Universal Health Services, Inc. Reports 2007 First Quarter Earnings
04/26/2007
KING OF PRUSSIA, Pa., April 26 /PRNewswire-FirstCall/ -- Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income was $49.5 million, or $.92 per diluted share, during the first quarter of 2007 as compared to $51.1 million, or $.88 per diluted share, during the comparable prior year quarter. Reported income from continuing operations was $49.6 million, or $.92 per diluted share, during the first quarter of 2007 as compared to $50.5 million, or $.87 per diluted share, during the first quarter of 2006.
After adjusting for the items mentioned below, and/or as indicated on the attached Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information ("Supplemental Schedule"), our adjusted income from continuing operations increased 15% to $47.9 million during the first quarter of 2007 as compared to $41.5 million during the comparable prior year quarter. Our adjusted income from continuing operations per diluted share increased 22% to $.89 during the first quarter of 2007 as compared to $.73 during the first quarter of 2006. Our adjusted net income was $47.9 million, or $.89 per diluted share, during the first quarter of 2007 as compared to $42.1 million, or $.74 per diluted share during the first quarter of 2006. As indicated on the Supplemental Schedule, our income from continuing operations and net income included an after-tax gain of $1.4 million, or $.03 per diluted share, realized on the sale of vacant real property in McAllen, Texas. For the three-month period ended March 31, 2006, our income from continuing operations and net income included hurricane related recoveries, net of expenses, minority interests and income taxes, of $9.0 million, or $.14 per diluted share.
Net revenues increased 16% to $1.20 billion during the first quarter of 2007 as compared to $1.03 billion during the first quarter of 2006. Our consolidated operating margin, as calculated on the attached Supplemental Schedule, was 13.9% and 13.6% during the three-month periods ended March 31, 2007 and 2006, respectively.
At our acute care hospitals owned during both periods ("same facility basis"), inpatient admissions increased 4.9% and patient days increased 4.6% during the first quarter of 2007 as compared to the comparable 2006 quarter. On a same facility basis, net revenues at our acute care facilities increased 11% during the first quarter of 2007 as compared to the comparable prior year quarter. Net revenue per adjusted admission at these facilities increased 5.3% during the first quarter of 2007 over the comparable prior year quarter. The operating margin at our acute care hospitals owned during both periods increased to 15.3% during the first quarter of 2007 as compared to 14.7% during the first quarter of 2006.
On a same facility basis, inpatient admissions at our behavioral health facilities increased 3.2% and patient days increased 3.5% during the first quarter of 2007 as compared to the comparable 2006 quarter. On a same facility basis, net revenues at our behavioral health facilities increased 6% during the first quarter of 2007 as compared to the comparable prior year quarter. Net revenue per adjusted admission at these facilities increased 2.7% during the first quarter of 2007 over the comparable prior year quarter. The operating margin at these behavioral health facilities was 23.2% during the first quarter of 2007 and 23.3% during the comparable quarter of the prior year.
Effective July 1, 2006, the pharmacy services for our acute care facilities were brought in-house from an outsourced vendor and as a result of this change, during the first quarter of 2007, as compared to the comparable quarter of 2006, we experienced an increase in our supplies expense and salaries, wages and benefits expense and a decrease in our other operating expenses. The transition of our pharmacy services favorably impacted our pre- tax income by approximately $2 million during the first quarter of 2007.
We will hold a conference call for investors and analysts at 9:00 a.m. Eastern Time on April 27, 2007. 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 April 27, 2007 and will continue through midnight on May 4, 2007. The recording can be accessed by calling 1-800-642- 1687 and entering the conference ID number 5494366. This call will also be available live over the internet at our web site at 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 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 web site: http://www.uhsinc.com.
This press release contains forward-looking statements based on current management expectations. Numerous factors, including those disclosed herein, those related to healthcare industry trends and those detailed in our filings with the Securities and Exchange Commission (as set forth in Item 1A-Risk Factors and in Item 7-Forward-Looking Statements and Risk Factors in our Form 10-K for the year ended December 31, 2006), 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 and earnings before interest, taxes, depreciation and amortization ("EBITDA"), 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 including items such as, but not limited to, gains on sales of assets and businesses, hurricane-related expenses and insurance recoveries and other amounts that may be 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, 2006. 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.
