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Universal Health Services, Inc. Reports 2012 First Quarter Financial Results
Consolidated Results of Operations, As Reported - Three-month periods ended March 31, 2012 and 2011:

KING OF PRUSSIA, Pa., April 26, 2012 /PRNewswire/ -- Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income attributable to UHS was $128.6 million, or $1.31 per diluted share, during the first quarter of 2012 as compared to $114.2 million, or $1.15 per diluted share, during the comparable quarter of 2011.

Net revenues increased 4% to $1.83 billion during the first quarter of 2012 as compared to $1.76 billion during the first quarter of 2011.

Consolidated Results of Operations, As Adjusted – Three-month period ended March 31, 2012:
After adjusting the reported results for the three-month period ended March 31, 2012 to neutralize the net favorable impact of the items mentioned below, and as reflected on the attached Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information ("Supplemental Schedule"), our adjusted net income attributable to UHS was $110.7 million, or $1.13 per diluted share, during the first quarter of 2012. There were no such adjustments required to our reported net income attributable to UHS for the first quarter of 2011.

As previously disclosed on April 12, 2012, and as indicated on the attached Supplemental Schedule, 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:

  • a favorable after-tax impact of $18.8 million, or $.19 per diluted share, resulting from an agreement entered into 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 (referred to collectively as "HHS") that is expected to result in an aggregate cash payment to us of approximately $36 million, the majority of which we expect to receive on or about June 30, 2012. After reductions for estimated related expenses and the portion attributable to third-party non-controlling ownership interests, this agreement, which was part of an industry-wide settlement with HHS related to litigation that was pending for several years contending that acute care hospitals in the U.S. were underpaid from the Medicare inpatient prospective payment system during a number of prior years, favorably impacted our pre-tax consolidated financial results by $30.2 million during the first quarter of 2012;
  • a favorable after-tax impact of $4.3 million, or $.04 per diluted share, representing the 2011 portion of the net Medicaid supplemental reimbursements we expect to receive pursuant to the Oklahoma Supplemental Hospital Offset Payment Program ("SHOPP"). Pursuant to the terms and conditions of the SHOPP program, during the state's fiscal years of 2012 and 2013, we estimate that we are entitled to annual net reimbursements of approximately $14 million, retroactive to July 1, 2011;
  • an aggregate unfavorable after-tax impact of $5.1 million, or $.05 per diluted share, resulting from: (i) 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; (ii) 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, 2012 and 2011:
At our acute care hospitals owned during both periods ("same facility basis"), adjusted admissions (adjusted for outpatient activity) increased 1.6% and adjusted patient days increased 1.0% during the first quarter of 2012, as compared to the first quarter of 2011. Net revenues at these facilities increased 0.8% during the first quarter of 2012 as compared to the comparable quarter of the prior year. At these facilities, net revenue per adjusted admission decreased 0.8% while net revenue per adjusted patient day decreased 0.2% during the first quarter of 2012 as compared to the comparable quarter of the prior year. The declines in net revenue per adjusted admission and adjusted patient day were largely due to difficult comparisons to the prior year quarter when our net revenues were favorably impacted by positive changes in payor mix and acuity of patients treated at our hospitals and a stabilization of uninsured patient volumes. On a same facility basis, the operating margin at our acute care hospitals decreased to 18.6% during the first quarter of 2012 as compared to 20.5% during the first quarter of 2011. 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 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 $315 million and $223 million during the three-month periods ended March 31, 2012 and 2011, respectively.

Behavioral Health Care Services - Three-month periods ended March 31, 2012 and 2011:
At our behavioral health care facilities, on a same facility basis, adjusted admissions increased 9.2% while adjusted patient days increased 2.8% during the first quarter of 2012 as compared to the first quarter of 2011. Net revenues at these facilities increased 5.3% during the first quarter of 2012 as compared to the comparable quarter in the prior year. At these facilities, net revenue per adjusted admission decreased 3.6% while net revenue per adjusted patient day increased 2.4% during the first quarter of 2012 over the comparable prior year quarter. The operating margin at our behavioral health care facilities owned during both periods increased to 26.8% during the first quarter of 2012 as compared to 26.5% during the first quarter of 2011.

Accounting for HITECH Act incentive payments 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 facilities and will continue to do so, on a facility-by-facility basis, until completion which is scheduled to occur by the end of 2013. Our acute care hospitals will be eligible for Medicare and Medicaid EHR incentive payments upon implementation of the EHR application, assuming they meet the "meaningful use" criteria.

