Universal Health Services, Inc. Reports First Quarter Earnings
04/22/2004
KING OF PRUSSIA, Pa., April 22 /PRNewswire-FirstCall/ -- Universal Health Services, Inc. (NYSE: UHS) announced today its results for the first quarter ended March 31, 2004. Reported net income was $46.2 million or $.74 per diluted share for the three-month period ended March 31, 2004, as compared to $52.8 million or $.84 per diluted share during the prior year first quarter.
Included in our results for the first quarter of 2004 was $2.8 million of pre-tax ($1.7 million after-tax) Medicaid disproportionate share hospital ("DSH") revenue, attributable to a prior period as discussed below. Excluding this DSH revenue, our adjusted net income was $44.4 million and our adjusted earnings per diluted share were $.72 (as calculated on the attached schedule of Supplemental Consolidated Income Statement Information), a 14% decrease from the $.84 per diluted share earned during the first quarter of 2003. Net revenues during the three-month period ended March 31, 2004 were $1.03 billion.
At our acute care hospitals owned during both periods located in the U.S. and Puerto Rico, admissions decreased approximately 1%, patient days remained unchanged, revenues increased 3.8% and revenue per adjusted patient day increased 2.7% during the 2004 first quarter, as compared to the prior year quarter (excluding the effect of the South Carolina DSH revenue attributable to a prior period). At our behavioral health hospitals owned in both periods, admissions increased 10%, patient days increased 6%, revenues increased 8.7% and revenue per adjusted patient day increased 2.8% during the first quarter of 2004 as compared to the prior year quarter.
Our operating margin (as calculated on the attached schedule of Supplemental Consolidated Income Statement Information), decreased to 14.1% in the three-month period ended March 31, 2004, as compared to 16.8% in the same period of the prior year. We recently received notification from South Carolina that the DSH program has been renewed for the state's 2004 fiscal year covering the period from July 1, 2003 through June 30, 2004. Included in our 2004 first quarter results is $4.1 million of revenue from this program attributable to the period of July 1, 2003 through March 31, 2004. Excluding the $2.8 million of pre-tax ($1.7 million after-tax) South Carolina DSH revenue attributable to a prior period, operating margins at our acute care hospitals located in the U.S. and Puerto Rico during both the three-month periods ended March 31, 2004 and March 31, 2003 decreased to 14.5% from 18.8%. Operating margins at our behavioral health hospitals owned during both periods increased to 24.1% during the first quarter of 2004 from 21.9% during the prior year quarter.
We anticipate earnings per diluted share for 2004 of $2.75 to $2.85. This estimate assumes stabilization of the market forces that have adversely impacted our earnings this year, namely softer volumes, increasing bad debt expense and erosion in our competitive position in selected markets.
During the quarter, as previously announced, we signed a definitive agreement with Catholic Healthcare West to sell 112-bed French Medical Center located in San Luis Obispo, California and 65-bed Arroyo Grande Community Hospital located in Arroyo Grande, California. We expect the sale of these two facilities to be completed during the second quarter of 2004. Subsequent to the end of the quarter, we sold the operations of Doctors' Hospital of Shreveport, a 136-bed leased acute care hospital in Shreveport, Louisiana. Combined proceeds for these sale transactions are expected to total approximately $40 million. The operating results of the two California hospitals and Shreveport are reflected as discontinued operations in the Consolidated Statements of Income for the three-month periods ended March 31, 2004 and 2003.
During the first quarter, we signed a letter of intent to purchase the Stonington Institute in Stonington, Connecticut including a 63-bed behavioral health hospital, partial services, a school, group homes and detox services. We also signed a letter of intent to purchase four behavioral health facilities from Keystone Education and Youth Services. The facilities include a 112-bed facility in Savannah, Georgia; a 77-bed hospital in Benton, Arkansas; an 82-bed operation in Las Vegas, Nevada; and a 72-bed hospital in Bowling Green, Kentucky. We expect to close these transactions, which are subject to regulatory approval, by April 30, 2004. The combined purchase price for these five facilities is approximately $100 million.
We believe that operating income, operating margin, EBITDA, adjusted net income and adjusted earnings per diluted share (as calculated on the attached schedules of Supplemental Consolidated Income Statement Information), which are non-GAAP financial measures, are helpful to our investors as measures of our operating performance. Since the source of financing for the purchase of property and equipment and other assets at each hospital varies, we believe that measuring operating performance before capital-related costs (such as depreciation and amortization, lease and rental and interest expense) provides a useful comparison of relative operating performance among our facilities. Operating income and operating margin are used by management as analytical indicators for purposes of assessing the relative operating performance of our individual hospitals and operating segments, and the overall Company. Also, our use of operating income, operating margin and EBITDA enables investors to compare our performance with that of others in the industry. In addition, we believe that comparing and discussing our financial results based on adjusted net income and adjusted earnings per diluted share, is helpful to our investors since it neutralizes the effect in each period, of items that are nonrecurring or non-operating in nature such as recovery of prior year provisions for judgment/closure costs, gains on sales of assets and businesses and provision for asset impairment.
