Universal Health Services, Inc. Reports First Quarter Earnings
04/27/2006
KING OF PRUSSIA, Pa., April 27 /PRNewswire-FirstCall/ -- Universal Health Services, Inc. (NYSE: UHS) announced today its results for the first quarter ended March 31, 2006. Reported net income was $51.1 million or $.88 per diluted share during the first quarter of 2006 as compared to $61.4 million or $.99 per diluted share during the comparable prior year quarter. Reported income from continuing operations was $50.5 million or $.87 per diluted share during the first quarter of 2006 as compared to $54.7 million or $.89 per diluted share during the first quarter of 2005. After adjusting for the hurricane-related insurance recoveries and expenses discussed below, our adjusted income from continuing operations was $41.5 million and our adjusted income from continuing operations per diluted share was $.73 during the three- month period ended March 31, 2006.
As indicated on the attached Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information for the Three Months Ended March 31, 2006 and 2005, included in our income from continuing operations and income from continuing operations per diluted share during the first quarter of 2006 are combined after-tax hurricane insurance recoveries, net of hurricane related expenses, of $9.0 million or $.14 per diluted share. These hurricane insurance recoveries and hurricane related expenses were incurred in connection with damage sustained in Louisiana from Hurricane Katrina that resulted in the closure of our Methodist Hospital, Lakeland Medical Pavilion, Chalmette Medical Center and Virtue Street Pavilion during the third quarter of 2005.
Net revenues increased 3% to $1.03 billion during the first quarter of 2006 as compared to $1.01 billion during the first quarter of 2005. Impacting our revenues during the first quarter of 2006 was the loss of revenues generated at our above-mentioned acute care facilities in Louisiana which, on a combined basis, generated $61.2 million of net revenues during the first quarter of 2005. Also, on January 1st of this year, we implemented a formal company-wide uninsured discount policy which has had the effect of lowering both net revenues and the provision for doubtful accounts by approximately $15 million during the first quarter without any significant impact on net income.
At our acute care hospitals owned during both periods, inpatient admissions increased 1.2% and patient days increased 0.2% during the first quarter of 2006 as compared to the comparable 2005 quarter. Since our above- mentioned facilities located in Louisiana have been closed since Hurricane Katrina, the inpatient statistics for those facilities have been excluded from the first quarter of each year. At our behavioral health care facilities owned during both quarters, inpatient admissions increased 5.9% and patient days increased 3.4% during the first quarter of 2006 as compared to the comparable 2005 quarter.
Our operating margin (as calculated on the attached Schedule of Non-GAAP Supplemental Consolidated Income Statement Information), decreased to 13.6% during the three-month period ended March 31, 2006 as compared to 15.9% during the same period of the prior year. The operating margin at our acute care hospitals owned during both periods ("same facility basis") decreased to 14.7% during the three months ended March 31, 2006 as compared to 17.7% during the three months ended March 31, 2005. On a same facility basis, the operating margin at our behavioral health hospitals increased to 25.3% during the first quarter of 2006 from 24.6% during the comparable quarter of the prior year.
Our provision for doubtful accounts was 7.3% during the first quarter of 2006 as compared to 8.2% during the comparable prior year quarter. Exclusive of the impact of the uninsured discount implemented at the beginning of this year, the provision for doubtful accounts would have been 8.6% of net revenues during the first quarter of 2006 as compared to 8.2% during the prior year's first quarter. The increase resulted primarily from an increase in the number of uninsured patients treated at our acute care hospitals.
We will hold a conference call for investors and analysts at 9:00 a.m. Eastern Time on April 28, 2006. 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 28, 2006 and will continue through midnight on May 5, 2006. The recording can be accessed by calling 1-800-642-1687 and entering the conference ID number 7813878.
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 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 "Risk Factors" on pages 24 through 30 and in "Forward-Looking Statements and Risk Factors" on pages 39 and 40 of our Form 10-K for the year ended December 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, gains on sales of assets and businesses, Hurricane related expenses and insurance recoveries, and 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, 2005. 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,
2006 2005
Net revenues $1,034,289 $1,006,645
Operating charges:
Salaries, wages and benefits 442,232 406,340
Other operating expenses 248,101 231,165
Supplies expense 128,513 126,536
Provision for doubtful accounts 75,007 82,408
Depreciation and amortization 39,030 39,696
Lease and rental expense 16,232 15,467
Hurricane related expenses 6,904 -
Hurricane insurance recoveries (22,291) -
933,728 901,612
Income before interest expense,
minority interests and income taxes 100,561 105,033
Interest expense, net 8,525 10,676
Minority interests in earnings
of consolidated entities 11,177 7,919
Income before income taxes 80,859 86,438
Provision for income taxes 30,367 31,748
Income from continuing operations 50,492 54,690
Income from discontinued operations,
net of income tax expense (a) 592 6,719
Net income $51,084 $61,409
Basic earnings per share: (b)
From continuing operations $0.94 $0.95
From discontinued operations 0.01 0.12
Total basic earnings per
share $0.95 $1.07
Diluted earnings per share: (b)
From continuing operations $0.87 $0.89
From discontinued operations 0.01 0.10
Total diluted earnings per
share $0.88 $0.99
Universal Health Services, Inc.
