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Universal Health Services, Inc. Reports 2007 First Quarter Earnings

KING OF PRUSSIA, Pa., April 26 /PRNewswire-FirstCall/ -- Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income was $49.5 million, or $.92 per diluted share, during the first quarter of 2007 as compared to $51.1 million, or $.88 per diluted share, during the comparable prior year quarter. Reported income from continuing operations was $49.6 million, or $.92 per diluted share, during the first quarter of 2007 as compared to $50.5 million, or $.87 per diluted share, during the first quarter of 2006.

After adjusting for the items mentioned below, and/or as indicated on the attached Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information ("Supplemental Schedule"), our adjusted income from continuing operations increased 15% to $47.9 million during the first quarter of 2007 as compared to $41.5 million during the comparable prior year quarter. Our adjusted income from continuing operations per diluted share increased 22% to $.89 during the first quarter of 2007 as compared to $.73 during the first quarter of 2006. Our adjusted net income was $47.9 million, or $.89 per diluted share, during the first quarter of 2007 as compared to $42.1 million, or $.74 per diluted share during the first quarter of 2006. As indicated on the Supplemental Schedule, our income from continuing operations and net income included an after-tax gain of $1.4 million, or $.03 per diluted share, realized on the sale of vacant real property in McAllen, Texas. For the three-month period ended March 31, 2006, our income from continuing operations and net income included hurricane related recoveries, net of expenses, minority interests and income taxes, of $9.0 million, or $.14 per diluted share.

Net revenues increased 16% to $1.20 billion during the first quarter of 2007 as compared to $1.03 billion during the first quarter of 2006. Our consolidated operating margin, as calculated on the attached Supplemental Schedule, was 13.9% and 13.6% during the three-month periods ended March 31, 2007 and 2006, respectively.

At our acute care hospitals owned during both periods ("same facility basis"), inpatient admissions increased 4.9% and patient days increased 4.6% during the first quarter of 2007 as compared to the comparable 2006 quarter. On a same facility basis, net revenues at our acute care facilities increased 11% during the first quarter of 2007 as compared to the comparable prior year quarter. Net revenue per adjusted admission at these facilities increased 5.3% during the first quarter of 2007 over the comparable prior year quarter. The operating margin at our acute care hospitals owned during both periods increased to 15.3% during the first quarter of 2007 as compared to 14.7% during the first quarter of 2006.

On a same facility basis, inpatient admissions at our behavioral health facilities increased 3.2% and patient days increased 3.5% during the first quarter of 2007 as compared to the comparable 2006 quarter. On a same facility basis, net revenues at our behavioral health facilities increased 6% during the first quarter of 2007 as compared to the comparable prior year quarter. Net revenue per adjusted admission at these facilities increased 2.7% during the first quarter of 2007 over the comparable prior year quarter. The operating margin at these behavioral health facilities was 23.2% during the first quarter of 2007 and 23.3% during the comparable quarter of the prior year.

Effective July 1, 2006, the pharmacy services for our acute care facilities were brought in-house from an outsourced vendor and as a result of this change, during the first quarter of 2007, as compared to the comparable quarter of 2006, we experienced an increase in our supplies expense and salaries, wages and benefits expense and a decrease in our other operating expenses. The transition of our pharmacy services favorably impacted our pre- tax income by approximately $2 million during the first quarter of 2007.

We will hold a conference call for investors and analysts at 9:00 a.m. Eastern Time on April 27, 2007. 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 27, 2007 and will continue through midnight on May 4, 2007. The recording can be accessed by calling 1-800-642- 1687 and entering the conference ID number 5494366. This call will also be available live over the internet at our web site at 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 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, 2006), 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 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 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, hurricane-related expenses and insurance recoveries 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, 2006. 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,
                                                   2007              2006

    Net revenues                                $1,197,601        $1,034,289

    Operating charges:
       Salaries, wages and benefits                510,993           442,232
       Other operating expenses                    245,352           248,101
       Supplies expense                            175,358           128,513
       Provision for doubtful accounts              99,093            75,007
       Depreciation and amortization                43,463            39,030
       Lease and rental expense                     16,176            16,232
       Hurricane related expenses, net                (433)            6,904
       Hurricane insurance recoveries                  -              (6,904)
                                                 1,090,002           949,115

    Income before interest expense,
      hurricane insurance recoveries in excess
      of expenses, minority interests and
      income taxes                                 107,599            85,174

