UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 28, 2014 (October 27, 2014)

 

 

UNIVERSAL HEALTH SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

DELAWARE		1-10765		23-2077891
(State or other jurisdiction of Incorporation or Organization)		(Commission File Number)		(I.R.S. Employer Identification No.)

UNIVERSAL CORPORATE CENTER

367 SOUTH GULPH ROAD

KING OF PRUSSIA, PENNSYLVANIA 19406

(Address of principal executive office) (Zip Code)

Registrant’s telephone number, including area code (610) 768-3300

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02 Results of Operations and Financial Condition

On October 27, 2014, Universal Health Services, Inc. issued the press release attached hereto as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits. 99.1 Universal Health Services, Inc., press release, dated October 27, 2014.

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: October 28, 2014

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Exhibit Index

 

Exhibit No.		Exhibit
99.1		Universal Health Services, Inc., press release, dated October 27, 2014.

Exhibit 99.1

FOR IMMEDIATE RELEASE

 

CONTACT:		Steve Filton
		Chief Financial Officer		October 27, 2014
		610-768-3300

UNIVERSAL HEALTH SERVICES, INC. REPORTS FINANCIAL

RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014

Consolidated Results of Operations, As Reported – Three and nine-month periods ended September 30, 2014 and 2013:

KING OF PRUSSIA, PA – Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income attributable to UHS was $82.8 million, or $.82 per diluted share, during the third quarter of 2014 as compared to $114.6 million, or $1.15 per diluted share, during the comparable quarter of 2013. Net revenues increased 11.1% to $2.02 billion during the third quarter of 2014 as compared to $1.82 billion during the third quarter of 2013.

Reported net income attributable to UHS was $372.5 million, or $3.71 per diluted share, during the first nine months of 2014 as compared to $386.2 million, or $3.89 per diluted share, during the comparable period of 2013. Net revenues increased 8.7% to $5.96 billion during the first nine months of 2014 as compared to $5.48 billion during the comparable period of 2013.

Included in our reported results during the three and nine-month periods ended September 30, 2014 was a pre-tax charge of $44.0 million incurred in connection with a previously disclosed legal settlement (as discussed below) as well as a pre-tax charge of $36.2 million resulting from the costs related to the extinguishment of debt in connection with the previously disclosed financing transactions that occurred during the quarter.

Consolidated Results of Operations, As Adjusted – Three and nine-month periods ended September 30, 2014 and 2013:

For the three-month period ended September 30, 2014, our adjusted net income attributable to UHS, as calculated on the attached Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information (“Supplemental Schedule”), increased approximately 26% to $137.5 million, or $1.36 per diluted share, as compared to $109.5 million, or $1.10 per diluted share, during the third quarter of 2013.

As reflected on the Supplemental Schedule, included in our reported results during the third quarter of 2014 was an aggregate net unfavorable after-tax impact of approximately $54.7 million, or $.54 per diluted share, related to:

 

•

an after-tax charge of $27.6 million ($44.0 million pre-tax), or $.27 per diluted share, incurred in connection with the previously disclosed $65 million settlement of Garden City Employees’ Retirement System v. Psychiatric Solutions, Inc. (“PSI”), Joey A. Jacobs, Brent Turner and Jack E. Polson. This matter was a shareholder class action

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lawsuit filed in 2009 against PSI and certain of its former officers alleging their violations of federal securities laws and we assumed the defense and liability of this matter as a result of our acquisition of PSI in 2010. The charge incurred during the third quarter of 2014 is net of approximately $16 million of commercial insurance recoveries that we were entitled to and a previously recorded estimated reserve;

 

•

an aggregate after-tax charge of $22.7 million ($36.2 million pre-tax), or $.23 per diluted share, recorded in connection with the costs related to extinguishment of debt resulting primarily from the early redemption of our previously outstanding $250 million, 7.00% senior unsecured notes that were scheduled to mature in 2018 and the repayment of $550 million of borrowings pursuant to the terms of our previously outstanding Term Loan B facility which was scheduled to mature in 2016, and;

 

•

an aggregate net unfavorable after-tax impact of $4.5 million, or $.04 per diluted share, related to the incentive income and depreciation and amortization expense recorded in connection with the implementation of electronic health records (“EHR”) applications at our acute care hospitals.

