Universal Health Services, Inc. Reports 2004 Fourth Quarter and Full Year Earnings
02/24/2005
KING OF PRUSSIA, Pa., Feb 24, 2005 /PRNewswire-FirstCall via COMTEX/ -- Universal Health Services, Inc. (NYSE: UHS) announced today its results for the fourth quarter and full year ended December 31, 2004. Reported net income was $37.2 million or $.61 per diluted share during the fourth quarter of 2004, as compared to $46.5 million or $.75 per diluted share during the fourth quarter of 2003. For the full year of 2004, reported net income was $169.5 million or $2.75 per diluted share as compared to $199.3 million or $3.20 per diluted share during 2003. Net revenues were $995 million and $887 million during the three-month periods ended December 31, 2004 and 2003, respectively, and $3.94 billion and $3.39 billion during the twelve-month periods ended December 31, 2004 and 2003, respectively.
Reported income from continuing operations was $38.1 million or $.62 per diluted share during the fourth quarter of 2004 as compared to $45.2 million or $.73 per diluted share during the fourth quarter of 2003. Income from continuing operations was $170.0 million or $2.76 per diluted share during the year ended December 31, 2004 as compared to $192.1 million or $3.09 per diluted share during the prior year.
Excluding the impact of a cumulative reduction to current and prior year's compensation expense resulting from the reversal of expense related to restricted shares granted to our Chief Executive Officer that were contingent on an earnings threshold which was not achieved, our adjusted income from continuing operations was $30.7 million or $.51 per diluted share during the three-month period ended December 31, 2004. Adjusted income from continuing operations was $162.3 million or $2.65 per diluted share during the year ended December 31, 2004 (as calculated on the attached Schedule of Non-GAAP Supplemental Consolidated Income Statement Information).
At our acute care hospitals owned during both periods located in the U.S., net revenues increased 2.6% during the fourth quarter of 2004, as compared to the comparable prior year quarter, due primarily to a 3.3% increase in revenue per adjusted patient day. Admissions to these facilities decreased .5% and patient days decreased 1.8% during the fourth quarter of 2004, as compared to the prior year quarter. At our behavioral health hospitals owned in both periods, admissions increased 2.0%, patient days increased 7.4%, net revenues increased 5.1% and revenue per adjusted patient day increased .5% during the fourth quarter of 2004, as compared to the prior year quarter.
Our adjusted operating margin (as calculated on the attached Schedule of Non-GAAP Supplemental Consolidated Income Statement Information), decreased to 12.3% during the three-month period ended December 31, 2004 as compared to 15.2% during the same period of the prior year. The operating margin at our acute care hospitals located in the U.S. owned during both periods ("same facility basis") decreased to 13.9% during the three months ended December 31, 2004 as compared to 14.8% during the three months ended December 31, 2003. Also contributing to the decrease in our consolidated operating margin during the fourth quarter of 2004, as compared to the comparable prior year quarter, was a much lower operating margin experienced at an acute care facility purchased during the first quarter of 2004 and a newly constructed acute care facility which opened during the third quarter of 2004. On a same facility basis, the operating margin at our behavioral health hospitals decreased to 19.3% during the fourth quarter of 2004 from 25.4% during the comparable quarter of the prior year. Favorably impacting the operating margin at our behavioral health hospitals during the fourth quarter of 2003 was the reversal of $4 million of previously established bad debt reserves which were reversed as a result of a certain payor's emergence from Chapter 11 bankruptcy protection.
The provision for doubtful accounts was 7.0% of net revenues during the fourth quarter of 2004 as compared to 8.0% during the prior year's fourth quarter. The decrease resulted primarily from an increase in balances classified as charity care as a result of implementation of an indigent discount policy.
We will hold a conference call for investors and analysts at 9:00 a.m. Eastern Time on February 25, 2005. 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 February 25, 2005 and will continue through midnight on March 4, 2005. The recording can be accessed by calling 1-800-642-1687 and entering the conference ID number 3720717.
This call will also be available live over the Internet at our web site at http://www.uhsinc.com. It will also be distributed over CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN's individual investor center at http://www.companyboardroom.com or by visiting any of the investor sites in CCBN's Individual Investor Network. Institutional investors can access the call via CCBN's password-protected event management site, StreetEvents (http://www.streetevents.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 September 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, adjusted income from continuing operations, adjusted operating income and adjusted operating margin, 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 adjusted income from continuing operations, as calculated, 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 reversal of previously recorded stock grant amortization, property write- downs, gains on sales of assets and businesses or other 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 and adjusted income from continuing operations 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 and adjusted income from continuing operations 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. Since operating income, operating margin and adjusted income from continuing operations 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 Statement Information which reconcile operating income and adjusted income from continuing operations to net income for the periods presented.
