Tenet Healthcare Corporation · NYSE:THC
Tenet Healthcare — Proxy Contest (May 2011)
35 slides from Tenet Healthcare's proxy contest presentation, May 2, 2011
Slide 1: Community Health Systems, Quarter 2011
tate) 7CHS COMMUNITY HEALTH SYSTEMS 45 Quarter, 2011
Slide 2: Forward-Looking Statements
Any statements made in this presentation that are not statements of historical fact, including statements about our beliefs and expectations, including any benefits of the proposed acquisition of Tenet Healthcare Corporation ("Tenet"), are forward-looking statements within the meaning of the federal
Slide 3: Additional Information / Participant Information
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This presentation relates to a business combination transaction with Tenet proposed by Community Health Systems, Inc. ("CHS" or "the Company"), whi
Slide 4: CHS is the Premier Hospital Company
CHS is the Premier Hospital Company Largest operator of non-urban and mid-size hospitals - 130 acute care facilities Geographic diversity 29 states Sole provider in over 60% of markets served 2009 Actual 2010 Actual Revenue $12,108 $12,987 EBITDA ** $ 1,671 $1,770 EBITDA Margin ** 13.8% 13.6% EPS $
Slide 5: National Health Expenditures
National Health Expenditures Large and Growing Market with Favorable Trends Source: Centers for Medicare and Medicaid Services Health Spending Expected to Grow 6.3% Annually Through 2019; Hospitals Represent Largest Portion U.S. Population Growth 1995 994 1997 1092 1999 1270.3 2001 1469.6 2003 1734.
Slide 6: Geographically Diverse: 130 Hospitals in 29 States
QHR Managed Facilities - 150 CHS Acute Care Facilities - 130 Geographically Diverse 130 Hospitals in 29 States Sole Provider in over 60% of Markets QHR 150 Facilities in 38 States Top 5 States YE 3-31-11 # of Revenue State Hospitals Contribution Texas 16 12.4% Pennsylvania 10 10.9% Indiana 8 10.1% A
Slide 7: Physician Recruitment Drives Growth
Physician Recruitment Drives Growth Strong Internal Recruiting Dedicated Physician Support Ongoing Monitoring of Practice Development 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Target # Physicians 175 247 277 340 426 470 507 534 594 769 1472 1679 1852 1900 # Physicians Com
Slide 8: ER Strategy: The Front Door of CHS' Hospitals
ER Strategy: "The Front Door" of CHS' Hospitals Initiatives Renovations/Expansions - 54 projects completed, several currently under way Marketing Programs - ER+ ProMed - Emergency room data tracking, quality management and measurement tool Discharge call back implementation Results Improved patient
Slide 9: Improve Hospital Operations
Improve Hospital Operations Acquisitions Ancillary Services Pharmacy Laboratory Surgery Imaging Billing and Collections Compliance Community Cares Customer Service ER Management Executive Recruitment Facilities Management Financial Reporting and Control Group Purchasing Health Information Management
Slide 10: 2010 Acquisitions
2010 Acquisitions Bluefield Regional Medical Center, Bluefield, West Virginia (October 2010) 240 beds and $95 million net revenue Located on border with Virginia in southeastern West Virginia Forum Health, Youngstown, Ohio (October 2010) 311 beds at Trumbull Memorial Hospital in Warren, Ohio 355 bed
Slide 11: Acquisition Performance for 2010 vs. Trailing
1997 - 2001 2002 2003 2004 2005 2006 2007 2008 2009 Trailing 722.467 214.6 545 151.7 246 322.5 6060.6 300 430 Actual 2010 1625.69 369.117 975.795 250.104 315.597 501.406 6656.868 356.703 581.015 Acquisition Performance for 2010 vs. Trailing By Year Acquired 1997 - 2001 2002 2003 2004 2005 2006 2007
Slide 12: Community Health Systems and Tenet Healthcare: A Compelling Opportunity for Value Creation
Community Health Systems and Tenet Healthcare: A Compelling Opportunity for Value Creation
Slide 13: Compelling Strategic Rationale
Compelling Strategic Rationale Subsequent Events Strong complementary fit with significant synergy potential Opportunity to leverage operating efficiencies and best practices Enhances ability to contract effectively with payors More attractive platform for physician recruitment CHS management team h
Slide 14: Attractive Offer for Tenet Shareholders
$6.00 per share in cash Offer represents 40% premium to December 9, 2010 closing price for Tenet Credit Suisse and Goldman have provided to us a letter indicating that it is highly confident it can arrange the debt financing for the transaction along with a syndicate of other financial institutions
Slide 15: Combined Company Pro Forma
Combined Company Pro Forma Tenet Note: Revenue as of YE 12/31/10. Revenue $13.0 billion $9.2 billion $22.2 billion Hospitals 130 50 180 States 29 11 30 Licensed Beds 19,400 13,430 32,830
Slide 16: Target Contribution to Combined Company
Target Contribution to Combined Company Tenet Acquisition Relative to Triad Triad Tenet Revenue 56% 42% EBITDA 55% 36% Beds 51% 41% Hospitals 41% 28% LTM as of 12/31/06 LTM as of 9/30/10 CHS has successfully integrated Triad. On a relative basis, Tenet is a smaller acquisition.
