8-K
TENET HEALTHCARE CORP (THC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
_______________
Date of Report: July 24, 2024
(Date of earliest event reported)
_______________
TENET HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
| Nevada | 1-7293 | 95-2557091 |
|---|---|---|
| (State of Incorporation) | (Commission File Number) | (IRS Employer<br>Identification Number) |
14201 Dallas Parkway
Dallas, TX 75254
(Address of principal executive offices, including zip code)
(469) 893-2200
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br>Symbol(s) | Name of each exchange <br>on which registered |
|---|---|---|
| Common stock, $0.05 par value | THC | NYSE |
| 6.875% Senior Notes due 2031 | THC31 | NYSE |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
The information contained herein is being furnished pursuant to Item 2.02 of Form 8-K, “Results of Operations and Financial Condition.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On July 24, 2024, Tenet Healthcare Corporation (the “Company”) issued a press release reporting the financial results of the Company for the quarter ended June 30, 2024. A copy of the press release is attached to this report as Exhibit 99.1 and incorporated herein by reference.
| Item 9.01. | Financial Statements and Exhibits. |
|---|
(d)Exhibits
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release issued on July 24, 2024 |
| 104 | Cover Page Interactive Data File (embedded within the inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TENET HEALTHCARE CORPORATION | ||
|---|---|---|
| Date: July 24, 2024 | By: | /s/ R. SCOTT RAMSEY |
| R. Scott Ramsey | ||
| Senior Vice President, Controller |
Document
Exhibit 99.1
Tenet Reports Strong Second Quarter 2024 Results;
Raises 2024 Financial Outlook
•Net income available to common shareholders in second quarter 2024 was $259 million, or $2.64 per diluted share
•Adjusted diluted earnings per share1 was $2.31 in second quarter 2024
•Consolidated Adjusted EBITDA1 in second quarter 2024 of $945 million increased 12.1% over second quarter 2023
•Second quarter 2024 Ambulatory Care Adjusted EBITDA of $447 million increased 20.8% over second quarter 2023
•Board of Directors has authorized a new $1.5 billion share repurchase program
•FY 2024 Adjusted EBITDA Outlook now expected to be in the range of $3.825 billion to $3.975 billion, a $300 million increase; FY 2024 Free Cash Flow outlook now expected to be in the range of $1.100 billion to $1.350 billion, a $150 million increase
DALLAS — July 24, 2024 — Tenet Healthcare Corporation (Tenet) (NYSE: THC) today announced its results for the quarter ended June 30, 2024.
"Our results through the second quarter, which have significantly exceeded our expectations, have been driven by volume and revenue growth as well as sustained fundamentally strong operating performance," said Saum Sutaria, M.D., Chairman and Chief Executive Officer of Tenet. "Our portfolio transformation and enhanced cash flow profile provide us with compelling opportunities for growth as we execute on our strategy and continue to broaden our service offerings for patient-centered care."
Page 1
Tenet’s results for second quarter 2024 versus second quarter 2023 are as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||
|---|---|---|---|---|
| ($ in millions, except per share results) | 2024 | 2023 | 2024 | 2023 |
| Net operating revenues | $5,103 | $5,082 | $10,471 | $10,103 |
| Net income available to Tenet common shareholders | $259 | $123 | $2,410 | $266 |
| Net income available to Tenet common shareholders per diluted share | $2.64 | $1.15 | $24.22 | $2.47 |
| Adjusted EBITDA1 | $945 | $843 | $1,969 | $1,675 |
| Adjusted diluted earnings per share1 | $2.31 | $1.44 | $5.53 | $2.87 |
•Net income available to the Company’s common shareholders in the second quarter 2024 was $259 million, or $2.64 per diluted share, versus $123 million, or $1.15 per diluted share, in second quarter 2023.
•Adjusted EBITDA1 in second quarter 2024 was $945 million compared to $843 million in second quarter 2023, reflecting strong same-hospital admission growth, strong ambulatory net revenue per case growth, favorable payer mix, and improved contract labor costs, partially offset by higher medical fees as well as the impact of hospital divestitures.
•In addition to the previously disclosed increased Medicaid supplemental revenues in Michigan, in the second quarter of 2024, the Company recognized a $30 million favorable pre-tax impact associated with additional Medicaid supplemental revenues in Texas related to prior years.
Page 2
Balance Sheet and Cash Flows
•Cash flows provided by operating activities for the six months ended June 30, 2024 were $1.333 billion versus $1.047 billion for the six months ended June 30, 2023.
•The Company produced free cash flow1 of $948 million for the six months ended June 30, 2024 versus $680 million for the six months ended June 30, 2023.
•In the three months ended June 30, 2024, the Company repurchased 1,990,227 shares of common stock for $270 million. In the six months ended June 30, 2024, the Company repurchased 4,801,461 shares of common stock for $548 million, which completed the Company's previous $1 billion share repurchase program.
•The Company's Board of Directors has authorized a $1.5 billion share repurchase program. Repurchases will be made at management's discretion from time to time in the open market or through privately negotiated transactions, subject to market conditions and other relevant factors.
•The Company’s ratio of net debt to Adjusted EBITDA1 was 2.61x at June 30, 2024 compared to 2.79x at March 31, 2024 and 3.89x at December 31, 2023.
