Tenet Announces Results for First Quarter Ended March 31, 2008

Business Wire,  May 6, 2008  

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Highlights:

* Same-hospital admissions increased 1.0 percent.

* Same-hospital commercial managed care admissions declined by 3.7 percent

* Same-hospital adjusted EBITDA (a non-GAAP term defined below) increased by 23 percent to $239 million.

* Same-hospital total commercial managed care revenues increased by 5.6 percent

* Adjusted net cash used in continuing operating activities (a non-GAAP term defined below) was $107 million in Q1'08 compared to adjusted net cash usage of $159 million in Q1'07.

* Capital expenditures of $189 million.

* Cash and cash equivalents of $278 million at March 31, 2008.

DALLAS -- Tenet Healthcare Corporation (NYSE:THC) today reported a net loss of $31 million, or $0.06 per share, for its first quarter of 2008 compared to net income of $75 million, or $0.16 per share, in the first quarter of 2007. Adjusted EBITDA for the first quarter of 2008 was $234 million, an increase of 20.6 percent as compared to $194 million in the first quarter of 2007. Same-hospital adjusted EBITDA was $239 million in the first quarter of 2008, an increase of $45 million, or 23.2 percent, from $194 million reported in the first quarter of 2007. Adjusted EBITDA is a non-GAAP term defined and reconciled below to net income (loss) as determined by generally accepted accounting principles (GAAP). The Company reported a net loss from continuing operations of $10 million, or $0.02 per share, in the first quarter of 2008 which included a litigation charge of $30 million, after-tax, or $0.06 per share. Net income from continuing operations in our first quarter of 2007 was $91 million, or $0.19 per share, which included a favorable income tax adjustment of $84 million, or $0.18 per share.

"The quarter represents the second consecutive quarter of positive admissions growth since early 2004," said Trevor Fetter, Tenet's president and chief executive officer. "And April admissions showed enhanced volume strength bringing admissions growth through the first four months of the year to 1.6 percent and moderating outpatient visits to a decline of just 0.1 percent. Beyond volume growth, strong pricing and effective cost control drove the Company's improved operating results, producing a 23 percent increase in same-hospital adjusted EBITDA. Our growth strategies are working, as evidenced by this strong financial performance, the success of our physician relationship effort, and increases in patient volumes in many of the service lines identified by our Targeted Growth Initiative. I am very pleased with the progress we've made."

Continuing Operations

The loss from continuing operations before income taxes for the first quarter of 2008 was $9 million compared to income from continuing operations before income taxes of $7 million for the first quarter of 2007. These amounts included the following three items, which aggregated to a net pre-tax charge of $46 million in the first quarter of 2008 compared to net pre-tax income of $10 million in the first quarter of 2007.

1. Litigation costs of $47 million pre-tax, primarily related to a charge for our estimated liability for wage and hour lawsuits and other unrelated employment matters were recorded in the first quarter of 2008 compared to a litigation benefit of $1 million pre-tax in the first quarter of 2007.

2. Favorable net cost report and related valuation allowance adjustments of $2 million pre-tax, were recorded in the first quarter of 2008 compared to favorable adjustments of $12 million pre-tax, in the first quarter of 2007; and,

3. Net impairment and restructuring charges of $1 million and $3 million pre-tax in the first quarter of 2008 and 2007, respectively.

Stock-based compensation expense, included in salaries, wages and benefits, was $10 million pre-tax, $6 million after-tax before a deferred tax valuation allowance, or $0.01 per share, in the first quarter of 2008 compared to $11 million pre-tax, $7 million after-tax, or $0.01 per share, in the first quarter of 2007.

Adjusted EBITDA

Adjusted EBITDA in the first quarter of 2008 was $234 million producing a margin (as a percentage of net operating revenues) of 9.9 percent, an increase of $40 million, or 20.6 percent, from adjusted EBITDA of $194 million in the first quarter of 2007. The adjusted EBITDA margin was 8.7 percent in the first quarter of 2007. Same-hospital adjusted EBITDA was $239 million in the first quarter of 2008, an increase of 23.2 percent from $194 million in the first quarter of 2007.

Adjusted EBITDA is a non-GAAP term defined by the Company as net income (loss) before (1) the cumulative effect of change in accounting principle, net of tax, (2) income (loss) from discontinued operations, net of tax, (3) income tax (expense) benefit, (4) net gains on sale of investments, (5) minority interests, (6) investment earnings, (7) interest expense, (8) litigation and investigation costs, (9) hurricane insurance recoveries, net of costs, (10) impairment of long-lived assets and goodwill and restructuring charges, net of insurance recoveries, (11) amortization, and (12) depreciation. A reconciliation of net income (loss) to "Adjusted EBITDA" is provided in Table #1 at the end of this release.