There are no EHR-related revenues included in our consolidated results of operations for the three-month periods ended March 31, 2012 and 2011. Although we received an aggregate of approximately $17 million of EHR incentive payments as of March 31, 2012, related to state Medicaid programs, these payments have been reflected as deferred revenue on our consolidated balance sheet as of March 31, 2012. These payments will be recorded as revenue on our consolidated statements of income in the periods in which the applicable hospitals are deemed to have met the "meaningful use" criteria. Although our results of operations for the three-month periods ended March 31, 2012 and 2011 include certain EHR-related expenses, the amounts did not have a material impact on our consolidated financial results.

Divestiture of behavioral health care facility:
In January, 2012, pursuant to our agreement with the Federal Trade Commission in connection with our November, 2010 acquisition of Psychiatric Solutions Inc., we received approximately $50 million of cash proceeds in connection with the divestiture of the Hospital San Juan Capestrano, a 108-bed facility located in Rio Piedras, Puerto Rico. The net pre-tax gain on the divestiture of this facility did not have a material impact on our consolidated results of operations for the three-month period ended March 31, 2012.

Conference call information:
We will hold a conference call for investors and analysts at 9:00 a.m. eastern time on April 27, 2012. The dial-in number is 1-877-648-7971. A live broadcast of the call will be available on our website at www.uhsinc.com. The webcast will also be available through Thompson StreetEvents Network at http://www.earnings.com or http://www.streetevents.com, a password-protected event management site for institutional investors. A digital recording of the conference call will be available following the completion of the conference call on April 27, 2012 on our website at www.uhsinc.com.

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, 2011), 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.

During the first quarter of 2012, we adopted the Financial Accounting Standards Board's Accounting Standards Update No. 2011-07, "Health Care Entities (Topic 954): Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities," which required health care entities to change the presentation in their statement of operations by reclassifying the provision for bad debts associated with patient service revenue from an operating expense to a deduction from patient service revenue (net of contractual allowances and discounts). As a result, the provision for doubtful accounts for our acute care and behavioral health care facilities is reflected as a deduction for net revenues in the accompanying consolidated statements of income for the three-month periods ended March 31, 2012 and 2011. The adoption of this standard had no impact on our financial position or results of operations.

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 revenues 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 items that are nonrecurring or non-operational in nature including items such as, but not limited to, 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, 2011. 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,



2012


2011






Net revenues before provision for doubtful accounts


$1,977,003


$1,910,528

  Less: Provision for doubtful accounts


151,714


153,116

Net revenues


1,825,289


1,757,412






Operating charges:





   Salaries, wages and benefits


889,506


845,864

   Other operating expenses


359,541


349,446

   Supplies expense


209,532


207,170

   Depreciation and amortization


73,820


71,351

   Lease and rental expense


23,862


23,168



1,556,261


1,496,999






Income from operations


269,028


260,413






Interest expense, net


46,710


56,417






Income before income taxes


222,318


203,996






Provision for income taxes


79,748


74,009






Net income


142,570


129,987






Less:  Income attributable to





noncontrolling interests


13,963


15,794






Net income attributable to UHS


$128,607


$114,193































Basic earnings per share attributable to UHS (a)


$1.33


$1.17






Diluted earnings per share attributable to UHS (a)


$1.31


$1.15

 

 

Universal Health Services, Inc.

Footnotes to Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)






Three months


ended March 31,


2012


2011





(a) Earnings per share calculation:








Basic and diluted:




Net income attributable to UHS

$128,607


$114,193

Less: Net income attributable to unvested restricted share grants

(168)


(149)

Net income attributable to UHS - basic and diluted

$128,439


$114,044





Weighted average number of common shares - basic

96,593


97,381





Basic earnings per share attributable to UHS:

$1.33


$1.17





Weighted average number of common shares

96,593


97,381

Add: Other share equivalents

1,198


1,487

Weighted average number of common shares and equiv. - diluted

97,791


98,868





Diluted earnings per share attributable to UHS:

$1.31


$1.15

 

 

Universal Health Services, Inc.


