Universal Health Services, Inc. Reports 2008 Second Quarter Results, Raises 2008 Full Year Guidance
07/28/2008
Reported net income was $52.1 million, or $.97 per diluted share, during the three-month period ended June 30, 2007 and $101.6 million, or $1.89 per diluted share, during the six-month period ended June 30, 2007. After adjusting our 2007 results for the item mentioned below, and other less material items as indicated on the attached Schedules of Non-GAAP Supplemental Consolidated Statements of Income Information ("Supplemental Schedule"), our adjusted net income was $42.7 million, or $.79 per diluted share, during the second quarter of 2007 and $90.6 million, or $1.69 per diluted share, during the six-month period ended June 30, 2007. As indicated on the Supplemental Schedules, included in our net income during the three and six-month periods ended June 30, 2007, was $10.0 million, or $.19 per diluted share, representing the prior year impact of a favorable after-tax adjustment to reduce our professional and general liability self-insurance reserves based upon the results of an actuarial analysis.
Net revenues increased 8% to $1.28 billion during the second quarter of 2008 as compared to $1.18 billion during the second quarter of 2007. Net revenues increased 8% to $2.58 billion during the six-month period ended June 30, 2008 as compared to $2.38 billion during the six-month period ended June 30, 2007.
Acute Care Services:
At our acute care hospitals owned during both periods ("same facility basis"), inpatient admissions increased 0.8% and patient days increased 1.3% during the second quarter of 2008 as compared to the second quarter of 2007. On a same facility basis, net revenues at our acute care facilities increased 7.6% during the second quarter of 2008 as compared to the comparable prior year quarter. Net revenue per adjusted admission at these facilities increased 7.0% during the second quarter of 2008 over the comparable prior year quarter. On a same facility basis, the operating margin (net revenues less salaries, wages and benefits, other operating expenses, supplies expense and provision for doubtful accounts) at our acute care hospitals increased to 14.6% during the second quarter of 2008 as compared to 12.7% during the second quarter of 2007.
On a same facility basis, inpatient admissions at our acute care facilities increased 0.8% and patient days increased 1.7% during the six-month period ended June 30, 2008 as compared to the comparable period of the prior year. Net revenues at these facilities increased 7.1% during the six-month period ended June 30, 2008 as compared to the comparable prior year period. Net revenue per adjusted admission at these facilities increased 6.0% during the six-month period ended June 30, 2008 over the comparable prior year period. On a same facility basis, the operating margin at our acute care hospitals increased to 15.9% during the first six months of 2008 as compared to 14.1% during the comparable six months of 2007.
We provide care to patients who meet certain financial or economic criteria without charge or at amounts substantially less than our established rates. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in net revenues or in accounts receivable, net. Our acute care hospitals provided charity care and uninsured discounts, based on charges at established rates, amounting to $143 million during each of the three-month periods ended June 30, 2008 and 2007 and $297 million and $270 million during the six-month periods ended June 30, 2008 and 2007, respectively.
Behavioral Health Care Services:
At our behavioral health facilities, on a same facility basis, inpatient admissions increased 8.5% and patient days increased 3.1% during the second quarter of 2008 as compared to the second quarter of 2007. On a same facility basis, net revenues at our behavioral health facilities increased 7.8% during the second quarter of 2008 as compared to the comparable prior year quarter. Net revenue per adjusted patient day at these facilities increased 5.1% during the second quarter of 2008 as compared to the comparable quarter of the prior year. The operating margin at our behavioral health facilities owned during both periods increased to 24.8% during the second quarter of 2008 as compared to 24.6% during the second quarter of 2007.
On a same facility basis, inpatient admissions increased 8.3% and patient days increased 4.7% during the first six months of 2008 over the comparable prior year period. On a same facility basis, net revenues at our behavioral health facilities increased 8.5% during the six-month period ended June 30, 2008 as compared to the comparable period of the prior year. Net revenue per adjusted patient day at these facilities increased 4.7% during the six-month period ended June 30, 2008 over the comparable period of the prior year. The operating margin at our behavioral health facilities owned during both periods increased to 24.3% during the first six months of 2008 as compared to 23.7% during the comparable period of the prior year.