As reflected on the Supplemental Schedule, included in our reported results during the third quarter of 2013 was a net favorable after-tax impact of approximately $5.1 million, or $.05 per diluted share, related to the incentive income and expenses recorded in connection with the implementation of EHR applications at our acute care hospitals.

For the nine-month period ended September 30, 2014, our adjusted net income attributable to UHS, as calculated on the attached Supplemental Schedule, increased approximately 23% to $429.8 million, or $4.28 per diluted share, as compared to $348.5 million, or $3.51 per diluted share, during the comparable period of 2013.

As reflected on the Supplemental Schedule, included in our reported results during the nine-month period ended September 30, 2014 was: (i) an unfavorable after-tax impact of approximately $27.6 million, or $.27 per diluted share, resulting from the above-mentioned litigation settlement during the third quarter of 2014; (ii) an aggregate unfavorable after-tax impact of approximately $22.7 million, or $.23 per diluted share, resulting from the above-mentioned costs related to extinguishment of debt incurred during the third quarter of 2014; (iii) an aggregate net unfavorable after-tax impact of approximately $13.3 million, or $.13 per diluted share, related to the incentive income and depreciation and amortization expense recorded in connection with the implementation of EHR applications, and; (iv) a favorable after-tax impact of $6.3 million, or $.06 per diluted share, resulting from a gain realized on the sale of a non-operating investment during the first quarter of 2014.

Included in our reported results during the nine-month period ended September 30, 2013 was a net favorable after-tax impact of $37.8 million, or $.38 per diluted share, resulting from a reduction to our professional and general liability self-insurance reserves relating to years prior to 2013, based upon a reserve analysis. During the nine-month period ended September 30, 2013, the pre-tax incentive income of $27.9 million earned in connection with the implementation of EHR applications was essentially offset by EHR-related expenses incurred during the period.

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Acute Care Services – Three and nine-month periods ended September 30, 2014 and 2013:

During the third quarter of 2014, at our acute care hospitals owned during both periods (“same facility basis”), adjusted admissions (adjusted for outpatient activity) increased 4.1% and adjusted patient days increased 6.7%, as compared to the third quarter of 2013. Net revenues at these facilities increased 7.9% during the third quarter of 2014 as compared to the comparable quarter of the prior year. At these facilities, net revenue per adjusted admission increased 3.6% while net revenue per adjusted patient day increased 1.0% during the third quarter of 2014 as compared to the comparable quarter of 2013. On a same facility basis, the operating margin at our acute care hospitals increased to 18.3% during the third quarter of 2014 as compared to 14.4% during the third quarter of 2013. We define operating margin as net revenues less salaries, wages and benefits, other operating expenses and supplies expense (excluding the EHR impact, as indicated on the Supplemental Schedule).

During the first nine months of 2014, at our acute care hospitals on a same facility basis, adjusted admissions increased 2.3% and adjusted patient days increased 6.4%, as compared to the comparable period of 2013. Net revenues at these facilities increased 8.4% during the first nine months of 2014 as compared to the comparable period of the prior year. At these facilities, net revenue per adjusted admission increased 5.9% while net revenue per adjusted patient day increased 1.9% during the first nine months of 2014 as compared to the comparable period of 2013. On a same facility basis, the operating margin at our acute care hospitals increased to 19.1% during the first nine months of 2014 as compared to 15.1% during the comparable period of 2013.

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 gross charges, amounting to approximately $266 million and $276 million during the three-month periods ended September 30, 2014 and 2013, respectively, and $852 million and $764 million during the nine-month periods ended September 30, 2014 and 2013, respectively. The provision for doubtful accounts at our acute care hospitals decreased to approximately $129 million during the three-month period ended September 30, 2014 as compared to $291 million during the comparable quarter of 2013, and decreased to $460 million during the nine-month period ended September 30, 2014 as compared to $725 million during the comparable period of 2013. During the three and nine-month periods ended September 30, 2014, as compared to the comparable periods of 2013, our acute care hospitals experienced a decrease in the aggregate of charity care, uninsured discounts and provision for doubtful accounts as a percentage of gross charges.

