FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-10765
UNIVERSAL HEALTH SERVICES, INC.
(Exact name of registrant as specified in its charter)
| DELAWARE | 23-2077891 | |
| (State or other jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PENNSYLVANIA 19406
(Address of principal executive office) (Zip Code)
Registrant’s telephone number, including area code (610) 768-3300
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common shares outstanding, as of October 31, 2004:
| Class A | 3,328,404 | |
| Class B | 54,642,923 | |
| Class C | 335,800 | |
| Class D | 27,715 |
UNIVERSAL HEALTH SERVICES, INC.
I N D E X
| PAGE NO. | ||||
| PART I. FINANCIAL INFORMATION |
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| Item 1. Financial Statements |
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| 3 | ||||
| Condensed Consolidated Balance Sheets - September 30, 2004 and December 31, 2003 |
4 | |||
| Condensed Consolidated Statements of Cash Flows Nine Months Ended September 30, 2004 and 2003 |
5 | |||
| Notes to Condensed Consolidated Financial Statements |
6 through 16 | |||
| Item 2. Management’s Discussion and Analysis of Operations and Financial Condition |
17 through 32 | |||
| PART II. Other Information |
33 through 35 | |||
| 36 | ||||
Page 2 of 36 Pages
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(000s omitted except per share amounts)
(unaudited)
| Three Months Ended September 30, |
Nine Months Ended September 30, | ||||||||||||
| 2004 |
2003 |
2004 |
2003 | ||||||||||
| Net revenues |
$ | 1,012,868 | $ | 871,453 | $ | 3,049,032 | $ | 2,620,393 | |||||
| Operating charges: |
|||||||||||||
| Salaries, wages and benefits |
415,371 | 351,333 | 1,243,018 | 1,040,860 | |||||||||
| Other operating expenses |
238,475 | 206,358 | 708,020 | 607,927 | |||||||||
| Supplies expense |
138,446 | 116,206 | 420,927 | 350,818 | |||||||||
| Provision for doubtful accounts |
82,028 | 60,591 | 243,123 | 184,037 | |||||||||
| Depreciation and amortization |
42,893 | 34,278 | 121,726 | 101,288 | |||||||||
| Lease and rental expense |
17,948 | 15,404 | 53,644 | 45,935 | |||||||||
| 935,161 | 784,170 | 2,790,458 | 2,330,865 | ||||||||||
| Income before interest expense, minority interests and income taxes |
77,707 | 87,283 | 258,574 | 289,528 | |||||||||
| Interest expense, net |
10,683 | 8,609 | 32,484 | 27,821 | |||||||||
| Minority interests in earnings of consolidated entities |
5,649 | 7,478 | 16,795 | 21,048 | |||||||||
| Income before income taxes |
61,375 | 71,196 | 209,295 | 240,659 | |||||||||
| Provision for income taxes |
22,625 | 26,574 | 77,405 | 89,530 | |||||||||
| Income from continuing operations |
38,750 | 44,622 | 131,890 | 151,129 | |||||||||
| Income (loss) from discontinued operations, net of income tax expense/(benefit) of $519 and ($2,603) during the three months ended September 30, 2004 and 2003 and ($246) and ($983) during the nine months ended September 30, 2004 and 2003, respectively |
(905 | ) | 4,439 | 428 | 1,672 | ||||||||
| Net income |
$ | 37,845 | $ | 49,061 | $ | 132,318 | $ | 152,801 | |||||
| Basic earnings (loss) per share: |
|||||||||||||
| From continuing operations |
$ | 0.67 | $ | 0.78 | $ | 2.29 | $ | 2.62 | |||||
| From discontinued operations |
(0.02 | ) | 0.08 | — | 0.03 | ||||||||
| Total basic earnings per share |
$ | 0.65 | $ | 0.86 | $ | 2.29 | $ | 2.65 | |||||
| Diluted earnings (loss) per share: |
|||||||||||||
| From continuing operations |
$ | 0.63 | $ | 0.72 | $ | 2.13 | $ | 2.42 | |||||
| From discontinued operations |
(0.01 | ) | 0.07 | 0.01 | 0.03 | ||||||||
| Total diluted earnings per share |
$ | 0.62 | $ | 0.79 | $ | 2.14 | $ | 2.45 | |||||
| Weighted average number of common shares - basic |
57,791 | 57,354 | 57,659 | 57,762 | |||||||||
| Add: Shares for conversion of convertible debentures |
6,577 | 6,577 | 6,577 | 6,577 | |||||||||
| Other share equivalents |
542 | 909 | 754 | 787 | |||||||||
| Weighted average number of common shares and equivalents - diluted |
64,910 | 64,840 | 64,990 | 65,126 | |||||||||
See accompanying notes to these condensed consolidated financial statements.
