SEC Filing - Universal Health Services Inc.

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-10765

UNIVERSAL HEALTH SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware

23-2077891

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

UNIVERSAL CORPORATE CENTER

367 SOUTH GULPH ROAD

KING OF PRUSSIA, Pennsylvania 19406

(Address of principal executive offices) (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class B Common Stock, $0.01 par value	UHS	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer		☐

Non-accelerated filer	☐	Smaller reporting company		☐
			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common shares outstanding, as of October 31, 2023:


Class A		6,577,100
Class B		61,006,826
Class C		661,688
Class D		13,090

UNIVERSAL HEALTH SERVICES, INC.

INDEX


		PAGE NO.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Condensed Consolidated Statements of Income – Three and Nine Months Ended September 30, 2023 and 2022		3

Condensed Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2023 and 2022		4

Condensed Consolidated Balance Sheets – September 30, 2023 and December 31, 2022		5

Condensed Consolidated Statements of Changes in Equity – Three and Nine Months Ended September 30, 2023 and 2022		6

Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2023 and 2022		8

Notes to Condensed Consolidated Financial Statements		9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		26

Item 3. Quantitative and Qualitative Disclosures About Market Risk		60

Item 4. Controls and Procedures		60

PART II. Other Information

Item 1. Legal Proceedings		61

Item 1A. Risk Factors		61

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		61

Item 5. Other Information		61

Item 6. Exhibits		62

Signatures		63

This Quarterly Report on Form 10-Q is for the quarter ended September 30, 2023. This Report modifies and supersedes documents filed prior to this Report. Information that we file with the Securities and Exchange Commission (the “SEC”) in the future will automatically update and supersede information contained in this Report.

In this Quarterly Report, “we,” “us,” “our” “UHS” and the “Company” refer to Universal Health Services, Inc. and its subsidiaries. UHS is a registered trademark of UHS of Delaware, Inc., the management company for, and a wholly-owned subsidiary of Universal Health Services, Inc. Universal Health Services, Inc. is a holding company and operates through its subsidiaries including its management company, UHS of Delaware, Inc. All healthcare and management operations are conducted by subsidiaries of Universal Health Services, Inc. To the extent any reference to “UHS” or “UHS facilities” in this report including letters, narratives or other forms contained herein relates to our healthcare or management operations it is referring to Universal Health Services, Inc.’s subsidiaries including UHS of Delaware, Inc. Further, the terms “we,” “us,” “our” or the “Company” in such context similarly refer to the operations of Universal Health Services Inc.’s subsidiaries including UHS of Delaware, Inc. Any reference to employees or employment contained herein refers to employment with or employees of the subsidiaries of Universal Health Services, Inc. including UHS of Delaware, Inc.

PART I. FINANCIAL INFORMATION

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share amounts)

(unaudited)


	Three months ended September 30,					Nine months ended September 30,
	2023		2022			2023			2022
Net revenues	$	3,562,774	$	3,336,027		$	10,578,430		$	9,952,390
Operating charges:
Salaries, wages and benefits		1,784,870		1,677,431			5,308,476			5,061,173
Other operating expenses		941,219		837,241			2,758,484			2,526,060
Supplies expense		378,667		366,337			1,138,950			1,092,403
Depreciation and amortization		137,195		145,874			422,560			433,508
Lease and rental expense		35,466		33,264			105,775			97,075
		3,277,417		3,060,147			9,734,245			9,210,219
Income from operations		285,357		275,880			844,185			742,171
Interest expense, net		53,378		35,653			153,085			83,002
Other (income) expense, net		11,472		6,015			31,797			15,244
Income before income taxes		220,507		234,212			659,303			643,925
Provision for income taxes		52,499		57,401			159,618			157,312
Net income		168,008		176,811			499,685			486,613
Less: Net income (loss) attributable to noncontrolling interests		1,019		(6,003	)		(1,732	)		(14,176	)
Net income attributable to UHS	$	166,989	$	182,814		$	501,417		$	500,789

Basic earnings per share attributable to UHS	$	2.42	$	2.52		$	7.18		$	6.78
Diluted earnings per share attributable to UHS	$	2.40	$	2.50		$	7.09		$	6.71

Weighted average number of common shares - basic		68,867		72,595			69,825			73,769
Add: Other share equivalents		757		465			825			743
Weighted average number of common shares and equivalents - diluted		69,624		73,060			70,650			74,512

The accompanying notes are an integral part of these condensed consolidated financial statements.

