United Surgical Partners International Announces First Quarter 2012 Results

DALLAS--(BUSINESS WIRE)-- United Surgical Partners International, Inc. (“USPI” or the “Company”) today announced results for the first quarter ended March 31, 2012.

First Quarter Financial Results

For the quarter ended March 31, 2012, consolidated net revenues increased 12% to $164.7 million compared with $147.1 million in the prior year period. Operating income for the first quarter was $63.2 million as compared with $59.0 million for the prior year period. EBITDA less noncontrolling interests increased 7% to $53.6 million versus $50.1 million in the prior year quarter.

The financial results for the first quarter were driven by systemwide revenue growth of 16%, consisting of 8% U.S. same-facility revenue growth and the remainder being due to acquisition activity.

Cash flows from operating activities for the first quarter totaled $55.9 million compared with $41.6 million for the prior year period. U.S. income tax payments decreased by $8.8 million in the first quarter of 2012 compared with the first quarter of 2011, primarily related to the sale of a business unit in December 2010. During the first quarter, the Company and its consolidated subsidiaries invested approximately $6.7 million in maintenance capital expenditures and an additional $9.8 million to develop new facilities and expand existing facilities.

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 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, 2012, 143 of the 209 facilities the Company operated were not consolidated.

Revenue Analysis

For the first quarter, the systemwide revenues of the facilities operated by the Company increased 16% on a year-over-year basis, while consolidated revenues increased 12%. The table below lists the key drivers of year-over-year changes in revenues.

Three Months Ended
March 31, 2012
As Reported     Unconsolidated
Under GAAP Affiliates
Total revenues, period ended March 31, 2011 $ 147,090 $ 347,815
Add: revenue from acquired facilities and de novos 9,466 31,860
Less: revenue of disposed facilities (5,597 )
Impact of exchange rate   (585 )    
Adjusted base period $ 155,971 $ 374,078
Increase from operations 6,501 33,434
Non-facility based revenue   2,251     952  
Total revenues, period ended March 31, 2012 $ 164,723   $ 408,464  

Development Activity

During the quarter, the Company acquired three facilities and opened one de novo facility. The Company expects to add 15 to 20 facilities in 2012.

Company Completes Refinancing and Spin-Out of its United Kingdom Subsidiaries

On April 3, 2012, the Company amended its senior secured credit facility, issued new senior unsecured notes, redeemed all validly tendered outstanding notes pursuant to the previously announced tender offer and consent solicitation, deposited funds with the trustee to redeem the remaining outstanding notes, and spun-off its U.K. subsidiary. The Company no longer has any ownership in the U.K.

Additionally, on April 3, 2012, a special cash dividend was paid by the Company in the amount of approximately $314.5 million. The proceeds of the dividend were used by USPI Holdings, Inc., the sole stockholder of the Company, to pay a special cash dividend on its common stock. In turn, the proceeds were used by USPI Group Holdings, Inc., the sole stockholder of USPI Holdings, Inc., to pay a special cash dividend to its common and preferred stockholders.


Commenting on the results, William H. Wilcox, USPI’s chief executive officer, said, “We were pleased with our growth for the quarter, though respectful of the relatively easy year-over-year comparisons due to weather related issues in the prior year period.”

The live broadcast of USPI’s first quarter conference call will begin at 5:00 p.m. Eastern Time on May 10, 2012. 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 201 domestic facilities, of which 139 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.

Unaudited Condensed Consolidated Statements of Operations
(in thousands, except number of facilities)
Three Months Ended
March 31,
2012     2011
Revenues $ 164,723 $ 147,090
Equity in earnings of unconsolidated affiliates 20,437 17,932
Operating expenses:
Salaries, benefits and other employee costs 45,639 39,461
Medical services and supplies 27,222 24,418
Other operating expenses 26,468 23,832
General and administrative expenses 12,196 9,780
Provision for doubtful accounts 2,340 1,746
Net gain on deconsolidations, disposals and impairments (299 ) (499 )
Depreciation and amortization   8,345     7,328  
Total operating expenses   121,911     106,066  
Operating income 63,249 58,956
Interest expense, net (15,555 ) (17,034 )
Other, net   100     72  
Income from continuing operations before income taxes 47,794 41,994
Income tax expense   (11,390 )   (9,868 )
Income from continuing operations 36,404 32,126
Discontinued operations, net of tax   -     (693 )
Net income 36,404 31,433
Less: Net income attributable to noncontrolling interests   (17,680 )   (15,712 )
Net income attributable to USPI’s common stockholder $ 18,724   $ 15,721  
Supplemental Data:
Facilities operated at period end 209 191
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
March 31, Dec. 31,
2012 2011
Current assets:
Cash and cash equivalents $ 49,099 $ 41,822

Accounts receivable, net of allowance for doubtful accounts of $8,773 and $8,576, respectively

54,925 58,057
Other receivables 17,753 10,499
Inventories 10,409 10,117
Deferred tax assets, net 14,974 14,704
Other   26,972   20,129
Total current assets 174,132 155,328
Property and equipment, net 248,093 235,321
Investments in unconsolidated affiliates 442,206 444,734
Goodwill and intangible assets, net 1,551,141 1,536,485
Other   26,708   21,630
Total assets $ 2,442,280 $ 2,393,498
Current liabilities:
Accounts payable $ 28,215 $ 28,765
Accrued expenses and other 236,060 222,985
Current portion of long-term debt   25,465   25,487
Total current liabilities 289,740 277,237
Long-term debt 1,046,810 1,042,969
Other liabilities   202,603   198,753
Total liabilities 1,539,153 1,518,959
Noncontrolling interests - redeemable 128,952 106,668
USPI stockholder’s equity 740,015 732,688
Noncontrolling interests - nonredeemable   34,160   35,183
Total equity   774,175   767,871
Total liabilities and equity $ 2,442,280 $ 2,393,498
Key Operating Statistics
(in thousands, except for number of facilities, cases and percentages)
Three Months Ended March 31,
2012     2011     % Change

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

United States:

Facility cases

220,661 212,148 4.0%
Net revenue/case $ 2,252 $ 2,170 3.8%
Net revenue (in thousands) $ 496,889 $ 460,449 7.9%
Facility operating income margin(3) 26.3 % 26.6 % (30) bps

United Kingdom:

Adjusted admissions 6,933 6,401 8.3%
Net revenue/adjusted admission $ 5,161 $ 5,147 0.3%

Net revenue/adjusted admission
(at constant currency translation rates)(4)

$ 5,161 $ 5,090 1.4%
Net revenue (in thousands) $ 35,781 $ 32,946 8.6%
Facility operating income margin(3) 20.4 % 22.2 % (180) bps


Total consolidated facilities 66 58
EBITDA less noncontrolling interests(5)
GAAP operating income $ 63,249 $ 58,956 7.3%
Depreciation and amortization 8,345 7,328
Net gain on deconsolidations, disposals & impairments   (299 )   (499 )
EBITDA 71,295 65,785
Net income attributable to noncontrolling interests   (17,680 )   (15,712 )
EBITDA less noncontrolling interests $ 53,615     50,073   7.1%


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


Statistics for acquired facilities are included in both periods.


Calculated as operating income divided by net revenue.


Calculated using first quarter 2012 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.


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 and good will impairment, 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.
Mark A. Kopser, 972-713-3500
Executive Vice President and Chief Financial Officer

KEYWORDS:   United States  North America  Texas

INDUSTRY KEYWORDS:   Health  Hospitals



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