================================================================================ FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 13, 2003 UNIVERSAL HEALTH SERVICES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 1-10765 23-2077891 - ------------------------------- ------- ---------- (State or other jurisdiction of (Commission (I.R.S. Employer Incorporation or Organization) File Number) Identification No.) UNIVERSAL CORPORATE CENTER 367 SOUTH GULPH ROAD KING OF PRUSSIA, PENNSYLVANIA 19406 ------------------------------------- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code (610) 768-3300 Not Applicable -------------- (Former name or former address, if changed since last report) ================================================================================ Item 5. Other Events. On February 13, 2003, Universal Health Services, Inc. issued a press release announcing the Company's final financial results for the full year ended December 31, 2002 and the appointment of Steve Filton as the Company's Chief Financial Officer. A copy of the press release is attached as Exhibit 99.1 hereto and incorporated by reference herein in its entirety. Item 7. Financial Statements and Exhibits. (c) Exhibits: 99.1 Press release, dated February 13, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Universal Health Services, Inc. By: /s/ Alan B. Miller ---------------------- Name: Alan B. Miller Title: President and Chief Executive Officer By: /s/ Steve Filton -------------------- Name: Steve Filton Title: Vice President, Controller and Chief Financial Officer Date: February 14, 2003 Exhibit Index Exhibit No. Exhibit - ----------- ------- 99.1 Press release, dated February 13, 2003
EXHIBIT 99.1 FOR IMMEDIATE RELEASE CONTACT: Steve Filton Chief Financial Officer February 13, 2003 610-768-3300 Universal Health Services, Inc. Reports a 19% Increase in Net Income, its Tenth Consecutive Annual Net Income Increase; Steve Filton Appointed CFO Universal Health Services, Inc. (NYSE: UHS) announced today its final results for the fourth quarter and full year ended December 31, 2002. Reported net income was $43.9 million or $.69 per share (diluted) during the fourth quarter of 2002 as compared to $927,000 or $.02 per share (diluted) during the fourth quarter of 2001. For the full year of 2002, reported net income was $175.4 million or $2.74 per share (diluted) as compared to $99.7 million or $1.60 per share (diluted) during 2001. Included in the reported results were various non-operating items as listed on the attached Summary of Consolidated Operating Results. Excluding these items, net income and earnings per share (diluted) increased 19% to $42.5 million and 20% to $.67, respectively, during the fourth quarter of 2002 as compared to $35.7 million and $.56, respectively, in the prior year quarter. Net revenues increased 15% during the three month period ended December 31, 2002 to $835.5 million as compared to $724.2 million during the prior year's fourth quarter. During the quarter ended December 31, 2002, EBITDA (as defined on the attached Summary of Consolidated Operating Results) increased 23% to $110.7 million as compared to $90.2 million during the prior year's fourth quarter. For the year ended December 31, 2002 (excluding the items listed on the attached Summary of Consolidated Operating Results), net income and earnings per share (diluted) increased 19% and 18%, respectively, to $174.0 million and $2.72 as compared to $146.2 million and $2.30, respectively, during 2001. During 2002, net revenues increased 15% to $3.26 billion as compared to $2.84 billion during 2001. EBITDA increased 17% during 2002 to $434.6 million as compared to $370.5 million during 2001. Chairman and CEO Alan Miller said, "Our hospitals provided increasing quality of care to their patients in 2002 and the Company continues its efforts to improve patient safety through training programs and new information systems such as the recently completed installation of a pharmacy management system that will greatly reduce the possibility of medication errors. The high quality reputations of our hospitals continue to attract an increasing number of patients. The efforts of the many talented people at UHS produced satisfying financial results even though hospitals continue to be