Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - TENET HEALTHCARE CORP | d27296d8ka.htm |
| EX-99.1 - EX-99.1 - TENET HEALTHCARE CORP | d27296dex991.htm |
| EX-99.2 - EX-99.2 - TENET HEALTHCARE CORP | d27296dex992.htm |
| EX-23.1 - EX-23.1 - TENET HEALTHCARE CORP | d27296dex231.htm |
Exhibit 99.3
Unaudited Pro Forma Condensed Combined Financial Data
The following unaudited pro forma condensed combined financial data gives effect to the Acquisitions and related financings as if they had been completed on March 31, 2015 with respect to the pro forma balance sheet data and as of January 1, 2014 with respect to the pro forma statements of operations data.
The Acquisitions will be accounted for under the acquisition method of accounting. Under acquisition accounting, the total purchase price will be allocated to the tangible and intangible assets acquired by Tenet based upon their respective fair values as of the closing date, which will be derived from valuations and other studies that are not yet available. A preliminary allocation of the purchase price has been made to major categories of assets and liabilities acquired in the pro forma condensed combined financial data set forth below based on estimates. The actual allocation of purchase price and the resulting effect on income from operations may differ materially from the pro forma amounts included herein.
The following unaudited pro forma condensed combined financial data are presented for illustrative purposes only and address a hypothetical situation and are not necessarily indicative of what Tenet’s actual financial position or results of operations would have been had the Acquisitions and related financings been completed on the dates indicated above. Additionally, the unaudited pro forma condensed combined financial data are based on currently available information and a number of assumptions, estimates and adjustments as described in the accompanying notes and are subject to adjustments. Furthermore, the following unaudited pro forma condensed combined financial data do not purport to project the future financial position or results of operations of the combined company. A number of factors may affect our results. See “Risk Factors” under Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2014 (“Annual Report”) and Item 1A of Part II of our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2015 (“Quarterly Report”), “Forward-Looking Statements” under Item 1 of Part I of our Annual Report and Item 2 of Part I of our Quarterly Report, and “Risk Factors” under Item 1A of Part I of United Surgical Partners International Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014 (“USPI Annual Report”) and Item 1A of Part II of United Surgical Partners International Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2015 (“USPI Quarterly Report”) and “Forward-Looking Statements” in the USPI Annual Report and the USPI Quarterly Report.
Tenet Healthcare Corporation
Unaudited Pro Forma Condensed Combined Balance Sheet
March 31, 2015
| (Dollars in millions) | Historical Tenet |
Historical USPI Aspen Combined |
Pro Forma Adjustments |
Pro Forma |
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| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
$ | 185 | $ | 50 | $ | (680 | ) | (b | ) | |||||||||||
| (1,420 | ) | (c | ) | |||||||||||||||||
| 2,786 | (c | ) | ||||||||||||||||||
| (70 | ) | (c | ) | |||||||||||||||||
| (750 | ) | (c | ) | |||||||||||||||||
| (21 | ) | (d | ) | $ | 80 | |||||||||||||||
| Available for sale securities |
— | 11 | (11 | ) | (a | ) | — | |||||||||||||
| Accounts receivable, less allowance for doubtful accounts |
2,468 | 78 | — | 2,546 | ||||||||||||||||
| Other receivables |
— | 31 | (31 | ) | (a | ) | — | |||||||||||||
| Inventories of supplies, at cost |
268 | 15 | — | 283 | ||||||||||||||||
| Income tax receivable |
2 | — | — | 2 | ||||||||||||||||
| Current portion of deferred income taxes |
718 | 30 | — | 748 | ||||||||||||||||
| Assets held for sale |
337 | — | — | 337 | ||||||||||||||||
| Other current assets |
1,146 | 27 | 42 | (a | ) | 1,215 | ||||||||||||||
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| Total current assets |
5,124 | 242 | (155 | ) | 5,211 | |||||||||||||||
| Investments and other assets |
355 | 596 | 30 | (a | ) | 981 | ||||||||||||||
| Other assets |
— | 30 | (30 | ) | (a | ) | — | |||||||||||||
| Deferred income taxes, net of current portion |
66 | — | (66 | ) | (a | ) | — | |||||||||||||
| Property and equipment, at cost, less accumulated depreciation and amortization |
7,528 | 335 | — | 7,863 | ||||||||||||||||
| Goodwill |
3,874 | 1,311 | (1,311 | ) | (b | ) | ||||||||||||||
| 2,791 | (b | ) | 6,665 | |||||||||||||||||
