Universal Health Services, Inc. Reports a 14% Increase in Adjusted Earnings Per Diluted Share, Its Eleventh Consecutive Annual Increase
02/18/2004
KING OF PRUSSIA, Pa., Feb. 18 /PRNewswire-FirstCall/ -- Universal Health Services, Inc. (NYSE: UHS) announced today its results for the fourth quarter and full year ended December 31, 2003. Reported net income was $46.5 million or $.75 per diluted share during the fourth quarter of 2003, as compared to $43.9 million or $.69 per diluted share during the fourth quarter of 2002. For the full year of 2003, reported net income was $199.3 million or $3.20 per diluted share as compared to $175.4 million or $2.74 per diluted share during 2002.
Included in the reported results for the fourth quarter ended December 31, 2003 were the following items (as listed on the attached schedule of Supplemental Consolidated Income Statement Information): (i) a previously disclosed after-tax increase of $5.6 million or $.08 per diluted share resulting from the reversal of an accrued liability (including accrued interest) due to a favorable Texas Supreme Court decision which reversed an unfavorable 2000 jury verdict and 2001 appellate court decision; (ii) an after-tax increase of $4.3 million or $.07 per diluted share resulting from a gain realized on the disposition of an investment in a health-care related company, and; (iii) an after-tax reduction of $8.7 million or $.13 per diluted share resulting from the write-down of the carrying value of an acute care pediatric hospital located in Puerto Rico to its estimated realizable value. Included in the reported results for the year ended December 31, 2003, in addition to the fourth quarter items mentioned above, were previously disclosed after-tax (and after-minority interest) gains amounting to $4.4 million or $.07 per diluted share realized on the sales of radiation therapy centers, medical office buildings and an outpatient surgery center, all of which were sold during the third quarter ended September 30, 2003.
Excluding the items listed above from the three month period ended December 31, 2003 and excluding an after-tax recovery of closure costs of $1.4 million or $.02 per diluted share included in the three month period ended December 31, 2002, adjusted net income and adjusted earnings per diluted share (both as calculated on the attached Schedule of Consolidated Income Statement Information) increased 6% to $45.3 million and 9% to $.73, respectively, during the fourth quarter of 2003 as compared to $42.5 million and $.67, respectively, in the prior year quarter. Net revenues increased 14% during the three month period ended December 31, 2003 to $949.5 million as compared to $835.5 million during the prior year's fourth quarter. During the quarter ended December 31, 2003, EBITDA (as calculated on the attached schedule of Supplemental Consolidated Income Statement Information) increased 10% to $121.5 million as compared to $110.7 million during the prior year's fourth quarter.
For the year ended December 31, 2003, adjusted net income and adjusted earnings per diluted share increased 11% and 14%, respectively, to $193.7 million and $3.11 as compared to $174.0 million and $2.72, respectively, during 2002. During 2003, net revenues increased 12% to $3.64 billion as compared to $3.26 billion during 2002. EBITDA increased 13% during 2003 to $490.7 million as compared to $434.6 million during 2002.
Chairman and CEO Alan Miller said, "Our hospitals owe their success to a responsive management style, and to a service philosophy that is based on integrity, competence and compassion. The UHS strategy is to build or purchase health care properties in rapidly growing markets, and then create a strong franchise based on exceptional service and effective cost control. The efforts of the many talented people at UHS produced solid financial results even though hospitals continue to be challenged by sluggish volumes. In addition to continuing to invest aggressively to provide the health care needed by our existing communities, UHS will also continue to look selectively to acquire hospitals where we believe our skills can improve the quality and financial viability of the hospital."
The growth in revenues and earnings was attained despite no growth in acute care admissions. Admissions to the Company's acute care hospitals located in the U.S. and Puerto Rico owned for more than a year decreased 2.5% during the fourth quarter of 2003 as compared to the prior year's fourth quarter. Admissions to the Company's behavioral health care facilities owned more than a year increased 5.5% during the fourth quarter of 2003 as compared to the prior year's fourth quarter. Contributing to the increase in revenues and earnings during the fourth quarter of 2003, as compared to the prior year quarter, was a 6.8% increase in net revenue per adjusted admission achieved at the Company's acute care hospitals located in the U.S. and Puerto Rico. Net revenue per adjusted admission at the Company's behavioral health hospitals increased 2.4% during the quarter.
