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Press release from PR Newswire

Universal Health Services, Inc. Reports 2013 First Quarter Financial Results

Thursday, April 25, 2013

Universal Health Services, Inc. Reports 2013 First Quarter Financial Results

17:01 EDT Thursday, April 25, 2013

Consolidated Results of Operations, As Reported - Three-month periods ended March 31, 2013 and 2012:

KING OF PRUSSIA, Pa., April 25, 2013 /PRNewswire/ -- Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income attributable to UHS was $119.8 million, or $1.21 per diluted share, during the first quarter of 2013 as compared to $128.6 million, or $1.31 per diluted share, during the comparable quarter of 2012.  Net revenues increased 2% to $1.83 billion during the first quarter of 2013 as compared to $1.79 billion during the first quarter of 2012. 

Consolidated Results of Operations, As Adjusted ? Three-month periods ended March 31, 2013 and 2012:For the three-month period ended March 31, 2013, our adjusted net income attributable to UHS, as calculated on the attached Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information ("Supplemental Schedule"), was $120.1 million, or $1.22 per diluted share, as compared to $110.7 million, or $1.13 per diluted share, during the first quarter of 2012.     

Included in our net income attributable to UHS during the first quarter of 2013 was an aggregate net unfavorable after-tax impact of $327,000 related to the incentive income and expenses recorded in connection with the implementation of electronic health records ("EHR") applications at our acute care hospitals (as discussed below in Accounting for HITECH Act incentive income and EHR expenses). 

Included in our net income attributable to UHS during the three-month period ended March 31, 2012, was an aggregate net favorable after-tax impact of $17.9 million, or $.18 per diluted share, consisting of the following: (i) a favorable after-tax impact of $18.8 million, or $.19 per diluted share, resulting from an industry-wide settlement with the United States Department of Health and Human Services, the Secretary of Health and Human Services, and the Centers for Medicare and Medicaid Services, related to underpayments of Medicare inpatient prospective payments during a number of prior years;  (ii) a favorable after-tax impact of $4.3 million, or $.04 per diluted share, representing the 2011 portion of the net Medicaid supplemental reimbursements recorded pursuant to the Oklahoma Supplemental Hospital Offset Payment Program, and; (iii) an aggregate unfavorable after-tax impact of $5.1 million, or $.05 per diluted share, resulting from the revised Supplemental Security Income ratios utilized for calculating Medicare disproportionate share hospital reimbursements for federal fiscal years 2006 through 2009 ($2.4 million unfavorable after-tax impact), and the write-off of receivables related to revenues recorded during 2011 at two of our acute care hospitals located in Florida resulting from reductions in certain county reimbursements due to reductions in federal matching Inter-Governmental Transfer funds ($2.7 million unfavorable after-tax impact). 

Acute Care Services ? Three-month periods ended March 31, 2013 and 2012:During the first quarter of 2013, at our acute care hospitals owned during both periods ("same facility basis"), adjusted admissions (adjusted for outpatient activity) decreased 1.5% and adjusted patient days increased 0.1%, as compared to the first quarter of 2012. Net revenues at these facilities increased 0.7% during the first quarter of 2013 as compared to the comparable quarter of 2012. At these facilities, net revenue per adjusted admission increased 2.2% while net revenue per adjusted patient day increased 0.6% during the first quarter of 2013 as compared to the first quarter of 2012. On a same facility basis, the operating margin at our acute care hospitals decreased to 16.0% during the first quarter of 2013 as compared to 19.0% during the first quarter of 2012. We define operating margin as net revenues less salaries, wages and benefits, other operating expenses and supplies expense (excluding the impact of the items mentioned above and excluding the EHR impact, as indicated on the Supplemental Schedule).

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 charges at established rates, amounting to $230 million and $312 million during the three-month periods ended March 31, 2013 and 2012, respectively.  The decrease in charity care and uninsured discounts recorded at our acute care hospitals during the first quarter of 2013, as compared to the first quarter of 2012, was offset by an increase in the provision for doubtful accounts which amounted to $218 million during the first quarter of 2013 as compared to $125 million during the first quarter of 2012. 

