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): April 28, 2016 (April 27, 2016)

 

 

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 April 27, 2016, 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 April 27, 2016.

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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: April 28, 2016

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Exhibit Index

 

Exhibit No.		Exhibit
99.1		Universal Health Services, Inc., press release, dated April 27, 2016.

Exhibit 99.1

FOR IMMEDIATE RELEASE

 

CONTACT:		Steve Filton
		Chief Financial Officer		April 27, 2016
		610-768-3300

UNIVERSAL HEALTH SERVICES, INC. REPORTS

2016 FIRST QUARTER FINANCIAL RESULTS

Consolidated Results of Operations, As Reported and As Adjusted – Three-month periods ended March 31, 2016 and 2015:

KING OF PRUSSIA, PA – Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income attributable to UHS was $190.8 million, or $1.93 per diluted share, during the first quarter of 2016 as compared to $174.3 million, or $1.73 per diluted share, during the comparable quarter of 2015. Net revenues increased 10.1% to $2.45 billion during the first quarter of 2016 as compared to $2.23 billion during the first quarter of 2015.

For the three-month period ended March 31, 2016, our adjusted net income attributable to UHS per diluted share, as calculated on the attached Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information (“Supplemental Schedule”), increased approximately 11% to $1.98 per diluted share, as compared to $1.78 per diluted share during the first quarter of 2015. As reflected on the Supplemental Schedule, included in our reported results during each of the first quarters of 2016 and 2015, are net unfavorable after-tax impacts of $.05 per diluted share related to the depreciation and amortization expense recorded in connection with the implementation of electronic health records (“EHR”) applications at our acute care hospitals.

Acute Care Services – Three-month periods ended March 31, 2016 and 2015:

During the first quarter of 2016, at our acute care hospitals owned during both periods (“same facility basis”), adjusted admissions (adjusted for outpatient activity) increased 7.8% and adjusted patient days increased 3.5%, as compared to the first quarter of 2015. Net revenues at these facilities increased 12.0% during the first quarter of 2016 as compared to the first quarter of the prior year. At these facilities, net revenue per adjusted admission increased 3.0% while net revenue per adjusted patient day increased 7.3% during the first quarter of 2016 as compared to the comparable quarter of 2015. On a same facility basis, the operating margin at our acute care hospitals increased to 21.1% during the first quarter of 2016 as compared to 20.5% during the first quarter of 2015. We define operating margin as net revenues less salaries, wages and benefits, other operating expenses and supplies expense (excluding the impact of EHR and other items, if applicable, as indicated on the Supplemental Schedules).

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 $345 million and $287 million during the three-month periods ended March 31, 2016 and 2015, respectively. The provision for doubtful accounts at our acute care hospitals amounted to approximately $140 million and $124 million during the three-month periods ended March 31,

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2016 and 2015, respectively. Our acute care hospitals experienced an increase in the aggregate of charity care, uninsured discounts and provision for doubtful accounts, as a percentage of gross charges, during the first quarter of 2016, as compared to the first quarter of 2015.

Behavioral Health Care Services – Three-month periods ended March 31, 2016 and 2015:

During the first quarter of 2016, at our behavioral health care facilities on a same facility basis, adjusted admissions increased 1.4% while adjusted patient days increased 1.0% as compared to the first quarter of 2015. At these facilities, net revenue per adjusted admission increased 1.8% while net revenue per adjusted patient day increased 2.2% during the first quarter of 2016 as compared to the comparable quarter in 2015. On a same facility basis, our behavioral health services’ net revenues increased 3.5% during the first quarter of 2016, as compared to the comparable quarter in 2015. The operating margins were 27.8% during the first quarter of 2016 and 28.4% during the first quarter of 2015.

Share Repurchase Program:

In February of 2016, our Board of Directors authorized a $400 million increase to our stock repurchase program, which increased the aggregate authorization to $800 million from the previous $400 million authorization approved during the third quarter of 2014. Pursuant to this program, we may purchase shares of our Class B Common Stock, from time to time as conditions allow, on the open market or in negotiated private transactions.

In conjunction with this program, during the first quarter of 2016, we repurchased approximately 1.3 million shares at an aggregate cost of $152.4 million (approximately $113 per share). Since inception of the program through March 31, 2016, we repurchased approximately 3.2 million shares at an aggregate cost of approximately $376.6 million (approximately $117 per share).

