Universal Health Services, Inc. Reports a 19% Increase in Net Income, its Tenth Consecutive Annual Net Income Increase; Steve Filton Appointed CFO
02/13/2003
Excluding these items, net income and earnings per share (diluted) increased 19% to $42.5 million and 20% to $.67, respectively, during the fourth quarter of 2002 as compared to $35.7 million and $.56, respectively, in the prior year quarter. Net revenues increased 15% during the three month period ended December 31, 2002 to $835.5 million as compared to $724.2 million during the prior year's fourth quarter. During the quarter ended December 31, 2002, EBITDA (as defined on the attached Summary of Consolidated Operating Results) increased 23% to $110.7 million as compared to $90.2 million during the prior year's fourth quarter.
For the year ended December 31, 2002 (excluding the items listed on the attached Summary of Consolidated Operating Results), net income and earnings per share (diluted) increased 19% and 18%, respectively, to $174.0 million and $2.72 as compared to $146.2 million and $2.30, respectively, during 2001. During 2002, net revenues increased 15% to $3.26 billion as compared to $2.84 billion during 2001. EBITDA increased 17% during 2002 to $434.6 million as compared to $370.5 million during 2001.
Chairman and CEO Alan Miller said, "Our hospitals provided increasing quality of care to their patients in 2002 and the Company continues its efforts to improve patient safety through training programs and new information systems such as the recently completed installation of a pharmacy management system that will greatly reduce the possibility of medication errors. The high quality reputations of our hospitals continue to attract an increasing number of patients. The efforts of the many talented people at UHS produced satisfying financial results even though hospitals continue to be challenged by rapidly rising labor and malpractice costs. We anticipate that 2003 will bring continued growth for our hospitals in both patient admissions and financial results. 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 strong growth in revenues and earnings resulted primarily from continuing substantial growth in admissions of patients to the Company's hospitals. Admissions to the Company's acute care hospitals located in the U.S. and Puerto Rico owned for more than a year increased 7.9% during the fourth quarter of 2002 over the prior year quarter. Admissions to the Company's behavioral health care facilities owned more than a year increased 7.7% during the fourth quarter of 2002 as compared to the prior year's fourth quarter. Also contributing to the increase in revenues and earnings during the fourth quarter of 2002, as compared to the prior year quarter, was a 5.2% 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 1% 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 increased 6.9% during 2002 over the prior year while admissions to the Company's behavioral health care facilities owned more than a year increased 6.4% during 2002 as compared to 2001. Net revenue per adjusted admission at the Company's acute care hospitals located in the U.S. and Puerto Rico increased 3.6% during 2002 as compared to the prior year. Net revenue per adjusted admission at the Company's behavioral health hospitals decreased less than 1% during the year as compared to 2001.
Cash flow from operations for the full year was $333 million, an increase of 12% from the prior year. During 2002, the Company invested $196 million in capital expenditures, purchased 1.7 million of its shares for $77 million and made net debt repayments of $67 million. By year-end 2002, the Company's shareholders' equity increased 14% to $917 million and debt declined to $689 million. The Company's return on capital, defined as net income (excluding from both years the items listed on the attached Summary of Consolidated Operating Results) divided by the sum of debt plus shareholders' equity, increased to 10.8% compared to 9.6% in 2001. The Company expects its return on capital to increase again in 2003 as recent investments in capital expenditures and acquisitions mature.
The Company also announced the planned departure of Kirk Gorman, the Company's Senior Vice President and Chief Financial Officer. Steve Filton, Vice President and Controller, will assume the title of Chief Financial Officer effective today. Mr. Gorman will remain with the Company during the transition period leading to the appointment of a permanent Chief Financial Officer, who will be selected from a search that will include internal and external candidates. Alan B. Miller, President and Chief Executive Officer of the Company, stated that the Company's Board of Directors concluded these management changes were necessary as a result of issues raised by KPMG, the Company's independent auditors, as a result of a recent communication from Mr. Gorman to KPMG regarding his views on their respective responsibilities and the level of expertise required of a chief financial officer with respect to the Company's financial statements. Although no issue whatsoever has been raised regarding the integrity of the Company's financial statements, KPMG has concluded that, because of Mr. Gorman's communication regarding the responsibilities and required expertise of a chief financial officer, it could no longer rely on the representations made by Mr. Gorman as the CFO of the Company.
