Universal Health Services, Inc. Reports Second Quarter Earnings
07/22/2004
KING OF PRUSSIA, Pa., July 22 /PRNewswire-FirstCall/ -- Universal Health Services, Inc. (NYSE: UHS) announced today that its net income was $48.3 million or $.78 per diluted share during the three-month period ended June 30, 2004 as compared to $51.0 million or $.82 per diluted share during the second quarter of 2003. Net income was $94.5 million or $1.52 per diluted share during the six-month period ended June 30, 2004 as compared to $103.7 million or $1.66 per diluted share during the prior year six-month period. Net revenues were $1.02 billion and $880 million during the three- month periods ended June 30, 2004 and 2003, respectively, and $2.04 billion and $1.75 billion during the six-month periods ended June 30, 2004 and 2003, respectively.
Income from continuing operations was $47.1 million or $.76 per diluted share during the second quarter of 2004 as compared to $52.1 million or $.84 per diluted share during the second quarter of 2003. Income from continuing operations was $93.2 million or $1.50 per diluted share during the six-month period ended June 30, 2004 as compared to $106.5 million or $1.70 per diluted share during the prior year six-month period. Excluding the $2.8 million of pre-tax Medicaid disproportionate share revenue ("DSH") recorded during the first quarter of 2004 ($1.7 million after-tax), which was attributable to a prior period, our adjusted income from continuing operations was $91.4 million or $1.48 per diluted share during the six-month period ended June 30, 2004.
At our acute care hospitals owned during both periods located in the U.S. and Puerto Rico, admissions decreased approximately 1%, patient days decreased 2%, revenues increased 2.2% and revenue per adjusted patient day increased 3.8% during the 2004 second quarter, as compared to the prior year quarter. At our behavioral health hospitals owned in both periods, admissions increased 7%, patient days increased 6%, revenues increased 7.5% and revenue per adjusted patient day increased 2.0% during the second 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 14.8% during the three-month period ended June 30, 2004 as compared to 17.1% during the same period of the prior year.
At our acute care hospitals located in the U.S. and Puerto Rico owned during both three-month periods ended June 30, 2004 and June 30, 2003, the operating margin decreased to 16.7% during the second quarter of 2004 from 18.9% during the second quarter of the prior year. The operating margin at our behavioral health hospitals owned during both periods increased to 24.5% during the second quarter of 2004 from 24.1% during the comparable quarter of the prior year.
During the second quarter of 2004, we spent approximately $105 million to purchase the following behavioral health care facilities: (i) the Stonington Institute in Stonington, Connecticut including a 63-bed behavioral health hospital, partial services, a school, group homes and detox services; (ii) a 112-bed facility in Savannah, Georgia; (iii) a 77-bed facility in Benton, Arkansas; (iv) the operations of an 82-bed facility in Las Vegas, Nevada, and; (v) a 72-bed facility in Bowling Green, Kentucky.
Also during the second quarter of 2004, in conjunction with our strategic plan to sell two recently acquired acute care hospitals in California as well as certain other under-performing assets, we sold the following acute care facilities for combined cash proceeds of approximately $68 million: (i) a 112- bed hospital located in San Luis Obispo, California; (ii) a 65-bed hospital located in Arroyo Grande, California; (iii) a 136-bed leased hospital in Shreveport, Louisiana, and; (iv) a 106-bed hospital located in La Place, Louisiana. In addition, subsequent to the end of the quarter, we sold a 160- bed pediatric and surgery hospital located in Rio Piedras, Puerto Rico. The operating results of all these facilities, as well as the $1.2 million after- tax net gain resulting from the divestitures during the second quarter of 2004, are reflected as discontinued operations in the Consolidated Statements of Income for the three-month and six-month periods ended June 30, 2004 and 2003.
We will hold a conference call for investors and analysts at 9:00 a.m. Eastern Time on July 23, 2004. The dial-in number is 1-877-648-7971. A digital recording of the conference call will be available two hours after the completion of the conference call on July 23, 2004 and will continue through midnight on July 30, 2004. The recording can be accessed by calling 1-800-642-1687 and entering the conference ID number of 8676437. This call will also be available live over the Internet at our web site at http://www.uhsinc.com.
Universal Health Services, Inc. is one of the nation's largest hospital companies, operating acute care and behavioral health hospitals and ambulatory centers nationwide, 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.