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


For the three months ended March 31, 2012 and 2011


(in thousands, except per share amounts)


(unaudited)





























Calculation of "EBITDA"












Three months ended


Three months ended



March 31, 2012


March 31, 2011




















Net revenues before provision for doubtful accounts

$1,977,003




$1,910,528




  Less: Provision for doubtful accounts

151,714




153,116




Net revenues

1,825,289


100.0%


1,757,412


100.0%











Operating charges:









   Salaries, wages and benefits

889,506


48.7%


845,864


48.1%


   Other operating expenses

359,541


19.7%


349,446


19.9%


   Supplies expense

209,532


11.5%


207,170


11.8%



1,458,579


79.9%


1,402,480


79.8%











Operating income/margin ("EBITDAR")

366,710


20.1%


354,932


20.2%











   Lease and rental expense

23,862




23,168




   Income attributable to noncontrolling interests

13,963




15,794













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

328,885


18.0%


315,970


18.0%











   Depreciation and amortization

73,820




71,351




   Interest expense, net

46,710




56,417













Income before income taxes 

208,355




188,202













Provision for income taxes

79,748




74,009




Net income attributable to UHS

$128,607




$114,193






















Calculation of Adjusted Net Income Attributable to UHS












Three months ended


Three months ended



March 31, 2012


March 31, 2011





Per




Per



Amount


Diluted Share


Amount


Diluted Share


Calculation of Adjusted Net Income Attributable to UHS









Net income attributable to UHS

$128,607


$1.31


$114,193


$1.15


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

$110,674


$1.13


$114,193


$1.15


 

 

Universal Health Services, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)








Three months



ended March 31,



2012


2011






Net income


$142,570


$129,987

Other comprehensive income (loss):





   Unrealized derivative gains on cash flow hedges


1,615


2,307

   Amortization of terminated hedge


(84)


(84)

Other comprehensive income before tax


1,531


2,223

Income tax expense related to items of other comprehensive income


582


860

Total other comprehensive income, net of tax


949


1,363






Comprehensive income


143,519


131,350

Less: Comprehensive income attributable to noncontrolling interests


13,963


15,794

Comprehensive income attributable to UHS


$129,556


$115,556

 

 

Universal Health Services, Inc.


Condensed Consolidated Balance Sheets


(in thousands)


(unaudited)













March 31,



December 31,





2012



2011


Assets








Current assets:








    Cash and cash equivalents


$

41,999


$

41,229


    Accounts receivable, net



1,116,634



969,802


    Supplies



96,974



96,775


    Deferred income taxes



115,916



108,324


    Other current assets



91,622



99,859


    Assets of facilities held for sale



0



48,916


          Total current assets



1,463,145



1,364,905










Property and equipment



5,185,774



5,106,160


Less: accumulated depreciation



(1,881,538)



(1,818,180)





3,304,236



3,287,980










Other assets:








    Goodwill



2,629,765



2,627,602


    Deferred charges



105,870



111,780


    Other



280,265



272,978




$

7,783,281


$

7,665,245










Liabilities and Stockholders' Equity








Current liabilities:








    Current maturities of long-term debt


$

2,512


$

2,479


    Accounts payable and accrued liabilities



814,173



832,125


    Federal and state taxes



75,305



0


    Liabilities of facilities held for sale



0



2,329


          Total current liabilities



891,990



836,933










Other noncurrent liabilities



403,071



401,908


Long-term debt



3,581,844



3,651,428


Deferred income taxes



198,645



209,592










Redeemable noncontrolling interest



228,928



218,266










UHS common stockholders' equity



2,427,312



2,296,352


Noncontrolling interest



51,491



50,766


          Total equity



2,478,803



2,347,118












$

7,783,281


$

7,665,245


 

 

Universal Health Services, Inc.


Consolidated Statements of Cash Flows


(in thousands)


(unaudited)



Three months



ended March 31,



2012


2011







Cash Flows from Operating Activities:





  Net income

$142,570


$129,987


  Adjustments to reconcile net income to net 





cash provided by operating activities:





Depreciation & amortization

73,820


71,526


Stock-based compensation expense

5,486


3,954


  Changes in assets & liabilities, net of effects from





acquisitions and dispositions:





   Accounts receivable

(146,670)


(103,919)


   Accrued interest

13,280


12,875


   Accrued and deferred income taxes 

75,471


68,994


   Other working capital accounts 

(48,074)


(27,056)


   Other assets and deferred charges

13,620


6,777


   Other 

(2,082)


11,208


   Accrued insurance expense, net of commercial premiums paid

24,581


23,744


   Payments made in settlement of self-insurance claims

(18,279)


(14,913)


          Net cash provided by operating activities

133,723


183,177







Cash Flows from Investing Activities:





   Property and equipment additions, net of disposals

(92,563)


(56,558)


   Proceeds received from sale of assets and businesses

53,461


991


   Costs incurred for purchase and implementation of electronic health records application

(14,501)


(8,145)


          Net cash used in investing activities

(53,603)


(63,712)







Cash Flows from Financing Activities:





   Reduction of long-term debt

(70,942)


(136,403)


   Additional borrowings

0


73,500


   Financing costs

0


(23,140)


   Repurchase of common shares

(2,017)


(3,170)


   Dividends paid

(4,832)


(4,876)


   Issuance of common stock

1,016


1,251


   Profit distributions to noncontrolling interests

(2,575)


(4,025)


          Net cash used in financing activities

(79,350)


(96,863)







Increase in cash and cash equivalents

770


22,602


Cash and cash equivalents, beginning of period

41,229


29,474


Cash and cash equivalents, end of period

$41,999


$52,076







Supplemental Disclosures of Cash Flow Information:





  Interest paid

$25,945


$37,130







  Income taxes paid, net of refunds

$3,419


$4,527







 

 

Universal Health Services, Inc.

