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8-K - FORM 8-K - UNITED SURGICAL PARTNERS INTERNATIONAL INCd83908e8vk.htm
Exhibit 99.1
(graphic)
Contact:      Mark A. Kopser
Executive Vice President and Chief Financial Officer
(972) 713-3500
UNITED SURGICAL PARTNERS INTERNATIONAL ANNOUNCES SECOND
QUARTER 2011 RESULTS
Dallas, Texas (August 2, 2011) — United Surgical Partners International, Inc. (“USPI” or the “Company”) today announced results for the second quarter and six months ended June 30, 2011.
Second Quarter Financial Results
     For the quarter ended June 30, 2011, consolidated net revenues increased 6% to $151.1 million compared with $143.2 million in the prior year period. Operating income increased 9% for the second quarter and was $62.5 million as compared with $57.6 million for the prior year period. Operating income was benefited by $2.0 million due to gains on the sale of facilities. Operating income margin for the second quarter increased 120 basis points to 41.4% versus 40.2% in the prior year period. For the quarter, EBITDA less noncontrolling interests was $50.8 million compared with $50.2 million in the prior year period.
     The financial results for the second quarter were driven by systemwide revenue growth of 12%, consisting of 6% U.S. same-facility revenue growth and the remainder being due to acquisition activity.
     Cash flows from operating activities for the second quarter totaled $31.1 million compared with $37.8 million for the prior year period. This decrease was due to an increase in the cash payment of taxes of $5.5 million. During the second quarter, the Company and its consolidated subsidiaries invested approximately $2.2 million in maintenance capital expenditures and an additional $4.1 million to develop new facilities and expand existing facilities.
Six-Month Financial Results
     For the six months ended June 30, 2011, consolidated net revenues increased 6% to $298.1 million compared with $281.1 million in the prior year period. Operating income increased 13% for the first half of 2011 to $121.5 million as compared with $107.9 million for the prior year period. Operating income margin for the first half of 2011 increased 240 basis points to 40.8% versus 38.4% in the prior year period. For the first half of 2011, EBITDA less noncontrolling interests increased 7% to $100.9 million compared with $94.6 million in the prior year period.
     Cash flows from operating activities for the six months ended June 30, 2011, totaled $72.7 million compared with $76.4 million for the prior year period. This decrease was due to an increase in the cash payment of taxes of $15.1 million. During the first half of 2011, the Company and its consolidated subsidiaries invested approximately $7.1 million in maintenance capital expenditures and an additional $6.2 million to develop new facilities and expand existing facilities.
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United Surgical Partners Announces Second Quarter 2011 Results
Page 2
August 2, 2011
Systemwide Financial Results
     Due to the Company’s partnerships with physicians and not-for-profit healthcare systems, the Company does not consolidate the financial results of the majority of its facilities. While revenues of the Company’s unconsolidated facilities are not recorded as revenues by USPI, equity in earnings of unconsolidated affiliates is a significant and growing portion of the Company’s overall earnings. To help analyze results of operations, management uses systemwide operating measures such as systemwide revenue growth, which includes revenues of both consolidated and unconsolidated facilities. In addition to overall systemwide revenue growth, USPI calculates growth rates and operating margins for the facilities that were operational in both the current and prior year periods, a group the Company refers to as same-store or same-facility. This group also consists of both consolidated and unconsolidated facilities. At June 30, 2011, 132 of the 191 facilities the Company operated were not consolidated.
Revenue Analysis
     For the second quarter, the systemwide revenues of the facilities operated by the Company increased 12% on a year-over-year basis, while consolidated revenues increased 6%. For the first half of 2011, the systemwide revenues of the facilities operated by the Company increased 13% on a year-over-year basis, while consolidated revenues increased 6%. The table below lists the key drivers of year-over-year changes in revenues.
                                 
    Three Months Ended     Six Months Ended  
    June 30, 2011     June 30, 2011  
    As Reported     Unconsolidated     As Reported     Unconsolidated  
    Under GAAP     Affiliates     Under GAAP     Affiliates  
Total revenues, period ended June 30, 2010
  $ 143,190     $ 326,838     $ 281,061     $ 621,538  
Add: Revenue from acquired facilities
    4,248       20,642       8,778       41,727  
Less: Revenue of deconsolidated facilities
    (3,277 )     3,277       (6,335 )     6,335  
Less: Revenue of disposed facilities
          (2,312 )           (2,312 )
Impact of exchange rate
    2,322             2,960        
 
                       
Adjusted base period
  $ 146,483     $ 348,445     $ 286,494     $ 667,288  
Increase from operations
    2,434       24,717       7,933       52,282  
Non-facility based revenue
    2,133       1,129       3,744       2,978  
 