Behavioral Health Care Services ? Three-month periods ended March 31, 2013 and 2012:During the first quarter of 2013, at our behavioral health care facilities on a same facility basis, adjusted admissions increased 0.6% while adjusted patient days decreased 0.2%, as compared to the first quarter of 2012. Net revenues at these facilities increased 2.4% during the first quarter of 2013, as compared to the comparable quarter in 2012. At these facilities, net revenue per adjusted admission increased 1.8% while net revenue per adjusted patient day increased 2.6% during the first quarter of 2013 over the comparable quarter in 2012. The operating margin at our behavioral health care facilities owned during both periods increased to 28.4% during the first quarter of 2013, as compared to 26.8% during the first quarter of 2012. 

Accounting for HITECH Act incentive income and EHR expenses:The health information technology provisions of the American Recovery and Reinvestment Act (referred to as the "HITECH Act") established criteria related to the "meaningful use" of electronic health records ("EHR") for acute care hospitals and established requirements for the Medicare and Medicaid EHR payment incentive programs.    

During 2011, we began implementing EHR applications at certain of our acute care hospitals and will continue to do so, on a hospital-by-hospital basis, until completion which is scheduled to occur by the end of June, 2013. As of March 31, 2013, EHR applications have been implemented at eighteen of our acute care hospitals. Our acute care hospitals are eligible for Medicare and Medicaid EHR incentive payments upon implementation of the EHR application, assuming they meet the "meaningful use" criteria.  As of March 31, 2013, thirteen hospitals met the "meaningful use" criteria.

As reflected on the Supplemental Schedule, our consolidated results of operations for the three-month period ended March 31, 2013 includes the net unfavorable after-tax impact of $327,000 ($524,000 pre-tax) recorded in connection with the implementation of EHR applications. Included in the pre-tax charge incurred during the first quarter of 2013 was $4.7 million of EHR incentive income offset by $5.2 million of net expenses, which as indicated on the Supplemental Schedule, consisted primarily of depreciation and amortization expense.

Conference call information:We will hold a conference call for investors and analysts at 9:00 a.m. eastern time on April 26, 2013. 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 follow shortly after 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 acute care and behavioral health hospitals and ambulatory centers nationwide and in 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, 2012), may cause the results to differ materially from those anticipated in the forward-looking statements.  The operating pressures that we continue to experience in many of our acute care markets has increased the volatility of our financial results making estimation of future results more challenging.  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.

As mentioned above, our acute care hospitals may qualify for EHR incentive payments upon implementation of an EHR application assuming they meet the "meaningful use" criteria. However, there can be no assurance that we (our acute care hospitals) will ultimately qualify for these incentive payments and, should we qualify, we are unable to quantify the amount of incentive payments we may receive since the amounts are dependent upon various factors including the implementation timing at each hospital. Should we qualify for incentive payments, 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. Hospitals that do 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. Although we believe that our acute care hospitals will be in compliance with the EHR standards by 2015, there can be no assurance that all of our facilities will be in compliance and therefore not subject to the penalty provision of the HITECH Act.

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 that are nonrecurring or non-operational in nature including items such as, but not limited to, costs related to extinguishment of debt, gains on sales of assets and businesses, reserves for settlements, legal judgments and lawsuits 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, 2012. 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,

2013

2012

Net revenues before provision for doubtful accounts

$2,078,348

$1,941,623

  Less: Provision for doubtful accounts

246,716

148,587

Net revenues

1,831,632

1,793,036

Operating charges:

   Salaries, wages and benefits

902,296

872,114

   Other operating expenses

381,007

351,300

   Supplies expense

204,642

205,360

   Depreciation and amortization

79,812

71,792

   Lease and rental expense

24,665

23,442

   Electronic health records incentive income

(4,712)

-

1,587,710

1,524,008

Income from operations

243,922

269,028

Interest expense, net

39,938

46,710

Income before income taxes

203,984

222,318

Provision for income taxes

74,049

79,748

Net income

129,935

142,570

Less:  Income attributable to

noncontrolling interests

10,151

13,963

Net income attributable to UHS

$119,784

$128,607

Basic earnings per share attributable to UHS (a)

$1.23

$1.33

Diluted earnings per share attributable to UHS (a)

$1.21

$1.31

 

Universal Health Services, Inc.