Conference call information:

We will hold a conference call for investors and analysts at 9:00 a.m. eastern time on April 28, 2016. 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, 2015), 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

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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 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 related to the implementation of EHR applications at our acute care hospitals and other items that are nonrecurring or non-operational in nature including, 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, 2015. 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.

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. Pursuant to regulations, hospitals that did 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. We believe that all of our acute care hospitals have met the applicable meaningful use criteria and therefore are not subject to a reduced market basked update to the inpatient prospective payment standardized amount. Under the HITECH Act, hospitals must continue to meet the applicable meaningful use criteria in each fiscal year or they will be subject to a market basket update reduction in a subsequent fiscal year.

(more)

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Universal Health Services, Inc.

Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)

 

		Three months ended March 31,
		2016				2015
Net revenues before provision for doubtful accounts		$	2,619,593			$	2,380,101
Less: Provision for doubtful accounts			169,795				154,748
Net revenues			2,449,798				2,225,353
Operating charges:
Salaries, wages and benefits			1,148,139				1,031,703
Other operating expenses			561,584				505,966
Supplies expense			255,250				238,741
Depreciation and amortization			104,049				98,998
Lease and rental expense			24,452				22,891
			2,093,474				1,898,299
Income from operations			356,324				327,054
Interest expense, net			29,600				30,037
Income before income taxes			326,724				297,017
Provision for income taxes			111,005				102,694
Net income			215,719				194,323
Less: Income attributable to noncontrolling interests			24,960				20,024
Net income attributable to UHS		$	190,759			$	174,299
Basic earnings per share attributable to UHS (a)		$	1.95			$	1.76
Diluted earnings per share attributable to UHS (a)		$	1.93			$	1.73

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Universal Health Services, Inc.

Footnotes to Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)

 

		Three months ended March 31,
		2016				2015
(a) Earnings per share calculation:
Basic and diluted:
Net income attributable to UHS		$	190,759			$	174,299
Less: Net income attributable to unvested restricted share grants			(89	)			(68	)
Net income attributable to UHS - basic and diluted		$	190,670			$	174,231
Weighted average number of common shares - basic			97,607				98,910
Basic earnings per share attributable to UHS:		$	1.95			$	1.76
Weighted average number of common shares			97,607				98,910
Add: Other share equivalents			1,288				1,737
Weighted average number of common shares and equiv. - diluted			98,895				100,647
Diluted earnings per share attributable to UHS:		$	1.93			$	1.73

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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 March 31, 2016 and 2015

(in thousands, except per share amounts)

(unaudited)

Calculation of “EBITDA”

 

		Three months ended March 31, 2016								Three months ended March 31, 2015
Net revenues before provision for doubtful accounts		$	2,619,593							$	2,380,101
Less: Provision for doubtful accounts			169,795								154,748
Net revenues			2,449,798				100.0	%			2,225,353				100.0	%
Operating charges:
Salaries, wages and benefits			1,148,139				46.9	%			1,031,703				46.4	%
Other operating expenses			561,584				22.9	%			505,966				22.7	%
Supplies expense			255,250				10.4	%			238,741				10.7	%
			1,964,973				80.2	%			1,776,410				79.8	%
Operating income/margin (“EBITDAR”)			484,825				19.8	%			448,943				20.2	%
Lease and rental expense			24,452								22,891
Income attributable to noncontrolling interests			24,960								20,024
Earnings before, depreciation and amortization, interest expense, and income taxes (“EBITDA”)			435,413				17.8	%			406,028				18.2	%
Depreciation and amortization			104,049								98,998
Interest expense, net			29,600								30,037
Income before income taxes			301,764								276,993
Provision for income taxes			111,005								102,694
Net income attributable to UHS		$	190,759							$	174,299

Calculation of Adjusted Net Income Attributable to UHS

 

		Three months ended March 31, 2016								Three months ended March 31, 2015
						Per								Per
		Amount				Diluted Share				Amount				Diluted Share
Calculation of Adjusted Net Income Attributable to UHS - including and excluding EHR impact:
Net income attributable to UHS		$	190,759			$	1.93			$	174,299			$	1.73
Plus/minus impact of EHR implementation:
EHR-related incentive income, pre-tax			—								—
EHR-related depreciation & amortization, pre-tax			9,306								9,306
EHR-related minority interest in earnings of consolidated entities, pre-tax			(962	)							(964	)
Income tax provision on EHR-related items			(3,110	)							(3,109	)
After-tax impact of EHR-related items			5,234				0.05				5,233				0.05
Adjusted net income attributable to UHS		$	195,993			$	1.98			$	179,532			$	1.78