Behavioral Health Care Services – Three and nine-month periods ended September 30, 2014 and 2013:

During the third quarter of 2014, at our behavioral health care facilities on a same facility basis, adjusted admissions increased 5.4% while adjusted patient days increased 2.1% compared to the third quarter of 2013. At these facilities, net revenue per adjusted admission decreased 0.3% while net revenue per adjusted patient day increased 2.9% during the third quarter of 2014 as compared to the comparable quarter in 2013. On a same facility basis, our behavioral health services’ net revenues increased 6.2% during the third quarter of 2014, as compared to the comparable quarter in 2013, and the operating margins were 27.6% and 27.3% during the three-month periods ended September 30, 2014 and 2013, respectively.

During the nine-month period ended September 30, 2014, at our behavioral health care facilities on a same facility basis, adjusted admissions increased 4.0% while adjusted patient days increased 1.4%

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compared to the comparable period of 2013. At these facilities, net revenue per adjusted admission remained relatively unchanged while net revenue per adjusted patient day increased 2.5% during the first nine months of 2014 as compared to the comparable period of 2013. On a same facility basis, our behavioral health services’ net revenues increased 5.3% during the first nine months of 2014, as compared to the comparable period of 2013, and the operating margins were 28.0% and 28.2% during the nine-month periods ended September 30, 2014 and 2013, respectively.

Acquisition of Cygnet and Share Repurchase Program:

As previously disclosed, in late September, 2014, we acquired the stock of Cygnet Health Care Limited (“Cygnet”) for a purchase price of approximately $327 million. Through this acquisition, we have added a total of 18 facilities located throughout the United Kingdom including 16 inpatient behavioral health hospitals and 2 nursing homes with a total of 734 beds. The Cygnet facilities generated aggregate revenues of approximately $161 million during the twelve-month period prior to our acquisition.

During the third quarter of 2014, our Board of Directors authorized a stock repurchase program whereby, from time to time as conditions allow, we may spend up to $400 million to purchase shares of our Class B Common Stock on the open market or in negotiated private transactions. In conjunction with this program, during the third quarter of 2014, we repurchased 226,692 shares at an aggregate cost of $25.2 million.

Conference call information:

We will hold a conference call for investors and analysts at 9:00 a.m. eastern time on October 28, 2014. The dial-in number is 1-877-648-7971.

A live broadcast of the conference call will be available on our website at www.uhsinc.com. A replay of the call will be available following the conclusion of the live call and will be available for one full year.

General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures:

Universal Health Services, Inc. (“UHS”) is one of the nation’s largest hospital companies operating through its subsidiaries acute care hospitals, behavioral health facilities and ambulatory centers located throughout the United States, the United Kingdom, Puerto Rico and the U.S. Virgin Islands. 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 and in Item 7-Forward-Looking Statements and Risk Factors in our Form 10-K for the year ended December 31, 2013 and in Item 2-Forward Looking Statements and Risk Factors in our Form 10-Q for the quarterly period ended June 30, 2014), may cause the 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

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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.

Our acute care hospitals are eligible for Medicare and Medicaid EHR incentive payments upon implementation of the EHR application, once they have demonstrated meaningful use of certified EHR technology for the applicable stage or have completed attestations to their adoption or implementation of certified EHR technology. However, there may be timing differences in the recognition of the incentive income and expenses recorded in connection with the implementation of the EHR application which may cause material period-to-period changes in our future results of operations. Hospitals that do not qualify as a meaningful user of EHR by 2015 are subject to a reduced market basket update to the inpatient prospective payment system standardized amount in 2015 and each subsequent fiscal year. Although we believe that our acute care hospitals will be in compliance with the EHR standards by 2015, there can be no assurance that all of our facilities will be in compliance and therefore not subject to the penalty provision of the HITECH Act.

