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Universal Health Services, Inc. Reports First Quarter Earnings

KING OF PRUSSIA, Pa., April 27 /PRNewswire-FirstCall/ -- Universal Health Services, Inc. (NYSE: UHS) announced today its results for the first quarter ended March 31, 2006. Reported net income was $51.1 million or $.88 per diluted share during the first quarter of 2006 as compared to $61.4 million or $.99 per diluted share during the comparable prior year quarter. Reported income from continuing operations was $50.5 million or $.87 per diluted share during the first quarter of 2006 as compared to $54.7 million or $.89 per diluted share during the first quarter of 2005. After adjusting for the hurricane-related insurance recoveries and expenses discussed below, our adjusted income from continuing operations was $41.5 million and our adjusted income from continuing operations per diluted share was $.73 during the three- month period ended March 31, 2006.

As indicated on the attached Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information for the Three Months Ended March 31, 2006 and 2005, included in our income from continuing operations and income from continuing operations per diluted share during the first quarter of 2006 are combined after-tax hurricane insurance recoveries, net of hurricane related expenses, of $9.0 million or $.14 per diluted share. These hurricane insurance recoveries and hurricane related expenses were incurred in connection with damage sustained in Louisiana from Hurricane Katrina that resulted in the closure of our Methodist Hospital, Lakeland Medical Pavilion, Chalmette Medical Center and Virtue Street Pavilion during the third quarter of 2005.

Net revenues increased 3% to $1.03 billion during the first quarter of 2006 as compared to $1.01 billion during the first quarter of 2005. Impacting our revenues during the first quarter of 2006 was the loss of revenues generated at our above-mentioned acute care facilities in Louisiana which, on a combined basis, generated $61.2 million of net revenues during the first quarter of 2005. Also, on January 1st of this year, we implemented a formal company-wide uninsured discount policy which has had the effect of lowering both net revenues and the provision for doubtful accounts by approximately $15 million during the first quarter without any significant impact on net income.

At our acute care hospitals owned during both periods, inpatient admissions increased 1.2% and patient days increased 0.2% during the first quarter of 2006 as compared to the comparable 2005 quarter. Since our above- mentioned facilities located in Louisiana have been closed since Hurricane Katrina, the inpatient statistics for those facilities have been excluded from the first quarter of each year. At our behavioral health care facilities owned during both quarters, inpatient admissions increased 5.9% and patient days increased 3.4% during the first quarter of 2006 as compared to the comparable 2005 quarter.

Our operating margin (as calculated on the attached Schedule of Non-GAAP Supplemental Consolidated Income Statement Information), decreased to 13.6% during the three-month period ended March 31, 2006 as compared to 15.9% during the same period of the prior year. The operating margin at our acute care hospitals owned during both periods ("same facility basis") decreased to 14.7% during the three months ended March 31, 2006 as compared to 17.7% during the three months ended March 31, 2005. On a same facility basis, the operating margin at our behavioral health hospitals increased to 25.3% during the first quarter of 2006 from 24.6% during the comparable quarter of the prior year.

Our provision for doubtful accounts was 7.3% during the first quarter of 2006 as compared to 8.2% during the comparable prior year quarter. Exclusive of the impact of the uninsured discount implemented at the beginning of this year, the provision for doubtful accounts would have been 8.6% of net revenues during the first quarter of 2006 as compared to 8.2% during the prior year's first quarter. The increase resulted primarily from an increase in the number of uninsured patients treated at our acute care hospitals.

We will hold a conference call for investors and analysts at 9:00 a.m. Eastern Time on April 28, 2006. The dial-in number is 1-877-648-7971. A digital recording of the conference call will be available two hours after the completion of the conference call on April 28, 2006 and will continue through midnight on May 5, 2006. The recording can be accessed by calling 1-800-642-1687 and entering the conference ID number 7813878.

This call will also be available live over the Internet at our web site at http://www.uhsinc.com. It will also be distributed over CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN's individual investor center at http://www.companyboardroom.com or by visiting any of the investor sites in CCBN's Individual Investor Network. Institutional investors can access the call via CCBN's password-protected event management site, StreetEvents (http://www.streetevents.com).

Universal Health Services, Inc. is one of the nation's largest hospital companies, operating acute care and behavioral health hospitals and ambulatory centers nationwide and in Puerto Rico. It acts as the advisor to Universal Health Realty Income Trust, a real estate investment trust (NYSE: UHT). For additional information on the Company, visit our web site: http://www.uhsinc.com.