challenged by rapidly rising labor and malpractice costs. We anticipate that 2003 will bring continued growth for our hospitals in both patient admissions and financial results. In addition to continuing to invest aggressively to provide the health care needed by our existing communities, UHS will also continue to look selectively to acquire hospitals where we believe our skills can improve the quality and financial viability of the hospital." The strong growth in revenues and earnings resulted primarily from continuing substantial growth in admissions of patients to the Company's hospitals. Admissions to the Company's acute care hospitals located in the U.S. and Puerto Rico owned for more than a year increased 7.9% during the fourth quarter of 2002 over the prior year quarter. Admissions to the Company's behavioral health care facilities owned more than a year increased 7.7% during the fourth quarter of 2002 as compared to the prior year's fourth quarter. Also contributing to the increase in revenues and earnings during the fourth quarter of 2002, as compared to the prior year quarter, was a 5.2% increase in net revenue per adjusted admission achieved at the Company's acute care hospitals located in the U.S. and Puerto Rico. Net revenue per adjusted admission at the Company's behavioral health hospitals increased 1% during the quarter. Admissions to the Company's acute care hospitals located in the U.S. and Puerto Rico owned for more than a year increased 6.9% during 2002 over the prior year while admissions to the Company's behavioral health care facilities owned more than a year increased 6.4% during 2002 as compared to 2001. Net revenue per adjusted admission at the Company's acute care hospitals located in the U.S. and Puerto Rico increased 3.6% during 2002 as compared to the prior year. Net revenue per adjusted admission at the Company's behavioral health hospitals decreased less than 1% during the year as compared to 2001. Cash flow from operations for the full year was $333 million, an increase of 12% from the prior year. During 2002, the Company invested $196 million in capital expenditures, purchased 1.7 million of its shares for $77 million and made net debt repayments of $67 million. By year-end 2002, the Company's shareholders' equity increased 14% to $917 million and debt declined to $689 million. The Company's return on capital, defined as net income (excluding from both years the items listed on the attached Summary of Consolidated Operating Results) divided by the sum of debt plus shareholders' equity, increased to 10.8% compared to 9.6% in 2001. The Company expects its return on capital to increase again in 2003 as recent investments in capital expenditures and acquisitions mature. The Company also announced the planned departure of Kirk Gorman, the Company's Senior Vice President and Chief Financial Officer. Steve Filton, Vice President and Controller, will assume the title of Chief Financial Officer effective today. Mr. Gorman will remain with the Company during the transition period leading to the appointment of a permanent Chief Financial Officer, who will be selected from a search that will include internal and external candidates. Alan B. Miller, President and Chief Executive Officer of the Company, stated that the Company's Board of Directors concluded these management changes were necessary as a result of issues raised by KPMG, the Company's independent auditors, as a result of a recent communication from Mr. Gorman to KPMG regarding his views on their respective responsibilities and the level of expertise required of a chief financial officer with respect to the Company's financial statements. Although no issue whatsoever has been raised regarding the integrity of the Company's financial statements, KPMG has concluded that, because of Mr. Gorman's communication regarding the responsibilities and required expertise of a chief financial officer, it could no longer rely on the representations made by Mr. Gorman as the CFO of the Company. The Company believes that the Company's stockholders will be well served by having Mr. Filton appointed the Company's interim Chief Financial Officer. Mr. Filton has extensive knowledge of the Company's business in his various roles within the Company for 18 years, including his position as Controller. Mr. Miller emphasized that the Company has the utmost regard for Mr. Gorman's integrity and capabilities and is very disappointed that the situation has arisen which caused Mr. Gorman's departure. 