<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
FEBRUARY 29, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ....... TO ....... .
COMMISSION FILE NUMBER 1-7293
- --------------------------------------------------------------------------------
TENET HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
NEVADA 95-2557091
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3820 STATE STREET
SANTA BARBARA, CA 93105
(Address of principal executive offices)
(805) 563-7000
(Registrant's telephone number, including area code)
----------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS: YES X NO
--- ---
AS OF MARCH 31, 2000 THERE WERE 312,758,739 SHARES OF $0.075 PAR VALUE
COMMON STOCK OUTSTANDING.
================================================================================
<PAGE>
TENET HEALTHCARE CORPORATION INDEX
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of May 31, 1999 and February 29, 2000.............................. 2
Condensed Consolidated Statements of Income
for the Three months and Nine months ended February 28, 1999 and
February 29, 2000..................................................... 4
Condensed Consolidated Statements of Comprehensive Income
for the Nine months ended February 28, 1999 and February 29, 2000..... 5
Condensed Consolidated Statements of Cash Flows
for the Nine months ended February 28, 1999 and February 29, 2000..... 6
Notes to Condensed Consolidated Financial Statements....................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................. 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................... 22
Item 6. Exhibits and Reports on Form 8-K........................................... 22
Signature............................................................................... 23
</TABLE>
- -------------------------
NOTE: ITEM 3 OF PART I AND ITEMS 2, 3, 4 AND 5 OF PART II ARE OMITTED
BECAUSE THEY ARE NOT APPLICABLE.
1
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS TENET HEALTHCARE CORPORATION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 29,
ASSETS 1999 2000
------------------------
(in millions)
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................. $ 29 $ 38
Short-term investments in debt securities.............. 130 111
Accounts receivable, less allowance for doubtful
accounts ($287 at May 31 and $361 at February 29).. 2,318 2,569
Inventories of supplies................................ 221 218
Deferred income taxes.................................. 196 152
Assets held for sale, at the lower of carrying value
or fair value less estimated costs to sell......... 655 211
Other current assets................................... 413 484
------------------------
Total current assets........................... 3,962 3,783
------------------------
Investments and other assets......................................... 569 451
Property and equipment, at cost...................................... 7,703 7,881
Less accumulated depreciation and amortization......... 1,864 2,088
------------------------
Net property and equipment............................. 5,839 5,793
------------------------
Intangible assets, at cost less accumulated amortization
($409 at May 31 and $470 at February 29)............... 3,401 3,365
------------------------
$13,771 $13,392
========================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
2
<PAGE>
TENET HEALTHCARE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 29,
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 2000
------------------------
(in millions)
<S> <C> <C>
Current liabilities:
Accounts payable................................................ $713 $608
Employee compensation and benefits.............................. 390 383
Accrued interest payable........................................ 163 74
Current portion of long-term debt............................... 45 11
Other current liabilities....................................... 711 724
------------------------
Total current liabilities.............................. 2,022 1,800
------------------------
Long-term debt, net of current portion............................... 6,391 5,997
Other long-term liabilities and minority interests................... 1,048 1,049
Deferred income taxes................................................ 440 443
Shareholders' equity:
Common stock, $0.075 par value; authorized 700,000,000 shares;
314,778,323 shares issued at May 31 and 316,443,647 shares 24 24
issued at February 29.......................................
Other shareholders' equity...................................... 3,916 4,149
Less common stock in treasury, at cost, 3,754,708 shares ....... (70) (70)
------------------------
Total shareholders' equity............................. 3,870 4,103
------------------------
$13,771 $13,392
------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
3
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME TENET HEALTHCARE CORPORATION
- -------------------------------------------------------------------------------
THREE AND NINE MONTHS ENDED FEBRUARY 28, 1999 AND FEBRUARY 29, 2000
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
1999 2000 1999 2000
---------------------------------------------------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net operating revenues..................................... $ 2,822 $ 2,850 $ 7,938 $ 8,503
---------------------------------------------------------
Operating expenses:
Salaries and benefits................................. 1,160 1,121 3,217 3,392
Supplies.............................................. 403 401 1,104 1,195
Provision for doubtful accounts....................... 190 214 533 647
Other operating expenses.............................. 611 614 1,710 1,843
Depreciation.......................................... 109 103 307 307
Amortization.......................................... 33 30 96 92
Impairment and other unusual charges .............. -- 232 -- 232
---------------------------------------------------------
Operating income........................................... 316 135 971 795
---------------------------------------------------------
Interest expense, net of capitalized portion............... (122) (117) (360) (361)
Investment earnings........................................ 8 5 21 16
Minority interests in income of consolidated subsidiaries.. -- (6) (5) (16)
Gains on sales of facilities and long-term investments..... -- 51 -- 119
---------------------------------------------------------
Income before income taxes and cumulative effect of
accounting change..................................... 202 68 627 553
Taxes on income............................................ (78) (30) (241) (252)
---------------------------------------------------------
Income before cumulative effect of accounting change....... 124 38 386 301
Cumulative effect of accounting change, net of taxes....... -- -- -- (19)
---------------------------------------------------------
Net income................................................. $124 $38 $386 $282
---------------------------------------------------------
Basic earnings (loss) per share:
Income before cumulative effect of accounting change.. $ 0.40 $ 0.12 $ 1.25 $ 0.96