Footnotes to Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
Three months
ended March 31,
2006 2005
(a) Calculation of income from discontinued
operations, net of income tax:
Income from operations $940 $4,936
Gains on divestitures - 9,096
Asset impairment charge - (3,105)
Income from discontinued operations,
pre-tax 940 10,927
Income tax provision (348) (4,208)
Income from discontinued operations,
net of income tax expense $592 $6,719
(b) Earnings per share calculation:
Basic:
Income from continuing operations $50,492 $54,690
Less: Dividends on unvested
restricted stock, net of taxes (23) (27)
Income from continuing operations -
basic $50,469 $54,663
Income from discontinued operations 592 6,719
Net income - basic $51,061 $61,382
Weighted average number of common
shares - basic 53,768 57,523
Basic earnings per share:
From continuing operations $0.94 $0.95
From discontinued operations 0.01 0.12
Total basic earnings per share $0.95 $1.07
Diluted:
Income from continuing operations $50,492 $54,690
Less: Dividends on unvested
restricted stock, net of taxes (23) (27)
Add: Debenture interest, net of taxes 2,457 2,382
Income from continuing operations -
diluted $52,926 $57,045
Income from discontinued operations 592 6,719
Net income - diluted $53,518 $63,764
Weighted average number of common
shares 53,768 57,523
Add: Shares for conversion of
convertible debentures 6,577 6,577
Other share equivalents 161 316
Weighted average number of common
shares and equiv. - diluted 60,506 64,416
Diluted earnings per share:
From continuing operations $0.87 $0.89
From discontinued operations 0.01 0.10
Total diluted earnings per
share $0.88 $0.99
Universal Health Services, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
March 31, December 31,
2006 2005
Assets:
Cash and cash equivalents $8,211 $7,963
Accounts receivable, net 547,800 499,726
Other current assets 102,568 100,609
Property, plant and equipment, net 1,510,193 1,429,653
Other assets 816,275 820,758
Total Assets $2,985,047 $2,858,709
Liabilities and Stockholders' Equity:
Current portion of long-term debt $3,999 $5,191
Other current liabilities 610,750 518,979
Other noncurrent liabilities 300,716 289,195
Long-term debt 603,533 637,654
Deferred income taxes 41,281 42,713
Minority interest 170,222 159,879
Stockholders' equity 1,254,546 1,205,098
Total Liabilities and Stockholders'
Equity $2,985,047 $2,858,709
Universal Health Services, Inc.
Schedule of Non-GAAP Supplemental Consolidated Statements of Income
Information
For the Three Months Ended March 31, 2006 and 2005
(in thousands, except per share amounts)
(unaudited)
Three months ended Three months ended
March 31, 2006 March 31, 2005
Net revenues $1,034,289 100.0% $1,006,645 100.0%
Operating charges:
Salaries, wages and benefits 442,232 42.8% 406,340 40.4%
Other operating expenses 248,101 24.0% 231,165 23.0%
Supplies expense 128,513 12.4% 126,536 12.6%
Provision for doubtful accounts 75,007 7.3% 82,408 8.2%
893,853 86.4% 846,449 84.1%
Operating income/margin 140,436 13.6% 160,196 15.9%
Lease and rental expense 16,232 15,467
Minority interests in earnings
of consolidated entities 11,177 7,919
Earnings before depreciation and
amortization, interest expense,
and income taxes ("EBITDA") 113,027 136,810
Hurricane related expenses 6,904 -
Hurricane insurance recoveries (22,291) -
Depreciation and amortization 39,030 39,696
Interest expense, net 8,525 10,676
Income before income taxes 80,859 86,438
Provision for income taxes 30,367 31,748
Income from continuing operations 50,492 54,690
Income from discontinued
operations, net of income taxes 592 6,719
Net income $51,084 $61,409
Three months ended Three months ended
March 31, 2006 March 31, 2005
Per Per
Diluted Diluted
Amount Share Amount Share
Calculation of Adjusted Income from
Continuing Operations
Income from continuing operations $50,492 $0.87 $54,690 $0.89
Add: Hurricane related expenses, net
of minority interests and income
taxes 4,073 0.07 - -
Less: Hurricane related insurance
recoveries, net of minority
interests and income taxes (13,055) (0.21) - -
Adjusted income from continuing
operations $41,510 $0.73 $54,690 $0.89
Universal Health Services, Inc.
