Universal Health Services, Inc. Reports Second Quarter Earnings, Including Gain on Sale of French Assets
07/27/2005
KING OF PRUSSIA, Pa., July 27, 2005 /PRNewswire-FirstCall via COMTEX/ -- Universal Health Services, Inc. (NYSE: UHS) announced today that its net income was $146.5 million or $2.34 per diluted share during the three-month period ended June 30, 2005 as compared to $48.3 million or $.78 per diluted share during the second quarter of 2004. Net income was $207.9 million or $3.32 per diluted share during the six-month period ended June 30, 2005 as compared to $94.4 million or $1.52 per diluted share during the prior year six-month period. Net revenues increased 9% to $991 million during the second quarter of 2005 as compared to $905 million during the quarter ended June 30, 2004. Net revenues increased 10% to $2.0 billion during the six-month period ended June 30, 2005 as compared to $1.8 billion during the prior year six-month period.
Included in the reported results for the quarter ended June 30, 2005 (as listed on the attached Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information) was an after-tax gain of $108.3 million or $1.70 per diluted share resulting from the sale of our 81.5% ownership interest in Medi-Partenaires, an operating company which owned fourteen hospitals in France. The operating results of these facilities, as well as the gain resulting from the divestiture, are reflected as discontinued operations in the Consolidated Statements of Income for the three-month and six-month periods ended June 30, 2005 and 2004. Included in the reported results for the quarter ended June 30, 2004 was a net after-tax gain of $1.5 million or $.02 per diluted share resulting primarily from the sale of two acute care facilities located in Louisiana and one acute care facility located in Puerto Rico. Excluding these gains from both three-month periods, our adjusted net income was $38.2 million or $.64 per diluted share during the three-months ended June 30, 2005 as compared to $46.8 million or $.76 per diluted share during the three-months ended June 30, 2004.
Included in the reported results for the six-month period ended June 30, 2005 was a net after-tax gain on the sale of facilities of $114.1 million or $1.78 per diluted share resulting from the sale of our ownership interest in Medi-Partenaires during the second quarter of 2005 and the sale of two acute care hospitals located in Puerto Rico and a home health business in Florida sold during the first quarter of 2005. Also included in our reported results during the six-month period ended June 30, 2005 was an after-tax impairment charge of $2.0 million or $.03 per diluted share recorded in connection with a women's hospital located in Edmond, Oklahoma which is scheduled to close in late September, 2005. Included in the reported results for the six-month period ended June 30, 2004 was a net after-tax gain on sale of facilities of $1.5 million or $.02 per diluted share recorded during the second quarter of 2004, as mentioned above, as well as prior period Medicaid disproportionate share hospital revenue recorded during the first quarter of 2004 amounting to $1.7 million (after-tax) or $.02 per diluted share. Excluding these items from both six-month periods, our adjusted net income was $95.8 million or $1.57 per diluted share during the six-months ended June 30, 2005 as compared to $91.2 million or $1.48 per diluted share during the six-months ended June 30, 2004.
At our acute care hospitals owned during both periods, inpatient admissions increased 2.7%, patient days increased 2.1%, revenues increased 6.6% and revenue per adjusted patient day increased 4.1% during the 2005 second quarter, as compared to the comparable prior year quarter. At our behavioral health hospitals owned in both periods, inpatient admissions increased 7.6%, patient days increased 7.3%, revenues increased 9.4%, and revenue per adjusted patient day increased 2.0% during the second quarter of 2005 as compared to the comparable prior year quarter.
Our consolidated operating margin decreased to 12.8% during the three- month period ended June 30, 2005 as compared to 14.9% during the same prior year quarter. At our acute care hospitals owned during both three-month periods ended June 30, 2005 and June 30, 2004, the operating margin decreased to 13.3% during the second quarter of 2005 from 15.9% during the second quarter of the prior year. The operating margin at our behavioral health hospitals owned during both periods increased to 25.5% during the second quarter of 2005 from 24.1% during the comparable quarter of the prior year.
Contributing significantly to the decrease in our operating margin and net income during the second quarter of 2005, as compared to the comparable prior year quarter, was a decrease in the combined admissions, patient days and payer mix at our acute care hospitals located in the McAllen/Edinburg, Texas market resulting primarily from continued intense competition from a physician-owned hospital in the market. In addition, an increased level of uninsured patients in our acute care hospitals during the quarter unfavorably impacted our bad debt expense and increased the level of charity care provided.
