Universal Health Services, Inc. Reports 2018 Third Quarter Financial Results And Narrows 2018 Full Year Earnings Guidance Range

10/25/2018
Microphone Webcast - Live
Q3 2018 Universal Health Services Earnings Conference Call
10/26/18 at 9:00 a.m. ET
 
Consolidated Results of Operations, As Reported and As Adjusted - Three-month periods ended September 30, 2018 and 2017:

KING OF PRUSSIA, Pa., Oct. 25, 2018 /PRNewswire/ -- Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income attributable to UHS was $171.7 million, or $1.84 per diluted share, during the third quarter of 2018 as compared to $141.2 million, or $1.47 per diluted share, during the comparable quarter of 2017.  Net revenues increased 4.2% to $2.65 billion during the third quarter of 2018 as compared to $2.54 billion during the third quarter of 2017.

For the three-month period ended September 30, 2018, our adjusted net income attributable to UHS, as calculated on the attached Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule"), was $208.8 million, or $2.23 per diluted share, as compared to $143.4 million, or $1.49 per diluted share, during the third quarter of 2017. 

Included in our reported and our adjusted net income attributable to UHS during the third quarter of 2018, is a pre-tax unrealized gain of $10.5 million, or $.09 per diluted share (included in "Other (income) expense, net"), resulting from an increase in the market value of shares of certain marketable securities held for investment and classified as available for sale.  

As reflected on the Supplemental Schedule, included in our reported results during the third quarter of 2018, is a net aggregate unfavorable after-tax impact of $37.1 million, or $.39 per diluted share, substantially all of which resulted from an unfavorable after-tax impact of $36.6 million, or $.39 per diluted share, resulting from a $48.0 million pre-tax increase in the reserve established in connection with the discussions with the Department of Justice ("DOJ Reserve"), as discussed below.  

As reflected on the Supplemental Schedule, included in our reported results during the third quarter of 2017, is a net aggregate unfavorable after-tax impact of $2.1 million, or $.02 per diluted share, consisting of: (i) an unfavorable after-tax impact of $2.6 million, or $.03 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, partially offset by; (ii) a favorable after-tax impact of $487,000, or $.01 per diluted share, resulting from our January 1, 2017 adoption of ASU 2016-09, "Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09").

As calculated on the attached Supplemental Schedule, our earnings before interest, taxes, depreciation & amortization ("EBITDA net of NCI"), was $377.7 million during the third quarter of 2018 as compared to $363.4 million during the third quarter of 2017.  Our adjusted earnings before interest, taxes, depreciation & amortization ("Adjusted EBITDA net of NCI"), which excludes the impact of the above-mentioned $48.0 million pre-tax increase in the DOJ Reserve and $11.4 million of other income, net, was $414.3 million during the third quarter of 2018 as compared to $363.4 million during the third quarter of 2017.

Consolidated Results of Operations, As Reported and As Adjusted  – Nine-month periods ended September 30, 2018 and 2017:
Reported net income attributable to UHS was $621.6 million, or $6.60 per diluted share, during the nine-month period ended September 30, 2018 as compared to $532.7 million, or $5.50 per diluted share, during the comparable period of 2017.  Net revenues increased 3.2% to $8.02 billion during the first nine months of 2018 as compared to $7.77 billion during the first nine months of 2017.

For the nine-month period ended September 30, 2018, our adjusted net income attributable to UHS, as calculated on the attached Supplemental Schedule, was $674.3 million, or $7.16 per diluted share, as compared to $535.8 million, or $5.53 per diluted share, during the comparable nine-month period of 2017. 

Included in our reported and our adjusted net income attributable to UHS during the first nine months of 2018, is a pre-tax unrealized gain of $18.5 million, or $.15 per diluted share (included in "Other (income) expense, net"), resulting from an increase in the market value of shares of certain marketable securities held for investment and classified as available for sale.  

As reflected on the Supplemental Schedule, included in our reported results during the nine-month period ended September 30, 2018, is a net aggregate unfavorable after-tax impact of $52.6 million, or $.56 per diluted share, consisting of: (i) an unfavorable after-tax impact of $53.7 million, or $.57 per diluted share, resulting from a $70.4 million pre-tax increase in the DOJ Reserve, as discussed below, partially offset by; (ii) a favorable after-tax impact of $1.1 million, or $.01 per diluted share, resulting from our adoption of ASU 2016-09.  

As reflected on the Supplemental Schedule, included in our reported results during the nine-month period ended September 30, 2017, is a net aggregate unfavorable after-tax impact of $3.1 million, or $.03 per diluted share, consisting of: (i) an unfavorable after-tax impact of $11.7 million, or $.12 per diluted share, related to the depreciation and amortization expense recorded in connection with the implementation of EHR applications at our acute care hospitals, partially offset by; (ii) a favorable after-tax impact of $8.6 million, or $.09 per diluted share, resulting from our adoption of ASU 2016-09. 

As calculated on the attached Supplemental Schedule, our earnings before interest, taxes, depreciation & amortization ("EBITDA net of NCI"), was $1.264 billion during the first nine months of 2018 as compared to $1.262 billion during the first nine months of 2017. Our adjusted earnings before interest, taxes, depreciation & amortization ("Adjusted EBITDA net of NCI"), which excludes the impact of the $70.4 million pre-tax increase in the DOJ Reserve and $26.7 million of other income, net, was $1.308 billion during the nine-month period ended September 30, 2018 as compared to $1.262 billion during the first nine months of 2017.