The Company believes that the Company's stockholders will be well served by having Mr. Filton appointed the Company's interim Chief Financial Officer. Mr. Filton has extensive knowledge of the Company's business in his various roles within the Company for 18 years, including his position as Controller.
Mr. Miller emphasized that the Company has the utmost regard for Mr. Gorman's integrity and capabilities and is very disappointed that the situation has arisen which caused Mr. Gorman's departure. 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).
Certain statements in this release may constitute forward-looking statements and are subject to various risks and uncertainties as discussed in the Company's filings with the Securities and Exchange Commission. The Company is not obligated to update these forward-looking statements even if the Company's assessment of these risks and uncertainties changes.
For additional information on the Company, visit our web site: http://www.uhsinc.com.
Universal Health Services, Inc.
Summary of Consolidated Operating Results
(in thousands, except per share amounts)
(unaudited)
Three months ended Twelve months ended
December 31, December 31,
% %
2002 2001 Incr 2002 2001 Incr
Net revenues $835,478 $724,162 15% $3,258,898 $2,840,491 15%
EBITDA (a) $110,711 $90,181 23% $434,649 $370,458 17%
Net income (loss):
Reported net
income, excluding
goodwill amortization,
recovery of facility closure
costs, provision
for insurance
settlements, loss
on early termination of
interest rate swaps
and loss on early
extinguishment
of debt $42,514 $35,698 19% $173,985 $146,213 19%
Goodwill
amortization (net
of tax) --- (3,900) --- (15,600)
Reported net
income, excluding
recovery of
facility closure
costs, provision
for insurance
settlements, loss
on early
termination of
interest rate
swaps and loss on
early extinguishments
of debt $42,514 $31,798 34% $173,985 $130,613 33%
Recovery of
facility closure
costs (net of
tax) (b) 1,376 --- 1,376 ---
Provision for
insurance
settlements (net
of tax) (c) --- (25,220) --- (25,220)
Loss on early
termination of
interest rate
swaps (net of tax)
(d) --- (4,643) --- (4,643)
Loss on early
extinguishment of
debt (net of tax)
(e) --- (1,008) --- (1,008)
Reported net
income $43,890 $927 $175,361 $99,742
Diluted earnings
(loss) per share:
Reported net
income, excluding
goodwill
amortization,
recovery of
facility closure
costs, provision
for insurance
settlements, loss
on early
termination of
interest rate swaps
and loss on early
extinguishment
of debt $0.67 $0.56 20% $2.72 $2.30 18%
Goodwill
amortization (net
of tax) --- ($0.06) --- ($0.24)
Reported net
income, excluding
recovery of
facility closure
costs, provision
for insurance
settlements, loss
on early termination of
interest rate
swaps and loss on
early extinguishments
of debt $0.67 $0.50 34% $2.72 $2.06 32%
Recovery of
facility closure
costs (net of tax) $0.02 --- $0.02 ---
Provision for
insurance
settlements (net
of tax) --- ($0.38) --- ($0.38)
Loss on early
termination of
interest rate
swaps (net of tax) --- ($0.07) --- ($0.07)
Loss on early
extinguishment of
debt (net of tax) --- ($0.01) --- ($0.01)
Anti-dilutive
effect of assumed
conversion of
debentures --- ($0.02) --- ---
Reported net income $0.69 $0.02 $2.74 $1.60
(a) EBITDA is defined as income before depreciation and amortization,
interest expense, recovery of facility closure costs, provision for
insurance settlements, loss on early termination of interest rate
swaps, loss on early extinguishment of debt and income taxes.