2008 Revised Guidance:
Based upon the operating trends and financial results experienced during the first six months of 2008, and subject to certain assumptions, provisions and adjustments, including those as set forth below in General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures, we are increasing our estimated range of earnings per diluted share from continuing operations for the year ended December 31, 2008 to $3.80 to $3.90 from the previously provided range of $3.70 to $3.80.
Conference Call Information:
We will hold a conference call for investors and analysts at 9:00 a.m. eastern time on July 29, 2008. The dial-in number is 1-877-648-7971. A digital recording of the conference call will be available two hours after the completion of the conference call on July 29, 2008 and will continue through midnight on August 12, 2008. The recording can be accessed by calling 1-800-642-1687 and entering the conference ID number 55562550. This call will also be available live over the internet at our web site at http://www.uhsinc.com. It will also be distributed over CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN's individual investor center at http://www.companyboardroom.com or by visiting any of the investor sites in CCBN's Individual Investor Network. Institutional investors can access the call via CCBN's password-protected event management site, StreetEvents (http://www.streetevents.com).
General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures:
Universal Health Services, Inc. is one of the nation's largest hospital companies, operating acute care and behavioral health hospitals and ambulatory centers nationwide and in Puerto Rico. 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.
This press release contains forward-looking statements based on current management expectations. Numerous factors, including those disclosed herein, those related to healthcare industry trends and those detailed in our filings with the Securities and Exchange Commission (as set forth in Item 1A-Risk Factors in our Form 10-K for the year ended December 31, 2007 and in Item 2-Forward-Looking Statements and Risk Factors in our Form 10-Q for the quarterly period ended March 31, 2008), may cause results to differ materially from those anticipated in the forward-looking statements. Many of the factors that will determine our future results are beyond our capability 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. We undertake 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.
We believe that operating income, operating margin, adjusted income from continuing operations, adjusted income from continuing operations per diluted share, adjusted net income, adjusted net income per diluted share and earnings before interest, taxes, depreciation and amortization ("EBITDA"), which are non-GAAP financial measures ("GAAP" is Generally Accepted Accounting Principles in the United States of America), are helpful to our investors as measures of our operating performance. In addition, we believe that comparing and discussing our financial results based on these measures, as calculated, is helpful to our investors since it neutralizes the effect in each year of items that are nonrecurring or non-operational in nature including items such as, but not limited to, gains on sales of assets and businesses, hurricane-related expenses and insurance recoveries, reserves for legal judgments, lawsuits and other settlements and other amounts that may be reflected in the current or prior year financial statements that relate to prior periods. To obtain a complete understanding of our financial performance these measures should be examined in connection with net income, determined in accordance with GAAP, as presented in the condensed consolidated financial statements and notes thereto in this report or in our other filings with the Securities and Exchange Commission including our Report on Form 10-K for the year ended December 31, 2007 and Report on Form 10-Q for the quarterly period ended March 31, 2008. Since the items included or excluded from these measures are significant components in understanding and assessing financial performance under GAAP, these measures should not be considered to be alternatives to net income as a measure of our operating performance or profitability. Since these measures, as presented, are not determined in accordance with GAAP and are thus susceptible to varying calculations, they may not be comparable to other similarly titled measures of other companies. Investors are encouraged to use GAAP measures when evaluating our financial performance.