Universal Health Services, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
Three months Twelve months
ended December 31, ended December 31,
2004 2003 2004 2003
Net revenues $994,836 $887,286 $3,938,320 $3,391,506
Operating charges:
Salaries, wages and
benefits 404,865 356,524 1,607,103 1,355,047
Other operating expenses 239,068 202,532 916,542 778,656
Supplies expense 147,589 122,547 546,801 449,225
Provision for doubtful
accounts 69,169 70,945 307,163 252,644
Depreciation and
amortization 40,085 34,956 155,514 130,039
Lease and rental expense 17,962 15,195 70,433 59,479
918,738 802,699 3,603,556 3,025,090
Income before interest
expense, minority interests
and income taxes 76,098 84,587 334,764 366,416
Interest expense, net 10,930 9,915 43,405 37,855
Minority interests in earnings
of consolidated entities 3,316 2,221 20,216 22,265
Income before income taxes 61,852 72,451 271,143 306,296
Provision for income taxes 23,733 27,204 101,137 114,217
Income from continuing
operations 38,119 45,247 170,006 192,079
Income (loss) from
discontinued operations, net
of income tax expense (a) (945) 1,221 (514) 7,190
Net income $37,174 $46,468 $169,492 $199,269
Basic earnings (loss) per
share: (b)
From continuing
operations $0.66 $0.79 $2.95 $3.33
From discontinued
operations ($0.02) $0.02 ($0.01) $0.12
Total basic earnings
per share $0.64 $0.81 $2.94 $3.45
Diluted earnings (loss) per
share: (b)
From continuing
operations $0.62 $0.73 $2.76 $3.09
From discontinued
operations ($0.01) $0.02 ($0.01) $0.11
Total diluted
earnings per share $0.61 $0.75 $2.75 $3.20
Universal Health Services, Inc.
Footnotes to Consolidated Statements of Income
Three months Twelve months
ended December 31, ended December 31,
2004 2003 2004 2003
(a) Calculation of income (loss)
from discontinued operations, net
of income tax:
Income (loss) from operations ($1,458) $26 ($6,191) $1,655
Gains (losses), net (29) 6,786 5,382 14,623
Provision for asset impairment - (13,742) - (13,742)
Recovery of provision for
judgment/closure costs - 8,867 - 8,867
Income (loss) from discontinued
operations, pre-tax (1,487) 1,937 (809) 11,403
Income tax (provision)/benefit 542 (716) 295 (4,213)
Income (loss) from discontinued
operations, net of income tax
expense ($945) $1,221 ($514) $7,190
(b) Earnings per share calculation:
Basic:
Income from continuing operations $38,119 $45,247 $170,006 $192,079
Less: Dividends on unvested
restricted stock, net of taxes (27) (28) (111) (28)
Income from continuing operations -
basic $38,092 $45,219 $169,895 $192,051
Income (loss) from discontinued
operations (945) 1,221 (514) 7,190
Net income - basic $37,147 $46,440 $169,381 $199,241
Weighted average number of common
shares - basic 57,635 57,466 57,653 57,688
Basic earnings (loss) per share:
From continuing operations $0.66 $0.79 $2.95 $3.33
From discontinued operations ($0.02) $0.02 ($0.01) $0.12
Total basic earnings per
share $0.64 $0.81 $2.94 $3.45
Diluted:
Income from continuing operations $38,119 $45,247 $170,006 $192,079
Less: Dividends on unvested
restricted stock, net of taxes (27) (28) (111) (28)
Add: Debenture interest, net of
taxes 2,334 2,222 9,240 8,799
Income from continuing operations -
diluted $40,426 $47,441 $179,135 $200,850
Income (loss) from discontinued
operations (945) 1,221 (514) 7,190
Net income - diluted $39,481 $48,662 $178,621 $208,040
Weighted average number of common
shares 57,635 57,466 57,653 57,688
Add: Shares for conversion of
convertible debentures 6,577 6,577 6,577 6,577
Other share equivalents 280 935 635 824
Weighted average number of common
shares and equiv. - diluted 64,492 64,978 64,865 65,089
Diluted earnings (loss) per share:
From continuing operations $0.62 $0.73 $2.76 $3.09
From discontinued operations ($0.01) $0.02 ($0.01) $0.11
Total diluted earnings per
share $0.61 $0.75 $2.75 $3.20
Universal Health Services, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
December 31, December 31,
2004 2003
Assets:
Cash and cash equivalents $33,125 $34,863
Accounts receivable, net 552,538 503,929
Other current assets 90,392 106,999
Property, plant and equipment, net 1,448,066 1,304,341
Other assets 765,852 822,598
Assets held for sale 132,870 -
Total Assets $3,022,843 $2,772,730
Liabilities and Stockholders' Equity:
Current portion of long-term debt $16,968 $10,871
Liabilities held for sale 14,720 -
Other current liabilities 437,968 384,882
Other noncurrent liabilities 243,617 216,094
Long-term debt 852,229 868,566
Deferred income taxes 50,212 41,841
Minority interest 186,543 159,554
Stockholders' equity 1,220,586 1,090,922
Total Liabilities and Stockholders' Equity $3,022,843 $2,772,730
Universal Health Services, Inc.