Footnotes to Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)

Three months

ended March 31,

2013

2012

(a) Earnings per share calculation:

Basic and diluted:

Net income attributable to UHS

$119,784

$128,607

Less: Net income attributable to unvested restricted share grants

(69)

(168)

Net income attributable to UHS - basic and diluted

$119,715

$128,439

Weighted average number of common shares - basic

97,711

96,593

Basic earnings per share attributable to UHS:

$1.23

$1.33

Weighted average number of common shares

97,711

96,593

Add: Other share equivalents

860

1,198

Weighted average number of common shares and equiv. - diluted

98,571

97,791

Diluted earnings per share attributable to UHS:

$1.21

$1.31

 

Universal Health Services, Inc.

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

For the three months ended March 31, 2013 and 2012

(in thousands, except per share amounts)

(unaudited)

Calculation of "EBITDA"

Three months ended

Three months ended

March 31, 2013

March 31, 2012

Net revenues before provision for doubtful accounts

$2,078,348

$1,941,623

  Less: Provision for doubtful accounts

246,716

148,587

Net revenues

1,831,632

100.0%

1,793,036

100.0%

Operating charges:

   Salaries, wages and benefits

902,296

49.3%

872,114

48.6%

   Other operating expenses

381,007

20.8%

351,300

19.6%

   Supplies expense

204,642

11.2%

205,360

11.5%

   EHR incentive income

(4,712)

-0.3%

-

0.0%

1,483,233

81.0%

1,428,774

79.7%

Operating income/margin ("EBITDAR")

348,399

19.0%

364,262

20.3%

   Lease and rental expense

24,665

23,442

   Income attributable to noncontrolling interests

10,151

13,963

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

313,583

17.1%

326,857

18.2%

   Depreciation and amortization

79,812

71,792

   Interest expense, net

39,938

46,710

Income before income taxes 

193,833

208,355

Provision for income taxes

74,049

79,748

Net income attributable to UHS

$119,784

$128,607

Calculation of Adjusted Net Income Attributable to UHS

Three months ended

Three months ended

March 31, 2013

March 31, 2012

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

$119,784

$1.21

$128,607

$1.31

Plus/minus adjustments:

  Medicare Rural Floor settlement, net of income taxes

(18,753)

(0.19)

  Oklahoma SHOPP Medicaid reimbursements related to prior years, net of income taxes

(4,329)

(0.04)

  Impact of revised SSI ratios and write-off Florida county receivables, net of income taxes

5,149

0.05

Subtotal after-tax adjustments to net income attributable to UHS

-

-

(17,933)

(0.18)

Adjusted net income attributable to UHS - including Electronic Health Records ("EHR") impact

$119,784

$1.21

$110,674

$1.13

Plus/minus impact of EHR implementation: 

EHR-related incentive income, pre-tax

(4,712)

EHR-related salaries, wages and benefits, pre-tax

326

EHR-related other operating costs, pre-tax

(35)

EHR-related depreciation & amortization, pre-tax

5,486

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

(541)

Income tax provision on EHR-related items 

(197)

After-tax impact of EHR-related items

327

0.01

-

-

Adjusted net income attributable to UHS

$120,111

$1.22

$110,674

$1.13

 

Universal Health Services, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

Three months

ended March 31,

2013

2012

Net income

$129,935

$142,570

Other comprehensive income (loss):

   Unrealized derivative gains (loss) on cash flow hedges

4,535

1,615

   Amortization of terminated hedge

(84)

(84)

Other comprehensive (loss) income before tax

4,451

1,531

Income tax expense related to items of other comprehensive income (loss)

1,678

582

Total other comprehensive (loss) income, net of tax

2,773

949

Comprehensive income

132,708

143,519

Less: Comprehensive income attributable to noncontrolling interests

10,151

13,963

Comprehensive income attributable to UHS

$122,557

$129,556

 

Universal Health Services, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

March 31,

December 31,

2013

2012

Assets

Current assets:

    Cash and cash equivalents

$

17,395

$

23,471

    Accounts receivable, net

1,149,402

1,067,197

    Supplies

98,974

99,000

    Deferred income taxes

120,691

104,461

    Other current assets

94,147

87,936

    Assets of facilities held for sale

20,742

25,431

          Total current assets

1,501,351

1,407,496

Property and equipment

5,447,227

5,368,345

Less: accumulated depreciation

(2,051,441)

(1,986,110)

3,395,786

3,382,235

Other assets:

    Goodwill

3,041,326

3,036,765

    Deferred charges

71,218

75,888

    Other

306,827

298,459

$

8,316,508

$

8,200,843

Liabilities and Stockholders' Equity

Current liabilities:

    Current maturities of long-term debt

$

1,712

$

2,589

    Accounts payable and accrued liabilities

886,434

889,557

    Federal and state taxes

75,087

1,062

    Liabilities of facilities held for sale

836

850

          Total current liabilities

964,069

894,058

Other noncurrent liabilities

379,723

395,355

Long-term debt

3,668,762

3,727,431

Deferred income taxes

182,575

183,747

Redeemable noncontrolling interest

234,724

234,303

UHS common stockholders' equity

2,834,907

2,713,345

Noncontrolling interest

51,748

52,604

          Total equity

2,886,655

2,765,949

$

8,316,508

$

8,200,843

 

Universal Health Services, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Three months

ended March 31,

2013

2012

Cash Flows from Operating Activities:

  Net income

$129,935

$142,570

  Adjustments to reconcile net income to net 

cash provided by operating activities:

Depreciation & amortization

79,923

73,820

Gains on sales of assets and businesses, net of losses

(2,092)

0

Stock-based compensation expense

7,111

5,486

  Changes in assets & liabilities, net of effects from

acquisitions and dispositions:

   Accounts receivable

(81,859)

(146,670)

   Accrued interest

11,497

13,280

   Accrued and deferred income taxes 

68,890

75,471

   Other working capital accounts 

(39,785)

(48,074)

   Other assets and deferred charges

6,662

7,120

   Other 

1,604

(2,082)

   Accrued insurance expense, net of commercial premiums paid

22,962

24,581

   Payments made in settlement of self-insurance claims

(17,085)

(18,279)

          Net cash provided by operating activities

187,763

127,223

Cash Flows from Investing Activities:

   Property and equipment additions, net of disposals

(95,919)

(92,563)

   Proceeds received from sale of assets and businesses

6,657

53,461

   Costs incurred for purchase and implementation of electronic health records application

(16,412)

(14,501)

   Return of deposit on terminated purchase agreement

0

6,500

          Net cash used in investing activities

(105,674)

(47,103)

Cash Flows from Financing Activities:

   Reduction of long-term debt

(69,926)

(70,942)

   Additional borrowings

9,500

0

   Repurchase of common shares

(14,027)

(2,017)

   Dividends paid

(4,870)

(4,832)

   Issuance of common stock

1,232

1,016

   Profit distributions to noncontrolling interests

(10,074)

(2,575)

          Net cash used in financing activities

(88,165)

(79,350)

(Decrease) increase in cash and cash equivalents

(6,076)

770

Cash and cash equivalents, beginning of period

23,471

41,229

Cash and cash equivalents, end of period

$17,395

$41,999

Supplemental Disclosures of Cash Flow Information:

  Interest paid

$22,982

$25,945

  Income taxes paid, net of refunds

$4,908

$3,419

 

Universal Health Services, Inc.