Slide 17: CHS Management Significantly Improved Triad's Operating Results
Triad Facilities LTM 6/30/07 0.12 CY 2009 0.148 +280 bps CHS Management Significantly Improved Triad's Operating Results Pre-acquisition Margin Improvement Substantial corporate cost savings and purchasing synergies achieved First Calendar Year: $145 million Peak Synergies: Over $275 million Recruit
Slide 18: CHS Management Team
Wayne T. Smith Chairman, President and CEO 30+ President and Chief Operating Officer at Humana W. Larry Cash Executive Vice President and CFO 30+ Vice President and Group CFO at HCA; Senior Vice President of Finance & Operations at Humana Rachel A. Seifert Executive Vice President, 15 Vice President
Slide 19: CHS Nominees and Directors
Wayne T. Smith Chairman, President and Chief Executive Officer Community Health Systems W. Larry Cash Executive Vice President and Chief Financial Officer John A. Clerico Co-founder and Chairman ChartMark Investments Former Executive VP and CFO of Praxair and Union Carbide James S. Ely III Founder a
Slide 20: Financial and Operating Highlights
Financial and Operating Highlights
Slide 21: CHS is an Industry Leader in Admissions Growth
2000 255770 2001 303677 2002 379604 2003 434570 2004 493776 2005 538445 2006 605511 2007 846835 2008 1207756 2009 1275888 2010 1308334 2000 139407 2001 165100 2002 205607 2003 238774 2004 267390 2005 291633 2006 326235 2007 461058 2008 668526 2009 692569 2010 693382 17% CAGR 18% CAGR Admissions CHS
Slide 22: 1st Quarter Consolidated Results
* Adjusted admissions include a factor for outpatient business Admissions Adjusted Admissions * Q1 10 176624 Q1 11 179079 Q1 10 322003 Q1 11 337153 +4.7% +1.4% 1st Quarter Consolidated Results
Slide 23: First Quarter Financial Results
Net Revenue $ 3,405,342 $ 3,125,507 9.0% EBITDA** $ 459,772 $ 434,540 5.8% EBITDA Margin ** 13.5% 13.9% Same Store EBITDA ** $ 473,222 $ 436,734 8.4% Same Store EBITDA Margin** 14.4% 14.0% Income From Continuing Operations $ 91,141 $ 86,485 Continuing Operations Margin 2.7% 2.8% Income Attributable
Slide 24: Consolidated Net Revenue by Payor Source
Managed Care Medicaid Medicare Self Pay 51.9 9.8 27.1 11.2 Year Ended December 31, 2009 Payor Mix Consolidated Net Revenue by Payor Source Managed Care Medicaid Medicare Self Pay 50.8 9.6 27.5 12.3 Self Pay Managed Care & Other Medicaid Medicare Year-To-Date March 31, 2011 Managed Care Medicaid Medi
Slide 25: Annual Same Store Growth
2007(1) Annual Same Store Growth * (% change - Year over Year) Admissions 4.5% 1.2% -0.2% 2.1% 1.1% -1.1% 2.0% -1.5% -2.5% -3.4%(2) Adj Admissions 5.1% -0.3% 1.2% 1.8% 0.9% 0.4% 2.2% 0.7% -0.5% 0.0%(2) Net Revenues 9.8% 8.6% 6.6% 9.0% 7.0% 5.7% 5.6% 5.9% 3.9% 5.1% EBITDA Growth ** 10.9% 9.0% 7.4% 12
Slide 26: Financial Information Consolidated
Financial Information Consolidated 2003 2004 2005 2006 2007 2008 2009 2010 3-31-11 A/R Days 65 63 61 62 54 53 48 46 47 Bad Debt 9.7% 10.1% 10.1% 12.5% 12.5% 11.2% 12.1% 12.2% 12.0% Cash Receipts as a % of Net Revenue less Bad Debts for the LTM 102% 103% 103% 103% 104%+ 102% 103% 102% 103% YTD