Cumulative effect of accounting change................ -- -- -- $ (0.06)
Net income............................................ $ 0.40 $ 0.12 $ 1.25 $ 0.90
Diluted earnings (loss) per share:
Income before cumulative effect of accounting change.. $ 0.40 $ 0.12 $ 1.23 $ 0.96
Cumulative effect of accounting change................ -- -- -- $ (0.06)
Net income............................................ $ 0.40 $ 0.12 $ 1.23 $ 0.90
Weighted average shares and dilutive securities outstanding
(in thousands):
Basic ................................................ 310,272 312,279 309,823 311,646
Diluted............................................... 312,945 315,869 313,512 314,277
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
4
<PAGE>
CONDENSED CONSOLIDATED
TENET HEALTHCARE CORPORATION STATEMENTS OF COMPREHENSIVE INCOME
- -------------------------------------------------------------------------------
NINE MONTHS ENDED FEBRUARY 28, 1999 AND FEBRUARY 29, 2000
<TABLE>
<CAPTION>
1999 2000
------------------------
(IN MILLIONS)
<S> <C> <C>
Net income .......................................................... $ 386 $ 282
------------------------
Other comprehensive income (loss):
Foreign currency translation adjustments........................ 2 (3)
Unrealized net holding losses arising during period on
securities held as available for sale....................... (3) (62)
Less reclassification adjustment for realized gains included in
net income ..................................................... -- (60)
------------------------
Other comprehensive loss before income taxes.................... (1) (125)
Income tax benefit related to items of other comprehensive income -- 47
------------------------
Other comprehensive loss........................................ (1) (78)
------------------------
Comprehensive income................................................. $ 385 $ 204
========================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
5
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS TENET HEALTHCARE CORPORATION
- -------------------------------------------------------------------------------
NINE MONTHS ENDED FEBRUARY 28, 1999 AND FEBRUARY 29, 2000
<TABLE>
<CAPTION>
1999 2000
------------------------
(IN MILLIONS)
<S> <C> <C>
Net cash provided by operating activities............................. $ 315 $ 322
------------------------
Cash flows from investing activities..................................
Proceeds from sales of facilities and other assets.............. 19 654
Purchases of property and equipment............................. (401) (396)
Purchases of businesses, net of cash acquired................... (470) (36)
Other Items..................................................... (101) (94)
------------------------
Net cash provided by (used in) investing activities....... (953) 128
------------------------
Cash flows from financing activities:
Proceeds from borrowings........................................ 1,534 1,258
Repayments of borrowings........................................ (872) (1,712)
Other Items..................................................... 14 13
------------------------
Net cash provided by (used in) financing activities....... 676 (441)
------------------------
Net increase in cash and cash equivalents............................. 38 9
Cash and cash equivalents at beginning of period...................... 23 29
------------------------
Cash and cash equivalents at end of period............................ $ 61 $ 38
========================
Supplemental disclosures:
Interest paid, net of amounts capitalized....................... $ 378 $ 437
Interest taxes paid, net of refunds received, related to:
Gains on sales of facilities and long-term investments.... -- 101
All other taxable income.................................. (30) 75
Receivables from sales of facilities and long-term investments........ -- 82
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
6
<PAGE>
TENET HEALTHCARE
CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. The financial information furnished herein is unaudited; however,
in the opinion of management, the information reflects all
adjustments that are necessary to fairly state the financial
position of Tenet Healthcare Corporation (together with its
subsidiaries, "Tenet" or the "Company"), the results of its
operations and its cash flows for the interim periods indicated.
All the adjustments are of a normal recurring nature.
The Company presumes that users of this interim financial
information have read or have access to the Company's audited
financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations for the preceding
fiscal year, and that the adequacy of additional disclosure
needed for a fair presentation may be determined in that context.
Accordingly, footnotes and other disclosures that would
substantially duplicate the disclosures contained in the
Company's most recent annual report to security holders have been
omitted. Patient volumes and net operating revenues of the
Company's hospitals are subject to seasonal variations caused by
a number of factors, including but not necessarily limited to,
seasonal cycles of illness, climate and weather conditions,
vacation patterns of both hospital patients and admitting
physicians and other factors relating to the timing of elective
hospital procedures. Quarterly operating results are not
necessarily representative of operations for a full year for
various reasons, including levels of occupancy, interest rates,
acquisitions, disposals, revenue allowance and discount
fluctuations, the timing of price changes, unusual or
non-recurring items and fluctuations in quarterly tax rates.
These same considerations apply to all year-to-year comparisons.
2. On June 1, 1999, the Company changed its method of accounting for
start-up costs to expense such costs as incurred in accordance
with Statement of Position 98-5, published by the Accounting
Standards Executive Committee of the American Institute of
Certified Public Accountants. The adoption of the Statement
resulted in the write-off of previously capitalized start-up
costs as of May 31, 1999 in the amount of $19 million, net of tax
benefit, which amount is shown in the accompanying consolidated
condensed statement of income for the nine months ended
February 29, 2000 as a cumulative effect of accounting change.
3. During the nine months ended February 29, 2000, the Company sold
17 general hospitals, three skilled nursing facilities and
certain other assets for $654 million in cash and $16 million in
notes. Also, the Company did not renew an expiring lease for a
49-bed hospital in Tennessee. The net pre-tax gain on the sales
of the above facilities amounted to $63 million. In addition, the
Company sold certain long-term investments for realized gains of
$56 million. The hospital sales were part of the Company's plan
to sell or close certain non-strategic hospitals in order to
streamline its organization by concentrating on markets where it
already has a strong presence. In December 1999, the Company
acquired a 222-bed acute care hospital in Poplar Bluff, Missouri
for $46 million in a transaction accounted for as a purchase.