Universal Health Services, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
Three months
ended March 31,
2007 2006
Net revenues $1,197,601 $1,034,289
Operating charges:
Salaries, wages and benefits 510,993 442,232
Other operating expenses 245,352 248,101
Supplies expense 175,358 128,513
Provision for doubtful accounts 99,093 75,007
Depreciation and amortization 43,463 39,030
Lease and rental expense 16,176 16,232
Hurricane related expenses, net (433) 6,904
Hurricane insurance recoveries - (6,904)
1,090,002 949,115
Income before interest expense,
hurricane insurance recoveries in excess
of expenses, minority interests and
income taxes 107,599 85,174
Interest expense, net 12,722 8,525
Hurricane insurance recoveries in
excess of expenses - (15,387)
Minority interests in earnings
of consolidated entities 14,192 11,177
Income before income taxes 80,685 80,859
Provision for income taxes 31,113 30,367
Income from continuing operations 49,572 50,492
(Loss) income from discontinued
operations, net of income taxes (a) (64) 592
Net income $49,508 $51,084
Basic earnings per share: (b)
From continuing operations $0.93 $0.94
From discontinued operations - 0.01
Total basic earnings per share $0.93 $0.95
Diluted earnings per share: (b)
From continuing operations $0.92 $0.87
From discontinued operations - 0.01
Total diluted earnings per share $0.92 $0.88
Universal Health Services, Inc.
Footnotes to Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
Three months
ended March 31,
2007 2006
(a) Calculation of income from discontinued
operations, net of income tax:
(Loss) income from operations ($102) $940
Income tax benefit (provision) 38 (348)
(Loss) income from discontinued operations,
net of income tax expense ($64) $592
(b) Earnings per share calculation:
Basic:
Income from continuing operations $49,572 $50,492
Less: Dividends on unvested restricted
stock, net of taxes (25) (23)
Income from continuing operations -
basic $49,547 $50,469
(Loss) income from discontinued
operations (64) 592
Net income - basic $49,483 $51,061
Weighted average number of common
shares - basic 53,493 53,768
Basic earnings per share:
From continuing operations $0.93 $0.94
From discontinued operations - 0.01
Total basic earnings per share $0.93 $0.95
Diluted:
Income from continuing operations $49,572 $50,492
Less: Dividends on unvested
restricted stock, net of taxes (25) (23)
Add: Debenture interest, net of taxes - 2,457
Income from continuing operations -
diluted $49,547 $52,926
(Loss) income from discontinued
operations (64) 592
Net income - diluted $49,483 $53,518
Weighted average number of common shares 53,493 53,768
Add: Shares for conversion of
convertible debentures - 6,577
Other share equivalents 193 161
Weighted average number of common
shares and equiv. - diluted 53,686 60,506
Diluted earnings per share:
From continuing operations $0.92 $0.87
From discontinued operations - 0.01
Total diluted earnings per share $0.92 $0.88
Universal Health Services, Inc.