We believe that operating income, operating margin, adjusted net income attributable to UHS, adjusted net income attributable to UHS 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, when applicable, 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 material items that are nonrecurring or non-operational in nature including items such as, but not limited to, costs related to extinguishment of debt, gains on sales of assets and businesses, reserves for settlements, legal judgments and lawsuits, impairments of long-lived assets 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, 2013 and our Report on Form 10-Q for the quarterly period ended June 30, 2014. 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 ended September 30,								Nine months ended September 30,
		2014				2013				2014				2013
Net revenues before provision for doubtful accounts		$	2,175,554			$	2,134,740			$	6,499,680			$	6,294,750
Less: Provision for doubtful accounts			157,796				318,371				541,935				811,774
Net revenues			2,017,758				1,816,369				5,957,745				5,482,976
Operating charges:
Salaries, wages and benefits			953,583				903,212				2,850,868				2,702,842
Other operating expenses			512,794				393,549				1,323,274				1,100,118
Supplies expense			222,708				206,995				662,280				613,981
Depreciation and amortization			93,456				86,971				277,506				248,465
Lease and rental expense			23,860				23,904				70,656				72,651
Electronic health records incentive income			(1,425	)			(23,148	)			(4,029	)			(27,943	)
Costs related to extinguishment of debt			36,171				0				36,171				0
			1,841,147				1,591,483				5,216,726				4,710,114
Income from operations			176,611				224,886				741,019				772,862
Interest expense, net			32,133				32,314				102,413				110,488
Income before income taxes			144,478				192,572				638,606				662,374
Provision for income taxes			48,440				69,473				224,102				241,537
Net income			96,038				123,099				414,504				420,837
Less: Income attributable to noncontrolling interests			13,241				8,512				41,958				34,625
Net income attributable to UHS		$	82,797			$	114,587			$	372,546			$	386,212
Basic earnings per share attributable to UHS (a)		$	0.84			$	1.17			$	3.77			$	3.94
Diluted earnings per share attributable to UHS (a)		$	0.82			$	1.15			$	3.71			$	3.89

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Universal Health Services, Inc.

Footnotes to Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)

 

		Three months ended September 30,								Nine months ended September 30,
		2014				2013				2014				2013
(a) Earnings per share calculation:
Basic and diluted:
Net income attributable to UHS		$	82,797			$	114,587			$	372,546			$	386,212
Less: Net income attributable to unvested restricted share grants			(17	)			(43	)			(164	)			(200	)
Net income attributable to UHS - basic and diluted		$	82,780			$	114,544			$	372,382			$	386,012
Weighted average number of common shares - basic			99,052				98,151				98,832				97,965
Basic earnings per share attributable to UHS:		$	0.84			$	1.17			$	3.77			$	3.94
Weighted average number of common shares			99,052				98,151				98,832				97,965
Add: Other share equivalents			1,981				1,436				1,643				1,158
Weighted average number of common shares and equiv. - diluted			101,033				99,587				100,475				99,123
Diluted earnings per share attributable to UHS:		$	0.82			$	1.15			$	3.71			$	3.89

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Universal Health Services, Inc.

Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information (“Supplemental Schedule”)

For the three months ended September 30, 2014 and 2013

(in thousands, except per share amounts)

(unaudited)

Calculation of “EBITDA”

 

		Three months ended September 30, 2014								Three months ended September 30, 2013
Net revenues before provision for doubtful accounts		$	2,175,554							$	2,134,740
Less: Provision for doubtful accounts			157,796								318,371
Net revenues			2,017,758				100.0	%			1,816,369				100.0	%
Operating charges:
Salaries, wages and benefits			953,583				47.3	%			903,212				49.7	%
Other operating expenses			512,794				25.4	%			393,549				21.7	%
Supplies expense			222,708				11.0	%			206,995				11.4	%
EHR incentive income			(1,425	)			-0.1	%			(23,148	)			-1.3	%
			1,687,660				83.6	%			1,480,608				81.5	%
Operating income/margin (“EBITDAR”)			330,098				16.4	%			335,761				18.5	%
Lease and rental expense			23,860								23,904
Income attributable to noncontrolling interests			13,241								8,512
Earnings before, depreciation and amortization, costs related to extinguishment of debt, interest expense, and income taxes (“EBITDA”)			292,997				14.5	%			303,345				16.7	%
Depreciation and amortization			93,456								86,971
Costs related to extinguishment of debt			36,171								0
Interest expense, net			32,133								32,314
Income before income taxes			131,237								184,060
Provision for income taxes			48,440								69,473
Net income attributable to UHS		$	82,797							$	114,587

Calculation of Adjusted Net Income Attributable to UHS

 