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). Certain statements in this release may constitute forward-looking statements and are subject to various risks and uncertainties as discussed in the Company's filings with the Securities and Exchange Commission. The Company is not obligated to update these forward-looking statements even if the Company's assessment of these risks and uncertainties changes. For additional information on the Company, visit our web site: http://www.uhsinc.com. Universal Health Services, Inc. Summary of Consolidated Operating Results (in thousands, except per share amounts) (unaudited) (a) EBITDA is defined as income before depreciation and amortization, interest expense, recovery of facility closure costs, provision for insurance settlements, loss on early termination of interest rate swaps, loss on early extinguishment of debt and income taxes. Below is a reconciliation of consolidated EBITDA to consolidated net income before income taxes and extraordinary charge
Three months ended Twelve months ended December 31, December 31, 2002 2001 % Incr 2002 2001 % Incr ---- ---- ------ ---- ---- ------ Net revenues $835,478 $724,162 15% $3,258,898 $2,840,491 15% EBITDA (a) $110,711 $ 90,181 23% $ 434,649 $ 370,458 17% Net income (loss): Reported net income, excluding goodwill amortization, recovery of facility closure costs, provision for insurance settlements, loss on early termination of interest rate swaps and loss on early extinguishment of debt $ 42,514 $ 35,698 19% $ 173,985 $ 146,213 19% Goodwill amortization (net of tax) --- (3,900) --- (15,600) Reported net income, excluding recovery of facility closure costs, provision for insurance settlements, loss on early termination of interest rate swaps and loss on early --------- -------- ---------- ---------- extinguishment of debt $ 42,514 $ 31,798 34% $ 173,985 $ 130,613 33% Recovery of facility closure costs (net of tax) (b) 1,376 --- 1,376 --- Provision for insurance settlements (net of tax) (c) --- (25,220) --- (25,220) Loss on early termination of interest rate swaps (net of tax) (d) --- (4,643) --- (4,643) Loss on early extinguishment of debt (net of tax) (e) --- (1,008) --- (1,008) --------- -------- ---------- ---------- Reported net income $ 43,890 $ 927 $ 175,361 $ 99,742 ========= ======== ========== ========== Diluted earnings (loss) per share: Reported net income, excluding goodwill amortization, recovery of facility closure costs, provision for insurance settlements, loss on early termination of interest rate swaps and loss on early extinguishment of debt $ 0.67 $ 0.56 20% $ 2.72 $ 2.30 18% Goodwill amortization (net of tax) --- ($0.06) --- ($0.24) Reported net income, excluding recovery of facility closure costs, provision for insurance settlements, loss on early termination of interest rate swaps and loss on early ---------- -------- ---------- ---------- extinguishment of debt $ 0.67 $ 0.50 34% $ 2.72 $ 2.06 32% Recovery of facility closure costs (net of tax) $ 0.02 --- $ 0.02 --- Provision for insurance settlements (net of tax) --- ($0.38) --- ($0.38) Loss on early termination of interest rate swaps (net of tax) --- ($0.07) --- ($0.07) Loss on early extinguishment of debt (net of tax) --- ($0.01) --- ($0.01) Anti-dilutive effect of assumed conversion of debentures --- ($0.02) --- --- ---------- -------- ---------- ---------- Reported net income $ 0.69 $ 0.02 $ 2.74 $ 1.60 ========== ======== ========== ========== (b) $2.2 million pre-tax recovery of facility closure costs resulting from the fourth quarter of 2002 sale of real estate of a facility closed in a prior year. (c) $40 million pre-tax charge to earnings recorded during the fourth quarter of 2001 to reserve for general and professional liability claims that may result from PHICO's liquidation. (d) $7.4 million pre-tax charge recorded during the fourth quarter of 2001 resulting from the early termination of interest rate swaps. (e) $1.6 million pre-tax charge recorded during the fourth quarter of 2001 resulting from the early extinguishment of a $135 million, 8-3/4% notes issued in 1995.
