01—Abstract
Summary
Summary of the 10-K filed February 16, 2024. Cited figures are marked; the original filing is the authoritative source.
Tenet Healthcare Corporation (THC) reported net operating revenues of $20.548 billiona for 2023, up from $19.174 billion in 2022, with operating income of $2.510 billion versus $2.333 billion.
Net income available to Tenet common shareholders was $611 millionb, compared with $411 million in 2022, and diluted earnings per share were $5.71 versus $3.79. Adjusted EBITDA was $3.541 billion, compared with $3.469 billion in 2022, and the Adjusted EBITDA margin was 17.2%, down from 18.1%. Net income available to noncontrolling interests rose to $700 million, which absorbs a large share of the company's earnings, particularly from its Ambulatory Care segment (USPI).
Net cash provided by operating activities was $2.374 billionc, up from $1.083 billion, helped by the absence of Medicare advance recoupments in 2023. The company reorganized into two segments, Hospital Operations and Services and Ambulatory Care, and as of December 31, 2023 it operated 61 hospitals and held interests in 461 ASCs and 24 surgical hospitals. Subsequent to year-end, Tenet completed the sale of three South Carolina hospitals in January 2024 for pre-tax proceeds of approximately $2.400 billion, and entered into a definitive agreement to sell four Orange County and Los Angeles County hospitals, expected to close in early 2024.
At year-end, long-term debt was $15.002 billiond and the ratio of long-term debt, net of cash, to Adjusted EBITDA was 3.89x. Cash and cash equivalents stood at $1.228 billion, and the company had $1.500 billion of borrowing availability under its Credit Agreement. Key risks highlighted in the filing include managed care concentration (top 10 payers generated 65% of managed care net patient service revenues), physician and labor shortages, cybersecurity exposure following the April 2022 incident, Medicaid funding pressures, and interest expense of $901 million, which equaled 36% of operating income.
02—Key points
Key Highlights
- Net operating revenues rose to $20.548 billion in 2023 from $19.174 billion in 2022, and operating income increased to $2.510 billion from $2.333 billion.
- Net income available to Tenet common shareholders was $611 million, up from $411 million, with diluted EPS of $5.71 versus $3.79 a year earlier.
- Adjusted EBITDA reached $3.541 billion, up from $3.469 billion, though the Adjusted EBITDA margin declined to 17.2% from 18.1%.
- Net cash provided by operating activities increased to $2.374 billion from $1.083 billion, largely because no Medicare advances were recouped in 2023 compared with $880 million in 2022.
- Subsequent to year-end, the sale of three South Carolina hospitals closed in January 2024 for pre-tax proceeds of approximately $2.400 billion, and a definitive agreement was signed to sell four California hospitals.
- Long-term debt totaled $15.002 billion, with a ratio of long-term debt net of cash to Adjusted EBITDA of 3.89x, and interest expense of $901 million equaled 36% of operating income.
- Net income available to noncontrolling interests grew to $700 million, reflecting the joint venture structure of USPI's Ambulatory Care segment.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 16, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $20.56B$19.17B | +7.2% |
| Operating Income | $2.51B$2.33B | +7.6% |
| Interest Expense | $901.00M$890.00M | +1.2% |
| Net Income | $611.00M$411.00M | +48.7% |
| EPS (Basic) | $6.01$3.84 | +56.5% |
| EPS (Diluted) | $5.71$3.79 | +50.7% |
| Shares Outstanding (Basic) | 101.64M106.93M | −4.9% |
| Shares Outstanding (Diluted) | 104.80M110.52M | −5.2% |
05—Questions
Frequently Asked Questions
How did Tenet's profitability change in 2023?
Net operating revenues increased to $20.548 billion from $19.174 billion, and operating income rose to $2.510 billion from $2.333 billion. Net income available to Tenet common shareholders increased to $611 million from $411 million, and diluted EPS was $5.71 versus $3.79. Adjusted EBITDA grew to $3.541 billion, but its margin fell to 17.2% from 18.1%.
What are the major divestitures and how do they affect the company?
Tenet closed the sale of three South Carolina hospitals on January 31, 2024, receiving pre-tax proceeds of approximately $2.400 billion. In January 2024 it also agreed to sell four Orange County and Los Angeles County hospitals, expected to close in early 2024 subject to regulatory approvals. The filing states these actions aim to improve profitability, reduce debt and redeploy capital.
How much debt does Tenet carry and how is it managed?
Long-term debt was $15.002 billion at December 31, 2023, and the ratio of long-term debt net of cash to Adjusted EBITDA was 3.89x. Nearly all long-term debt carries fixed rates, notes mature between 2026 and 2031, and $1.500 billion was available under the Credit Agreement with no cash borrowings outstanding.
What are the most significant risks to Tenet's business?
The filing identifies concentration in managed care contracts, with the top 10 payers generating 65% of managed care net patient service revenues. Other risks include physician and nurse shortages, labor union activity, Medicaid and Medicare reimbursement changes, cybersecurity threats following the April 2022 incident, and the significant interest burden from its indebtedness.
06—Continue