		Three months ended September 30, 2014								Three months ended September 30, 2013
		Amount				Per Diluted Share				Amount				Per Diluted Share
Calculation of Adjusted Net Income Attributable to UHS - including and excluding EHR impact:
Net income attributable to UHS		$	82,797			$	0.82			$	114,587			$	1.15
Plus/minus adjustments:
Litigation settlement, net of income taxes			27,570				0.27				—				—
Costs related to extinguishment of debt, net of income taxes			22,665				0.23				—				—
Subtotal after-tax adjustments to net income attributable to UHS			50,235				0.50				—				—
Adjusted net income attributable to UHS - including Electronic Health Records (“EHR”) impact		$	133,032			$	1.32			$	114,587			$	1.15
Plus/minus impact of EHR implementation:
EHR-related incentive income, pre-tax			(1,425	)							(23,148	)
EHR-related salaries, wages and benefits, pre-tax			—								4,753
EHR-related other operating costs, pre-tax			—								(893	)
EHR-related depreciation & amortization, pre-tax			9,312								10,916
EHR-related minority interest in earnings of consolidated entities, pre-tax			(733	)							147
Income tax provision on EHR-related items			(2,671	)							3,098
After-tax impact of EHR-related items			4,483				0.04				(5,127	)			(0.05	)
Adjusted net income attributable to UHS		$	137,515			$	1.36			$	109,460			$	1.10

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Universal Health Services, Inc.

Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information (“Supplemental Schedule”)

For the nine months ended September 30, 2014 and 2013

(in thousands, except per share amounts)

(unaudited)

Calculation of “EBITDA”

 

		Nine months ended September 30, 2014								Nine months ended September 30, 2013
Net revenues before provision for doubtful accounts		$	6,499,680							$	6,294,750
Less: Provision for doubtful accounts			541,935								811,774
Net revenues			5,957,745				100.0	%			5,482,976				100.0	%
Operating charges:
Salaries, wages and benefits			2,850,868				47.9	%			2,702,842				49.3	%
Other operating expenses			1,323,274				22.2	%			1,100,118				20.1	%
Supplies expense			662,280				11.1	%			613,981				11.2	%
EHR incentive income			(4,029	)			-0.1	%			(27,943	)			-0.5	%
			4,832,393				81.1	%			4,388,998				80.0	%
Operating income/margin (“EBITDAR”)			1,125,352				18.9	%			1,093,978				20.0	%
Lease and rental expense			70,656								72,651
Income attributable to noncontrolling interests			41,958								34,625
Earnings before, depreciation and amortization, costs related to extinguishment of debt, interest expense, and income taxes (“EBITDA”)			1,012,738				17.0	%			986,702				18.0	%
Depreciation and amortization			277,506								248,465
Costs related to extinguishment of debt			36,171								0
Interest expense, net			102,413								110,488
Income before income taxes			596,648								627,749
Provision for income taxes			224,102								241,537
Net income attributable to UHS		$	372,546							$	386,212

Calculation of Adjusted Net Income Attributable to UHS

 

		Nine months ended September 30, 2014								Nine months ended September 30, 2013
		Amount				Per Diluted Share				Amount				Per Diluted Share
Calculation of Adjusted Net Income Attributable to UHS - including and excluding EHR impact:
Net income attributable to UHS		$	372,546			$	3.71			$	386,212			$	3.89
Plus/minus adjustments:
Gain on sale of investment, net of income taxes			(6,330	)			(0.06	)			—				—
Litigation settlement, net of income taxes			27,570				0.27				—				—
Costs related to extinguishment of debt, net of income taxes			22,665				0.23				—				—
Reduction of reserves relating to prior years for professional and general liability self-insured claims, net of income taxes			—				—				(37,826	)			(0.38	)
Subtotal after-tax adjustments to net income attributable to UHS			43,905				0.44				(37,826	)			(0.38	)
Adjusted net income attributable to UHS - including Electronic Health Records (“EHR”) impact		$	416,451			$	4.15			$	348,386			$	3.51
Plus/minus impact of EHR implementation:
EHR-related incentive income, pre-tax			(4,029	)							(27,943	)
EHR-related salaries, wages and benefits, pre-tax			0								4,991
EHR-related other operating costs, pre-tax			0								1,125
EHR-related depreciation & amortization, pre-tax			27,912								23,408
EHR-related minority interest in earnings of consolidated entities, pre-tax			(2,571	)							(1,378	)
Income tax provision on EHR-related items			(7,969	)							(76	)
After-tax impact of EHR-related items			13,343				0.13				127				—
Adjusted net income attributable to UHS		$	429,794			$	4.28			$	348,513			$	3.51

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Universal Health Services, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

 

