Universal Health Services, Inc. Reports 2016 First Quarter Financial Results

04/27/2016
Webcast ImageWebcast - Live
Q1 2016 Universal Health Services Earnings Conference Call
04/28/16 at 9:00 a.m. ET


Consolidated Results of Operations, As Reported and As Adjusted - Three-month periods ended March 31, 2016 and 2015:

KING OF PRUSSIA, Pa., April 27, 2016 /PRNewswire/ -- Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income attributable to UHS was $190.8 million, or $1.93 per diluted share, during the first quarter of 2016 as compared to $174.3 million, or $1.73 per diluted share, during the comparable quarter of 2015.  Net revenues increased 10.1% to $2.45 billion during the first quarter of 2016 as compared to $2.23 billion during the first quarter of 2015.

For the three-month period ended March 31, 2016, our adjusted net income attributable to UHS per diluted share, as calculated on the attached Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information ("Supplemental Schedule"), increased approximately 11% to $1.98 per diluted share, as compared to $1.78 per diluted share during the first quarter of 2015.  As reflected on the Supplemental Schedule, included in our reported results during each of the first quarters of 2016 and 2015, are net unfavorable after-tax impacts of $.05 per diluted share related to the depreciation and amortization expense recorded in connection with the implementation of electronic health records ("EHR") applications at our acute care hospitals. 

Acute Care Services – Three-month periods ended March 31, 2016 and 2015:
During the first quarter of 2016, at our acute care hospitals owned during both periods ("same facility basis"), adjusted admissions (adjusted for outpatient activity) increased 7.8% and adjusted patient days increased 3.5%, as compared to the first quarter of 2015. Net revenues at these facilities increased 12.0% during the first quarter of 2016 as compared to the first quarter of the prior year. At these facilities, net revenue per adjusted admission increased 3.0% while net revenue per adjusted patient day increased 7.3% during the first quarter of 2016 as compared to the comparable quarter of 2015. On a same facility basis, the operating margin at our acute care hospitals increased to 21.1% during the first quarter of 2016 as compared to 20.5% during the first quarter of 2015. We define operating margin as net revenues less salaries, wages and benefits, other operating expenses and supplies expense (excluding the impact of EHR and other items, if applicable, as indicated on the Supplemental Schedules).

We provide care to patients who meet certain financial or economic criteria without charge or at amounts substantially less than our established rates. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in net revenues or in accounts receivable, net. Our acute care hospitals provided charity care and uninsured discounts, based on gross charges, amounting to approximately $345 million and $287 million during the three-month periods ended March 31, 2016 and 2015, respectively. The provision for doubtful accounts at our acute care hospitals amounted to approximately $140 million and $124 million during the three-month periods ended March 31, 2016 and 2015, respectively. Our acute care hospitals experienced an increase in the aggregate of charity care, uninsured discounts and provision for doubtful accounts, as a percentage of gross charges, during the first quarter of 2016, as compared to the first quarter of 2015.        

Behavioral Health Care Services – Three-month periods ended March 31, 2016 and 2015:
During the first quarter of 2016, at our behavioral health care facilities on a same facility basis, adjusted admissions increased 1.4% while adjusted patient days increased 1.0% as compared to the first quarter of 2015. At these facilities, net revenue per adjusted admission increased 1.8% while net revenue per adjusted patient day increased 2.2% during the first quarter of 2016 as compared to the comparable quarter in 2015. On a same facility basis, our behavioral health services' net revenues increased 3.5% during the first quarter of 2016, as compared to the comparable quarter in 2015. The operating margins were 27.8% during the first quarter of 2016 and 28.4% during the first quarter of 2015.   

Share Repurchase Program:
In February of 2016, our Board of Directors authorized a $400 million increase to our stock repurchase program, which increased the aggregate authorization to $800 million from the previous $400 million authorization approved during the third quarter of 2014.  Pursuant to this program, we may purchase shares of our Class B Common Stock, from time to time as conditions allow, on the open market or in negotiated private transactions. 

In conjunction with this program, during the first quarter of 2016, we repurchased approximately 1.3 million shares at an aggregate cost of $152.4 million (approximately $113 per share).  Since inception of the program through March 31, 2016, we repurchased approximately 3.2 million shares at an aggregate cost of approximately $376.6 million (approximately $117 per share). 

Conference call information:
We will hold a conference call for investors and analysts at 9:00 a.m. eastern time on April 28, 2016. The dial-in number is 1-877-648-7971. 

A live broadcast of the conference call will be available on our website at www.uhsinc.com.  A replay of the call will be available following the conclusion of the live call and will be available for one full year.