Schedule of Non-GAAP Supplemental Consolidated Statements of Income
Information ("Supplemental Schedule")
For the Three Months Ended March 31, 2007 and 2006
(in thousands, except per share amounts)
(unaudited)
Three months ended Three months ended
March 31, 2007 March 31, 2006
Net revenues $1,197,601 100.0% $1,034,289 100.0%
Operating charges:
Salaries, wages and benefits 510,993 42.7% 442,232 42.8%
Other operating expenses 245,352 20.5% 248,101 24.0%
Supplies expense 175,358 14.6% 128,513 12.4%
Provision for doubtful accounts 99,093 8.3% 75,007 7.3%
1,030,796 86.1% 893,853 86.4%
Operating income/margin 166,805 13.9% 140,436 13.6%
Lease and rental expense 16,176 16,232
Minority interests in earnings
of consolidated entities 14,192 11,177
Earnings before hurricane related
expenses, hurricane insurance
recoveries, depreciation and
amortization, interest expense,
and income taxes ("EBITDA") 136,437 113,027
Hurricane related expenses, net
of recoveries (433) (15,387)
Depreciation and amortization 43,463 39,030
Interest expense, net 12,722 8,525
Income before income taxes 80,685 80,859
Provision for income taxes 31,113 30,367
Income from continuing operations 49,572 50,492
(Loss) income from discontinued
operations, net of income taxes (64) 592
Net income $49,508 $51,084
Three months ended Three months ended
March 31, 2007 March 31, 2006
Per Per
Amount Diluted Diluted
Share Amount Share
Calculation of Adjusted Income
from Continuing Operations
Income from continuing operations $49,572 $0.92 $50,492 $0.87
Plus/minus adjustments:
Hurricane related recoveries,
net of expenses, minority
interests and income taxes (269) - (8,982) (0.14)
Gain on sale of real property,
net of income taxes (1,369) (0.03) - -
Subtotal after-tax adjustments to
income from continuing operations (1,638) (0.03) (8,982) (0.14)
Adjusted income from continuing
operations $47,934 $0.89 $41,510 $0.73
Calculation of Adjusted Net Income
Net income $49,508 $0.92 $51,084 $0.88
After-tax adjustments to income
from continuing operations, as
indicated above (1,638) (0.03) (8,982) (0.14)
Adjusted net income $47,870 $0.89 $42,102 $0.74
Universal Health Services, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
March 31, December 31,
2007 2006
Assets:
Cash and cash equivalents $11,215 $14,939
Accounts receivable, net 667,282 595,009
Other current assets 129,146 118,558
Property, plant and equipment, net 1,775,471 1,685,085
Other assets 884,074 863,451
Total Assets $3,467,188 $3,277,042
Liabilities and Stockholders' Equity:
Current portion of long-term debt $2,851 $1,938
Other current liabilities 519,253 500,513
Other noncurrent liabilities 353,157 340,815
Long-term debt 910,424 821,363
Deferred income taxes 32,935 35,888
Minority interest 187,373 174,061
Stockholders' equity 1,461,195 1,402,464
Total Liabilities and Stockholders'
Equity $3,467,188 $3,277,042
Universal Health Services, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three months
ended March 31,
2007 2006
Cash Flows from Operating Activities:
Net income $49,508 $51,084
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization 43,482 39,030
Accretion of discount on convertible
debentures - 3,573
Gain on sale of assets (2,200) -
Hurricane insurance recoveries - (22,291)
Changes in assets & liabilities, net of
effects from acquisitions and dispositions:
Accounts receivable (57,307) (48,074)
Accrued interest 9,534 3,337
Accrued and deferred income taxes 27,373 27,118
Other working capital accounts 13,565 30,635
Other assets and deferred charges (2,811) 1,039
Other (4,041) 4,707
Minority interest in earnings of
consolidated entities, net of
distributions 10,972 10,343
Accrued insurance expense, net of
commercial premiums paid 23,071 22,529
Payments made in settlement of
self-insurance claims (12,170) (12,690)
Net cash provided by operating
activities 98,976 110,340
Cash Flows from Investing Activities:
Property and equipment additions,
net of disposals (99,349) (83,203)
Proceeds received from sale of
assets 5,268 -
Acquisition of assets and businesses (73,378) (11,735)
Hurricane insurance recoveries received - 28,000
Purchase of minority ownership interest
in majority owned business (14,762) -
Net cash used in investing activities (182,221) (66,938)
Cash Flows from Financing Activities:
Additional borrowings 84,664 -
Reduction of long-term debt - (38,886)
Repurchase of common shares (3,288) (1,566)
Dividends paid (4,310) (4,286)
Issuance of common stock 115 1,584
Capital contributions from minority member 2,340 -
Net cash provided by (used in)
financing activities 79,521 (43,154)
(Decrease) Increase in cash and cash
equivalents (3,724) 248
Cash and cash equivalents, beginning
of period 14,939 7,963
Cash and cash equivalents, end of period $11,215 $8,211
Supplemental Disclosures of Cash Flow
Information:
Interest paid $5,182 $1,615
Income taxes paid, net of refunds $3,700 $3,598
Universal Health Services, Inc.