Consolidated EBITDA $ 110,711 $ 90,181 $ 434,649 $ 370,458 Less: Depreciation and amortization (34,350) (32,893) (124,794) (127,523) Interest expense, net (9,248) (7,368) (34,746) (36,176) Recovery of facility closure costs 2,182 --- 2,182 --- Provision for insurance settlements --- (40,000) --- (40,000) Gain/(losses) on foreign exchange and derivative transactions 50 (7,353) (220) (8,862) --------- -------- --------- --------- Consolidated income before income tax $ 69,345 $ 2,567 $ 277,071 $157,897 ========= ======== ========= ========= Universal Health Services, Inc. Consolidated Statements of Income (in thousands, except per share amounts)
Three months Twelve months ended December 31, ended December 31, ------------------------ ---------------------- 2002 2001 2002 2001 ---- ---- ---- ---- Net revenues $835,478 $724,162 $3,258,898 $2,840,491 Operating charges: Salaries, wages and benefits 334,334 289,643 1,298,967 1,122,428 Other operating expenses 201,209 179,286 787,408 668,026 Supplies expense 111,395 91,469 425,142 368,091 Provision for doubtful accounts 58,033 53,438 231,362 240,025 Depreciation and amortization 34,350 32,893 124,794 127,523 Lease and rental expense 15,623 13,951 61,712 53,945 Interest expense, net 9,248 7,368 34,746 36,176 Provision for insurance settlements 0 40,000 0 40,000 Recovery of facility closure costs (2,182) 0 (2,182) 0 (Gain)/losses on foreign exchange and derivative transactions (50) 7,353 220 8,862 -------- -------- ---------- ---------- 761,960 715,401 2,962,169 2,665,076 -------- -------- ---------- ---------- Income before minority interests, income taxes and extraordinary charge 73,518 8,761 296,729 175,415 Minority interests in earnings of consolidated entities 4,173 6,194 19,658 17,518 -------- -------- ---------- ---------- Income before income taxes 69,345 2,567 277,071 157,897 Provision for income taxes 25,455 632 101,710 57,147 -------- -------- ---------- ---------- Net income before extraordinary charge 43,890 1,935 175,361 100,750 Extraordinary charge from early extinguishment of debt, net of taxes 0 1,008 0 1,008 -------- -------- ---------- ---------- Net income $ 43,890 $ 927 $ 175,361 $ 99,742 ======== ======== ========== ========== Earnings per common share - basic $ 0.74 $ 0.02 $ 2.94 $ 1.67 ======== ======== ========== ========== Earnings per common share - diluted $ 0.69 $ 0.02 $ 2.74 $ 1.60 ======== ======== ========== ========== Weighted average number of common shares - basic 59,241 59,829 59,730 59,874 Weighted average number of common share equivalents 7,582 688 7,345 7,346 -------- -------- ---------- ---------- Weighted average number of common shares and equiv. - diluted 66,823 60,517 67,075 67,220 ======== ======== ========== ========== EARNINGS PER SHARE CALCULATION Net income $ 43,890 $ 927 $ 175,361 $ 99,742 Add: Debenture interest, net of taxes 2,134 0 8,451 8,120 -------- -------- ---------- ---------- Adjusted net income $ 46,024 $ 927 $ 183,812 $ 107,862 Weighted average number of common shares - basic 59,241 59,829 59,730 59,874 Add: Shares for conversion of convertible debentures 6,577 0 6,577 6,577 Other share equivalents 1,005 688 768 769 -------- -------- ---------- ---------- Weighted average number of common shares and equiv. - diluted 66,823 60,517 67,075 67,220 Earnings per common share - diluted $ 0.69 $ 0.02 $ 2.74 $ 1.60 ======== ======== ========== ========== Universal Health Services, Inc. Condensed Consolidated Balance Sheets (in thousands)
