United Surgical Partners International Announces First Quarter 2013 Results

United Surgical Partners International Announces First Quarter 2013 Results

DALLAS--(BUSINESS WIRE)-- United Surgical Partners International, Inc. ("USPI" or the "Company") today announced results for the first quarter ended March 31, 2013.

First Quarter Financial Results


For the quarter ended March 31, 2013, consolidated net revenues increased 13% to $145.1 million compared with $128.2 million in the prior year period. Operating income for the first quarter was $58.2 million as compared with $58.1 million for the prior year period. EBITDA less noncontrolling interests increased 4% to $47.8 million versus $45.8 million in the prior year quarter. The operating results for the first quarter were driven by acquisition-related revenue growth, offset by a decrease in same-facility revenue, primarily due to a 3% decrease in same facility volume.

Cash flows from operating activities for the first quarter totaled $38.6 million compared with $50.8 million for the prior year period, due primarily to additional interest expense arising from our April 2012 refinancing. During the first quarter, the Company and its consolidated subsidiaries invested approximately $3.2 million in maintenance capital expenditures and an additional $5.6 million to develop new facilities and expand or invest in the infrastructure of existing facilities.

Systemwide Financial Results

Due to the Company's partnerships with physicians and prominent 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 include 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 March 31, 2013, 150 of the 214 facilities the Company operated were not consolidated.

For the first quarter, the systemwide revenues of the facilities operated by the Company increased 5% on a year-over-year basis, driven by acquisitions. On a same-store basis, systemwide net revenue decreased 1.6%.

Development Activity

During the quarter, the Company opened one de novo facility. The Company expects to add 12 to 15 facilities in 2013.

Reclassification of Prior Year Earnings Due to Spin-Out of the Company's United Kingdom Subsidiary

During the second quarter of 2012, the Company spun-off its U.K. subsidiary. As a result, the Company no longer has any ownership in the U.K. subsidiary, which was renamed European Surgical Partners, Ltd., and has classified its prior earnings as discontinued operations.

Conclusion

Commenting on the results, William H. Wilcox, USPI's chief executive officer, said, "We believe that uncertainty regarding the economy and employment, together with continued changes in insurance plan design in some markets, impacted first quarter volumes and results. We remain comfortable with our long-term strategy and have put plans in place that we believe position us well for the remainder of the year."

The live broadcast of USPI's first quarter conference call will begin at 10:00 a.m. Eastern Time on May 15, 2013. 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 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 215 facilities, of which 149 are jointly owned with not-for-profit healthcare systems.

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.

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.

Unaudited Condensed Consolidated Statements of Income

(in thousands, except number of facilities)

Three Months Ended
March 31,

2013

2012

Revenues

$

145,108

$

128,195

Equity in earnings of unconsolidated affiliates

19,325

20,437

Operating expenses:

Salaries, benefits and other employee costs

39,013

33,299

Medical services and supplies

22,836

18,698

Other operating expenses

24,591

20,192

General and administrative expenses

9,904

10,599

Provision for doubtful accounts

3,044

2,346

Net gain on deconsolidations, disposals and impairments

(101

)

(299

)

Depreciation and amortization

6,903

5,686

Total operating expenses

106,190

90,521

Operating income

58,243

58,111

Interest expense, net

(28,560

)

(15,076

)

Other, net

-

56

Income from continuing operations before income taxes

29,683

43,091

Income tax expense

(4,857

)

(10,122

)

Income from continuing operations

24,826

32,969

Discontinued operations, net of tax

-

3,435

Net income

24,826

36,404

Less: Net income attributable to noncontrolling interests

(17,240

)

(17,680

)

Net income attributable to USPI's common stockholder

$

7,586

$

18,724

Supplemental Data:

Facilities operated at period end

214

209

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

March 31,
2013

Dec. 31,
2012

ASSETS

Current assets:

Cash and cash equivalents

$

47,419

$

51,203

Available for sale securities

10,855

10,741

Accounts receivable, net of allowance for doubtful accounts of $10,988 and $9,904, respectively

46,093

50,108

Other receivables

27,312

14,611

Inventories of supplies

8,604

8,017

Deferred tax assets, net

20,657

20,687

Other

19,367

16,607

Total current assets

180,307

171,974

Property and equipment, net

130,460

126,526

Investments in unconsolidated affiliates

467,972

484,079

Goodwill and intangible assets, net

1,566,970

1,555,108

Other

23,443

23,062

Total assets

$

2,369,152

$

2,360,749

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

15,670

$

14,981

Accrued expenses and other

234,449

241,512

Current portion of long-term debt

17,602

17,913

Total current liabilities

267,721

274,406

Long-term debt

1,457,855

1,461,621

Other liabilities

207,136

199,336

Total liabilities

1,932,712

1,935,363

Noncontrolling interests - redeemable

155,848

153,399

USPI stockholder's equity

238,274

233,715

Noncontrolling interests - nonredeemable

42,318

38,272

Total equity

280,592

271,987

Total liabilities and equity

$

2,369,152

$

2,360,749

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.

Key Operating Statistics

(in thousands, except for number of facilities, cases and percentages)

Three Months Ended March 31,

2013

2012

% Change

Systemwide same-facility statistics(1) (2):

Facility cases(3)

225,434

232,613

(3.1

)%

Net revenue/case

$

2,284

$

2,249

1.5

%

Net revenue

$

514,819

$

523,200

(1.6

)%

Facility operating income margin(4)

23.4

%

25.9

%

(250) bps

Other

Total consolidated facilities

64

59

EBITDA less noncontrolling interests(5)

GAAP operating income

$

58,243

$

58,111

0.2

%

Depreciation and amortization

6,903

5,686

Net gain on deconsolidations, disposals and impairments

(101

)

(299

)

EBITDA

65,045

63,498

Net income attributable to noncontrolling interests

(17,240

)

(17,680

)

EBITDA less noncontrolling interests

$

47,805

$

45,818

4.3

%

(1)

Excludes de novo facilities in their first year of operations. Includes facilities accounted for under the equity method as well as consolidated facilities.

(2)

Statistics for acquired facilities are included in both periods.

(3)

The first quarter of 2013 had one less surgical day than the first quarter of 2012.

(4)

Calculated as operating income divided by net revenue.

(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, depreciation and amortization, and net gain 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.



United Surgical Partners International, Inc.
Jason B. Cagle, 972-713-3500
Senior Vice President and Chief Financial Officer

KEYWORDS: United States North America Texas

INDUSTRY KEYWORDS:

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