
| EPS (Basic) | $3.84$8.55 | −55.1% |
| EPS (Diluted) | $3.79$8.42 | −55.0% |
| Shares Outstanding (Basic) | 106.93M106.83M | +0.1% |
| Shares Outstanding (Diluted) | 110.52M108.57M | +1.8% |
05—Questions
Frequently Asked Questions
How did Tenet's core hospital business perform in 2022?
Hospital Operations net operating revenues before inter-segment eliminations declined $921 million year over year to $15.061 billion, reflecting the loss of the Miami Hospitals sold in August 2021, lower overall patient volumes, decreased COVID-related volumes and acuity, and the cybersecurity disruption. Same-hospital admissions decreased 4.5% and same-hospital net operating revenues decreased $304 million, or 2.1%.
What is driving growth at Tenet's Ambulatory Care segment?
USPI held interests in 442 ASCs and 24 surgical hospitals in 35 states at year-end. During 2022 the company added 37 fully operational ASCs through acquisitions and opened 15 de novo facilities, and Ambulatory Care net operating revenues increased $453 million from acquisitions and $146 million from same-facility growth. Tenet also bought Baylor's 5% USPI interest for $406 million, raising its ownership to 100% of voting shares.
How leveraged is Tenet and what did it do to manage debt in 2022?
Long-term debt was $15.079 billion at December 31, 2022, and interest expense was $890 million, representing 38% of operating income of $2.333 billion. Tenet issued $2.000 billion of 6.125% senior secured first lien notes due 2030 and used most of the proceeds to retire the 6.750% senior unsecured notes due 2023 early, at a loss of $71 million on that redemption. The filing states a long-term objective to reduce debt and lower the ratio of debt to Adjusted EBITDA.
What shareholder returns and capital commitments did Tenet announce?
In October 2022 the board authorized repurchases of up to $1 billion of common stock through December 31, 2024. Through year-end, Tenet repurchased 5,888,841 shares for approximately $250 million at an average price of $42.45. Capital expenditures were $762 million in 2022, and the company expects 2023 capital expenditures of $625 million to $675 million.
What significant events occurred after year-end 2022?
In January 2023 Tenet agreed to sell its 51% interest in San Ramon Regional Medical Center to John Muir Health, subject to regulatory approvals. The company also reached a settlement in principle with the Department of Justice to resolve the Detroit Medical Center investigation, subject to conditions, and stated that it was fully reserved for this potential settlement at December 31, 2022.
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