During the second quarter of 2005, using the cash proceeds generated from the sales of facilities as well as the net cash provided by operations, we repaid approximately $87 million of debt and purchased approximately 2.65 million shares of our outstanding common stock for approximately $59 per share or $156 million in the aggregate.
We will hold a conference call for investors and analysts at 9:00 a.m. Eastern Time on July 28, 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 July 28, 2005 and will continue through midnight on August 5, 2005. The recording can be accessed by calling 1-800- 642-1687 and entering the conference ID number of 7490517. 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 and in Puerto Rico. 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 website: 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 March 31, 2005), 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 income from continuing operations per diluted share, adjusted net income, adjusted net income per diluted share, adjusted operating income and adjusted operating margin, which are non-GAAP financial measures ("GAAP" is Generally Accepted Accounting Principles in the United States of America), 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, 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 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 these measures should be examined in connection with net income, determined in accordance with GAAP, 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, 2004. Since the items included or excluded from these measures are significant components in understanding and assessing financial performance under GAAP, these measures should not be considered to be alternatives to net income as a measure of our operating performance or profitability. Since these measures, as presented, are not determined in accordance with GAAP 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. Below are Schedules of Non-GAAP Supplemental Consolidated Income Statement Information which reconcile these measures to net income for the periods presented.
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,
2005 2004 2005 2004
Net revenues $990,888 $905,494 $1,997,533 $1,812,620
Operating charges:
Salaries, wages and
benefits 407,897 369,335 814,237 740,793
Other operating expenses 234,707 213,274 465,872 421,229
Supplies expense 126,124 113,521 252,660 229,105
Provision for doubtful
accounts 95,478 74,244 177,886 157,801
Depreciation and
amortization 37,988 35,033 77,684 68,342
Lease and rental expense 15,288 15,255 30,755 30,148
917,482 820,662 1,819,094 1,647,418
Income before interest
expense, minority interests
and
income taxes 73,406 84,832 178,439 165,202
Interest expense, net 7,450 9,359 18,126 18,926
Minority interests in earnings
of consolidated entities 7,926 5,183 15,845 8,710
Income before income taxes 58,030 70,290 144,468 137,566
Provision for income taxes 21,398 25,908 53,146 50,671
Income from continuing
operations 36,632 44,382 91,322 86,895
Income from discontinued
operations, net of income tax
expense (a) 109,822 3,907 116,541 7,578
Net income $146,454 $48,289 $207,863 $94,473
Basic earnings per share: (b)
From continuing
operations $0.65 $0.77 $1.60 $1.51
From discontinued
operations 1.95 0.07 2.05 0.13
Total basic earnings
per share $2.60 $0.84 $3.65 $1.64
Diluted earnings per share: (b)
From continuing
operations $0.61 $0.72 $1.50 $1.40
From discontinued
operations 1.73 0.06 1.82 0.12
Total diluted
earnings per share $2.34 $0.78 $3.32 $1.52
Universal Health Services, Inc.
Footnotes to Consolidated Statements of Income
Three months Six months
ended June 30, ended June 30,
2005 2004 2005 2004
(a) Calculation of income from
discontinued operations, net of
income tax:
Income from operations $2,602 $4,039 $4,433 $10,114
Gains on divestitures 164,736 2,338 173,831 2,338
Income from discontinued operations,
pre-tax 167,338 6,377 178,264 12,452
Income tax provision (57,516) (2,470) (61,723) (4,874)
Income from discontinued operations,
net of income tax expense $109,822 $3,907 $116,541 $7,578
(b) Earnings per share calculation:
Basic:
Income from continuing operations $36,632 $44,382 $91,322 $86,895
Less: Dividends on unvested
restricted stock, net of taxes (28) (28) (55) (56)
Income from continuing operations -
basic $36,604 $44,354 $91,267 $86,839
Income from discontinued operations 109,822 3,907 116,541 7,578
Net income - basic $146,426 $48,261 $207,808 $94,417
Weighted average number of common
shares - basic 56,425 57,622 56,974 57,593
Basic earnings per share:
From continuing operations $0.65 $0.77 $1.60 $1.51
From discontinued operations 1.95 0.07 2.05 0.13
Total basic earnings per
share $2.60 $0.84 $3.65 $1.64
Diluted:
Income from continuing operations $36,632 $44,382 $91,322 $86,895
Less: Dividends on unvested
restricted stock, net of taxes (28) (28) (55) (56)
Add: Debenture interest, net of
taxes 2,382 2,305 4,764 4,573
Income from continuing operations -