This press release contains forward-looking statements based on current management expectations. Numerous factors, including those disclosed herein, those related to healthcare industry trends and those detailed in our filings with the Securities and Exchange Commission (as set forth in "Risk Factors" on pages 24 through 30 and in "Forward-Looking Statements and Risk Factors" on pages 39 and 40 of our Form 10-K for the year ended December 31, 2005), may cause results to differ materially from those anticipated in the forward- looking statements. Many of the factors that will determine our future results are beyond our capability to control or predict. These statements are subject to risks and uncertainties and therefore actual results may differ materially. Readers should not place undue reliance on such forward-looking statements which reflect management's view only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

We believe that operating income, operating margin, adjusted income from continuing operations, adjusted income from continuing operations per diluted share, adjusted net income, adjusted net income per diluted share, adjusted operating income and adjusted operating margin, which are non-GAAP financial measures ("GAAP" is Generally Accepted Accounting Principles in the United States of America), are helpful to our investors as measures of our operating performance. In addition, we believe that comparing and discussing our financial results based on these measures, as calculated, is helpful to our investors since it neutralizes the effect in each year of items that are nonrecurring or non-operational in nature such as, gains on sales of assets and businesses, Hurricane related expenses and insurance recoveries, and other amounts reflected in the current or prior year financial statements that relate to prior periods. To obtain a complete understanding of our financial performance these measures should be examined in connection with net income, determined in accordance with GAAP, as presented in the condensed consolidated financial statements and notes thereto in this Report or in our other filings with the Securities and Exchange Commission including our Report on Form 10-K for the year ended December 31, 2005. Since the items included or excluded from these measures are significant components in understanding and assessing financial performance under GAAP, these measures should not be considered to be alternatives to net income as a measure of our operating performance or profitability. Since these measures, as presented, are not determined in accordance with GAAP and are thus susceptible to varying calculations, they may not be comparable to other similarly titled measures of other companies. Investors are encouraged to use GAAP measures when evaluating our financial performance.



                         Universal Health Services, Inc.
                        Consolidated Statements of Income
                    (in thousands, except per share amounts)
                                   (unaudited)

                                                        Three months
                                                       ended March 31,
                                                   2006              2005

    Net revenues                                $1,034,289        $1,006,645

    Operating charges:
       Salaries, wages and benefits                442,232           406,340
       Other operating expenses                    248,101           231,165
       Supplies expense                            128,513           126,536
       Provision for doubtful accounts              75,007            82,408
       Depreciation and amortization                39,030            39,696
       Lease and rental expense                     16,232            15,467
       Hurricane related expenses                    6,904               -
       Hurricane insurance recoveries              (22,291)              -
                                                   933,728           901,612

    Income before interest expense,
     minority interests and income taxes           100,561           105,033


    Interest expense, net                            8,525            10,676
    Minority interests in earnings
     of consolidated entities                       11,177             7,919

    Income before income taxes                      80,859            86,438

    Provision for income taxes                      30,367            31,748

    Income from continuing operations               50,492            54,690

    Income from discontinued operations,
     net of income tax expense (a)                     592             6,719


    Net income                                     $51,084           $61,409


    Basic earnings per share: (b)
         From continuing operations                  $0.94             $0.95
         From discontinued operations                 0.01              0.12
              Total basic earnings per
               share                                 $0.95             $1.07

    Diluted earnings per share: (b)
         From continuing operations                  $0.87             $0.89
         From discontinued operations                 0.01              0.10
              Total diluted earnings per
               share                                 $0.88             $0.99



                         Universal Health Services, Inc.
                 Footnotes to Consolidated Statements of Income
                    (in thousands, except per share amounts)
                                   (unaudited)

                                                         Three months
                                                        ended March 31,
                                                     2006              2005

    (a) Calculation of income from discontinued
        operations, net of income tax:

    Income from operations                            $940            $4,936
    Gains on divestitures                              -               9,096
    Asset impairment charge                            -              (3,105)
    Income from discontinued operations,
     pre-tax                                           940            10,927
    Income tax provision                              (348)           (4,208)
    Income from discontinued operations,
     net of income tax expense                        $592            $6,719


    (b) Earnings per share calculation:

    Basic:
    Income from continuing operations              $50,492           $54,690
    Less: Dividends on unvested
     restricted stock, net of taxes                    (23)              (27)
    Income from continuing operations -
     basic                                         $50,469           $54,663
    Income from discontinued operations                592             6,719
    Net income - basic                             $51,061           $61,382

    Weighted average number of common
     shares - basic                                 53,768            57,523