Schedule of Non-GAAP Supplemental Consolidated
Statements of Income Information
For the Three Months Ended December 31, 2004 and 2003
(in thousands)
(unaudited)
Three months ended Three months ended
December 31, 2004 December 31, 2003
Net revenues $994,836 100.0% $887,286 100.0%
Operating charges:
Salaries, wages and benefits 404,865 40.7% 356,524 40.2%
Other operating expenses 239,068 24.0% 202,532 22.8%
Supplies expense 147,589 14.8% 122,547 13.8%
Provision for doubtful accounts 69,169 7.0% 70,945 8.0%
860,691 86.5% 752,548 84.8%
Operating income/margin 134,145 13.5% 134,738 15.2%
Lease and rental expense 17,962 15,195
Minority interests in earnings of
consolidated entities 3,316 2,221
Earnings before depreciation and
amortization, interest expense, and
income taxes ("EBITDA") 112,867 117,322
Depreciation and amortization 40,085 34,956
Interest expense, net 10,930 9,915
Income before income taxes 61,852 72,451
Provision for income taxes 23,733 27,204
Income from continuing operations 38,119 45,247
Income (loss) from discontinued
operations, net of income taxes (945) 1,221
Net income $37,174 $46,468
Three months ended Three months ended
December 31, 2004 December 31, 2003
Per Per
Calculation of Adjusted Income from Diluted Diluted
Continuing Operations Amount Share Amount Share
Income from continuing operations $38,119 $0.62 $45,247 $0.73
Less: After-tax reversal of previously
recorded stock grant amortization
expense (7,394) ($0.11) - -
Adjusted income from continuing
operations $30,725 $0.51 $45,247 $0.73
Calculation of Adjusted Operating
Income/Margin Amount Margin Amount Margin
Operating income/margin $134,145 13.5% $134,738 15.2%
Less: Pre-tax reversal of previously
recorded stock grant amortization
expense (11,632) (1.2%) - -
Adjusted operating income/margin $122,513 12.3% $134,738 15.2%
Universal Health Services, Inc.
Schedule of Non-GAAP Supplemental Consolidated
Statements of Income Information
For the Twelve Months Ended December 31, 2004 and 2003
(in thousands)
(unaudited)
Twelve months ended Twelve months ended
December 31, 2004 December 31, 2003
Net revenues $3,938,320 100.0% $3,391,506 100.0%
Operating charges:
Salaries, wages and benefits 1,607,103 40.8% 1,355,047 40.0%
Other operating expenses 916,542 23.3% 778,656 23.0%
Supplies expense 546,801 13.9% 449,225 13.2%
Provision for doubtful accounts 307,163 7.8% 252,644 7.4%
3,377,609 85.8% 2,835,572 83.6%
Operating income/margin 560,711 14.2% 555,934 16.4%
Lease and rental expense 70,433 59,479
Minority interests in earnings
of consolidated entities 20,216 22,265
Earnings before depreciation and
amortization, interest expense,
and income taxes ("EBITDA") 470,062 474,190
Depreciation and amortization 155,514 130,039
Interest expense, net 43,405 37,855
Income before income taxes 271,143 306,296
Provision for income taxes 101,137 114,217
Income from continuing operations 170,006 192,079
Income (loss) from discontinued
operations, net of income taxes (514) 7,190
Net income $169,492 $199,269
Twelve months Twelve months
ended ended
December 31, 2004 December 31, 2003
Per Per
Calculation of Adjusted Income from Diluted Diluted
Continuing Operations Amount Share Amount Share
Income from continuing operations $170,006 $2.76 $192,079 $3.09
Less: After-tax DSH revenue
attributable to prior year (1,748) ($0.02) - -
Add: After-tax hurricane property
damage 1,474 $0.02 - -
Less: After-tax reversal of previously
recorded stock grant amortization
expense (7,394) ($0.11) - -
Adjusted income from continuing
operations $162,338 $2.65 $192,079 $3.09
Calculation of Adjusted Operating
Income/Margin Amount Margin Amount Margin
Operating income/margin $560,711 14.2% $555,934 16.4%
Less: Pre-tax reversal of previously
recorded stock grant amortization
expense (11,632) (0.3%) - -
Adjusted operating income/margin $549,079 13.9% $555,934 16.4%
Universal Health Services, Inc.
