Universal Health Services, Inc. Reports Third Quarter Earnings
10/21/2004
KING OF PRUSSIA, Pa., Oct. 21 /PRNewswire-FirstCall/ -- Universal Health Services, Inc. (NYSE: UHS) announced today that its net income was $37.8 million or $.62 per diluted share during the three-month period ended September 30, 2004 as compared to $49.1 million or $.79 per diluted share during the third period of 2003. Net income was $132.3 million or $2.14 per diluted share during the nine-month period ended September 30, 2004 as compared to $152.8 million or $2.45 per diluted share during the prior year nine-month period. Net revenues were $1.01 billion and $871 million during the three-month periods ended September 30, 2004 and 2003, respectively, and $3.05 billion and $2.62 billion during the nine-month periods ended September 30, 2004 and 2003, respectively.
Income from continuing operations was $38.8 million or $.63 per diluted share during the third quarter of 2004 as compared to $44.6 million or $.72 per diluted share during the third quarter of 2003. Income from continuing operations was $131.9 million or $2.13 per diluted share during the nine-month period ended September 30, 2004 as compared to $151.1 million or $2.42 per diluted share during the prior year nine-month period. Excluding the $2.3 million pre-tax property write-down ($1.5 million or $.02 per diluted share after-tax) recorded in the third quarter resulting from property damage caused by a hurricane, our adjusted income from continuing operations (as calculated on the attached schedule of Non-GAAP Supplemental Consolidated Income Statement Information) was $40.2 million or $.65 per diluted share during the three-month period ended September 30, 2004. Adjusted income from continuing operations, excluding the property write-down mentioned above and disproportionate share revenue attributable to a prior period recorded during the first quarter of 2004, was $131.6 million or $2.13 per diluted share during the nine-month period ended September 30, 2004.
At our acute care hospitals owned during both periods located in the U.S. and Puerto Rico, net revenues increased 3% during the third quarter of 2004, as compared to the comparable prior year quarter, due primarily to a 4.6% increase in revenue per adjusted patient day. Admissions to these facilities decreased approximately 2% and patient days decreased 3% during the third quarter of 2004, as compared to the prior year quarter. At our behavioral health hospitals owned in both periods, admissions increased 5%, patient days increased 7%, net revenues increased 8% and revenue per adjusted patient day increased 0.7% during the third quarter of 2004, as compared to the prior year quarter.
Our operating margin (as calculated on the attached schedule of Non-GAAP Supplemental Consolidated Income Statement Information), decreased to 13.7% during the three-month period ended September 30, 2004 as compared to 15.7% during the same period of the prior year. The operating margin at our acute care hospitals located in the U.S. and Puerto Rico owned during both periods remained unchanged at 17.5% during each of the quarters ended September 30, 2004 and September 30, 2003. However, the decrease in our consolidated operating margin during the third quarter of 2004, as compared to the comparable prior year quarter, was primarily caused by a much lower combined operating margin experienced at three acute care facilities purchased during the first quarter of 2004 and two newly constructed acute care facilities, one of which opened during the fourth quarter of 2003 and the other during the third quarter of 2004. The operating margin at our behavioral health hospitals owned during both periods decreased slightly to 22.2% during the third quarter of 2004 from 22.4% during the comparable quarter of the prior year.
We will hold a conference call for investors and analysts at 9:00 a.m. Eastern Time on October 22, 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 October 22, 2004 and will continue through midnight on October 29, 2004. The recording can be accessed by calling 1-800-642-1687 and entering the conference ID number 1503810. 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 17 and 18 of our Form 10-Q for the quarterly period ended June 30, 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.