    Interest expense, net                           12,722             8,525
    Hurricane insurance recoveries in
      excess of expenses                               -             (15,387)
    Minority interests in earnings
      of consolidated entities                      14,192            11,177

    Income before income taxes                      80,685            80,859

    Provision for income taxes                      31,113            30,367

    Income from continuing operations               49,572            50,492

    (Loss) income from discontinued
     operations, net of income taxes (a)               (64)              592


    Net income                                     $49,508           $51,084


    Basic earnings per share: (b)
      From continuing operations                     $0.93             $0.94
      From discontinued operations                     -                0.01
         Total basic earnings per share              $0.93             $0.95

    Diluted earnings per share: (b)
      From continuing operations                     $0.92             $0.87
      From discontinued operations                     -                0.01
         Total diluted earnings per share            $0.92             $0.88



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

                                                         Three months
                                                         ended March 31,
                                                     2007               2006

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

    (Loss) income from operations                    ($102)             $940
    Income tax benefit (provision)                      38              (348)
    (Loss) income from discontinued operations,
      net of income tax expense                       ($64)             $592


    (b) Earnings per share calculation:

    Basic:
    Income from continuing operations              $49,572           $50,492
    Less: Dividends on unvested restricted
      stock, net of taxes                              (25)              (23)
    Income from continuing operations -
      basic                                        $49,547           $50,469
    (Loss) income from discontinued
      operations                                       (64)              592
    Net income - basic                             $49,483           $51,061

    Weighted average number of common
     shares - basic                                 53,493            53,768

    Basic earnings per share:
      From continuing operations                     $0.93             $0.94
      From discontinued operations                     -                0.01
         Total basic earnings per share              $0.93             $0.95

    Diluted:
    Income from continuing operations              $49,572           $50,492
    Less: Dividends on unvested
     restricted stock, net of taxes                    (25)              (23)
    Add: Debenture interest, net of taxes              -               2,457
    Income from continuing operations -
      diluted                                      $49,547           $52,926
    (Loss) income from discontinued
      operations                                       (64)              592
    Net income - diluted                           $49,483           $53,518

    Weighted average number of common shares        53,493            53,768
    Add: Shares for conversion of
     convertible debentures                            -               6,577
        Other share equivalents                        193               161
    Weighted average number of common
     shares and equiv. - diluted                    53,686            60,506

    Diluted earnings per share:
      From continuing operations                     $0.92             $0.87
      From discontinued operations                     -                0.01
         Total diluted earnings per share            $0.92             $0.88



                         Universal Health Services, Inc.
       Schedule of Non-GAAP Supplemental Consolidated Statements of Income
                      Information ("Supplemental Schedule")
                For the Three Months Ended March 31, 2007 and 2006
                     (in thousands, except per share amounts)
                                   (unaudited)

                                       Three months ended  Three months ended
                                         March 31, 2007      March 31, 2006


    Net revenues                       $1,197,601  100.0%  $1,034,289  100.0%

    Operating charges:
       Salaries, wages and benefits       510,993   42.7%     442,232   42.8%
       Other operating expenses           245,352   20.5%     248,101   24.0%
       Supplies expense                   175,358   14.6%     128,513   12.4%
       Provision for doubtful accounts     99,093    8.3%      75,007    7.3%
                                        1,030,796   86.1%     893,853   86.4%

    Operating income/margin               166,805   13.9%     140,436   13.6%

       Lease and rental expense            16,176              16,232
       Minority interests in earnings
        of consolidated entities           14,192              11,177

    Earnings before hurricane related
     expenses, hurricane insurance
     recoveries, depreciation and
     amortization, interest expense,
     and income taxes ("EBITDA")          136,437             113,027

       Hurricane related expenses, net
        of recoveries                        (433)            (15,387)
       Depreciation and amortization       43,463              39,030
       Interest expense, net               12,722               8,525

    Income before income taxes             80,685              80,859

    Provision for income taxes             31,113              30,367

    Income from continuing operations      49,572              50,492

    (Loss) income from discontinued
     operations, net of income taxes          (64)                592