To obtain a complete understanding of our financial performance, operating income, operating margin, EBITDA, adjusted net income and adjusted net income per diluted share should be examined in connection with net income determined in accordance with generally accepted accounting principles, as presented in these financial statements as well as information provided elsewhere such as our Reports on Forms 10-Q and 10-K. Since the items excluded from operating income, operating margin, EBITDA, adjusted net income and adjusted earnings per diluted share are significant components in understanding and assessing financial performance under generally accepted accounting principles, these measures should not be considered to be alternatives to net income as a measure of our operating performance or profitability. Because these measures are not determined in accordance with generally accepted accounting principles and are thus susceptible to varying calculations, operating income, operating margin, EBITDA, adjusted net income and adjusted earnings per diluted share as presented may not be comparable to other similarly titled measures of other companies. Investors are encouraged to use GAAP measures when evaluating our financial performance.
This press release contains forward-looking statements based on current management expectations. Numerous factors, including those related to healthcare industry trends and those detailed in our filings with the Securities and Exchange Commission (as set forth on pages 22 and 23 of our Form 10-K for the year ended December 31, 2003), 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 ability 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.
Universal Health Services, Inc. is one of the nation's largest hospital companies, operating acute care and behavioral health hospitals and ambulatory centers nationwide, in Puerto Rico and in France. 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.
Universal Health Services, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
Three months
ended March 31,
2004 2003
Net revenues $1,035,482 $886,079
Operating charges:
Salaries, wages and benefits 421,157 351,357
Other operating expenses 235,871 201,518
Supplies expense 144,937 119,329
Provision for doubtful accounts 87,227 65,247
Depreciation and amortization 39,378 34,189
Lease and rental expense 18,336 15,683
946,906 787,323
Income before interest expense,
minority interests, income taxes,
and discontinued operations 88,576 98,756
Interest expense, net 10,911 9,849
Minority interests in earnings
of consolidated entities 4,919 5,030
Income from continuing operations
before income taxes 72,746 83,877
Provision for income taxes 26,946 30,990
Income from continuing operations 45,800 52,887
Income (loss) from discontinued
operations, net of income tax
expense of $219 in 2003 and benefit
of ($58) in 2002 expense of $219 in
2004 and benefit of ($58) in 2003 383 (97)
Net income $46,183 $52,790
Basic earnings per share:
From continuing operations $0.80 $0.91
From discontinued operations - -
Total basic earnings per share $0.80 $0.91
Diluted earnings per share:
From continuing operations $0.74 $0.84
From discontinued operations - -
Total diluted earnings per share $0.74 $0.84
EARNINGS PER SHARE CALCULATION
Income from continuing operations $45,800 $52,887
Less: Dividends on unvested
restricted stock, net of taxes (28) 0
Income from continuing operations - basic 45,772 52,887
Add: Debenture interest, net of taxes 2,268 2,177
Income from continuing operations - diluted 48,040 55,064
Less: Income (loss) from discontinued
operations 383 (97)
Net income - diluted $48,423 $54,967
Weighted average number of common
shares - basic 57,564 58,277
Add: Shares for conversion of
convertible debentures 6,577 6,577
Other share equivalents 946 742
Weighted average number of common
shares and equiv. - diluted 65,087 65,596
Earnings per common share from
continuing operations - basic $0.80 $0.91
Earnings per common share from
continuing operations - diluted $0.74 $0.84
Earnings per common share from
discontinued operations - basic - -
Earnings per common share from
discontinued operations - diluted - -
Universal Health Services, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
March 31, December 31,
2004 2003
Assets:
Cash and cash equivalents $38,381 $35,068
Accounts receivable, net 602,159 499,074
Other current assets 124,246 106,391
Property, plant and equipment, net 1,418,961 1,302,025
Other assets 735,036 788,772
Assets held for sale 46,438 41,400
Total Assets $2,965,221 $2,772,730
Liabilities and Stockholders' Equity:
Current portion of long-term debt $12,528 $10,871
Liabilities held for sale 9,382 2,014
Other current liabilities 475,205 382,868
Other noncurrent liabilities 216,721 216,094
Long-term debt 895,882 868,566
Deferred income taxes 43,755 41,841
Minority interest 178,419 159,554
Stockholders' equity 1,133,329 1,090,922
Total Liabilities and Stockholders'
Equity $2,965,221 $2,772,730
Universal Health Services, Inc.