Page 3
Ambulatory Care (Ambulatory) Segment
Tenet’s Ambulatory business segment is comprised of the operations of United Surgical Partners International (USPI). As of June 30, 2024, USPI had interests in 520 ambulatory surgery centers (377 consolidated) and 24 surgical hospitals (seven consolidated) in 38 states.
| Three Months Ended June 30, | Six Months Ended June 30, | |||
|---|---|---|---|---|
| Ambulatory segment results ($ in millions) | 2024 | 2023 | 2024 | 2023 |
| Revenues | ||||
| Net operating revenues | 1,141 | 942 | 2,136 | 1,847 |
| Same-facility system-wide net patient service revenues2 | 1,889 | 1,764 | 3,626 | 3,395 |
| Volume Changes versus the Prior-Year Period | ||||
| Same-facility system-wide surgical cases2 | 0.2 | 6.6 | — | 7.2 |
| Same-facility system-wide surgical cases on same-business day basis2 | 0.2 | 6.6 | — | 7.2 |
| Adjusted EBITDA, Margins and NCI | ||||
| Adjusted EBITDA | 447 | 370 | 841 | 710 |
| Adjusted EBITDA margin | 39.2% | 39.3% | 39.4% | 38.4% |
| Adjusted EBITDA less NCI | 273 | 231 | 514 | 445 |
All values are in US Dollars.
•Second quarter 2024 net operating revenues increased 21.1% compared to second quarter 2023 driven by strong net revenue per case growth, acquisitions of facilities, and increased service lines.
•Surgical business same-facility system-wide net patient service revenues increased 7.1% in second quarter 2024 compared to second quarter 2023, with cases up 0.2% and net revenue per case up 6.8%. Net revenue per case growth was driven by higher acuity associated with favorable case mix as well as favorable payer mix.
•Second quarter 2024 Adjusted EBITDA increased 20.8% compared to second quarter 2023, due to strong net revenue per case growth, disciplined expense management, and contributions from acquisitions and de novo facilities.
Page 4
Hospital Operations and Services (Hospital) Segment
Tenet’s Hospital business segment is primarily comprised of acute care and specialty hospitals, imaging centers, ancillary outpatient facilities, micro-hospitals and physician practices. It also provides comprehensive end-to-end and focused point services, including hospital and physician revenue cycle management, patient communications and engagement support and value-based care solutions.
| Three Months Ended June 30, | Six Months Ended June 30, | |||
|---|---|---|---|---|
| Hospital segment results ($ in millions) | 2024 | 2023 | 2024 | 2023 |
| Revenues | ||||
| Net operating revenues | $3,962 | $4,140 | $8,335 | $8,256 |
| Same-hospital net patient service revenues3 | $3,444 | $3,184 | $6,915 | $6,317 |
| Same-Hospital Volume Changes versus the Prior-Year Period | ||||
| Admissions | 5.2% | 3.0% | 4.7% | 3.6% |
| Adjusted admissions4 | 2.4% | 3.2% | 2.1% | 4.9% |
| Outpatient visits (including outpatient ER visits) | 0.6% | (1.3)% | (0.1)% | (0.6)% |
| Emergency Room visits (inpatient and outpatient) | 1.7% | 0.4% | 2.8% | 2.5% |
| Hospital surgeries | 1.5% | (0.1)% | (0.3)% | 1.1% |
| Adjusted EBITDA | ||||
| Adjusted EBITDA | $498 | $473 | $1,128 | $965 |
| Adjusted EBITDA margin | 12.6% | 11.4% | 13.5% | 11.7% |
•Second quarter 2024 net operating revenues declined 4.3% from second quarter 2023 primarily due to the impact of hospital divestitures in first quarter 2024, partially offset by strong same hospital admissions growth, favorable payer mix, and improved pricing yield.
•Same-hospital net patient service revenue per adjusted admission increased 5.7% year-over-year for second quarter 2024 primarily due to improved pricing yield, favorable payer mix, and our focus on growing higher acuity services.
•Adjusted EBITDA in second quarter 2024 was $498 million compared to $473 million in second quarter 2023, reflecting strong same-hospital admission growth and revenue per adjusted admission, improved contract labor costs, partially offset by higher medical fees as well as the impact of hospital divestitures.
•In addition to the previously disclosed increased Medicaid supplemental revenues in Michigan, in the second quarter of 2024, the Company recognized a $30 million favorable pre-tax impact associated with additional Medicaid supplemental revenues in Texas related to prior years.
Page 5
2024 Outlook1
Tenet’s Outlook for full year 2024 (consolidated and by segment) and third quarter 2024 follows. This outlook reflects the completion of the sale of three Coastal South Carolina hospitals on January 31, 2024 and the completion of the sale of six California hospitals on March 31, 2024.
| CONSOLIDATED ($ in millions, except per share amounts) | FY 2024 Outlook |
|---|---|
| Net operating revenues | 20,600 to 21,000 |
| Net income available to Tenet common stockholders | 2,825 to 2,930 |
| Adjusted EBITDA | 3,825 to 3,975 |
| Adjusted EBITDA margin | 18.6% to 18.9% |
| Diluted income per common share | 28.83 to 29.90 |
| Adjusted net income | 1,020 to 1,090 |
| Adjusted diluted earnings per share | 10.41 to 11.12 |
| Equity in earnings of unconsolidated affiliates | 260 to 270 |
| Depreciation and amortization | 830 to 860 |
| Interest expense | 815 to 825 |
| Income tax expense5 | 1,040 to 1,075 |
| Net income available to NCI | 820 to 870 |
| Weighted average diluted common shares | ~98 million |
| NCI cash distributions | 725 to 775 |
| Net cash provided by operating activities6 | 1,900 to 2,250 |
| Adjusted net cash provided by operating activities6 | 2,025 to 2,325 |
| Capital expenditures | 800 to 900 |
| Free cash flow6 | 1,100 to 1,350 |
| Adjusted free cash flow6 | 1,225 to 1,425 |
All values are in US Dollars.
