Universal Health Services, Inc. Reports 2013 First Quarter Financial Results

 Universal Health Services, Inc. Reports 2013 First Quarter Financial Results

Consolidated Results of Operations, As Reported - Three-month periods ended
March 31, 2013 and 2012:

PR Newswire

KING OF PRUSSIA, Pa., April 25, 2013

KING OF PRUSSIA, Pa., April 25, 2013 /PRNewswire/ --Universal Health
Services, Inc. (NYSE: UHS) announced today that its reported net income
attributable to UHS was $119.8 million, or $1.21 per diluted share, during the
first quarter of 2013 as compared to $128.6 million, or $1.31 per diluted
share, during the comparable quarter of 2012. Net revenues increased 2% to
$1.83 billion during the first quarter of 2013 as compared to $1.79 billion
during the first quarter of 2012.

Consolidated Results of Operations, As Adjusted – Three-month periods ended
March 31, 2013 and 2012:
For the three-month period ended March 31, 2013, our adjusted net income
attributable to UHS, as calculated on the attached Schedule of Non-GAAP
Supplemental Consolidated Statements of Income Information ("Supplemental
Schedule"), was $120.1 million, or $1.22 per diluted share, as compared to
$110.7 million, or $1.13 per diluted share, during the first quarter of 2012.


Included in our net income attributable to UHS during the first quarter of
2013 was an aggregate net unfavorable after-tax impact of $327,000 related to
the incentive income and expenses recorded in connection with the
implementation of electronic health records ("EHR") applications at our acute
care hospitals (as discussed below in Accounting for HITECH Act incentive
income and EHR expenses).

Included in our net income attributable to UHS during the three-month period
ended March 31, 2012, was an aggregate net favorable after-tax impact of $17.9
million, or $.18 per diluted share, consisting of the following: (i) a
favorable after-tax impact of $18.8 million, or $.19 per diluted share,
resulting from an industry-wide settlement with the United States Department
of Health and Human Services, the Secretary of Health and Human Services, and
the Centers for Medicare and Medicaid Services, related to underpayments of
Medicare inpatient prospective payments during a number of prior years; (ii)
a favorable after-tax impact of $4.3 million, or $.04 per diluted share,
representing the 2011 portion of the net Medicaid supplemental reimbursements
recorded pursuant to the Oklahoma Supplemental Hospital Offset Payment
Program, and; (iii) an aggregate unfavorable after-tax impact of $5.1 million,
or $.05 per diluted share, resulting from the revised Supplemental Security
Income ratios utilized for calculating Medicare disproportionate share
hospital reimbursements for federal fiscal years 2006 through 2009 ($2.4
million unfavorable after-tax impact), and the write-off of receivables
related to revenues recorded during 2011 at two of our acute care hospitals
located in Florida resulting from reductions in certain county reimbursements
due to reductions in federal matching Inter-Governmental Transfer funds ($2.7
million unfavorable after-tax impact).

Acute Care Services – Three-month periods ended March 31, 2013 and 2012:
During the first quarter of 2013, at our acute care hospitals owned during
both periods ("same facility basis"), adjusted admissions (adjusted for
outpatient activity) decreased 1.5% and adjusted patient days increased 0.1%,
as compared to the first quarter of 2012. Net revenues at these facilities
increased 0.7% during the first quarter of 2013 as compared to the comparable
quarter of 2012. At these facilities, net revenue per adjusted admission
increased 2.2% while net revenue per adjusted patient day increased 0.6%
during the first quarter of 2013 as compared to the first quarter of 2012. On
a same facility basis, the operating margin at our acute care hospitals
decreased to 16.0% during the first quarter of 2013 as compared to 19.0%
during the first quarter of 2012. We define operating margin as net revenues
less salaries, wages and benefits, other operating expenses and supplies
expense (excluding the impact of the items mentioned above and excluding the
EHR impact, as indicated on the Supplemental Schedule).

We provide care to patients who meet certain financial or economic criteria
without charge or at amounts substantially less than our established rates.
Because we do not pursue collection of amounts determined to qualify as
charity care, they are not reported in net revenues or in accounts receivable,
net. Our acute care hospitals provided charity care and uninsured discounts,
based on charges at established rates, amounting to $230 million and $312
million during the three-month periods ended March 31, 2013 and 2012,
respectively. The decrease in charity care and uninsured discounts recorded
at our acute care hospitals during the first quarter of 2013, as compared to
the first quarter of 2012, was offset by an increase in the provision for
doubtful accounts which amounted to $218 million during the first quarter of
2013 as compared to $125 million during the first quarter of 2012.

Behavioral Health Care Services – Three-month periods ended March 31, 2013 and
2012:
During the first quarter of 2013, at our behavioral health care facilities on
a same facility basis, adjusted admissions increased 0.6% while adjusted
patient days decreased 0.2%, as compared to the first quarter of 2012. Net
revenues at these facilities increased 2.4% during the first quarter of 2013,
as compared to the comparable quarter in 2012. At these facilities, net
revenue per adjusted admission increased 1.8% while net revenue per adjusted
patient day increased 2.6% during the first quarter of 2013 over the
comparable quarter in 2012. The operating margin at our behavioral health care
facilities owned during both periods increased to 28.4% during the first
quarter of 2013, as compared to 26.8% during the first quarter of 2012.

Accounting for HITECH Act incentive income and EHR expenses:
The health information technology provisions of the American Recovery and
Reinvestment Act (referred to as the "HITECH Act") established criteria
related to the "meaningful use" of electronic health records ("EHR") for acute
care hospitals and established requirements for the Medicare and Medicaid EHR
payment incentive programs. 

During 2011, we began implementing EHR applications at certain of our acute
care hospitals and will continue to do so, on a hospital-by-hospital basis,
until completion which is scheduled to occur by the end of June, 2013. As of
March 31, 2013, EHR applications have been implemented at eighteen of our
acute care hospitals. Our acute care hospitals are eligible for Medicare and
Medicaid EHR incentive payments upon implementation of the EHR application,
assuming they meet the "meaningful use" criteria. As of March 31, 2013,
thirteen hospitals met the "meaningful use" criteria.

As reflected on the Supplemental Schedule, our consolidated results of
operations for the three-month period ended March 31, 2013 includes the net
unfavorable after-tax impact of $327,000 ($524,000 pre-tax) recorded in
connection with the implementation of EHR applications. Included in the
pre-tax charge incurred during the first quarter of 2013 was $4.7 million of
EHR incentive income offset by $5.2 million of net expenses, which as
indicated on the Supplemental Schedule, consisted primarily of depreciation
and amortization expense.

Conference call information:
We will hold a conference call for investors and analysts at 9:00 a.m. eastern
time on April 26, 2013. 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 follow shortly after 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 acute care and behavioral health hospitals and
ambulatory centers nationwide and in Puerto Rico and the U.S. Virgin Islands.
It acts as the advisor to Universal Health Realty Income Trust, a real estate
investment trust (NYSE:UHT). For additional information on the Company, visit
our web site: http://www.uhsinc.com.

This press release contains forward-looking statements based on current
management expectations. Numerous factors, including those disclosed herein,
those related to healthcare industry trends and those detailed in our filings
with the Securities and Exchange Commission (as set forth in Item 1A-Risk
Factors and in Item 7-Forward-Looking Statements and Risk Factors in our Form
10-K for the year ended December 31, 2012), may cause the results to differ
materially from those anticipated in the forward-looking statements. The
operating pressures that we continue to experience in many of our acute care
markets has increased the volatility of our financial results making
estimation of future results more challenging. 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.

As mentioned above, our acute care hospitals may qualify for EHR incentive
payments upon implementation of an EHR application assuming they meet the
"meaningful use" criteria. However, there can be no assurance that we (our
acute care hospitals) will ultimately qualify for these incentive payments
and, should we qualify, we are unable to quantify the amount of incentive
payments we may receive since the amounts are dependent upon various factors
including the implementation timing at each hospital. Should we qualify for
incentive payments, there may be timing differences in the recognition of the
incentive income and expenses recorded in connection with the implementation
of the EHR application which may cause material period-to-period changes in
our future results of operations. Hospitals that do not qualify as a
meaningful user of EHR by 2015 are subject to a reduced market basket update
to the inpatient prospective payment system standardized amount in 2015 and
each subsequent fiscal year. Although we believe that our acute care hospitals
will be in compliance with the EHR standards by 2015, there can be no
assurance that all of our facilities will be in compliance and therefore not
subject to the penalty provision of the HITECH Act.

We believe that operating income, operating margin, adjusted net income
attributable to UHS, adjusted net income attributable to UHS per diluted share
and earnings before interest, taxes, depreciation and amortization ("EBITDA"),
which are non-GAAP financial measures ("GAAP" is Generally Accepted Accounting
Principles in the United States of America), are helpful to our investors as
measures of our operating performance. In addition, we believe that, when
applicable, comparing and discussing our financial results based on these
measures, as calculated, is helpful to our investors since it neutralizes the
effect in each year of material items that are nonrecurring or non-operational
in nature including items such as, but not limited to, costs related to
extinguishment of debt, gains on sales of assets and businesses, reserves for
settlements, legal judgments and lawsuits and other amounts that may be
reflected in the current or prior year financial statements that relate to
prior periods. To obtain a complete understanding of our financial
performance these measures should be examined in connection with net income,
determined in accordance with GAAP, as presented in the condensed consolidated
financial statements and notes thereto in this report or in our other filings
with the Securities and Exchange Commission including our Report on Form 10-K
for the year ended December 31, 2012. 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,
                                                    2013        2012
Net revenues before provision for doubtful accounts $2,078,348  $1,941,623
 Less: Provision for doubtful accounts             246,716     148,587
Net revenues                                        1,831,632   1,793,036
Operating charges:
 Salaries, wages and benefits                     902,296     872,114
 Other operating expenses                         381,007     351,300
 Supplies expense                                 204,642     205,360
 Depreciation and amortization                    79,812      71,792
 Lease and rental expense                         24,665      23,442
 Electronic health records incentive income       (4,712)     -
                                                    1,587,710   1,524,008
Income from operations                              243,922     269,028
Interest expense, net                               39,938      46,710
Income before income taxes                          203,984     222,318
Provision for income taxes                          74,049      79,748
Net income                                          129,935     142,570
Less: Income attributable to
noncontrolling interests                            10,151      13,963
Net income attributable to UHS                      $119,784    $128,607
Basic earnings per share attributable to UHS (a)    $1.23       $1.33
Diluted earnings per share attributable to UHS (a)  $1.21       $1.31



Universal Health Services, Inc.
Footnotes to Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
                                                            Three months
                                                            ended March 31,
                                                            2013      2012
(a) Earnings per share calculation:
Basic and diluted:
Net income attributable to UHS                              $119,784  $128,607
Less: Net income attributable to unvested restricted share  (69)      (168)
grants
Net income attributable to UHS - basic and diluted          $119,715  $128,439
Weighted average number of common shares - basic            97,711    96,593
Basic earnings per share attributable to UHS:               $1.23     $1.33
Weighted average number of common shares                    97,711    96,593
Add: Other share equivalents                                860       1,198
Weighted average number of common shares and equiv. -       98,571    97,791
diluted
Diluted earnings per share attributable to UHS:             $1.21     $1.31



Universal Health Services, Inc.
Schedule of Non-GAAP Supplemental Consolidated Statements of Income
Information ("Supplemental Schedule")
For the three months ended March 31, 2013 and 2012
(in thousands, except per share amounts)
(unaudited)
Calculation of "EBITDA"
                                      Three months ended   Three months ended
                                      March 31, 2013       March 31, 2012
Net revenues before provision for     $2,078,348           $1,941,623
doubtful accounts
 Less: Provision for doubtful        246,716              148,587
accounts
Net revenues                          1,831,632   100.0%   1,793,036   100.0%
Operating charges:
 Salaries, wages and benefits       902,296     49.3%    872,114     48.6%
 Other operating expenses           381,007     20.8%    351,300     19.6%
 Supplies expense                   204,642     11.2%    205,360     11.5%
 EHR incentive income               (4,712)     -0.3%    -           0.0%
                                      1,483,233   81.0%    1,428,774   79.7%
Operating income/margin ("EBITDAR")   348,399     19.0%    364,262     20.3%
 Lease and rental expense           24,665               23,442
 Income attributable to             10,151               13,963
noncontrolling interests
Earnings before, depreciation and
amortization, interest expense, and   313,583     17.1%    326,857     18.2%
income taxes ("EBITDA")
 Depreciation and amortization      79,812               71,792
 Interest expense, net              39,938               46,710
Income before income taxes           193,833              208,355
Provision for income taxes            74,049               79,748
Net income attributable to UHS        $119,784             $128,607
Calculation of Adjusted Net Income Attributable to UHS
                                      Three months ended   Three months ended
                                      March 31, 2013       March 31, 2012
                                                  Per                  Per
                                      Amount      Diluted  Amount      Diluted
                                                  Share                Share
Calculation of Adjusted Net Income
Attributable to UHS - including and
excluding EHR impact:
Net income attributable to UHS        $119,784    $1.21    $128,607    $1.31
Plus/minus adjustments:
 Medicare Rural Floor settlement,                         (18,753)    (0.19)
net of income taxes
 Oklahoma SHOPP Medicaid
reimbursements related to prior                            (4,329)     (0.04)
years, net of income taxes
 Impact of revised SSI ratios and
write-off Florida county receivables,                      5,149       0.05
net of income taxes
Subtotal after-tax adjustments to net -           -        (17,933)    (0.18)
income attributable to UHS
Adjusted net income attributable to
UHS - including Electronic Health     $119,784    $1.21    $110,674    $1.13
Records ("EHR") impact
Plus/minus impact of EHR
implementation:
EHR-related incentive income, pre-tax (4,712)
EHR-related salaries, wages and       326
benefits, pre-tax
EHR-related other operating costs,    (35)
pre-tax
EHR-related depreciation &            5,486
amortization, pre-tax
EHR-related minority interest in
earnings of consolidated entities,    (541)
pre-tax
Income tax provision on EHR-related   (197)
items
After-tax impact of EHR-related items 327         0.01     -           -
Adjusted net income attributable to   $120,111    $1.22    $110,674    $1.13
UHS



Universal Health Services, Inc.
Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
                                                            Three months
                                                            ended March 31,
                                                            2013      2012
Net income                                                  $129,935  $142,570
Other comprehensive income (loss):
 Unrealized derivative gains (loss) on cash flow hedges   4,535     1,615
 Amortization of terminated hedge                         (84)      (84)
Other comprehensive (loss) income before tax                4,451     1,531
Income tax expense related to items of other comprehensive  1,678     582
income (loss)
Total other comprehensive (loss) income, net of tax         2,773     949
Comprehensive income                                        132,708   143,519
Less: Comprehensive income attributable to noncontrolling   10,151    13,963
interests
Comprehensive income attributable to UHS                    $122,557  $129,556



Universal Health Services, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
                                                March 31,      December 31,
                                                2013           2012
Assets
Current assets:
 Cash and cash equivalents                 $ 17,395       $ 23,471
 Accounts receivable, net                    1,149,402      1,067,197
 Supplies                                    98,974         99,000
 Deferred income taxes                       120,691        104,461
 Other current assets                        94,147         87,936
 Assets of facilities held for sale          20,742         25,431
 Total current assets                  1,501,351      1,407,496
Property and equipment                          5,447,227      5,368,345
Less: accumulated depreciation                  (2,051,441)    (1,986,110)
                                                3,395,786      3,382,235
Other assets:
 Goodwill                                    3,041,326      3,036,765
 Deferred charges                            71,218         75,888
 Other                                       306,827        298,459
                                              $ 8,316,508    $ 8,200,843
Liabilities and Stockholders' Equity
Current liabilities:
 Current maturities of long-term debt      $ 1,712        $ 2,589
 Accounts payable and accrued liabilities    886,434        889,557
 Federal and state taxes                     75,087         1,062
 Liabilities of facilities held for sale     836            850
 Total current liabilities             964,069        894,058
Other noncurrent liabilities                    379,723        395,355
Long-term debt                                  3,668,762      3,727,431
Deferred income taxes                           182,575        183,747
Redeemable noncontrolling interest              234,724        234,303
UHS common stockholders' equity                 2,834,907      2,713,345
Noncontrolling interest                         51,748         52,604
 Total equity                          2,886,655      2,765,949
                                              $ 8,316,508    $ 8,200,843



Universal Health Services, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
                                                          Three months
                                                          ended March 31,
                                                          2013       2012
Cash Flows from Operating Activities:
 Net income                                              $129,935   $142,570
 Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization                               79,923     73,820
Gains on sales of assets and businesses, net of losses    (2,092)    0
Stock-based compensation expense                          7,111      5,486
 Changes in assets & liabilities, net of effects from
acquisitions and dispositions:
 Accounts receivable                                    (81,859)   (146,670)
 Accrued interest                                       11,497     13,280
 Accrued and deferred income taxes                     68,890     75,471
 Other working capital accounts                        (39,785)   (48,074)
 Other assets and deferred charges                      6,662      7,120
 Other                                                 1,604      (2,082)
 Accrued insurance expense, net of commercial premiums  22,962     24,581
paid
 Payments made in settlement of self-insurance claims   (17,085)   (18,279)
 Net cash provided by operating activities       187,763    127,223
Cash Flows from Investing Activities:
 Property and equipment additions, net of disposals     (95,919)   (92,563)
 Proceeds received from sale of assets and businesses   6,657      53,461
 Costs incurred for purchase and implementation of      (16,412)   (14,501)
electronic health records application
 Return of deposit on terminated purchase agreement     0          6,500
 Net cash used in investing activities           (105,674)  (47,103)
Cash Flows from Financing Activities:
 Reduction of long-term debt                            (69,926)   (70,942)
 Additional borrowings                                  9,500      0
 Repurchase of common shares                            (14,027)   (2,017)
 Dividends paid                                         (4,870)    (4,832)
 Issuance of common stock                               1,232      1,016
 Profit distributions to noncontrolling interests       (10,074)   (2,575)
 Net cash used in financing activities           (88,165)   (79,350)
(Decrease) increase in cash and cash equivalents          (6,076)    770
Cash and cash equivalents, beginning of period            23,471     41,229
Cash and cash equivalents, end of period                  $17,395    $41,999
Supplemental Disclosures of Cash Flow Information:
 Interest paid                                           $22,982    $25,945
 Income taxes paid, net of refunds                       $4,908     $3,419



Universal Health Services, Inc.
Supplemental Statistical Information
(unaudited)
                                                         % Change
                                                         Quarter Ended
Same Facility:                                           3/31/2013
Acute Care Hospitals
Revenues                                                 0.7%
Adjusted Admissions                                      -1.5%
Adjusted Patient Days                                    0.1%
Revenue Per Adjusted Admission                           2.2%
Revenue Per Adjusted Patient Day                         0.6%
Behavioral Health Hospitals
Revenues                                                 2.4%
Adjusted Admissions                                      0.6%
Adjusted Patient Days                                    -0.2%
Revenue Per Adjusted Admission                           1.8%
Revenue Per Adjusted Patient Day                         2.6%
UHS Consolidated                         First Quarter Ended
                                         3/31/2013       3/31/2012
Revenues                                 $1,831,632      $1,793,036
EBITDA (1)                             $313,583        $326,857
EBITDA Margin (1)                        17.1%           18.2%
Cash Flow From Operations                $187,763        $127,223
Days Sales Outstanding                   56              57
Capital Expenditures                     $95,919         $92,563
Debt                                    3,670,474       3,584,356
Shareholders Equity                      2,834,907       2,427,312
Debt / Total Capitalization              56.4%           59.6%
Debt / EBITDA (2)                        3.02            3.11
Debt / Cash From Operations (2)          4.19            5.41
Acute Care EBITDAR Margin (3)            15.9%           19.0%
Behavioral Health EBITDAR Margin         28.2%           26.5%
(3)
(1) Net of Minority Interest
(2) Latest 4 quarters
(3) Before Corporate overhead allocation and minority interest. Before
Adjustments shown on Supplemental Schedule.



UNIVERSAL HEALTH SERVICES, INC.
SELECTED HOSPITAL STATISTICS
FOR THE THREE MONTHS ENDED
MARCH 31, 2013 AND 2012
AS REPORTED:
                     Acute                       Behavioral Health
                     03/31/13   03/31/12   %     03/31/13   03/31/12   %
Hospitals owned and  23         24         -4.2% 184        175        5.1%
leased
Average licensed     5,617      5,784      -2.9% 20,024     19,088     4.9%
beds
Patient days         290,702    299,417    -2.9% 1,355,054  1,309,162  3.5%
Average daily        3,230.0    3,290.3    -1.8% 15,056.2   14,386.4   4.7%
census
Occupancy-licensed   57.5%      56.9%      1.1%  75.2%      75.4%      -0.2%
beds
Admissions           63,739     66,555     -4.2% 101,396    95,775     5.9%
Length of stay       4.6        4.5        1.4%  13.4       13.7       -2.5%
Inpatient revenue    $3,507,040 $3,278,025 7.0%  $1,576,148 $1,415,538 11.3%
Outpatient revenue   1,651,575  1,548,850  6.6%  185,802    160,673    15.6%
Total patient        5,158,615  4,826,875  6.9%  1,761,950  1,576,211  11.8%
revenue
Other revenue        31,125     20,979     48.4% 31,100     36,566     -14.9%
Gross hospital       5,189,740  4,847,854  7.1%  1,793,050  1,612,777  11.2%
revenue
Total deductions     4,062,963  3,795,959  7.0%  854,899    729,189    17.2%
Net hospital
revenue before
provision for        $1,126,777 $1,051,895 7.1%  $938,151   $883,588   6.2%
doubtful accounts
Provision for        $218,043   125,364    73.9% 28,607     23,268     22.9%
doubtful accounts
Net hospital         $908,734   $926,531   -1.9% $909,544   $860,320   5.7%
revenue
SAME FACILITY:
                     Acute (1)                  Behavioral Health
                                                 (2)
                     03/31/13   03/31/12   %     03/31/13   03/31/12   %
Hospitals owned and  23         23         0.0%  173        173        0.0%
leased
Average licensed     5,617      5,541      1.4%  18,950     18,831     0.6%
beds
Patient days         290,702    290,008    0.2%  1,283,310  1,286,795  -0.3%
Average daily        3,230.0    3,186.9    1.4%  14,259.0   14,140.6   0.8%
census
Occupancy-licensed   57.5%      57.5%      0.0%  75.2%      75.1%      0.2%
beds
Admissions           63,739     64,610     -1.3% 95,108     94,603     0.5%
Length of stay       4.6        4.5        1.6%  13.5       13.6       -0.8%
(1) Auburn is excluded in both current and prior years
(2) San Juan Capestrano, Keys of Carolina, Jefferson Trail, Manatee Palms
Group Homes, The Peaks, Garfield Park
 and the Ascend facilities are excluded in both current and prior years.
 Brooke Glen Behavioral Hospital is included in both current and prior
years from March 1st through current date.



SOURCE Universal Health Services, Inc.

Website: http://www.uhsinc.com
Contact: Steve Filton, Chief Financial Officer, 610-768-3300
 
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