Below is a
reconciliation of
consolidated
EBITDA to
consolidated net
income before
income taxes and
extraordinary
charge
Consolidated
EBITDA $110,711 $90,181 $434,649 $370,458
Less: Depreciation
and amortization (34,350) (32,893) (124,794) (127,523)
Interest
expense, net (9,248) (7,368) (34,746) (36,176)
Recovery of
facility
closure costs 2,182 --- 2,182 ---
Provision for
insurance
settlements --- (40,000) --- (40,000)
Gain/(losses)
on foreign
exchange and
derivative
transactions 50 (7,353) (220) (8,862)
Consolidated income
before income tax $69,345 $2,567 $277,071 $157,897
(b) $2.2 million pre-tax recovery of facility closure costs resulting
from the fourth quarter of 2002 sale of real estate of a facility
closed in a prior year.
(c) $40 million pre-tax charge to earnings recorded during the fourth
quarter of 2001 to reserve for general and professional liability
claims that may result from PHICO's liquidation.
(d) $7.4 million pre-tax charge recorded during the fourth quarter of
2001 resulting from the early termination of interest rate swaps.
(e) $1.6 million pre-tax charge recorded during the fourth quarter of
2001 resulting from the early extinguishment of a $135 million,
8-3/4% notes issued in 1995.
Universal Health Services, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
Three months Twelve months
ended December 31, ended December 31,
2002 2001 2002 2001
Net revenues $835,478 $724,162 $3,258,898 $2,840,491
Operating charges:
Salaries, wages and
benefits 334,334 289,643 1,298,967 1,122,428
Other operating expenses 201,209 179,286 787,408 668,026
Supplies expense 111,395 91,469 425,142 368,091
Provision for doubtful
accounts 58,033 53,438 231,362 240,025
Depreciation and
amortization 34,350 32,893 124,794 127,523
Lease and rental expense 15,623 13,951 61,712 53,945
Interest expense, net 9,248 7,368 34,746 36,176
Provision for insurance
settlements 0 40,000 0 40,000
Recovery of facility
closure costs (2,182) 0 (2,182) 0
(Gain)/losses on foreign
exchange and derivative
transactions (50) 7,353 220 8,862
761,960 715,401 2,962,169 2,665,076
Income before minority
interests, income taxes and
extraordinary charge 73,518 8,761 296,729 175,415
Minority interests in earnings
of consolidated entities 4,173 6,194 19,658 17,518
Income before income taxes 69,345 2,567 277,071 157,897
Provision for income taxes 25,455 632 101,710 57,147
Net income before
extraordinary charge 43,890 1,935 175,361 100,750
Extraordinary charge from
early extinguishment
of debt, net of taxes 0 1,008 0 1,008
Net income $43,890 $927 $175,361 $99,742
Earnings per common share -
basic $0.74 $0.02 $2.94 $1.67
Earnings per common share -
diluted $0.69 $0.02 $2.74 $1.60
Weighted average number of
common shares - basic 59,241 59,829 59,730 59,874
Weighted average number of
common share equivalents 7,582 688 7,345 7,346
Weighted average number of
common shares and equiv. -
diluted 66,823 60,517 67,075 67,220
EARNINGS PER SHARE CALCULATION
Net income $43,890 $927 $175,361 $99,742
Add: Debenture interest, net
of taxes 2,134 0 8,451 8,120
Adjusted net income $46,024 $927 $183,812 $107,862
Weighted average number of
common shares - basic 59,241 59,829 59,730 59,874
Add: Shares for conversion of
convertible debentures 6,577 0 6,577 6,577
Other share
equivalents 1,005 688 768 769
Weighted average number of
common shares and equiv. -
diluted 66,823 60,517 67,075 67,220
Earnings per common share -
diluted $0.69 $0.02 $2.74 $1.60
Universal Health Services, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
December 31, December 31,
2002 2001
Assets:
Cash and cash equivalents $17,750 $22,848
Accounts receivable, net 474,763 418,083
Other current assets 114,063 107,331
Property, plant and equipment, net 1,167,287 1,031,205
Other assets 549,366 589,122
$2,323,229 $2,168,589
Liabilities and Stockholders'
Equity:
Current portion of long-term debt $3,714 $2,436
Other current liabilities 362,160 320,280
Other noncurrent liabilities 206,238 164,390
Minority interest 134,339 125,914
Long-term debt 685,053 718,830
Deferred income taxes 14,266 28,839
Stockholders' equity 917,459 807,900
$2,323,229 $2,168,589
Universal Health Services, Inc.