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Universal Health Services, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

 

		Three months ended March 31,
		2016				2015
Net income		$	215,719			$	194,323
Other comprehensive income (loss):
Unrealized derivative gains (loss) on cash flow hedges			(14,299	)			4,132
Amortization of terminated hedge			(84	)			(84	)
Foreign currency translation adjustment			5,986				(418	)
Other comprehensive income before tax			(8,397	)			3,630
Income tax expense related to items of other comprehensive income			(5,360	)			1,497
Total other comprehensive income, net of tax			(3,037	)			2,133
Comprehensive income			212,682				196,456
Less: Comprehensive income attributable to noncontrolling interests			24,960				20,024
Comprehensive income attributable to UHS		$	187,722			$	176,432

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Universal Health Services, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

		March 31, 2016				December 31, 2015
Assets
Current assets:
Cash and cash equivalents		$	54,590			$	61,228
Accounts receivable, net			1,374,737				1,302,429
Supplies			116,725				116,037
Deferred income taxes			0				135,120
Other current assets			89,386				103,490
Total current assets			1,635,438				1,718,304
Property and equipment			6,655,292				6,530,569
Less: accumulated depreciation			(2,774,740	)			(2,694,591	)
			3,880,552				3,835,978
Other assets:
Goodwill			3,594,901				3,596,114
Deferred charges			16,235				16,688
Other			437,883				448,360
		$	9,565,009			$	9,615,444
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt		$	88,262			$	62,722
Accounts payable and accrued liabilities			1,147,384				1,033,697
Federal and state taxes			49,794				3,987
Total current liabilities			1,285,440				1,100,406
Other noncurrent liabilities			295,684				278,834
Long-term debt			3,192,144				3,368,634
Deferred income taxes			178,947				315,900
Redeemable noncontrolling interest			261,492				242,509
UHS common stockholders’ equity			4,289,218				4,249,647
Noncontrolling interest			62,084				59,514
Total equity			4,351,302				4,309,161
		$	9,565,009			$	9,615,444

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Universal Health Services, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

		Three months ended March 31,
		2016				2015
Cash Flows from Operating Activities:
Net income		$	215,719			$	194,323
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation & amortization			104,049				98,998
Stock-based compensation expense			13,204				10,829
Changes in assets & liabilities, net of effects from acquisitions and dispositions:
Accounts receivable			(79,962	)			(96,972	)
Accrued interest			688				1,117
Accrued and deferred income taxes			91,131				79,050
Other working capital accounts			98,972				(29,829	)
Other assets and deferred charges			(5,803	)			(234	)
Other			20,911				17,807
Accrued insurance expense, net of commercial premiums paid			22,616				22,748
Payments made in settlement of self-insurance claims			(17,298	)			(26,562	)
Net cash provided by operating activities			464,227				271,275
Cash Flows from Investing Activities:
Property and equipment additions, net of disposals			(127,214	)			(89,276	)
Acquisition of property and businesses			(19,543	)			(34,500	)
Net cash used in investing activities			(146,757	)			(123,776	)
Cash Flows from Financing Activities:
Reduction of long-term debt			(166,671	)			(158,871	)
Additional borrowings			14,400				20,800
Financing costs			(44	)			0
Repurchase of common shares			(171,042	)			(28,767	)
Dividends paid			(9,757	)			(9,899	)
Issuance of common stock			2,331				1,768
Excess income tax benefits related to stock-based compensation			11,002				20,807
Profit distributions to noncontrolling interests			(3,407	)			(2,413	)
Proceeds received from sale/leaseback of real property			0				12,551
Net cash used in financing activities			(323,188	)			(144,024	)
Effect of exchange rate changes on cash and cash equivalents			(920	)			(466	)
(Decrease) increase in cash and cash equivalents			(6,638	)			3,009
Cash and cash equivalents, beginning of period			61,228				32,069
Cash and cash equivalents, end of period		$	54,590			$	35,078
Supplemental Disclosures of Cash Flow Information:
Interest paid		$	27,133			$	27,158
Income taxes paid, net of refunds		$	9,093			$	2,876
Noncash purchases of property and equipment		$	47,374			$	33,082

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Universal Health Services, Inc.