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Universal Health Services, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
Three months Six months
ended June 30, ended June 30,
2008 2007 2008 2007
Net revenues $1,278,692 $1,178,976 $2,576,407 $2,376,577
Operating charges:
Salaries, wages and
benefits 536,788 498,579 1,087,248 1,009,572
Other operating expenses 263,173 238,093 515,668 483,445
Supplies expense 176,567 169,246 358,384 344,604
Provision for doubtful
accounts 122,677 103,039 243,552 202,132
Depreciation and
amortization 48,009 45,406 95,379 88,869
Lease and rental expense 17,947 16,605 35,614 32,781
Hurricane related
expenses, net - 1,058 - 625
1,165,161 1,072,026 2,335,845 2,162,028
Income before interest
expense, minority
interests and income
taxes 113,531 106,950 240,562 214,549
Interest expense, net 13,249 13,040 26,728 25,762
Minority interests in
earnings of consolidated
entities 11,427 8,675 24,706 22,867
Income before income taxes 88,855 85,235 189,128 165,920
Provision for income taxes 34,615 33,193 73,225 64,306
Income from continuing
operations 54,240 52,042 115,903 101,614
Income (loss) from
discontinued operations,
net of income taxes - 29 - (35)
Net income $54,240 $52,071 $115,903 $101,579
Basic earnings per share:
From continuing operations $1.07 $0.97 $2.27 $1.90
From discontinued
operations - - - -
Total basic earnings
per share $1.07 $0.97 $2.27 $1.90
Diluted earnings per share:
From continuing operations $1.07 $0.97 $2.27 $1.89
From discontinued
operations - - - -
Total diluted earnings
per share $1.07 $0.97 $2.27 $1.89
Weighted average number
of common shares 50,629 53,499 50,946 53,496
Other share equivalents 181 229 127 211
Weighted average number
of common shares and
equiv. - diluted 50,810 53,728 51,073 53,707
Universal Health Services, Inc.
Schedule of Non-GAAP Supplemental Consolidated Statements of Income
Information ("Supplemental Schedule")
For the three months ended June 30, 2008 and 2007
(in thousands, except per share amounts)
(unaudited)
Three months ended Three months ended
June 30, 2008 June 30, 2007
Net revenues $1,278,692 100.0% $1,178,976 100.0%
Operating charges:
Salaries, wages and benefits 536,788 42.0% 498,579 42.3%
Other operating expenses 263,173 20.6% 238,093 20.2%
Supplies expense 176,567 13.8% 169,246 14.4%
Provision for doubtful accounts 122,677 9.6% 103,039 8.7%
1,099,205 86.0% 1,008,957 85.6%
Operating income/margin 179,487 14.0% 170,019 14.4%
Lease and rental expense 17,947 16,605
Minority interests in earnings
of consolidated entities 11,427 8,675
Earnings before hurricane related
expenses, depreciation and
amortization, interest expense,
and income taxes ("EBITDA") 150,113 144,739
Hurricane related expenses, net - 1,058
Depreciation and amortization 48,009 45,406
Interest expense, net 13,249 13,040
Income before income taxes 88,855 85,235
Provision for income taxes 34,615 33,193
Income from continuing operations 54,240 52,042
Income from discontinued
operations, net of income taxes - 29
Net income $54,240 $52,071
Three months ended Three months ended
June 30, 2008 June 30, 2007
Per Per
Diluted Diluted
Amount Share Amount Share
Calculation of Adjusted Income
from Continuing Operations
Income from continuing operations $54,240 $1.07 $52,042 $0.97
Plus/minus adjustments:
Hurricane related expenses, net - - 652 0.01
Reduction of reserve for
professional and general
liability self-insured claims,
net of minority interests and
income taxes - - (10,045) (0.19)
Subtotal after-tax adjustments to
income from continuing operations - - (9,393) (0.18)
Adjusted income from continuing
operations $54,240 $1.07 $42,649 $0.79
Calculation of Adjusted Net
Income
Net income $54,240 $1.07 $52,071 $0.97
After-tax adjustments to income
from continuing operations, as
indicated above - - (9,393) (0.18)
Adjusted net income $54,240 $1.07 $42,678 $0.79
Universal Health Services, Inc.
