TENET HEALTHCARE CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - January 29, 2019

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Exhibit 99.1

Unaudited Pro Forma Financial Statements
The following Unaudited Pro Forma Financial Statements are based on the Company’s historical consolidated results of operations and financial position, adjusted to give effect to the Transaction, as defined in Item 2.01 of this Form 8-K, as if it had been completed on September 30, 2018 with respect to the pro forma condensed balance sheet and as of January 1, 2017 with respect to the pro forma condensed statements of operations.
The Unaudited Pro Forma Financial Statements and the accompanying notes should be read together with the Company’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2017, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (“Annual Report”) and its unaudited condensed consolidated financial statements and accompanying notes as of and for the nine months ended September 30, 2018 and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Quarterly Report on Form 10-Q ("Quarterly Report") for the nine months ended September 30, 2018. The Unaudited Pro Forma Financial Statements may differ materially from the future financial position or results of operations due to a number of factors described in “Risk Factors” under Item 1A of Part 1 of our Annual Report and “Forward-Looking Statements” under Item 1 of Part 1 of our Annual Report.


1

Tenet Healthcare Corporation
Unaudited Pro Forma Condensed Balance Sheet
September 30, 2018
 
 
Historical
 
Pro Forma Adjustments
 
Pro Forma
ASSETS
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
500

 
$
42

 
(a)
 
$
542

Accounts receivable, less allowance for doubtful accounts
 
2,484

 
 
 
 
 
2,484

Inventories of supplies, at cost
 
307

 
 
 
 
 
307

Income tax receivable
 
27

 
 
 
 
 
27

Assets held for sale
 
128

 
(112
)
 
(a)
 
16

Other current assets
 
1,046

 
 
 
 
 
1,046

Total current assets
 
4,492

 
(70
)
 
 
 
4,422

Investments and other assets
 
1,462

 
20

 
(a)
 
1,482

Deferred income taxes
 
348

 
 
 
 
 
348

Property and equipment, at cost, less accumulated depreciation and amortization
 
6,888

 


 
 
 
6,888

Goodwill
 
7,313

 
 
 
 
 
7,313

Other intangible assets, at cost, less accumulated amortization
 
1,762

 
 
 
 
 
1,762

Total assets 
 
$
22,265

 
$
(50
)
 
 
 
$
22,215

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Current portion of long-term debt
 
$
672

 
 
 
 
 
$
672

Accounts payable
 
1,065

 
 
 
 
 
1,065

Accrued compensation and benefits
 
814

 
 
 
 
 
814

Professional and general liability reserves
 
230

 
 
 
 
 
230

Accrued interest payable
 
330

 
 
 
 
 
330

Liabilities held for sale
 
71

 
$
(49
)
 
(a)
 
22

Other current liabilities
 
1,042

 
(1
)
 
(a)
 
1,041

Total current liabilities
 
4,224

 
(50
)
 
 
 
4,174

Long-term debt, net of current portion
 
14,178

 
 
 
 
 
14,178

Professional and general liability reserves
 
627

 
 
 
 
 
627

Defined benefit plan obligations
 
476

 
 
 
 
 
476

Deferred income taxes
 
36

 
 
 
 
 
36

Other long-term liabilities
 
622

 
 
 
 
 
622

Total liabilities
 
20,163

 
(50
)
 
 
 
20,113

Commitments and contingencies
 
 
 
 
 
 
 
 
Redeemable noncontrolling interests in equity of consolidated subsidiaries
 
1,444

 
 
 
 
 
1,444

Equity:
 
 
 
 
 
 
 
 
Shareholders’ equity:
 
 
 
 
 
 
 
 
Common stock
 
7

 
 
 
 
 
7

Additional paid-in capital
 
4,733

 
 
 
 
 
4,733

Accumulated other comprehensive loss
 
(202
)
 


 
 
 
(202
)
Accumulated deficit
 
(2,231
)
 
—

 
(a)
 
(2,231
)
Common stock in treasury, at cost
 
(2,415
)
 
 
 
 
 
(2,415
)
Total shareholders’ equity
 
(108
)
 
—

 
 
 
(108
)
Noncontrolling interests
 
766

 
 
 
 
 
766

Total equity
 
658

 
—

 
 
 
658

Total liabilities and equity
 
$
22,265

 
$
(50
)
 
 
 
$
22,215




2

Notes to Unaudited Pro Forma
Condensed Balance Sheet

(a)
Records the net purchase price cash proceeds and recognition of the initial deposit, escrowed proceeds and long-term note receivable related to the sale of the Chicago area hospitals and related facilities, derecognition of the related assets and liabilities held for sale, and the related tax impact from the sale, using an effective rate of 24%, which includes the federal statutory rate of 21% and the applicable state taxes.
 