We believe that operating income, operating margin, earnings before depreciation and amortization, interest expense and income taxes ("EBITDA"), adjusted income from continuing operations and adjusted income from continuing operations per diluted share, which are non-GAAP financial measures ("GAAP" is Generally Accepted Accounting Principles), are helpful to our investors as measures of our operating performance. In addition, we believe that comparing and discussing our financial results based on these measures is helpful to our investors since it neutralizes the effect in each year of items that are nonrecurring or non-operational in nature such as property write-downs, 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, operating income, operating margin, EBITDA, adjusted income from continuing operations and adjusted income from continuing operations per diluted share should be examined in connection with net income, determined in accordance with accounting principles generally accepted in the United States of America, 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, 2003. Since the items included or excluded from operating income, operating margin, EBITDA, adjusted income from continuing operations and adjusted income from continuing operations per diluted share are significant components in understanding and assessing financial performance under accounting principles generally accepted in the United States of America, these measures should not be considered to be alternatives to net income as a measure of our operating performance or profitability. Because operating income, operating margin, EBITDA, adjusted income from continuing operations and adjusted income from continuing operations per diluted share are not measurements determined in accordance with accounting principles generally accepted in the United States of America and are thus susceptible to varying calculations, these measures 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. Below are schedules of Non-GAAP Supplemental Consolidated Income Statements of Income Information which reconcile operating income, adjusted income from continuing operations and adjusted income from continuing operations per diluted share to net income for the periods presented.
Universal Health Services, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
Three months Nine months
ended September 30, ended September 30,
2004 2003 2004 2003
Net revenues $1,012,868 $871,453 $3,049,032 $2,620,393
Operating charges:
Salaries, wages and
benefits 415,371 351,333 1,243,018 1,040,860
Other operating expenses 238,475 206,358 708,020 607,927
Supplies expense 138,446 116,206 420,927 350,818
Provision for doubtful
accounts 82,028 60,591 243,123 184,037
Depreciation and
amortization 42,893 34,278 121,726 101,288
Lease and rental expense 17,948 15,404 53,644 45,935
935,161 784,170 2,790,458 2,330,865
Income before interest
expense, minority interests
and income taxes 77,707 87,283 258,574 289,528
Interest expense, net 10,683 8,609 32,484 27,821
Minority interests in
earnings of consolidated
entities 5,649 7,478 16,795 21,048
Income before income taxes 61,375 71,196 209,295 240,659
Provision for income taxes 22,625 26,574 77,405 89,530
Income from continuing
operations 38,750 44,622 131,890 151,129
Income (loss) from
discontinued operations,
net of income tax
expense (a) (905) 4,439 428 1,672
Net income $37,845 $49,061 $132,318 $152,801
Basic earnings (loss) per
share: (b)
From continuing
operations $0.67 $0.78 $2.29 $2.62
From discontinued
operations ($0.02) $0.08 $0.00 $0.03
Total basic
earnings per
share $0.65 $0.86 $2.29 $2.65
Diluted earnings (loss) per
share: (b)
From continuing
operations $0.63 $0.72 $2.13 $2.42
From discontinued
operations ($0.01) $0.07 $0.01 $0.03
Total diluted
earnings per
share $0.62 $0.79 $2.14 $2.45
Universal Health Services, Inc.
Footnotes to Consolidated Statements of Income
Three months Nine months
ended ended
September 30, September 30,
2004 2003 2004 2003
(a) Calculation of income (loss)
from discontinued operations, net
of income tax:
Loss from operations ($4,497) ($795) ($4,737) ($5,182)
Gains, net of losses on divestitures 3,073 7,837 5,411 7,837
Income (loss) from discontinued
operations, pre-tax (1,424) 7,042 674 2,655
Income tax (provision)/benefit 519 (2,603) (246) (983)
Income (loss) from discontinued
operations, net of income tax
expense ($905) $4,439 $428 $1,672
(b) Earnings per share calculation:
Basic:
Income from continuing operations $38,750 $44,622 $131,890 $151,129
Less: Dividends on unvested
restricted stock, net of taxes (28) 0 (84) 0
Income from continuing operations -
basic $38,722 $44,622 $131,806 $151,129
Income (loss) from discontinued
operations (905) 4,439 428 1,672
Net income - basic $37,817 $49,061 $132,234 $152,801
Weighted average number of common
shares - basic 57,791 57,354 57,659 57,762