Schedule of Non-GAAP Supplemental Consolidated Statements of Income
Information ("Supplemental Schedule")
For the six months ended June 30, 2008 and 2007
(in thousands, except per share amounts)
(unaudited)
Six months ended Six months ended
June 30, 2008 June 30, 2007
Net revenues $2,576,407 100.0% $2,376,577 100.0%
Operating charges:
Salaries, wages and benefits 1,087,248 42.2% 1,009,572 42.5%
Other operating expenses 515,668 20.0% 483,445 20.3%
Supplies expense 358,384 13.9% 344,604 14.5%
Provision for doubtful accounts 243,552 9.5% 202,132 8.5%
2,204,852 85.6% 2,039,753 85.8%
Operating income/margin 371,555 14.4% 336,824 14.2%
Lease and rental expense 35,614 32,781
Minority interests in earnings
of consolidated entities 24,706 22,867
Earnings before hurricane related
expenses, depreciation and
amortization, interest expense,
and income taxes ("EBITDA") 311,235 281,176
Hurricane related expenses, net - 625
Depreciation and amortization 95,379 88,869
Interest expense, net 26,728 25,762
Income before income taxes 189,128 165,920
Provision for income taxes 73,225 64,306
Income from continuing operations 115,903 101,614
Loss from discontinued operations,
net of income taxes - (35)
Net income $115,903 $101,579
Six months ended Six months ended
June 30, 2008 June 30, 2007
Per Per
Diluted Diluted
Amount Share Amount Share
Calculation of Adjusted Income from
Continuing Operations
Income from continuing operations $115,903 $2.27 $101,614 $1.89
Plus/minus adjustments:
Hurricane related expenses, net - - 386 0.01
Gain on sale of real property, net
of income taxes - - (1,356) (0.02)
Reduction of reserve for
professional and general
liability self-insured claims,
net of minority interests and
income taxes - - (10,045) (0.19)
Subtotal after-tax adjustments to
income from continuing operations - - (11,015) (0.20)
Adjusted income from continuing
operations $115,903 $2.27 $90,599 $1.69
Calculation of Adjusted Net Income
Net income $115,903 $2.27 $101,579 $1.89
After-tax adjustments to income
from continuing operations, as
indicated above - - (11,015) (0.20)
Adjusted net income $115,903 $2.27 $90,564 $1.69
Universal Health Services, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30, December 31,
2008 2007
Assets:
Cash and cash equivalents $6,211 $16,354
Accounts receivable, net 710,065 627,186
Other current assets 127,712 131,307
Property, plant and equipment, net 1,989,905 1,933,916
Other assets 884,700 899,894
Total Assets $3,718,593 $3,608,657
Liabilities and Stockholders' Equity:
Current portion of long-term debt $2,814 $3,116
Other current liabilities 504,444 484,595
Other noncurrent liabilities 353,069 344,755
Long-term debt 1,050,491 1,008,786
Deferred income taxes 37,703 40,022
Minority interests 225,598 210,184
Stockholders' equity 1,544,474 1,517,199
Total Liabilities and Stockholders'
Equity $3,718,593 $3,608,657
Universal Health Services, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six months
ended June 30,
2008 2007
Cash Flows from Operating Activities:
Net income $115,903 $101,579
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation & amortization 95,379 88,888
Gain on sale of assets - (2,200)
Changes in assets & liabilities,
net of effects from
acquisitions and dispositions:
Accounts receivable (73,912) (36,291)
Accrued interest 811 9,260
Accrued and deferred income taxes 3,288 (7,368)
Other working capital accounts 18,331 (125)
Other assets and deferred charges 6,854 (3,783)
Other 5,410 (1,240)
Minority interest in earnings of
consolidated entities, net of
distributions 13,307 9,260
Accrued insurance expense, net of
commercial premiums paid 38,743 23,395
Payments made in settlement of
self-insurance claims (25,648) (22,399)
Net cash provided by
operating activities 198,466 158,976
Cash Flows from Investing Activities:
Property and equipment additions,
net of disposals (156,062) (184,587)
Proceeds received from sale of
assets 2,235 5,268
Settlement proceeds received
related to prior year acquisition,
net of expenses 1,539 -
Investment in joint-venture (2,095) -
Acquisition of assets and businesses - (81,195)
Purchase of minority ownership
interest in majority owned business - (14,762)
Net cash used in investing
activities (154,383) (275,276)
Cash Flows from Financing Activities:
Additional borrowings, net of
financing costs 150,155 116,271
Reduction of long-term debt (109,727) -
Repurchase of common shares (89,816) (3,341)
Dividends paid (8,096) (8,621)
Issuance of common stock 1,151 1,444
Capital contributions from
minority member 2,107 8,271
Net cash (used in) provided by
financing activities (54,226) 114,024
Decrease in cash and cash equivalents (10,143) (2,276)
Cash and cash equivalents, beginning
of period 16,354 14,939
Cash and cash equivalents, end of period $6,211 $12,663
Supplemental Disclosures of Cash Flow
Information:
Interest paid $29,335 $20,216
Income taxes paid, net of refunds $70,269 $71,410
Universal Health Services, Inc.