7
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS TENET HEALTHCARE CORPORATION
- -------------------------------------------------------------------------------
4. During the quarter ended February 29, 2000, the Company recorded
impairment and other unusual charges of $232 million. Of the
total charge, $177 million relates to the Company's previously
announced plans to terminate or allow the expiration of certain
employment and management contracts with approximately 440
physicians over the next 18 months and $55 million relates to the
Company's decision to close or sell two general hospitals and
other property and equipment. The charge consists of $148 million
in impairment charges to value property and equipment and other
assets at the lower of carrying value or estimated fair values,
$66 million for lease cancellation and other exit costs,
$5 million for the estimated costs to close or sell the general
hospitals, $9 million in severance costs for the termination of
approximately 504 employees at the hospital to be closed and at
the above physician practices and $4 million to buy out physician
employment contracts. The $148 million impairment charge includes
$44 million for the write-down of property and equipment and
$104 million for the write-down of goodwill and other assets.
Over the past several years, the Company has employed, or entered
into full-risk management agreements with physicians in most of
its markets. A large percentage of these physician practices were
acquired as part of large hospital acquisitions or through the
formation of integrated health care delivery systems. These
physician practices, however, have not been profitable.
Accordingly, during the latter part of fiscal 1999, the Company
undertook the process of evaluating its physician strategy in
each of its markets and began to develop plans to either
terminate or allow a significant number of its existing contracts
to expire. During the quarter ended February 29, 2000, Company
management, with the authority to do so, authorized the
termination of the contractual relationships with approximately
50% of its contracted physicians. The physicians, employees and
property owners/lessors affected by this decision have been duly
notified. The Company expects to incur additional charges in the
future as the balance of its physician contracts are evaluated
for possible termination. The net operating revenues and
operating losses from these activities have not been material.
8
<PAGE>
TENET HEALTHCARE
CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The following table presents a reconciliation of beginning and ending
liability balances in connection with the merger, impairment and
restructuring charges recorded in fiscal 1997,1998 and 1999, as well as
the charges recorded during the current quarter, by type of cost for
the nine-month period ended February 29, 2000 (in millions):
<TABLE>
<CAPTION>
BALANCES AT CASH OTHER BALANCES AT
RESERVES RELATED TO: 05/31/99(1) CHARGES PAYMENTS ITEMS(2) 2/29/00(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Estimated costs to sell or
close hospitals and
other facilities......... $ 30 $ 5 $ (13) $ -- $22
Impairment losses to value
property, equipment,
goodwill and other
assets, at estimated
fair values.............. -- 148 -- (148) --
Severance costs in connection
with the implementation
of hospital cost control
programs, general
overhead reduction
plans, closure of home
health agencies and, in
fiscal 2000, closure of
hospitals and
termination of physician
contracts................ 19 9 (11) -- 17
Lease cancellation and other exit costs......... 46 66 (28) (9) 75
Accruals for unfavorable
lease commitments at six
medical offices buildings......... 20 -- (4) -- 16
1997 merger..................................... 8 -- (4) -- 4
Termination of physician contracts.............. 6 4 (6) -- 4
--------------------------------------------------------
Total...................................... $ 129 $ 232 $ (66) $ (157) $ 138
========================================================
</TABLE>
(1) The above liability balances are included in
other current liabilities and other long-term
liabilities in the accompanying consolidated
balance sheets.
(2) Other items primarily include write-offs of
long-lived assets, including property and
equipment, goodwill and other assets.
Cash payments to be applied against these accruals are
expected to approximate $66 million in the remainder of
fiscal 2000 and $72 million thereafter.
9
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS TENET HEALTHCARE CORPORATION
- -------------------------------------------------------------------------------
5. The table below provides a reconciliation between net income
and net cash provided by operating activities for the nine
months ended February 28, 1999 and February 29, 2000:
<TABLE>
<CAPTION>
1999 2000
---------------------
(IN MILLIONS)
<S> <C> <C>
Net income ...................................................................... $386 $282
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization .............................................. 403 399
Provision for doubtful accounts ............................................ 533 647
Deferred income taxes ...................................................... 95 (27)
Gains on sales of facilities and long-term investments ..................... -- (119)
Impairment and other unusual charges ....................................... -- 232
Cumulative effect of accounting change, net of taxes..................... -- 19
Other items ................................................................ 15 27
Increases (decreases) in cash from changes in
operating assets and liabilities, net of effects
from purchases and sales of businesses:
Accounts receivable .................................................... (1,120) (965)
Inventories and other current assets ................................... (94) (49)
Income taxes payable ................................................... 145 99
Accounts payable, accrued expenses and other current liabilities ....... 17 (132)
Other long-term liabilities ............................................ (28) (9)
Net expenditures for discontinued operations, merger, impairment and other
unusual charges ........................................................ (37) (82)
=====================
Net cash provided by operating activities .................................. $ 315 $ 322
=====================
</TABLE>
10
<PAGE>
TENET HEALTHCARE
CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
6. The following is a reconciliation of the numerators and the
denominators of the Company's basic and diluted earnings per
share computations before the cumulative effect of an
accounting change for the three months and nine months ended
February 28, 1999 and February 29, 2000. Income is expressed
in millions and weighted average shares are expressed in
thousands:
<TABLE>
<CAPTION>
1999 2000
WEIGHTED WEIGHTED
AVERAGE AVERAGE
INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE
THREE MONTHS (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
---------------------------------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share:
Income available to common
shareholders............... $ 124 310,272 $ 0.40 $ 38 312,279 $ 0.12
------- ---------
Effect of dilutive stock
options and warrants(1).... -- 2,673 -- 3,590
------------------------ -----------------------
Diluted earnings per share:
Income available to common
shareholders............... $ 124 312,945 $ 0.40 $ 38 315,869 $ 0.12
------------------------------------------------------------------------------
</TABLE>
(1) Outstanding options to purchase 18,224,951 and 16,454,797
shares of common stock were not included in the
computation of diluted earnings per share for the
three-month periods ended February 28, 1999 and February
29, 2000, respectively, because the options' exercise
prices were greater than the average market price of the
common stock.
