Universal Health Services, Inc. Reports First Quarter Earnings
04/27/2006
KING OF PRUSSIA, Pa., April 27 /PRNewswire-FirstCall/ -- Universal Health Services, Inc. (NYSE: UHS) announced today its results for the first quarter ended March 31, 2006. Reported net income was $51.1 million or $.88 per diluted share during the first quarter of 2006 as compared to $61.4 million or $.99 per diluted share during the comparable prior year quarter. Reported income from continuing operations was $50.5 million or $.87 per diluted share during the first quarter of 2006 as compared to $54.7 million or $.89 per diluted share during the first quarter of 2005. After adjusting for the hurricane-related insurance recoveries and expenses discussed below, our adjusted income from continuing operations was $41.5 million and our adjusted income from continuing operations per diluted share was $.73 during the three- month period ended March 31, 2006.
As indicated on the attached Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information for the Three Months Ended March 31, 2006 and 2005, included in our income from continuing operations and income from continuing operations per diluted share during the first quarter of 2006 are combined after-tax hurricane insurance recoveries, net of hurricane related expenses, of $9.0 million or $.14 per diluted share. These hurricane insurance recoveries and hurricane related expenses were incurred in connection with damage sustained in Louisiana from Hurricane Katrina that resulted in the closure of our Methodist Hospital, Lakeland Medical Pavilion, Chalmette Medical Center and Virtue Street Pavilion during the third quarter of 2005.
Net revenues increased 3% to $1.03 billion during the first quarter of 2006 as compared to $1.01 billion during the first quarter of 2005. Impacting our revenues during the first quarter of 2006 was the loss of revenues generated at our above-mentioned acute care facilities in Louisiana which, on a combined basis, generated $61.2 million of net revenues during the first quarter of 2005. Also, on January 1st of this year, we implemented a formal company-wide uninsured discount policy which has had the effect of lowering both net revenues and the provision for doubtful accounts by approximately $15 million during the first quarter without any significant impact on net income.
At our acute care hospitals owned during both periods, inpatient admissions increased 1.2% and patient days increased 0.2% during the first quarter of 2006 as compared to the comparable 2005 quarter. Since our above- mentioned facilities located in Louisiana have been closed since Hurricane Katrina, the inpatient statistics for those facilities have been excluded from the first quarter of each year. At our behavioral health care facilities owned during both quarters, inpatient admissions increased 5.9% and patient days increased 3.4% during the first quarter of 2006 as compared to the comparable 2005 quarter.
Our operating margin (as calculated on the attached Schedule of Non-GAAP Supplemental Consolidated Income Statement Information), decreased to 13.6% during the three-month period ended March 31, 2006 as compared to 15.9% during the same period of the prior year. The operating margin at our acute care hospitals owned during both periods ("same facility basis") decreased to 14.7% during the three months ended March 31, 2006 as compared to 17.7% during the three months ended March 31, 2005. On a same facility basis, the operating margin at our behavioral health hospitals increased to 25.3% during the first quarter of 2006 from 24.6% during the comparable quarter of the prior year.
Our provision for doubtful accounts was 7.3% during the first quarter of 2006 as compared to 8.2% during the comparable prior year quarter. Exclusive of the impact of the uninsured discount implemented at the beginning of this year, the provision for doubtful accounts would have been 8.6% of net revenues during the first quarter of 2006 as compared to 8.2% during the prior year's first quarter. The increase resulted primarily from an increase in the number of uninsured patients treated at our acute care hospitals.
We will hold a conference call for investors and analysts at 9:00 a.m. Eastern Time on April 28, 2006. 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 April 28, 2006 and will continue through midnight on May 5, 2006. The recording can be accessed by calling 1-800-642-1687 and entering the conference ID number 7813878.
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).
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 "Risk Factors" on pages 24 through 30 and in "Forward-Looking Statements and Risk Factors" on pages 39 and 40 of our Form 10-K for the year ended December 31, 2005), 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, adjusted operating income and adjusted operating margin, 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 such as, gains on sales of assets and businesses, Hurricane related expenses and insurance recoveries, and other amounts 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, 2005. 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.