Basic earnings (loss) per share:
From continuing operations $0.67 $0.78 $2.29 $2.62
From discontinued operations ($0.02) $0.08 $0.00 $0.03
Total basic earnings per
share $0.65 $0.86 $2.29 $2.65
Diluted:
Income from continuing operations $38,750 $44,622 $131,890 $151,129
Less: Dividends on unvested
restricted stock, net of taxes (28) 0 (84) 0
Add: Debenture interest, net of
taxes 2,333 2,222 6,906 6,577
Income from continuing operations -
diluted $41,055 $46,844 $138,712 $157,706
Income (loss) from discontinued
operations (905) 4,439 428 1,672
Net income - diluted $40,150 $51,283 $139,140 $159,378
Weighted average number of common
shares 57,791 57,354 57,659 57,762
Add: Shares for conversion of
convertible debentures 6,577 6,577 6,577 6,577
Other share equivalents 542 909 754 787
Weighted average number of common
shares and equiv. - diluted 64,910 64,840 64,990 65,126
Diluted earnings (loss) per share:
From continuing operations $0.63 $0.72 $2.13 $2.42
From discontinued operations ($0.01) $0.07 $0.01 $0.03
Total diluted earnings per
share $0.62 $0.79 $2.14 $2.45
Universal Health Services, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
September 30, December 31,
2004 2003
Assets:
Cash and cash equivalents $34,554 $34,863
Accounts receivable, net 580,010 503,929
Other current assets 113,604 106,999
Property, plant and equipment, net 1,449,964 1,304,341
Other assets 800,170 822,598
Total Assets $2,978,302 $2,772,730
Liabilities and Stockholders' Equity:
Current portion of long-term debt $11,924 $10,871
Other current liabilities 451,815 384,882
Other noncurrent liabilities 221,931 216,094
Long-term debt 828,766 868,566
Deferred income taxes 62,319 41,841
Minority interest 187,170 159,554
Stockholders' equity 1,214,377 1,090,922
Total Liabilities and Stockholders'
Equity $2,978,302 $2,772,730
Universal Health Services, Inc.
Schedule of Non-GAAP Supplemental Consolidated Statements of Income
Information
For the Three Months Ended September 30, 2004 and 2003
(in thousands)
(unaudited)
Three months ended Three months ended
September 30, 2004 September 30, 2003
Net revenues $1,012,868 100.0% $871,453 100.0%
Operating charges:
Salaries, wages and benefits 415,371 41.0% 351,333 40.3%
Other operating expenses 238,475 23.5% 206,358 23.7%
Supplies expense 138,446 13.7% 116,206 13.3%
Provision for doubtful accounts 82,028 8.1% 60,591 7.0%
874,320 86.3% 734,488 84.3%
Operating income/margin 138,548 13.7% 136,965 15.7%
Lease and rental expense 17,948 15,404
Minority interests in earnings of
consolidated entities 5,649 7,478
Earnings before depreciation and
amortization, interest expense, and
income taxes ("EBITDA") 114,951 114,083
Depreciation and amortization 42,893 34,278
Interest expense, net 10,683 8,609
Income before income taxes 61,375 71,196
Provision for income taxes 22,625 26,574
Income from continuing operations 38,750 44,622
Income (loss) from discontinued
operations, net of income taxes (905) 4,439
Net income $37,845 $49,061
Per Per
Calculation of Adjusted Income from Diluted Diluted
Continuing Operations Amount Share Amount Share
Income from continuing operations $38,750 $0.63 $44,622 $0.72
Add: After-tax hurricane property
damage 1,474 $0.02 - -
Adjusted income from continuing
operations $40,224 $0.65 $44,622 $0.72
Universal Health Services, Inc.
Schedule of Non-GAAP Supplemental Consolidated Statements of Income
Information
For the Nine Months Ended September 30, 2004 and 2003
(in thousands)
(unaudited)
Nine months ended Nine months ended
September 30, 2004 September 30, 2003
Net revenues $3,049,032 100.0% $2,620,393 100.0%
Operating charges:
Salaries, wages and benefits 1,243,018 40.8% 1,040,860 39.7%
Other operating expenses 708,020 23.2% 607,927 23.2%
Supplies expense 420,927 13.8% 350,818 13.4%
Provision for doubtful accounts 243,123 8.0% 184,037 7.0%
2,615,088 85.8% 2,183,642 83.3%
Operating income/margin 433,944 14.2% 436,751 16.7%
Lease and rental expense 53,644 45,935
Minority interests in earnings
of consolidated entities 16,795 21,048
Earnings before depreciation and
amortization, interest expense,
and income taxes ("EBITDA") 363,505 369,768
Depreciation and amortization 121,726 101,288
Interest expense, net 32,484 27,821
Income before income taxes 209,295 240,659
Provision for income taxes 77,405 89,530
Income from continuing operations 131,890 151,129
Income from discontinued
operations, net of income taxes 428 1,672
Net income $132,318 $152,801
Per Per
Calculation of Adjusted Income from Diluted Diluted
Continuing Operations Amount Share Amount Share
Income from continuing operations $131,890 $2.13 $151,129 $2.42
Less: After-tax DSH revenue
attributable to prior period (1,748) ($0.02) - -
Add: After-tax hurricane property
damage 1,474 $0.02 - -
Adjusted income from continuing
operations $131,616 $2.13 $151,129 $2.42
Universal Health Services, Inc.