General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures:
Universal Health Services, Inc. ("UHS") is one of the nation's largest hospital companies operating through its subsidiaries acute care hospitals, behavioral health facilities and ambulatory centers located throughout the United States, the United Kingdom, Puerto Rico and the U.S. Virgin Islands.  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, 2015), may cause the 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 net income attributable to UHS, adjusted net income attributable to UHS 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, when applicable, 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 material items related to the implementation of EHR applications at our acute care hospitals and other items that are nonrecurring or non-operational in nature including, but not limited to, costs related to extinguishment of debt, gains on sales of assets and businesses, reserves for settlements, legal judgments and lawsuits, impairments of long-lived assets 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, 2015. 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.

Our acute care hospitals are eligible for Medicare and Medicaid EHR incentive payments upon implementation of the EHR application, once they have demonstrated meaningful use of certified EHR technology for the applicable stage or have completed attestations to their adoption or implementation of certified EHR technology.  However, there may be timing differences in the recognition of the incentive income and expenses recorded in connection with the implementation of the EHR application which may cause material period-to-period changes in our future results of operations. Pursuant to regulations, hospitals that did not qualify as a meaningful user of EHR by 2015 are subject to a reduced market basket update to the inpatient prospective payment system standardized amount in 2015 and each subsequent fiscal year. We believe that all of our acute care hospitals have met the applicable meaningful use criteria and therefore are not subject to a reduced market basked update to the inpatient prospective payment standardized amount. Under the HITECH Act, hospitals must continue to meet the applicable meaningful use criteria in each fiscal year or they will be subject to a market basket update reduction in a subsequent fiscal year.  

Universal Health Services, Inc.

Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)






Three months


ended March 31,


2016


2015





Net revenues before provision for doubtful accounts

$2,619,593


$2,380,101

  Less: Provision for doubtful accounts

169,795


154,748

Net revenues

2,449,798


2,225,353





Operating charges:




   Salaries, wages and benefits

1,148,139


1,031,703

   Other operating expenses

561,584


505,966

   Supplies expense

255,250


238,741

   Depreciation and amortization

104,049


98,998

   Lease and rental expense

24,452


22,891


2,093,474


1,898,299





Income from operations

356,324


327,054





Interest expense, net

29,600


30,037





Income before income taxes

326,724


297,017





Provision for income taxes

111,005


102,694





Net income

215,719


194,323





Less:  Income attributable to




noncontrolling interests

24,960


20,024





Net income attributable to UHS

$190,759


$174,299













Basic earnings per share attributable to UHS (a)

$1.95


$1.76





Diluted earnings per share attributable to UHS (a)

$1.93


$1.73





 

 

Universal Health Services, Inc.

Footnotes to Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)






Three months


ended March 31,


2016


2015





(a) Earnings per share calculation:








Basic and diluted:




Net income attributable to UHS

$190,759


$174,299

Less: Net income attributable to unvested restricted share grants

(89)


(68)

Net income attributable to UHS - basic and diluted

$190,670


$174,231





Weighted average number of common shares - basic

97,607


98,910





Basic earnings per share attributable to UHS:

$1.95


$1.76





Weighted average number of common shares

97,607


98,910

Add: Other share equivalents

1,288


1,737

Weighted average number of common shares and equiv. - diluted

98,895


100,647





Diluted earnings per share attributable to UHS:

$1.93


$1.73





 

 

Universal Health Services, Inc.

Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information ("Supplemental Schedule")

For the three months ended March 31, 2016 and 2015

(in thousands, except per share amounts)

(unaudited)

























Calculation of "EBITDA"










Three months ended


Three months ended


March 31, 2016


March 31, 2015

















Net revenues before provision for doubtful accounts

$2,619,593




$2,380,101



  Less: Provision for doubtful accounts

169,795




154,748



Net revenues

2,449,798


100.0%


2,225,353


100.0%









Operating charges:








   Salaries, wages and benefits

1,148,139


46.9%


1,031,703


46.4%

   Other operating expenses

561,584


22.9%


505,966


22.7%

   Supplies expense

255,250


10.4%


238,741


10.7%


1,964,973


80.2%


1,776,410


79.8%









Operating income/margin ("EBITDAR")

484,825


19.8%


448,943


20.2%









   Lease and rental expense

24,452




22,891



   Income attributable to noncontrolling interests

24,960




20,024











Earnings before, depreciation and amortization, interest expense, and income taxes ("EBITDA")

435,413


17.8%


406,028


18.2%









   Depreciation and amortization

104,049




98,998



   Interest expense, net

29,600




30,037











Income before income taxes

301,764




276,993











Provision for income taxes

111,005




102,694



Net income attributable to UHS

$190,759




$174,299



















Calculation of Adjusted Net Income Attributable to UHS










Three months ended


Three months ended


March 31, 2016


March 31, 2015




Per




Per


Amount


Diluted Share


Amount


Diluted Share

Calculation of Adjusted Net Income Attributable to UHS - including and excluding EHR impact:








Net income attributable to UHS

$190,759


$1.93


$174,299


$1.73









Plus/minus impact of EHR implementation:








EHR-related incentive income, pre-tax

-




-



EHR-related depreciation & amortization, pre-tax

9,306




9,306



EHR-related minority interest in earnings of consolidated entities, pre-tax

(962)




(964)



Income tax provision on EHR-related items

(3,110)




(3,109)



After-tax impact of EHR-related items

5,234


0.05


5,233


0.05

Adjusted net income attributable to UHS

$195,993


$1.98


$179,532


$1.78

















 

 

Universal Health Services, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)






Three months


ended March 31,


2016


2015





Net income

$215,719


$194,323

Other comprehensive income (loss):




   Unrealized derivative gains (loss) on cash flow hedges

(14,299)


4,132

   Amortization of terminated hedge

(84)


(84)

   Foreign currency translation adjustment

5,986


(418)

Other comprehensive income before tax

(8,397)


3,630

Income tax expense related to items of other comprehensive income

(5,360)


1,497

Total other comprehensive income, net of tax

(3,037)


2,133





Comprehensive income

212,682


196,456

Less: Comprehensive income attributable to noncontrolling interests

24,960


20,024

Comprehensive income attributable to UHS

$187,722


$176,432





 

 

Universal Health Services, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)











March 31,



December 31,




2016



2015

Assets







Current assets:







    Cash and cash equivalents


$

54,590


$

61,228

    Accounts receivable, net



1,374,737



1,302,429

    Supplies



116,725



116,037

    Deferred income taxes



0



135,120

    Other current assets



89,386



103,490

          Total current assets



1,635,438



1,718,304








Property and equipment



6,655,292



6,530,569

Less: accumulated depreciation



(2,774,740)



(2,694,591)




3,880,552



3,835,978








Other assets:







    Goodwill



3,594,901



3,596,114

    Deferred charges



16,235



16,688

    Other



437,883



448,360



$

9,565,009


$

9,615,444








Liabilities and Stockholders' Equity







Current liabilities:







    Current maturities of long-term debt


$

88,262


$

62,722

    Accounts payable and accrued liabilities


1,147,384



1,033,697

    Federal and state taxes



49,794



3,987

          Total current liabilities



1,285,440



1,100,406








Other noncurrent liabilities



295,684



278,834

Long-term debt



3,192,144



3,368,634

Deferred income taxes



178,947



315,900








Redeemable noncontrolling interest



261,492



242,509








UHS common stockholders' equity



4,289,218



4,249,647

Noncontrolling interest



62,084



59,514

          Total equity



4,351,302



4,309,161










$

9,565,009


$

9,615,444








 

 

Universal Health Services, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


Three months


ended March 31,


2016


2015





Cash Flows from Operating Activities:




  Net income

$215,719


$194,323

  Adjustments to reconcile net income to net




cash provided by operating activities:




Depreciation & amortization

104,049


98,998

Stock-based compensation expense

13,204


10,829

  Changes in assets & liabilities, net of effects from




acquisitions and dispositions:




   Accounts receivable

(79,962)


(96,972)

   Accrued interest

688


1,117

   Accrued and deferred income taxes

91,131


79,050

   Other working capital accounts

98,972


(29,829)

   Other assets and deferred charges

(5,803)


(234)

   Other

20,911


17,807

   Accrued insurance expense, net of commercial premiums paid

22,616


22,748

   Payments made in settlement of self-insurance claims

(17,298)


(26,562)

          Net cash provided by operating activities

464,227


271,275





Cash Flows from Investing Activities:




   Property and equipment additions, net of disposals

(127,214)


(89,276)

   Acquisition of property and businesses

(19,543)


(34,500)

          Net cash used in investing activities

(146,757)


(123,776)





Cash Flows from Financing Activities:




   Reduction of long-term debt

(166,671)


(158,871)

   Additional borrowings

14,400


20,800

   Financing costs

(44)


0

   Repurchase of common shares

(171,042)


(28,767)

   Dividends paid

(9,757)


(9,899)

   Issuance of common stock

2,331


1,768

   Excess income tax benefits related to stock-based compensation

11,002


20,807

   Profit distributions to noncontrolling interests

(3,407)


(2,413)

   Proceeds received from sale/leaseback of real property

0


12,551

          Net cash used in financing activities

(323,188)


(144,024)





   Effect of exchange rate changes on cash and cash equivalents

(920)


(466)

(Decrease) increase in cash and cash equivalents

(6,638)


3,009

Cash and cash equivalents, beginning of period

61,228


32,069

Cash and cash equivalents, end of period

$54,590


$35,078





Supplemental Disclosures of Cash Flow Information:




  Interest paid

$27,133


$27,158





  Income taxes paid, net of refunds

$9,093


$2,876





  Noncash purchases of property and equipment

$47,374


$33,082





 

 

Universal Health Services, Inc.