Supplemental Statistical Information
(unaudited)
% Change % Change
Quarter Ended 12 mos. ended
Same Store: 12/31/2002 12/31/2002
Acute Care Hospitals
Revenues 12.6% 10.2%
Adjusted Admissions 7.0% 6.3%
Adjusted Patient Days 5.7% 5.3%
Revenue Per Adjusted Admission 5.2% 3.6%
Revenue Per Adjusted Patient Day 6.6% 4.6%
Behavioral Health Hospitals
Revenues 8.1% 5.7%
Adjusted Admissions 7.1% 6.1%
Adjusted Patient Days 7.0% 4.5%
Revenue Per Adjusted Admission 0.9% -0.4%
Revenue Per Adjusted Patient Day 1.6% 1.1%
UHS Consolidated Quarter Ended Twelve months Ended
12/31/2002 12/31/2001 12/31/2002 12/31/2001
Revenues $835,478 $724,162 $3,258,898 $2,840,491
EBITDA (1) $110,711 $90,181 $434,649 $370,458
EBITDA Margin (1) 13.3% 12.5% 13.3% 13.0%
Cash Flow From
Operations $87,417 $44,132 $332,598 $297,543
Days Sales
Outstanding 52 53 53 54
Capital
Expenditures $38,956 $41,393 $195,640 $152,938
Debt (net of
cash) - - $671,017 $698,418
Shareholders
Equity - - $917,459 $807,900
Debt / Total
Capitalization - - 42.2% 46.4%
Debt / EBITDA
(2) - - 1.54 1.89
Debt / Cash From
Operations (2) - - 2.02 2.35
Acute Care
EBITDAR Margin
(3) 17.6% 17.4% 17.3% 17.8%
Behavioral
Health EBITDAR
Margin (3) 20.8% 17.8% 20.2% 19.0%
(1) Net of Minority Interest
(2) Latest 4 quarters
(3) Before Corporate overhead allocation and minority interest
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
DECEMBER 31, 2002
AS REPORTED:
FOR THE THREE MONTHS ENDED
ACUTE (1) BEHAVIORAL HEALTH
12/31/02 12/31/01 % 12/31/02 12/31/01 %
Hospitals owned
and leased 25 24 4.2% 37 37 0.0%
Average licensed
beds 5,713 5,596 2.1% 3,754 3,749 0.1%
Patient days 310,478 281,059 10.5% 248,708 231,907 7.2%
Average daily
census 3,374.8 3,055.0 10.5% 2,703.3 2,520.7 7.2%
Occupancy-licensed
beds 59.1% 54.6% 8.2% 72.0% 67.2% 7.1%
Admissions 67,395 59,797 12.7% 20,379 18,929 7.7%
Length of stay 4.6 4.7 -2.0% 12.2 12.3 -0.4%
Inpatient
revenue $1,384,584 $1,037,270 33.5% $241,497 $218,163 10.7%
Outpatient
revenue 474,790 370,306 28.2% 37,434 35,985 4.0%
Total patient
revenue 1,859,374 1,407,576 32.1% 278,931 254,148 9.8%
Other revenue 13,865 15,604 -11.1% 7,923 10,411 -23.9%
Gross hospital
revenue 1,873,239 1,423,180 31.6% 286,854 264,559 8.4%
Total
deductions 1,224,075 870,787 40.6% 147,211 132,626 11.0%
Net hospital
revenue $649,164 $552,393 17.5% $139,643 $131,933 5.8%
SAME STORE:
FOR THE THREE MONTHS ENDED
ACUTE (1) (2) BEHAVIORAL HEALTH (3)
12/31/02 12/31/01 % 12/31/02 12/31/01 %
Hospitals owned
and leased 23 24 -4.2% 37 37 0.0%
Average licensed
beds 5,446 5,596 -2.7% 3,754 3,749 0.1%
Patient days 297,804 281,051 6.0% 248,722 231,895 7.3%
Average daily
census 3,237.0 3,054.9 6.0% 2,703.5 2,520.6 7.3%
Occupancy-
licensed beds 59.4% 54.6% 8.9% 72.0% 67.2% 7.1%
Admissions 64,512 59,797 7.9% 20,379 18,929 7.7%
Length of stay 4.6 4.7 -1.8% 12.2 12.3 -0.4%
(1) Does not include hospitals located in France.