| Other intangible assets, at cost, less accumulated amortization |
1,478 | 367 | (20 | ) | (b | ) | ||||||||||||||
| 70 | (c | ) | 1,895 | |||||||||||||||||
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| Total assets |
$ | 18,425 | $ | 2,881 | $ | 1,309 | $ | 22,615 | ||||||||||||
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| LIABILITIES AND EQUITY |
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| Current liabilities: |
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| Short-term borrowings |
$ | 400 | $ | — | $ | (400 | ) | (c | ) | $ | — | |||||||||
| Current portion of long-term debt |
110 | 21 | (10 | ) | (c | ) | 121 | |||||||||||||
| Accounts payable |
1,098 | 44 | — | 1,142 | ||||||||||||||||
| Accrued compensation and benefits |
671 | 24 | — | 695 | ||||||||||||||||
| Professional and general liability reserves |
188 | — | 27 | (a | ) | 215 | ||||||||||||||
| Accrued interest payable |
268 | 20 | (20 | ) | (c | ) | 268 | |||||||||||||
| Due to affiliates |
— | 167 | — | 167 | ||||||||||||||||
| Liabilities held for sale |
45 | — | — | 45 | ||||||||||||||||
| Other current liabilities |
954 | 65 | (27 | ) | (a | ) | 992 | |||||||||||||
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| Total current liabilities |
3,734 | 341 | (430 | ) | 3,645 | |||||||||||||||
| Long-term debt, net of current portion |
11,824 | 1,789 | (1,390 | ) | (c | ) | ||||||||||||||
| 2,786 | (c | ) | ||||||||||||||||||
| (350 | ) | (c | ) | 14,659 | ||||||||||||||||
| Professional and general liability reserves |
524 | — | — | 524 | ||||||||||||||||
| Defined benefit plan obligations |
629 | — | — | 629 | ||||||||||||||||
| Deferred tax liability |
— | 208 | (66 | ) | (a | ) | — | |||||||||||||
| (85 | ) | (b | ) | |||||||||||||||||
| (4 | ) | (d | ) | 53 | ||||||||||||||||
| Other long-term liabilities |
534 | 39 | — | 573 | ||||||||||||||||
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| Total liabilities |
17,245 | 2,377 | 461 | 20,083 | ||||||||||||||||
| Commitments and contingencies |
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| Redeemable noncontrolling interests in equity of consolidated subsidiaries |
208 | 196 | 1,112 | (b | ) | 1,516 | ||||||||||||||
| Equity: |
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| Shareholders’ equity: |
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| Common stock |
7 | 62 | (62 | ) | (b | ) | 7 | |||||||||||||
| Additional paid-in capital |
4,751 | 220 | (220 | ) | (b | ) | 4,751 | |||||||||||||
| Accumulated other comprehensive loss |
(179 | ) | (12 | ) | 12 | (b | ) | (179 | ) | |||||||||||
| Receivable from sale of common stock |
— | (7 | ) | 7 | (b | ) | — | |||||||||||||
| Accumulated (deficit) earnings |
(1,363 | ) | (16 | ) | 16 | (b | ) | |||||||||||||
| (17 | ) | (d | ) | (1,380 | ) | |||||||||||||||
| Common stock in treasury, at cost |
(2,377 | ) | — | — | (2,377 | ) | ||||||||||||||
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| Total shareholders’ equity |
839 | 247 | (264 | ) | 822 | |||||||||||||||
| Noncontrolling interests |
133 | 61 | — | 194 | ||||||||||||||||
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| Total equity |
972 | 308 | (264 | ) | 1,016 | |||||||||||||||
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| Total liabilities and equity |
$ | 18,425 | $ | 2,881 | $ | 1,309 | $ | 22,615 | ||||||||||||
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Notes to Unaudited Pro Forma Condensed Combined
Balance Sheet
| (a) | Adjusts the historical presentation of USPI and Aspen combined financial statements to conform to Tenet’s presentation. |
| (b) | Records the payment of the purchase price to USPI and Aspen and the adjustments as a result of the preliminary allocation of the purchase price to the assets and liabilities acquired. The preliminary purchase price allocation is as follows: |
| Current assets |
$ | 242 | ||
| Investment in affiliates |
596 | |||
| Other assets |
30 | |||
| Property and equipment |
335 | |||
| Goodwill |
2,791 | |||
| Intangible assets |
347 | |||
| Current liabilities |
(341 | ) | ||
| Long-term debt, net of current portion |
(1,789 | ) | ||
| Other liabilities |
(39 | ) | ||
| Deferred tax liability |
(123 | ) | ||
| Redeemable noncontrolling interest |
(1,308 | ) | ||
| Noncontrolling interest |
(61 | ) | ||
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| Total |
$ | 680 | ||
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No adjustments to the carrying value or useful lives of property and equipment were made in the preliminary purchase price allocations. Once detailed valuations and other studies are completed, the purchase price allocation will be updated.