Acute Care Services – Three and nine-month periods ended September 30, 2018 and 2017:
During the third quarter of 2018, at our acute care hospitals owned during both periods ("same facility basis"), adjusted admissions (adjusted for outpatient activity) increased 1.5% and adjusted patient days increased 4.1%, as compared to the third quarter of 2017. At these facilities, net revenue per adjusted admission increased 6.6% while net revenue per adjusted patient day increased 3.9% during the third quarter of 2018 as compared to the comparable quarter of 2017. Net revenues from our acute care services on a same facility basis increased 6.7% during the third quarter of 2018 as compared to the comparable quarter of the prior year.

During the nine-month period ended September 30, 2018, at our acute care hospitals on a same facility basis, adjusted admissions increased 2.0% and adjusted patient days increased 4.8%, as compared to the comparable period  of 2017. At these facilities, net revenue per adjusted admission increased 4.2% while net revenue per adjusted patient day increased 1.5% during the first nine months of 2018 as compared to the comparable period of 2017. Net revenues from our acute care services on a same facility basis increased 4.5% during the first nine months of 2018 as compared to the comparable period of the prior year.

Behavioral Health Care Services – Three and nine-month periods ended September 30, 2018 and 2017:
During the third quarter of 2018, at our behavioral health care facilities on a same facility basis, adjusted admissions increased 4.7% while adjusted patient days increased 0.6% as compared to the third quarter of 2017. At these facilities, net revenue per adjusted admission decreased 1.9% while net revenue per adjusted patient day increased 2.1% during the third quarter of 2018 as compared to the comparable quarter in 2017. On a same facility basis, our behavioral health care services' net revenues increased 2.5% during the third quarter of 2018 as compared to the third quarter of 2017.   

During the nine-month period ended September 30, 2018, at our behavioral health care facilities on a same facility basis, adjusted admissions increased 2.5% while adjusted patient days increased 0.2% as compared to the comparable period of 2017. At these facilities, net revenue per adjusted admission increased 0.7% while net revenue per adjusted patient day increased 3.0% during the first nine months of 2018 as compared to the comparable period in 2017. On a same facility basis, our behavioral health care services' net revenues increased 2.8% during the first nine months of 2018 as compared to the comparable period of 2017.   

Net Cash Provided by Operating Activities and Share Repurchase Program:
For the nine months ended September 30, 2018, our net cash provided by operating activities was $975 million as compared to $879 million generated during the first nine months of 2017. The $97 million increase was due to: (i) a $98 million favorable change in cash flows from foreign currency forward exchange contracts related to our investments in the U.K; (ii) an $84 million unfavorable change in accounts receivable; (iii) a $65 million favorable change in other working capital accounts resulting primarily from changes in accrued expenses and accounts payable due to timing of disbursements, and; (iv) $18 million of other combined net favorable changes.

In November of 2017, our Board of Directors authorized a $400 million increase to our stock repurchase program, which increased the aggregate authorization to $1.2 billion from the previous $800 million authorization approved during 2016 and 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 our stock repurchase program, during the third quarter of 2018, we have repurchased 940,059 shares at an aggregate cost of approximately $117.9 million (approximately $125 per share).  During the first nine months of 2018, we have repurchased approximately 2.10 million shares at an aggregate cost of $252.0 million (approximately $120 per share). Since inception of the program in 2014 through September 30, 2018, we have repurchased approximately 9.45 million shares at an aggregate cost of $1.09 billion (approximately $115 per share). 

Narrowing of 2018 Full Year Earnings Guidance Range:
Based upon the operating trends and financial results experienced during the first nine months of 2018, we are narrowing our estimated range of adjusted net income attributable to UHS for the year ended December 31, 2018 to $9.25 to $9.60 per diluted share as compared to the previously provided range of $9.25 to $9.90 per diluted share.  This revised estimated guidance range decreases the upper end of the previously provided range by 3.0% while the lower end of the range remains unchanged. 

This revised estimated earnings guidance range excludes the unfavorable impact of the reserve established in connection with the civil aspects of the government's investigation of our certain of our behavioral health care facilities ("DOJ Reserve"), as discussed below, and excludes the impact on our provision for income taxes and net income attributable to UHS resulting from of our adoption of ASU 2016-09. 

Included in the revised estimated earnings guidance range for the year ended December 31, 2018 is the above-mentioned pre-tax unrealized gain of $18.5 million, or $.15 per diluted share, recorded during the first nine months of 2018 resulting from an increase in the market value of shares of certain marketable securities held for investment and classified as available for sale.  The revised estimated earnings guidance range for the full year of 2018 assumes no change in the market value of these marketable securities during the fourth quarter of 2018.     

In addition, this revised estimated earnings guidance range excludes the impact of future items, if applicable and material, that are nonrecurring or non-operational in nature including items such as, but not limited to, gains/losses on sales of assets and businesses, costs related to extinguishment of debt, reserves for settlements, legal judgments and lawsuits, impairments of long-lived and intangible assets, impact of share repurchases and other amounts that may be reflected in our financial statements that relate to prior periods. It is also subject to certain conditions including those as set forth below in General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures.

Conference call information:
We will hold a conference call for investors and analysts at 9:00 a.m. eastern time on October 26, 2018. 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.

DOJ Reserve:
During the three and nine-month periods ended September 30, 2018, we recorded pre-tax increases of approximately $48.0 million and $70.4 million, respectively, to the reserve established in connection with the civil aspects of the government's investigation of certain of our behavioral health care facilities, increasing the aggregate pre-tax reserve to approximately $90 million as of September 30, 2018.  Changes in the reserve may be required in future periods as discussions with the Department of Justice continue and additional information becomes available.  We cannot predict the ultimate resolution of this matter and therefore can provide no assurance that final amounts paid in settlement or otherwise, if any, or associated costs, will not differ materially from our established reserve.  Please see Item 1-Legal Proceedings in our Form 10-Q for the quarterly period ended June 30, 2018 for additional disclosure in connection with this matter.