(2) Central Montgomery and Lancaster are excluded in both current and
prior years. Rancho Springs is included in the current and prior year
totals from February 1st through year to date. Inland Valley and
Rancho Springs merged to become one entity called Southwest Health
Care effective July 1, 2002.
(3) Pembroke, San Juan Capestrano and Westwood Lodge are included in
current and prior years from February 1 through year to date.
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
DECEMBER 31, 2002
AS REPORTED:
FOR THE TWELVE MONTHS ENDED
ACUTE (1) BEHAVIORAL HEALTH
12/31/02 12/31/01 % 12/31/02 12/31/01 %
Hospitals owned
and leased 25 24 4.2% 37 37 0.0%
Average licensed
beds 5,813 5,514 5.4% 3,752 3,732 0.5%
Patient days 1,239,040 1,123,264 10.3% 1,005,882 950,236 5.9%
Average daily
census 3,394.6 3,077.4 10.3% 2,755.8 2,603.4 5.9%
Occupancy-
licensed beds 58.4% 55.8% 4.6% 73.4% 69.8% 5.3%
Admissions 266,261 237,802 12.0% 84,348 78,688 7.2%
Length of stay 4.7 4.7 -1.5% 11.9 12.1 -1.2%
Inpatient
revenue $5,183,944 $4,032,623 28.6% $979,824 $908,424 7.9%
Outpatient
revenue 1,814,757 1,432,232 26.7% 149,604 143,907 4.0%
Total patient
revenue 6,998,701 5,464,855 28.1% 1,129,428 1,052,331 7.3%
Other revenue 58,609 57,663 1.6% 36,021 40,094 -10.2%
Gross hospital
revenue 7,057,310 5,522,518 27.8% 1,165,449 1,092,425 6.7%
Total
deductions 4,533,018 3,340,466 35.7% 599,864 553,982 8.3%
Net hospital
revenue $2,524,292 $2,182,052 15.7% $565,585 $538,443 5.0%
SAME STORE:
FOR THE TWELVE MONTHS ENDED
ACUTE (1) (2) BEHAVIORAL HEALTH (3)
12/31/02 12/31/01 % 12/31/02 12/31/01 %
Hospitals owned
and leased 23 24 -4.2% 37 37 0.0%
Average
licensed beds 5,538 5,506 0.6% 3,723 3,712 0.3%
Patient days 1,184,060 1,122,448 5.5% 997,910 948,526 5.2%
Average daily
census 3,244.0 3,075.2 5.5% 2,734.0 2,598.7 5.2%
Occupancy-
licensed beds 58.6% 55.9% 4.9% 73.4% 70.0% 4.9%
Admissions 253,899 237,477 6.9% 83,645 78,588 6.4%
Length of stay 4.7 4.7 -1.3% 11.9 12.1 -1.2%
(1) Does not include hospitals located in France.
(2) Central Montgomery and Lancaster are excluded in both current and
prior years. Rancho Springs is included in the current and prior
year totals from February 1st through year to date. Inland Valley
and Rancho Springs merged to become one entity called Southwest
Health Care effective July 1, 2002.
(3) Pembroke, San Juan Capestrano and Westwood Lodge are included in
current and prior years from February 1 through year to date.
SOURCE Universal Health Services, Inc.
CONTACT: Steve Filton, Chief Financial Officer of Universal Health
Services, +1-610-768-3300
/Company News On-Call:
http://www.prnewswire.com/gh/cnoc/comp/916225.html
URL: http://www.uhsinc.com
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