Supplemental Statistical Information
(unaudited)
% Change
Quarter Ended
Same Facility: 3/31/2007
Acute Care Hospitals
Revenues 11.1%
Adjusted Admissions 5.5%
Adjusted Patient Days 5.2%
Revenue Per Adjusted Admission 5.3%
Revenue Per Adjusted Patient Day 5.6%
Behavioral Health Hospitals
Revenues 5.6%
Adjusted Admissions 2.8%
Adjusted Patient Days 3.2%
Revenue Per Adjusted Admission 2.7%
Revenue Per Adjusted Patient Day 2.4%
UHS Consolidated First Quarter Ended
3/31/2007 3/31/2006
Revenues $1,197,601 $1,034,289
EBITDA (1) $136,437 $113,027
EBITDA Margin (1) 11.4% 10.9%
Cash Flow From Operations $98,976 $110,340
Days Sales Outstanding 50 48
Capital Expenditures $99,349 $83,203
Debt 913,275 599,321
Shareholders Equity 1,461,195 1,254,546
Debt / Total Capitalization 38.5% 32.3%
Debt / EBITDA (2) 1.97 1.43
Debt / Cash From Operations (2) 5.78 1.49
Acute Care EBITDAR Margin (3) 15.1% 14.7%
Behavioral Health EBITDAR Margin (3) 22.4% 23.2%
(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, 2007
AS REPORTED:
For the three months ended
Acute (1) Behavioral Health
03/31/07 03/31/06 % 03/31/07 03/31/06 %
Hospitals owned
and leased 25 24 4.2% 81 75 8.0%
Average licensed
beds 5,498 4,989 10.2% 7,060 6,397 10.4%
Patient days 309,174 283,229 9.2% 481,353 451,885 6.5%
Average daily
census 3,435.3 3,147.0 9.2% 5,348.4 5,020.9 6.5%
Occupancy-
licensed beds 62.5% 63.1% -0.9% 75.8% 78.5% -3.5%
Admissions 68,766 63,167 8.9% 29,319 28,072 4.4%
Length of stay 4.5 4.5 0.3% 16.4 16.1 2.0%
Inpatient
revenue $2,271,139 $1,941,155 17.0% $433,912 $409,400 6.0%
Outpatient
revenue 868,131 708,511 22.5% 59,645 53,274 12.0%
Total patient
revenue 3,139,270 2,649,666 18.5% 493,557 462,674 6.7%
Other revenue 14,451 12,523 15.4% 7,830 8,075 -3.0%
Gross hospital
revenue 3,153,721 2,662,189 18.5% 501,387 470,749 6.5%
Total
deductions 2,260,856 1,892,237 19.5% 225,675 217,121 3.9%
Net hospital
revenue $892,865 $769,952 16.0% $275,712 $253,628 8.7%
SAME FACILITY:
Acute (2) Behavioral Health (3)
03/31/07 03/31/06 % 03/31/07 03/31/06 %
Hospitals owned
and leased 24 24 0.0% 72 72 0.0%
Average licensed
beds 5,183 4,989 3.9% 6,614 6,321 4.6%
Patient days 296,163 283,248 4.6% 461,745 446,274 3.5%
Average daily
census 3,290.7 3,147.2 4.6% 5,130.5 4,958.6 3.5%
Occupancy-licensed
beds 63.5% 63.1% 0.6% 77.6% 78.4% -1.1%
Admissions 66,235 63,167 4.9% 28,567 27,692 3.2%
Length of stay 4.5 4.5 -0.3% 16.2 16.1 0.3%
(1) Licensed beds from our Acute care hospitals located in New Orleans
are excluded.
(2) Our three acute care hospitals located in New Orleans and Texoma are
excluded in current and prior years.
(3) Academy at Canyon Creek, Casa de Lago, Cedar Ridge RTC, Cedar Ridge
Hospital, Highlands Behavior, Lincoln Trail, North Star Palmer, North
Star RTC and Spring Mountain Sahara are excluded in the current and
prior year. Tennessee Valley, Tuscaloosa Juvenile Detention Center
and Triple L. Group Homes are excluded in both current and prior
years.
SOURCE Universal Health Services, Inc.
CONTACT: Steve Filton, Chief Financial Officer of Universal Health Services, Inc., +1-610-768-3300