<TABLE>
<CAPTION>
1999 2000
WEIGHTED WEIGHTED
AVERAGE AVERAGE
INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE
NINE MONTHS (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
---------------------------------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share:
Income available to common
shareholders............... $ 386 309,823 $ 1.25 $ 301 311,646 $ 0.96
======= =========
Effect of dilutive stock
options and warrants(1).... -- 3,689 -- 2,631
------------------------ -----------------------
Diluted earnings per share:
Income available to common
shareholders............... $ 386 313,512 $ 1.23 $ 301 314,277 $ 0.96
==============================================================================
</TABLE>
(1) Outstanding options to purchase 11,275,506 and 20,304,748
shares of common stock were not included in the
computation of diluted earnings per share for the
nine-month periods ended February 28, 1999 and
February 29, 2000, respectively, because the options'
exercise prices were greater than the average market
price of the common stock.
11
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS TENET HEALTHCARE CORPORATION
- -------------------------------------------------------------------------------
7. The following table sets forth the tax effects allocated to each
component of other comprehensive income for the nine months ended
February 28, 1999 and February 29, 2000:
<TABLE>
<CAPTION>
1999 2000
BEFORE- TAX NET-OF BEFORE- TAX NET-OF
TAX (EXPENSE) TAX TAX (EXPENSE) TAX
AMOUNT OR BENEFIT AMOUNT AMOUNT OR BENEFIT AMOUNT
-------------------------------- ----------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Foreign currency translation adjustment.......... $ 2 $(1) $ 1 $ (3) $ 1 $ (2)
Unrealized holding gains (losses) on securities.. (3) 1 (2) (62) 26 (36)
Reclassification adjustments..................... -- -- -- (60) 20 (40)
--------------------------------------------------------------------
Other comprehensive income (loss)................ $(1) $ 0 $(1) $(125) $47 $(78)
====================================================================
</TABLE>
The following table sets forth the accumulated other comprehensive income
balances, by component, as of February 28, 1999 and February 29, 2000:
<TABLE>
<CAPTION>
1999 2000
ACCUMULATED UNREALIZED ACCUMULATED
FOREIGN UNREALIZED OTHER FOREIGN GAINS OTHER
CURRENCY GAINS ON COMPREHENSIVE CURRENCY (LOSSES) ON RECLASSIFICATION COMPREHENSIVE
ITEMS SECURITIES INCOME ITEMS SECURITIES ADJUSTMENTS INCOME
------------------------------------ -------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning balance...... $-- $50 $50 $-- $ 77 -- $ 77
Current-period change.. 1 (2) (1) (2) (36) (40) (78)
-------------------------------------------------------------------------------------------
Ending balance......... $ 1 $48 $49 $(2) $ 41 $(40) $ (1)
===========================================================================================
</TABLE>
8. On March 24, 2000 the Company redeemed and effectively terminated all
of the rights issued under the stockholder rights plan adopted on
December 22, 1998. The rights were redeemed at a price of $0.01 per
right with one right per common share, or 312,689,221 rights in total.
At the Company's 1999 annual meeting, a majority of the Company's
common shares were voted in favor of a shareholder recommendation that
the Board of Directors redeem and terminate the shareholder rights
agreement. The board took its action in light of that vote.
9. In December 1999, a wholly owned subsidiary of Tenet Healthcare
Corporation and Ventro Corporation (formerly known as Chemdex
Corporation) announced the formation of a new company, Broadlane, Inc.
Broadlane was organized to provide a business-to-business e-commerce
marketplace to streamline and eliminate inefficiencies from the
existing ways in which suppliers and distributors sell, and health
care providers purchase, health care supplies.
As of February 29, 2000, the Tenet subsidiary owned 66.6% and Ventro
Corporation owned 21.0% of Broadlane's outstanding shares.
12
<PAGE>
TENET HEALTHCARE
CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
10. There have been no material changes to the description of professional
and general liability insurance set forth in Note 9A or significant
legal proceedings set forth in Note 9B of Notes to Consolidated
Financial Statements of Tenet for its fiscal year ended May 31, 1999,
and the Company's Quarterly Report on Form 10-Q for the period ended
November 30, 1999.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS TENET HEALTHCARE CORPORATION
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Operatingresults for the quarter ended February 29, 2000 included the
following highlights:
- strong growth in patient volumes and revenues
- continuing improvements in cost controls
- significant improvements in operating margins
- progress in the Company's initiatives with respect to its
physician practices
On a same-facility basis, admissions improved 3.6% over the year-ago
quarter, patient revenues were up 10.6% and net inpatient revenues per
admission were up 8.5%. Total Company EBITDA margins (the ratio of
earnings before interest, taxes, depreciation and amortization and
impairment and other unusual charges to net operating revenues)
increased from 16.2% to 17.5%.
