Tenet Issues Information on Financial Implications of Changes to Federal Tax Law
- Cash tax payments will be lower by
$10 million to$20 million per year over the next several years due to the repeal of the corporate alternative minimum tax. - No material change in the Company’s ability to utilize its federal income tax net operating loss (NOL) carryforwards, which the Company projects will approximate
$1.6 billion as ofDecember 31, 2017 . - Due to the positive impact from 100 percent bonus depreciation, taxable income on the Company’s federal tax return will be lower, resulting in slower utilization of the NOL. We anticipate approximately 80 percent of capital expenditures in 2018 should qualify for immediate expensing, which will more than offset the impact of the interest expense limitation.
- Diluted earnings per share from continuing operations is now expected to be
$0.05 to$0.19 in 2018 compared to the previous diluted EPS Outlook of$0.63 to$0.68 , and Adjusted diluted earnings per share from continuing operations is now expected to be$0.58 to$0.97 compared to the previous Adjusted EPS Outlook of$1.07 to$1.36 due to the Company not being able to currently recognize for accounting purposes the future benefit related to the excess interest expense limitation carryforward, net of the benefit derived from the lower tax rate. - The Company is reiterating its 2018 Outlook for revenue, Adjusted EBITDA and Adjusted free cash flow, which were originally provided on
December 19, 2017 .
“The change in the tax law is positive for Tenet from an economic perspective,” said
In addition to the implications described above, the Company will recognize in the fourth quarter ended
About
The terms "THC", "
This release contains “forward-looking statements” - that is, statements that relate to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “assume,” “anticipate,” “intend,” “plan,” “project,” “believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include, but are not limited to, the factors disclosed under “Forward-Looking Statements” and “Risk Factors” in our Form 10-K for the year ended
Tenet uses its Company website to provide important information to investors about the Company including the posting of important announcements regarding financial performance and corporate development.
Non-GAAP Financial Measures
Adjusted EBITDA, a non-GAAP measure, is defined by the Company as net income (loss) attributable to
Adjusted net income (loss) from continuing operations attributable to
Free Cash Flow, a non-GAAP measure, is defined by the Company as (1) net cash provided by (used in) operating activities, less (2) purchases of property and equipment from continuing operations.
Adjusted Free Cash Flow, a non-GAAP measure, is defined by the Company as (1) Adjusted net cash provided by (used in) operating activities from continuing operations, less (2) purchases of property and equipment from continuing operations. Adjusted net cash provided by (used in) operating activities, a non-GAAP measure, is defined by the Company as cash provided by (used in) operating activities prior to (1) payments for restructuring charges, acquisition-related costs and litigation costs and settlements, and (2) net cash provided by (used in) operating activities from discontinued operations.
The Company believes the foregoing non-GAAP measures are useful to investors and analysts because they present additional information on the Company’s financial performance. Investors, analysts, Company management and the Company’s Board of Directors utilize these non-GAAP measures, in addition to GAAP measures, to track the Company’s financial and operating performance and compare the Company’s performance to its peer companies, which utilize similar non-GAAP measures in their presentations. The
The Company believes that Adjusted EBITDA is a useful measure, in part, because certain investors and analysts use both historical and projected Adjusted EBITDA, in addition to other GAAP and non-GAAP measures, as factors in determining the estimated fair value of shares of the Company’s common stock. Company management also regularly reviews the Adjusted EBITDA performance for each operating segment. The Company does not use Adjusted EBITDA to measure liquidity, but instead to measure operating performance.
We use, and we believe investors and analysts use, Free Cash Flow and Adjusted Free Cash Flow as supplemental measures to analyze cash flows generated from our operations because we believe it is useful to investors in evaluating our ability to fund distributions paid to noncontrolling interests, acquisitions, purchasing equity interests in joint ventures or repaying debt.
These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Because these measures exclude many items that are included in our financial statements, they do not provide a complete measure of our operating performance. For example, the Company’s definitions of Free Cash Flow and Adjusted Free Cash Flow do not include other important uses of cash including (1) cash used to purchase businesses or joint venture interests, or (2) any items that are classified as Cash Flows From Financing Activities on the Company’s Consolidated Statement of Cash Flows, including items such as (i) cash used to repay borrowings, (ii) distributions paid to noncontrolling interests, or (iii) payments under the Put/Call Agreement for USPI redeemable noncontrolling interest, which are recorded on the Statement of Cash Flows as the purchase of noncontrolling interest. Accordingly, investors are encouraged to use GAAP measures when evaluating the Company’s financial performance.