Supplemental Statistical Information
(unaudited)
% Change % Change
Quarter Ended 9 mos. ended
Same Facility: 9/30/2004 9/30/2004
Acute Care Hospitals
Revenues 3.0% 2.9%
Adjusted Admissions -0.4% 0.1%
Adjusted Patient Days -1.5% -0.4%
Revenue Per Adjusted Admission 3.4% 2.9%
Revenue Per Adjusted Patient Day 4.6% 3.4%
Behavioral Health Hospitals
Revenues 8.0% 8.6%
Adjusted Admissions 5.4% 7.4%
Adjusted Patient Days 7.2% 6.4%
Revenue Per Adjusted Admission 2.4% 1.1%
Revenue Per Adjusted Patient Day 0.7% 2.0%
UHS Consolidated Third Quarter Ended Nine months Ended
9/30/2004 9/30/2003 9/30/2004 9/30/2003
Revenues $1,012,868 $871,453 $3,049,032 $2,620,393
EBITDA (1) $114,951 $114,083 $363,505 $369,768
EBITDA Margin (1) 11.3% 13.1% 11.9% 14.1%
Cash Flow From Operations $92,236 $103,224 $316,911 $313,402
Days Sales Outstanding 53 51 52 50
Capital Expenditures $55,783 $61,026 $173,801 $167,230
Debt (net of cash) - - $806,136 $615,490
Shareholders Equity - - $1,214,377 $1,022,840
Debt / Total Capitalization - - 39.9% 37.6%
Debt / EBITDA (2) - - 1.66 1.28
Debt / Cash From Operations (2) - - 2.14 1.54
Acute Care EBITDAR Margin (3) 15.3% 17.8% 15.1% 18.7%
Behavioral Health EBITDAR
Margin (3) 22.2% 22.4% 23.4% 22.8%
(1) Net of Minority Interest
(2) Latest 4 quarters
(3) Before Corporate overhead allocation and minority interest
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
SEPTEMBER 30, 2004
AS REPORTED:
FOR THE THREE MONTHS ENDED
ACUTE (1) (2) BEHAVIORAL HEALTH
9/30/04 9/30/03 % 9/30/04 9/30/03 %
Hospitals owned
and leased 27 22 22.7% 44 39 12.8%
Average licensed
beds 6,189 5,333 16.1% 4,386 3,902 12.4%
Patient days 320,005 294,413 8.7% 318,778 263,926 20.8%
Average daily
census 3,478.3 3,200.1 8.7% 3,465.0 2,868.8 20.8%
Occupancy-licensed
beds 56.2% 60.0% -6.3% 79.0% 73.5% 7.5%
Admissions 68,827 63,133 9.0% 23,764 21,949 8.3%
Length of stay 4.6 4.7 -0.3% 13.4 12.0 11.6%
Inpatient
revenue $1,684,877 $1,425,855 18.2% $315,401 $269,972 16.8%
Outpatient
revenue 663,771 517,557 28.3% 42,374 35,764 18.5%
Total patient
revenue 2,348,648 1,943,412 20.9% 357,775 305,736 17.0%
Other revenue 10,570 10,433 1.3% 8,416 8,338 0.9%
Gross hospital
revenue 2,359,218 1,953,845 20.7% 366,191 314,074 16.6%
Total
deductions 1,598,908 1,301,254 22.9% 189,400 164,054 15.4%
Net hospital
revenue $760,310 $652,591 16.5% $176,791 $150,020 17.8%
SAME FACILITY:
FOR THE THREE MONTHS ENDED
ACUTE (1) (3) BEHAVIORAL HEALTH (4)
9/30/04 9/30/03 % 9/30/04 9/30/03 %
Hospitals owned
and leased 22 22 0.0% 39 39 0.0%
Average licensed
beds 5,387 5,333 1.0% 3,980 3,902 2.0%
Patient days 285,596 294,409 -3.0% 282,514 263,939 7.0%
Average daily
census 3,104.3 3,200.1 -3.0% 3,070.8 2,868.9 7.0%
Occupancy-licensed
beds 57.6% 60.0% -4.0% 78.0% 74.3% 4.9%
Admissions 61,857 63,133 -2.0% 23,046 21,949 5.0%
Length of stay 4.6 4.7 -1.0% 12.3 12.0 1.9%
(1) Does not include hospitals located in France.