Income before income taxes and cumulative effect of accounting change
was $202 million in the quarter ended February 28, 1999 and $68 million
in the quarter ended February 29, 2000. For the nine-month periods
ended February 28, 1999 and February 29, 2000, income before income
taxes and cumulative effect of accounting change was $627 million and
$553 million, respectively. The 2000 quarter includes impairment and
other unusual charges of $232 million, described below. The 2000
quarter and nine-month period also include pretax gains on sales of
facilities and long-term investments of $51 million and $119 million,
respectively.
Results of operations for the quarter and nine months ended February
29, 2000 include the operations of seven general hospitals acquired in
November 1998, one in December 1998, two in March 1999 and one in
December 1999 and exclude, from the dates of sale or closure, the
operations of 18 general hospitals and certain other facilities sold or
closed since February 28, 1999. The following are summaries of
consolidated operations for the three months and nine months ended
February 28, 1999 and February 29, 2000:
<TABLE>
<CAPTION>
THREE MONTHS ENDED FEBRUARY 28 AND 29,
1999 2000 1999 2000
----------------------------------------------------
(IN MILLIONS) (% OF NET OPERATING REVENUES)
<S> <C> <C> <C> <C>
Net operating revenues:
Domestic general hospitals................... $2,581 $2,683 91.5% 94.1%
Other operations ............................. 241 167 8.5% 5.9%
----------------------------------------------------
Net operating revenues...................................... 2,822 2,850 100.0% 100.0%
----------------------------------------------------
Operating expenses:
Salaries and benefits......................... (1,160) (1,121) 41.1% 39.3%
Supplies...................................... (403) (401) 14.3% 14.1%
Provision for doubtful accounts............... (190) (214) 6.7% 7.5%
Other operating expenses...................... (611) (614) 21.7% 21.5%
Depreciation.................................. (109) (103) 3.8% 3.7%
Amortization.................................. (33) (30) 1.2% 1.1%
Impairment and other unusual charges ......... -- (232) -- 8.1%
</TABLE>
14
<PAGE>
TENET HEALTHCARE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
---------------------------------------------
Operating income............................................ $316 $135 11.2% 4.7%
=============================================
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED FEBRUARY 28 AND 29,
1999 2000 1999 2000
---------------------------------------------------
(IN MILLIONS) (% OF NET OPERATING REVENUES)
<S> <C> <C> <C> <C>
Net operating revenues:
Domestic general hospitals............................. $7,234 $7,930 91.1% 93.3%
Other operations ...................................... 704 573 8.9% 6.7%
---------------------------------------------------
Net operating revenues...................................... 7,938 8,503 100.0% 100.0%
---------------------------------------------------
Operating expenses:
Salaries and benefits.................................. (3,217) (3,392) 40.5% 39.9%
Supplies............................................... (1,104) (1,195) 13.9% 14.1%
Provision for doubtful accounts........................ (533) (647) 6.7% 7.6%
Other operating expenses............................... (1,710) (1,843) 21.6% 21.7%
Depreciation........................................... (307) (307) 3.9% 3.6%
Amortization........................................... (96) (92) 1.2% 1.1%
Impairment and other unusual charges .............. -- (232) -- 2.7%
---------------------------------------------------
Operating income............................................ $ 971 $ 795 12.2% 9.3%
===================================================
</TABLE>
Net operating revenues of other operations in the tables above consist
primarily of revenues from: (i) physician practices, (ii) rehabilitation
hospitals, long-term care facilities, psychiatric and specialty hospitals
that are located on or near the same campuses as the Company's general
hospitals; (iii) the Company's hospital in Barcelona, Spain; (iv) health care
joint ventures operated by the Company; (v) subsidiaries of the Company
offering managed care and indemnity products; and (vi) equity in earnings of
unconsolidated affiliates.
The table below sets forth certain selected historical operating statistics
for the Company's domestic general hospitals:
<TABLE>
<CAPTION>
THREE MONTHS ENDED FEBRUARY 28 AND 29, NINE MONTHS ENDED FEBRUARY 28 AND 29
INCREASE INCREASE
1999 2000 (DECREASE) 1999 2000 (DECREASE)
------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Number of hospitals (at end of
period).............................. 129 112 (17) * 129 112 (17)*
Licensed beds (at end of period)..... 30,471 27,414 (10.0)% 30,471 27,414 (10.0)%
Net inpatient revenues (in millions). $ 1,725 $ 1,831 6.1% $ 4,737 $5,242 10.7%
Net outpatient revenues (in millions) $807 $ 795 (1.5)% $ 2,348 $2,512 7.0%
Admissions........................... 248,407 239,792 (3.5)% 688,629 706,287 2.6%
Equivalent admissions................ 351,849 335,658 (4.6)% 996,683 1,019,036 2.2%
Average length of stay (days)........ 5.3 5.3 -- 5.2 5.2 --
Patient days......................... 1,304,313 1,274,739 (2.3)% 3,554,223 3,682,942 3.6%
Equivalent patient days.............. 1,832,782 1,770,750 (3.4)% 5,094,834 5,253,680 3.1%
Net inpatient revenue per patient day $ 1,323 $ 1,436 8.5% $ 1,333 $1,423 6.8%
Net inpatient revenue per admission. $ 6,944 $ 7,636 10.0% $ 6,879 $7,422 7.9%
Utilization of licensed beds......... 47.6% 51.1% 3.5% * 44.9% 46.2% 1.3%*
Outpatient visits.................... 2,372,360 2,220,852 (6.4)% 7,119,700 6,979,498 (2.0)%
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS TENET HEALTHCARE CORPORATION
- --------------------------------------------------------------------------------
* The change is the difference between 1999 and 2000 amounts shown.