December 31, December 31, 2002 2001 ---------------- ---------------- Assets: Cash and cash equivalents $ 17,750 $ 22,848 Accounts receivable, net 474,763 418,083 Other current assets 114,063 107,331 Property, plant and equipment, net 1,167,287 1,031,205 Other assets 549,366 589,122 ---------- ---------- $2,323,229 $2,168,589 ========== ========== Liabilities and Stockholders' Equity: Current portion of long-term debt $ 3,714 $ 2,436 Other current liabilities 362,160 320,280 Other noncurrent liabilities 206,238 164,390 Minority interest 134,339 125,914 Long-term debt 685,053 718,830 Deferred income taxes 14,266 28,839 Stockholders' equity 917,459 807,900 ---------- ---------- $2,323,229 $2,168,589 ========== ========== Universal Health Services, Inc. Supplemental Statistical Information (unaudited) - --------------------------------------------------------------------------------
% Change % Change - ------------------------------------- Quarter Ended 12 mos. ended Same Store: 12/31/2002 12/31/2002 - ------------------------------------- ---------------- --------------- Acute Care Hospitals - -------------------- Revenues 12.6% 10.2% Adjusted Admissions 7.0% 6.3% Adjusted Patient Days 5.7% 5.3% Revenue Per Adjusted Admission 5.2% 3.6% Revenue Per Adjusted Patient Day 6.6% 4.6% Behavioral Health Hospitals - --------------------------- Revenues 8.1% 5.7% Adjusted Admissions 7.1% 6.1% Adjusted Patient Days 7.0% 4.5% Revenue Per Adjusted Admission 0.9% -0.4% Revenue Per Adjusted Patient Day 1.6% 1.1% /(1)/ Net of Minority Interest /(2)/ Latest 4 quarters /(3)/ Before Corporate overhead allocation and minority interest
- ------------------------------------- UHS Consolidated Quarter Ended Twelve months Ended - ------------------------------------- ------------------------------ ----------------------------- 12/31/2002 12/31/2001 12/31/2002 12/31/2001 ---------- ---------- ---------- ---------- Revenues $835,478 $724,162 $3,258,898 $2,840,491 EBITDA /(1)/ $110,711 $ 90,181 $ 434,649 $ 370,458 EBITDA Margin /(1)/ 13.3% 12.5% 13.3% 13.0% Cash Flow From Operations $ 87,417 $ 44,132 $ 332,598 $ 297,543 Days Sales Outstanding 52 53 53 54 Capital Expenditures $ 38,956 $ 41,393 $ 195,640 $ 152,938 Debt (net of cash) - - $ 671,017 $ 698,418 Shareholders Equity - - $ 917,459 $ 807,900 Debt / Total Capitalization - - 42.2% 46.4% Debt / EBITDA /(2)/ - - 1.54 1.89 Debt / Cash From Operations /(2)/ - - 2.02 2.35 Acute Care EBITDAR Margin /(3)/ 17.6% 17.4% 17.3% 17.8% Behavioral Health EBITDAR Margin /(3)/ 20.8% 17.8% 20.2% 19.0% UNIVERSAL HEALTH SERVICES, INC. SELECTED HOSPITAL STATISTICS DECEMBER 31, 2002 AS REPORTED: SAME STORE:
FOR THE THREE MONTHS ENDED ACUTE (1) BEHAVIORAL HEALTH 12/31/02 12/31/01 % 12/31/02 12/31/01 % -------- -------- - -------- -------- - Hospitals owned and leased 25 24 4.2% 37 37 0.0% Average licensed beds 5,713 5,596 2.1% 3,754 3,749 0.1% Patient days 310,478 281,059 10.5% 248,708 231,907 7.2% Average daily census 3,374.8 3,055.0 10.5% 2,703.3 2,520.7 7.2% Occupancy-licensed beds 59.1% 54.6% 8.2% 72.0% 67.2% 7.1% Admissions 67,395 59,797 12.7% 20,379 18,929 7.7% Length of stay 4.6 4.7 -2.0% 12.2 12.3 -0.4% Inpatient revenue $1,384,584 $1,037,270 33.5% $241,497 $218,163 10.7% Outpatient revenue 474,790 370,306 28.2% 37,434 35,985 4.0% Total patient revenue 1,859,374 1,407,576 32.1% 278,931 254,148 9.8% Other revenue 13,865 15,604 -11.1% 7,923 10,411 -23.9% Gross hospital revenue 1,873,239 1,423,180 31.6% 286,854 264,559 8.4% Total deductions 1,224,075 870,787 40.6% 147,211 132,626 11.0% Net hospital revenue $ 649,164 $ 552,393 17.5% $139,643 $131,933 5.8% (1) Does not include hospitals located in France. (2) Central Montgomery and Lancaster are excluded in both current and prior years. Rancho Springs is included in the current and prior year totals from February 1st through year to date. Inland Valley and Rancho Springs merged to become one entity called Southwest Health Care effective July 1, 2002. (3) Pembroke, San Juan Capestrano and Westwood Lodge are included in current and prior years from February 1 through year to date.