Universal Health Services, Inc. Consolidated Statements of Income (in thousands, except per share amounts) (unaudited) Three months ended March 31, 2006 2005 Net revenues $1,034,289 $1,006,645 Operating charges: Salaries, wages and benefits 442,232 406,340 Other operating expenses 248,101 231,165 Supplies expense 128,513 126,536 Provision for doubtful accounts 75,007 82,408 Depreciation and amortization 39,030 39,696 Lease and rental expense 16,232 15,467 Hurricane related expenses 6,904 - Hurricane insurance recoveries (22,291) - 933,728 901,612 Income before interest expense, minority interests and income taxes 100,561 105,033 Interest expense, net 8,525 10,676 Minority interests in earnings of consolidated entities 11,177 7,919 Income before income taxes 80,859 86,438 Provision for income taxes 30,367 31,748 Income from continuing operations 50,492 54,690 Income from discontinued operations, net of income tax expense (a) 592 6,719 Net income $51,084 $61,409 Basic earnings per share: (b) From continuing operations $0.94 $0.95 From discontinued operations 0.01 0.12 Total basic earnings per share $0.95 $1.07 Diluted earnings per share: (b) From continuing operations $0.87 $0.89 From discontinued operations 0.01 0.10 Total diluted earnings per share $0.88 $0.99 Universal Health Services, Inc. Footnotes to Consolidated Statements of Income (in thousands, except per share amounts) (unaudited) Three months ended March 31, 2006 2005 (a) Calculation of income from discontinued operations, net of income tax: Income from operations $940 $4,936 Gains on divestitures - 9,096 Asset impairment charge - (3,105) Income from discontinued operations, pre-tax 940 10,927 Income tax provision (348) (4,208) Income from discontinued operations, net of income tax expense $592 $6,719 (b) Earnings per share calculation: Basic: Income from continuing operations $50,492 $54,690 Less: Dividends on unvested restricted stock, net of taxes (23) (27) Income from continuing operations - basic $50,469 $54,663 Income from discontinued operations 592 6,719 Net income - basic $51,061 $61,382 Weighted average number of common shares - basic 53,768 57,523 Basic earnings per share: From continuing operations $0.94 $0.95 From discontinued operations 0.01 0.12 Total basic earnings per share $0.95 $1.07 Diluted: Income from continuing operations $50,492 $54,690 Less: Dividends on unvested restricted stock, net of taxes (23) (27) Add: Debenture interest, net of taxes 2,457 2,382 Income from continuing operations - diluted $52,926 $57,045 Income from discontinued operations 592 6,719 Net income - diluted $53,518 $63,764 Weighted average number of common shares 53,768 57,523 Add: Shares for conversion of convertible debentures 6,577 6,577 Other share equivalents 161 316 Weighted average number of common shares and equiv. - diluted 60,506 64,416 Diluted earnings per share: From continuing operations $0.87 $0.89 From discontinued operations 0.01 0.10 Total diluted earnings per share $0.88 $0.99 Universal Health Services, Inc. Condensed Consolidated Balance Sheets (in thousands) (unaudited) March 31, December 31, 2006 2005 Assets: Cash and cash equivalents $8,211 $7,963 Accounts receivable, net 547,800 499,726 Other current assets 102,568 100,609 Property, plant and equipment, net 1,510,193 1,429,653 Other assets 816,275 820,758 Total Assets $2,985,047 $2,858,709 Liabilities and Stockholders' Equity: Current portion of long-term debt $3,999 $5,191 Other current liabilities 610,750 518,979 Other noncurrent liabilities 300,716 289,195 Long-term debt 603,533 637,654 Deferred income taxes 41,281 42,713 Minority interest 170,222 159,879 Stockholders' equity 1,254,546 1,205,098 Total Liabilities and Stockholders' Equity $2,985,047 $2,858,709 Universal Health Services, Inc. Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information For the Three Months Ended March 31, 2006 and 2005 (in thousands, except per share amounts) (unaudited) Three months ended Three months ended March 31, 2006 March 31, 2005 Net revenues $1,034,289 100.0% $1,006,645 100.0% Operating charges: Salaries, wages and benefits 442,232 42.8% 406,340 40.4% Other operating expenses 248,101 24.0% 231,165 23.0% Supplies expense 128,513 12.4% 126,536 12.6% Provision for doubtful accounts 75,007 7.3% 82,408 8.2% 893,853 86.4% 846,449 84.1% Operating income/margin 140,436 13.6% 160,196 15.9% Lease and rental expense 16,232 15,467 Minority interests in earnings of consolidated entities 11,177 7,919 Earnings before depreciation and amortization, interest expense, and income taxes ("EBITDA") 113,027 136,810 Hurricane related expenses 6,904 - Hurricane insurance recoveries (22,291) - Depreciation and amortization 39,030 39,696 Interest expense, net 8,525 10,676 Income before income taxes 80,859 86,438 Provision for income taxes 30,367 31,748 Income from continuing operations 50,492 54,690 Income from discontinued operations, net of income taxes 592 6,719 Net income $51,084 $61,409 Three months ended Three months ended March 31, 2006 March 31, 2005 Per Per Diluted Diluted Amount Share Amount Share Calculation of Adjusted Income from Continuing Operations Income from continuing operations $50,492 $0.87 $54,690 $0.89 Add: Hurricane related expenses, net of minority interests and income taxes 4,073 0.07 - - Less: Hurricane related insurance recoveries, net of minority interests and income taxes (13,055) (0.21) - - Adjusted income from continuing operations $41,510 $0.73 $54,690 $0.89 Universal Health Services, Inc. Supplemental Statistical Information (unaudited) % Change Quarter Ended Same Facility: 3/31/2006 Acute Care Hospitals Revenues 3.1% Adjusted Admissions 1.8% Adjusted Patient Days 1.2% Revenue Per Adjusted Admission 1.3% Revenue Per Adjusted Patient Day 2.0% Behavioral Health Hospitals Revenues 9.8% Adjusted Admissions 6.1% Adjusted Patient Days 3.5% Revenue Per Adjusted Admission 3.4% Revenue Per Adjusted Patient Day 6.1% UHS Consolidated First Quarter Ended 3/31/2006 3/31/2005 Revenues $1,034,289 $1,006,645 EBITDA (1) $113,027 $136,810 EBITDA Margin (1) 10.9% 13.6% Cash Flow From Operations $110,325 $134,612 Days Sales Outstanding 48 45 Capital Expenditures $83,188 $57,920 Debt (net of cash) 599,321 646,322 Shareholders Equity 1,254,546 1,274,895 Debt / Total Capitalization 32.3% 33.6% Debt / EBITDA (2) 1.43 1.30 Debt / Cash From Operations (2) 1.49 1.49 Acute Care EBITDAR Margin (3) 14.7% 17.0% Behavioral Health EBITDAR Margin (3) 23.2% 24.6% (1) Net of Minority Interest (2) Latest 4 quarters (3) Before Corporate overhead allocation and minority interest UNIVERSAL HEALTH SERVICES, INC. SELECTED HOSPITAL STATISTICS MARCH 31, 2006 AS REPORTED: For the three months ended Acute (1) (2) Behavioral Health 03/31/06 03/31/05 % 03/31/06 03/31/05 % Hospitals owned and leased 21 24 -12.5% 75 44 70.5% Average licensed beds 4,989 5,549 -10.1% 6,397 4,414 44.9% Patient days 283,248 312,500 -9.4% 451,885 325,874 38.7% Average daily census 3,147.2 3,472.2 -9.4% 5,020.9 3,620.8 38.7% Occupancy-licensed beds 63.1% 62.6% 0.8% 78.5% 82.0% -4.3% Admissions 63,167 67,091 -5.8% 28,072 25,045 12.1% Length of stay 4.5 4.7 -3.7% 16.1 13.0 23.7% Inpatient revenue $1,941,155 $1,946,868 -0.3% $409,400 $325,897 25.6% Outpatient revenue 708,511 690,580 2.6% 53,274 48,515 9.8% Total patient revenue 2,649,666 2,637,448 0.5% 462,674 374,412 23.6% Other revenue 12,523 13,116 -4.5% 8,075 7,960 1.4% Gross hospital revenue 2,662,189 2,650,564 0.4% 470,749 382,372 23.1% Total deductions 1,892,237 1,843,940 2.6% 217,121 192,812 12.6% Net hospital revenue $769,952 $806,624 -4.5% $253,628 $189,560 33.8% SAME FACILITY: Acute (1)(3) Behavioral Health (4) 03/31/06 03/31/05 % 03/31/06 03/31/05 % Hospitals owned and leased 21 21 0.0% 44 44 0.0% Average licensed beds 4,989 5,004 -0.3% 4,455 4,414 0.9% Patient days 283,248 282,627 0.2% 336,951 325,872 3.4% Average daily census 3,147.2 3,140.3 0.2% 3,743.9 3,620.8 3.4% Occupancy-licensed beds 63.1% 62.8% 0.5% 84.0% 82.0% 2.4% Admissions 63,167 62,413 1.2% 26,530 25,045 5.9% Length of stay 4.5 4.5 -1.0% 12.7 13.0 -2.4% (1) Does not include hospitals located in France or discontinued operations. (2) Does not include discontinued operations. Licensed beds from our Acute care hospitals located in New Orleans are excluded in 2006. (3) Discontinued operations and our three acute care hospitals located in New Orleans are excluded in current and prior years. (4) Ascent, Boulder Creek, Center for Change, King George School, Northwest Academy, Wyoming Behavioral and the Keystone facilities are excluded in current and prior year.
SOURCE: Universal Health Services, Inc.
CONTACT: Steve Filton, Chief Financial Officer, Universal Health Services, Inc., +1-610-768-3300