01—Abstract
Summary
Summary of the 8-K filed February 1, 2024. Cited figures are marked; the original filing is the authoritative source.
Tenet Healthcare Corporation (NYSE: THC) reported on February 1, 2024 that it expects Adjusted EBITDA for the year ended December 31, 2023 to be above the high end of its current guidance range, after normalizing for $52 milliona of aggregate pre-tax income recognized in the fourth quarter from Medicaid supplemental revenue program adjustments in California and Texas.
The company said its financial statement close is not yet complete, the estimates may change, and it expects to report complete full-year 2023 results on February 8, 2024. The press release also cited strong surgical growth at United Surgical Partners International (USPI) as a driver of results. Tenet also disclosed portfolio transformation activity.
It completed the sale of three South Carolina hospitals and related operations to Novant Health for approximately $2.4 billionb in cash (after-tax proceeds of approximately $1.750 billion). It also entered a definitive agreement to sell four California hospitals (Fountain Valley Regional Hospital and Medical Center, Lakewood Regional Medical Center, Los Alamitos Medical Center and Placentia Linda Hospital) and related operations to UCI Health for $975 million in cash, plus retention of pre-closing net working capital estimated at approximately $130 million. The California sale is not subject to a financing contingency and is expected to close in the spring of 2024, subject to regulatory approvals including Hart-Scott-Rodino clearance.
For the California hospitals, the filing states that for 2023 they generated revenues of approximately $1 billionc, pre-tax income of approximately $29 million and Adjusted EBITDA of approximately $71 million. Tenet estimates a pre-tax book gain of approximately $500 million on that sale, and expects its 2024 income tax expense to be favorably impacted by approximately $40 million from that sale. The press release estimates a favorable 2024 tax impact of approximately $190 million across both transactions, and says the transactions support Tenet's objective of reducing leverage.
02—Key points
Key Highlights
- Preliminary FY2023 Adjusted EBITDA is expected to exceed the high end of the current guidance range, after normalizing for $52 million of pre-tax income recognized in Q4 from Medicaid supplemental revenue program adjustments in California and Texas.
- Tenet completed the sale of three South Carolina hospitals and related operations to Novant Health for approximately $2.4 billion in cash (after-tax proceeds of approximately $1.750 billion).
- Tenet entered a definitive agreement to sell four Orange County and Los Angeles County hospitals to UCI Health for $975 million in cash (after-tax proceeds of approximately $800 million), plus retained pre-closing net working capital of approximately $130 million.
- The California hospitals generated 2023 revenues of approximately $1 billion, pre-tax income of approximately $29 million and Adjusted EBITDA of approximately $71 million.
- Tenet estimates a pre-tax book gain of approximately $500 million on the California sale and a favorable 2024 income tax expense impact of approximately $40 million from it; across both transactions, the press release estimates approximately $190 million.
- The California transaction is not subject to a financing contingency and is expected to close in spring 2024, subject to HSR and other regulatory approvals.
- Complete fourth-quarter and full-year 2023 results are scheduled for release on February 8, 2024; the estimates may change before then.
03—Questions
Frequently Asked Questions
Will Tenet beat its FY2023 Adjusted EBITDA guidance?
Tenet estimates that FY2023 Adjusted EBITDA will be above the high end of its current guidance range, after normalizing for $52 million of pre-tax income recognized in Q4 from Medicaid supplemental revenue program adjustments in California and Texas. The company states the financial statement close is not yet complete and actual results may differ.
What is the size of the California hospital sale and what is being sold?
Tenet agreed to sell Fountain Valley Regional Hospital and Medical Center, Lakewood Regional Medical Center, Los Alamitos Medical Center and Placentia Linda Hospital, plus related operations, to UCI Health for $975 million in cash, subject to customary purchase price adjustments. Tenet also retains net working capital related to pre-closing operations, estimated at approximately $130 million.
What financial impact does Tenet expect from the divestitures?
Tenet estimates a pre-tax book gain of approximately $500 million on the California sale. It expects the gain to favorably affect 2024 income tax expense by approximately $40 million from the California sale, and the press release estimates approximately $190 million across both transactions, due to a reduction in interest expense limitations. The company says the transactions support its objective of reducing leverage.
When are the transactions expected to close and what could affect them?
The California sale is expected to close in spring 2024. Completion is subject to closing conditions, including expiration or termination of the Hart-Scott-Rodino waiting period and other regulatory filings and approvals. The agreement is not subject to a financing contingency. The South Carolina sale to Novant Health has already been completed.
When will Tenet report complete 2023 results?
Tenet expects to report complete results for the year ended December 31, 2023, including fourth-quarter results, on February 8, 2024. Until then, the preliminary figures may change as the financial close is finalized.
04—Continue