    Net income                            $49,508             $51,084

                                       Three months ended  Three months ended
                                         March 31, 2007      March 31, 2006
                                                    Per                 Per
                                         Amount   Diluted             Diluted
                                                   Share     Amount    Share
    Calculation of Adjusted Income
     from Continuing Operations
    Income from continuing operations     $49,572   $0.92     $50,492   $0.87
    Plus/minus adjustments:
       Hurricane related recoveries,
        net of expenses, minority
        interests and income taxes           (269)    -        (8,982)  (0.14)
       Gain on sale of real property,
        net of income taxes                (1,369)  (0.03)        -       -
    Subtotal after-tax adjustments to
     income from continuing operations     (1,638)  (0.03)     (8,982)  (0.14)
    Adjusted income from continuing
     operations                           $47,934   $0.89     $41,510   $0.73

    Calculation of Adjusted Net Income
    Net income                            $49,508   $0.92     $51,084   $0.88
    After-tax adjustments to income
     from continuing operations, as
     indicated above                       (1,638)  (0.03)     (8,982)  (0.14)
    Adjusted net income                   $47,870   $0.89     $42,102   $0.74


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

                                                 March 31,        December 31,
                                                    2007              2006

    Assets:
    Cash and cash equivalents                      $11,215           $14,939
    Accounts receivable, net                       667,282           595,009
    Other current assets                           129,146           118,558
    Property, plant and equipment, net           1,775,471         1,685,085
    Other assets                                   884,074           863,451
    Total Assets                                $3,467,188        $3,277,042

    Liabilities and Stockholders' Equity:
    Current portion of long-term debt               $2,851            $1,938
    Other current liabilities                      519,253           500,513
    Other noncurrent liabilities                   353,157           340,815
    Long-term debt                                 910,424           821,363
    Deferred income taxes                           32,935            35,888
    Minority interest                              187,373           174,061
    Stockholders' equity                         1,461,195         1,402,464
    Total Liabilities and Stockholders'
      Equity                                    $3,467,188        $3,277,042



                         Universal Health Services, Inc.
                      Consolidated Statements of Cash Flows
                                  (in thousands)
                                   (unaudited)
                                                         Three months
                                                        ended March 31,
                                                    2007              2006

    Cash Flows from Operating Activities:
      Net income                                    $49,508           $51,084
      Adjustments to reconcile net income to net
       cash provided by operating activities:
       Depreciation & amortization                   43,482            39,030
       Accretion of discount on convertible
        debentures                                      -               3,573
       Gain on sale of assets                        (2,200)              -
       Hurricane insurance recoveries                   -             (22,291)
    Changes in assets & liabilities, net of
      effects from acquisitions and dispositions:
      Accounts receivable                           (57,307)          (48,074)
      Accrued interest                                9,534             3,337
      Accrued and deferred income taxes              27,373            27,118
      Other working capital accounts                 13,565            30,635
      Other assets and deferred charges              (2,811)            1,039
      Other                                          (4,041)            4,707
      Minority interest in earnings of
        consolidated entities, net of
        distributions                                10,972            10,343
      Accrued insurance expense, net of
        commercial premiums paid                     23,071            22,529
      Payments made in settlement of
        self-insurance claims                       (12,170)          (12,690)
        Net cash provided by operating
          activities                                 98,976           110,340

    Cash Flows from Investing Activities:
      Property and equipment additions,
        net of disposals                            (99,349)          (83,203)
      Proceeds received from sale of
        assets                                        5,268               -
      Acquisition of assets and businesses          (73,378)          (11,735)
      Hurricane insurance recoveries received           -              28,000
      Purchase of minority ownership interest
        in majority owned business                  (14,762)              -
        Net cash used in investing activities      (182,221)          (66,938)

    Cash Flows from Financing Activities:
      Additional borrowings                          84,664               -
      Reduction of long-term debt                       -             (38,886)
      Repurchase of common shares                    (3,288)           (1,566)
      Dividends paid                                 (4,310)           (4,286)
      Issuance of common stock                          115             1,584
      Capital contributions from minority member      2,340               -
        Net cash provided by (used in)
          financing activities                       79,521           (43,154)

    (Decrease) Increase in cash and cash
     equivalents                                     (3,724)              248
    Cash and cash equivalents, beginning
     of period                                       14,939             7,963
    Cash and cash equivalents, end of period        $11,215            $8,211

    Supplemental Disclosures of Cash Flow
      Information:
      Interest paid                                  $5,182            $1,615

      Income taxes paid, net of refunds              $3,700            $3,598



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


                                                                   % Change
                                                                 Quarter Ended
    Same Facility:                                                   3/31/2007