Credit Facilities:
Earlier this week we entered into a sixth amendment to our credit agreement originally dated as of November 15, 2010 to, among other things: (i) increase the aggregate amount of the revolving credit facility by $200 million to $1 billion; (ii) increase the aggregate amount of the tranche A term loan by approximately $290 million to $2 billion, and; (iii) extend the maturity date of the credit agreement from August 7, 2019 to October 23, 2023. We also anticipate adding an additional seven-year tranche B term loan facility in the aggregate principal amount of up to $500 million in the very near future.

Adoption of New Revenue Recognition Standard:
On January 1, 2018, we adopted, using the modified retrospective approach, ASU 2014-09 and ASU 2016-08, "Revenue from Contracts with Customers (Topic 606)" and "Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net)", respectively, which provides guidance for revenue recognition. The standard's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The most significant change from the adoption of the new standard relates to our estimation for the allowance for doubtful accounts. Under the previous standards, our estimate for amounts not expected to be collected based upon our historical experience, were reflected as provision for doubtful accounts, included within net revenue. Under the new standard, our estimate for amounts not expected to be collected based on historical experience will continue to be recognized as a reduction to net revenue, however, not reflected separately as provision for doubtful accounts. Under the new standard, subsequent changes in estimate of collectability due to a change in the financial status of a payor, for example a bankruptcy, will be recognized as bad debt expense in operating charges. The adoption of this ASU in 2018, and amounts recognized as bad debt expense and included in other operating expenses, did not have a material impact on our consolidated financial statements.      

Tax Cuts and Jobs Act of 2017:
Effective January 1, 2018, our provision for income taxes, net income attributable to UHS, and net income attributable to UHS per diluted share, were favorably impacted by the Tax Cuts and Jobs Act of 2017 which made broad and complex changes to the U.S. tax code including, among other things, reducing the U.S. federal corporate tax rate from 35% to 21%.  

General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures:
One of the nation's largest and most respected hospital companies, Universal Health Services, Inc. ("UHS") has built an impressive record of achievement and performance. Growing steadily since its inception into an esteemed Fortune 500 corporation, UHS today has annual revenue exceeding $10 billion. In 2018, UHS was recognized as one of the World's Most Admired Companies by Fortune; ranked #268 on the Fortune 500; and in 2017, listed #275 in Forbes inaugural ranking of America's Top 500 Public Companies.

Our operating philosophy is as effective today as it was 40 years ago, enabling us to provide compassionate care to our patients and their loved ones: Build or acquire high quality hospitals in rapidly growing markets, invest in the people and equipment needed to allow each facility to thrive, and become the leading healthcare provider in each community we serve.

Headquartered in King of Prussia, PA, UHS has more than 83,000 employees and through its subsidiaries operates 350 inpatient acute care hospitals and behavioral health facilities and 32 outpatient and other facilities located in 37 states, Washington, D.C., the United Kingdom and 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, 2017 and in Item 2-Forward-Looking Statements and Risk Factors in our Form 10-Q for the quarterly period ended June 30, 2018), 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, EBITDA net of NCI and adjusted EBITDA net of NCI, 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 impacting our net income attributable to UHS, such as, changes in the reserve established in connection with our discussions with the Department of Justice, our adoption of ASU 2016-09, and other potential material items that are nonrecurring or non-operational in nature including, but not limited to, reserves for various matters including settlements, legal judgments and lawsuits, costs related to extinguishment of debt, gains/losses on sales of assets and businesses, impairments of long-lived and intangible 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 attributable to UHS, as determined in accordance with GAAP, and 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 Reports on Form 10-K for the year ended December 31, 2017 and Form 10-Q for the quarterly period ended June 30, 2018. 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

 

Nine months

 

ended September 30,

 

ended September 30,

 

2018

 

2017

 

2018

 

2017

               

Net revenues before provision for doubtful accounts

   

$2,775,790

     

$8,428,971

  Less: Provision for doubtful accounts

   

233,926

     

661,893

Net revenues

$2,648,913

 

2,541,864

 

$8,017,782

 

7,767,078

               

Operating charges:

             

   Salaries, wages and benefits

1,316,710

 

1,251,528

 

3,922,832

 

3,725,786

   Other operating expenses

651,442

 

628,523

 

1,896,745

 

1,868,076

   Supplies expense

285,201

 

268,089

 

867,863

 

820,242

   Depreciation and amortization

112,286

 

110,217

 

334,970

 

334,127

   Lease and rental expense

26,110

 

26,197

 

79,932

 

77,413

 

2,391,749

 

2,284,554

 

7,102,342

 

6,825,644

               

Income from operations

257,164

 

257,310

 

915,440

 

941,434

               

Interest expense, net

39,506

 

36,956

 

115,082

 

108,383

Other (income) expense, net

(11,409)

 

0

 

(26,717)

 

0

               

Income before income taxes

229,067

 

220,354

 

827,075

 

833,051

               

Provision for income taxes

54,186

 

74,992

 

192,814

 

286,774

               

Net income

174,881

 

145,362

 

634,261

 

546,277

               

Less:  Net income attributable to

             

noncontrolling interests ("NCI")

3,135

 

4,117

 

12,631

 

13,583

               

Net income attributable to UHS

$171,746

 

$141,245

 

$621,630

 

$532,694

               
               
               
               
               
               

Basic earnings per share attributable to UHS (a)

$1.85

 

$1.48

 

$6.63

 

$5.54

               

Diluted earnings per share attributable to UHS (a)

$1.84

 

$1.47

 

$6.60

 

$5.50

 

 

Universal Health Services, Inc.