Supplemental Statistical Information
(un-audited)
% Change % Change
Quarter Ended 6 months ended
Same Facility: 06/30/2008 06/30/2008
Acute Care Hospitals
Revenues 7.6% 7.1%
Adjusted Admissions 0.6% 1.1%
Adjusted Patient Days 1.1% 2.0%
Revenue Per Adjusted Admission 7.0% 6.0%
Revenue Per Adjusted Patient Day 6.5% 5.1%
Behavioral Health Hospitals
Revenues 7.8% 8.5%
Adjusted Admissions 7.9% 7.2%
Adjusted Patient Days 2.5% 3.6%
Revenue Per Adjusted Admission -0.1% 1.2%
Revenue Per Adjusted Patient Day 5.1% 4.7%
UHS Consolidated Second Quarter Ended Six months Ended
06/30/2008 06/30/2007 06/30/2008 06/30/2007
Revenues $1,278,692 $1,178,976 $2,576,407 $2,376,577
EBITDA (1) 150,113 144,739 311,235 281,176
EBITDA Margin (1) 11.7% 12.3% 12.1% 11.8%
Cash Flow From Operations 66,790 60,000 198,466 158,976
Days Sales Outstanding 51 50 50 49
Capital Expenditures 74,311 85,238 156,062 184,587
Debt 1,053,305 954,074
Shareholders Equity 1,544,474 1,514,774
Debt / Total Capitalization 40.5% 38.6%
Debt / EBITDA (2) 1.95 1.97
Debt / Cash From
Operations (2) 2.71 6.86
Acute Care EBITDAR
Margin (3) (4) 14.3% 14.7% 15.3% 14.9%
Behavioral Health EBITDAR
Margin (3) (4) 24.3% 25.2% 23.7% 23.8%
(1) Net of Minority Interest
(2) Latest 4 quarters
(3) Before Corporate overhead allocation and minority interest
(4) Excluding discontinued operations
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
FOR THE THREE MONTHS ENDED
JUNE 30, 2008
AS REPORTED:
ACUTE (1) BEHAVIORAL HEALTH
06/30/08 06/30/07 % change 06/30/08 06/30/07 % change
Hospitals owned
and leased 23 22 4.5% 83 82 1.2%
Average licensed
beds 5,578 5,417 3.0% 7,668 7,258 5.6%
Patient days 296,760 286,702 3.5% 530,769 501,482 5.8%
Average daily
census 3,261.1 3,150.6 3.5% 5,832.6 5,510.8 5.8%
Occupancy-licensed
beds 58.5% 58.2% 0.5% 76.1% 75.9% 0.2%
Admissions 66,322 64,139 3.4% 32,560 29,707 9.6%
Length of stay 4.5 4.5 0.1% 16.3 16.9 -3.4%
Inpatient
revenue $2,353,566 $2,092,069 12.5% $489,317 $452,963 8.0%
Outpatient
revenue 974,976 897,359 8.6% 65,335 59,443 9.9%
Total patient
revenue 3,328,542 2,989,428 11.3% 554,652 512,406 8.2%
Other revenue 20,373 15,110 34.8% 9,893 6,632 49.2%
Gross hospital
revenue 3,348,915 3,004,538 11.5% 564,545 519,038 8.8%
Total
deductions 2,407,035 2,150,866 11.9% 247,229 232,185 6.5%
Net hospital
revenue $941,880 $853,672 10.3% $317,316 $286,853 10.6%
SAME FACILITY:
ACUTE (2) BEHAVIORAL HEALTH (3)
06/30/08 06/30/07 % change 06/30/08 06/30/07 % change
Hospitals owned
and leased 22 22 0.0% 81 81 0.0%
Average licensed
beds 5,413 5,417 -0.1% 7,467 7,252 3.0%
Patient days 290,481 286,714 1.3% 516,762 501,219 3.1%
Average daily
census 3,192.1 3,150.7 1.3% 5,678.7 5,507.9 3.1%
Occupancy-licensed
beds 59.0% 58.2% 1.4% 76.1% 76.0% 0.1%
Admissions 64,657 64,139 0.8% 32,230 29,701 8.5%
Length of stay 4.5 4.5 0.5% 16.0 16.9 -5.0%
(1) Acute care hospitals located in New Orleans are excluded in 2007 and
2008.