Slide 27: Bad Debt
Bad Debt (1) Adjusted Net Revenue = Net Revenue + Charity Care + Administrative Self Pay Discount ($ in millions) First quarter same store self-pay admissions decreased 4.2% and same store self-pay adjusted admissions increased 3.9%. As a percent of total admissions, same store self-pay admissions w
Slide 28: Balance Sheet Data
Balance Sheet Data Working Capital 12-31-09 Total Assets Stockholders' Equity $ 1,217,199 $14,021,472 $ 2,015,417 ($ in thousands) 12-31-10 $ 1,229,153 $2,250,377 Long Term Debt $ 8,844,638 $ 8,808,382 $14,698,123 3-31-11 $ 1,230,164 $ 2,372,283 $ 8,794,146 $14,718,279 Note: As of March 31, 2011, ap
Slide 29: Ability to Deleverage
Ability to Deleverage Ratios 1996 1.6 2006 0.5 2010 0.7 Debt to Net Revenue 1996 9.3 2006 3.4 2010 5 Debt to EBITDA Triad Acquisition 2010 ratios well below 1996 levels Triad Acquisition
Slide 30: Cash Provided by Operating Activities
($ millions) Cash from Operating Activities 2002 285 2003 244 2004 326 2005 411 2006 350 2007 688 2008 1057 2009 1076 2010 1189 Q110 299 Q111 187.5 Cash Provided by Operating Activities 2011 Guidance $1,150 to $1,250 million Note: Q1 2011 cash from operating activities lower than 2010 due to an acce
Slide 31: Capital Expenditures
($ in millions) Capital Expenditures Renovation, Equipment & Replacement 5.1% 5.0% 5.2% 7.2% 6.3% 4.8% 5.1% 4.1% 4.5% As a Percent of Net Revenue Replacement Hospitals Including Corporate Office As a % of Net Revenue 2011 Guidance $750 to $850 million Includes $180 million for replacement hospitals
Slide 32: Community Health's Strategy Has Delivered Results
1996 108 1997 122 1998 166 1999 203 2000 251 2001 291 2002 349 2003 429 2004 494 2005 573 2006 572 2007 827 2008 1525 2009 1671 2010 1770 ($MM) 1996 622 1997 742 1998 855 1999 1052 2000 1306 2001 1531 2002 2039 2003 2677 2004 3204 2005 3738 2006 4180 2007 7127 2008 10840.098 2009 12107.6 2010 12986.
Slide 33: CHS Is The Premier Hospital Company
CHS Is The Premier Hospital Company Geographically Diversified Strong Asset Base Attractive Market Segments Experienced Management Team Acquisition Opportunities Proven Formula Consistent Financial Performance Revenue and Profit Upside
Slide 34: Unaudited Supplemental Information
Unaudited Supplemental Information EBITDA consists of net income attributable to Community Health Systems, Inc. before interest, income taxes, and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude discontinued operations, gain/loss from early extinguishment of debt and net
Slide 35: Unaudited Supplemental Information Continued
Unaudited Supplemental Information Continued The following table reconciles ADJUSTED EBITDA, as defined, to net cash provided by operating activities as derived directly from the condensed consolidated financial statements (in thousands):