Footnotes to Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)

               
 

Three months

 

Nine months

(a) Earnings per share calculation:

ended September 30,

 

ended September 30,

 

2018

 

2017

 

2018

 

2017

Basic and diluted:

             

Net income attributable to UHS

$171,746

 

$141,245

 

$621,630

 

$532,694

Less: Net income attributable to unvested restricted share grants

(317)

 

(81)

 

(813)

 

(257)

Net income attributable to UHS - basic and diluted

$171,429

 

$141,164

 

$620,817

 

$532,437

               

Weighted average number of common shares - basic

92,849

 

95,246

 

93,639

 

96,026

               

Basic earnings per share attributable to UHS:

$1.85

 

$1.48

 

$6.63

 

$5.54

               

Weighted average number of common shares

92,849

 

95,246

 

93,639

 

96,026

Add: Other share equivalents

481

 

731

 

459

 

771

Weighted average number of common shares and equiv. - diluted

93,330

 

95,977

 

94,098

 

96,797

               

Diluted earnings per share attributable to UHS:

$1.84

 

$1.47

 

$6.60

 

$5.50

 

 

 

Universal Health Services, Inc.

Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule")

For the Three Months ended September 30, 2018 and 2017

(in thousands, except per share amounts)

(unaudited)

               
               
               

Calculation of Earnings/Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA/Adjusted EBITDA net of NCI")

               
 

Three months ended

 

% Net

 

Three months ended

 

% Net

 

September 30, 2018

 

revenues

 

September 30, 2017

 

revenues

               

Net income attributable to UHS

$171,746

     

$141,245

   

   Depreciation and amortization

112,286

     

110,217

   

   Interest expense, net

39,506

     

36,956

   

   Provision for income taxes

54,186

     

74,992

   

EBITDA net of NCI

$377,724

 

14.3%

 

$363,410

 

14.3%

               

Other (income) expense, net

(11,409)

     

-

   

Increase in DOJ Reserve

47,981

     

-

   

Adjusted EBITDA net of NCI

$414,296

 

15.6%

 

$363,410

 

14.3%

               

Net revenues

$2,648,913

     

$2,541,864

   
               
               
               
               
               

Calculation of Adjusted Net Income Attributable to UHS

               
 

Three months ended

 

Three months ended

 

September 30, 2018

 

September 30, 2017

     

Per

     

Per

 

Amount

 

Diluted Share

 

Amount

 

Diluted Share

               

Net income attributable to UHS

$171,746

 

$1.84

 

$141,245

 

$1.47

Plus/minus after-tax adjustments:

             

Increase in DOJ Reserve, after-tax

36,578

 

0.39

 

-

 

-

Impact of ASU 2016-09

481

 

-

 

(487)

 

(0.01)

EHR depreciation & amortization, after-tax

-

 

-

 

2,636

 

0.03

Subtotal adjustments

37,059

 

0.39

 

2,149

 

0.02

Adjusted net income attributable to UHS

$208,805

 

$2.23

 

$143,394

 

$1.49

 

 

 

Universal Health Services, Inc.

Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule")

For the Nine Months ended September 30, 2018 and 2017

(in thousands, except per share amounts)

(unaudited)

               
               
               

Calculation of Earnings/Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA/Adjusted EBITDA net of NCI")

               
 

Nine months ended

 

% Net

 

Nine months ended

 

% Net

 

September 30, 2018

 

revenues

 

September 30, 2017

 

revenues

               

Net income attributable to UHS

$621,630

     

$532,694

   

   Depreciation and amortization

334,970

     

334,127

   

   Interest expense, net

115,082

     

108,383

   

   Provision for income taxes

192,814

     

286,774

   

EBITDA net of NCI

$1,264,496

 

15.8%

 

$1,261,978

 

16.2%

               

Other (income) expense, net

(26,717)

     

-

   

Increase in DOJ Reserve

70,432

     

-

   

Adjusted EBITDA net of NCI

$1,308,211

 

16.3%

 

$1,261,978

 

16.2%

               

Net revenues

$8,017,782

     

$7,767,078

   
               
               
               
               
               

Calculation of Adjusted Net Income Attributable to UHS

               
 

Nine months ended

 

Nine months ended

 

September 30, 2018

 

September 30, 2017

     

Per

     

Per

 

Amount

 

Diluted Share

 

Amount

 

Diluted Share

               

Net income attributable to UHS

$621,630

 

$6.60

 

$532,694

 

$5.50

Plus/minus after-tax adjustments:

             

Increase in DOJ Reserve, after-tax

53,694

 

0.57

 

-

 

-

Impact of ASU 2016-09

(1,056)

 

(0.01)

 

(8,619)

 

(0.09)

EHR depreciation & amortization, after-tax

-

 

-

 

11,747

 

0.12

Subtotal adjustments

52,638

 

0.56

 

3,128

 

0.03

Adjusted net income attributable to UHS

$674,268

 

$7.16

 

$535,822

 

$5.53

 

 

 

Universal Health Services, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

               
 

Three months

 

Nine months

 

ended September 30,

 

ended September 30,

 

2018

 

2017

 

2018

 

2017

               

Net income

$174,881

 

$145,362

 

$634,261

 

$546,277

Other comprehensive income (loss):

             

   Unrealized derivative gains (losses) on cash flow hedges

(1,924)

 

610

 

(345)

 

3,547

   Foreign currency translation adjustment

(12,323)

 

983

 

(15,480)

 

9,932

   Other

0

 

(2,515)

 

0

 

1,645

Other comprehensive income (loss) before tax

(14,247)

 

(922)

 

(15,825)

 

15,124

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

293

 

(711)

 

(82)

 

1,935

Total other comprehensive income (loss), net of tax

(14,540)

 

(211)

 

(15,743)

 

13,189

               

Comprehensive income

160,341

 

145,151

 

618,518

 

559,466

Less: Comprehensive income attributable to noncontrolling interests

3,135

 

4,117

 