Page 6
| Ambulatory Segment ($ in millions) | FY 2024 Outlook |
|---|---|
| Net operating revenues | $4,325 to $4,475 |
| Adjusted EBITDA | $1,750 to $1,810 |
| NCI | $685 to $715 |
| Adjusted EBITDA less NCI | $1,065 to $1,095 |
| Changes versus prior year7: | |
| Surgical cases volumes | Up 1.0% to 2.0% |
| Net revenues per surgical case | Up 4.5% to 5.5% |
| Hospital Segment ($ in millions) | FY 2024 Outlook |
| --- | --- |
| Net operating revenues | $16,275 to $16,525 |
| Adjusted EBITDA | $2,075 to $2,165 |
| NCI | $135 to $155 |
| Changes versus prior year7: | |
| Inpatient admissions | Up 3.0% to 4.0% |
| Adjusted admissions | Up 1.0% to 3.0% |
Management’s Webcast Discussion of Results
Tenet management will discuss the Company’s second quarter 2024 results in a webcast scheduled for 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on July 24, 2024. Investors can access the webcast through the Company’s website at www.tenethealth.com/investors.
The slide presentation associated with the webcast referenced above, a copy of this earnings press release, and a related supplemental financial disclosures document will be available on the Company’s Investor Relations website on July 24, 2024.
Page 7
Cautionary Statement
This release contains “forward-looking statements” - that is, statements that relate to future, not past, events. In this context, forward-looking statements often address the Company’s expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “assume,” “believe,” “budget,” “estimate,” “forecast,” “intend,” “plan,” “predict,” “project,” “seek,” “see,” “target,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Particular uncertainties that could cause the Company’s actual results to be materially different than those expressed in the Company’s 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 December 31, 2023 and other filings with the Securities and Exchange Commission.
Footnotes
1.Tables and discussions throughout this earnings release include certain financial measures, including those related to our third quarter and full year 2024 Outlook, that are not in accordance with accounting principles generally accepted in the United States of America (GAAP). Reconciliations of GAAP measures to the Adjusted (non-GAAP) measures used are detailed in Tables #1-6 included at the end of this earnings release. Management’s reasoning for the use of these non-GAAP measures and descriptions of the various non-GAAP measures are included in the Non-GAAP Financial Measures section of this earnings release.
2.Same-facility system-wide revenues and statistical information include the results of the facilities in which the Ambulatory segment has an investment that are not consolidated by Tenet. To help analyze the segment’s results of operations, management uses system-wide measures, which include revenues and cases of both consolidated and unconsolidated facilities.
3.For 2024, same-hospital revenues and statistical data include those for hospitals and hospital-affiliated outpatient centers operated by the Company’s Hospital segment continuously from January 1, 2023 through June 30, 2024. Amounts associated with physician practices are excluded.
4.Adjusted admissions represent actual patient admissions adjusted to include outpatient services provided by facilities in our Hospital segment by multiplying actual patient admissions by the sum of gross inpatient revenues and outpatient revenues, then dividing that result by gross inpatient revenues.
5.Income tax expense is calculated by multiplying 24% (the federal corporate tax rate of 21% plus an estimate of state taxes) by the sum of: pretax income less GAAP facility level NCI expense plus permanent differences, and non-deductible interest expense.
6.For 2024, Outlook for net cash provided by operating activities, Adjusted net cash provided by operating activities, Free cash flow and Adjusted free cash flow include an estimate of approximately $700 million of net income tax payments associated with the gains on sale of the three hospitals and related operations in South Carolina and the six hospitals and related operations in California.
7.Change versus prior year is presented on a same-facility system-wide basis for USPI Ambulatory surgical cases and on a same-hospital basis for hospital statistics.
Page 8
About Tenet Healthcare
Tenet Healthcare Corporation (NYSE: THC) is a diversified healthcare services company headquartered in Dallas. Our care delivery network includes United Surgical Partners International, the largest ambulatory platform in the country, which operates ambulatory surgery centers and surgical hospitals. We also operate a national portfolio of acute care and specialty hospitals, other outpatient facilities, a network of leading employed physicians and a global business center in Manila, Philippines. Our Conifer Health Solutions subsidiary provides revenue cycle management and value-based care services to hospitals, health systems, physician practices, employers and other clients. Across the Tenet enterprise, we are united by our mission to deliver quality, compassionate care in the communities we serve. For more information, please visit www.tenethealth.com.
Contact Information
| Investor Contact | Media Contact |
|---|---|
| Will McDowell | Robert Dyer |
| 469-893-2387 | 469-893-2640 |
| william.mcdowell@tenethealth.com | mediarelations@tenethealth.com |
Page 9
Non-GAAP Financial Measures
The Company believes the non-GAAP measures described below 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 use similar non-GAAP financial measures in their presentations and earnings releases. The Human Resources Committee of the Company’s Board of Directors also uses certain of these measures to evaluate management’s performance for the purpose of determining incentive compensation. Additional information regarding the purpose and utility of specific non-GAAP measures used in this release is set forth below.
•Adjusted EBITDA is defined by the Company as net income available (loss attributable) to Tenet common shareholders before (1) the cumulative effect of changes in accounting principles, (2) net loss attributable (income available) to noncontrolling interests, (3) income (loss) from discontinued operations, net of tax, (4) income tax benefit (expense), (5) gain (loss) from early extinguishment of debt, (6) other non-operating income (expense), net, (7) interest expense, (8) litigation and investigation benefit (costs), net of insurance recoveries, (9) net gains (losses) on sales, consolidation and deconsolidation of facilities, (10) impairment and restructuring charges and acquisition-related costs, (11) depreciation and amortization and (12) income (loss) from divested and closed businesses (i.e., health plan businesses). Litigation and investigation costs excluded do not include ordinary course of business malpractice and other litigation and related expenses.