Supplemental Statistical Information

(unaudited)



























 % Change







Quarter ended


Same Facility:





3/31/2016









Acute Care Hospitals







Revenues





12.0%


Adjusted Admissions





7.8%


Adjusted Patient Days





3.5%


Revenue Per Adjusted Admission




3.0%


Revenue Per Adjusted Patient Day




7.3%























Behavioral Health Hospitals






Revenues





3.5%


Adjusted Admissions





1.4%


Adjusted Patient Days





1.0%


Revenue Per Adjusted Admission




1.8%


Revenue Per Adjusted Patient Day




2.2%






























UHS Consolidated



First quarter ended





3/31/2016


3/31/2015









Revenues



$2,449,798


$2,225,353


EBITDA   (1)



$435,413


$406,028


EBITDA Margin (1)



17.8%


18.2%
















Cash Flow From Operations


$464,227


$271,275


Days Sales Outstanding



51


56


Capital Expenditures 



$127,214


$89,276









Debt



$3,280,406


$3,118,642


UHS' Shareholders Equity



$4,289,218


$3,906,963


Debt / Total Capitalization



43.3%


44.6%


Debt / EBITDA  (2)



2.03


2.12


Debt / Cash From Operations  (2)


2.70


2.80
















Acute Care EBITDAR Margin  (3)

21.1%


20.5%


Behavioral Health EBITDAR Margin  (3)

27.8%


28.4%
















(1)  Net of Minority Interest





(2)  Latest 4 quarters





(3)  Same facility basis, before Corporate overhead allocation and minority interest.

 

Universal Health Services, Inc.

Selected Hospital Statistics

For the three months ended

March 31, 2016 and 2015



















AS REPORTED:





























                       ACUTE



               BEHAVIORAL HEALTH



03/31/16

03/31/15

% change


03/31/16

03/31/15

% change










Hospitals owned and leased

24

24

0.0%


217

203

6.9%

Average licensed beds


5,854

5,792

1.1%


21,751

20,985

3.7%

Patient days


325,171

317,979

2.3%


1,500,705

1,443,066

4.0%

Average daily census


3,573.5

3,533.1

1.1%


16,491.3

16,034.1

2.9%

Occupancy-licensed beds

61.0%

61.0%

0.1%


75.8%

76.4%

-0.8%

Admissions


69,674

65,419

6.5%


115,421

112,706

2.4%

Length of stay


4.7

4.9

-4.0%


13.0

12.8

1.6%










Inpatient revenue


$4,965,537

$4,328,767

14.7%


$1,959,570

$1,823,425

7.5%

Outpatient revenue


2,767,329

2,284,712

21.1%


221,643

204,569

8.3%

Total patient revenue


7,732,866

6,613,479

16.9%


2,181,213

2,027,994

7.6%

Other revenue


111,557

88,675

25.8%


50,538

50,680

-0.3%

Gross hospital revenue


7,844,423

6,702,154

17.0%


2,231,751

2,078,674

7.4%










Total deductions


6,417,521

5,431,864

18.1%


1,040,661

971,973

7.1%










Net hospital revenue before








  provision for doubtful accounts

1,426,902

1,270,290

12.3%


1,191,090

1,106,701

7.6%










Provision for doubtful accounts

139,755

124,350

12.4%


30,044

30,356

-1.0%










Net hospital revenue


$1,287,147

$1,145,940

12.3%


$1,161,046

$1,076,345

7.9%



















SAME FACILITY:




















                      ACUTE



             BEHAVIORAL HEALTH (1)



03/31/16

03/31/15

% change


03/31/16

03/31/15

% change










Hospitals owned and leased

24

24

0.0%


201

201

0.0%

Average licensed beds


5,854

5,792

1.1%


20,999

20,707

1.4%

Patient days


325,171

317,979

2.3%


1,448,374

1,431,252

1.2%

Average daily census


3,573.5

3,533.1

1.1%


15,916.2

15,902.8

0.1%

Occupancy-licensed beds

61.0%

61.0%

0.1%


75.8%

76.8%

-1.3%

Admissions


69,674

65,419

6.5%


114,109

112,327

1.6%

Length of stay


4.7

4.9

-4.0%


12.7

12.7

-0.4%



















(1) Garland Behavioral Health, ALPHA (UK) entities, and the Foundations Recovery Network entities are excluded in both

    current and prior years.


















 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/universal-health-services-inc-reports-2016-first-quarter-financial-results-300258567.html

SOURCE Universal Health Services, Inc.

Steve Filton, Chief Financial Officer, 610-768-3300