12,631

 

13,583

Comprehensive income attributable to UHS

$157,206

 

$141,034

 

$605,887

 

$545,883

 

 

 

Universal Health Services, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

             
     

September 30,

   

December 31,

     

2018

   

2017

Assets

           

Current assets:

           

    Cash and cash equivalents

 

$

83,721

 

$

74,423

    Accounts receivable, net

   

1,543,348

   

1,500,898

    Supplies

   

144,471

   

136,177

    Other current assets

   

169,713

   

86,504

          Total current assets

   

1,941,253

   

1,798,002

             

Property and equipment

   

8,459,668

   

7,921,126

Less: accumulated depreciation

   

(3,623,049)

   

(3,349,289)

     

4,836,619

   

4,571,837

             

Other assets:

           

    Goodwill

   

3,852,851

   

3,825,157

    Deferred charges

   

6,933

   

9,787

    Deferred income taxes

   

2,944

   

3,007

    Other

   

632,985

   

554,038

Total Assets

 

$

11,273,585

 

$

10,761,828

             

Liabilities and Stockholders' Equity

           

Current liabilities:

           

    Current maturities of long-term debt

 

$

342,425

 

$

545,619

    Accounts payable and accrued liabilities

   

1,435,592

   

1,284,081

    Federal and state taxes

   

252

   

18,334

          Total current liabilities

   

1,778,269

   

1,848,034

             

Other noncurrent liabilities

   

319,113

   

306,304

Long-term debt

   

3,683,919

   

3,494,390

Deferred income taxes

   

46,765

   

54,962

             

Redeemable noncontrolling interest

   

6,389

   

6,702

             

UHS common stockholders' equity

   

5,363,745

   

4,989,514

Noncontrolling interest

   

75,385

   

61,922

          Total equity

   

5,439,130

   

5,051,436

             

Total Liabilities and Stockholders' Equity

 

$

11,273,585

 

$

10,761,828

 

 

 

Universal Health Services, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

Nine months

 

ended September 30,

 

2018

 

2017

       

Cash Flows from Operating Activities:

     

  Net income

$634,261

 

$546,277

  Adjustments to reconcile net income to net 

     

cash provided by operating activities:

     

Depreciation & amortization

335,002

 

334,127

Stock-based compensation expense

50,645

 

42,838

Gain on sale of assets and businesses

(2,513)

 

0

  Changes in assets & liabilities, net of effects from

     

acquisitions and dispositions:

     

   Accounts receivable

(74,129)

 

10,090

   Accrued interest

(5,808)

 

(5,747)

   Accrued and deferred income taxes 

(53,165)

 

(20,177)

   Other working capital accounts 

89,157

 

23,729

   Other assets and deferred charges

(37,133)

 

(21,346)

   Other 

23,008

 

(54,664)

   Accrued insurance expense, net of commercial premiums paid

69,386

 

80,814

   Payments made in settlement of self-insurance claims

(53,223)

 

(57,224)

          Net cash provided by operating activities

975,488

 

878,717

       

Cash Flows from Investing Activities:

     

   Property and equipment additions, net of disposals

(521,349)

 

(418,693)

   Acquisition of property and businesses

(108,016)

 

(19,610)

   Proceeds received from sales of assets and businesses

13,502

 

0

   Costs incurred for purchase and implementation of information technology applications

(25,487)

 

(26,401)

   Decrease (increase) in capital reserves of commercial insurance subsidiary

100

 

(3,000)

   Investment in, and advances to,  joint venture

(13,910)

 

0

          Net cash used in investing activities

(655,160)

 

(467,704)

       

Cash Flows from Financing Activities:

     

   Reduction of long-term debt

(99,969)

 

(143,526)

   Additional borrowings

82,400

 

43,124

   Financing costs

(774)

 

(34)

   Repurchase of common shares

(261,256)

 

(242,870)

   Dividends paid

(28,086)

 

(28,776)

   Issuance of common stock

7,737

 

7,637

   Profit distributions to noncontrolling interests

(8,243)

 

(15,924)

          Net cash used in financing activities

(308,191)

 

(380,369)

       

   Effect of exchange rate changes on cash, cash equivalents and restricted cash

(1,742)

 

1,485

Increase in cash, cash equivalents and restricted cash

10,395

 

32,129

Cash, cash equivalents and restricted cash, beginning of period

167,297

 

121,950

Cash, cash equivalents and restricted cash, end of period

$177,692

 

$154,079

       

Supplemental Disclosures of Cash Flow Information:

     

  Interest paid

$114,162

 

$107,442

       

  Income taxes paid, net of refunds

$247,486

 

$305,885

       

  Noncash purchases of property and equipment

$88,932

 

$64,958

 

 

 

Universal Health Services, Inc.

Supplemental Statistical Information

(unaudited)

                   
                   
                   
         

 % Change 

 

 % Change 

   
         

Quarter ended

 

9 months ended

   

Same Facility:

       

9/30/2018

 

9/30/2018

   
                   

Acute Care Hospitals

                 

Revenues

       

6.7%

 

4.5%

   

Adjusted Admissions

       

1.5%

 

2.0%

   

Adjusted Patient Days

       

4.1%

 

4.8%

   

Revenue Per Adjusted Admission

     

6.6%

 

4.2%

   

Revenue Per Adjusted Patient Day

     

3.9%

 

1.5%

   
                   
                   
                   

Behavioral Health Hospitals

                 

Revenues

       

2.5%

 

2.8%

   

Adjusted Admissions

       

4.7%

 

2.5%

   

Adjusted Patient Days

       

0.6%

 

0.2%

   

Revenue Per Adjusted Admission

     

-1.9%

 

0.7%

   

Revenue Per Adjusted Patient Day

     

2.1%

 