		Three months ended September 30,								Nine months ended September 30,
		2014				2013				2014				2013
Net income		$	96,038			$	123,099			$	414,504			$	420,837
Other comprehensive income (loss):
Unrealized derivative gains (loss) on cash flow hedges			4,712				3,054				12,922				12,871
Amortization of terminated hedge			(84	)			(84	)			(252	)			(252	)
Currency translation adjustment			(2,506	)			0				(2,506	)			0
Other comprehensive income before tax			2,122				2,970				10,164				12,619
Income tax expense related to items of other comprehensive income			1,620				1,120				4,685				4,758
Total other comprehensive income, net of tax			502				1,850				5,479				7,861
Comprehensive income			96,540				124,949				419,983				428,698
Less: Comprehensive income attributable to noncontrolling interests			13,241				8,512				41,958				34,625
Comprehensive income attributable to UHS		$	83,299			$	116,437			$	378,025			$	394,073

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Universal Health Services, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

		September 30, 2014				December 31, 2013
Assets
Current assets:
Cash and cash equivalents		$	39,711			$	17,238
Accounts receivable, net			1,239,478				1,116,961
Supplies			104,390				101,781
Deferred income taxes			95,204				119,903
Other current assets			143,311				76,446
Total current assets			1,622,094				1,432,329
Property and equipment			6,105,090				5,691,902
Less: accumulated depreciation			(2,456,116	)			(2,249,733	)
			3,648,974				3,442,169
Other assets:
Goodwill			3,296,358				3,049,016
Deferred charges			41,910				57,881
Other			352,256				330,328
		$	8,961,592			$	8,311,723
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt		$	81,477			$	99,312
Accounts payable and accrued liabilities			1,083,987				953,449
Federal and state taxes			0				7,127
Total current liabilities			1,165,464				1,059,888
Other noncurrent liabilities			280,797				284,589
Long-term debt			3,373,341				3,209,762
Deferred income taxes			253,191				239,148
Redeemable noncontrolling interest			231,473				218,107
UHS common stockholders’ equity			3,603,204				3,249,979
Noncontrolling interest			54,122				50,250
Total equity			3,657,326				3,300,229
		$	8,961,592			$	8,311,723

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Universal Health Services, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

		Nine months ended September 30,
		2014				2013
Cash Flows from Operating Activities:
Net income		$	414,504			$	420,837
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation & amortization			277,506				248,648
Gains on sales of assets and businesses, net of losses			(7,837	)			(2,973	)
Stock-based compensation expense			22,713				20,072
Write-off of deferred financing costs related to extinguishment of debt			19,730				0
Changes in assets & liabilities, net of effects from acquisitions and dispositions:
Accounts receivable			(98,193	)			(99,261	)
Accrued interest			6,547				10,376
Accrued and deferred income taxes			(18,392	)			5,109
Other working capital accounts			59,613				10,313
Other assets and deferred charges			15,868				13,425
Other			(7,000	)			5,792
Accrued insurance expense, net of commercial premiums paid			57,729				(1,406	)
Payments made in settlement of self-insurance claims			(53,234	)			(55,009	)
Net cash provided by operating activities			689,554				575,923
Cash Flows from Investing Activities:
Property and equipment additions, net of disposals			(309,361	)			(279,751	)
Proceeds received from sale of assets and businesses			15,178				37,118
Cash paid/reserved related to acquisition of property and businesses			(402,405	)			(1,320	)
Costs incurred for purchase and implementation of electronic health records application			(11,204	)			(42,353	)
Net cash used in investing activities			(707,792	)			(286,306	)
Cash Flows from Financing Activities:
Reduction of long-term debt			(842,543	)			(234,231	)
Additional borrowings			969,800				1,500
Financing costs			(13,413	)			0
Repurchase of common shares			(63,292	)			(22,186	)
Dividends paid			(19,794	)			(14,706	)
Issuance of common stock			4,907				4,096
Excess income tax benefits related to stock-based compensation			30,242				15,809
Profit distributions to noncontrolling interests			(25,074	)			(51,248	)
Net cash provided by (used in) financing activities			40,833				(300,966	)
Effect of exchange rate changes on cash and cash equivalents			(122	)			0
Increase (decrease) in cash and cash equivalents			22,473				(11,349	)
Cash and cash equivalents, beginning of period			17,238				23,471
Cash and cash equivalents, end of period		$	39,711			$	12,122
Supplemental Disclosures of Cash Flow Information:
Interest paid, including early redemption premium and original issue discount write-off in 2014		$	98,670			$	88,430
Income taxes paid, net of refunds		$	212,148			$	218,290

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Universal Health Services, Inc.