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 in "Forward-Looking Statements and Risk Factors" on pages 14 and 15 of our Form 10-Q for the quarterly period ended March 31, 2004), may cause results to differ materially from those anticipated in the forward-looking statements. Many of the factors that will determine our future results are beyond our capability to control or predict. These statements are subject to risks and uncertainties and therefore actual results may differ materially. Readers should not place undue reliance on such forward-looking statements which reflect management's view only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
Universal Health Services, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
Three months Six months
ended June 30, ended June 30,
2004 2003 2004 2003
Net revenues $1,018,700 $879,661 $2,038,646 $1,751,354
Operating charges:
Salaries, wages and
benefits 414,000 346,132 828,390 690,321
Other operating expenses 238,455 205,043 470,107 402,164
Supplies expense 140,087 118,018 282,931 235,111
Provision for doubtful
accounts 75,762 59,886 161,139 123,498
Depreciation and
amortization 40,319 34,048 78,970 67,141
Lease and rental expense 18,117 15,490 36,115 30,935
926,740 778,617 1,857,652 1,549,170
Income before interest
expense, minority interests
and income taxes 91,960 101,044 180,994 202,184
Interest expense, net 10,899 9,370 21,805 19,215
Minority interests in
earnings of consolidated
entities 6,260 8,530 11,179 13,560
Income before income taxes 74,801 83,144 148,010 169,409
Provision for income taxes 27,699 31,065 54,813 62,937
Income from continuing
operations 47,102 52,079 93,197 106,472
Income (loss) from
discontinued operations,
net of income tax
expense (a) 1,187 (1,129) 1,276 (2,732)
Net income $48,289 $50,950 $94,473 $103,740
Basic earnings per share:(b)
From continuing
operations $0.82 $0.90 $1.62 $1.84
From discontinued
operations $0.02 ($0.02) $0.02 ($0.05)
Total basic
earnings per
share $0.84 $0.88 $1.64 $1.79
Diluted earnings per share: (b)
From continuing
operations $0.76 $0.84 $1.50 $1.70
From discontinued
operations $0.02 ($0.02) $0.02 ($0.04)
Total diluted
earnings per
share $0.78 $0.82 $1.52 $1.66
Universal Health Services, Inc.
Three months Six months
ended June 30, ended June 30,
2004 2003 2004 2003
(a) Calculation of income (loss) from
discontinued operations, net of
income tax:
Loss from operations ($63) ($1,790) ($331) ($4,334)
Gains, net of losses on divestitures 1,929 - 2,338 -
Income/loss from discontinued
operations, pre-tax 1,866 (1,790) 2,007 (4,334)
Income tax (provision)/benefit (679) 661 (731) 1,602
Income (loss) from discontinued
operations, net of income tax
expense $1,187 ($1,129) $1,276 ($2,732)
(b) Earnings per share calculation:
Basic:
Income from continuing operations $47,102 $52,079 $93,197 $106,472
Less: Dividends on unvested
restricted stock, net of taxes (28) 0 (56) 0
Income from continuing operations -
basic $47,074 $52,079 $93,141 $106,472
Income (loss) from discontinued
operations 1,187 (1,129) 1,276 (2,732)
Net income - basic $48,261 $50,950 $94,417 $103,740
Weighted average number of common
shares - basic 57,622 57,655 57,593 57,966
Basic earnings per share:
From continuing operations $0.82 $0.90 $1.62 $1.84
From discontinued operations $0.02 ($0.02) $0.02 ($0.05)
Total basic earnings per
share $0.84 $0.88 $1.64 $1.79
Diluted:
Income from continuing operations $47,102 $52,079 $93,197 $106,472
Less: Dividends on unvested
restricted stock, net of taxes (28) 0 (56) 0
Add: Debenture interest, net of taxes 2,305 2,178 4,573 4,355
Income from continuing operations -
diluted $49,379 $54,257 $97,714 $110,827
Income (loss) from discontinued
operations 1,187 (1,129) 1,276 (2,732)
Net income - diluted $50,566 $53,128 $98,990 $108,095
Weighted average number of common
shares 57,622 57,655 57,593 57,966
Add: Shares for conversion of
convertible debentures 6,577 6,577 6,577 6,577
Other share equivalents 774 710 860 726
Weighted average number of common
shares and equiv. - diluted 64,973 64,942 65,030 65,269
Diluted earnings per share:
From continuing operations $0.76 $0.84 $1.50 $1.70
From discontinued operations $0.02 ($0.02) $0.02 ($0.04)
Total diluted earnings per
share $0.78 $0.82 $1.52 $1.66
Universal Health Services, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30, December 31,
2004 2003
Assets:
Cash and cash equivalents $36,335 $35,186
Accounts receivable, net 575,365 488,876
Other current assets 100,072 103,426
Property, plant and equipment, net 1,433,785 1,271,117
Other assets 808,395 812,251
Assets held for sale 10,258 61,874
Total Assets $2,964,210 $2,772,730
Liabilities and Stockholders' Equity:
Current portion of long-term debt $13,193 $10,871
Liabilities held for sale 5,112 9,197
Other current liabilities 455,592 375,685
Other noncurrent liabilities 229,476 216,094
Long-term debt 849,587 868,566
Deferred income taxes 47,691 41,841
Minority interest 184,616 159,554
Stockholders' equity 1,178,943 1,090,922
Total Liabilities and Stockholders'
Equity $2,964,210 $2,772,730
Universal Health Services, Inc.