The table below sets forth certain selected operating statistics for the
Company's domestic general hospitals on a same-store basis:
<TABLE>
<CAPTION>
Three Months Ended February 28 and 29, Nine months Ended February 28 and 29
Increase Increase
1999 2000 (Decrease) 1999 2000 (Decrease)
------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Average licensed beds............... 26,622 26,731 0.4% 26,283 26,184 (0.4)%
Patient days........................ 1,186,589 1,242,863 4.7% 3,293,270 3,373,491 2.4%
Net inpatient revenue per patient
day................................. $ 1,349 $ 1,448 7.3% $ 1,351 $ 1,426 5.6%
Admissions.......................... 224,789 232,940 3.6% 636,354 648,086 1.8%
Net inpatient revenue per admission. $ 7,122 $ 7,727 8.5% $ 6,993 $ 7,424 6.2%
Outpatient visits................... 2,096,116 2,099,685 0.2% 6,497,762 6,263,066 (3.6)%
Average length of stay (days)....... 5.3 5.3 -- 5.2 5.2 --
</TABLE>
The table below sets forth the sources of net patient revenues for the
Company's domestic general hospitals for the three and nine-month
periods ended February 28, 1999 and February 29, 2000, expressed as
percentages of net patient revenues from all sources:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28 and 29, February 28 and 29,
1999 2000 1999 2000
-------------------------------------------
<S> <C> <C> <C> <C>
Medicare ........................................................... 34.5% 33.0% 34.5% 32.4%
Medicaid ........................................................... 8.7% 8.6% 9.1% 8.4%
Managed care ....................................................... 38.4% 40.6% 37.1% 40.8%
Indemnity and other ................................................ 18.4% 17.8% 19.3% 18.4%
</TABLE>
Pressures to control health care costs and a shift from traditional
Medicare to Medicare managed care plans after the Balanced Budget
Act of 1997 was enacted have resulted in an increase in the number
of patients whose health care coverage is provided under managed
care plans. The Company generally receives lower payments per
patient from managed care payors than it does from traditional
indemnity insurers. In spite of this, one of the most significant
trends in the quarter ended February 29, 2000 was the continuing
improvement in net inpatient revenue per admission. On a total store
basis, this statistic increased 10.0% and, on a same-store basis, it
increased by 8.5%, the largest periodic increases in recent years.
While increases in any quarter will vary, there now appears to be an
upward trend that the Company expects will continue. The pricing
environment for managed care and other non-government payors has
improved and the Company expects continuing benefits as it
renegotiates and renews contracts with improved terms and continues
to terminate capitated arrangements with managed care payors and
employers. In most of the large markets served by the Company,
capitation arrangements generally have been disappointing to both
physicians and hospitals.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS TENET HEALTHCARE CORPORATION
- -------------------------------------------------------------------------------
To address all the changes impacting the health care industry, while
continuing to provide quality care to patients, the Company has implemented
strategies to reduce inefficiencies, create synergies, obtain additional
business and control costs. In the past 18 months, such strategies have
included hospital cost-control programs and overhead reduction plans and
the enhancement of integrated health care delivery systems. The Company has
positioned itself for additional cost savings in the years to come, for
example, by recently outsourcing housekeeping, laundry, dietary and plant
maintenance services in nearly two-thirds of its hospitals nationwide.
Further consolidations and implementation of additional cost-control
programs and other operating efficiencies may be undertaken in the future.
Salaries and benefits expense as a percentage of net operating revenues
improved significantly, dropping from 41.1% in the quarter ended February
28, 1999 to 39.3% in the current quarter. This decrease is primarily the
result of continuing cost control measures, improved labor productivity and
the outsourcing of certain hospital services described above.
Supplies expense as a percentage of net operating revenues was 14.3% in the
quarter ended February 28, 1999 and 14.1% in the current quarter. The
slight decrease was primarily was due to continuing cost control measures,
offset by greater patient acuity, which requires the use of more expensive
supplies, and higher prices for new products. The Company continues to
focus on reducing supplies expense through improved utilization and by
developing and expanding programs designed to improve the purchasing of
supplies through its group purchasing organization.
The provision for doubtful accounts as a percentage of net operating
revenues rose to 7.5% in the current quarter from 6.7% for the quarter
ended February 28, 1999, but has been declining for the past two quarters.
It was 7.8% in the quarter ended August 31, 1999 and 7.6% in the quarter
ended November 30, 1999. The Company has taken a series of actions to
mitigate the increase in bad debt expense over the prior year, including
improving the process for collecting receivables, pursuing the acceleration
of payments from managed care payors, standardizing and improving billing
systems and developing a set of best practices in the patient admission and
registration process.
Other operating expenses as a percentage of net operating revenues for the
quarters ended February 28, 1999 and February 29, 2000 were 21.7% and
21.5%, respectively. This decrease is primarily the result of continuing
cost control measures, despite the increase in other expenses as a result
of the outsourcing of certain hospital services.
Taxes on income as a percentage of income before income taxes were 38.7% in
the current quarter, excluding the effect of impairment and other unusual
charges, as well as gains on sales of facilities and long-term investments.