    Acute Care Hospitals
    Revenues                                                            11.1%
    Adjusted Admissions                                                  5.5%
    Adjusted Patient Days                                                5.2%
    Revenue Per Adjusted Admission                                       5.3%
    Revenue Per Adjusted Patient Day                                     5.6%


    Behavioral Health Hospitals

    Revenues                                                             5.6%
    Adjusted Admissions                                                  2.8%
    Adjusted Patient Days                                                3.2%
    Revenue Per Adjusted Admission                                       2.7%
    Revenue Per Adjusted Patient Day                                     2.4%



    UHS Consolidated                                First Quarter Ended
                                                3/31/2007         3/31/2006

    Revenues                                    $1,197,601        $1,034,289
    EBITDA   (1)                                  $136,437          $113,027
    EBITDA Margin (1)                                11.4%             10.9%

    Cash Flow From Operations                      $98,976          $110,340
    Days Sales Outstanding                              50                48
    Capital Expenditures                           $99,349           $83,203

    Debt                                           913,275           599,321
    Shareholders Equity                          1,461,195         1,254,546
    Debt / Total Capitalization                      38.5%             32.3%
    Debt / EBITDA (2)                                 1.97              1.43
    Debt / Cash From Operations (2)                   5.78              1.49

    Acute Care EBITDAR Margin (3)                    15.1%             14.7%
    Behavioral Health EBITDAR Margin (3)             22.4%             23.2%

    (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, 2007

    AS REPORTED:
                                 For the three months ended
                            Acute (1)               Behavioral Health
                      03/31/07    03/31/06    %    03/31/07  03/31/06     %
    Hospitals owned
     and leased             25          24   4.2%        81        75    8.0%
    Average licensed
     beds                5,498       4,989  10.2%     7,060     6,397   10.4%
    Patient days       309,174     283,229   9.2%   481,353   451,885    6.5%
    Average daily
     census            3,435.3     3,147.0   9.2%   5,348.4   5,020.9    6.5%
    Occupancy-
     licensed beds        62.5%       63.1% -0.9%      75.8%     78.5%  -3.5%
    Admissions          68,766      63,167   8.9%    29,319    28,072    4.4%
    Length of stay         4.5         4.5   0.3%      16.4      16.1    2.0%

    Inpatient
     revenue        $2,271,139  $1,941,155  17.0%  $433,912  $409,400    6.0%
    Outpatient
     revenue           868,131     708,511  22.5%    59,645    53,274   12.0%
    Total patient
     revenue         3,139,270   2,649,666  18.5%   493,557   462,674    6.7%
    Other revenue       14,451      12,523  15.4%     7,830     8,075   -3.0%
    Gross hospital
     revenue         3,153,721   2,662,189  18.5%   501,387   470,749    6.5%

    Total
     deductions      2,260,856   1,892,237  19.5%   225,675   217,121    3.9%

    Net hospital
      revenue         $892,865    $769,952  16.0%  $275,712  $253,628    8.7%


    SAME FACILITY:

                             Acute  (2)           Behavioral Health (3)
                      03/31/07    03/31/06    %    03/31/07  03/31/06     %
    Hospitals owned
      and leased            24          24   0.0%        72        72    0.0%
    Average licensed
      beds               5,183       4,989   3.9%     6,614     6,321    4.6%
    Patient days       296,163     283,248   4.6%   461,745   446,274    3.5%
    Average daily
      census           3,290.7     3,147.2   4.6%   5,130.5   4,958.6    3.5%
    Occupancy-licensed
      beds                63.5%       63.1%  0.6%      77.6%     78.4%  -1.1%
    Admissions          66,235      63,167   4.9%    28,567    27,692    3.2%
    Length of stay         4.5         4.5  -0.3%      16.2      16.1    0.3%

    (1)  Licensed beds from our Acute care hospitals located in New Orleans
         are excluded.

    (2)  Our three acute care hospitals located in New Orleans and Texoma are
         excluded in current and prior years.
    (3)  Academy at Canyon Creek, Casa de Lago, Cedar Ridge RTC, Cedar Ridge
         Hospital, Highlands Behavior, Lincoln Trail, North Star Palmer, North
         Star RTC and Spring Mountain Sahara are excluded in the current and
         prior year. Tennessee Valley, Tuscaloosa Juvenile Detention Center
         and Triple L. Group Homes are excluded in both current and prior
         years.

SOURCE Universal Health Services, Inc.

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

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