(2) Acute care hospitals located in New Orleans and Centennial Hills
Hospital are excluded in current and prior years.
(3) Casa de Lago, Cottonwood Treatment Center, Foundations Behavioral and
Shenandoah Valley are excluded in current and prior years. Highlands
Behavioral is included in both current and prior years from March 1st
through year to date. Dover Behavioral is included in both current
and prior years from May 1st through year to date.
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
FOR THE SIX MONTHS ENDED
JUNE 30, 2008
AS REPORTED:
ACUTE (1) BEHAVIORAL HEALTH
06/30/08 06/30/07 % change 06/30/08 06/30/07 % change
Hospitals owned
and leased 23 22 4.5% 83 75 10.7%
Average licensed
beds 5,578 5,417 3.0% 7,632 7,158 6.6%
Patient days 617,355 595,876 3.6% 1,060,724 982,835 7.9%
Average daily
census 3,392.1 3,292.1 3.0% 5,828.2 5,430.0 7.3%
Occupancy-licensed
beds 60.8% 60.8% 0.1% 76.4% 75.9% 0.7%
Admissions 136,833 132,905 3.0% 65,442 59,026 10.9%
Length of stay 4.5 4.5 0.6% 16.2 16.7 -2.7%
Inpatient
revenue $4,858,886 $4,363,208 11.4% $978,050 $886,875 10.3%
Outpatient
revenue 1,930,131 1,765,490 9.3% 131,923 119,088 10.8%
Total patient
revenue 6,789,017 6,128,698 10.8% 1,109,973 1,005,963 10.3%
Other revenue 39,505 29,561 33.6% 18,051 14,462 24.8%
Gross hospital
revenue 6,828,522 6,158,259 10.9% 1,128,024 1,020,425 10.5%
Total
deductions 4,915,635 4,411,722 11.4% 497,850 457,860 8.7%
Net hospital
revenue $1,912,887 $1,746,537 9.5% $630,174 $562,565 12.0%
SAME FACILITY:
ACUTE (2) BEHAVIORAL HEALTH (3)
06/30/08 06/30/07 % change 06/30/08 06/30/07 % change
Hospitals owned
and leased 22 22 0.0% 81 81 0.0%
Average licensed
beds 5,413 5,417 -0.1% 7,387 7,153 3.3%
Patient days 605,933 595,870 1.7% 1,027,845 982,142 4.7%
Average daily
census 3,329.3 3,292.1 1.1% 5,647.5 5,426.2 4.1%
Occupancy-licensed
beds 61.5% 60.8% 1.2% 76.5% 75.9% 0.8%
Admissions 133,987 132,905 0.8% 63,975 59,095 8.3%
Length of stay 4.5 4.5 0.9% 16.1 16.6 -3.3%
(1) Acute care hospitals located in New Orleans are excluded in 2007 and
2008.
(2) Acute care hospitals located in New Orleans and Centennial Hills
Hospital are excluded in current and prior years.
(3) Casa de Lago, Cottonwood Treatment Center, Foundations Behavioral and
Shenandoah Valley are excluded in current and prior years. Highlands
Behavioral is included in both current and prior years from March 1st
through year to date. Dover Behavioral is included in both current
and prior years from May 1st through year to date.
SOURCE Universal Health Services, Inc.
http://www.uhsinc.com