                       
Total revenues, period ended June 30, 2011
  $ 151,050     $ 374,291     $ 298,141     $ 722,548  
 
                       
Development Activity
     During the quarter, the Company opened four facilities and sold its interest in four facilities. The Company expects to add 15 to 20 facilities in 2011.
Summary
     Commenting on the results, William H. Wilcox, USPI’s chief executive officer, said, “We continue to focus on gaining market share in the current environment and expect to see further growth in the number of opportunities to acquire facilities in both new and existing markets.”
     The live broadcast of USPI’s second quarter conference call will begin at 5:00 p.m. Eastern Time on August 2, 2011. A 30-day online replay will be available approximately an hour following the conclusion of the live broadcast. A link to these events can be found on the Company’s website
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United Surgical Partners Announces Second Quarter 2011 Results
Page 3
August 2, 2011
at www.uspi.com or at www.earnings.com. Additional financial information pertaining to United Surgical Partners International may be found by visiting the Investor Relations section of the Company’s website.
     USPI, headquartered in Dallas, Texas, currently has ownership interests in or operates 191 surgical facilities. Of the Company’s 186 domestic facilities, 134 are jointly owned with not-for-profit healthcare systems. The Company also operates five facilities in the United Kingdom.
     The above includes forward-looking statements based on current management expectations. Numerous factors exist that may cause results to differ from these expectations. Many of the factors that will determine the Company’s future results are beyond the ability of the Company to control or predict. These statements are subject to risks and uncertainties relating to the Company, including without limitation, (i) reduction in reimbursement from payors; (ii) the Company’s ability to attract physicians and retain qualified management and personnel; (iii) the Company’s significant leverage; (iv) geographic concentrations of certain of the Company’s operations; (v) risks associated with the Company’s acquisition and development strategies; (vi) the regulated nature of the healthcare industry; (vii) the highly competitive nature of the healthcare business; and (viii) those risks and uncertainties described from time to time in the Company’s filings with the Securities and Exchange Commission. Therefore, the Company’s actual results may differ materially. The Company undertakes no obligation to update any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
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United Surgical Partners Announces Second Quarter 2011 Results
Page 4
August 2, 2011
UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
Unaudited Condensed Consolidated Statements of Income

(in thousands, except number of facilities)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Revenues
  $ 151,050     $ 143,190     $ 298,141     $ 281,061  
 
                               
Equity in earnings of unconsolidated affiliates
    20,101       18,219       38,033       32,507  
 
                               
Operating expenses:
                               
Salaries, benefits and other employee costs
    41,009       37,416       80,470       74,679  
Medical services and supplies
    24,759       23,881       49,177       48,307  
Other operating expenses
    23,879       23,225       47,711       45,280  
General and administrative expenses
    11,113       9,119       20,893       17,668  
Provision for doubtful accounts
    2,287       2,425       4,034       4,307  
Net gain (loss) on deconsolidations, disposals and impairments
    (1,979 )     277       (2,478 )     593  
Depreciation and amortization
    7,545       7,482       14,873       14,786  
 
                       
Total operating expenses
    108,613       103,825       214,680       205,620  
 
                       
Operating income
    62,538       57,584       121,494       107,948  
Interest expense, net
    (16,744 )     (17,412 )     (33,777 )     (35,022 )
Other, net
    (192 )     20       (120 )     355  
 
                       
Income from continuing operations before income taxes
    45,602       40,192       87,597       73,281  
Income tax expense
    (10,700 )     (9,496 )     (20,567 )     (17,142 )
 
                       
Income from continuing operations
    34,902       30,696       67,030       56,139  
Discontinued operations, net of tax
    166       326       (529 )     529  
 
                       
Net income
    35,068       31,022       66,501       56,668  
Less: Net income attributable to noncontrolling interests
    (17,282 )     (15,135 )     (32,994 )     (28,770 )
 
                       
Net income attributable to USPI’s common stockholder
  $ 17,786     $ 15,887     $ 33,507     $ 27,898  
 
                       
 
                               
Supplemental Data:
                               
Facilities operated at period end
    191       172       191       172  
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United Surgical Partners Announces Second Quarter 2011 Results
Page 5
August 2, 2011
UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
Unaudited Condensed Consolidated Balance Sheets

(in thousands)
                 
    June 30,     Dec. 31,  
    2011     2010  
ASSETS
               
 
               
Current assets:
               