•Adjusted diluted earnings (loss) per share is defined by the Company as Adjusted net income available (loss attributable) to Tenet common shareholders, divided by the weighted average diluted shares outstanding in the reporting period.
•Adjusted net income available (loss attributable) to Tenet common shareholders is defined by the Company as net income available (loss attributable) to Tenet common shareholders before (1) income (loss) from discontinued operations, net of tax, (2) gain (loss) from early extinguishment of debt, (3) litigation and investigation benefit (costs), net of insurance recoveries, (4) net gains (losses) on sales, consolidation and deconsolidation of facilities, (5) impairment and restructuring charges and acquisition-related costs, (6) income (loss) from divested and closed businesses (i.e., health plan businesses) and (7) the associated impact of these items on taxes and noncontrolling interests. Litigation and investigation costs excluded do not include ordinary course of business malpractice and other litigation and related expenses.
•Free Cash Flow is defined by the Company as (1) net cash provided by (used in) operating activities, less (2) purchases of property and equipment.
•Adjusted Free Cash Flow is defined by the Company as (1) Adjusted net cash provided by (used in) operating activities, less (2) purchases of property and equipment.
•Adjusted net cash provided by (used in) operating activities 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 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.
The Company uses, and believes investors use, Free Cash Flow and Adjusted Free Cash Flow as supplemental non-GAAP measures to analyze cash flows generated from the Company’s operations. The Company believes these measures are useful to investors in evaluating its ability to fund distributions paid to noncontrolling interests or for 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 the Company’s financial statements, they do not provide a complete measure of the Company’s 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, or (ii) distributions paid to noncontrolling interests. Accordingly, investors are encouraged to use GAAP measures when evaluating the Company’s financial performance.
See corresponding reconciliations of the non-GAAP financial measures referred to above to the most comparable GAAP financial measures in Tables #1 - 6 below.
Page 10
Tenet Healthcare Corporation
Financial Statements and Reconciliations
Second Quarter Earnings Release
Table of Contents
| Description | Page |
|---|---|
| Consolidated Statements of Operations | 12 |
| Consolidated Balance Sheets | 14 |
| Consolidated Statements of Cash Flows | 15 |
| Segment Reporting | 16 |
| Table #1–Reconciliations of NetIncometoAdjusted Net Income | 17 |
| Table #2–Reconciliations of Net Income toAdjusted EBITDA | 18 |
| Table #3–Reconciliations of Net Cash Provided by Operating Activities to Free Cash Flow and Adjusted Free Cash Flow | 19 |
| Table #4–Reconciliations of Outlook Net Income to Outlook Adjusted Net Income | 20 |
| Table #5– Reconciliations of Outlook Net Income to Outlook Adjusted EBITDA | 21 |
| Table #6–Reconciliations of Outlook Net Cash Provided byOperating Activities to Outlook Free Cash Flow and Outlook Adjusted Free Cash Flow | 22 |
Page 11
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| (Dollars in millions, except per share amounts) | Three Months Ended June 30, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | % | 2023 | % | Change | |||||||||||
| Net operating revenues | $ | 5,103 | 100.0 | % | $ | 5,082 | 100.0 | % | 0.4 | % | |||||
| Grant income | 5 | 0.1 | % | 8 | 0.2 | % | (37.5) | % | |||||||
| Equity in earnings of unconsolidated affiliates | 61 | 1.2 | % | 54 | 1.1 | % | 13.0 | % | |||||||
| Operating expenses: | |||||||||||||||
| Salaries, wages and benefits | 2,168 | 42.5 | % | 2,285 | 45.0 | % | (5.1) | % | |||||||
| Supplies | 908 | 17.8 | % | 891 | 17.5 | % | 1.9 | % | |||||||
| Other operating expenses, net | 1,148 | 22.4 | % | 1,125 | 22.1 | % | 2.0 | % | |||||||
| Depreciation and amortization | 208 | 4.1 | % | 213 | 4.3 | % | |||||||||
| Impairment and restructuring charges, and acquisition-related costs | 29 | 0.6 | % | 16 | 0.3 | % | |||||||||
| Litigation and investigation costs | 5 | 0.1 | % | 10 | 0.2 | % | |||||||||
| Net gains on sales, consolidation and deconsolidation of facilities | (58) | (1.1) | % | — | — | % | |||||||||
| Operating income | 761 | 14.9 | % | 604 | 11.9 | % | |||||||||
| Interest expense | (203) | (226) | |||||||||||||
| Other non-operating income, net | 29 | 6 | |||||||||||||
| Loss from early extinguishment of debt | — | (11) | |||||||||||||
| Income before income taxes | 587 | 373 | |||||||||||||
| Income tax expense | (110) | (80) | |||||||||||||
| Net income | 477 | 293 | |||||||||||||
| Less: Net income available to noncontrolling interests | 218 | 170 | |||||||||||||
| Net income available to Tenet Healthcare Corporation common shareholders | $ | 259 | $ | 123 | |||||||||||
| Earnings per share available to Tenet Healthcare Corporation common shareholders: | |||||||||||||||
| Basic | $ | 2.66 | $ | 1.21 | |||||||||||
| Diluted | $ | 2.64 | $ | 1.15 | |||||||||||