Supplemental Statistical Information

(unaudited)

 

Same Facility:		% Change Quarter ended 3/31/2016
Acute Care Hospitals
Revenues			12.0	%
Adjusted Admissions			7.8	%
Adjusted Patient Days			3.5	%
Revenue Per Adjusted Admission			3.0	%
Revenue Per Adjusted Patient Day			7.3	%
Behavioral Health Hospitals
Revenues			3.5	%
Adjusted Admissions			1.4	%
Adjusted Patient Days			1.0	%
Revenue Per Adjusted Admission			1.8	%
Revenue Per Adjusted Patient Day			2.2	%

 

 

 

UHS Consolidated		First quarter ended
		3/31/2016				3/31/2015
Revenues		$	2,449,798			$	2,225,353
EBITDA (1)		$	435,413			$	406,028
EBITDA Margin (1)			17.8	%			18.2	%
Cash Flow From Operations		$	464,227			$	271,275
Days Sales Outstanding			51				56
Capital Expenditures		$	127,214			$	89,276
Debt		$	3,280,406			$	3,118,642
UHS’ Shareholders Equity		$	4,289,218			$	3,906,963
Debt / Total Capitalization			43.3	%			44.6	%
Debt / EBITDA (2)			2.03				2.12
Debt / Cash From Operations (2)			2.70				2.80
Acute Care EBITDAR Margin (3)			21.1	%			20.5	%
Behavioral Health EBITDAR Margin (3)			27.8	%			28.4	%

 

(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

March 31, 2016 and 2015

 

AS REPORTED:
		ACUTE												BEHAVIORAL HEALTH
		03/31/16				03/31/15				% change				03/31/16				03/31/15				% change
Hospitals owned and leased			24				24				0.0	%			217				203				6.9	%
Average licensed beds			5,854				5,792				1.1	%			21,751				20,985				3.7	%
Patient days			325,171				317,979				2.3	%			1,500,705				1,443,066				4.0	%
Average daily census			3,573.5				3,533.1				1.1	%			16,491.3				16,034.1				2.9	%
Occupancy-licensed beds			61.0	%			61.0	%			0.1	%			75.8	%			76.4	%			-0.8	%
Admissions			69,674				65,419				6.5	%			115,421				112,706				2.4	%
Length of stay			4.7				4.9				-4.0	%			13.0				12.8				1.6	%
Inpatient revenue		$	4,965,537			$	4,328,767				14.7	%		$	1,959,570			$	1,823,425				7.5	%
Outpatient revenue			2,767,329				2,284,712				21.1	%			221,643				204,569				8.3	%
Total patient revenue			7,732,866				6,613,479				16.9	%			2,181,213				2,027,994				7.6	%
Other revenue			111,557				88,675				25.8	%			50,538				50,680				-0.3	%
Gross hospital revenue			7,844,423				6,702,154				17.0	%			2,231,751				2,078,674				7.4	%
Total deductions			6,417,521				5,431,864				18.1	%			1,040,661				971,973				7.1	%
Net hospital revenue before provision for doubtful accounts			1,426,902				1,270,290				12.3	%			1,191,090				1,106,701				7.6	%
Provision for doubtful accounts			139,755				124,350				12.4	%			30,044				30,356				-1.0	%
Net hospital revenue		$	1,287,147			$	1,145,940				12.3	%		$	1,161,046			$	1,076,345				7.9	%
SAME FACILITY:
		ACUTE												BEHAVIORAL HEALTH (1)
		03/31/16				03/31/15				% change				03/31/16				03/31/15				% change
Hospitals owned and leased			24				24				0.0	%			201				201				0.0	%
Average licensed beds			5,854				5,792				1.1	%			20,999				20,707				1.4	%
Patient days			325,171				317,979				2.3	%			1,448,374				1,431,252				1.2	%
Average daily census			3,573.5				3,533.1				1.1	%			15,916.2				15,902.8				0.1	%
Occupancy-licensed beds			61.0	%			61.0	%			0.1	%			75.8	%			76.8	%			-1.3	%
Admissions			69,674				65,419				6.5	%			114,109				112,327				1.6	%
Length of stay			4.7				4.9				-4.0	%			12.7				12.7				-0.4	%

 

(1)	Garland Behavioral Health, ALPHA (UK) entities, and the Foundations Recovery Network entities are excluded in both current and prior years.