    Basic earnings per share:
         From continuing operations                  $0.94             $0.95
         From discontinued operations                 0.01              0.12
              Total basic earnings per share         $0.95             $1.07

    Diluted:
    Income from continuing operations              $50,492           $54,690
    Less: Dividends on unvested
     restricted stock, net of taxes                    (23)              (27)
    Add: Debenture interest, net of taxes            2,457             2,382
    Income from continuing operations -
     diluted                                       $52,926           $57,045
    Income from discontinued operations                592             6,719
    Net income - diluted                           $53,518           $63,764

    Weighted average number of common
     shares                                         53,768            57,523
    Add: Shares for conversion of
     convertible debentures                          6,577             6,577
             Other share equivalents                   161               316
    Weighted average number of common
     shares and equiv. - diluted                    60,506            64,416

    Diluted earnings per share:
         From continuing operations                  $0.87             $0.89
         From discontinued operations                 0.01              0.10
              Total diluted earnings per
               share                                 $0.88             $0.99



                         Universal Health Services, Inc.
                      Condensed Consolidated Balance Sheets
                                 (in thousands)
                                   (unaudited)


                                                March 31,        December 31,
                                                   2006              2005

    Assets:
    Cash and cash equivalents                       $8,211            $7,963
    Accounts receivable, net                       547,800           499,726
    Other current assets                           102,568           100,609
    Property, plant and equipment, net           1,510,193         1,429,653
    Other assets                                   816,275           820,758
    Total Assets                                $2,985,047        $2,858,709

    Liabilities and Stockholders' Equity:
    Current portion of long-term debt               $3,999            $5,191
    Other current liabilities                      610,750           518,979
    Other noncurrent liabilities                   300,716           289,195
    Long-term debt                                 603,533           637,654
    Deferred income taxes                           41,281            42,713
    Minority interest                              170,222           159,879
    Stockholders' equity                         1,254,546         1,205,098
    Total Liabilities and Stockholders'
     Equity                                     $2,985,047        $2,858,709



                         Universal Health Services, Inc.
       Schedule of Non-GAAP Supplemental Consolidated Statements of Income
                                Information
                For the Three Months Ended March 31, 2006 and 2005
                     (in thousands, except per share amounts)
                                   (unaudited)

                                       Three months ended  Three months ended
                                         March 31, 2006      March 31, 2005


    Net revenues                       $1,034,289  100.0%  $1,006,645  100.0%

    Operating charges:
       Salaries, wages and benefits       442,232   42.8%     406,340   40.4%
       Other operating expenses           248,101   24.0%     231,165   23.0%
       Supplies expense                   128,513   12.4%     126,536   12.6%
       Provision for doubtful accounts     75,007    7.3%      82,408    8.2%
                                          893,853   86.4%     846,449   84.1%

    Operating income/margin               140,436   13.6%     160,196   15.9%

       Lease and rental expense            16,232              15,467
       Minority interests in earnings
        of consolidated entities           11,177               7,919

    Earnings before depreciation and
     amortization, interest expense,
     and income taxes ("EBITDA")          113,027             136,810

       Hurricane related expenses           6,904                 -
       Hurricane insurance recoveries     (22,291)                -
       Depreciation and amortization       39,030              39,696
       Interest expense, net                8,525              10,676

    Income before income taxes             80,859              86,438

    Provision for income taxes             30,367              31,748

    Income from continuing operations      50,492              54,690

    Income from discontinued
     operations, net of income taxes          592               6,719

    Net income                            $51,084             $61,409



                                       Three months ended  Three months ended
                                         March 31, 2006      March 31, 2005
                                                   Per                 Per
                                                 Diluted             Diluted
                                         Amount   Share      Amount   Share
    Calculation of Adjusted Income from
     Continuing Operations
    Income from continuing operations    $50,492   $0.87     $54,690   $0.89
    Add: Hurricane related expenses, net
     of minority interests and income
     taxes                                 4,073    0.07         -       -
    Less: Hurricane related insurance
     recoveries, net of minority
     interests and income taxes          (13,055)  (0.21)        -       -
    Adjusted income from continuing
     operations                          $41,510   $0.73     $54,690   $0.89



                              Universal Health Services, Inc.
                         Supplemental Statistical Information
                                       (unaudited)


                                         % Change
                                        Quarter Ended
    Same Facility:                        3/31/2006

    Acute Care Hospitals
    Revenues                                 3.1%
    Adjusted Admissions                      1.8%
    Adjusted Patient Days                    1.2%
    Revenue Per Adjusted Admission           1.3%
    Revenue Per Adjusted Patient Day         2.0%