Supplemental Consolidated Income Statement Information
(in thousands)
unaudited
Three months ended Three months ended
March 31, 2004 March 31, 2003
Net revenues $1,035,482 100.0% $886,079 100.0%
Operating charges:
Salaries, wages and benefits 421,157 40.7% 351,357 39.7%
Other operating expenses 235,871 22.8% 201,518 22.7%
Supplies expense 144,937 14.0% 119,329 13.5%
Provision for doubtful accounts 87,227 8.4% 65,247 7.4%
889,192 85.9% 737,451 83.2%
Operating income/margin 146,290 14.1% 148,628 16.8%
Lease and rental expense 18,336 15,683
Minority interests in earnings of
consolidated entities 4,919 5,030
Earnings before depreciation and
amortization, interest expense,
income (loss) from discontinued
operations, and income taxes
("EBITDA") 123,035 127,915
Depreciation and amortization 39,378 34,189
Interest expense, net 10,911 9,849
Income from continuing operations
before income taxes 72,746 83,877
Provision for income taxes 26,946 30,990
Income from continuing operations 45,800 52,887
Income (loss) from discontinued
operations, net of income taxes 383 (97)
Net income $46,183 $52,790
Per Per
Calculation of Adjusted Net Income Diluted Diluted
Amount Share Amount Share
Net income $46,183 $0.74 $52,790 $0.84
Less: After-tax DSH revenue
attributable to prior period (1,748) ($0.02) - -
Adjusted net income $44,435 $0.72 $52,790 $0.84
Universal Health Services, Inc.
Supplemental Statistical Information
(unaudited)
% Change
Quarter Ended
Same Facility: 3/31/2004
Acute Care Hospitals
Revenues 3.8%
Adjusted Admissions 0.5%
Adjusted Patient Days 1.0%
Revenue Per Adjusted Admission 3.3%
Revenue Per Adjusted Patient Day 2.7%
Behavioral Health Hospitals
Revenues 8.7%
Adjusted Admissions 10.1%
Adjusted Patient Days 5.8%
Revenue Per Adjusted Admission -1.2%
Revenue Per Adjusted Patient Day 2.8%
UHS Consolidated First Quarter Ended
3/31/2004 3/31/2003
Revenues $1,035,482 $886,079
EBITDA (1) $123,035 $127,915
EBITDA Margin (1) 11.9% 14.4%
Cash Flow From Operations $94,923 $80,766
Days Sales Outstanding 53 51
Capital Expenditures $70,436 $43,549
Debt (net of cash) 870,029 709,276
Shareholders Equity 1,133,329 949,989
Debt / Total Capitalization 43.4% 42.7%
Debt / EBITDA (2) 1.79 1.57
Debt / Cash From Operations (2) 2.24 2.00
Acute Care EBITDAR Margin (3) 14.4% 18.8%
Behavioral Health EBITDAR Margin (3) 24.1% 21.9%
(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, 2004
AS REPORTED:
For the three months ended
Acute (1)
03/31/04 03/31/03 %
Hospitals owned and leased 28 24 16.7%
Average licensed beds 6,528 5,599 16.6%
Patient days 352,064 316,191 11.3%
Average daily census 3,868.8 3,513.2 10.1%
Occupancy-licensed beds 59.3% 62.7% -5.5%
Admissions 73,413 67,505 8.8%
Length of stay 4.8 4.7 2.4%
Inpatient revenue $1,811,781 $1,497,389 21.0%
Outpatient revenue 649,675 502,635 29.3%
Total patient revenue 2,461,456 2,000,024 23.1%
Other revenue 11,085 11,767 -5.8%
Gross hospital revenue 2,472,541 2,011,791 22.9%
Total deductions 1,691,175 1,341,690 26.0%
Net hospital revenue $781,366 $670,101 16.6%
(1) not including assets held for sale
AS REPORTED:
For the three months ended
Behavioral Health
03/31/04 03/31/03 %
Hospitals owned and leased 39 39 0.0%
Average licensed beds 3,904 3,871 0.9%
Patient days 283,898 268,083 5.9%
Average daily census 3,154.4 2,978.7 5.9%
Occupancy-licensed beds 80.8% 76.9% 5.0%
Admissions 24,139 21,954 10.0%
Length of stay 11.8 12.2 -3.7%
Inpatient revenue $293,729 $273,277 7.5%
Outpatient revenue 42,976 38,573 11.4%
Total patient revenue 336,705 311,850 8.0%
Other revenue 8,436 8,601 -1.9%
Gross hospital revenue 345,141 320,451 7.7%
Total deductions 179,143 167,704 6.8%
Net hospital revenue $165,998 $152,747 8.7%
(1) not including assets held for sale
SAME FACILITY:
For the three months ended
Acute (2) Behavioral Health
03/31/04 03/31/03 % 03/31/04 03/31/03 %
Hospitals owned and
leased 24 24 0.0% 39 39 0.0%
Average licensed
beds 5,714 5,599 2.1% 3,904 3,871 0.9%
Patient days 316,753 316,191 0.2% 283,902 268,083 5.9%
Average daily
census 3,480.8 3,513.2 -0.9% 3,119.8 2,978.7 4.7%
Occupancy-licensed
beds 60.9% 62.7% -2.9% 79.9% 76.9% 3.9%
Admissions 66,891 67,505 -0.9% 24,139 21,954 10.0%
Length of stay 4.7 4.7 1.1% 11.8 12.2 -3.7%
(2) Assets held for sale and Corona Medical, Lakeland, Methodist and
Spring Valley are excluded in both current and prior years.
SOURCE Universal Health Services, Inc.
CONTACT: Steve Filton, Chief Financial Officer, Universal Health
Services, Inc., +1-610-768-3300
Web site: http://www.uhsinc.com