Supplemental Statistical Information

(unaudited)






















 % Change 








Quarter Ended



Same Facility:





3/31/2012











Acute Care Hospitals








Revenues





0.8%



Adjusted Admissions





1.6%



Adjusted Patient Days





1.0%



Revenue Per Adjusted Admission





-0.8%



Revenue Per Adjusted Patient Day





-0.2%



















Behavioral Health Hospitals
















Revenues





5.3%



Adjusted Admissions





9.2%



Adjusted Patient Days





2.8%



Revenue Per Adjusted Admission





-3.6%



Revenue Per Adjusted Patient Day





2.4%



































UHS Consolidated





First Quarter Ended






3/31/2012


3/31/2011









Revenues





$1,825,289


$1,757,412

EBITDA   (1)





$328,885


$315,970

EBITDA Margin (1)





18.0%


18.0%









Cash Flow From Operations





$133,723


$183,177

Days Sales Outstanding





56


48

Capital Expenditures





$92,563


$56,558









Debt 





3,584,356


3,853,892

Shareholders Equity





2,427,312


2,094,393

Debt / Total Capitalization





59.6%


64.8%

Debt / EBITDA (2)





3.10


4.43

Debt / Cash From Operations (2)





5.36


7.07

















Acute Care EBITDAR Margin (3)





18.6%


20.5%

Behavioral Health EBITDAR Margin(3)





26.3%


26.1%

















(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, 2012 AND 2011






















AS REPORTED:
































                Acute 



  Behavioral Health





03/31/12

03/31/11

%


03/31/12

03/31/11

%












Hospitals owned and leased


21

21

0.0%


175

180

-2.8%


Average licensed beds


5,784

5,695

1.6%


19,088

19,396

-1.6%


Patient days


299,417

307,386

-2.6%


1,309,162

1,299,272

0.8%


Average daily census


3,290.3

3,415.4

-3.7%


14,386.4

14,436.4

-0.3%


Occupancy-licensed beds


56.9%

60.0%

-5.1%


75.4%

74.4%

1.3%


Admissions


66,555

67,938

-2.0%


95,775

89,563

6.9%


Length of stay


4.5

4.5

-0.6%


13.7

14.5

-5.8%












Inpatient revenue


$3,349,035

$3,222,247

3.9%


$1,422,085

$1,391,201

2.2%


Outpatient revenue


1,598,517

1,370,118

16.7%


161,258

149,595

7.8%


Total patient revenue


4,947,552

4,592,365

7.7%


1,583,343

1,540,796

2.8%


Other revenue


21,730

17,354

25.2%


36,568

34,208

6.9%


Gross hospital revenue


4,969,282

4,609,719

7.8%


1,619,911

1,575,004

2.9%












Total deductions and bad debt


4,015,050

3,687,177

8.9%


755,038

746,056

1.2%












Net hospital revenue


$954,232

$922,542

3.4%


$864,873

$828,948

4.3%






















SAME FACILITY:






















                Acute  



  Behavioral Health (1)





03/31/12

03/31/11

%


03/31/12

03/31/11

%












Hospitals owned and leased


21

21

0.0%


175

175

0.0%


Average licensed beds


5,784

5,695

1.6%


18,909

18,840

0.4%


Patient days


299,417

307,386

-2.6%


1,300,636

1,271,286

2.3%


Average daily census


3,290.3

3,415.4

-3.7%


14,292.7

14,125.4

1.2%


Occupancy-licensed beds


56.9%

60.0%

-5.1%


75.6%

75.0%

0.8%


Admissions


66,555

67,938

-2.0%


94,752

87,235

8.6%


Length of stay


4.5

4.5

-0.6%


13.7

14.6

-5.8%
































(1) King George School, Marion, Pennsylvania Clinical School, San Juan Capestrano, Brooke Glen 




     Behavioral, and Jefferson Trail are excluded in current and prior years.





 

 

SOURCE Universal Health Services, Inc.

Steve Filton, Chief Financial Officer, +1-610-768-3300

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