Page 3 of 36 Pages
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, unaudited)
| September 30, 2004 |
December 31, 2003 |
|||||||
| Assets | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 34,554 | $ | 34,863 | ||||
| Accounts receivable, net |
580,010 | 503,929 | ||||||
| Supplies |
63,679 | 61,736 | ||||||
| Deferred income taxes |
19,119 | 25,271 | ||||||
| Other current assets |
30,806 | 19,992 | ||||||
| Total current assets |
728,168 | 645,791 | ||||||
| Property and equipment |
2,287,912 | 2,079,279 | ||||||
| Less: accumulated depreciation |
(837,948 | ) | (774,938 | ) | ||||
| 1,449,964 | 1,304,341 | |||||||
| Other assets: |
||||||||
| Goodwill |
652,160 | 442,504 | ||||||
| Deferred charges |
15,185 | 15,832 | ||||||
| Other |
132,825 | 364,262 | ||||||
| 800,170 | 822,598 | |||||||
| $ | 2,978,302 | $ | 2,772,730 | |||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: |
||||||||
| Current maturities of long-term debt |
$ | 11,924 | $ | 10,871 | ||||
| Accounts payable and accrued liabilities |
442,020 | 370,259 | ||||||
| Federal and state taxes |
9,795 | 14,623 | ||||||
| Total current liabilities |
463,739 | 395,753 | ||||||
| Other noncurrent liabilities |
221,931 | 216,094 | ||||||
| Minority interest |
187,170 | 159,554 | ||||||
| Long-term debt, net of current maturities |
828,766 | 868,566 | ||||||
| Deferred income taxes |
62,319 | 41,841 | ||||||
| Common stockholders’ equity: |
||||||||
| Class A Common Stock, 3,328,404 shares outstanding in 2004, 3,328,404 in 2003 |
33 | 33 | ||||||
| Class B Common Stock, 54,714,313 shares outstanding in 2004, 54,376,706 in 2003 |
547 | 544 | ||||||
| Class C Common Stock, 335,800 shares outstanding in 2004, 335,800 in 2003 |
3 | 3 | ||||||
| Class D Common Stock, 27,859 shares outstanding in 2004, 31,259 in 2003 |
— | — | ||||||
| Capital in excess of par, net of deferred compensation of $6,464 in 2004 and $9,456 in 2003 |
48,401 | 42,480 | ||||||
| Cumulative dividends |
(18,628 | ) | (4,644 | ) | ||||
| Retained earnings |
1,183,012 | 1,050,694 | ||||||
| Accumulated other comprehensive income |
1,009 | 1,812 | ||||||
| 1,214,377 | 1,090,922 | |||||||
| $ | 2,978,302 | $ | 2,772,730 | |||||
See accompanying notes to these condensed consolidated financial statements.
Page 4 of 36 Pages
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000s unaudited)
| Nine Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash Flows from Operating Activities: |
||||||||
| Net income |
$ | 132,318 | $ | 152,801 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation & amortization |
124,407 | 105,849 | ||||||
| Accretion of discount on convertible debentures |
9,355 | 8,888 | ||||||
| Gains on sales of assets and businesses, net of losses |
(5,411 | ) | (7,837 | ) | ||||
| Property write-down due to hurricane damage |
2,318 | — | ||||||
| Changes in assets & liabilities, net of effects from acquisitions and dispositions: |
||||||||
| Accounts receivable |
(43,065 | ) | 7,610 | |||||
| Accrued interest |
4,132 | 2,252 | ||||||
| Accrued and deferred income taxes |
27,395 | 28,264 | ||||||
| Other working capital accounts |
26,252 | (12,108 | ) | |||||
| Other assets and deferred charges |
(3,957 | ) | 17,594 | |||||
| Other |
7,086 | (10,356 | ) | |||||
| Minority interest in earnings of consolidated entities, net of distributions |
13,033 | 4,603 | ||||||
| Accrued insurance expense, net of commercial premiums paid |
57,637 | 45,968 | ||||||
| Payments made in settlement of self-insurance claims |
(37,986 | ) | (30,126 | ) | ||||
| Net cash provided by operating activities |
313,514 | 313,402 | ||||||
| Cash Flows from Investing Activities: |
||||||||
| Property and equipment additions, net of disposals |
(177,329 | ) | (167,230 | ) | ||||
| Proceeds received from sales of assets and businesses |
81,352 | 18,590 | ||||||
| Acquisition of businesses |
(147,316 | ) | (48,296 | ) | ||||
| Net cash used in investing activities |
(243,293 | ) | (196,936 | ) | ||||
| Cash Flows from Financing Activities: |
||||||||
| Reduction of long-term debt |
(77,069 | ) | (65,543 | ) | ||||
| Additional borrowings |
24,107 | — | ||||||