3.0%

   
                   
                   
                   
                   

UHS Consolidated

   

Third quarter ended

 

Nine months ended

     

9/30/2018

 

9/30/2017

 

9/30/2018

 

9/30/2017

                   

Revenues

   

$2,648,913

 

$2,541,864

 

$8,017,782

 

$7,767,078

EBITDA net of NCI

   

$377,724

 

$363,410

 

$1,264,496

 

$1,261,978

EBITDA Margin net of NCI

   

14.3%

 

14.3%

 

15.8%

 

16.2%

Adjusted EBITDA net of NCI

   

$414,296

 

$363,410

 

$1,308,211

 

$1,261,978

Adjusted EBITDA Margin net of NCI

 

15.6%

 

14.3%

 

16.3%

 

16.2%

                   
                   

Cash Flow From Operations

   

$346,227

 

$344,921

 

$975,488

 

$878,717

Days Sales Outstanding

   

54

 

53

 

53

 

51

Capital Expenditures  

   

$151,097

 

$156,241

 

$521,349

 

$418,693

                   

Debt 

           

$4,026,344

 

$4,040,153

UHS' Shareholders Equity

           

$5,363,745

 

$4,865,212

Debt / Total Capitalization

           

42.9%

 

45.4%

Debt / EBITDA net of NCI (1)

           

2.35

 

2.41

Debt / Adjusted EBITDA net of NCI (1)

       

2.29

 

2.41

Debt / Cash From Operations (1)

           

3.15

 

3.76

                   

(1)  Latest 4 quarters

                 

 

 

 

Universal Health Services, Inc.

Acute Care Hospital Services

For the three and nine months ended

September 30, 2018 and 2017

(in thousands)

                                 
                                 

Same Facility Basis - Acute Care Hospital Services

                             
                                 
   

Three months ended

 

Three months ended

 

Nine months ended

 

Nine months ended

   

September 30, 2018

 

September 30, 2017

 

September 30, 2018

 

September 30, 2017

   

Amount

 

% of Net
Revenues 

 

Amount

 

% of Net
Revenues 

 

Amount

 

% of Net
Revenues 

 

Amount

 

% of Net
Revenues 

Net revenues before provision for doubtful accounts

         

$1,492,502

             

$4,563,562

   

Less: Provision for doubtful accounts

         

204,979

             

573,331

   

Net revenues

 

$1,373,357

 

100.0%

 

1,287,523

 

100.0%

 

$4,171,735

 

100.0%

 

3,990,231

 

100.0%

Operating charges:

                               

Salaries, wages and benefits

 

596,731

 

43.5%

 

566,107

 

44.0%

 

1,762,273

 

42.2%

 

1,672,670

 

41.9%

Other operating expenses

 

311,462

 

22.7%

 

313,200

 

24.3%

 

926,659

 

22.2%

 

942,115

 

23.6%

Supplies expense

 

235,271

 

17.1%

 

217,035

 

16.9%

 

718,542

 

17.2%

 

670,443

 

16.8%

Depreciation and amortization

 

68,647

 

5.0%

 

64,833

 

5.0%

 

207,962

 

5.0%

 

194,490

 

4.9%

Lease and rental expense

 

14,052

 

1.0%

 

14,605

 

1.1%

 

43,043

 

1.0%

 

43,066

 

1.1%

Subtotal-operating expenses

 

1,226,163

 

89.3%

 

1,175,780

 

91.3%

 

3,658,479

 

87.7%

 

3,522,784

 

88.3%

Income from operations

 

147,194

 

10.7%

 

111,743

 

8.7%

 

513,256

 

12.3%

 

467,447

 

11.7%

Interest expense, net

 

382

 

0.0%

 

639

 

0.0%

 

1,344

 

0.0%

 

2,074

 

0.1%

Other (income) expense, net

 

-

 

 

-

 

-

 

(2,498)

 

(0.1)%

 

-

 

-

Income before income taxes

 

146,812

 

10.7%

 

111,104

 

8.6%

 

514,410

 

12.3%

 

465,373

 

11.7%

                                 
                                 
                                 

All Acute Care Hospital Services

                               
                                 
   

Three months ended

 

Three months ended

 

Nine months ended

 

Nine months ended

   

September 30, 2018

 

September 30, 2017

 

September 30, 2018

 

September 30, 2017

   

Amount

 

% of Net
Revenues

 

Amount

 

% of Net
Revenues 

 

Amount

 

% of Net
Revenues

 

Amount

 

% of Net
Revenues 

Net revenues before provision for doubtful accounts

         

$1,521,727

             

$4,646,083

   

Less: Provision for doubtful accounts

         

204,979

             

573,331

   

Net revenues

 

$1,383,050

 

100.0%

 

1,316,748

 

100.0%

 

$4,232,673

 

100.0%

 

4,072,752

 

100.0%

Operating charges:

                               

Salaries, wages and benefits

 

596,932

 

43.2%

 

566,214

 

43.0%

 

1,762,826

 

41.6%

 

1,672,909

 

41.1%

Other operating expenses

 

320,317

 

23.2%

 

342,486

 

26.0%

 

988,279

 

23.3%

 

1,018,454

 

25.0%

Supplies expense

 

235,272

 

17.0%

 

217,035

 

16.5%

 

718,543

 

17.0%

 

670,444

 

16.5%

Depreciation and amortization

 

68,647

 

5.0%

 

69,062

 

5.2%

 

207,962

 

4.9%

 

213,417

 

5.2%

Lease and rental expense

 

14,052

 

1.0%

 

14,605

 

1.1%

 

43,043

 

1.0%

 

43,066

 

1.1%

Subtotal-operating expenses

 

1,235,220

 

89.3%

 

1,209,402

 

91.8%

 

3,720,653

 