Supplemental Consolidated Income Statement Information
(in thousands)
(unaudited)
Three months ended Three months ended
June 30, 2004 June 30, 2003
Net revenues $1,018,700 100.0% $879,661 100.0%
Operating charges:
Salaries, wages and benefits 414,000 40.6% 346,132 39.3%
Other operating expenses 238,455 23.4% 205,043 23.3%
Supplies expense 140,087 13.8% 118,018 13.4%
Provision for doubtful accounts 75,762 7.4% 59,886 6.8%
868,304 85.2% 729,079 82.9%
Operating income/margin (c) 150,396 14.8% 150,582 17.1%
Lease and rental expense 18,117 15,490
Minority interests in earnings of
consolidated entities 6,260 8,530
Earnings before depreciation and
amortization, interest expense, and
income taxes ("EBITDA") (c) 126,019 126,562
Depreciation and amortization 40,319 34,048
Interest expense, net 10,899 9,370
Income before income taxes 74,801 83,144
Provision for income taxes 27,699 31,065
Income from continuing operations 47,102 52,079
Income (loss) from discontinued
operations, net of income taxes 1,187 (1,129)
Net income $48,289 $50,950
Universal Health Services, Inc.
Supplemental Consolidated Income Statement Information
(in thousands)
(unaudited)
Six months ended Six months ended
June 30, 2004 June 30, 2003
Net revenues $2,038,646 100.0% $1,751,354 100.0%
Operating charges:
Salaries, wages and benefits 828,390 40.6% 690,321 39.4%
Other operating expenses 470,107 23.1% 402,164 23.0%
Supplies expense 282,931 13.9% 235,111 13.4%
Provision for doubtful accounts 161,139 7.9% 123,498 7.1%
1,742,567 85.5% 1,451,094 82.9%
Operating income/margin (c) 296,079 14.5% 300,260 17.1%
Lease and rental expense 36,115 30,935
Minority interests in earnings
of consolidated entities 11,179 13,560
Earnings before depreciation and
amortization, interest expense,
and income taxes ("EBITDA") (c) 248,785 255,765
Depreciation and amortization 78,970 67,141
Interest expense, net 21,805 19,215
Income before income taxes 148,010 169,409
Provision for income taxes 54,813 62,937
Income from continuing operations 93,197 106,472
Income (loss) from discontinued
operations, net of income taxes 1,276 (2,732)
Net income $94,473 $103,740
Per Per
Calculation of Adjusted Income from Diluted Diluted
Continuing Operations (c) Amount Share Amount Share
Income from continuing operations $93,197 $1.50 $106,472 $1.70
Less: After-tax DSH revenue
attributable to prior period (1,748) ($0.02) - -
Adjusted income from continuing
operations $91,449 $1.48 $106,472 $1.70
(c) We believe that operating income, operating margin, EBITDA, adjusted income from continuing operations, adjusted net income, adjusted income from continuing operations per diluted share 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 income from continuing operations, adjusted net income, adjusted income from continuing operations per diluted share 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-operational in nature such as gains on sales of assets and businesses or amounts reflected in the current or prior year financial statements that relate to prior periods.