| (c) | Reflects the issuance of $2.8 billion of debt at 99.5% of par to fund the Contribution and Purchase Transactions and pay off the assumed debt of $1.4 billion, net of $70 million capitalized debt issuance costs. Also reflects the payoff of the interim loan agreement and a $350 million reduction in the amounts outstanding under the Credit Agreement. |
| (d) | Records estimated transaction fees paid to third parties in connection with the Contribution and Purchase Transactions. Costs to retire USPI debt are not included in the pro forma balance sheet adjustments. |
Tenet Healthcare Corporation
Unaudited Pro Forma Condensed Combined Historical
Statement of Operations
Year Ended December 31, 2014
| (Dollars in millions except per share amounts) | Historical Tenet |
Historical USPI Aspen Combined |
Pro Forma Adjustments |
Pro Forma |
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| Net operating revenues: |
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| Net operating revenues before provision for doubtful accounts and premiums |
$ | 17,920 | $ | 831 | (a | ) | $ | 18,751 | ||||||||||||
| Net patient service revenues |
— | $ | 724 | (724 | ) | (a | ) | — | ||||||||||||
| Management and contract service revenue |
— | 96 | (96 | ) | (a | ) | — | |||||||||||||
| Other revenue |
— | 11 | (11 | ) | (a | ) | — | |||||||||||||
| Less: provision for doubtful accounts |
(1,305 | ) | — | (11 | ) | (a | ) | (1,316 | ) | |||||||||||
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| Net operating revenues |
16,615 | 831 | (11 | ) | 17,435 | |||||||||||||||
| Equity in earnings |
— | 117 | 117 | |||||||||||||||||
| Operating expenses: |
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| Salaries, wages and benefits |
8,023 | 237 | 40 | (a | ) | 8,300 | ||||||||||||||
| Medical services and supplies |
— | 142 | (142 | ) | (a | ) | — | |||||||||||||
| Supplies |
2,630 | — | 142 | (a | ) | 2,772 | ||||||||||||||
| Loss on deconsolidations |
— | 7 | (7 | ) | (a | ) | — | |||||||||||||
| Other operating expenses, net |
4,114 | 158 | 23 | (a | ) | 4,295 | ||||||||||||||
| Electronic health record incentives |
(104 | ) | — | — | (104 | ) | ||||||||||||||
| General and administrative |
— | 63 | (63 | ) | (a | ) | — | |||||||||||||
| Provision for doubtful accounts |
— | 11 | (11 | ) | (a | ) | — | |||||||||||||
| Depreciation and amortization |
849 | 42 | 891 | |||||||||||||||||
| Impairment and restructuring charges, and acquisition-related costs |
153 | — | 7 | (a | ) | 160 | ||||||||||||||
| Litigation and investigation costs |
25 | — | — | 25 | ||||||||||||||||
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| Operating income |
925 | 288 | — | 1,213 | ||||||||||||||||
| Interest expense |
(754 | ) | (106 | ) | 90 | (b | ) | |||||||||||||
| (164 | ) | (c | ) | |||||||||||||||||
| (6 | ) | (d | ) | |||||||||||||||||
| 8 | (f | ) | (932 | ) | ||||||||||||||||
| Loss from early extinguishment of debt |
(24 | ) | — | — | (24 | ) | ||||||||||||||
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| Income (loss) from continuing operations, before income taxes |
147 | 182 | (72 | ) | 257 | |||||||||||||||
| Income tax benefit (expense) |
(49 | ) | (39 | ) | 29 | (e | ) | (59 | ) | |||||||||||
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| Income (loss) from continuing operations |
98 | 143 | (43 | ) | 198 | |||||||||||||||
| Less: Net income attributable to noncontrolling interests |
64 | 79 | 46 | (g | ) | 189 | ||||||||||||||
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| Net income (loss) from continuing operations attributable to common shareholders |
$ | 34 | $ | 64 | $ | (89 | ) | $ | 9 | |||||||||||
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| Earnings per share from continuing operations attributable to Tenet Healthcare Corporation common shareholders |
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| Basic |
$ | 0.35 | $ | 0.09 | ||||||||||||||||
| Diluted |
$ | 0.34 | $ | 0.09 | ||||||||||||||||
| Weighted average shares and dilutive securities outstanding (in thousands): |
||||||||||||||||||||
| Basic |
97,801 | 97,801 | ||||||||||||||||||
| Diluted |
100,287 | 100,287 | ||||||||||||||||||
Tenet Healthcare Corporation
Unaudited Pro Forma Condensed Combined Historical
Statement of Operations
Three Months Ended March 31, 2015
| (Dollars in millions except per share amounts) | Historical Tenet |
Historical USPI Aspen Combined |
Pro Forma Adjustments |
Pro Forma |
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| Net operating revenues: |
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| Net operating revenues before provision for doubtful accounts and premiums |