| Weighted average shares and dilutive securities outstanding (in thousands): | |||||||||||||||
| Basic | 97,267 | 101,766 | |||||||||||||
| Diluted | 98,444 | 104,778 |
Page 12
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| (Dollars in millions, except per share amounts) | Six Months Ended June 30, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | % | 2023 | % | Change | |||||||||||
| Net operating revenues | $ | 10,471 | 100.0 | % | $ | 10,103 | 100.0 | % | 3.6 | % | |||||
| Grant income | 5 | — | % | 11 | 0.1 | % | (54.5) | % | |||||||
| Equity in earnings of unconsolidated affiliates | 120 | 1.1 | % | 104 | 1.0 | % | 15.4 | % | |||||||
| Operating expenses: | |||||||||||||||
| Salaries, wages and benefits | 4,489 | 42.9 | % | 4,543 | 45.0 | % | (1.2) | % | |||||||
| Supplies | 1,836 | 17.5 | % | 1,782 | 17.6 | % | 3.0 | % | |||||||
| Other operating expenses, net | 2,302 | 21.9 | % | 2,218 | 22.0 | % | 3.8 | % | |||||||
| Depreciation and amortization | 416 | 4.0 | % | 430 | 4.2 | % | |||||||||
| Impairment and restructuring charges, and acquisition-related costs | 56 | 0.5 | % | 37 | 0.4 | % | |||||||||
| Litigation and investigation costs | 9 | 0.1 | % | 14 | 0.1 | % | |||||||||
| Net gains on sales, consolidation and deconsolidation of facilities | (2,558) | (24.4) | % | (13) | (0.1) | % | |||||||||
| Operating income | 4,046 | 38.6 | % | 1,207 | 11.9 | % | |||||||||
| Interest expense | (421) | (447) | |||||||||||||
| Other non-operating income, net | 54 | 4 | |||||||||||||
| Loss from early extinguishment of debt | (8) | (11) | |||||||||||||
| Income before income taxes | 3,671 | 753 | |||||||||||||
| Income tax expense | (860) | (164) | |||||||||||||
| Net income | 2,811 | 589 | |||||||||||||
| Less: Net income available to noncontrolling interests | 401 | 323 | |||||||||||||
| Net income available to Tenet Healthcare Corporation common shareholders | $ | 2,410 | $ | 266 | |||||||||||
| Earnings per share available to Tenet Healthcare Corporation common shareholders: | |||||||||||||||
| Basic | $ | 24.49 | $ | 2.61 | |||||||||||
| Diluted | $ | 24.22 | $ | 2.47 | |||||||||||
| Weighted average shares and dilutive securities outstanding (in thousands): | |||||||||||||||
| Basic | 98,424 | 102,028 | |||||||||||||
| Diluted | 99,557 | 105,354 |
Page 13
TENET HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (Dollars in millions) | June 30, | December 31, | ||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 2,880 | $ | 1,228 | ||
| Accounts receivable | 2,817 | 2,914 | ||||
| Inventories of supplies, at cost | 382 | 411 | ||||
| Assets held for sale | 21 | 775 | ||||
| Other current assets | 1,855 | 1,839 | ||||
| Total current assets | 7,955 | 7,167 | ||||
| Investments and other assets | 3,156 | 3,157 | ||||
| Deferred income taxes | 85 | 77 | ||||
| Property and equipment, at cost, less accumulated depreciation and amortization | 5,857 | 6,236 | ||||
| Goodwill | 10,799 | 10,307 | ||||
| Other intangible assets, at cost, less accumulated amortization | 1,413 | 1,368 | ||||
| Total assets | $ | 29,265 | $ | 28,312 | ||
| LIABILITIES AND EQUITY | ||||||
| Current liabilities: | ||||||
| Current portion of long-term debt | $ | 102 | $ | 120 | ||
| Accounts payable | 1,270 | 1,408 | ||||
| Accrued compensation and benefits | 788 | 930 | ||||
| Professional and general liability reserves | 283 | 254 | ||||
| Accrued interest payable | 149 | 200 | ||||
| Liabilities held for sale | 11 | 69 | ||||
| Income tax payable | 715 | 23 | ||||
| Other current liabilities | 2,175 | 1,756 | ||||
| Total current liabilities | 5,493 | 4,760 | ||||
| Long-term debt, net of current portion | 12,769 | 14,882 | ||||
| Professional and general liability reserves | 844 | 792 | ||||
| Defined benefit plan obligations | 334 | 335 | ||||
| Deferred income taxes | 245 | 326 | ||||
| Other long-term liabilities | 1,711 | 1,709 | ||||
| Total liabilities | 21,396 | 22,804 | ||||
| Commitments and contingencies | ||||||
| Redeemable noncontrolling interests in equity of consolidated subsidiaries | 2,813 | 2,391 | ||||
| Equity: | ||||||
| Shareholders’ equity: | ||||||
| Common stock | 8 | 8 | ||||
| Additional paid-in capital | 4,840 | 4,834 | ||||
| Accumulated other comprehensive loss | (177) | (181) | ||||
| Retained earnings (accumulated deficit) | 2,218 | (192) | ||||
| Common stock in treasury, at cost | (3,414) | (2,861) | ||||
| Total shareholders’ equity | 3,475 | 1,608 | ||||
| Noncontrolling interests | 1,581 | 1,509 | ||||
| Total equity | 5,056 | 3,117 | ||||
| Total liabilities and equity | $ | 29,265 | $ | 28,312 |
Page 14
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| (Dollars in millions) | Six Months Ended | |||||
|---|---|---|---|---|---|---|
| June 30, | ||||||
| 2024 | 2023 | |||||
| Net income | $ | 2,811 | $ | 589 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 416 | 430 | ||||
| Deferred income tax expense (benefit) | (93) | 37 | ||||
| Stock-based compensation expense | 36 | 33 | ||||
| Impairment and restructuring charges, and acquisition-related costs | 56 | 37 | ||||
| Litigation and investigation costs | 9 | 14 | ||||
| Net gains on sales, consolidation and deconsolidation of facilities | (2,558) | (13) | ||||