 
 
 
 
 
 
 
 
 
 
 


3

Tenet Healthcare Corporation
Unaudited Pro Forma Condensed Statement of Operations
For the Year Ended December 31, 2017

(Dollars in millions except per share amounts)
 
Historical
 
Pro Forma Adjustments
 
Pro Forma
 
 
 
 
 
 
 
 
 
Net operating revenues:
 
 
 
 
 
 
 
 
Net operating revenues before provision for doubtful accounts
 
$
20,613

 
$
(322
)
 
(a)
 
$
20,291

Less: Provision for doubtful accounts
 
1,434

 
(15
)
 
(a)
 
1,419

Net operating revenues 
 
19,179

 
(307
)
 
 
 
18,872

Equity in earnings of unconsolidated affiliates
 
144

 
 
 
 
 
144

Operating expenses:
 
 
 
 
 
 
 
 
Salaries, wages and benefits
 
9,274

 
(168
)
 
(a)
 
9,106

Supplies
 
3,085

 
(51
)
 
(a)
 
3,034

Other operating expenses, net
 
4,570

 
(90
)
 
(a)
 
4,480

Electronic health record incentives
 
(9
)
 
1

 
(a)
 
(8
)
Depreciation and amortization
 
870

 
(12
)
 
(a)
 
858

Impairment and restructuring charges, and acquisition-related costs
 
541

 
(73
)
 
(a)
 
468

Litigation and investigation costs
 
23

 
 
 
 
 
23

Gains on sales, consolidation and deconsolidation of facilities
 
(144
)
 
 
 
 
 
(144
)
Operating income
 
1,113

 
86

 
 
 
1,199

Interest expense
 
(1,028
)
 
 
 
 
 
(1,028
)
Other non-operating income (expense), net
 
(22
)
 
 
 
 
 
(22
)
Loss on early extinguishment of debt
 
(164
)
 
 
 
 
 
(164
)
Net loss from continuing operations, before income taxes
 
(101
)
 
86

 
 
 
(15
)
Income tax benefit (expense)
 
(219
)
 
(27
)
 
(b)
 
(246
)
Net loss from continuing operations 
 
(320
)
 
59

 
 
 
(261
)
Less: Net income attributable to noncontrolling interests
 
384

 
 
 
 
 
384

Net loss from continuing operations attributable to Tenet Healthcare Corporation common shareholders 
 
$
(704
)
 
$
59

 
 
 
$
(645
)
Loss from continuing operations per share attributable to Tenet Healthcare Corporation common shareholders:
 
 
 
 
 
 
 
 
Basic
 
$
(7.00
)
 
 
 
 
 
$
(6.41
)
Diluted
 
$
(7.00
)
 
 
 
 
 
$
(6.41
)
Weighted average shares and dilutive securities outstanding (in thousands):
 
 
 
 
 
 
 
 
Basic
 
100,592

 
 
 
 
 
100,592

Diluted
 
100,592

 
 
 
 
 
100,592




4

Tenet Healthcare Corporation
Unaudited Pro Forma Condensed Statement of Operations
For the Nine Months Ended September 30, 2018

(Dollars in millions except per share amounts)
 
Historical
 
Pro Forma Adjustments
 
Pro Forma
 
 
 
 
 
 
 
 
 
Net operating revenues
 
$
13,694

 
$
(228
)
 
(a)
 
$
13,466

Equity in earnings of unconsolidated affiliates
 
97

 
 
 
 
 
97

Operating expenses:
 
 
 
 
 
 
 
 
Salaries, wages and benefits
 
6,478

 
(131
)
 
(a)
 
6,347

Supplies
 
2,248

 
(39
)
 
(a)
 
2,209

Other operating expenses, net
 
3,181

 
(68
)
 
(a)
 
3,113

Electronic health record incentives
 
(1
)
 
 
 
 
 
(1
)
Depreciation and amortization
 
602

 
 
 
 
 
602

Impairment and restructuring charges, and acquisition-related costs
 
123

 
(17
)
 
(a)
 
106

Litigation and investigation costs
 
28

 
 
 
 
 
28

Gains on sales, consolidation and deconsolidation of facilities
 
(111
)
 
 
 
 
 
(111
)
Operating income
 
1,243

 
27

 
 
 
1,270

Interest expense
 
(758
)
 
 
 
 
 
(758
)
Other non-operating income (expense), net
 
(2
)
 
 
 
 
 
(2
)
Loss from early extinguishment of debt
 
(2
)
 
 
 
 
 
(2
)
Net income from continuing operations, before income taxes
 
481

 
27

 
 
 
508

Income tax benefit (expense)
 
(120
)
 
(7
)
 
(c)
 
(127
)
Net income from continuing operations
 
361

 
20

 
 
 
381

Less: Net income attributable to noncontrolling interests
 
248

 
 
 
 
 
248

Net income from continuing operations attributable to Tenet Healthcare Corporation common shareholders
 
$
113

 
$
20

 
 
 
$
133

Earnings from continuing operations per share attributable to Tenet Healthcare Corporation common shareholders:
 
 
 
 
 
 
 
 
Basic
 
$
1.11

 
 
 
 
 
$
1.30

Diluted
 
$
1.09

 
 
 
 
 
$
1.28

Weighted average shares and dilutive securities outstanding (in thousands):
 
 
 
 
 
 
 
 
Basic
 
101,980

 
 
 
 
 
101,980

Diluted
 
103,802

 
 
 
 
 
103,802




5


Notes to Unaudited Pro Forma
Condensed Statement of Operations

(a)
Eliminates the historical revenue and operating expenses of the divested Chicago area hospitals and related facilities.
 
 
(b)
Reflects the applicable income tax effects of the pro forma adjustments in this column at an effective tax rate of 37%, which includes the federal statutory rate of 35% and the applicable state tax rate that were in effect during the period presented, adjusted for the impact of nondeductible goodwill. Also includes the reversal of $2 million of tax expense related to the impact on deferred taxes of the decrease in the federal statutory rate from 35% to 21% due to the Tax Cuts and Jobs Act enacted December 22, 2017.
 
 
(c)
Reflects the applicable income tax effects of the pro forma adjustments in this column at an effective tax rate of 24%, which includes the federal statutory rate of 21% and the applicable state tax rate that were in effect during the period presented.
 
 
 
 



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