diluted $38,986 $46,659 $96,031 $91,412
Income from discontinued operations 109,822 3,907 116,541 7,578
Net income - diluted $148,808 $50,566 $212,572 $98,990
Weighted average number of common
shares 56,425 57,622 56,974 57,593
Add: Shares for conversion of
convertible debentures 6,577 6,577 6,577 6,577
Other share equivalents 646 774 481 860
Weighted average number of common
shares and equiv. - diluted 63,648 64,973 64,032 65,030
Diluted earnings per share:
From continuing operations $0.61 $0.72 $1.50 $1.40
From discontinued operations 1.73 0.06 1.82 0.12
Total diluted earnings per
share $2.34 $0.78 $3.32 $1.52
Universal Health Services, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30, December 31,
2005 2004
Assets:
Cash and cash equivalents $114,747 $33,125
Accounts receivable, net 550,437 552,538
Other current assets 97,591 90,392
Property, plant and equipment, net 1,351,062 1,448,066
Other assets 656,488 765,852
Assets held for sale - 132,870
Total Assets $2,770,325 $3,022,843
Liabilities and Stockholders' Equity:
Current portion of long-term debt $3,994 $16,968
Liabilities held for sale - 11,116
Other current liabilities 479,587 441,572
Other noncurrent liabilities 261,099 243,617
Long-term debt 525,849 852,229
Deferred income taxes 49,161 50,212
Minority interest 168,849 186,543
Stockholders' equity 1,281,786 1,220,586
Total Liabilities and Stockholders'
Equity $2,770,325 $3,022,843
Universal Health Services, Inc.
Schedule of Non-GAAP Supplemental Consolidated Statements of Income
Information
For the Three Months Ended June 30, 2005 and 2004
(in thousands)
(unaudited)
Three months ended Three months ended
June 30, 2005 June 30, 2004
Net revenues $990,888 100.0% $905,494 100.0%
Operating charges:
Salaries, wages and benefits 407,897 41.2% 369,335 40.8%
Other operating expenses 234,707 23.7% 213,274 23.6%
Supplies expense 126,124 12.7% 113,521 12.5%
Provision for doubtful accounts 95,478 9.6% 74,244 8.2%
864,206 87.2% 770,374 85.1%
Operating income/margin 126,682 12.8% 135,120 14.9%
Lease and rental expense 15,288 15,255
Minority interests in earnings of
consolidated entities 7,926 5,183
Earnings before depreciation and
amortization, interest expense, and
income taxes ("EBITDA") 103,468 114,682
Depreciation and amortization 37,988 35,033
Interest expense, net 7,450 9,359
Income before income taxes 58,030 70,290
Provision for income taxes 21,398 25,908
Income from continuing operations 36,632 44,382
Income from discontinued operations,
net of income taxes 109,822 3,907
Net income $146,454 $48,289
Three months ended Three months ended
June 30, 2005 June 30, 2004
Per Per
Diluted Diluted
Amount Share Amount Share
Calculation of Adjusted Net Income
Net income $146,454 $2.34 $48,289 $0.78
Less: After-tax gain on sale of
facilities (108,291) (1.70) (1,486) (0.02)
Adjusted net income $38,163 $0.64 $46,803 $0.76
Universal Health Services, Inc.
Schedule of Non-GAAP Supplemental Consolidated Statements of Income
Information
For the Six Months Ended June 30, 2005 and 2004
(in thousands)
(unaudited)
Six months ended Six months ended
June 30, 2005 June 30, 2004
Net revenues $1,997,533 100.0% $1,812,620 100.0%
Operating charges:
Salaries, wages and benefits 814,237 40.8% 740,793 40.9%
Other operating expenses 465,872 23.3% 421,229 23.2%
Supplies expense 252,660 12.6% 229,105 12.6%
Provision for doubtful accounts 177,886 8.9% 157,801 8.7%
1,710,655 85.6% 1,548,928 85.5%
Operating income/margin 286,878 14.4% 263,692 14.5%
Lease and rental expense 30,755 30,148
Minority interests in earnings
of consolidated entities 15,845 8,710
Earnings before depreciation and
amortization, interest expense,
and income taxes ("EBITDA") 240,278 224,834
Depreciation and amortization 77,684 68,342
Interest expense, net 18,126 18,926
Income before income taxes 144,468 137,566
Provision for income taxes 53,146 50,671
Income from continuing operations 91,322 86,895
Income from discontinued
operations, net of income taxes 116,541 7,578
Net income $207,863 $94,473
Six months ended Six months ended
June 30, 2005 June 30, 2004
Per Per
Diluted Diluted
Amount Share Amount Share
Calculation of Adjusted Income from
Continuing Operations
Income from continuing operations $91,322 $1.50 $86,895 $1.40
Less: After-tax DSH revenue
attributable to prior year - - (1,748) (0.02)
Adjusted income from continuing
operations $91,322 $1.50 $85,147 $1.38
Calculation of Adjusted Net Income
Net income $207,863 $3.32 $94,473 $1.52
Add: After-tax asset impairment
charge 1,974 0.03 - -
Less: After-tax gain on sale of
facilities (114,073) (1.78) (1,486) (0.02)
Less: After-tax DSH revenue
attributable to prior year - - (1,748) (0.02)
Adjusted net income $95,764 $1.57 $91,239 $1.48
Amount Margin Amount Margin
Calculation of Adjusted Operating
Income/Margin
Operating income/margin $286,878 14.4% $263,692 14.5%
Less: After-tax DSH revenue
attributable to prior year - - (1,748) -
Adjusted operating income/margin $286,878 14.4% $261,944 14.5%
Universal Health Services, Inc.