Admissions to the Company's acute care hospitals located in the U.S. and Puerto Rico owned for more than a year decreased .5% during 2003 as compared to the prior year while admissions to the Company's behavioral health care facilities owned more than a year increased 2.9% during 2003 as compared to 2002. Net revenue per adjusted admission at the Company's acute care hospitals located in the U.S. and Puerto Rico increased 7.3% during 2003 as compared to the prior year. Net revenue per adjusted admission at the Company's behavioral health hospitals increased 3.3% during the year as compared to 2002.
Cash flow from operations for the full year was $374 million, an increase of 13% from the prior year. During 2003, the Company invested $224 million in capital expenditures and purchased 1.36 million of its shares for $54 million. By year-end 2003, the Company's shareholders' equity increased 19% to $1.091 billion. The Company also spent $278 million on hospital acquisitions, including $230 million spent on December 31, 2003 to acquire four acute care facilities (three located in California and one in Louisiana acquired effective January 1, 2004). The Company's return on capital, defined as adjusted net income divided by the sum of debt (excluding the $230 million spent on December 31, 2003 to purchase four acute care hospitals) plus shareholders' equity, increased to 11.1% in 2003 as compared to 10.8% in 2002.
The Company's provision for doubtful accounts was 7.8% of net revenues during the fourth quarter of 2003 as compared to 6.9% during the prior year's fourth quarter. The increase resulted primarily from an increase in uninsured and self-pay patients which unfavorably impacts the collectibility of our patient accounts. We expect this trend to continue until there is a notable strengthening of the labor market.
Management of the Company believes that operating income, operating margin, EBITDA, adjusted net income and adjusted earnings per diluted share (as calculated on the attached schedules of Supplemental Consolidated Income Statement Information), which are non-GAAP financial measures, are helpful to our investors as measures of our operating performance. Since the source of financing for the purchase of property and equipment and other assets at each hospital varies, we believe that measuring operating performance before capital-related costs (such as depreciation and amortization, lease and rental and interest expense) provides a useful comparison of relative operating performance among our facilities. Operating income and operating margin are used by management as analytical indicators for purposes of assessing the relative operating performance of our individual hospitals and operating segments, and the overall Company. Also, our use of operating income, operating margin and EBITDA enables investors to compare our performance with that of others in the industry. In addition, we believe that comparing and discussing our financial results based on adjusted net income and adjusted earnings per diluted share, is helpful to our investors since it neutralizes the effect in each period, of items that are nonrecurring or non-operating in nature such as recovery of prior year provisions for judgment/closure costs, gains on sales of assets and businesses and provision for asset impairment.
To obtain a complete understanding of our financial performance, operating income, operating margin, EBITDA, adjusted net income and adjusted net income per diluted share should be examined in connection with net income determined in accordance with generally accepted accounting principles, as presented in these financial statements as well as information provided elsewhere such as the Company's Reports on Forms 10-Q and 10-K. Since the items excluded from operating income, operating margin, EBITDA, adjusted net income and adjusted earnings per diluted share are significant components in understanding and assessing financial performance under generally accepted accounting principles, these measures should not be considered to be alternatives to net income as a measure of our operating performance or profitability. Because these measures are not determined in accordance with generally accepted accounting principles and are thus susceptible to varying calculations, operating income, operating margin, EBITDA, adjusted net income and adjusted earnings per diluted share as presented may not be comparable to other similarly titled measures of other companies. Investors are encouraged to use GAAP measures when evaluating our financial performance.
