uhs-10q_20190331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 1-10765

 

UNIVERSAL HEALTH SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

 

DELAWARE

 

23-2077891

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

UNIVERSAL CORPORATE CENTER

367 SOUTH GULPH ROAD

KING OF PRUSSIA, PENNSYLVANIA 19406

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (610) 768-3300

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class B Common Stock, $0.01 par value

UHS

New York Stock Exchange

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and ‘emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common shares outstanding, as of April 30, 2019:

 

Class A

 

6,577,100

Class B

 

82,882,673

Class C

 

661,688

Class D

 

18,573

 

 


UNIVERSAL HEALTH SERVICES, INC.

INDEX

 

 

 

PAGE NO.

 

 

 

PART I. FINANCIAL INFORMATION

  

 

 

 

 

Item 1. Financial Statements (unaudited)

 

 

 

 

 

Condensed Consolidated Statements of Income - Three Months Ended March 31, 2019 and 2018

 

3

 

 

 

Condensed Consolidated Statements of Comprehensive Income - Three Months Ended March 31, 2019 and 2018

 

4

 

 

 

Condensed Consolidated Balance Sheets - March 31, 2019 and December 31, 2018

 

5

 

 

 

Condensed Consolidated Statements of Changes in Equity - Three Months Ended March 31, 2019 and 2018

 

6

 

 

 

Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2019 and 2018

 

8

 

 

 

          Notes to Condensed Consolidated Financial Statements

 

9

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

27

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

52

 

 

 

Item 4. Controls and Procedures

 

52

 

 

 

PART II. Other Information

 

 

 

 

 

Item 1. Legal Proceedings

 

54

 

 

 

Item 1A. Risk Factors

 

57

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

57

 

 

 

Item 6. Exhibits

 

58

 

 

 

EXHIBIT INDEX

 

59

 

 

 

Signatures

 

60

This Quarterly Report on Form 10-Q is for the quarter ended March 31, 2019. This Report modifies and supersedes documents filed prior to this Report. Information that we file with the Securities and Exchange Commission (the “SEC”) in the future will automatically update and supersede information contained in this Report.

In this Quarterly Report, “we,” “us,” “our” “UHS” and the “Company” refer to Universal Health Services, Inc. and its subsidiaries. UHS is a registered trademark of UHS of Delaware, Inc., the management company for, and a wholly-owned subsidiary of Universal Health Services, Inc. Universal Health Services, Inc. is a holding company and operates through its subsidiaries including its management company, UHS of Delaware, Inc. All healthcare and management operations are conducted by subsidiaries of Universal Health Services, Inc. To the extent any reference to “UHS” or “UHS facilities” in this report including letters, narratives or other forms contained herein relates to our healthcare or management operations it is referring to Universal Health Services, Inc.’s subsidiaries including UHS of Delaware, Inc. Further, the terms “we,” “us,” “our” or the “Company” in such context similarly refer to the operations of Universal Health Services Inc.’s subsidiaries including UHS of Delaware, Inc. Any reference to employees or employment contained herein refers to employment with or employees of the subsidiaries of Universal Health Services, Inc. including UHS of Delaware, Inc.

 

 

2


PART I. FINANCIAL INFORMATION

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share amounts)

(unaudited)

 

 

Three months ended

March 31,

 

 

2019

 

 

2018

 

Net revenues

$

2,804,391

 

 

$

2,687,516

 

Operating charges:

 

 

 

 

 

 

 

Salaries, wages and benefits

 

1,365,546

 

 

 

1,300,148

 

Other operating expenses

 

644,780

 

 

 

620,819

 

Supplies expense

 

307,463

 

 

 

292,929

 

Depreciation and amortization

 

120,040

 

 

 

113,103

 

Lease and rental expense

 

26,125

 

 

 

26,703

 

 

 

2,463,954

 

 

 

2,353,702

 

Income from operations

 

340,437

 

 

 

333,814

 

Interest expense, net

 

39,640

 

 

 

37,576

 

Other (income) expense, net

 

4,501

 

 

 

-

 

Income before income taxes

 

296,296

 

 

 

296,238

 

Provision for income taxes

 

58,898

 

 

 

67,569

 

Net income

 

237,398

 

 

 

228,669

 

Less: Net income attributable to noncontrolling interests

 

3,230

 

 

 

4,837

 

Net income attributable to UHS

$

234,168

 

 

$

223,832

 

 

 

 

 

 

 

 

 

Basic earnings per share attributable to UHS

$

2.57

 

 

$

2.37

 

Diluted earnings per share attributable to UHS

$

2.57

 

 

$

2.36

 

 

 

 

 

 

 

 

 

Weighted average number of common shares - basic

 

90,776

 

 

 

94,226

 

Add: Other share equivalents

 

191

 

 

 

457

 

Weighted average number of common shares and

   equivalents - diluted

 

90,967

 

 

 

94,683

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

3


UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(amounts in thousands, unaudited)

 

 

 

Three months ended

March 31,

 

 

 

2019

 

 

2018

 

Net income

 

$

237,398

 

 

$

228,669

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Unrealized derivative gains (losses) on cash flow hedges

 

 

(2,917

)

 

 

2,124

 

Foreign currency translation adjustment

 

 

(14,262

)

 

 

(4,341

)

Other

 

 

-

 

 

 

2,367

 

Other comprehensive income (loss) before tax

 

 

(17,179

)

 

 

150

 

Income tax expense (benefit) related to items of other

   comprehensive income (loss)

 

 

(2,466

)

 

 

1,077

 

Total other comprehensive income (loss), net of tax

 

 

(14,713

)

 

 

(927

)

Comprehensive income

 

 

222,685

 

 

 

227,742

 

Less: Comprehensive income attributable to noncontrolling

   interests

 

 

3,230

 

 

 

4,837

 

Comprehensive income attributable to UHS

 

$

219,455

 

 

$

222,905

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, unaudited)

 

 

March 31,

2019

 

 

December 31,

2018

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

62,726

 

 

$

105,220

 

Accounts receivable, net

 

1,602,405

 

 

 

1,509,909

 

Supplies

 

149,928

 

 

 

148,206

 

Other current assets

 

145,382

 

 

 

174,467

 

Total current assets

 

1,960,441

 

 

 

1,937,802

 

 

 

 

 

 

 

 

 

Property and equipment

 

8,733,367

 

 

 

8,563,455

 

Less: accumulated depreciation

 

(3,818,529

)

 

 

(3,715,515

)

 

 

4,914,838

 

 

 

4,847,940

 

Other assets:

 

 

 

 

 

 

 

Goodwill

 

3,856,664

 

 

 

3,844,628

 

Deferred income taxes

 

5,350

 

 

 

5,280

 

Right of use assets-operating leases

 

342,032

 

 

 

0

 

Deferred charges

 

8,207

 

 

 

8,772

 

Other

 

633,745

 

 

 

621,058

 

Total Assets

$

11,721,277

 

 

$

11,265,480

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current maturities of long-term debt

$

71,991

 

 

$

63,446

 

Accounts payable and accrued liabilities

 

1,355,717

 

 

 

1,253,714

 

Legal reserves

 

128,294

 

 

 

129,150

 

Operating lease liabilities

 

56,136

 

 

 

0

 

Federal and state taxes

 

44,628

 

 

 

2,428

 

Total current liabilities

 

1,656,766

 

 

 

1,448,738

 

 

 

 

 

 

 

 

 

Other noncurrent liabilities

 

364,334

 

 

 

361,809

 

Operating lease liabilities noncurrent

 

286,101

 

 

 

0

 

Long-term debt

 

3,821,938

 

 

 

3,935,187

 

Deferred income taxes

 

35,984

 

 

 

49,661

 

Redeemable noncontrolling interests

 

3,843

 

 

 

4,292

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

UHS common stockholders’ equity

 

5,482,415

 

 

 

5,389,262

 

Noncontrolling interest

 

69,896

 

 

 

76,531

 

Total equity

 

5,552,311

 

 

 

5,465,793

 

Total Liabilities and Stockholders’ Equity

$

11,721,277

 

 

$

11,265,480

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three Months Ended March 31, 2019

(amounts in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

UHS

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Common

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling

 

 

Class A

 

 

Class B

 

 

Class C

 

 

Class D

 

 

Cumulative

 

 

Retained

 

 

Comprehensive

 

 

Stockholders'

 

 

Noncontrolling

 

 

 

 

 

 

 

Interest

 

 

Common

 

 

Common

 

 

Common

 

 

Common

 

 

Dividends

 

 

Earnings

 

 

Income (Loss)

 

 

Equity

 

 

Interest

 

 

Total

 

Balance, January 1, 2019

 

$

4,292

 

 

$

66

 

 

$

841

 

 

$

7

 

 

$

0

 

 

$

(409,156

)

 

$

5,793,262

 

 

$

4,242

 

 

$

5,389,262

 

 

$

76,531

 

 

$

5,465,793

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued/(converted)

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

2,720

 

 

 

 

 

 

2,726

 

 

 

 

 

 

2,726

 

Repurchased

 

 

 

 

 

 

 

 

(10

)

 

 

 

 

 

 

 

 

 

 

 

(137,219

)

 

 

 

 

 

(137,229

)

 

 

 

 

 

(137,229

)

Restricted share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,523

 

 

 

 

 

 

1,523

 

 

 

 

 

 

1,523

 

Dividends paid

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,081

)

 

 

 

 

 

 

 

 

(9,081

)

 

 

 

 

 

(9,081

)

Stock option expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,759

 

 

 

 

 

 

15,759

 

 

 

 

 

 

15,759

 

Distributions to noncontrolling interests

 

 

(500

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,814

)

 

 

(9,814

)

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income to UHS / noncontrolling interests

 

 

51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

234,168

 

 

 

 

 

 

234,168

 

 

 

3,179

 

 

 

237,347

 

Foreign currency translation adjustments, net of income tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,489

)

 

 

(12,489

)

 

 

 

 

 

(12,489

)

Unrealized derivative losses on cash flow hedges, net of income tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,224

)

 

 

(2,224

)

 

 

 

 

 

(2,224

)

Subtotal - comprehensive income

 

 

51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

234,168

 

 

 

(14,713

)

 

 

219,455

 

 

 

3,179

 

 

 

222,634

 

Balance, March 31, 2019

 

$

3,843

 

 

$

66

 

 

$

837

 

 

$

7

 

 

$

 

 

$

(418,237

)

 

$

5,910,213

 

 

$

(10,471

)

 

$

5,482,415

 

 

$

69,896

 

 

$

5,552,311

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.


6


UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three Months Ended March 31, 2018

(amounts in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

UHS

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Common

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling

 

 

Class A

 

 

Class B

 

 

Class C

 

 

Class D

 

 

Cumulative

 

 

Retained

 

 

Comprehensive

 

 

Stockholders'

 

 

Noncontrolling

 

 

 

 

 

 

 

Interest

 

 

Common

 

 

Common

 

 

Common

 

 

Common

 

 

Dividends

 

 

Earnings

 

 

Income (Loss)

 

 

Equity

 

 

Interest

 

 

Total

 

Balance, January 1, 2018

 

$

6,702

 

 

$

66

 

 

$

869

 

 

$

7

 

 

$

0

 

 

$

(371,814

)

 

$

5,353,209

 

 

$

7,177

 

 

$

4,989,514

 

 

$

61,922

 

 

$

5,051,436

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued/(converted)

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

2,664

 

 

 

 

 

 

2,666

 

 

 

 

 

 

2,666

 

Repurchased

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

(9,440

)

 

 

 

 

 

(9,441

)

 

 

 

 

 

(9,441

)

Restricted share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

545

 

 

 

 

 

 

545

 

 

 

 

 

 

545

 

Dividends paid

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,422

)

 

 

 

 

 

 

 

 

(9,422

)

 

 

 

 

 

(9,422

)

Stock option expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,879

 

 

 

 

 

 

18,879

 

 

 

 

 

 

18,879

 

Distributions to noncontrolling interests

 

 

(500

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,717

)

 

 

(3,717

)

Purchase of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,213

 

 

 

7,213

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income to UHS / noncontrolling interests

 

 

(121

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

223,832

 

 

 

 

 

 

223,832

 

 

 

4,958

 

 

 

228,790

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,341

)

 

 

(4,341

)

 

 

 

 

 

(4,341

)

Other, net of income tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,795

 

 

 

1,795

 

 

 

 

 

 

1,795

 

Unrealized derivative gains on cash flow hedges, net of income tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,619

 

 

 

1,619

 

 

 

 

 

 

1,619

 

Subtotal - comprehensive income

 

 

(121

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

223,832

 

 

 

(927

)

 

 

222,905

 

 

 

4,958

 

 

 

227,863

 

Balance, March 31, 2018

 

$

6,081

 

 

$

66

 

 

$

870

 

 

$

7

 

 

$

 

 

$

(381,236

)

 

$

5,589,689

 

 

$

6,250

 

 

$

5,215,646

 

 

$

70,376

 

 

$

5,286,022

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

7


UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands, unaudited)

 

 

 

Three months

ended March 31,

 

 

 

2019

 

 

2018

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Net income

 

$

237,398

 

 

$

228,669

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation & amortization

 

 

120,040

 

 

 

113,134

 

Stock-based compensation expense

 

 

17,591

 

 

 

19,700

 

Gain on sale of assets and businesses

 

 

0

 

 

 

(703

)

Changes in assets & liabilities, net of effects from acquisitions and dispositions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(101,619

)

 

 

(72,526

)

Accrued interest

 

 

(2,687

)

 

 

(6,209

)

Accrued and deferred income taxes

 

 

52,291

 

 

 

61,674

 

Other working capital accounts

 

 

107,878

 

 

 

59,032