Supplemental Statistical Information
(unaudited)
% Change
Quarter Ended
Same Facility: 3/31/2006
Acute Care Hospitals
Revenues 3.1%
Adjusted Admissions 1.8%
Adjusted Patient Days 1.2%
Revenue Per Adjusted Admission 1.3%
Revenue Per Adjusted Patient Day 2.0%
Behavioral Health Hospitals
Revenues 9.8%
Adjusted Admissions 6.1%
Adjusted Patient Days 3.5%
Revenue Per Adjusted Admission 3.4%
Revenue Per Adjusted Patient Day 6.1%
UHS Consolidated First Quarter Ended
3/31/2006 3/31/2005
Revenues $1,034,289 $1,006,645
EBITDA (1) $113,027 $136,810
EBITDA Margin (1) 10.9% 13.6%
Cash Flow From Operations $110,325 $134,612
Days Sales Outstanding 48 45
Capital Expenditures $83,188 $57,920
Debt (net of cash) 599,321 646,322
Shareholders Equity 1,254,546 1,274,895
Debt / Total Capitalization 32.3% 33.6%
Debt / EBITDA (2) 1.43 1.30
Debt / Cash From Operations (2) 1.49 1.49
Acute Care EBITDAR Margin (3) 14.7% 17.0%
Behavioral Health EBITDAR Margin (3) 23.2% 24.6%
(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, 2006
AS REPORTED: For the three months ended
Acute (1) (2) Behavioral Health
03/31/06 03/31/05 % 03/31/06 03/31/05 %
Hospitals owned
and leased 21 24 -12.5% 75 44 70.5%
Average licensed
beds 4,989 5,549 -10.1% 6,397 4,414 44.9%
Patient days 283,248 312,500 -9.4% 451,885 325,874 38.7%
Average daily
census 3,147.2 3,472.2 -9.4% 5,020.9 3,620.8 38.7%
Occupancy-licensed
beds 63.1% 62.6% 0.8% 78.5% 82.0% -4.3%
Admissions 63,167 67,091 -5.8% 28,072 25,045 12.1%
Length of stay 4.5 4.7 -3.7% 16.1 13.0 23.7%
Inpatient
revenue $1,941,155 $1,946,868 -0.3% $409,400 $325,897 25.6%
Outpatient
revenue 708,511 690,580 2.6% 53,274 48,515 9.8%
Total patient
revenue 2,649,666 2,637,448 0.5% 462,674 374,412 23.6%
Other revenue 12,523 13,116 -4.5% 8,075 7,960 1.4%
Gross hospital
revenue 2,662,189 2,650,564 0.4% 470,749 382,372 23.1%
Total deductions 1,892,237 1,843,940 2.6% 217,121 192,812 12.6%
Net hospital
revenue $769,952 $806,624 -4.5% $253,628 $189,560 33.8%
SAME FACILITY:
Acute (1)(3) Behavioral Health (4)
03/31/06 03/31/05 % 03/31/06 03/31/05 %
Hospitals owned
and leased 21 21 0.0% 44 44 0.0%
Average licensed
beds 4,989 5,004 -0.3% 4,455 4,414 0.9%
Patient days 283,248 282,627 0.2% 336,951 325,872 3.4%
Average daily
census 3,147.2 3,140.3 0.2% 3,743.9 3,620.8 3.4%
Occupancy-licensed
beds 63.1% 62.8% 0.5% 84.0% 82.0% 2.4%
Admissions 63,167 62,413 1.2% 26,530 25,045 5.9%
Length of stay 4.5 4.5 -1.0% 12.7 13.0 -2.4%
(1) Does not include hospitals located in France or discontinued
operations.
(2) Does not include discontinued operations. Licensed beds from our Acute
care hospitals located in New Orleans are excluded in 2006.
(3) Discontinued operations and our three acute care hospitals located in
New Orleans are excluded in current and prior years.
(4) Ascent, Boulder Creek, Center for Change, King George School,
Northwest Academy, Wyoming Behavioral and the Keystone facilities are
excluded in current and prior year.
SOURCE: Universal Health Services, Inc.
CONTACT: Steve Filton, Chief Financial Officer, Universal Health Services, Inc., +1-610-768-3300