$ | 4,791 | $ | 207 | (a | ) | $ | 4,998 | ||||||||||||
| Net patient service revenues |
— | $ | 179 | (179 | ) | (a | ) | — | ||||||||||||
| Management and contract service revenue |
— | 25 | (25 | ) | (a | ) | — | |||||||||||||
| Other revenue |
— | 3 | (3 | ) | (a | ) | — | |||||||||||||
| Less: provision for doubtful accounts |
(363 | ) | — | (2 | ) | (a | ) | (365 | ) | |||||||||||
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| Net operating revenues |
4,428 | 207 | (2 | ) | 4,633 | |||||||||||||||
| Equity in earnings |
— | 21 | 21 | |||||||||||||||||
| Operating expenses: |
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| Salaries, wages and benefits |
2,125 | 61 | 10 | (a | ) | 2,196 | ||||||||||||||
| Medical services and supplies |
— | 34 | (34 | ) | (a | ) | — | |||||||||||||
| Supplies |
687 | — | 34 | (a | ) | 721 | ||||||||||||||
| Other operating expenses, net |
1,093 | 43 | 9 | (a | ) | |||||||||||||||
| (5 | ) | (h | ) | 1,140 | ||||||||||||||||
| Electronic health record incentives |
(6 | ) | — | — | (6 | ) | ||||||||||||||
| General and administrative |
— | 19 | (19 | ) | (a | ) | — | |||||||||||||
| Provision for doubtful accounts |
— | 2 | (2 | ) | (a | ) | — | |||||||||||||
| Depreciation and amortization |
207 | 10 | — | 217 | ||||||||||||||||
| Impairment and restructuring charges, and acquisition-related costs |
29 | — | (3 | ) | (h | ) | 26 | |||||||||||||
| Litigation and investigation costs |
3 | — | — | 3 | ||||||||||||||||
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| Operating income |
290 | 59 | 8 | 357 | ||||||||||||||||
| Interest expense |
(199 | ) | (27 | ) | 22 | (b | ) | |||||||||||||
| (42 | ) | (c | ) | |||||||||||||||||
| (1 | ) | (d | ) | |||||||||||||||||
| 2 | (f | ) | ||||||||||||||||||
| 3 | (h | ) | (242 | ) | ||||||||||||||||
| Debt extinguishment costs |
— | (3 | ) | 3 | (h | ) | — | |||||||||||||
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| Income (loss) from continuing operations, before income taxes |
91 | 29 | (5 | ) | 115 | |||||||||||||||
| Income tax benefit (expense) |
(16 | ) | (5 | ) | 3 | (e | ) | (18 | ) | |||||||||||
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| Income (loss) from continuing operations |
75 | 24 | (2 | ) | 97 | |||||||||||||||
| Less: Net income attributable to noncontrolling interests |
29 | 19 | 7 | (g | ) | 55 | ||||||||||||||
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| Net income (loss) from continuing operations attributable to common shareholders |
$ | 46 | $ | 5 | $ | (9 | ) | $ | 42 | |||||||||||
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| Earnings per share from continuing operations attributable to Tenet Healthcare Corporation common shareholders |
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| Basic |
$ | 0.47 | $ | 0.43 | ||||||||||||||||
| Diluted |
$ | 0.46 | $ | 0.42 | ||||||||||||||||
| Weighted average shares and dilutive securities outstanding (in thousands): |
||||||||||||||||||||
| Basic |
98,699 | 98,699 | ||||||||||||||||||
| Diluted |
100,872 | 100,872 | ||||||||||||||||||
Notes to Unaudited Pro Forma Condensed Combined
Statements of Operations
| (a) | Adjusts the historical presentation of USPI and Aspen combined financial statements to conform to Tenet’s presentation. |
| (b) | Eliminates USPI’s historical interest expense related to the debt that was paid off in connection with the Contribution and Purchase Transactions. |
| (c) | Reflects the increase in interest expense for the $2.8 billion of borrowings incurred to fund the Contribution and Purchase Transactions and acquisition of Aspen and the payoff of the acquired debt based on an assumed blended interest rate of 5.79% along with estimated debt issuance costs of $70 million and original issue discount of $14 million, which will be amortized over the term of the debt. |
| (d) | Adjusts amortization of debt issue costs for the borrowings incurred to fund the Contribution and Purchase Transactions and pay off the acquired debt. |
| (e) | Reflects the applicable income tax effects of the pro forma adjustments in this column at an effective tax rate of 37%. |
| (f) | Reflects the decrease in interest expense resulting from pay down of the amounts outstanding under the Credit Agreement. |
| (g) | Adjusts the noncontrolling interest to reflect the ownership by Tenet of 50.1% of the businesses consolidated in the joint venture from both Tenet and USPI. |
| (h) | Eliminates acquisition expenses related to this transaction and other nonrecurring expenses reflected in the historical financial statements. |