| Loss from early extinguishment of debt | 8 | 11 | ||||
| Equity in earnings of unconsolidated affiliates, net of distributions received | (3) | 7 | ||||
| Amortization of debt discount and debt issuance costs | 14 | 18 | ||||
| Net gains from the sale of investments and long-lived assets | (1) | (15) | ||||
| Other items, net | (3) | (3) | ||||
| Changes in cash from operating assets and liabilities: | ||||||
| Accounts receivable | 77 | 7 | ||||
| Inventories and other current assets | 16 | 160 | ||||
| Income taxes | 713 | (31) | ||||
| Accounts payable, accrued expenses and other current liabilities | (124) | (168) | ||||
| Other long-term liabilities | 23 | 12 | ||||
| Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements | (64) | (78) | ||||
| Net cash provided by operating activities | 1,333 | 1,047 | ||||
| Cash flows from investing activities: | ||||||
| Purchases of property and equipment | (385) | (367) | ||||
| Purchases of businesses or joint venture interests, net of cash acquired | (510) | (96) | ||||
| Proceeds from sales of facilities and other assets | 4,048 | 16 | ||||
| Proceeds from sales of marketable securities and long-term investments | 17 | 26 | ||||
| Purchases of marketable securities and long-term investments | (26) | (37) | ||||
| Other items, net | (10) | (9) | ||||
| Net cash provided by (used in) investing activities | 3,134 | (467) | ||||
| Cash flows from financing activities: | ||||||
| Repayments of borrowings | (2,179) | (1,437) | ||||
| Proceeds from borrowings | 8 | 1,362 | ||||
| Repurchases of common stock | (548) | (90) | ||||
| Debt issuance costs | — | (15) | ||||
| Distributions paid to noncontrolling interests | (323) | (270) | ||||
| Proceeds from the sale of noncontrolling interests | 10 | 30 | ||||
| Purchases of noncontrolling interests | (88) | (79) | ||||
| Advances from managed care payers | 342 | — | ||||
| Other items, net | (37) | (5) | ||||
| Net cash used in financing activities | (2,815) | (504) | ||||
| Net increase in cash and cash equivalents | 1,652 | 76 | ||||
| Cash and cash equivalents at beginning of period | 1,228 | 858 | ||||
| Cash and cash equivalents at end of period | $ | 2,880 | $ | 934 | ||
| Supplemental disclosures: | ||||||
| Interest paid, net of capitalized interest | $ | (459) | $ | (445) | ||
| Income tax payments, net | $ | (240) | $ | (158) |
Page 15
TENET HEALTHCARE CORPORATION
SEGMENT REPORTING
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, | June 30, | |||||||||||
| (Dollars in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||
| Net operating revenues: | ||||||||||||
| Ambulatory Care | $ | 1,141 | $ | 942 | $ | 2,136 | $ | 1,847 | ||||
| Hospital Operations and Services | 3,962 | 4,140 | 8,335 | 8,256 | ||||||||
| Total | $ | 5,103 | $ | 5,082 | $ | 10,471 | $ | 10,103 | ||||
| Equity in earnings of unconsolidated affiliates: | ||||||||||||
| Ambulatory Care | $ | 58 | $ | 52 | $ | 114 | $ | 99 | ||||
| Hospital Operations and Services | 3 | 2 | 6 | 5 | ||||||||
| Total | $ | 61 | $ | 54 | $ | 120 | $ | 104 | ||||
| Adjusted EBITDA: | ||||||||||||
| Ambulatory Care | $ | 447 | $ | 370 | $ | 841 | $ | 710 | ||||
| Hospital Operations and Services | 498 | 473 | 1,128 | 965 | ||||||||
| Total | $ | 945 | $ | 843 | $ | 1,969 | $ | 1,675 | ||||
| Adjusted EBITDA margins: | ||||||||||||
| Ambulatory Care | 39.2 | % | 39.3 | % | 39.4 | % | 38.4 | % | ||||
| Hospital Operations and Services | 12.6 | % | 11.4 | % | 13.5 | % | 11.7 | % | ||||
| Total | 18.5 | % | 16.6 | % | 18.8 | % | 16.6 | % | ||||
| Capital expenditures: | ||||||||||||
| Ambulatory Care | $ | 19 | $ | 20 | $ | 37 | $ | 38 | ||||
| Hospital Operations and Services | 126 | 112 | 348 | 329 | ||||||||
| Total | $ | 145 | $ | 132 | $ | 385 | $ | 367 |
Page 16
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP disclosures
Table #1 – Reconciliations of Net Income Available to Tenet Healthcare Corporation Common Shareholders to Adjusted Net Income Available to Common Shareholders
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| June 30, | June 30, | |||||||
| (Dollars in millions, except per share amounts) | 2024 | 2023 | 2024 | 2023 | ||||
| Net income available to Tenet Healthcare Corporation common shareholders | $ | 259 | $ | 123 | $ | 2,410 | $ | 266 |
| Less: | ||||||||
| Impairment and restructuring charges, and acquisition-related costs | (29) | (16) | (56) | (37) | ||||
| Litigation and investigation costs | (5) | (10) | (9) | (14) | ||||
| Net gains on sales, consolidation and deconsolidation of facilities | 58 | — | 2,558 | 13 | ||||
| Loss from early extinguishment of debt | — | (11) | (8) | (11) | ||||
| Tax and noncontrolling interests impact of above items | 9 | 6 | (625) | 7 | ||||
| Adjusted net income available to common shareholders | $ | 226 | $ | 154 | $ | 550 | $ | 308 |
| Diluted earnings per share | $ | 2.64 | $ | 1.15 | $ | 24.22 | $ | 2.47 |
| Less: | ||||||||
| Impairment and restructuring charges, and acquisition-related costs | (0.30) | (0.15) | (0.56) | (0.35) | ||||
| Litigation and investigation costs | (0.05) | (0.10) | (0.09) | (0.13) | ||||
| Net gains on sales, consolidation and deconsolidation of facilities | 0.59 | — | 25.70 | 0.12 | ||||
| Loss from early extinguishment of debt | — | (0.10) | (0.08) | (0.10) | ||||