(2) not including discontinued operations
(3) Does not include Arroyo Grande, French, Corona, Lakeland, Methodist,
Spring Valley, Lakewood Ranch, Doctors of Shreveport, River Parishes
or Caribbean Pediatric in current and prior years.
(4) Stonington is excluded in both current and prior years from April 1
through year to date and the four facilities purchased from Keystone
are excluded in both years from May 1 through year to date.
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
SEPTEMBER 30, 2004
AS REPORTED:
FOR THE NINE MONTHS ENDED
ACUTE (1) (2) BEHAVIORAL HEALTH
9/30/04 9/30/03 % 9/30/04 9/30/03 %
Hospitals owned
and leased 27 22 22.7% 44 39 12.8%
Average licensed
beds 6,255 5,333 17.3% 4,166 3,892 7.0%
Patient days 984,424 897,214 9.7% 913,399 801,467 14.0%
Average daily
census 3,592.8 3,286.5 9.3% 3,333.6 2,935.8 13.5%
Occupancy-licensed
beds 57.4% 61.6% -6.8% 80.0% 75.4% 6.1%
Admissions 209,164 191,740 9.1% 71,847 65,932 9.0%
Length of stay 4.7 4.7 0.6% 12.7 12.2 4.6%
Inpatient
revenue $5,166,589 $4,336,609 19.1% $919,867 $817,616 12.5%
Outpatient
revenue 1,945,515 1,516,032 28.3% 131,822 115,515 14.1%
Total patient
revenue 7,112,104 5,852,641 21.5% 1,051,689 933,131 12.7%
Other revenue 30,618 33,001 -7.2% 25,367 25,913 -2.1%
Gross hospital
revenue 7,142,722 5,885,642 21.4% 1,077,056 959,044 12.3%
Total
deductions 4,864,985 3,922,134 24.0% 556,630 501,440 11.0%
Net hospital
revenue $2,277,737 $1,963,508 16.0% $520,426 $457,604 13.7%
SAME FACILITY:
FOR THE NINE MONTHS ENDED
ACUTE (1) (3) BEHAVIORAL HEALTH (4)
9/30/04 9/30/03 % 9/30/04 9/30/03 %
Hospitals owned
and leased 22 22 0.0% 39 39 0.0%
Average licensed
beds 5,428 5,333 1.8% 3,935 3,892 1.1%
Patient days 880,800 897,160 -1.8% 852,770 801,555 6.4%
Average daily
census 3,214.6 3,286.3 -2.2% 3,112.3 2,936.1 6.0%
Occupancy-licensed
beds 59.2% 61.6% -3.9% 79.1% 75.4% 4.8%
Admissions 189,042 191,740 -1.4% 70,655 65,932 7.2%
Length of stay 4.7 4.7 -0.4% 12.1 12.2 -0.7%
(1) Does not include hospitals located in France.
(2) Does not include discontinued operations
(3) Does not include Arroyo Grande, French, Corona, Lakeland, Methodist,
Spring Valley, Lakewood Ranch, Doctors of Shreveport, River Parishes
or Caribbean Pediatric in current and prior years.
(4) Stonington is excluded in both current and prior years from April 1
through year to date and the four facilities purchased from Keystone
are excluded in both years from May 1 through year to date.
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