    Behavioral Health Hospitals

    Revenues                                 9.8%
    Adjusted Admissions                      6.1%
    Adjusted Patient Days                    3.5%
    Revenue Per Adjusted Admission           3.4%
    Revenue Per Adjusted Patient Day         6.1%



    UHS Consolidated                            First Quarter Ended
                                            3/31/2006         3/31/2005

    Revenues                               $1,034,289        $1,006,645
    EBITDA (1)                               $113,027          $136,810
    EBITDA Margin (1)                           10.9%             13.6%

    Cash Flow From Operations                $110,325          $134,612
    Days Sales Outstanding                         48                45
    Capital Expenditures                      $83,188           $57,920

    Debt (net of cash)                        599,321           646,322
    Shareholders Equity                     1,254,546         1,274,895
    Debt / Total Capitalization                 32.3%             33.6%
    Debt / EBITDA (2)                            1.43              1.30
    Debt / Cash From Operations (2)              1.49              1.49


    Acute Care EBITDAR Margin (3)               14.7%             17.0%
    Behavioral Health EBITDAR Margin (3)        23.2%             24.6%


    (1)  Net of Minority Interest
    (2)  Latest 4 quarters
    (3)  Before Corporate overhead allocation and minority interest



                       UNIVERSAL HEALTH SERVICES, INC.
                         SELECTED HOSPITAL STATISTICS
                                MARCH 31, 2006

    AS REPORTED:                     For the three months ended

                           Acute (1) (2)            Behavioral Health
                      03/31/06   03/31/05    %    03/31/06  03/31/05    %

    Hospitals owned
     and leased             21         24 -12.5%        75        44  70.5%
    Average licensed
     beds                4,989      5,549 -10.1%     6,397     4,414  44.9%
    Patient days       283,248    312,500  -9.4%   451,885   325,874  38.7%
    Average daily
     census            3,147.2    3,472.2  -9.4%   5,020.9   3,620.8  38.7%
    Occupancy-licensed
     beds                63.1%      62.6%   0.8%     78.5%     82.0%  -4.3%
    Admissions          63,167     67,091  -5.8%    28,072    25,045  12.1%
    Length of stay         4.5        4.7  -3.7%      16.1      13.0  23.7%

    Inpatient
     revenue        $1,941,155 $1,946,868  -0.3%  $409,400  $325,897  25.6%
    Outpatient
     revenue           708,511    690,580   2.6%    53,274    48,515   9.8%
    Total patient
     revenue         2,649,666  2,637,448   0.5%   462,674   374,412  23.6%
    Other revenue       12,523     13,116  -4.5%     8,075     7,960   1.4%
    Gross hospital
     revenue         2,662,189  2,650,564   0.4%   470,749   382,372  23.1%

    Total deductions 1,892,237  1,843,940   2.6%   217,121   192,812  12.6%

    Net hospital
     revenue          $769,952   $806,624  -4.5%  $253,628  $189,560  33.8%


    SAME FACILITY:

                           Acute (1)(3)            Behavioral Health (4)
                      03/31/06   03/31/05    %    03/31/06  03/31/05    %

    Hospitals owned
     and leased             21         21   0.0%        44        44   0.0%
    Average licensed
     beds                4,989      5,004  -0.3%     4,455     4,414   0.9%
    Patient days       283,248    282,627   0.2%   336,951   325,872   3.4%
    Average daily
     census            3,147.2    3,140.3   0.2%   3,743.9   3,620.8   3.4%
    Occupancy-licensed
     beds                63.1%      62.8%   0.5%     84.0%     82.0%   2.4%
    Admissions          63,167     62,413   1.2%    26,530    25,045   5.9%
    Length of stay         4.5        4.5  -1.0%      12.7      13.0  -2.4%

    (1) Does not include hospitals located in France or discontinued
        operations.
    (2) Does not include discontinued operations. Licensed beds from our Acute
        care hospitals located in New Orleans are excluded in 2006.
    (3) Discontinued operations and our three acute care hospitals located in
        New Orleans are excluded in current and prior years.
    (4) Ascent, Boulder Creek, Center for Change, King George School,
        Northwest Academy, Wyoming Behavioral and the Keystone facilities are
        excluded in current and prior year.

SOURCE: Universal Health Services, Inc.

CONTACT: Steve Filton, Chief Financial Officer, Universal Health Services, Inc., +1-610-768-3300

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