Cash and cash equivalents
  $ 61,715     $ 60,253  
Accounts receivable, net of allowance for doubtful accounts of $7,347 and $7,481, respectively
    48,521       50,082  
Other receivables
    19,476       15,242  
Inventories
    9,233       9,191  
Deferred tax assets, net
    14,425       14,961  
Other
    23,042       14,682  
 
           
Total current assets
    176,412       164,411  
 
               
Property and equipment, net
    200,284       202,260  
Investments in unconsolidated affiliates
    394,547       393,561  
Goodwill and intangible assets, net
    1,595,691       1,587,877  
Other
    21,983       24,630  
 
           
Total assets
  $ 2,388,917     $ 2,372,739  
 
           
 
               
LIABILITIES AND EQUITY
               
 
               
Current liabilities:
               
Accounts payable
  $ 20,786     $ 23,488  
Accrued expenses and other
    207,082       218,786  
Current portion of long-term debt
    25,833       22,386  
 
           
Total current liabilities
    253,701       264,660  
 
               
Long-term debt
    1,017,540       1,047,440  
Other liabilities
    164,549       157,820  
 
           
Total liabilities
    1,435,790       1,469,920  
 
               
Noncontrolling interests — redeemable
    98,648       81,668  
 
               
USPI stockholder’s equity
    820,417       786,757  
Noncontrolling interests — nonredeemable
    34,062       34,394  
 
           
Total equity
    854,479       821,151  
 
           
Total liabilities and equity
  $ 2,388,917     $ 2,372,739  
 
           
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United Surgical Partners Announces Second Quarter 2011 Results
Page 6
August 2, 2011
UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
Key Operating Statistics
                         
    Three Months Ended June 30,  
    2011     2010     % Change  
Systemwide same-facility statistics(1) (2):
                       
United States:
                       
Facility cases
    210,897       209,263       0.8 %
Net revenue/case
  $ 2,233     $ 2,122       5.2 %
Net revenue (in thousands)
  $ 470,907     $ 443,987       6.1 %
Facility operating income margin(3)
    27.2 %     27.5 %   (30) bps
 
                       
United Kingdom:
                       
Adjusted admissions
    5,392       5,583       (3.4 %)
Net revenue/adjusted admission
  $ 5,107     $ 4,434       15.2 %
Net revenue/adjusted admission (at constant currency translation rates)(4)
  $ 5,107     $ 4,848       5.3 %
Net revenue (in thousands)
  $ 27,537     $ 24,755       11.2 %
Facility operating income margin(3)
    19.6 %     23.5 %   (390) bps
 
                       
Other:
                       
Total consolidated facilities
    59       60          
 
                       
EBITDA less noncontrolling interests(5)
                       
GAAP operating income
  $ 62,538     $ 57,584       8.6 %
Depreciation and amortization
    7,545       7,482          
Net (gain) loss on deconsolidations, disposals and impairments
    (1,979 )     277          
 
                 
EBITDA
    68,104       65,343          
Net income attributable to noncontrolling interests
    (17,282 )     (15,135 )        
 
                 
EBITDA less noncontrolling interests
  $ 50,822     $ 50,208       1.2 %
 
                 
 
(1)    Excludes facilities in their first year of operations. Includes facilities accounted for under the equity method as well as consolidated facilities.
 
(2)    Statistics are included in both periods for current year acquisitions.
 
(3)   Calculated as operating income divided by net revenue.
 
(4)    Calculated using second quarter 2011 exchange rates. The Company believes net revenue per adjusted admission is an important measure of the United Kingdom operations and that using a constant currency translation rate more accurately reflects the trend of the business.
 
(5)    EBITDA and EBITDA less noncontrolling interests are not measures defined under generally accepted accounting principles (GAAP). The Company believes EBITDA and EBITDA less noncontrolling interests are important measures for purposes of allocating resources and assessing performance. EBITDA, which is computed by adding operating income plus depreciation and amortization, net (gain) loss on deconsolidations, disposals and impairments, is commonly used as an analytical indicator within the healthcare industry and also serves as a measure of leverage capacity and debt service ability. EBITDA less noncontrolling interests, which is computed by subtracting net income attributable to noncontrolling interests from EBITDA, adjusts both years’ EBITDA to reflect that the Company does not own 100% of each facility. EBITDA and EBITDA less noncontrolling interests should not be considered as measures of financial performance under GAAP, and the items excluded from EBITDA and EBITDA less noncontrolling interests are significant components in understanding and assessing financial performance. Because EBITDA and EBITDA less noncontrolling interests are not measurements determined in accordance with GAAP and are thus susceptible to varying calculation methods, EBITDA and EBITDA less noncontrolling interests as presented by United Surgical Partners International may not be comparable to similarly titled measures of other companies.
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