EX-99.2 3 thc-20170930ex992phil8k.htm EXHIBIT 99.2 Exhibit
Exhibit 99.2

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, 2017 with respect to the pro forma condensed consolidated balance sheet and as of January 1, 2016 with respect to the pro forma condensed consolidated 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, 2016, 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, 2016 (“Annual Report”) and its unaudited condensed consolidated financial statements and accompanying notes as of and for the nine months ended September 30, 2017 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, 2017. 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 Consolidated Balance Sheet
September 30, 2017
(Dollars in millions)
 
Historical
 
Pro Forma Adjustments
 
Pro Forma
ASSETS
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
429

 
$
153

 
(a)
 
$
582

Accounts receivable, less allowance for doubtful accounts
 
2,567

 
 
 
 
 
2,567

Inventories of supplies, at cost
 
297

 
 
 
 
 
297

Income tax receivable
 
14

 
 
 
 
 
14

Assets held for sale
 
842

 
(222
)
 
(a)
 
620

Other current assets
 
1,160

 
 
 
 
 
1,160

Total current assets
 
5,309

 
(69
)
 
 
 
5,240

Investments and other assets
 
1,253

 
17

 
(a)
 
1,270

Deferred income taxes
 
783

 
—

 
(a)
 
783

Property and equipment, at cost, less accumulated depreciation and amortization
 
7,077

 


 
 
 
7,077

Goodwill
 
7,022

 
 
 
 
 
7,022

Other intangible assets, at cost, less accumulated amortization
 
1,764

 
 
 
 
 
1,764

Total assets 
 
$
23,208

 
$
(52
)
 
 
 
$
23,156

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Current portion of long-term debt
 
$
140

 
 
 
 
 
$
140

Accounts payable
 
1,100

 
 
 
 
 
1,100

Accrued compensation and benefits
 
800

 
 
 
 
 
800

Professional and general liability reserves
 
210

 
 
 
 
 
210

Accrued interest payable
 
336

 
 
 
 
 
336

Liabilities held for sale
 
407

 
(52
)
 
(a)
 
355

Other current liabilities
 
1,146

 
 
 
 
 
1,146

Total current liabilities
 
4,139

 
(52
)
 
 
 
4,087

Long-term debt, net of current portion
 
14,741

 
 
 
 
 
14,741

Professional and general liability reserves
 
617

 
 
 
 
 
617

Defined benefit plan obligations
 
596

 
 
 
 
 
596

Other long-term liabilities
 
604

 
 
 
 
 
604

Total liabilities
 
20,697

 
(52
)
 
 
 
20,645

Commitments and contingencies
 
 
 
 
 
 
 
 
Redeemable noncontrolling interests in equity of consolidated subsidiaries
 
1,816

 
 
 
 
 
1,816

Equity:
 
 
 
 
 
 
 
 
Shareholders’ equity:
 
 
 
 
 
 
 
 
Common stock
 
7

 
 
 
 
 
7

Additional paid-in capital
 
4,835

 
 
 
 
 
4,835

Accumulated other comprehensive loss
 
(238
)
 
 
 
 
 
(238
)
Accumulated deficit
 
(2,161
)
 
—

 
(a)
 
(2,161
)
Common stock in treasury, at cost
 
(2,419
)
 
 
 
 
 
(2,419
)
Total shareholders’ equity
 
24

 
—

 
 
 
24

Noncontrolling interests
 
671

 
 
 
 
 
671

Total equity
 
695

 
—

 
 
 
695

Total liabilities and equity
 
$
23,208

 
$
(52
)
 
 
 
$
23,156




2

Notes to Unaudited Pro Forma
Condensed Consolidated Balance Sheet

(a)
Records the initial base purchase price cash and note receivable proceeds from the sale of the Philadelphia-area hospitals and related facilities, derecognition of the related assets and liabilities held for sale, and the related after-tax loss on sale, using an effective rate of 37%, which includes the federal statutory rate of 35% and the applicable state tax rate that were in effect as of September 30, 2017.
 