FOR THE THREE MONTHS ENDED ACUTE (1) (2) BEHAVIORAL HEALTH (3) 12/31/02 12/31/01 % 12/31/02 12/31/01 % -------- -------- - -------- -------- - Hospitals owned and leased 23 24 -4.2% 37 37 0.0% Average licensed beds 5,446 5,596 -2.7% 3,754 3,749 0.1% Patient days 297,804 281,051 6.0% 248,722 231,895 7.3% Average daily census 3,237.0 3,054.9 6.0% 2,703.5 2,520.6 7.3% Occupancy-licensed beds 59.4% 54.6% 8.9% 72.0% 67.2% 7.1% Admissions 64,512 59,797 7.9% 20,379 18,929 7.7% Length of stay 4.6 4.7 -1.8% 12.2 12.3 -0.4% UNIVERSAL HEALTH SERVICES, INC. SELECTED HOSPITAL STATISTICS DECEMBER 31, 2002 AS REPORTED: SAME STORE:
FOR THE TWELVE MONTHS ENDED ACUTE (1) BEHAVIORAL HEALTH 12/31/02 12/31/01 % 12/31/02 12/31/01 % -------- -------- --- -------- -------- - Hospitals owned and leased 25 24 4.2% 37 37 0.0% Average licensed beds 5,813 5,514 5.4% 3,752 3,732 0.5% Patient days 1,239,040 1,123,264 10.3% 1,005,882 950,236 5.9% Average daily census 3,394.6 3,077.4 10.3% 2,755.8 2,603.4 5.9% Occupancy-licensed beds 58.4% 55.8% 4.6% 73.4% 69.8% 5.3% Admissions 266,261 237,802 12.0% 84,348 78,688 7.2% Length of stay 4.7 4.7 -1.5% 11.9 12.1 -1.2% Inpatient revenue $5,183,944 $4,032,623 28.6% $ 979,824 $ 908,424 7.9% Outpatient revenue 1,814,757 1,432,232 26.7% 149,604 143,907 4.0% Total patient revenue 6,998,701 5,464,855 28.1% 1,129,428 1,052,331 7.3% Other revenue 58,609 57,663 1.6% 36,021 40,094 -10.2% Gross hospital revenue 7,057,310 5,522,518 27.8% 1,165,449 1,092,425 6.7% Total deductions 4,533,018 3,340,466 35.7% 599,864 553,982 8.3% Net hospital revenue $2,524,292 $2,182,052 15.7% $ 565,585 $ 538,443 5.0% (1) Does not include hospitals located in France. (2) Central Montgomery and Lancaster are excluded in both current and prior years. Rancho Springs is included in the current and prior year totals from February 1st through year to date. Inland Valley and Rancho Springs merged to become one entity called Southwest Health Care effective July 1, 2002. (3) Pembroke, San Juan Capestrano and Westwood Lodge are included in current and prior years from February 1 through year to date.
FOR THE TWELVE MONTHS ENDED ACUTE (1) (2) BEHAVIORAL HEALTH (3) 12/31/02 12/31/01 % 12/31/02 12/31/01 % -------- -------- - -------- -------- - Hospitals owned and leased 23 24 -4.2% 37 37 0.0% Average licensed beds 5,538 5,506 0.6% 3,723 3,712 0.3% Patient days 1,184,060 1,122,448 5.5% 997,910 948,526 5.2% Average daily census 3,244.0 3,075.2 5.5% 2,734.0 2,598.7 5.2% Occupancy-licensed beds 58.6% 55.9% 4.9% 73.4% 70.0% 4.9% Admissions 253,899 237,477 6.9% 83,645 78,588 6.4% Length of stay 4.7 4.7 -1.3% 11.9 12.1 -1.2%