| Tax and noncontrolling interests impact of above items | 0.09 | 0.06 | (6.28) | 0.06 | ||||
| Adjusted diluted earnings per share | $ | 2.31 | $ | 1.44 | $ | 5.53 | $ | 2.87 |
| Weighted average basic shares outstanding (in thousands) | 97,267 | 101,766 | 98,424 | 102,028 | ||||
| Weighted average dilutive shares outstanding (in thousands) | 98,444 | 104,778 | 99,557 | 105,354 |
Page 17
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP disclosures
Table #2 – Reconciliations of Net Income Available to Tenet Healthcare Corporation Common Shareholders to Adjusted EBITDA
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, | June 30, | |||||||||||
| (Dollars in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||
| Net income available to Tenet Healthcare Corporation common shareholders | $ | 259 | $ | 123 | $ | 2,410 | $ | 266 | ||||
| Less: | ||||||||||||
| Net income available to noncontrolling interests | (218) | (170) | (401) | (323) | ||||||||
| Net income | 477 | 293 | 2,811 | 589 | ||||||||
| Income tax expense | (110) | (80) | (860) | (164) | ||||||||
| Loss from early extinguishment of debt | — | (11) | (8) | (11) | ||||||||
| Other non-operating income, net | 29 | 6 | 54 | 4 | ||||||||
| Interest expense | (203) | (226) | (421) | (447) | ||||||||
| Operating income | 761 | 604 | 4,046 | 1,207 | ||||||||
| Litigation and investigation costs | (5) | (10) | (9) | (14) | ||||||||
| Net gains on sales, consolidation and deconsolidation of facilities | 58 | — | 2,558 | 13 | ||||||||
| Impairment and restructuring charges, and acquisition-related costs | (29) | (16) | (56) | (37) | ||||||||
| Depreciation and amortization | (208) | (213) | (416) | (430) | ||||||||
| Adjusted EBITDA | $ | 945 | $ | 843 | $ | 1,969 | $ | 1,675 | ||||
| Net operating revenues | $ | 5,103 | $ | 5,082 | $ | 10,471 | $ | 10,103 | ||||
| Net income available to Tenet Healthcare Corporation common shareholders as a % of net operating revenues | 5.1 | % | 2.4 | % | 23.0 | % | 2.6 | % | ||||
| Adjusted EBITDA as a % of net operating revenues (Adjusted EBITDA margin) | 18.5 | % | 16.6 | % | 18.8 | % | 16.6 | % |
Page 18
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP disclosures
Table #3 – Reconciliations of Net Cash Provided by Operating Activities to
Free Cash Flow and Adjusted Free Cash Flow
(Unaudited)
| 2024 | ||||||||
|---|---|---|---|---|---|---|---|---|
| (Dollars in millions) | Q2 | YTD | ||||||
| Net cash provided by operating activities | $ | 747 | $ | 1,333 | ||||
| Purchases of property and equipment | (145) | (385) | ||||||
| Free cash flow | $ | 602 | $ | 948 | ||||
| Net cash provided by (used in) investing activities | $ | (194) | $ | 3,134 | ||||
| Net cash used in financing activities | $ | (154) | $ | (2,815) | ||||
| Net cash provided by operating activities | $ | 747 | $ | 1,333 | ||||
| Less: | ||||||||
| Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements | (39) | (64) | ||||||
| Adjusted net cash provided by operating activities | 786 | 1,397 | ||||||
| Purchases of property and equipment | (145) | (385) | ||||||
| Adjusted free cash flow | $ | 641 | $ | 1,012 | 2023 | |||
| --- | --- | --- | ||||||
| (Dollars in millions) | Q2 | YTD | ||||||
| Net cash provided by operating activities | $ | 598 | $ | 1,047 | ||||
| Purchases of property and equipment | (132) | (367) | ||||||
| Free cash flow | $ | 466 | $ | 680 | ||||
| Net cash used in investing activities | $ | (181) | $ | (467) | ||||
| Net cash used in financing activities | $ | (249) | $ | (504) | ||||
| Net cash provided by operating activities | $ | 598 | $ | 1,047 | ||||
| Less: | ||||||||
| Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements | (54) | (78) | ||||||
| Adjusted net cash provided by operating activities | 652 | 1,125 | ||||||
| Purchases of property and equipment | (132) | (367) | ||||||
| Adjusted free cash flow | $ | 520 | $ | 758 |
Page 19
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP disclosures
Table #4 – Reconciliations of Outlook Net Income Available to Tenet Healthcare Corporation Common Shareholders to Outlook Adjusted Net Income Available to Common Shareholders
(Unaudited)
| Third Quarter 2024 | FY 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| (Dollars in millions, except per share amounts) | Low | High | Low | High | ||||
| Net income available to Tenet Healthcare Corporation common shareholders | $ | 195 | $ | 240 | $ | 2,825 | $ | 2,930 |
| Less: | ||||||||
| Impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements(1) | (20) | (10) | (125) | (75) | ||||
| Net gains on sales, consolidation and deconsolidation of facilities(2) | — | — | 2,558 | 2,558 | ||||
| Loss from early extinguishment of debt(2) | — | — | (8) | (8) | ||||
| Tax and noncontrolling interests impact of above items | 5 | — | (620) | (635) | ||||
| Adjusted net income available to common shareholders | $ | 210 | $ | 250 | $ | 1,020 | $ | 1,090 |
| Diluted earnings per share | $ | 2.01 | $ | 2.47 | $ | 28.83 | $ | 29.90 |
| Less: | ||||||||
| Impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements | (0.20) | (0.11) | (1.27) | (0.76) | ||||
| Net gains on sales, consolidation and deconsolidation of facilities | — | — | 26.10 | 26.10 | ||||
