UNIVERSAL HEALTH SERV 'B' KING OF PRUSSIA, Pa., April 25, 2017 /PRNewswire/ -- Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income attributable to UHS was $206.1 million, or $2.12 per diluted share, during the first quarter of 2017 as compared to $190.8 million, or $1.93 per diluted share, during the comparable quarter of 2016.
Net revenues increased 6.7% to $2.61 billion during the first quarter of 2017 as compared to $2.45 billion during the first quarter of 2016. As calculated on attached Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule"), our earnings before interest, taxes, depreciation & amortization ("EBITDA") increased 5.7% to $460.3 million during the first quarter of 2017 as compared to $435.4 million during the first quarter of 2016.
For the three-month period ended March 31, 2017, our adjusted net income attributable to UHS, as calculated on the attached Supplemental Schedule, increased to $204.4 million, or $2.10 per diluted share, as compared to $196.0 million, or $1.98 per diluted share, during the first quarter of 2016. As reflected on the Supplemental Schedule, included in our reported results during the first quarter of 2017, is a favorable after-tax impact of $6.8 million, or $.07 per diluted share, related to our January 1, 2017 adoption of ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"), as discussed below. Also included in our reported results were the unfavorable after-tax impacts of $5.1 million, or $.05 per diluted share, during the first quarter of 2017 and $5.2 million, or $.05 per diluted share, during the first quarter of 2016, related to the depreciation and amortization expense recorded in connection with the implementation of electronic health records ("EHR") applications at our acute care hospitals.
Acute Care Services - Three-month periods ended March 31, 2017 and 2016:
During the first quarter of 2017, at our acute care hospitals owned during both periods ("same facility basis"), adjusted admissions (adjusted for outpatient activity) increased 5.1% and adjusted patient days increased 1.7%, as compared to the first quarter of 2016. Net revenues from our acute care services increased 4.8% during the first quarter of 2017 as compared to the first quarter of the prior year. At these facilities, net revenue per adjusted admission decreased 0.4% while net revenue per adjusted patient day increased 3.0% during the first quarter of 2017 as compared to the comparable quarter of 2016. On a same facility basis, the operating margin generated from our acute care services was 19.7% during the first quarter of 2017 as compared to 21.1% during the first quarter of 2016. We define operating margin as net revenues less salaries, wages and benefits, other operating expenses and supplies expense, divided by net revenues (excluding the impact of EHR).
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 gross charges, amounting to approximately $416 million and $345 million during the three-month periods ended March 31, 2017 and 2016, respectively. The provision for doubtful accounts at our acute care hospitals amounted to approximately $181 million and $140 million during the three-month periods ended March 31, 2017 and 2016.
Behavioral Health Care Services - Three-month periods ended March 31, 2017 and 2016:
During the first quarter of 2017, at our behavioral health care facilities on a same facility basis, adjusted admissions increased 2.4% while adjusted patient days increased 0.2% as compared to the first quarter of 2016. At these facilities, net revenue per adjusted admission decreased 1.1% while net revenue per adjusted patient day increased 1.1% during the first quarter of 2017 as compared to the comparable quarter in 2016. On a same facility basis, our behavioral health care services' net revenues increased 1.4% during the first quarter of 2017, as compared to the first quarter of 2016, and the operating margins were 25.6% and 27.5% during the first quarters of 2017 and 2016, respectively.
Update on the Review by The Competition and Markets Authority ("CMA") of Our December, 2016 Acquisition of Cambian Group, PLC's Adult Services' Division:
Late last week the CMA notified us that they have identified potential competition concerns in certain markets and announced its decision to refer our acquisition of Cambian Group, PLC's Adult Services division for a Phase 2 investigation unless we offer acceptable undertakings to address their concerns. The deadline to propose potential undertakings is April 28, 2017 and the CMA has until May 8, 2017 to accept or reject our proposed undertakings.
Share Repurchase Program:
In February of 2016, our Board of Directors authorized a $400 million increase to our stock repurchase program, which increased the aggregate authorization to $800 million from the previous $400 million authorization approved during the third quarter of 2014. Pursuant to this program, we may purchase shares of our Class B Common Stock, from time to time as conditions allow, on the open market or in negotiated private transactions.
In conjunction with this program, during the first quarter of 2017, we have repurchased 103,948 shares at an aggregate cost of $11.2 million (approximately $108 per share). Since inception of the program through March 31, 2017, we have repurchased approximately 4.49 million shares at an aggregate cost of approximately $525.3 million (approximately $117 per share).
Adoption of ASU 2016-09:
Effective January 1, 2017, we adopted ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting", which amends the accounting for employee share-based payment transactions to require recognition of the tax effects resulting from the settlement of stock-based awards as income tax expense or benefit in the income statement in the reporting period in which they occur. In connection with the adoption of ASU 2016-09, during the first quarter of 2017, we recorded a $6.8 million reduction to our provision for income taxes which resulted in an increase of $6.8 million, or $.07 per diluted share, in net income attributable to UHS.
Since the impact of ASU 2016-09 on our future financial statements is dependent upon the timing of stock option exercises, and the market price of our stock at the time of exercise, we are unable to estimate the impact this adoption will have on our future provision for income taxes and net income attributable to UHS. This reporting change is applied prospectively, effective as of January 1, 2017, with the exception of the change in the presentation of the excess income tax benefits related to stock-based compensation in the Statement of Cash Flows, which was applied retrospectively.
Conference call information:
We will hold a conference call for investors and analysts at 9:00 a.m. eastern time on Wednesday, April 26, 2017. The dial-in number is 1-877-648-7971.
A live broadcast of the conference call will be available on our website at www.uhsinc.com. A replay of the call will be available following the conclusion of the live call and will be available for one full year.
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 through its subsidiaries acute care hospitals, behavioral health facilities and ambulatory centers located throughout the United States, the United Kingdom, 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, 2016), may cause the results to differ materially from those anticipated in the forward-looking statements. Many of the factors that will determine our future results are beyond our capability to control or predict. These statements are subject to risks and uncertainties and therefore actual results may differ materially. Readers should not place undue reliance on such forward-looking statements which reflect management's view only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
We believe that operating income, operating margin, adjusted net income attributable to UHS, adjusted net income attributable to UHS per diluted share, EBITDA and adjusted 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 material items that are nonrecurring or non-operational in nature including, but not limited to, costs/benefits related to the impact on our provision for income taxes and net income attributable to UHS resulting from our January 1, 2017 adoption of ASU 2016-09, the implementation of EHR applications at our acute care hospitals, extinguishment of debt, gains/losses on sales of assets and businesses, reserves for settlements, legal judgments and lawsuits, impairments of long-lived assets, and other items and other material 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, 2016. 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,
---------------
2017 2016
---- ----
Net revenues before provision for
doubtful accounts $2,825,472 $2,619,593
Less: Provision for doubtful
accounts 212,614 169,795
------- -------
Net revenues 2,612,858 2,449,798
Operating charges:
Salaries, wages and benefits 1,237,964 1,148,139
Other operating expenses 607,360 561,584
Supplies expense 277,614 255,250
Depreciation and amortization 110,798 104,049
Lease and rental expense 25,189 24,452
2,258,925 2,093,474
--------- ---------
Income from operations 353,933 356,324
Interest expense, net 35,507 29,600
------ ------
Income before income taxes 318,426 326,724
Provision for income taxes 107,899 111,005
------- -------
Net income 210,527 215,719
Less: Net income attributable to
noncontrolling interests 4,472 24,960
Net income attributable to UHS $206,055 $190,759
======== ========
Basic earnings per share
attributable to UHS (a) $2.13 $1.95
===== =====
Diluted earnings per share
attributable to UHS (a) $2.12 $1.93
===== =====
Universal Health Services, Inc.
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Footnotes to Consolidated Statements of Income
----------------------------------------------
(in thousands, except per share amounts)
(unaudited)
Three months
ended March 31,
---------------
2017 2016
---- ----
(a) Earnings per share calculation:
--------------------------------
Basic and diluted:
------------------
Net income attributable to UHS $206,055 $190,759
Less: Net income attributable to
unvested restricted share
grants (94) (89)
--- ---
Net income attributable to UHS -
basic and diluted $205,961 $190,670
======== ========
Weighted average number of
common shares -basic 96,585 97,607
------ ------
Basic earnings per share
attributable to UHS: $2.13 $1.95
===== =====
Weighted average number of
common shares 96,585 97,607
Add: Other share equivalents 787 1,288
Weighted average number of
common shares and equiv. -
diluted 97,372 98,895
------ ------
Diluted earnings per share
attributable to UHS: $2.12 $1.93
===== =====
Universal Health Services, Inc.
-------------------------------
Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule")
----------------------------------------------------------------------
For the three months ended March 31, 2017 and 2016
--------------------------------------------------
(in thousands, except per share amounts)
(unaudited)
Calculation of Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
---------------------------------------------------------------------------------------
Three months ended % Net Three months ended % Net
March 31, 2017 revenues March 31, 2016 revenues
-------------- -------- -------------- --------
Net income attributable to UHS $206,055 $190,759
Depreciation and amortization 110,798 104,049
Interest expense, net 35,507 29,600
Provision for income taxes 107,899 111,005
------- -------
EBITDA $460,259 17.6% $435,413 17.8%
-------- ---- -------- ----
EHR-related net income attributable to (202) (962)
noncontrolling interests, pre-tax
Adjusted EBITDA $460,057 17.6% $434,451 17.7%
-------- ---- -------- ----
Net revenues $2,612,858 $2,449,798
========== ==========
Calculation of Adjusted Net Income Attributable to UHS
------------------------------------------------------
Three months ended Three months ended
March 31, 2017 March 31, 2016
-------------- --------------
Per Per
Amount Diluted Share Amount Diluted Share
------ ------------- ------ -------------
Net income attributable to UHS $206,055 $2.12 $190,759 $1.93
Plus/minus adjustments:
Impact of ASU 2016-09 (6,750) (0.07) - -
After-tax impact of EHR-related items 5,073 0.05 5,234 0.05
----- ---- ----- ----
Adjusted net income attributable to UHS $204,378 $2.10 $195,993 $1.98
======== ===== ======== =====
Universal Health Services, Inc.
-------------------------------
Consolidated Statements of Comprehensive Income
-----------------------------------------------
(in thousands)
(unaudited)
Three months
ended March 31,
---------------
2017 2016
---- ----
Net income $210,527 $215,719
Other comprehensive income (loss):
Unrealized derivative gains (losses)
on cash flow hedges 3,066 (14,299)
Amortization of terminated hedge 0 (84)
Unrealized gain on marketable
security 1,094 0
Foreign currency translation
adjustment 7,236 5,986
----- -----
Other comprehensive income (loss)
before tax 11,396 (8,397)
Income tax expense (benefit) related
to items of other comprehensive
income 1,551 (5,360)
Total other comprehensive income
(loss), net of tax 9,845 (3,037)
----- ------
Comprehensive income 220,372 212,682
Less: Comprehensive income
attributable to noncontrolling
interests 4,472 24,960
Comprehensive income attributable to
UHS $215,900 $187,722
======== ========
Universal Health Services, Inc.
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Condensed Consolidated Balance Sheets
-------------------------------------
(in thousands)
(unaudited)
March 31, December 31,
2017 2016
---- ----
Assets
Current assets:
Cash and cash equivalents $62,974 $33,747
Accounts receivable, net 1,447,802 1,439,553
Supplies 126,481 125,365
Other current assets 94,817 82,706
Total current assets 1,732,074 1,681,371
--------- ---------
Property and equipment 7,470,405 7,314,437
Less: accumulated
depreciation (3,073,869) (2,983,481)
4,396,536 4,330,956
--------- ---------
Other assets:
Goodwill 3,787,515 3,784,106
Deferred charges 12,562 13,520
Deferred income taxes 1,255 1,234
Other 518,317 506,615
Total Assets $10,448,259 $10,317,802
=========== ===========
Liabilities and
Stockholders' Equity
Current liabilities:
Current maturities of long-
term debt $126,064 $105,895
Accounts payable and
accrued liabilities 1,282,540 1,209,329
Federal and state taxes 108,823 2,149
Total current liabilities 1,517,427 1,317,373
--------- ---------
Other noncurrent
liabilities 272,680 275,167
Long-term debt 3,772,515 4,030,230
Deferred income taxes 75,468 88,119
Redeemable noncontrolling
interest 8,848 9,319
UHS common stockholders'
equity 4,735,962 4,533,220
Noncontrolling interest 65,359 64,374
------ ------
Total equity 4,801,321 4,597,594
Total Liabilities and
Stockholders' Equity $10,448,259 $10,317,802
=========== ===========
Universal Health Services, Inc.
-------------------------------
Consolidated Statements of Cash Flows
-------------------------------------
(in thousands)
(unaudited)
Three months
ended March 31,
2017 2016
---- ----
Cash Flows from Operating Activities:
Net income $210,527 $215,719
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation &
amortization 110,798 104,049
Stock-based
compensation expense 15,348 13,204
Changes in assets & liabilities, net of effects
from
acquisitions and dispositions:
Accounts receivable (5,362) (79,962)
Accrued interest (6,123) 688
Accrued and deferred
income taxes 102,269 91,131
Other working capital
accounts 66,877 98,972
Other assets and
deferred charges (7,755) (5,803)
Other (229) 20,911
Excess income tax
benefits related to
stock-based
compensation 0 11,002
Accrued insurance
expense, net of
commercial premiums
paid 22,007 22,616
Payments made in
settlement of self-
insurance claims (25,349) (17,298)
Net cash provided by
operating activities 483,008 475,229
------- -------
Cash Flows from Investing Activities:
Property and equipment
additions, net of
disposals (144,338) (127,214)
Acquisition of property
and businesses (17,832) (19,543)
Increase in capital
reserves of commercial
insurance subsidiary (3,000) 0
Costs incurred for
purchase and
implementation of
information technology
application (9,456) 0
Net cash used in
investing activities (174,626) (146,757)
-------- --------
Cash Flows from Financing Activities:
Reduction of long-term
debt (260,633) (166,671)
Additional borrowings 21,600 14,400
Financing costs 0 (44)
Repurchase of common
shares (29,167) (171,042)
Dividends paid (9,662) (9,757)
Issuance of common
stock 2,540 2,331
Profit distributions to
noncontrolling
interests (4,118) (3,407)
Net cash used in
financing activities (279,440) (334,190)
-------- --------
Effect of exchange rate
changes on cash and
cash equivalents 285 (920)
--- ----
Increase (decrease) in
cash and cash
equivalents 29,227 (6,638)
Cash and cash
equivalents, beginning
of period 33,747 61,228
Cash and cash
equivalents, end of
period $62,974 $54,590
======= =======
Supplemental Disclosures of Cash Flow Information:
Interest paid $39,404 $27,133
======= =======
Income taxes paid, net
of refunds $5,253 $9,093
====== ======
Noncash purchases of
property and equipment $56,427 $47,374
======= =======
Universal Health Services, Inc.
-------------------------------
Supplemental Statistical Information
------------------------------------
(unaudited)
% Change
Quarter ended
Same Facility: 3/31/2017
-------------- ---------
Acute Care Hospitals
--------------------
Revenues 4.8%
Adjusted Admissions 5.1%
Adjusted Patient Days 1.7%
Revenue Per Adjusted Admission -0.4%
Revenue Per Adjusted Patient Day 3.0%
Behavioral Health Hospitals
---------------------------
Revenues 1.4%
Adjusted Admissions 2.4%
Adjusted Patient Days 0.2%
Revenue Per Adjusted Admission -1.1%
Revenue Per Adjusted Patient Day 1.1%
UHS Consolidated First quarter ended
---------------- -------------------
3/31/2017 3/31/2016
--------- ---------
Revenues $2,612,858 $2,449,798
EBITDA (1) $460,259 $435,413
EBITDA Margin (1) 17.6% 17.8%
Cash Flow From Operations $483,008 $475,229
Days Sales Outstanding 50 51
Capital Expenditures $144,338 $127,214
Debt $3,898,579 $3,280,406
UHS' Shareholders Equity $4,735,962 $4,289,218
Debt / Total Capitalization 45.2% 43.3%
Debt / EBITDA (2) 2.32 2.03
Debt / Cash From Operations (2) 2.91 2.62
Acute Care EBITDAR Margin (3) 19.7% 21.1%
Behavioral Health EBITDAR Margin (3) 25.6% 27.5%
(1) Net of Minority Interest
(2) Latest 4 quarters
(3) Same facility basis, before Corporate overhead allocation and minority interest.
Universal Health Services, Inc.
-------------------------------
Selected Hospital Statistics
----------------------------
For the Three Months ended
March 31, 2017 and 2016
AS REPORTED:
------------
ACUTE BEHAVIORAL HEALTH
3/31/17 3/31/16 % change 3/31/17 3/31/16 % change
------- ------- --------- ------- ------- ---------
Hospitals owned and leased 26 24 8.3% 292 217 34.6%
Average licensed beds 6,107 5,854 4.3% 23,056 21,751 6.0%
Patient days 333,000 325,171 2.4% 1,592,454 1,500,705 6.1%
Average daily census 3,700.0 3,573.5 3.5% 17,693.9 16,491.3 7.3%
Occupancy-licensed beds 60.6% 61.0% -0.7% 76.7% 75.8% 1.2%
Admissions 74,351 69,674 6.7% 118,330 115,421 2.5%
Length of stay 4.5 4.7 -4.0% 13.5 13.0 3.5%
Inpatient revenue $5,597,850 $4,965,537 12.7% $2,183,002 $1,959,570 11.4%
Outpatient revenue 3,294,177 2,767,329 19.0% 246,460 221,643 11.2%
Total patient revenue 8,892,027 7,732,866 15.0% 2,429,462 2,181,213 11.4%
Other revenue 121,265 111,557 8.7% 51,476 50,538 1.9%
Gross hospital revenue 9,013,292 7,844,423 14.9% 2,480,938 2,231,751 11.2%
Total deductions 7,442,762 6,417,521 16.0% 1,231,190 1,040,661 18.3%
Net hospital revenue before
provision for doubtful accounts 1,570,530 1,426,902 10.1% 1,249,748 1,191,090 4.9%
Provision for doubtful accounts 180,983 139,755 29.5% 31,626 30,044 5.3%
Net hospital revenue $1,389,547 $1,287,147 8.0% $1,218,122 $1,161,046 4.9%
SAME FACILITY:
--------------
ACUTE (1) BEHAVIORAL HEALTH (2)
3/31/17 3/31/16 % change 3/31/17 3/31/16 % change
------- ------- --------- ------- ------- ---------
Hospitals owned and leased 24 24 0.0% 211 211 0.0%
Average licensed beds 5,952 5,854 1.7% 21,758 21,489 1.3%
Patient days 327,969 325,171 0.9% 1,493,406 1,490,216 0.2%
Average daily census 3,644.1 3,573.5 2.0% 16,593.4 16,376.0 1.3%
Occupancy-licensed beds 61.2% 61.0% 0.3% 76.3% 76.2% 0.1%
Admissions 72,652 69,674 4.3% 117,955 115,135 2.4%
Length of stay 4.5 4.7 -3.3% 12.7 12.9 -2.2%
(1) Henderson Hospital and Desert View Hospital are excluded in current year.
(2) Skywood Recovery and CAMBIAN facilities are excluded in current year.
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SOURCE Universal Health Services, Inc.