Supplemental Statistical Information

(unaudited)

 

Same Facility:		% Change quarter ended 9/30/2014				% Change 9 months ended 9/30/2014
Acute Care Hospitals
Revenues			7.9	%			8.4	%
Adjusted Admissions			4.1	%			2.3	%
Adjusted Patient Days			6.7	%			6.4	%
Revenue Per Adjusted Admission			3.6	%			5.9	%
Revenue Per Adjusted Patient Day			1.0	%			1.9	%
Behavioral Health Hospitals
Revenues			6.2	%			5.3	%
Adjusted Admissions			5.4	%			4.0	%
Adjusted Patient Days			2.1	%			1.4	%
Revenue Per Adjusted Admission			-0.3	%			-0.1	%
Revenue Per Adjusted Patient Day			2.9	%			2.5	%

 

UHS Consolidated		Third quarter ended								Nine months ended
		9/30/2014				9/30/2013				9/30/2014				9/30/2013
Revenues		$	2,017,758			$	1,816,369			$	5,957,745			$	5,482,976
EBITDA (1)			292,997				303,345				1,012,738				986,702
EBITDA Margin (1)			14.5	%			16.7	%			17.0	%			18.0	%
Cash Flow From Operations			231,138				185,006				689,554				575,923
Days Sales Outstanding			57				59				57				58
Capital Expenditures			122,575				103,807				309,361				279,751
Debt											3,454,818				3,499,927
UHS’ Shareholders Equity											3,603,204				3,110,778
Debt / Total Capitalization											48.9	%			52.9	%
Debt / EBITDA (2)											2.59				2.63
Debt / Cash From Operations (2)											3.46				4.17
Acute Care EBITDAR Margin (3)			18.3	%			14.4	%			19.1	%			15.1	%
Behavioral Health EBITDAR Margin (3)			27.6	%			27.3	%			28.0	%			28.2	%

 

(1)	Net of Minority Interest

(2)	Latest 4 quarters

(3)	Same facility basis, before Corporate overhead allocation and minority interest.

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Universal Health Services, Inc.

Selected Hospital Statistics

For the Three Months ended

September 30, 2014 and 2013

 

AS REPORTED:
		ACUTE												BEHAVIORAL HEALTH
		09/30/14				09/30/13				% change				09/30/14				09/30/13				% change
Hospitals owned and leased			24				23				4.3	%			202				182				11.0	%
Average licensed beds			5,769				5,617				2.7	%			20,263				19,930				1.7	%
Patient days			285,861				272,905				4.7	%			1,381,789				1,331,234				3.8	%
Average daily census			3,107.2				2,966.3				4.7	%			15,019.4				14,469.9				3.8	%
Occupancy-licensed beds			53.9	%			52.8	%			2.0	%			74.1	%			72.6	%			2.1	%
Admissions			63,749				61,155				4.2	%			108,334				101,183				7.1	%
Length of stay			4.5				4.5				0.5	%			12.8				13.2				-3.1	%
Inpatient revenue		$	3,616,647			$	3,296,484				9.7	%		$	1,678,222			$	1,567,436				7.1	%
Outpatient revenue			2,058,148				1,712,290				20.2	%			192,032				179,783				6.8	%
Total patient revenue			5,674,795				5,008,774				13.3	%			1,870,254				1,747,219				7.0	%
Other revenue			84,541				33,912				149.3	%			46,539				33,921				37.2	%
Gross hospital revenue			5,759,336				5,042,686				14.2	%			1,916,793				1,781,140				7.6	%
Total deductions			4,592,288				3,852,278				19.2	%			911,975				845,786				7.8	%
Net hospital revenue before provision for doubtful accounts			1,167,048				1,190,408				-2.0	%			1,004,818				935,354				7.4	%
Provision for doubtful accounts			128,913				290,875				-55.7	%			28,804				27,419				5.1	%
Net hospital revenue		$	1,038,135			$	899,533				15.4	%		$	976,014			$	907,935				7.5	%
SAME FACILITY:
		ACUTE (1)												BEHAVIORAL HEALTH (2)
		09/30/14				09/30/13				% change				09/30/14				09/30/13				% change
Hospitals owned and leased			23				23				0.0	%			174				174				0.0	%
Average licensed beds			5,629				5,617				0.2	%			19,651				19,472				0.9	%
Patient days			282,118				272,905				3.4	%			1,338,361				1,309,960				2.2	%
Average daily census			3,066.5				2,966.3				3.4	%			14,547.4				14,238.7				2.2	%
Occupancy-licensed beds			54.5	%			52.8	%			3.2	%			74.0	%			73.1	%			1.2	%
Admissions			61,634				61,155				0.8	%			106,583				101,135				5.4	%
Length of stay			4.6				4.5				2.6	%			12.6				13.0				-3.1	%

 

(1)	Temecula is excluded in both current and prior years

(2)	Bristol Youth Academy, Community BH, Gulf Coast Treatment Center, John Costigan Ctr, Okaloosa Youth Academy, Palo Verde, The Peaks, Psychiatric Institute of Washington, Sun Coast BH, Fairfax Everett and the UK facilities are excluded in both current and prior years.

---

Universal Health Services, Inc.

Selected Hospital Statistics

For the Nine Months ended

September 30, 2014 and 2013

 

AS REPORTED:
		ACUTE												BEHAVIORAL HEALTH
		09/30/14				09/30/13				% change				09/30/14				09/30/13				% change
Hospitals owned and leased			24				23				4.3	%			202				182				11.0	%
Average licensed beds			5,776				5,617				2.8	%			19,991				19,979				0.1	%
Patient days			875,717				836,355				4.7	%			4,104,323				4,055,171				1.2	%
Average daily census			3,207.8				3,063.6				4.7	%			15,034.2				14,854.1				1.2	%
Occupancy-licensed beds			55.5	%			54.5	%			1.8	%			75.2	%			74.3	%			1.2	%
Admissions			187,587				185,591				1.1	%			319,665				304,305				5.0	%
Length of stay			4.7				4.5				3.6	%			12.8				13.3				-3.7	%
Inpatient revenue		$	11,217,320			$	10,124,908				10.8	%		$	4,973,633			$	4,741,967				4.9	%
Outpatient revenue			6,083,715				5,072,065				19.9	%			580,627				559,288				3.8	%
Total patient revenue			17,301,035				15,196,973				13.8	%			5,554,260				5,301,255				4.8	%
Other revenue			173,227				95,784				80.9	%			135,956				95,908				41.8	%
Gross hospital revenue			17,474,262				15,292,757				14.3	%			5,690,216				5,397,163				5.4	%
Total deductions			13,980,408				11,864,873				17.8	%			2,694,348				2,563,604				5.1	%
Net hospital revenue before provision for doubtful accounts			3,493,854				3,427,884				1.9	%			2,995,868				2,833,559				5.7	%
Provision for doubtful accounts			460,319				724,971				-36.5	%			82,049				86,610				-5.3	%
Net hospital revenue		$	3,033,535			$	2,702,913				12.2	%		$	2,913,819			$	2,746,949				6.1	%
SAME FACILITY:
		ACUTE (1)												BEHAVIORAL HEALTH (2)
		09/30/14				09/30/13				% change				09/30/14				09/30/13				% change
Hospitals owned and leased			23				23				0.0	%			174				174				0.0	%
Average licensed beds			5,636				5,617				0.3	%			19,562				19,406				0.8	%
Patient days			866,284				836,355				3.6	%			4,019,543				3,962,813				1.4	%
Average daily census			3,173.2				3,063.6				3.6	%			14,723.6				14,515.8				1.4	%
Occupancy-licensed beds			56.3	%			54.5	%			3.2	%			75.3	%			74.8	%			0.6	%
Admissions			184,874				185,591				-0.4	%			315,626				303,189				4.1	%
Length of stay			4.7				4.5				4.0	%			12.7				13.1				-2.6	%

 

(1)	Temecula is excluded in both current and prior years

(2)

Bristol Youth Academy, Community BH, Gulf Coast Treatment Center, John Costigan Ctr, Okaloosa Youth Academy, Palo Verde, The Peaks, Psychiatric Institute of Washington, Sun Coast BH, Fairfax Everett, and the UK facilities are excluded in both current and prior years. Garfield Park is excluded in both current and prior years in January only. Austin Oaks is excluded in both current and prior years January thru May.