Supplemental Statistical Information
(un-audited)
% Change % Change
Quarter Ended 12 mos. ended
Same Facility: 12/31/2004 12/31/2004
Acute Care Hospitals
Revenues 2.6% 3.1%
Adjusted Admissions 0.9% 0.3%
Adjusted Patient Days -0.7% -0.4%
Revenue Per Adjusted Admission 1.7% 2.8%
Revenue Per Adjusted Patient Day 3.3% 3.4%
Behavioral Health Hospitals
Revenues 7.3% 7.9%
Adjusted Admissions 1.5% 5.4%
Adjusted Patient Days 6.8% 6.3%
Revenue Per Adjusted Admission 5.7% 2.4%
Revenue Per Adjusted Patient Day 0.5% 1.5%
UHS Consolidated Fourth Quarter Ended Twelve months Ended
12/31/2004 12/31/2003 12/31/2004 12/31/2003
Revenues $994,836 $887,286 $3,938,320 $3,391,506
EBITDA (1) 112,867 117,322 470,062 474,190
EBITDA Margin (1) 11.3% 13.2% 11.9% 14.0%
Cash Flow From Operations 81,015 63,373 394,529 376,775
Days Sales Outstanding 51 52 51 54
Capital Expenditures 54,658 57,140 231,987 224,370
Debt (net of cash) - - 836,072 $844,574
Shareholders Equity - - 1,220,586 $1,090,922
Debt / Total Capitalization - - 40.7% 43.6%
Debt / EBITDA - - 1.78 1.78
Debt / Cash From Operations - - 2.12 2.24
Acute Care EBITDAR Margin (2) 12.5% 15.3% 14.7% 18.1%
Behavioral Health EBITDAR
Margin (2) 19.0% 25.4% 22.3% 23.5%
(1) Net of Minority Interest
(2) Before Corporate overhead allocation and minority interest
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
DECEMBER 31, 2004
AS REPORTED:
FOR THE THREE MONTHS ENDED
ACUTE (1) (2)
12/31/04 12/31/03 %
Hospitals owned and leased 25 25 0.0%
Average licensed beds 5,602 4,998 12.1%
Patient days 284,920 260,778 9.3%
Average daily census 3,097.0 2,834.5 9.3%
Occupancy-licensed beds 55.3% 56.7% -2.5%
Admissions 63,218 57,795 9.4%
Length of stay 4.5 4.5 -0.1%
Inpatient revenue $1,692,754 $1,453,424 16.5%
Outpatient revenue 648,448 512,535 26.5%
Total patient revenue 2,341,202 1,965,959 19.1%
Other revenue 8,274 8,261 0.2%
Gross hospital revenue 2,349,476 1,974,220 19.0%
Total deductions 1,629,805 1,339,457 21.7%
Net hospital revenue $719,671 $634,763 13.4%
BEHAVIORAL HEALTH
12/31/04 12/31/03 %
Hospitals owned and leased 44 39 12.8%
Average licensed beds 4,386 3,902 12.4%
Patient days 320,753 265,733 20.7%
Average daily census 3,486.4 2,888.4 20.7%
Occupancy-licensed beds 79.5% 74.0% 7.4%
Admissions 22,896 21,756 5.2%
Length of stay 14.0 12.2 14.7%
Inpatient revenue $318,264 $274,269 16.0%
Outpatient revenue 45,538 40,600 12.2%
Total patient revenue 363,802 314,869 15.5%
Other revenue 7,482 7,432 0.7%
Gross hospital revenue 371,284 322,301 15.2%
Total deductions 192,938 167,501 15.2%
Net hospital revenue $178,346 $154,800 15.2%
SAME FACILITY:
FOR THE THREE MONTHS ENDED
ACUTE (1) (3) BEHAVIORAL HEALTH (4)
12/31/04 12/31/03 % 12/31/04 12/31/03 %
Hospitals owned and
leased 25 25 0.0% 39 39 0.0%
Average licensed
beds 4,894 4,998 -2.1% 3,980 3,902 2.0%
Patient days 255,990 260,778 -1.8% 285,494 265,733 7.4%
Average daily census 2,782.5 2,834.5 -1.8% 3,103.2 2,888.2 7.4%
Occupancy-licensed
beds 56.9% 56.7% 0.3% 78.0% 74.0% 5.3%
Admissions 57,488 57,795 -0.5% 22,195 21,756 2.0%
Length of stay 4.5 4.5 -1.3% 12.9 12.2 5.3%
(1) Does not include hospitals located in France
(2) Does not include discontinued operations
(3) Does not include discontinued operations, Corona,
Methodist/Lakeland or Lakewood Ranch in current or prior years.