Income taxes related to the gains on sales of facilities and long-term
investments were $20 million for the three months ended February 29, 2000
and $82 million for the nine months ended February 29, 2000 due to the
effect of nondeductible goodwill related to assets sold.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
TENET HEALTHCARE CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
In addition to striving to continuously improve its portfolio of general
hospitals through acquisitions, the Company also divests, from time to
time, hospitals that are not essential to its strategic objectives. During
the quarter ended February 29, 2000, management approved plans that commit
the Company to close or sell two general hospitals and other property and
equipment. Accordingly, the Company recorded impairment and restructuring
charges of $55 million during the quarter. The charge consists of $46
million in impairment charges to value property and equipment and other
assets at the lower of carrying value or estimated fair values, $2 million
for lease cancellation and other exit costs, $5 million for the estimated
costs to close or sell the general hospitals, and $2 million in severance
costs for the termination of approximately 284 employees at the hospital to
be closed. The impairment charge includes $25 million for the write-down of
property and equipment and $21 million for the write-down of goodwill and
other assets.
Net operating revenues from the Company's other operations were $241
million for the quarter ended February 28, 1999, compared to $167 million
for the current quarter. The decrease is primarily the result of disposals,
terminations and contract expirations of physician practices.
Over the past several years, the Company has employed, or entered into
full-risk management agreements with physicians in most of its markets. A
large percentage of these physician practices were acquired as part of
large hospital acquisitions or through the formation of integrated health
care delivery systems. These physician practices, however, have not been
profitable. Accordingly, during the latter part of fiscal 1999, the Company
undertook the process of evaluating its physician strategy in each of its
markets and began to develop plans to either terminate or allow a
significant number of its existing contracts to expire. During the quarter
ended February 29, 2000, Company management, with the authority to do so,
authorized the termination of the contractual relationships with
approximately 50% of its contracted physicians. Accordingly, the Company
recorded impairment and other unusual charges of $177 million relating to
the plans to terminate or allow the expiration of employment and management
contracts with approximately 440 physicians. The charge consists of $102
million in impairment charges to value property and equipment and other
assets at the lower of carrying value or estimated fair values, $64 million
for lease cancellation and other exit costs, $7 million in severance costs
for the termination of 220 employees at the physician practices and $4
million to buy out physician employment contracts. The impairment charge
includes $19 million for the write-down of property and equipment and $83
million for the write-down of goodwill and other assets.
The charge taken in the current quarter relates to approximately 50% of
the Company's contracted physicians at February 29, 2000. The Company
expects to incur additional charges in the future as the balance of its
physician contracts are evaluated for possible termination. The future
benefits of all these actions could be significant, but would not likely
occur until fiscal 2001 and beyond. Future cash expenditures related to
the hospital and physician practice charges recorded during the current
quarter are expected to be $79 million, of which $22 million is expected
to be spent during the balance of fiscal 2000 and $57 million thereafter.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS TENET HEALTHCARE CORPORATION
- -------------------------------------------------------------------------------
The Company has invested approximately $37 million in several
internet-related health care ventures in order to facilitate adaptation of
these new technologies to the Company's core business. Patient care,
medical education, consumer information and day-to-day business transaction
efficiency are examples of areas of focus that the Company believes can be
significantly improved by appropriate internet applications. During the
quarters ended November 30, 1999 and February 29, 2000, the Company
recorded $5 million and $51 million, respectively, in realized gains from
sales of certain of these investments. The unrealized gains from market
appreciation of the balance of this investment portfolio amounted to $43
million at the end of the quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity for the nine months ended February 28, 1999 and
February 29, 2000 was derived primarily from the proceeds of borrowings
under its unsecured revolving bank credit agreement, sales of assets, and
net cash provided by operating activities, as shown in the following table:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
FEBRUARY 28, FEBRUARY 29,
1999 2000
---------------------------
(IN MILLIONS)
<S> <C> <C>
Proceeds from borrowings.............................. $1,534 $ 1,258
Proceeds from sales of facilities and other assets.... 19 654
Net cash provided by operating activities............. 315 322
Repayments of borrowings.............................. (872) (1,712)
Purchases of property and equipment................... (401) (396)
Purchases of businesses, net of cash acquired......... (470) (36)
Other net investing and financing activities.......... (87) (81)
---------------------------
Net increase in cash and cash equivalents ....... $ 38 $ 9
===========================
</TABLE>
Net cash provided by operating activities for the nine months ended
February 28, 1999 was $352 million before $37 million in expenditures for
discontinued operations, merger, impairment and other unusual charges. Net
cash provided by operating activities for the nine months ended February
29, 2000 was $404 million before net expenditures of $82 million for such
charges.
Management believes that future cash provided by recurring operating
activities, the availability of credit under its credit agreement, the sale
of assets and, depending on capital market conditions and to the extent
permitted by the restrictive covenants of the credit agreement and the
indentures governing the Company's senior and senior subordinated notes,
other borrowings or the sale of equity securities should be adequate to
meet known debt service requirements and to finance planned capital
expenditures, acquisitions and other presently known operating needs over
the next three years. The Company's unused borrowing capacity under its
credit agreement was $1.1 billion as of March 31, 2000. The Company expects
to refinance the credit agreement on or before its January 31, 2002
maturity date.
19
<PAGE>
TENET HEALTHCARE MANAGEMEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
Cash payments for property and equipment were $396 million in the nine
months ended February 29, 2000 compared to $401 million in the
corresponding prior year nine-month period. The Company expects to spend
approximately $400 - $500 million annually on capital expenditures,
before any significant acquisitions of facilities and other health care
operations and before an estimated $100 million in remaining commitments
to fund the construction of two new hospitals over the next year and a
half. Such capital expenditures primarily relate to the development of
integrated health care systems in selected geographic areas, design and
construction of new buildings, expansion and renovation of existing
facilities, equipment and information systems additions and
replacements, introduction of new medical technologies and various other
capital improvements.