This press release contains forward-looking statements based on current management expectations. Numerous factors, including those related to healthcare industry trends and those detailed in the Company's filings with the Securities and Exchange Commission (as set forth on page 16 of the Company's Form 10-Q for the quarterly period ended September 30, 2003), may cause results to differ materially from those anticipated in the forward- looking statements. Many of the factors that will determine the Company's future results are beyond the ability of the Company to control or predict. These statements are subject to risks and uncertainties and therefore actual results may differ materially. Readers should not place undue reliance on such forward-looking statements which reflect management's view only as of the date hereof. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
Universal Health Services, Inc. is one of the nation's largest hospital companies, operating acute care and behavioral health hospitals and ambulatory centers nationwide, in Puerto Rico and in France. It acts as the advisor to Universal Health Realty Income Trust, a real estate investment trust (NYSE: UHT).
For additional information on the Company, visit our web site:
http://www.uhsinc.com.
Universal Health Services, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
Three months Twelve months
ended December 31, ended December 31,
2003 2002 2003 2002
Net revenues $949,472 $835,478 $3,643,566 $3,258,898
Operating charges:
Salaries, wages and
benefits 381,725 334,334 1,457,395 1,298,967
Other operating expenses 219,545 201,209 848,495 787,408
Supplies expense 133,755 111,395 495,945 425,142
Provision for doubtful
accounts 74,314 58,033 263,724 231,362
Depreciation and
amortization 38,617 34,350 144,466 124,794
Lease and rental expense 16,401 15,623 64,077 61,712
Provision for asset
impairment 13,742 0 13,742 0
878,099 754,944 3,287,844 2,929,385
Income before interest
expense, recovery of
provision for
judgment/closure costs, gains
on sales of assets and
businesses,
minority interests, and income
taxes 71,373 80,534 355,722 329,513
Interest expense, net 10,394 9,198 38,233 34,966
Recovery of provision for
judgment/closure costs (8,867) (2,182) (8,867) (2,182)
Gains on sales of assets and
businesses (6,786) 0 (14,623) 0
Minority interests in earnings
of consolidated entities 2,244 4,173 23,280 19,658
Income before income taxes 74,388 69,345 317,699 277,071
Provision for income taxes 27,920 25,455 118,430 101,710
Net income $46,468 $43,890 $199,269 $175,361
Earnings per common share -
basic $0.81 $0.74 $3.45 $2.94
Earnings per common share -
diluted $0.75 $0.69 $3.20 $2.74
EARNINGS PER SHARE CALCULATION
Net income $46,468 $43,890 $199,269 $175,361
Less: Dividends on unvested
restricted stock, net of
taxes (28) 0 (28) 0
Adjusted net income - basic 46,440 43,890 199,241 175,361
Add: Debenture interest, net
of taxes 2,222 2,134 8,799 8,451
Adjusted net income - diluted $48,662 $46,024 $208,040 $183,812
Weighted average number of
common shares - basic 57,466 59,241 57,688 59,730
Add: Shares for conversion of
convertible debentures 6,577 6,577 6,577 6,577
Other share
equivalents 935 1,005 824 768
Weighted average number of
common shares and equiv. -
diluted 64,978 66,823 65,089 67,075
Earnings per common share -
basic $0.81 $0.74 $3.45 $2.94
Earnings per common share -
diluted $0.75 $0.69 $3.20 $2.74
Universal Health Services, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
December 31, December 31,
2003 2002
Assets:
Cash and cash equivalents $34,863 $17,750
Accounts receivable, net 503,929 474,763
Other current assets 106,999 101,105
Property, plant and equipment, net 1,304,341 1,173,195
Other assets 822,598 562,324
$2,772,730 $2,329,137
Liabilities and Stockholders'
Equity:
Current portion of long-term debt $10,871 $8,253
Other current liabilities 384,882 362,160
Other noncurrent liabilities 216,094 206,238
Minority interest 159,554 140,247
Long-term debt 868,566 680,514
Deferred income taxes 41,841 14,266
Stockholders' equity 1,090,922 917,459
$2,772,730 $2,329,137
Universal Health Services, Inc.