Supplemental Statistical Information

(unaudited)

 % Change 

Quarter Ended

Same Facility:

3/31/2013

Acute Care Hospitals

Revenues

0.7%

Adjusted Admissions

-1.5%

Adjusted Patient Days

0.1%

Revenue Per Adjusted Admission

2.2%

Revenue Per Adjusted Patient Day

0.6%

Behavioral Health Hospitals

Revenues

2.4%

Adjusted Admissions

0.6%

Adjusted Patient Days

-0.2%

Revenue Per Adjusted Admission

1.8%

Revenue Per Adjusted Patient Day

2.6%

UHS Consolidated

First Quarter Ended

3/31/2013

3/31/2012

Revenues

$1,831,632

$1,793,036

EBITDA   (1)

$313,583

$326,857

EBITDA Margin (1)

17.1%

18.2%

Cash Flow From Operations

$187,763

$127,223

Days Sales Outstanding

56

57

Capital Expenditures

$95,919

$92,563

Debt 

3,670,474

3,584,356

Shareholders Equity

2,834,907

2,427,312

Debt / Total Capitalization

56.4%

59.6%

Debt / EBITDA (2)

3.02

3.11

Debt / Cash From Operations (2)

4.19

5.41

Acute Care EBITDAR Margin (3)

15.9%

19.0%

Behavioral Health EBITDAR Margin (3)

28.2%

26.5%

(1)  Net of Minority Interest

(2)  Latest 4 quarters

(3)  Before Corporate overhead allocation and minority interest. Before Adjustments shown on Supplemental Schedule.

 

UNIVERSAL HEALTH SERVICES, INC.

SELECTED HOSPITAL STATISTICS

FOR THE THREE MONTHS ENDED

MARCH 31, 2013 AND 2012

AS REPORTED:

Acute

Behavioral Health

03/31/13

03/31/12

%

03/31/13

03/31/12

%

Hospitals owned and leased

23

24

-4.2%

184

175

5.1%

Average licensed beds

5,617

5,784

-2.9%

20,024

19,088

4.9%

Patient days

290,702

299,417

-2.9%

1,355,054

1,309,162

3.5%

Average daily census

3,230.0

3,290.3

-1.8%

15,056.2

14,386.4

4.7%

Occupancy-licensed beds

57.5%

56.9%

1.1%

75.2%

75.4%

-0.2%

Admissions

63,739

66,555

-4.2%

101,396

95,775

5.9%

Length of stay

4.6

4.5

1.4%

13.4

13.7

-2.5%

Inpatient revenue

$3,507,040

$3,278,025

7.0%

$1,576,148

$1,415,538

11.3%

Outpatient revenue

1,651,575

1,548,850

6.6%

185,802

160,673

15.6%

Total patient revenue

5,158,615

4,826,875

6.9%

1,761,950

1,576,211

11.8%

Other revenue

31,125

20,979

48.4%

31,100

36,566

-14.9%

Gross hospital revenue

5,189,740

4,847,854

7.1%

1,793,050

1,612,777

11.2%

Total deductions

4,062,963

3,795,959

7.0%

854,899

729,189

17.2%

Net hospital revenue before

provision for doubtful accounts

$1,126,777

$1,051,895

7.1%

$938,151

$883,588

6.2%

Provision for doubtful accounts

$218,043

125,364

73.9%

28,607

23,268

22.9%

Net hospital revenue 

$908,734

$926,531

-1.9%

$909,544

$860,320

5.7%

SAME FACILITY:

Acute  (1)

 Behavioral Health (2)

03/31/13

03/31/12

%

03/31/13

03/31/12

%

Hospitals owned and leased

23

23

0.0%

173

173

0.0%

Average licensed beds

5,617

5,541

1.4%

18,950

18,831

0.6%

Patient days

290,702

290,008

0.2%

1,283,310

1,286,795

-0.3%

Average daily census

3,230.0

3,186.9

1.4%

14,259.0

14,140.6

0.8%

Occupancy-licensed beds

57.5%

57.5%

0.0%

75.2%

75.1%

0.2%

Admissions

63,739

64,610

-1.3%

95,108

94,603

0.5%

Length of stay

4.6

4.5

1.6%

13.5

13.6

-0.8%

(1) Auburn is excluded in both current and prior years

(2) San Juan Capestrano, Keys of Carolina, Jefferson Trail, Manatee Palms Group Homes, The Peaks, Garfield Park

     and the Ascend facilities are excluded in both current and prior years.

     Brooke Glen Behavioral Hospital is included in both current and prior years from March 1st through current date.

 

SOURCE Universal Health Services, Inc.

For further information: Steve Filton, Chief Financial Officer, 610-768-3300

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