To obtain a complete understanding of our financial performance, these measures should be examined in connection with net income determined in accordance with 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 income from continuing operations, adjusted net income, adjusted income from continuing operations per diluted share 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, they may not be comparable to other similarly titled measures of other companies. Investors are encouraged to use GAAP measures when evaluating our financial performance.
Universal Health Services, Inc.
Supplemental Statistical Information
(unaudited)
% Change % Change
Quarter Ended 6 mos. ended
Same Facility: 6/30/2004 6/30/2004
Acute Care Hospitals
Revenues 2.2% 2.9%
Adjusted Admissions 0.1% 0.3%
Adjusted Patient Days -1.6% 0.1%
Revenue Per Adjusted Admission 2.1% 2.6%
Revenue Per Adjusted Patient Day 3.8% 2.8%
Behavioral Health Hospitals
Revenues 8.3% 8.5%
Adjusted Admissions 6.7% 8.4%
Adjusted Patient Days 6.2% 6.0%
Revenue Per Adjusted Admission 1.6% 0.1%
Revenue Per Adjusted Patient Day 2.0% 2.3%
UHS Consolidated Second Quarter Ended Six months Ended
6/30/2004 6/30/2003 6/30/2004 6/30/2003
Revenues $1,018,700 $879,661 $2,038,646 $1,751,354
EBITDA (1) $126,019 $126,562 $248,785 $255,765
EBITDA Margin (1) 12.4% 14.4% 12.2% 14.6%
Cash Flow From Operations $129,752 $129,412 $224,675 $210,178
Days Sales Outstanding 52 47 51 47
Capital Expenditures $47,582 $62,655 $118,018 $106,204
Debt (net of cash) - - $826,445 $675,415
Shareholders Equity - - $1,178,943 $976,432
Debt / Total Capitalization - - 41.2% 40.9%
Debt / EBITDA (2) - - 1.71 1.43
Debt / Cash From Operations (2) - - 2.13 1.66
Acute Care EBITDAR Margin (3) 15.3% 18.9% 15.0% 19.2%
Behavioral Health EBITDAR
Margin (3) 24.1% 24.1% 24.1% 23.0%
(1) Net of Minority Interest
(2) Latest 4 quarters
(3) Before Corporate overhead allocation and minority interest
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
JUNE 30, 2004
AS REPORTED:
FOR THE THREE MONTHS ENDED
ACUTE (1) (2)
6/30/04 6/30/03 %
Hospitals owned and leased 26 22 18.2%
Average licensed beds 6,314 5,333 18.4%
Patient days 320,285 294,829 8.6%
Average daily census 3,519.6 3,239.9 8.6%
Occupancy-licensed beds 55.7% 60.8% -8.2%
Admissions 68,831 63,074 9.1%
Length of stay 4.7 4.7 -0.5%
Inpatient revenue $1,687,108 $1,430,272 18.0%
Outpatient revenue 649,442 511,842 26.9%
Total patient revenue 2,336,550 1,942,114 20.3%
Other revenue 9,900 11,359 -12.8%
Gross hospital revenue 2,346,450 1,953,473 20.1%
Total deductions 1,594,852 1,298,271 22.8%
Net hospital revenue $751,598 $655,202 14.7%
(1) Does not include hospitals located in France.
(2) not including assets held for sale
AS REPORTED:
FOR THE THREE MONTHS ENDED
BEHAVIORAL HEALTH
6/30/04 6/30/03 %
Hospitals owned and leased 44 39 12.8%
Average licensed beds 4,214 3,902 8.0%
Patient days 310,723 269,451 15.3%
Average daily census 3,414.5 2,961.0 15.3%
Occupancy-licensed beds 81.0% 75.9% 6.8%
Admissions 23,944 22,029 8.7%
Length of stay 13.0 12.2 6.1%
Inpatient revenue $310,737 $274,367 13.3%
Outpatient revenue 46,472 41,178 12.9%
Total patient revenue 357,209 315,545 13.2%
Other revenue 8,610 8,974 -4.1%
Gross hospital revenue 365,819 324,519 12.7%
Total deductions 188,087 169,682 10.8%
Net hospital revenue $177,732 $154,837 14.8%
(1) Does not include hospitals located in France.
