Tenet Health(US:THC)2024-10-29 20:06PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Tenet Healthcare Corporation's unaudited condensed consolidated financial statements for the periods ended September 30, 2024 Condensed Consolidated Balance Sheets Total assets increased to $29.37 billion, driven by a rise in cash to $4.09 billion, while long-term debt decreased to $12.78 billion, and total equity grew to $5.43 billion Condensed Consolidated Balance Sheet Highlights (in Millions) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $29,372 | $28,312 | | Cash and cash equivalents | $4,094 | $1,228 | | Goodwill | $10,588 | $10,307 | | Total Liabilities | $21,297 | $22,804 | | Long-term debt, net of current portion | $12,776 | $14,882 | | Total Equity | $5,426 | $3,117 | | Retained earnings (accumulated deficit) | $2,690 | $(192) | Condensed Consolidated Statements of Operations Net income available to common shareholders surged to $2.88 billion for the nine months ended September 30, 2024, primarily due to a $2.91 billion gain on facility sales, with diluted EPS reaching $29.27 Statement of Operations Highlights (in Millions, except per-share amounts) | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net operating revenues | $15,593 | $15,169 | | Net (gains) on sales of facilities | $(2,906) | $(12) | | Operating income | $5,135 | $1,775 | | Net income available to common shareholders | $2,882 | $367 | | Diluted earnings per share | $29.27 | $3.41 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased to $2.38 billion, while investing activities provided $3.80 billion, primarily from $4.97 billion in facility sales proceeds, leading to a $2.87 billion net cash increase Cash Flow Summary (in Millions) | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,378 | $1,550 | | Net cash provided by (used in) investing activities | $3,801 | $(636) | | Net cash used in financing activities | $(3,313) | $(718) | | Net increase in cash and cash equivalents | $2,866 | $196 | | Cash and cash equivalents at end of period | $4,094 | $1,054 | Notes to Condensed Consolidated Financial Statements These notes detail significant accounting policies, including segment reporting changes, substantial gains from hospital dispositions, ongoing Ambulatory Care acquisitions, and significant share repurchases - The company combined its Hospital Operations and Conifer segments into a single reporting segment, 'Hospital Operations and Services' (Hospital Operations), effective Q4 2023, with all prior-period data restated to reflect this change1417 - Significant asset sales were completed in 2024, including three hospitals in South Carolina (gain of $1.677 billion), four in California (gain of $527 million), two more in California (gain of $271 million), and five in Alabama (gain of $357 million)424445 - In March 2024, the company redeemed all $2.1 billion of its 4.875% senior secured notes due 2026, resulting in an $8 million loss from early extinguishment of debt56 - A new $1.5 billion share repurchase program was authorized in July 2024, with $124 million used to repurchase 795,000 shares under this new program as of September 30, 20248182 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses performance, focusing on strategies like Ambulatory Care expansion, hospital portfolio optimization, and debt reduction, while detailing segment results, operating expenses, liquidity, and capital resources - Key strategies include expanding the Ambulatory Care segment, driving growth in hospital systems through operational effectiveness and portfolio optimization, and reducing long-term debt139141146 - The company continues to face staffing shortages, particularly for nurses, and inflationary pressures on wages and medical supplies133135 Adjusted EBITDA Reconciliation (in Millions) | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net income available to common shareholders | $2,882 | $367 | | Adjustments (Interest, Taxes, D&A, etc.) | $65 | $2,162 | | Adjusted EBITDA | $2,947 | $2,529 | - Liquidity was significantly boosted by proceeds from asset sales, with cash at $4.094 billion and availability under the credit facility at $1.5 billion as of September 30, 2024269 Results of Operations by Segment Hospital Operations revenue decreased 0.5% (up 8.5% ex-divestitures), while Ambulatory Care revenue grew 17.5% due to acquisitions and higher net revenue per case, with a superior operating margin of 37.9% Segment Performance - Nine Months Ended Sep 30, 2024 (in Millions) | Segment | Net Operating Revenues | Operating Income | Operating Margin | | :--- | :--- | :--- | :--- | | Hospital Operations | $12,318 | $3,893 | 31.6% | | Ambulatory Care | $3,275 | $1,242 | 37.9% | - On a same-hospital basis, the Hospital Operations segment experienced a 4.9% increase in total admissions and a 7.8% increase in net operating revenues for the nine months ended September 30, 2024, compared to the prior year212216 - The Ambulatory Care segment's revenue growth for the nine months ended September 30, 2024, was driven by a $403 million increase from acquisitions and a $147 million increase in same-facility net operating revenues236 - The Ambulatory Care segment added a net of 48 facilities in the first nine months of 2024, primarily through 51 acquisitions and the opening of 12 de novo centers246 Liquidity and Capital Resources Liquidity significantly strengthened to $4.09 billion cash, driven by $4.97 billion in asset sales proceeds, used for debt reduction and share repurchases, with projected capital expenditures of $800-$900 million - The ratio of total long-term debt (net of cash) to the last twelve months' Adjusted EBITDA was 2.22x at September 30, 2024263 - Capital expenditures for the full year 2024 are anticipated to be between $800 million and $900 million267 Key Cash Flow Drivers - Nine Months Ended Sep 30, 2024 (in Billions) | Item | Amount | | :--- | :--- | | Net cash from operating activities | $2.38 | | Proceeds from sales of facilities | $4.97 | | Repayments of borrowings | $(2.21) | | Repurchases of common stock | $(0.67) | | Purchases of businesses | $(0.52) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk primarily stems from interest rates on its debt, with nearly all $12.97 billion in long-term debt carrying fixed rates, minimizing floating rate exposure - The company has minimal exposure to floating interest rates as all current long-term debt has fixed rates, except for potential borrowings under its Credit Agreement284 Fixed-Rate Long-Term Debt (in Billions) | Metric | Amount | | :--- | :--- | | Total Principal | $12.969 | | Fair Value | $12.862 | | Average Effective Interest Rate | 5.7% | Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2024289 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls290 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various lawsuits and regulatory investigations, with material legal proceedings detailed in Note 12 of the Condensed Consolidated Financial Statements - For information regarding material legal proceedings, the company incorporates by reference Note 12 to the Condensed Consolidated Financial Statements291 Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - There have been no material changes to the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2023292 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2024, the company repurchased 795,000 shares for $124 million under its new $1.5 billion share repurchase program, with $1.376 billion remaining available Share Repurchases - Q3 2024 | Month | Shares Purchased (Thousands) | Average Price Paid | | :--- | :--- | :--- | | July 2024 | — | N/A | | August 2024 | — | N/A | | September 2024 | 795 | $155.95 | - In July 2024, the board authorized a new share repurchase program for up to $1.5 billion of common stock with no expiration date293 Item 5. Other Information No directors or Section 16 officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the third quarter of 2024 - No directors or Section 16 officers adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended September 30, 2024295 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - The exhibits filed with the report include certifications from the CEO and CFO, as well as Inline XBRL taxonomy documents297