| Loss from early extinguishment of debt | — | — | (0.08) | (0.08) | ||||
| Tax and noncontrolling interests impact of above items | 0.05 | — | (6.33) | (6.48) | ||||
| Adjusted diluted earnings per share | $ | 2.16 | $ | 2.58 | $ | 10.41 | $ | 11.12 |
| Weighted average basic shares outstanding (in thousands) | 96,000 | 96,000 | 97,000 | 97,000 | ||||
| Weighted average dilutive shares outstanding (in thousands) | 97,000 | 97,000 | 98,000 | 98,000 | ||||
| (1) The figures shown represent the Company's estimate for restructuring charges plus the actual year-to-date results for impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements. The Company does not generally forecast impairment charges, acquisition-related costs, and litigation costs and settlements because it 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. | ||||||||
| (2) The Company does not generally forecast net gains on sales, consolidation and deconsolidation of facilities or losses from the early extinguishment of debt because the Company does not believe that it can forecast these items with sufficient accuracy since it is indeterminable at the time the Company provides its financial Outlook. The figures shown relate to transactions that have already occurred in 2024. |
Page 20
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP disclosures
Table #5 – Reconciliations of Outlook Net Income Available to Tenet Healthcare Corporation Common Shareholders to Outlook Adjusted EBITDA
(Unaudited)
| Third Quarter 2024 | FY 2024 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in millions) | Low | High | Low | High | ||||||||
| Net income available to Tenet Healthcare Corporation common shareholders | $ | 195 | $ | 240 | $ | 2,825 | $ | 2,930 | ||||
| Less: | ||||||||||||
| Net income available to noncontrolling interests | (195) | (205) | (820) | (870) | ||||||||
| Income tax expense | (90) | (105) | (1,040) | (1,075) | ||||||||
| Interest expense | (205) | (195) | (825) | (815) | ||||||||
| Loss from early extinguishment of debt(2) | — | — | (8) | (8) | ||||||||
| Other non-operating income, net | 15 | 25 | 90 | 100 | ||||||||
| Net gains on sales, consolidation and deconsolidation of facilities(2) | — | — | 2,558 | 2,558 | ||||||||
| Impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements(1) | (20) | (10) | (125) | (75) | ||||||||
| Depreciation and amortization | (210) | (220) | (830) | (860) | ||||||||
| Adjusted EBITDA | $ | 900 | $ | 950 | $ | 3,825 | $ | 3,975 | ||||
| Net income available to Tenet Healthcare Corporation common shareholders | $ | 195 | $ | 240 | $ | 2,825 | $ | 2,930 | ||||
| Net operating revenues | $ | 5,000 | $ | 5,100 | $ | 20,600 | $ | 21,000 | ||||
| Net income available to Tenet Healthcare Corporation common shareholders as a % of net operating revenues | 3.9 | % | 4.7 | % | 13.7 | % | 14.0 | % | ||||
| Adjusted EBITDA as a % of net operating revenues (Adjusted EBITDA margin) | 18.0 | % | 18.6 | % | 18.6 | % | 18.9 | % | ||||
| (1) The figures shown represent the Company's estimate for restructuring charges plus the actual year-to-date results for impairment and restructuring charges, acquisition-related costs, and litigation costs and settlements. The Company does not generally forecast impairment charges, acquisition-related costs, and litigation costs and settlements because it 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. | ||||||||||||
| (2) The Company does not generally forecast net gains on sales, consolidation and deconsolidation of facilities or losses from the early extinguishment of debt because the Company does not believe that it can forecast these items with sufficient accuracy since it is indeterminable at the time the Company provides its financial Outlook. The figures shown relate to transactions that have already occurred in 2024. |
Page 21
TENET HEALTHCARE CORPORATION
Additional Supplemental Non-GAAP disclosures
Table #6 – Reconciliations of Outlook Net Cash Provided by Operating Activities to Outlook Free Cash Flow and Outlook Adjusted Free Cash Flow
(Unaudited)
| FY 2024 | ||||
|---|---|---|---|---|
| (Dollars in millions) | Low | High | ||
| Net cash provided by operating activities | $ | 1,900 | $ | 2,250 |
| Purchases of property and equipment | (800) | (900) | ||
| Free cash flow | $ | 1,100 | $ | 1,350 |
| Net cash provided by operating activities | $ | 1,900 | $ | 2,250 |
| Less: | ||||
| Payments for restructuring charges, acquisition-related costs and litigation costs and settlements(1) | (125) | (75) | ||
| Adjusted net cash provided by operating activities | 2,025 | 2,325 | ||
| Purchases of property and equipment | (800) | (900) | ||
| Adjusted free cash flow(2) | $ | 1,225 | $ | 1,425 |
| (1) The figures shown represent the Company's estimate for restructuring payments plus the actual year-to-date payments for restructuring charges, acquisition-related costs, and litigation costs and settlements. The Company does not generally forecast payments for acquisition-related costs, and litigation costs and settlements because it 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. | ||||
| (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, and (ii) distributions paid to noncontrolling interests. |
Page 22