A reconciliation of Outlook Adjusted EBITDA to Outlook net income (loss) attributable to
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Additional Supplemental Non-GAAP disclosures |
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| Table #1 – Reconciliation of Outlook Adjusted EBITDA to | ||||||||||
| Outlook Net Income Attributable to |
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(Unaudited) |
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| (Dollars in millions, except per share amounts) | 2018 | |||||||||
| Low | High | |||||||||
| Net income attributable to |
$ | — | $ | 20 | ||||||
| Less: Net income attributable to noncontrolling interests | (415 | ) | (435 | ) | ||||||
| Net loss from discontinued operations, net of tax | (5 | ) | — | |||||||
| Income from continuing operations | 420 | 455 | ||||||||
| Income tax expense | (180 | ) | (160 | ) | ||||||
| Income from continuing operations, before income taxes | 600 | 615 | ||||||||
| Interest expense | (1,000 | ) | (1,010 | ) | ||||||
| Loss on early extinguishment of debt | (5 | ) | — | |||||||
| Other non-operating expense, net | (20 | ) | (25 | ) | ||||||
| Operating income | 1,625 | 1,650 | ||||||||
| Gains on sales, consolidation and deconsolidation of facilities(1) | — | — | ||||||||
| Impairment and restructuring charges, acquisition-related costs and litigation costs and settlements(1) | (50 | ) | (100 | ) | ||||||
| Depreciation and amortization | (790 | ) | (810 | ) | ||||||
| Loss from divested and closed businesses | (10 | ) | (15 | ) | ||||||
| Adjusted EBITDA | $ | 2,475 | $ | 2,575 | ||||||
| Net income from continuing operations | $ | 5 | $ | 20 | ||||||
| Net income from continuing operations as a % of operating revenues | 0.0 | % | 0.1 | % | ||||||
| Net operating revenues | $ | 17,800 | $ | 18,200 | ||||||
| Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) | 13.9 | % | 14.1 | % | ||||||
| Adjusted EBITDA | $ | 2,475 | $ | 2,575 | ||||||
| Depreciation and amortization | (790 | ) | (810 | ) | ||||||
| Interest expense | (1,000 | ) | (1,010 | ) | ||||||
| Other non-operating expense, net | (20 | ) | (25 | ) | ||||||
| Adjusted income from continuing operations before income taxes | 665 | 730 | ||||||||
| Income tax expense | (190 | ) | (195 | ) | ||||||
| Adjusted income from continuing operations | 475 | 535 | ||||||||
| Net income attributable to noncontrolling interests | (415 | ) | (435 | ) | ||||||
| Adjusted net income from continuing operations attributable to common shareholders | $ | 60 | $ | 100 | ||||||
| Basic weighted average shares outstanding (in millions) | 102 | 102 | ||||||||
| Fully diluted weighted average shares outstanding (in millions) | 103 | 103 | ||||||||
| Diluted earnings per share from continuing operations | $ | 0.05 | $ | 0.19 | ||||||
| Adjusted diluted earnings per share from continuing operations | $ | 0.58 | $ | 0.97 | ||||||
| (1) | The Company has provided an estimate of restructuring charges that it anticipates in 2018. The Company does not forecast impairment charges, acquisition-related costs and litigation costs and settlements and gains (losses) on sales, and consolidation and deconsolidation of facilities because the Company does not believe that it can forecast these items with sufficient accuracy since some of these items are indeterminable at the time the Company provides its financial Outlook. | |
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Additional Supplemental Non-GAAP disclosures |
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| Table #2 – Reconciliation of Outlook Adjusted Free Cash Flow | |||||||||||||||
| for the Year Ending |
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| (Dollars in millions) | 2018 | ||||||||||||||
| Low | High | ||||||||||||||
| Net cash provided by operating activities | $ | 1,245 | $ | 1,450 | |||||||||||
| Less: Payments for restructuring charges, acquisition-related costs and litigation costs and settlements(1) | (50 | ) | (100 | ) | |||||||||||
| Net cash used in operating activities from discontinued operations | (5 | ) | — | ||||||||||||
| Adjusted net cash provided by operating activities – continuing operations | 1,300 | 1,550 | |||||||||||||
| Purchases of property and equipment – continuing operations | (625 | ) | (675 | ) | |||||||||||
| Adjusted free cash flow – continuing operations(2) | $ | 675 | $ | 875 | |||||||||||
| (1) | The Company has provided an estimate of payments that it anticipates in 2018 related to restructuring charges. The Company does not forecast payments related to acquisition-related costs and litigation costs and settlements because the Company does not believe that it can forecast these items with sufficient accuracy since some of these items may be indeterminable at the time the Company provides its financial Outlook. | |
| (2) | The Company's definition of Adjusted Free Cash Flow does not include other important uses of cash including (1) cash used to purchase businesses or joint venture interests, or (2) any items that are classified as Cash Flows From Financing Activities on the Company's Consolidated Statement of Cash Flows, including items such as (i) cash used to repay borrowings, (ii) distributions paid to noncontrolling interests, or (iii) payments under the Put/Call Agreement for USPI redeemable noncontrolling interests, which are recorded on the Statement of Cash Flows as the purchase of noncontrolling interests. | |
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