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(amounts in thousands, unaudited)


	Three months ended September 30,						Nine months ended September 30,
	2023			2022			2023			2022
Net income	$	168,008		$	176,811		$	499,685		$	486,613
Other comprehensive income (loss):
Foreign currency translation adjustment		(24,631	)		24,242			(703	)		(22,460	)
Other comprehensive income (loss) before tax		(24,631	)		24,242			(703	)		(22,460	)
Income tax expense (benefit) related to items of other comprehensive income (loss)		(926	)		6,685			(95	)		5,809
Total other comprehensive income (loss), net of tax		(23,705	)		17,557			(608	)		(28,269	)
Comprehensive income		144,303			194,368			499,077			458,344
Less: Comprehensive income (loss) attributable to noncontrolling interests		1,019			(6,003	)		(1,732	)		(14,176	)
Comprehensive income attributable to UHS	$	143,284		$	200,371		$	500,809		$	472,520

The accompanying notes are an integral part of these condensed consolidated financial statements.

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, unaudited)


	September 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	80,768		$	102,818
Accounts receivable, net		2,234,343			2,017,722
Supplies		214,587			218,517
Other current assets		223,303			198,283
Total current assets		2,753,001			2,537,340

Property and equipment		11,610,188			11,085,852
Less: accumulated depreciation		(5,523,135	)		(5,167,394	)
		6,087,053			5,918,458
Other assets:
Goodwill		3,912,122			3,909,456
Deferred income taxes		99,580			68,397
Right of use assets-operating leases		443,924			454,650
Deferred charges		7,062			6,264
Other		570,728			599,623
Total Assets	$	13,873,470		$	13,494,188

Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt	$	126,555		$	81,447
Accounts payable and other liabilities		1,783,460			1,760,588
Operating lease liabilities		72,655			67,776
Federal and state taxes		7,145			4,608
Total current liabilities		1,989,815			1,914,419

Other noncurrent liabilities		587,829			487,669
Operating lease liabilities noncurrent		388,550			395,522
Long-term debt		4,796,074			4,726,533

Redeemable noncontrolling interests		4,719			4,695

Equity:
UHS common stockholders’ equity		6,064,915			5,920,582
Noncontrolling interest		41,568			44,768
Total equity		6,106,483			5,965,350
Total Liabilities and Stockholders’ Equity	$	13,873,470		$	13,494,188

The accompanying notes are an integral part of these condensed consolidated financial statements.

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three and Nine Months ended September 30, 2023

(amounts in thousands, unaudited)


																		Accumulated			UHS
	Redeemable																	Other			Common
	Noncontrolling		Class A		Class B			Class C		Class D		Cumulative			Retained			Comprehensive			Stockholders'			Noncontrolling
	Interest		Common		Common			Common		Common		Dividends			Earnings			Income (Loss)			Equity			Interest			Total
Balance, July 1, 2023	$	4,213	$	66	$	628		$	7	$	0	$	(632,473	)	$	6,705,525		$	13,429		$	6,087,182		$	41,577		$	6,128,759
Common Stock
Issued/(converted)		—		—		1			—		—		—			3,243			—			3,244			—			3,244
Repurchased, including excise tax		—		—		(14	)		—		—		—			(177,320	)		—			(177,334	)		—			(177,334	)
Restricted share-based compensation expense		—		—		—			—		—		—			6,132			—			6,132			—			6,132
Dividends paid and accrued		—		—		—			—		—		(13,801	)		—			—			(13,801	)		—			(13,801	)
Stock option expense		—		—		—			—		—		—			16,208			—			16,208			—			16,208
Distributions to noncontrolling interests		—		—		—			—		—		—			—			—			—			(523	)		(523	)
Purchase (sale) of ownership interests by (from) minority members		—		—		—			—		—		—			—			—			—			—			—
Comprehensive income:
Net income (loss) to UHS / noncontrolling interests		506		—		—			—		—		—			166,989			—			166,989			514			167,503
Foreign currency translation adjustments, net of income tax		—		—		—			—		—		—			—			(23,705	)		(23,705	)		—			(23,705	)
Subtotal - comprehensive income		506		—		—			—		—		—			166,989			(23,705	)		143,284			514			143,798
Balance, September 30, 2023	$	4,719	$	66	$	615		$	7	$	—	$	(646,274	)	$	6,720,777		$	(10,276	)	$	6,064,915		$	41,568		$	6,106,483