87.9%

 

3,618,290

 

88.8%

Income from operations

 

147,830

 

10.7%

 

107,346

 

8.2%

 

512,020

 

12.1%

 

454,462

 

11.2%

Interest expense, net

 

382

 

0.0%

 

639

 

0.0%

 

1,344

 

0.0%

 

2,074

 

0.1%

Other (income) expense, net

 

-

 

 

-

 

-

 

(2,498)

 

(0.1)%

 

-

 

-

Income before income taxes

 

147,448

 

10.7%

 

106,707

 

8.1%

 

513,174

 

12.1%

 

452,388

 

11.1%

                                 
                                 

We believe that providing our results on a "Same Facility" basis (which is a non-GAAP measure), which includes the operating results for facilities and businesses operated in both the current year and prior year periods, is helpful to our investors as a measure of our operating performance. Our Same Facility results also neutralize (if applicable), the effect of material items that are nonrecurring or non-operational in nature including items such as, but not limited to, reserves for various matters, settlements, legal judgments and lawsuits, cost related to extinguishment of debt, gains/losses on sales of assets and businesses, impairments of long-lived and intangible assets, the impact of the EHR applications (in 2017) and other amounts that may be reflected in the current or prior year financial statements that relate to prior periods. Our Same Facility basis results exclude from net revenues and other operating expenses, provider tax assessments incurred in each period. However, these provider tax assessments are included in net revenues and other operating expenses as reflected in the table under All Acute Care Hospital Services. The provider tax assessments had no impact on the income before income taxes as reflected on the above tables since the amounts offset between net revenues and other operating expenses. To obtain a complete understanding of our financial performance, the Same Facility results should be examined in connection with our net income as determined in accordance with GAAP and as presented herein and the condensed consolidated financial statements and notes thereto as contained in our Form 10-K for the year ended December 31, 2017 and Form 10-Q for the quarter ended June 30, 2018.

                                 

The All Acute Care Hospital Services table summarizes the results of operations for all our acute care operations during the periods presented. These amounts include: (i) our acute care results on a same facility basis, as indicated above; (ii) the impact of the implementation of EHR applications at our acute care hospitals (in 2017); (iii) the impact of provider tax assessments which increased net revenues and other operating expenses but had no impact on income before income taxes, and; (iv) certain other amounts including the results of facilities acquired or opened during the last twelve months.

 

 

 

Universal Health Services, Inc.

Behavioral Health Care Services

For the three and nine months ended

September 30, 2018 and 2017

(in thousands)

                                 
                                 

Same Facility - Behavioral Health Care Services

                               
                                 
   

Three months ended

 

Three months ended

 

Nine months ended

 

Nine months ended

   

September 30, 2018

 

September 30, 2017

 

September 30, 2018

 

September 30, 2017

   

Amount

 

% of Net
Revenues 

 

Amount

 

% of Net
Revenues 

 

Amount

 

% of Net
Revenues 

 

Amount

 

% of Net
Revenues 

Net revenues before provision for doubtful accounts

         

$1,214,673

             

$3,657,858

   

Less: Provision for doubtful accounts

         

24,363

             

83,161

   

Net revenues

 

$1,220,393

 

100.0%

 

1,190,310

 

100.0%

 

$3,673,759

 

100.0%

 

3,574,697

 

100.0%

Operating charges:

                               

Salaries, wages and benefits

 

643,435

 

52.7%

 

617,950

 

51.9%

 

1,916,808

 

52.2%

 

1,821,961

 

51.0%

Other operating expenses

 

236,179

 

19.4%

 

235,596

 

19.8%

 

700,694

 

19.1%

 

702,049

 

19.6%

Supplies expense

 

49,233

 

4.0%

 

50,043

 

4.2%

 

146,960

 

4.0%

 

146,609

 

4.1%

Depreciation and amortization

 

38,710

 

3.2%

 

36,918

 

3.1%

 

112,882

 

3.1%

 

108,167

 

3.0%

Lease and rental expense

 

11,619

 

1.0%

 

11,048

 

0.9%

 

35,548

 

1.0%

 

32,760

 

0.9%

Subtotal-operating expenses

 

979,176

 

80.2%

 

951,555

 

79.9%

 

2,912,892

 

79.3%

 

2,811,546

 

78.7%

Income from operations

 

241,217

 

19.8%

 

238,755

 

20.1%

 

760,867

 

20.7%

 

763,151

 

21.3%

Interest expense, net

 

398

 

0.0%

 

428

 

0.0%

 

1,235

 

0.0%

 

1,590

 

0.0%

Other (income) expense, net

 

(1,258)

 

(0.1)%

 

-

 

-

 

-

 

 

-

 

-

Income before income taxes

 

242,077

 

19.8%

 

238,327

 

20.0%

 

759,632

 

20.7%

 

761,561

 

21.3%

                                 
                                 
                                 

All Behavioral Health Care Services

                               
                                 
   

Three months ended

 

Three months ended

 

Nine months ended

 

Nine months ended

   

September 30, 2018

 

September 30, 2017

 

September 30, 2018

 

September 30, 2017

   

Amount

 

% of Net
Revenues

 

Amount

 

% of Net
Revenues 

 

Amount

 

% of Net
Revenues

 

Amount

 

% of Net
Revenues 

Net revenues before provision for doubtful accounts

         

$1,249,585

             

$3,769,879

   

Less: Provision for doubtful accounts

         

25,037

             

84,649

   

Net revenues

 

$1,262,472

 

100.0%

 

1,224,548

 

100.0%

 

$3,774,551

 

100.0%

 

3,685,230

 

100.0%

Operating charges:

                               

Salaries, wages and benefits

 

661,240

 

52.4%

 

632,492

 

51.7%

 

1,955,220

 