Supplemental Consolidated Income Statement Information
(in thousands)
unaudited
Three months ended Three months ended
December 31, 2003 December 31, 2002
Net revenues $949,472 100.0% $835,478 100.0%
Operating charges:
Salaries, wages and benefits 381,725 40.2% 334,334 40.0%
Other operating expenses 219,545 23.1% 201,209 24.1%
Supplies expense 133,755 14.1% 111,395 13.3%
Provision for doubtful accounts 74,314 7.8% 58,033 6.9%
809,339 85.2% 704,971 84.4%
Operating income/margin 140,133 14.8% 130,507 15.6%
Lease and rental expense 16,401 15,623
Minority interests in earnings of
consolidated entities 2,244 4,173
Earnings before depreciation and
amortization, interest expense,
recovery of provision for
judgment/closure costs, gains on
sales of assets and businesses,
provision for asset impairment and
income taxes ("EBITDA") 121,488 110,711
Depreciation and amortization 38,617 34,350
Interest expense, net 10,394 9,198
Recovery of provision for
judgment/closure costs (8,867) (2,182)
Gains on sales of assets and
businesses (6,786) 0
Provision for asset impairment 13,742 0
Income before income taxes 74,388 69,345
Provision for income taxes 27,920 25,455
Net income $46,468 $43,890
Per Per
Diluted Diluted
Calculation of Adjusted Net Income Amount Share Amount Share
Net income $46,468 $0.75 $43,890 $0.69
Less: After-tax recovery of
provision for judgment/closure costs (5,590) ($0.08) (1,376) ($0.02)
Less: After-tax and minority
interest gains on sales of assets
and businesses (4,279) ($0.07) - -
Plus: After-tax charge on provision
for asset impairment 8,664 $0.13 - -
Adjusted net income $45,263 $0.73 $42,514 $0.67
Universal Health Services, Inc.
Supplemental Consolidated Income Statement Information
(in thousands)
unaudited
Twelve months ended Twelve months ended
December 31, 2003 December 31, 2002
Net revenues $3,643,566 100.0% $3,258,898 100.0%
Operating charges:
Salaries, wages and benefits 1,457,395 40.0% 1,298,967 39.9%
Other operating expenses 848,495 23.3% 787,408 24.2%
Supplies expense 495,945 13.6% 425,142 13.0%
Provision for doubtful accounts 263,724 7.2% 231,362 7.1%
3,065,559 84.1% 2,742,879 84.2%
Operating income/margin 578,007 15.9% 516,019 15.8%
Lease and rental expense 64,077 61,712
Minority interests in earnings
of consolidated entities 23,280 19,658
Earnings before depreciation and
amortization, interest expense,
recovery of provision for
judgment/closure costs, gains on
sales of assets and businesses,
provision for asset impairment
and income taxes ("EBITDA") 490,650 434,649
Depreciation and amortization 144,466 124,794
Interest expense, net 38,233 34,966
Recovery of provision for
judgment/closure costs (8,867) (2,182)
Gains on sales of assets and
businesses (14,623) 0
Provision for asset impairment 13,742 0
Income before income taxes 317,699 277,071
Provision for income taxes 118,430 101,710
Net income $199,269 $175,361
Per Per
Diluted Diluted
Calculation of Adjusted Net Income Amount Share Amount Share
Net income $199,269 $3.20 $175,361 $2.74
Less: After-tax recovery of provision
for judgment/closure costs (5,590) ($0.08) (1,376) ($0.02)
Less: After-tax and minority interest
gains on sales of assets and