Supplemental Statistical Information
(un-audited)
% Change % Change
Quarter Ended 6 months ended
Same Facility: 6/30/2005 6/30/2005
Acute Care Hospitals
Revenues 6.6% 7.7%
Adjusted Admissions 2.6% 2.4%
Adjusted Patient Days 2.4% 1.9%
Revenue Per Adjusted Admission 3.9% 5.1%
Revenue Per Adjusted Patient Day 4.1% 5.7%
Behavioral Health Hospitals
Revenues 9.4% 7.5%
Adjusted Admissions 7.2% 3.6%
Adjusted Patient Days 7.3% 5.0%
Revenue Per Adjusted Admission 2.1% 3.7%
Revenue Per Adjusted Patient Day 2.0% 2.3%
UHS Consolidated Second Quarter Ended Six months Ended
6/30/2005 6/30/2004 6/30/2005 6/30/2004
Revenues $990,888 $905,494 $1,997,533 $1,812,620
EBITDA (1) 103,468 114,682 240,278 224,834
EBITDA Margin (1) 10.4% 12.7% 12.0% 12.4%
Cash Flow From Operations 92,260 129,549 226,872 224,675
Days Sales Outstanding 51 52 50 51
Capital Expenditures 50,927 47,582 108,847 118,018
Debt (net of cash) - 415,096 $826,445
Shareholders Equity - 1,281,786 $1,178,943
Debt / Total Capitalization - 24.5% 41.2%
Debt / EBITDA (2) - 0.85 1.71
Debt / Cash From Operations (2) - 1.05 2.13
Acute Care EBITDAR Margin (3) 13.2% 15.7% 15.0% 15.3%
Behavioral Health EBITDAR
Margin (3) 25.5% 24.1% 25.0% 24.1%
(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, 2005
AS REPORTED:
FOR THE THREE MONTHS ENDED
ACUTE (1) (2)
06/30/05 06/30/04 %
Hospitals owned and leased 24 23 4.3%
Average licensed beds 5,552 5,704 -2.7%
Patient days 289,568 281,476 2.9%
Average daily census 3,147.5 3,059.5 2.9%
Occupancy-licensed beds 56.7% 53.6% 5.7%
Admissions 64,301 61,907 3.9%
Length of stay 4.5 4.5 -1.0%
Inpatient revenue $1,839,847 $1,644,878 11.9%
Outpatient revenue 718,853 632,882 13.6%
Total patient revenue 2,558,700 2,277,760 12.3%
Other revenue 14,382 8,788 63.7%
Gross hospital revenue 2,573,082 2,286,548 12.5%
Total deductions 1,792,209 1,568,221 14.3%
Net hospital revenue $780,873 $718,327 8.7%
FOR THE THREE MONTHS ENDED
BEHAVIORAL HEALTH
06/30/05 06/30/04 %
Hospitals owned and leased 44 44 0.0%
Average licensed beds 4,456 4,214 5.7%
Patient days 343,214 310,723 10.5%
Average daily census 3,730.6 3,377.4 10.5%
Occupancy-licensed beds 83.7% 80.1% 4.5%
Admissions 25,983 23,944 8.5%
Length of stay 13.2 13.0 1.8%
Inpatient revenue $344,811 $310,737 11.0%
Outpatient revenue 51,466 46,472 10.7%
Total patient revenue 396,277 357,209 10.9%
Other revenue 8,719 8,610 1.3%
Gross hospital revenue 404,996 365,819 10.7%
Total deductions 205,608 188,087 9.3%
Net hospital revenue $199,388 $177,732 12.2%
SAME FACILITY:
FOR THE THREE MONTHS ENDED
ACUTE (1) (3) BEHAVIORAL HEALTH (4)
06/30/05 06/30/04 % 06/30/05 06/30/04 %
Hospitals owned and
leased 23 23 0.0% 44 44 0.0%
Average licensed
beds 5,432 5,704 -4.8% 4,341 4,214 3.0%
Patient days 287,314 281,463 2.1% 333,497 310,729 7.3%
Average daily
census 3,157.3 3,093.0 2.1% 3,664.8 3,414.6 7.3%
Occupancy-licensed
beds 58.1% 54.2% 7.2% 84.4% 81.0% 4.2%
Admissions 63,567 61,907 2.7% 25,773 23,944 7.6%
Length of stay 4.5 4.5 -0.6% 12.9 13.0 -0.3%
(1) Does not include hospitals located in France
(2) Does not include Discontinued Operations
(3) All Discontinued Operations and Lakewood Ranch are excluded in
current and prior years. Lakeland is included in both current and
prior years for January only.