Spring Valley is included in the current and prior year from
October 1st through year end.
(4) Stonington is excluded in both current and prior years from April
1 through year end and the four facilities purchased from
Keystone are excluded in both years from May 1 through year end.
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
DECEMBER 31, 2004
AS REPORTED:
FOR THE TWELVE MONTHS ENDED
ACUTE (1) (2)
12/31/04 12/31/03 %
Hospitals owned and leased 25 25 0.0%
Average licensed beds 5,645 4,792 17.8%
Patient days 1,150,882 1,032,348 11.5%
Average daily census 3,144.5 2,828.4 11.2%
Occupancy-licensed beds 55.7% 59.0% -5.6%
Admissions 251,655 227,932 10.4%
Length of stay 4.6 4.5 1.0%
Inpatient revenue $6,732,660 $5,658,490 19.0%
Outpatient revenue 2,544,891 1,985,040 28.2%
Total patient revenue 9,277,551 7,643,530 21.4%
Other revenue 35,604 37,757 -5.7%
Gross hospital revenue 9,313,155 7,681,287 21.2%
Total deductions 6,415,436 5,181,737 23.8%
Net hospital revenue $2,897,719 $2,499,550 15.9%
BEHAVIORAL HEALTH
12/31/04 12/31/03 %
Hospitals owned and leased 44 39 12.8%
Average licensed beds 4,225 3,894 8.5%
Patient days 1,234,152 1,067,200 15.6%
Average daily census 3,372.0 2,923.8 15.3%
Occupancy-licensed beds 79.8% 75.1% 6.3%
Admissions 94,743 87,688 8.0%
Length of stay 13.0 12.2 7.0%
Inpatient revenue $1,238,131 $1,091,885 13.4%
Outpatient revenue 177,360 156,115 13.6%
Total patient revenue 1,415,491 1,248,000 13.4%
Other revenue 32,849 33,345 -1.5%
Gross hospital revenue 1,448,340 1,281,345 13.0%
Total deductions 749,568 668,941 12.1%
Net hospital revenue $698,772 $612,404 14.1%
SAME FACILITY:
FOR THE TWELVE MONTHS ENDED
ACUTE (1) (3)
12/31/04 12/31/03 %
Hospitals owned and leased 25 25 0.0%
Average licensed beds 4,837 4,792 0.9%
Patient days 1,018,249 1,032,348 -1.4%
Average daily census 2,782.1 2,828.6 -1.6%
Occupancy-licensed beds 57.5% 59.0% -2.6%
Admissions 225,803 227,932 -0.9%
Length of stay 4.5 4.5 -0.4%
BEHAVIORAL HEALTH (4)
12/31/04 12/31/03 %
Hospitals owned and leased 39 39 0.0%
Average licensed beds 3,947 3,894 1.4%
Patient days 1,138,297 1,067,200 6.7%
Average daily census 3,110.1 2,923.8 6.4%
Occupancy-licensed beds 78.8% 75.1% 4.9%
Admissions 92,850 87,688 5.9%
Length of stay 12.3 12.2 0.7%
(1) Does not include hospitals located in France
(2) Does not include discontinued operations
(3) Does not include discontinued operations, Corona,
Methodist/Lakeland or Lakewood Ranch in current or prior years.
Spring Valley is included in the current and prior year from
October 1st through year end.
(4) Stonington is excluded in both current and prior years from April
1 through year end and the four facilities purchased from
Keystone are excluded in both years from May 1 through year end.
SOURCE Universal Health Services, Inc.
Steve Filton, Chief Financial Officer of Universal Health Services, +1-610-768-3300