businesses (8,675) ($0.14) - -
Plus: After-tax charge on provision
for asset impairment 8,664 $0.13 - -
Adjusted net income $193,668 $3.11 $173,985 $2.72
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
DECEMBER 31, 2003
AS REPORTED:
FOR THE THREE MONTHS ENDED
ACUTE (1)
12/31/03 12/31/02 %
Hospitals owned and leased 25 25 0.0%
Average licensed beds 6,010 5,713 5.2%
Patient days 315,139 310,478 1.5%
Average daily census 3,425.4 3,374.8 1.5%
Occupancy-licensed beds 57.0% 59.1% -3.5%
Admissions 66,990 67,395 -0.6%
Length of stay 4.7 4.6 2.1%
Inpatient revenue $1,525,554 $1,384,584 10.2%
Outpatient revenue 551,708 474,790 16.2%
Total patient revenue 2,077,262 1,859,374 11.7%
Other revenue 11,392 13,865 -17.8%
Gross hospital revenue 2,088,654 1,873,239 11.5%
Total deductions 1,396,707 1,224,075 14.1%
Net hospital revenue $691,947 $649,164 6.6%
SAME FACILITY:
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
DECEMBER 31, 2003
AS REPORTED:
FOR THE THREE MONTHS ENDED
BEHAVIORAL HEALTH
12/31/03 12/31/02 %
Hospitals owned and leased 39 37 5.4%
Average licensed beds 3,902 3,754 3.9%
Patient days 265,733 248,708 6.8%
Average daily census 2,888.4 2,703.3 6.8%
Occupancy-licensed beds 74.0% 72.0% 2.8%
Admissions 21,756 20,379 6.8%
Length of stay 12.2 12.2 0.1%
Inpatient revenue $274,269 $241,497 13.6%
Outpatient revenue 40,600 37,434 8.5%
Total patient revenue 314,869 278,931 12.9%
Other revenue 7,432 7,923 -6.2%
Gross hospital revenue 322,301 286,854 12.4%
Total deductions 167,501 147,211 13.8%
Net hospital revenue $154,800 $139,643 10.9%
SAME FACILITY:
FOR THE THREE MONTHS ENDED
ACUTE (1)(2) BEHAVIORAL HEALTH (3)
12/31/03 12/31/02 % 12/31/03 12/31/02 %
Hospitals owned and
leased 25 25 0.0% 37 37 0.0%
Average licensed
beds 5,834 5,713 2.1% 3,785 3,754 0.8%
Patient days 310,666 310,482 0.1% 256,340 248,722 3.1%
Average daily
census 3,376.8 3,374.8 0.1% 2,786.3 2,703.5 3.1%
Occupancy-licensed
beds 57.9% 59.1% -2.0% 73.6% 72.0% 2.2%
Admissions 65,734 67,395 -2.5% 21,508 20,379 5.5%
Length of stay 4.7 4.6 2.6% 11.9 12.2 -2.3%
(1) Does not include hospitals located in France
(2) Spring Valley Hospital is excluded in both years
(3) North Star Hospital and Residential Center are excluded in both
current and prior years.
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
DECEMBER 31, 2003
AS REPORTED:
FOR THE TWELVE MONTHS ENDED
ACUTE (1)
12/31/03 12/31/02 %
Hospitals owned and leased 25 25 0.0%
Average licensed beds 5,804 5,813 -0.2%
Patient days 1,247,882 1,239,040 0.7%
Average daily census 3,418.9 3,394.6 0.7%
Occupancy-licensed beds 58.9% 58.4% 0.9%
Admissions 266,207 266,261 0.0%
Length of stay 4.7 4.7 0.7%
Inpatient revenue $5,947,211 $5,183,944 14.7%
Outpatient revenue 2,140,781 1,814,757 18.0%
Total patient revenue 8,087,992 6,998,701 15.6%
Other revenue 51,337 58,609 -12.4%
Gross hospital revenue 8,139,329 7,057,310 15.3%
Total deductions 5,413,741 4,533,018 19.4%
Net hospital revenue $2,725,588 $2,524,292 8.0%
SAME FACILITY:
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
DECEMBER 31, 2003
AS REPORTED:
FOR THE TWELVE MONTHS ENDED
BEHAVIORAL HEALTH
12/31/03 12/31/02 %
Hospitals owned and leased 39 37 5.4%
Average licensed beds 3,894 3,752 3.8%