(4) Stonington is included in both current and prior years from April
1 through year to date. The four facilities purchased from
Keystone are included in both current and prior years from May
1st through year to date.
UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
JUNE 30, 2005
AS REPORTED:
FOR THE SIX MONTHS ENDED
ACUTE (1) (2)
06/30/05 06/30/04 %
Hospitals owned and leased 24 23 4.3%
Average licensed beds 5,551 5,678 -2.2%
Patient days 602,068 585,086 2.9%
Average daily census 3,326.3 3,214.8 3.5%
Occupancy-licensed beds 59.9% 56.6% 5.8%
Admissions 131,392 126,457 3.9%
Length of stay 4.6 4.6 -1.0%
Inpatient revenue $3,786,715 $3,396,296 11.5%
Outpatient revenue 1,409,433 1,249,316 12.8%
Total patient revenue 5,196,148 4,645,612 11.9%
Other revenue 27,498 17,799 54.5%
Gross hospital revenue 5,223,646 4,663,411 12.0%
Total deductions 3,636,149 3,212,633 13.2%
Net hospital revenue $1,587,497 $1,450,778 9.4%
FOR THE SIX MONTHS ENDED
BEHAVIORAL HEALTH
06/30/05 06/30/04 %
Hospitals owned and leased 44 44 0.0%
Average licensed beds 4,435 4,059 9.3%
Patient days 669,088 594,621 12.5%
Average daily census 3,696.6 3,267.1 13.1%
Occupancy-licensed beds 83.4% 80.5% 3.6%
Admissions 51,028 48,083 6.1%
Length of stay 13.1 12.4 6.0%
Inpatient revenue $670,708 $604,466 11.0%
Outpatient revenue 99,981 89,448 11.8%
Total patient revenue 770,689 693,914 11.1%
Other revenue 16,679 16,951 -1.6%
Gross hospital revenue 787,368 710,865 10.8%
Total deductions 398,420 367,230 8.5%
Net hospital revenue $388,948 $343,635 13.2%
SAME FACILITY:
FOR THE SIX MONTHS ENDED
ACUTE (1) (3) BEHAVIORAL HEALTH (4)
06/30/05 06/30/04 % 06/30/05 06/30/04 %
Hospitals owned and
leased 23 23 0.0% 44 44 0.0%
Average licensed
beds 5,420 5,678 -4.5% 4,175 4,059 2.9%
Patient days 595,743 585,112 1.8% 625,500 594,612 5.2%
Average daily census 3,291.4 3,214.9 2.4% 3,455.8 3,267.1 5.8%
Occupancy-licensed
beds 60.7% 56.6% 7.3% 82.8% 80.5% 2.8%
Admissions 129,687 126,457 2.6% 49,994 48,083 4.0%
Length of stay 4.6 4.6 -0.7% 12.5 12.4 1.2%
(1) Does not include hospitals located in France
(2) Does not include Discontinued Operations
(3) All Discontinued Operations and Lakewood Ranch are excluded in
current and prior years. Lakeland is included in both current and
prior years for January only.
(4) Stonington is included in both current and prior years from April
1 through year to date. The four facilities purchased from
Keystone are included in both current and prior years from May
1st through year to date.
SOURCE Universal Health Services, Inc.
Steve Filton, Chief Financial Officer, Universal Health Services, +1-610-768-3300