THE YEAR 2000 ISSUE
The Company has not experienced any significant adverse consequences as a
result of the Year 2000 Issue. Its patient care equipment, other equipment
and information technology systems performed and continue to perform
satisfactorily as the calendar changed from December 31, 1999 to January 1,
2000. The Company estimates that its total cost for addressing all Year
2000 issues was approximately $90 million, substantially all of which has
been accounted for as capital expenditures.
BUSINESS OUTLOOK
The general hospital industry in the United States and the Company's
general hospitals continue to have significant unused capacity, and thus
there is substantial competition for patients. Inpatient utilization
continues to be negatively affected by payor-required pre-admission
authorization and by payor pressure to maximize outpatient and alternative
health care delivery services for less acutely ill patients. Increased
competition, admission constraints and payor pressure, as well as the shift
in patient mix to managed care, are expected to continue.
The ongoing challenge facing the Company and the health care industry as a
whole is to continue to provide quality patient care in an environment of
rising costs, strong competition for patients and continued pressure on
payment rates by government and other payors. Because of national, state
and private industry efforts to reform health care delivery and payment
systems, the health care industry as a whole faces increased uncertainty.
The Company is unable to predict whether any other health care legislation
at the federal and/or state level will be passed in the future and what
action it may take in response to such legislation, but it continues to
monitor all proposed legislation and analyze its potential impact in order
to formulate its future business strategies.
20
<PAGE>
MANAGEMEMENT'S DISCUSSION AND ANALYSIS OF TENET HEALTHCARE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS STATEMENTS CORPORATION
- -------------------------------------------------------------------------------
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q,
including, without limitation, statements containing the words believes,
anticipates, expects, will, may, might, should, estimates, appears, and
words of similar import, constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on management's current expectations
and involve known and unknown risks, uncertainties and other factors, many
of which the Company is unable to predict or control, that may cause the
actual results, performance or achievements of the Company or industry
results to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions, both nationally and in the regions in which the Company
operates; industry capacity; demographic changes; existing laws and
government regulations and changes in, or the failure to comply with, laws
and governmental regulations; legislative proposals for health care reform;
the ability to enter into managed care provider arrangements on acceptable
terms; a shift from fee-for-service payment to capitated and other
risk-based payment systems; changes in Medicare and Medicaid reimbursement
levels; liability and other claims asserted against the Company;
competition; the loss of any significant customers; technological and
pharmaceutical improvements that increase the cost of providing, or reduce
the demand for, health care; changes in business strategy or development
plans; the ability to attract and retain qualified personnel, including
physicians; the significant indebtedness of the Company; and the
availability and terms of capital to fund the expansion of the Company's
business, including the acquisition of additional facilities. Given these
uncertainties, prospective investors are cautioned not to place undue
reliance on such forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly announce the results
of any revisions to any of the forward-looking statements contained herein
to reflect future events or developments.
21
<PAGE>
TENET HEALTHCARE CORPORATION OTHER INFORMATION
- -------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
Material Developments in Previously Reported Legal Proceedings:
There have been no material developments in the legal proceedings
previously described in the Company's Annual Report on Form 10-K
for its fiscal year ended May 31, 1999, and the Company's
Quarterly Report on Form 10-Q for the period ended November 30,
1999.
ITEMS 2, 3, 4 AND 5 ARE NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
(27.1) Financial Data Schedule for the nine months ended
February 29, 2000 (included only in the EDGAR
filing).
(b) Reports on Form 8-K
(i) Current Report on Form 8-K, filed with the Securities and
Exchange Commission on February 24, 2000.
22
<PAGE>
OTHER INFORMATION TENET HEALTHCARE CORPORATION
- -------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TENET HEALTHCARE CORPORATION
(Registrant)
Date: April 13, 2000
/s/ DAVID L. DENNIS
--------------------------------------------------
David L. Dennis
Vice Chairman,
Chief Corporate Officer and Chief Financial Officer
(Principal Financial Officer)
/S/ RAYMOND L. MATHIASEN
--------------------------------------------------
Raymond L. Mathiasen
Executive Vice President,
Chief Accounting Officer
(Principal Accounting Officer)
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED BALANCE SHEET AT NOVEMBER 30, 1999, AND
CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED FEBRUARY
29, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 38,000
<SECURITIES> 111,000
<RECEIVABLES> 2,856,000
<ALLOWANCES> 361,000
<INVENTORY> 218,000
<CURRENT-ASSETS> 3,783,000
<PP&E> 7,881,000
<DEPRECIATION> 2,088,000
<TOTAL-ASSETS> 13,392,000
<CURRENT-LIABILITIES> 1,800,000
<BONDS> 5,997,000
0
0
<COMMON> 24,000
<OTHER-SE> 4,079,000
<TOTAL-LIABILITY-AND-EQUITY> 13,392,000
<SALES> 0
<TOTAL-REVENUES> 8,503,000
<CGS> 0
<TOTAL-COSTS> 6,829,000
<OTHER-EXPENSES> 232,000
<LOSS-PROVISION> 647,000
<INTEREST-EXPENSE> 361,000
<INCOME-PRETAX> 553,000
<INCOME-TAX> 252,000
<INCOME-CONTINUING> 301,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 19,000
<NET-INCOME> 282,000
<EPS-BASIC> 0.90
<EPS-DILUTED> 0.90
</TABLE>