(2) not including assets held for sale
SAME FACILITY:
FOR THE THREE MONTHS ENDED
ACUTE (1)(2) BEHAVIORAL HEALTH (3)
6/30/04 6/30/03 % 6/30/04 6/30/03 %
Hospitals owned and
leased 24 24 0.0% 39 39 0.0%
Average licensed
beds 5,714 5,599 2.1% 3,922 3,902 0.5%
Patient days 294,558 301,219 -2.2% 286,441 269,451 6.3%
Average daily
census 3,236.9 3,310.1 -2.2% 3,147.7 2,961.0 6.3%
Occupancy-licensed
beds 56.6% 59.1% -4.2% 80.3% 75.9% 5.8%
Admissions 64,127 64,815 -1.1% 23,470 22,029 6.5%
Length of stay 4.6 4.6 -1.2% 12.2 12.2 -0.2%
(1) Does not include hospitals located in France.
(2) Does not include Doctors of Shreveport, Arroyo Grande, French
hospital, Lakeland, Corona, Methodist and Spring Valley in current
and prior years.
(3) Does not include Stonington, Coastal Harbor, Rivendell-Arkansas,
Rivendell-Kentucky and Spring Mountain in current and prior years.
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
JUNE 30, 2004
AS REPORTED:
FOR THE SIX MONTHS ENDED
ACUTE (1) (2)
6/30/04 6/30/03 %
Hospitals owned and leased 26 22 18.2%
Average licensed beds 6,288 5,333 17.9%
Patient days 664,419 602,801 10.2%
Average daily census 3,650.7 3,330.4 9.6%
Occupancy-licensed beds 58.1% 62.4% -7.0%
Admissions 140,337 128,607 9.1%
Length of stay 4.7 4.7 1.0%
Inpatient revenue $3,481,712 $2,910,754 19.6%
Outpatient revenue 1,281,744 998,475 28.4%
Total patient revenue 4,763,456 3,909,229 21.9%
Other revenue 20,048 22,568 -11.2%
Gross hospital revenue 4,783,504 3,931,797 21.7%
Total deductions 3,266,077 2,620,880 24.6%
Net hospital revenue $1,517,427 $1,310,917 15.8%
(1) Does not include hospitals located in France.
(2) not including assets held for sale
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
JUNE 30, 2004
AS REPORTED:
FOR THE SIX MONTHS ENDED
BEHAVIORAL HEALTH
6/30/04 6/30/03 %
Hospitals owned and leased 44 39 12.8%
Average licensed beds 4,060 3,887 4.5%
Patient days 594,621 537,541 10.6%
Average daily census 3,267.1 2,969.8 10.0%
Occupancy-licensed beds 80.5% 76.4% 5.3%
Admissions 48,083 43,983 9.3%
Length of stay 12.4 12.2 1.2%
Inpatient revenue $604,466 $547,644 10.4%
Outpatient revenue 89,448 79,751 12.2%
Total patient revenue 693,914 627,395 10.6%
Other revenue 16,951 17,575 -3.6%
Gross hospital revenue 710,865 644,970 10.2%
Total deductions 367,230 337,386 8.8%
Net hospital revenue $343,635 $307,584 11.7%
(1) Does not include hospitals located in France.
(2) not including assets held for sale
SAME FACILITY:
FOR THE SIX MONTHS ENDED
ACUTE (1) (2) BEHAVIORAL HEALTH (3)
6/30/04 6/30/03 % 6/30/04 6/30/03 %
Hospitals owned
and leased 24 24 0.0% 39 39 0.0%
Average licensed
beds 5,714 5,599 2.1% 3,913 3,887 0.7%
Patient days 611,374 617,427 -1.0% 570,352 537,480 6.1%
Average daily
census 3,359.2 3,411.2 -1.5% 3,133.8 2,969.5 5.5%
Occupancy-
licensed
beds 58.8% 60.9% -3.5% 80.1% 76.4% 4.8%
Admissions 131,018 132,320 -1.0% 47,609 43,983 8.2%
Length of stay 4.7 4.7 0.0% 12.0 12.2 -2.0%
(1) Does not include hospitals located in France.
(2) Does not include Doctors of Shreveport, Arroyo Grande, French
hospital, Lakeland, Corona, Methodist and Spring Valley in current
and prior years.
(3) Does not include Stonington, Coastal Harbor, Rivendell-Arkansas,
Rivendell-Kentucky and Spring Mountain in current and prior years.
SOURCE Universal Health Services, Inc.
CONTACT: Steve Filton, Chief Financial Officer of Universal Health
Services, +1-610-768-3300
Web site: http://www.uhsinc.com