 
 
 
 
 
 
 
 
 
 
 


3

Tenet Healthcare Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2016

(Dollars in millions except per share amounts)
 
Historical
 
Pro Forma Adjustments
 
Pro Forma
 
 
 
 
 
 
 
 
 
Net operating revenues:
 
 
 
 
 
 
 
 
Net operating revenues before provision for doubtful accounts
 
$
21,070

 
$
(813
)
 
(a)
 
$
20,257

Less: Provision for doubtful accounts
 
1,449

 
(26
)
 
(a)
 
1,423

Net operating revenues 
 
19,621

 
(787
)
 
 
 
18,834

Equity in earnings of unconsolidated affiliates
 
131

 
—

 
 
 
131

Operating expenses:
 
 
 
 
 
 
 
 
Salaries, wages and benefits
 
9,356

 
(391
)
 
(a)
 
8,965

Supplies
 
3,124

 
(114
)
 
(a)
 
3,010

Other operating expenses, net
 
4,891

 
(302
)
 
(a)
 
4,589

Electronic health record incentives
 
(32
)
 
1

 
(a)
 
(31
)
Depreciation and amortization
 
850

 
(18
)
 
(a)
 
832

Impairment and restructuring charges, and acquisition-related costs
 
202

 
(38
)
 
(a)
 
164

Litigation and investigation costs
 
293

 
—

 
 
 
293

Gains on sales, consolidation and deconsolidation of facilities
 
(151
)
 
—

 
 
 
(151
)
Operating income
 
1,219

 
75

 
 
 
1,294

Interest expense
 
(979
)
 
—

 
 
 
(979
)
Other non-operating income (expense), net
 
8

 
—

 
 
 
8

Net income from continuing operations, before income taxes
 
248

 
75

 
 
 
323

Income tax benefit (expense)
 
(67
)
 
(27
)
 
(b)
 
(94
)
Net income from continuing operations 
 
181

 
48

 
 
 
229

Less: Net income attributable to noncontrolling interests
 
368

 
1

 
(a)
 
369

Net loss attributable to Tenet Healthcare Corporation common shareholders 
 
$
(187
)
 
$
47

 
 
 
$
(140
)
Loss per share attributable to Tenet Healthcare Corporation common shareholders:
 
 
 
 
 
 
 
 
Basic
 
$
(1.88
)
 
 
 
 
 
$
(1.41
)
Diluted
 
$
(1.88
)
 
 
 
 
 
$
(1.41
)
Weighted average shares and dilutive securities outstanding (in thousands):
 
 
 
 
 
 
 
 
Basic
 
99,321

 
 
 
 
 
99,321

Diluted
 
99,321

 
 
 
 
 
99,321




4

Tenet Healthcare Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended September 30, 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
 
$
15,310

 
$
(617
)
 
(a)
 
$
14,693

Less: Provision for doubtful accounts
 
1,109

 
(13
)
 
(a)
 
1,096

Net operating revenues 
 
14,201

 
(604
)
 
 
 
13,597

Equity in earnings of unconsolidated affiliates
 
95

 
—

 
 
 
95

Operating expenses:
 
 
 
 
 
 
 
 
Salaries, wages and benefits
 
6,990

 
(289
)
 
(a)
 
6,701

Supplies
 
2,285

 
(79
)
 
(a)
 
2,206

Other operating expenses, net
 
3,466

 
(231
)
 
(a)
 
3,235

Electronic health record incentives
 
(8
)
 
—

 
 
 
(8
)
Depreciation and amortization
 
662

 
(16
)
 
(a)
 
646

Impairment and restructuring charges, and acquisition-related costs
 
403

 
(235
)
 
(a)
 
168

Litigation and investigation costs
 
12

 
—

 
 
 
12

Gains on sales, consolidation and deconsolidation of facilities
 
(142
)
 
—

 
 
 
(142
)
Operating income
 
628

 
246

 
 
 
874

Interest expense
 
(775
)
 
1

 
(a)
 
(774
)
Other non-operating income (expense), net
 
(14
)
 
—

 
 
 
(14
)
Loss from early extinguishment of debt
 
(164
)
 
—

 
 
 
(164
)
Net income from continuing operations, before income taxes
 
(325
)
 
247

 
 
 
(78
)
Income tax benefit (expense)
 
105

 
(86
)
 
(b)
 
19

Net income from continuing operations
 
(220
)
 
161

 
 
 
(59
)
Less: Net income attributable to noncontrolling interests
 
254

 
—

 
 
 
254

Net loss attributable to Tenet Healthcare Corporation common shareholders
 
$
(474
)
 
$
161

 
 
 
$
(313
)
Loss per share attributable to Tenet Healthcare Corporation common shareholders:
 
 
 
 
 
 
 
 
Basic
 
$
(4.72
)
 
 
 
 
 
$
(3.12
)
Diluted
 
$
(4.72
)
 
 
 
 
 
$
(3.12
)
Weighted average shares and dilutive securities outstanding (in thousands):
 
 
 
 
 
 
 
 
Basic
 
100,475

 
 
 
 
 
100,475

Diluted
 
100,475

 
 
 
 
 
100,475




5


Notes to Unaudited Pro Forma
Condensed Consolidated Statement of Operations

(a)
Eliminates the historical revenue and operating expenses of the divested Philadelphia 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.
 
 
 
 



6