51.8%

 

1,869,170

 

50.7%

Other operating expenses

 

262,337

 

20.8%

 

261,959

 

21.4%

 

778,698

 

20.6%

 

784,678

 

21.3%

Supplies expense

 

49,958

 

4.0%

 

50,947

 

4.2%

 

148,965

 

3.9%

 

149,967

 

4.1%

Depreciation and amortization

 

40,718

 

3.2%

 

38,574

 

3.2%

 

118,948

 

3.2%

 

113,083

 

3.1%

Lease and rental expense

 

11,931

 

0.9%

 

11,475

 

0.9%

 

36,489

 

1.0%

 

33,993

 

0.9%

Subtotal-operating expenses

 

1,026,184

 

81.3%

 

995,447

 

81.3%

 

3,038,320

 

80.5%

 

2,950,891

 

80.1%

Income from operations

 

236,288

 

18.7%

 

229,101

 

18.7%

 

736,231

 

19.5%

 

734,339

 

19.9%

Interest expense, net

 

397

 

0.0%

 

428

 

0.0%

 

1,234

 

0.0%

 

1,590

 

0.0%

Other (income) expense, net

 

1,721

 

0.1%

 

-

 

-

 

636

 

0.0%

 

-

 

-

Income before income taxes

 

234,170

 

18.5%

 

228,673

 

18.7%

 

734,361

 

19.5%

 

732,749

 

19.9%

                                 
                                 

We believe that providing our results on a "Same Facility" basis (which is a non-GAAP measure), which includes the operating results for facilities and businesses operated in both the current year and prior year periods, is helpful to our investors as a measure of our operating performance. Our Same Facility results also neutralize (if applicable), the effect of material items that are nonrecurring or non-operational in nature including items such as, but not limited to, reserves for various matters, settlements, legal judgments and lawsuits, cost related to extinguishment of debt, gains/losses on sales of assets and businesses, impairments of long-lived and intangible assets, and other amounts that may be reflected in the current or prior year financial statements that relate to prior periods. Our Same Facility basis results exclude from net revenues and other operating expenses, provider tax assessments incurred in each period.However, these provider tax assessments are included in net revenues and other operating expenses as reflected in the table under All Behavioral Health Care Services. The provider tax assessments had no impact on the income before income taxes as reflected on the above tables since the amounts offset between net revenues and other operating expenses. To obtain a complete understanding of our financial performance, the Same Facility results should be examined in connection with our net income as determined in accordance with GAAP and as presented herein and in the condensed consolidated financial statements and notes thereto as contained in our Form 10-K for the year ended December 31, 2017 and Form 10-Q for the quarter ended June 30, 2018.

                                 

The All Behavioral Health Care Services table summarizes the results of operations for all our behavioral health care facilities during the periods presented. These amounts include: (i) our behavioral health results on a same facility basis, as indicated above; (ii) the impact of provider tax assessments which increased net revenues and other operating expenses but had no impact on income before income taxes, and; (iii) certain other amounts including the results of facilities acquired or opened during the last twelve months.

 

 

 

Universal Health Services, Inc.

Selected Hospital Statistics

For the three months ended

September 30, 2018 and 2017

                         
                         

AS REPORTED:

                       
                         
                         
   

ACUTE

 

BEHAVIORAL HEALTH

   

9/30/18

 

9/30/17

 

%  change

 

9/30/18

 

9/30/17

 

%  change

                         

Hospitals owned and leased

 

26

 

26

 

0.0%

 

324

 

298

 

8.7%

Average licensed beds

 

6,213

 

6,147

 

1.1%

 

23,612

 

23,173

 

1.9%

Average available beds

 

6,037

 

5,975

 

1.0%

 

23,528

 

23,093

 

1.9%

Patient days

 

336,093

 

324,697

 

3.5%

 

1,618,280

 

1,594,487

 

1.5%

Average daily census

 

3,653.2

 

3,529.3

 

3.5%

 

17,590.0

 

17,331.4

 

1.5%

Occupancy-licensed beds

 

58.8%

 

57.4%

 

2.4%

 

74.5%

 

74.8%

 

-0.4%

Occupancy-available beds

 

60.5%

 

59.1%

 

2.4%

 

74.8%

 

75.1%

 

-0.4%

Admissions

 

74,357

 

73,692

 

0.9%

 

122,212

 

116,301

 

5.1%

Length of stay

 

4.5

 

4.4

 

2.6%

 

13.2

 

13.7

 

-3.4%

                         

Inpatient revenue

 

$6,009,303

 

$5,344,625

 

12.4%

 

$2,459,078

 

$2,257,231

 

8.9%

Outpatient revenue

 

3,694,389

 

3,199,066

 

15.5%

 

242,167

 

236,559

 

2.4%

Total patient revenue

 

9,703,692

 

8,543,691

 

13.6%

 

2,701,245

 

2,493,790

 

8.3%

Other revenue

 

99,094

 

113,346

 

-12.6%

 

51,096

 

50,143

 

1.9%

Gross hospital revenue

 

9,802,786

 

8,657,037

 

13.2%

 

2,752,341

 

2,543,933

 

8.2%

Total deductions

 

8,419,736

 

7,135,310

 

18.0%

 

1,489,869

 

1,294,348

 

15.1%

Net hospital revenue before 

                       

  provision for doubtful accounts

 

1,383,050

 

1,521,727

 

-9.1%

 

1,262,472

 

1,249,585

 

1.0%

Provision for doubtful accounts

 

0

 

204,979

 

-100.0%

 

0

 

25,037

 

-100.0%

Net hospital revenue 

 

$1,383,050

 

$1,316,748

 

5.0%

 

$1,262,472

 

$1,224,548

 

3.1%

                         
                         

SAME FACILITY: