Universal Health Services, Inc. Reports 2020 Second Quarter Financial Results

·21 min read

Consolidated Results of Operations, As Reported and As Adjusted - Three-month periods ended June 30, 2020 and 2019:

KING OF PRUSSIA, Penn. , July 27, 2020 /PRNewswire/ -- Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income attributable to UHS was $251.9 million , or $2.95 per diluted share, during the second quarter of 2020, as compared to $238.3 million , or $2.66 per diluted share, during the comparable quarter of 2019.  Net revenues decreased 4.4% to $2.730 billion during the second quarter of 2020 as compared to $2.855 billion during the second quarter of 2019.

As reflected on the Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule"), our adjusted net income attributable to UHS during the second quarter of 2020 was $250.2 million , or $2.93 per diluted share, as compared to $247.2 million , or $2.76 per diluted share, during the second quarter of 2019. 

Included in our reported and adjusted net income attributable to UHS during the three-month period ended June 30, 2020 was approximately $161.9 million , or $1.90 per diluted share, resulting from the recognition of approximately $218 million of net revenues recorded in connection with various governmental stimulus programs, most notably the Public Health and Social Services Emergency Fund grants, as provided for by the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). Approximately $157 million of the governmental stimulus program net revenues were attributable to our acute care services and approximately $61 million were attributable to our behavioral health care services.  

As reflected on the Supplemental Schedule, included in our reported results during the second quarter of 2020, was a net aggregate favorable after-tax impact of $1.7 million , or $.02 per diluted share, consisting of the following: (i) an after-tax unrealized gain of $2.2 million , or $.03 per diluted share, ( $2.9 million pre-tax which is included in "Other (income) expense, net"), resulting from an increase in the market value of shares of certain marketable securities held for investment and classified as available for sale, and; (ii) a unfavorable after-tax impact of $0.5 million , or $.01 per diluted share, resulting from our adoption of ASU 2016-09, "Compensation Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09").

As reflected on the Supplemental Schedule, included in our reported results during the second quarter of 2019, is an aggregate net unfavorable after-tax impact of $8.9 million , or $.10 per diluted share, resulting from: (i) an unfavorable after-tax impact of $8.4 million , or $.09 per diluted share, resulting from an $11.0 million pre-tax increase in the reserve ("DOJ Reserve") established in connection with the government's investigation of our behavioral health hospitals, (as previously disclosed, settlement agreements were finalized in early July, 2020 thereby resolving this matter), and; (ii) an unfavorable after-tax impact of $0.5 million , or $.01 per diluted share, resulting from our adoption of ASU 2016-09.

Included in our reported and our adjusted net income attributable to UHS during the second quarter of 2019 is a pre-tax unrealized gain of $6.9 million , or $.06 per diluted share (included in "Other (income) expense, net"), resulting from an increase in the market value of shares of certain marketable securities held for investment and classified as available for sale.  

As calculated on the attached Supplemental Schedule, our earnings before interest, taxes, depreciation & amortization ("EBITDA net of NCI", NCI is net income attributable to noncontrolling interests), was $482.8 million during the second quarter of 2020, as compared to $471.5 million during the second quarter of 2019. Our adjusted earnings before interest, taxes, depreciation & amortization ("Adjusted EBITDA net of NCI"), which excludes the impact of other (income) expense, net, and the increase in the DOJ Reserve recorded during the second quarter of 2019, was $479.7 million during the second quarter of 2020 as compared to $474.8 million during the second quarter of 2019.

COVID-19

The impact of the COVID-19 pandemic, which began during the second half of March, 2020, has had a material unfavorable effect on our operations and financial results since that time.  Patient volumes at both our acute care and behavioral health care facilities were most significantly reduced in April. Our acute care and behavioral health facilities began experiencing gradual and continued improvement in patient volumes in May and June as various states eased stay-at-home restrictions and acute care hospitals were permitted to resume elective surgeries and procedures.  However, many of our acute care and behavioral health facilities are located in states that began experiencing significant increases in COVID-19 infections in June and continuing into July. We believe that the adverse impact that COVID-19 will have on our future operations and financial results will depend upon many factors, most of which are beyond our capability to control or predict. 

Consolidated Results of Operations, As Reported and As Adjusted  Six-month periods ended June 30, 2020 and 2019:

Reported net income attributable to UHS was $394.0 million , or $4.58 per diluted share, during the six-month period ended June 30, 2020 , as compared to $472.5 million , or $5.23 per diluted share, during the first six months of 2019.  Net revenues decreased 1.8% to $5.559 billion during the first six months of 2020 as compared to $5.660 billion during the comparable period of 2019.

As reflected on the Supplemental Schedule, our adjusted net income attributable to UHS during the six-month period ended June 30, 2020 was $400.4 million , or $4.65 per diluted share, as compared to $470.5 million , or $5.21 per diluted share, during the first six months of 2019. 

Our reported and adjusted net income attributable to UHS during the six-month period ended June 30, 2020 included approximately $161.9 million , or $1.89 per diluted share, resulting from the above-mentioned recognition of approximately $218 million of net revenues recorded in connection with governmental stimulus programs, most notably the CARES Act.    

As reflected on the Supplemental Schedule, included in our reported results during the six-month period ended June 30, 2020 , was a net aggregate unfavorable after-tax impact of $6.4 million , or $.07 per diluted share, consisting of the following: (i) an after-tax unrealized loss of $5.1 million , or $.06 per diluted share, ( $6.7 million pre-tax which is included in "Other (income) expense, net"), resulting from a decrease in the market value of shares of certain marketable securities held for investment and classified as available for sale, and; (ii) an unfavorable after-tax impact of $1.3 million , or $.01 per diluted share, resulting from our adoption of ASU 2016-09.

As reflected on the Supplemental Schedule, included in our reported results during the six-month period ended June 30, 2019 , is an aggregate net favorable after-tax impact of $2.0 million , or $.02 per diluted share, resulting from: (i) an unfavorable after-tax impact of $8.4 million , or $.09 per diluted share, resulting from the above-mentioned $11.0 million pre-tax increase in the DOJ Reserve, and; (ii) a favorable after-tax impact of $10.4 million , or $.11 per diluted share, resulting from our adoption of ASU 2016-09.

Included in our reported and our adjusted net income attributable to UHS during the six-month period ended June 30, 2019 is a pre-tax unrealized gain of $2.6 million , or $.02 per diluted share (included in "Other (income) expense, net"), resulting from an increase in the market value of shares of certain marketable securities held for investment and classified as available for sale.  

As calculated on the attached Supplemental Schedule, our EBITDA net of NCI was $831.9 million during the first six months of 2020, as compared to $924.3 million during the first six months of 2019. Our Adjusted EBITDA net of NCI, which excludes the impact of other (income) expense, net, and the increase in the DOJ Reserve recorded during the first six months of 2019, was $838.3 million during the six-month period ended June 30, 2020 and $932.0 million during the comparable period of 2019.

Acute Care Services Three and six-month periods ended June 30, 2020 and 2019:

During the second quarter of 2020, at our acute care hospitals owned during both periods ("same facility basis"), adjusted admissions (adjusted for outpatient activity) decreased 24.8% and adjusted patient days decreased 18.1%, as compared to the second quarter of 2019. At these facilities, excluding the governmental stimulus revenues of approximately $157 million recorded during the second quarter of 2020, net revenue per adjusted admission increased 12.7% while net revenue per adjusted patient day increased 3.5% during the second quarter of 2020 as compared to the second quarter of 2019. During the second quarter of 2020, as compared to the second quarter of 2019, net revenues generated from our acute care services on a same facility basis decreased 3.5% including the governmental stimulus revenues, and decreased 14.0% excluding the governmental stimulus revenues.

During the six-month period ended June 30, 2020 , at our acute care hospitals on a same facility basis, adjusted admissions decreased 14.4% and adjusted patient days decreased 9.1%, as compared to the first six months of 2019. At these facilities, excluding the governmental stimulus revenues of approximately $157 million recorded during the first six months of 2020, net revenue per adjusted admission increased 7.7% while net revenue per adjusted patient day increased 1.3% during the six-month period ended June 30, 2020 as compared to the comparable six-month period of 2019. During the first six months of 2020, as compared to the first six months of 2019, net revenues generated from our acute care services on a same facility basis decreased 1.6% including the governmental stimulus revenues, and decreased 6.8% excluding the governmental stimulus revenues.

Behavioral Health Care Services Three and six-month periods ended June 30, 2020 and 2019:

During the second quarter of 2020, at our behavioral health care facilities on a same facility basis, adjusted admissions decreased 15.4% while adjusted patient days decreased 10.4% as compared to the second quarter of 2019. At these facilities, excluding the governmental stimulus revenues of approximately $61 million recorded during the second quarter of 2020, net revenue per adjusted admission increased 8.1% while net revenue per adjusted patient day increased 2.0% during the second quarter of 2020 as compared to the comparable quarter in 2019. During the second quarter of 2020, as compared to the second quarter of 2019, net revenues generated from our behavioral health care services on a same facility basis decreased 3.8% including the governmental stimulus revenues, and decreased 8.5% excluding the governmental stimulus revenues.     

During the six-month period ended June 30, 2020 , at our behavioral health care facilities on a same facility basis, adjusted admissions decreased 8.6% and adjusted patient days decreased 5.9%, as compared to the first six months of 2019. At these facilities, excluding the governmental stimulus revenues of approximately $61 million recorded during the first six months of 2020, net revenue per adjusted admission increased 5.9% while net revenue per adjusted patient day increased 2.8% during the first six months of 2020 as compared to the comparable period of 2019. During the first six months of 2020, as compared to the first six months of 2019, net revenues generated from our behavioral health care services on a same facility basis decreased 0.8% including the governmental stimulus revenues, and decreased 3.2% excluding the governmental stimulus revenues.

Net Cash Provided by Operating Activities and Liquidity:

Net Cash Provided by Operating Activities:

For the six months ended June 30, 2020 , our net cash provided by operating activities increased to $1.451 billion as compared to $673 million generated during the first six months of 2019.

The $779 million net increase was due to: (i) a favorable change of $477 million resulting from the Medicare accelerated payments and deferred governmental stimulus grants; (ii) a favorable change of $233 million in accounts receivable; (iii) a favorable change of $134 million in accrued and deferred income taxes; (iv) an unfavorable change of $67 million resulting from a decrease in net income plus/minus depreciation and amortization expense, stock-based compensation expense and loss on sales of assets and businesses, and; (v) $2 million of other combined net favorable changes.

Liquidity:

As of June 30, 2020 , there were no borrowings outstanding pursuant to our $1 billion revolving credit facility or our $450 million accounts receivable securitization program.  As of that date, we had $1.375 billion of aggregate available borrowing capacity pursuant to the terms of these debt facilities, net of outstanding letters of credit.    

In addition, as of June 30, 2020 , we had approximately $574 million of short-term cash investments.

Conference call information:

We will hold a conference call for investors and analysts at 9:00 a.m. eastern time on July 28, 2020 . 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 . Also, 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:

One of the nation's largest and most respected providers of hospital and healthcare services, Universal Health Services, Inc. has built an impressive record of achievement and performance. Growing steadily since our inception into an esteemed Fortune 500 corporation, our annual revenues were approximately $11.4 billion during 2019. In 2020, UHS was again recognized as one of the World's Most Admired Companies by Fortune ; in 2019 ranked #293 on the Fortune 500; and listed #330 in Forbes ranking of U.S.' Largest Public Companies.

Our operating philosophy is as effective today as it was 40 years ago, enabling us to provide compassionate care to our patients and their loved ones.  Our strategy includes building or acquiring high quality hospitals in rapidly growing markets, investing in the people and equipment needed to allow each facility to thrive, and becoming the leading healthcare provider in each community we serve.

Headquartered in King of Prussia, PA , UHS has more than 90,000 employees and through its subsidiaries operates 26 acute care hospitals, 330 behavioral health facilities, 41 outpatient facilities and ambulatory care access points, an insurance offering, a physician network and various related services located in 37 U.S. states, Washington, D.C. , Puerto Rico and the United Kingdom . 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 the anticipated impact of COVID-19 on our operations and financial results, 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-Q for the quarterly period ended March 31, 2020 ), may cause the results to differ materially from those anticipated in the forward-looking statements.  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.  Many of the factors that could affect our future results are beyond our control or ability to predict, including the impact of the COVID-19 pandemic. Our future operations and financial results will likely be materially impacted by developments related to COVID-19 including, but not limited to, the length of time and severity of the spread of the pandemic; the volume of cancelled or rescheduled elective procedures and the volume of COVID-19 patients treated at our hospitals and other healthcare facilities; measures we are taking to respond to the COVID-19 pandemic; the impact of government and administrative regulation and stimulus on the hospital industry and potential retrospective adjustment in future periods of governmental stimulus grants recorded as revenues in prior periods; declining patient volumes and unfavorable changes in payer mix caused by deteriorating macroeconomic conditions (including increases in uninsured and underinsured patients as the result of business closings and layoffs); potential disruptions to our clinical staffing and shortages and disruptions related to supplies required for our employees and patients; and potential increases to expenses related to staffing, supply chain or other expenditures; the impact of our substantial indebtedness and the ability to refinance such indebtedness on acceptable terms, as well as risks associated with disruptions in the financial markets and the business of financial institutions as the result of the COVID-19 pandemic which could impact us from a financing perspective; and changes in general economic conditions nationally and regionally in our markets resulting from the COVID-19 pandemic. We are not able to fully quantify the impact that these factors will have on our future financial results, but expect developments related to the COVID-19 pandemic to materially affect our financial performance in 2020.

We believe that adjusted net income attributable to UHS, adjusted net income attributable to UHS per diluted share, EBITDA net of NCI and Adjusted EBITDA net of NCI, 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 of material items impacting our net income attributable to UHS, such as, our adoption of ASU 2016-09, unrealized gains/losses resulting from changes in the market value of shares of certain marketable securities held for investment and classified as available for sale, and other potential material items that are nonrecurring or non-operational in nature including, but not limited to, impairments of long-lived and intangible assets, changes in the reserve established in connection with our discussions with the Department of Justice, reserves for various matters including settlements, legal judgments and lawsuits, costs related to extinguishment of debt, gains/losses on sales of assets and businesses, 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 attributable to UHS, as determined in accordance with GAAP, and 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 Reports on Form 10-K for the year ended December 31, 2019 and Form 10-Q for the quarterly period ended March 31, 2020 . 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


Six months


ended June 30,


ended June 30,


2020


2019


2020


2019









Net revenues

$2,729,754


$2,855,168


$5,559,421


$5,659,559









Operating charges:








   Salaries, wages and benefits

1,308,010


1,383,481


2,740,679


2,749,027

   Other operating expenses

625,747


672,564


1,315,537


1,317,344

   Supplies expense

283,572


305,857


601,399


613,320

   Depreciation and amortization

126,208


121,168


250,602


241,208

   Lease and rental expense

28,186


26,535


56,479


52,660


2,371,723


2,509,605


4,964,696


4,973,559









Income from operations

358,031


345,563


594,725


686,000









Interest expense, net

25,473


42,487


61,824


82,127

Other (income) expense, net

(3,100)


(7,732)


6,460


(3,231)









Income before income taxes

335,658


310,808


526,441


607,104









Provision for income taxes

79,154


69,543


125,477


128,441









Net income

256,504


241,265


400,964


478,663









Less:  Net income attributable to








noncontrolling interests ("NCI")

4,575


2,945


6,998


6,175









Net income attributable to UHS

$251,929


$238,320


$393,966


$472,488

















































Basic earnings per share attributable to UHS (a)

$2.97


$2.67


$4.60


$5.24









Diluted earnings per share attributable to UHS (a)

$2.95


$2.66


$4.58


$5.23

 

Universal Health Services, Inc.

Footnotes to Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)










Three months


Six months

(a) Earnings per share calculation:

ended June 30,


ended June 30,


2020


2019


2020


2019

Basic and diluted:








Net income attributable to UHS

$251,929


$238,320


$393,966


$472,488

Less: Net income attributable to unvested restricted share grants

(824)


(656)


(1,197)


(1,171)

Net income attributable to UHS - basic and diluted

$251,105


$237,664


$392,769


$471,317









Weighted average number of common shares - basic

84,632


89,136


85,422


89,956









Basic earnings per share attributable to UHS:

$2.97


$2.67


$4.60


$5.24









Weighted average number of common shares

84,632


89,136


85,422


89,956

Add: Other share equivalents

427


99


335


145

Weighted average number of common shares and equiv. - diluted

85,059


89,235


85,757


90,101









Diluted earnings per share attributable to UHS:

$2.95


$2.66


$4.58


$5.23

 

Universal Health Services, Inc.

Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule")

For the Three Months ended June 30, 2020 and 2019

(in thousands, except per share amounts)

(unaudited)

















Calculation of Earnings/Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA/Adjusted EBITDA net of NCI")










Three months ended


% Net


Three months ended


% Net


June 30, 2020


revenues


June 30, 2019


revenues









Net income attributable to UHS

$251,929




$238,320



   Depreciation and amortization

126,208




121,168



   Interest expense, net

25,473




42,487



   Provision for income taxes

79,154




69,543



EBITDA net of NCI

$482,764


17.7%


$471,518


16.5%









Other (income) expense, net

(3,100)




(7,732)



Increase in DOJ Reserve

-




10,978



Adjusted EBITDA net of NCI

$479,664


17.6%


$474,764


16.6%









Net revenues

$2,729,754




$2,855,168











































Calculation of Adjusted Net Income Attributable to UHS










Three months ended


Three months ended


June 30, 2020


June 30, 2019




Per




Per


Amount


Diluted Share


Amount


Diluted Share









Net income attributable to UHS

$251,929


$2.95


$238,320


$2.66

Plus/minus after-tax adjustments:








Unrealized gain on marketable securities held for sale

(2,223)


(0.03)


-


-

Increase in DOJ Reserve

-


-


8,369


0.09

Impact of ASU 2016-09

505


0.01


509


0.01

Subtotal adjustments

(1,718)


(0.02)


8,878


0.10

Adjusted net income attributable to UHS

$250,211


$2.93


$247,198


$2.76

 

Universal Health Services, Inc.

Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule")

For the Six Months ended June 30, 2020 and 2019

(in thousands, except per share amounts)

(unaudited)




Calculation of Earnings/Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA/Adjusted EBITDA net of NCI")










Six months ended


% Net


Six months ended


% Net


June 30, 2020


revenues


June 30, 2019


revenues









Net income attributable to UHS

$393,966




$472,488



   Depreciation and amortization

250,602




241,208



   Interest expense, net

61,824




82,127



   Provision for income taxes

125,477




128,441



EBITDA net of NCI

$831,869


15.0%


$924,264


16.3%









Other (income) expense, net

6,460




(3,231)



Increase in DOJ Reserve

-




10,978



Adjusted EBITDA net of NCI

$838,329


15.1%


$932,011


16.5%









Net revenues

$5,559,421




$5,659,559











































Calculation of Adjusted Net Income Attributable to UHS










Six months ended


Six months ended


June 30, 2020


June 30, 2019




Per




Per


Amount


Diluted Share


Amount


Diluted Share









Net income attributable to UHS

$393,966


$4.58


$472,488


$5.23

Plus/minus after-tax adjustments:








Unrealized loss on marketable securities held for sale

5,127


0.06


-


-

Increase in DOJ Reserve

-


-


8,369


0.09

Impact of ASU 2016-09

1,275


0.01


(10,398)


(0.11)

Subtotal adjustments

6,402


0.07


(2,029)


(0.02)

Adjusted net income attributable to UHS

$400,368


$4.65


$470,459


$5.21

 

Universal Health Services, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)










Three months


Six months


ended June 30,


ended June 30,


2020


2019


2020


2019









Net income

$256,504


$241,265


$400,964


$478,663

Other comprehensive income (loss):








Unrealized derivative gains (losses) on cash flow hedges

0


(1,008)


0


(3,925)

Foreign currency translation adjustment

6,676


5,159


(32,525)


(9,103)

Other comprehensive income (loss) before tax

6,676


4,151


(32,525)


(13,028)

Income tax expense (benefit) related to items of other comprehensive income (loss)

898


1,616


(1,210)


(850)

Total other comprehensive income (loss), net of tax

5,778


2,535


(31,315)


(12,178)









Comprehensive income

262,282


243,800


369,649


466,485

Less: Comprehensive income attributable to noncontrolling interests

4,575


2,945


6,998


6,175

Comprehensive income attributable to UHS

$257,707


$240,855


$362,651


$460,310

Universal Health Services, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)








June 30,


December 31,


2020


2019

Assets






Current assets:






Cash and cash equivalents

$

539,622


$

61,268

Accounts receivable, net


1,438,697



1,560,847

Supplies


167,626



159,889

Other current assets


150,842



133,930

Total current assets


2,296,787



1,915,934







Property and equipment


9,398,890



9,106,377

Less: accumulated depreciation


(4,294,341)



(4,089,679)



5,104,549



5,016,698







Other assets:






Goodwill


3,836,020



3,869,760

Deferred income taxes


20,241



16,189

Right of use assets-operating leases


335,388



326,518

Deferred charges


6,390



6,373

Other


549,124



516,778

Total Assets

$

12,148,499


$

11,668,250







Liabilities and Stockholders' Equity






Current liabilities:






Current maturities of long-term debt

$

82,085


$

87,550

Accounts payable and other liabilities


1,371,698



1,272,374

Medicare accelerated payments and deferred governmental stimulus grants


477,099



0

Legal reserves


145,227



144,509

Operating lease liabilities


56,629



56,442

Federal and state taxes


126,431



2,515

Total current liabilities


2,259,169



1,563,390







Other noncurrent liabilities


374,616



329,932

Operating lease liabilities noncurrent


279,747



270,076

Long-term debt


3,449,940



3,896,577

Deferred income taxes


19,168



25,071







Redeemable noncontrolling interest


4,287



4,333







UHS common stockholders' equity


5,688,647



5,504,105

Noncontrolling interest


72,925



74,766

Total equity


5,761,572



5,578,871







Total Liabilities and Stockholders' Equity

$

12,148,499


$

11,668,250

Universal Health Services, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


Six months


ended June 30,


2020





Cash Flows from Operating Activities:




Net income

$400,964


$478,663

Adjustments to reconcile net income to net




cash provided by operating activities:




Depreciation & amortization

250,602


241,208

Loss on sale of assets and businesses

2,161


0

Stock-based compensation expense

33,954


34,676

Changes in assets & liabilities, net of effects from




acquisitions and dispositions:




Accounts receivable

131,294


(101,329)

Accrued interest

(2,191)


948

Accrued and deferred income taxes

116,707


(16,846)

Other working capital accounts

26,361


30,082

Medicare accelerated payments and deferred governmental stimulus grants

477,099


0

Other assets and deferred charges

5,095


(1,333)

Other

(7,659)


(1,209)

Accrued insurance expense, net of commercial premiums paid

81,016


51,819

Payments made in settlement of self-insurance claims

(64,034)


(44,115)

Net cash provided by operating activities

1,451,369


672,564





Cash Flows from Investing Activities:




Property and equipment additions, net of disposals

(354,610)


(323,920)

Proceeds received from sales of assets and businesses

6,440


0

Acquisition of businesses and property

(968)


0

Inflows from foreign exchange contracts that hedge our net U.K. investment

57,029


4,885

Costs incurred for purchase and implementation of information technology applications

(4,421)


(13,893)

Investment in, and advances to, joint ventures and other

(285)


(11,949)

Net cash used in investing activities

(296,815)


(344,877)





Cash Flows from Financing Activities:




Reduction of long-term debt

(459,332)


(28,617)

Additional borrowings

5,453


177,200

Repurchase of common shares

(200,054)


(494,649)

Dividends paid

(17,344)


(17,953)

Issuance of common stock

5,852


5,271

Profit distributions to noncontrolling interests

(8,885)


(11,650)

Net cash used in financing activities

(674,310)


(370,398)





Effect of exchange rate changes on cash, cash equivalents and restricted cash

(1,639)


(273)

Increase (decrease) in cash, cash equivalents and restricted cash

478,605


(42,984)

Cash, cash equivalents and restricted cash, beginning of period

105,667


199,685

Cash, cash equivalents and restricted cash, end of period

$584,272


$156,701





Supplemental Disclosures of Cash Flow Information:




Interest paid

$61,802


$78,623





Income taxes paid, net of refunds

$14,394


$145,404





Noncash purchases of property and equipment

$80,031


$71,923





Right-of-use assets obtained in exchange for lease obligations

$37,780


$359,329

Universal Health Services, Inc.

Supplemental Statistical Information

(unaudited)

















% Change


% Change






Quarter ended


6 months ended

Same Facility:





6/30/2020


6/30/2020









Acute Care Hospitals








Revenues (a)





-3.5%


-1.6%

Revenues-excludes governmental stimulus revenues





-14.0%


-6.8%

Adjusted Admissions





-24.8%


-14.4%

Adjusted Patient Days





-18.1%


-9.1%

Revenue Per Adjusted Admission-excludes governmental stimulus revenues





12.7%


7.7%

Revenue Per Adjusted Patient Day-excludes governmental stimulus revenues





3.5%


1.3%









Behavioral Health Hospitals








Revenues (b)





-3.8%


-0.8%

Revenues-excludes governmental stimulus revenues





-8.5%


-3.2%

Adjusted Admissions





-15.4%


-8.6%

Adjusted Patient Days





-10.4%


-5.9%

Revenue Per Adjusted Admission-excludes governmental stimulus revenues





8.1%


5.9%

Revenue Per Adjusted Patient Day-excludes governmental stimulus revenues





2.0%


2.8%









(a) Includes governmental stimulus program revenues of $157 million.








(b) Includes governmental stimulus program revenues of $61 million.
























UHS Consolidated

second quarter ended


six months ended


6/30/2020


6/30/2019


6/30/2020


6/30/2019









Revenues

$2,729,754


$2,855,168


$5,559,421


$5,659,559

EBITDA net of NCI

$482,764


$471,518


$831,869


$924,264

EBITDA Margin net of NCI

17.7%


16.5%


15.0%


16.3%

Adjusted EBITDA net of NCI

$479,664


$474,764


$838,329


$932,011

Adjusted EBITDA Margin net of NCI

17.6%


16.6%


15.1%


16.5%









Cash Flow From Operations





$1,451,369


$672,564

Days Sales Outstanding





47


51

Capital Expenditures





$354,610


$323,920









Debt





$3,532,025


$4,148,954

UHS' Shareholders Equity





$5,688,647


$5,393,089

Debt / Total Capitalization





38.3%


43.5%

Debt / EBITDA net of NCI (1)





2.19


2.50

Debt / Adjusted EBITDA net of NCI (1)





2.07


2.31

Debt / Cash From Operations (1)





1.59


3.10

Net Debt / EBITDA net of NCI (1) (2)





1.83



Net Debt / Adjusted EBITDA net of NCI (1) (2)





1.73



Net Debt / Cash From Operations (1) (2)





1.33











(1) Latest 4 quarters

(2) Debt, net of $574 million of short-term cash investments held as of June 30, 2020

Universal Health Services, Inc.

Acute Care Hospital Services

For the three and six months ended

June 30, 2020 and 2019

(in thousands)



























Same Facility Basis - Acute Care Hospital Services




































Three months ended


Three months ended


Six months ended


Six months ended



June 30, 2020


June 30, 2019


June 30, 2020


June 30, 2019



Amount


% of Net
Revenues


Amount


% of Net
Revenues


Amount


% of Net
Revenues


Amount


% of Net
Revenues

Net revenues (a)


$1,446,099


100.0%


$1,499,054


100.0%


$2,943,222


100.0%


$2,990,405


100.0%

Operating charges:

















Salaries, wages and benefits


589,677


40.8%


624,035


41.6%


1,248,606


42.4%


1,243,352


41.6%

Other operating expenses


344,384


23.8%


340,414


22.7%


719,915


24.5%


673,152


22.5%

Supplies expense


233,419


16.1%


255,703


17.1%


497,949


16.9%


513,847


17.2%

Depreciation and amortization


78,440


5.4%


75,810


5.1%


156,368


5.3%


150,171


5.0%

Lease and rental expense


16,563


1.1%


14,736


1.0%


32,583


1.1%


29,035


1.0%

Subtotal-operating expenses


1,262,483


87.3%


1,310,698


87.4%


2,655,421


90.2%


2,609,557


87.3%

Income from operations


183,616


12.7%


188,356


12.6%


287,801


9.8%


380,848


12.7%

Interest expense, net


516


0.0%


244


0.0%


1,134


0.0%


523


0.0%

Other (income) expense, net


-


-


(45)


(0.0)%


-


-


(45)


(0.0)%

Income before income taxes


$183,100


12.7%


$188,157


12.6%


$286,667


9.7%


$380,370


12.7%




















































All Acute Care Hospital Services




































Three months ended


Three months ended


Six months ended


Six months ended



June 30, 2020


June 30, 2019


June 30, 2020


June 30, 2019



Amount


% of Net
Revenues


Amount


% of Net
Revenues


Amount


% of Net
Revenues


Amount


% of Net
Revenues

Net revenues (a)


$1,467,506


100.0%


$1,531,709


100.0%


$2,988,555


100.0%


$3,046,553


100.0%

Operating charges:

















Salaries, wages and benefits


589,762


40.2%


624,035


40.7%


1,248,721


41.8%


1,243,352


40.8%

Other operating expenses


365,810


24.9%


373,069


24.4%


765,267


25.6%


729,300


23.9%

Supplies expense


233,419


15.9%


255,703


16.7%


497,949


16.7%


513,847


16.9%

Depreciation and amortization


78,440


5.3%


75,810


4.9%


156,368


5.2%


150,171


4.9%

Lease and rental expense


16,563


1.1%


14,736


1.0%


32,583


1.1%


29,035


1.0%

Subtotal-operating expenses


1,283,994


87.5%


1,343,353


87.7%


2,700,888


90.4%


2,665,705


87.5%

Income from operations


183,512


12.5%


188,356


12.3%


287,667


9.6%


380,848


12.5%

Interest expense, net


516


0.0%


244


0.0%


1,134


0.0%


523


0.0%

Other (income) expense, net


-


-


(45)


(0.0)%


-


-


(45)


(0.0)%

Income before income taxes


$182,996


12.5%


$188,157


12.3%


$286,533


9.6%


$380,370


12.5%


















(a) Includes $157 million of governmental stimulus program revenues in each of the three and six-months periods ended June 30, 2020.


We believe that providing our results on a "Same Facility" basis (which is a non-GAAP measure), which includes the operating results for facilities and businesses operated in both the current year and prior year periods, is helpful to our investors as a measure of our operating performance. Our Same Facility results also neutralize (if applicable), the effect of material items that are nonrecurring or non-operational in nature including items such as, but not limited to, reserves for various matters, settlements, legal judgments and lawsuits, cost related to extinguishment of debt, gains/losses on sales of assets and businesses, impairments of long-lived and intangible assets and other amounts that may be reflected in the current or prior year financial statements that relate to prior periods. Our Same Facility basis results exclude from net revenues and other operating expenses, provider tax assessments incurred in each period. However, these provider tax assessments are included in net revenues and other operating expenses as reflected in the table under All Acute Care Hospital Services. The provider tax assessments had no impact on the income before income taxes as reflected on the above tables since the amounts offset between net revenues and other operating expenses. To obtain a complete understanding of our financial performance, the Same Facility results should be examined in connection with our net income as determined in accordance with GAAP and as presented herein and the condensed consolidated financial statements and notes thereto as contained in our Form 10-K for the year ended December 31, 2019 and Form 10-Q for the quarter ended March 31, 2020.


The All Acute Care Hospital Servicestable summarizes the results of operations for all our acute care operations during the periods presented. These amounts include: (i) our acute care results on a same facility basis, as indicated above; (ii) the impact of provider tax assessments which increased net revenues and other operating expenses but had no impact on income before income taxes, and; (iii) certain other amounts including the results of facilities acquired or opened during the last twelve months.

Universal Health Services, Inc.

Behavioral Health Care Services

For the three and six months ended

June 30, 2020 and 2019

(in thousands)



























Same Facility - Behavioral Health Care Services

































Three months ended


Three months ended


Six months ended


Six months ended


June 30, 2020


June 30, 2019


June 30, 2020


June 30, 2019


Amount


% of Net
Revenues


Amount


% of Net
Revenues


Amount


% of Net
Revenues


Amount


% of Net
Revenues

Net revenues (a)

$1,240,631


100.0%


$1,289,115


100.0%


$2,524,631


100.0%


$2,546,024


100.0%

Operating charges:
















Salaries, wages and benefits

648,385


52.3%


676,003


52.4%


1,340,862


53.1%


1,343,926


52.8%

Other operating expenses

221,709


17.9%


237,490


18.4%


464,918


18.4%


474,762


18.6%

Supplies expense

50,386


4.1%


49,608


3.8%


102,015


4.0%


98,324


3.9%

Depreciation and amortization

43,342


3.5%


40,565


3.1%


86,273


3.4%


81,494


3.2%

Lease and rental expense

10,576


0.9%


10,718


0.8%


21,787


0.9%


21,338


0.8%

Subtotal-operating expenses

974,398


78.5%


1,014,384


78.7%


2,015,855


79.8%


2,019,844


79.3%

Income from operations

266,233


21.5%


274,731


21.3%


508,776


20.2%


526,180


20.7%

Interest expense, net

361


0.0%


369


0.0%


725


0.0%


744


0.0%

Other (income) expense, net

922


0.1%


109


0.0%


1,811


0.1%


784


0.0%

Income before income taxes

$264,950


21.4%


$274,253


21.3%


$506,240


20.1%


$524,652


20.6%

















































All Behavioral Health Care Services

































Three months ended


Three months ended


Six months ended


Six months ended


June 30, 2020


June 30, 2019


June 30, 2020


June 30, 2019


Amount


% of Net
Revenues


Amount


% of Net
Revenues


Amount


% of Net
Revenues


Amount


% of Net
Revenues

Net revenues (a)

$1,259,123


100.0%


$1,320,241


100.0%


$2,565,232


100.0%


$2,606,624


100.0%

Operating charges:
















Salaries, wages and benefits

649,376


51.6%


683,948


51.8%


1,342,648


52.3%


1,359,647


52.2%

Other operating expenses

245,045


19.5%


265,785


20.1%


511,227


19.9%


527,922


20.3%

Supplies expense

50,363


4.0%


49,986


3.8%


102,002


4.0%


99,117


3.8%

Depreciation and amortization

45,038


3.6%


42,339


3.2%


88,927


3.5%


84,891


3.3%

Lease and rental expense

11,259


0.9%


11,719


0.9%


23,417


0.9%


23,363


0.9%

Subtotal-operating expenses

1,001,081


79.5%


1,053,777


79.8%


2,068,221


80.6%


2,094,940


80.4%

Income from operations

258,042


20.5%


266,464


20.2%


497,011


19.4%


511,684


19.6%

Interest expense, net

354


0.0%


369


0.0%


751


0.0%


744


0.0%

Other (income) expense, net

922


0.1%


109


0.0%


1,811


0.1%


786


0.0%

Income before income taxes

$256,766


20.4%


$265,986


20.1%


$494,449


19.3%


$510,154


19.6%

















(a) Includes $61 million of governmental stimulus program revenues in each of the three and six-months periods ended June 30, 2020.


We believe that providing our results on a "Same Facility" basis (which is a non-GAAP measure), which includes the operating results for facilities and businesses operated in both the current year and prior year periods, is helpful to our investors as a measure of our operating performance. Our Same Facility results also neutralize (if applicable), the effect of material items that are nonrecurring or non-operational in nature including items such as, but not limited to, reserves for various matters, settlements, legal judgments, lawsuits and reserves established in connection with the government's investigation of our behavioral health care facilities, cost related to extinguishment of debt, gains/losses on sales of assets and businesses, impairments of long-lived and intangible assets and other amounts that may be reflected in the current or prior year financial statements that relate to prior periods. Our Same Facility basis results exclude from net revenues and other operating expenses, provider tax assessments incurred in each period. However, these provider tax assessments are included in net revenues and other operating expenses as reflected in the table under All Behavioral Health Care Services. The provider tax assessments had no impact on the income before income taxes as reflected on the above tables since the amounts offset between net revenues and other operating expenses. To obtain a complete understanding of our financial performance, the Same Facility results should be examined in connection with our net income as determined in accordance with GAAP and as presented herein and in the condensed consolidated financial statements and notes thereto as contained in our Form 10-K for the year ended December 31, 2019 and Form 10-Q for the quarter ended March 31, 2020.


The All Behavioral Health Care Servicestable summarizes the results of operations for all our behavioral health care facilities during the periods presented. These amounts include: (i) our behavioral health results on a same facility basis, as indicated above; (ii) the impact of provider tax assessments which increased net revenues and other operating expenses but had no impact on income before income taxes, and; (iii) certain other amounts including the results of facilities acquired or opened during the last twelve months as well as the results of certain facilities that were closed or restructured during the past year.

Universal Health Services, Inc.

Selected Hospital Statistics

For the three months ended

June 30, 2020 and 2019






















AS REPORTED:


































ACUTE


BEHAVIORAL HEALTH


06/30/20


06/30/19


% change


06/30/20


06/30/19


% change













Hospitals owned and leased

26


26


0.0%


330


327


0.9%

Average licensed beds

6,451


6,371


1.3%


23,573


23,798


-0.9%

Average available beds

6,279


6,195


1.4%


23,470


23,698


-1.0%

Patient days

317,359


357,894


-11.3%


1,464,601


1,632,531


-10.3%

Average daily census

3,487.4


3,932.9


-11.3%


16,094.5


17,939.9


-10.3%

Occupancy-licensed beds

54.1%


61.7%


-12.4%


68.3%


75.4%


-9.4%

Occupancy-available beds

55.5%


63.5%


-12.5%


68.6%


75.7%


-9.4%

Admissions

64,208


78,879


-18.6%


102,770


121,687


-15.5%

Length of stay

4.9


4.5


8.9%


14.3


13.4


6.2%













Inpatient revenue

$6,736,777


$7,051,925


-4.5%


$2,285,359


$2,547,626


-10.3%

Outpatient revenue

3,394,680


4,402,308


-22.9%


216,174


268,693


-19.5%

Total patient revenue

10,131,457


11,454,233


-11.5%


2,501,533


2,816,319


-11.2%

Other revenue

269,749


114,017


136.6%


113,717


62,140


83.0%

Gross hospital revenue

10,401,206


11,568,250


-10.1%


2,615,250


2,878,459


-9.1%

Total deductions

8,933,700


10,036,541


-11.0%


1,356,127


1,558,218


-13.0%

Net hospital revenue

$1,467,506


$1,531,709


-4.2%


$1,259,123


$1,320,241


-4.6%

























SAME FACILITY:

























ACUTE


BEHAVIORAL HEALTH


06/30/20


06/30/19


% change


06/30/20


06/30/19


% change













Hospitals owned and leased

26


26


0.0%


312


312


0.0%

Average licensed beds

6,451


6,371


1.3%


23,399


23,299


0.4%

Average available beds

6,279


6,195


1.4%


23,296


23,199


0.4%

Patient days

317,359


357,894


-11.3%


1,456,945


1,614,274


-9.7%

Average daily census

3,487.4


3,932.9


-11.3%


16,010.4


17,739.3


-9.7%

Occupancy-licensed beds

54.1%


61.7%


-12.4%


68.4%


76.1%


-10.1%

Occupancy-available beds

55.5%


63.5%


-12.5%


68.7%


76.5%


-10.1%

Admissions

64,208


78,879


-18.6%


102,248


119,975


-14.8%

Length of stay

4.9


4.5


8.9%


14.2


13.5


5.9%

Universal Health Services, Inc.

Selected Hospital Statistics

For the six months ended

June 30, 2020 and 2019






















AS REPORTED:


































ACUTE


BEHAVIORAL HEALTH


06/30/20


06/30/19


% change


06/30/20


06/30/19


% change













Hospitals owned and leased

26


26


0.0%


330


327


0.9%

Average licensed beds

6,451


6,371


1.3%


23,604


23,871


-1.1%

Average available beds

6,279


6,195


1.4%


23,501


23,771


-1.1%

Patient days

687,872


727,620


-5.5%


3,057,212


3,251,336


-6.0%

Average daily census

3,779.5


4,020.2


-6.0%


16,797.9


17,963.2


-6.5%

Occupancy-licensed beds

58.6%


63.1%


-7.2%


71.2%


75.3%


-5.4%

Occupancy-available beds

60.2%


64.9%


-7.2%


71.5%


75.6%


-5.4%

Admissions

141,976


159,542


-11.0%


223,787


245,394


-8.8%

Length of stay

4.8


4.6


6.2%


13.7


13.2


3.1%













Inpatient revenue

$14,558,249


$14,215,639


2.4%


$4,810,898


$5,031,625


-4.4%

Outpatient revenue

8,076,421


8,659,922


-6.7%


475,913


535,239


-11.1%

Total patient revenue

22,634,670


22,875,561


-1.1%


5,286,811


5,566,864


-5.0%

Other revenue

386,027


223,343


72.8%


170,107


110,739


53.6%

Gross hospital revenue

23,020,697


23,098,904


-0.3%


5,456,918


5,677,603


-3.9%

Total deductions

20,032,142


20,052,351


-0.1%


2,891,686


3,070,979


-5.8%

Net hospital revenue

$2,988,555


$3,046,553


-1.9%


$2,565,232


$2,606,624


-1.6%

























SAME FACILITY:

























ACUTE


BEHAVIORAL HEALTH


06/30/20


06/30/19


% change


06/30/20


06/30/19


% change













Hospitals owned and leased

26


26