Patient days 1,067,200 1,005,882 6.1%
Average daily census 2,923.8 2,755.8 6.1%
Occupancy-licensed beds 75.1% 73.4% 2.2%
Admissions 87,688 84,348 4.0%
Length of stay 12.2 11.9 2.1%
Inpatient revenue $1,091,885 $979,824 11.4%
Outpatient revenue 156,115 149,604 4.4%
Total patient revenue 1,248,000 1,129,428 10.5%
Other revenue 33,345 36,021 -7.4%
Gross hospital revenue 1,281,345 1,165,449 9.9%
Total deductions 668,941 599,864 11.5%
Net hospital revenue $612,404 $565,585 8.3%
SAME FACILITY:
FOR THE TWELVE MONTHS ENDED
ACUTE (1)(2)
12/31/03 12/31/02 %
Hospitals owned and leased 25 25 0.0%
Average licensed beds 5,760 5,813 -0.9%
Patient days 1,243,482 1,239,139 0.4%
Average daily census 3,406.8 3,394.9 0.4%
Occupancy-licensed beds 59.1% 58.4% 1.3%
Admissions 264,951 266,261 -0.5%
Length of stay 4.7 4.7 0.8%
FOR THE TWELVE MONTHS ENDED
BEHAVIORAL HEALTH (3)
12/31/03 12/31/02 %
Hospitals owned and leased 37 37 0.0%
Average licensed beds 3,777 3,752 0.7%
Patient days 1,032,950 1,005,867 2.7%
Average daily census 2,830.0 2,755.8 2.7%
Occupancy-licensed beds 74.9% 73.4% 2.0%
Admissions 86,786 84,348 2.9%
Length of stay 11.9 11.9 -0.2%
(1) Does not include hospitals located in France
(2) Spring Valley Hospital is excluded in both years
(3) North Star Hospital and Residential Center are excluded in both
current and prior years.
Universal Health Services, Inc.
Supplemental Statistical Information
(un-audited)
% Change % Change
Quarter Ended 12 mos. ended
Same Facility: 12/31/2003 12/31/2003
Acute Care Hospitals
Revenues 5.3% 7.6%
Adjusted Admissions -1.4% 0.3%
Adjusted Patient Days 0.8% 1.0%
Revenue Per Adjusted Admission 6.8% 7.3%
Revenue Per Adjusted Patient Day 4.4% 6.6%
Behavioral Health Hospitals
Revenues 7.0% 5.5%
Adjusted Admissions 4.5% 2.2%
Adjusted Patient Days 2.4% 2.1%
Revenue Per Adjusted Admission 2.4% 3.3%
Revenue Per Adjusted Patient Day 4.5% 3.3%
UHS Consolidated Fourth Quarter Ended Twelve months Ended
12/31/2003 12/31/2002 12/31/2003 12/31/2002
Revenues $949,472 $835,478 $3,643,566 $3,258,898
EBITDA (1) $121,488 $110,711 $490,650 $434,649
EBITDA Margin (1) 12.8% 13.3% 13.5% 13.3%
Cash Flow From Operations $60,329 $86,078 $373,731 $331,259
Days Sales Outstanding 49 52 50 53
Capital Expenditures
(including acquisitions) $280,282 $40,627 $477,218 $201,469
Debt (net of cash) - - $844,574 $671,017
Shareholders Equity - - $1,090,922 $917,459
Debt / Total Capitalization - - 43.6% 42.2%
Debt / EBITDA (2) - - 1.72 1.54
Debt / Cash From Operations
(2) - - 2.26 2.03
Acute Care EBITDAR Margin (3) 14.7% 17.1% 17.2% 17.3%
Behavioral Health EBITDAR
Margin (3) 25.4% 20.4% 23.5% 20.3%
(1) Net of Minority Interest
(2) Latest 4 quarters
(3) Before Corporate overhead allocation and minority interest
SOURCE Universal Health Services, Inc.
-0- 02/18/2004
/CONTACT: Steve Filton, Chief Financial Officer, Universal Health
Services, +1-610-768-3300/
/Company News On-Call: http://www.prnewswire.com/comp/916225.html/
/Web site: http://www.uhsinc.com /
(UHS UHT)
CO: Universal Health Services, Inc.; Universal Health Realty Income Trust
ST: Pennsylvania
IN: HEA FIN
SU: ERN
MR
-- PHW043 --
2421 02/18/2004 17:10 EST http://www.prnewswire.com