Tenet second quarter net operating revenues increase 3.1% to $2.374 billion

Tenet Healthcare Corporation (NYSE:THC):

“Our results for the second quarter extended the positive momentum we reported in recent quarters”

Key Metrics (all percentage changes compare Q2'11 to Q2'10)

• 3.1 percent growth in net operating revenues to $2.374 billion, an increase of $71 million
• 1.0 percent growth in adjusted admissions, the 3^rd consecutive quarter of positive growth
  • 0.1 percent decline in paying admissions
• Earnings per diluted share from continuing operations of $0.09 per share, an increase of $0.02, or 29 percent, excluding $0.01 per share of litigation and impairment pre-tax expense of $10 million

Tenet Healthcare Corporation (NYSE:THC) today reported adjusted EBITDA of $277 million for the second quarter ended June 30, 2011, an increase of $9 million, or 3.4 percent, compared to $268 million for the second quarter of 2010. Income from continuing operations, before income taxes, was $66 million in the second quarter of 2011, an increase of $1 million, or 1.5 percent, as compared to $65 million in the second quarter of 2010. Net income attributable to common shareholders was $55 million, or $0.11 per diluted share, compared to $25 million, or $0.05 per diluted share, for the second quarter of 2010.

"Our results for the second quarter extended the positive momentum we reported in recent quarters," said Trevor Fetter, president and chief executive officer. "Net revenues grew by 3.1 percent reflecting growth of 1.0 percent in adjusted admissions and 1.1 percent growth in surgeries. These increases provide additional evidence that our growth initiatives are gaining traction. Based on the solid performance for the first half of the year, we are reconfirming our Outlook for 2011 Adjusted EBITDA in the existing range of $1.175 billion to $1.275 billion."

Discussion of Results (Percentage changes compare Q2'11 to Q2'10, unless otherwise noted.)

Adjusted EBITDA grew by 3.4 percent reflecting growth in adjusted admissions, improvements in commercial pricing, sustained cost control, and a decline in bad debt expense. These favorable items more than offset pressures from declines in government reimbursement rates. Adjusted EBITDA also reflected Healthcare Information Technology ("HIT") incentive payments which offset incremental current period implementation and operating expense associated with Tenet's HIT initiative. Adjusted EBITDA was adversely impacted by a retroactive Medicaid adjustment enacted by one state.

Adjusted admissions increased by 1.0 percent. Admissions and paying admissions declined by 0.2 and 0.1 percent, respectively.

Net operating revenues were $2.374 billion, an increase of $71 million, or 3.1 percent, compared to net operating revenues of $2.303 billion in the second quarter of 2010. Net operating revenues in the second quarter of 2011 included Medicaid HIT incentive payments recorded in other non-patient revenues. Net patient revenues per adjusted patient day increased by 2.0 percent.

Acuity was unchanged in the second quarter of 2011 as compared to the second quarter of 2010. The impact of continuing favorable pricing increases on commercial volumes was partially offset by changes in government reimbursement. Growth in imaging volumes made a positive contribution to operating margins although this volume growth moderated increases in the quarter's pricing metrics.

Total controllable operating expenses were $1.926 billion, an increase of $64 million, or 3.4 percent. This increase reflects annual salary increases for our broad employee population and increases in HIT implementation and operating expenses. Controllable operating expenses is defined as the sum of salaries, wages and benefits, supplies, and other operating expenses.

The sum of uninsured and charity admissions declined by 1.9 percent. Bad debt expense was $171 million, a decline of $2 million. Last year's second quarter bad debt expense included a favorable $28 million adjustment for Medicare bad debts. The current quarter benefited from lower uninsured revenues and favorable resolution of aged accounts.

Net cash provided by operating activities was $178 million in the second quarter of 2011 compared to $191 million in the second quarter of 2010, a decrease of $13 million. Capital expenditures were $82 million in the second quarter of 2011, as compared to $77 million in the second quarter of 2010. Cash and cash equivalents were $264 million at June 30, 2011, a decrease of $3 million, from $267 million at March 31, 2011. Cash usage in the second quarter of 2011 includes the use of $72 million to repurchase 11.5 million shares of the Company's common stock and $22 million for the purchase of four outpatient centers. Through July 31, the Company has repurchased an aggregate total of 16.8 million shares of common stock, representing 3.4 percent of outstanding common shares, at an average price of $6.24 per share, for an expenditure of approximately $105 million.

The Company raised its Outlook for 2011 diluted earnings per share by three cents as a result of lower tax expense and a reduced share count related to the Company's share buyback program.

SOURCE Tenet Healthcare Corporation