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8-K - 8-K - UNIVERSAL HEALTH REALTY INCOME TRUSTuht-8k_20151028.htm

                      Exhibit 99.1

 

UNIVERSAL HEALTH REALTY INCOME TRUST

 

 

Universal Corporate Center

 

 

 

 

367 S. Gulph Road

 

 

 

 

P.O. Box 61558

 

 

 

 

King of Prussia, PA 19406

 

 

 

 

(610) 265-0688

 

FOR IMMEDIATE RELEASE

CONTACT:

 

Charles Boyle

 

October 28, 2015

 

 

Chief Financial Officer

 

 

 

 

(610) 768-3300

 

 

UNIVERSAL HEALTH REALTY INCOME TRUST

REPORTS 2015 THIRD QUARTER FINANCIAL RESULTS

Consolidated Results of Operations - Three-Month Periods Ended September 30, 2015 and 2014:

KING OF PRUSSIA, PA - Universal Health Realty Income Trust (NYSE:UHT) announced today that for the three-month period ended September 30, 2015, reported net income was $3.6 million, or $.27 per diluted share, as compared to $28.1 million, or $2.18 per diluted share, during the third quarter of 2014.

Included in our reported results during the third quarter of 2014 was a $25.1 million gain ($1.95 per diluted share) from the fair value recognition resulting from the purchase of minority interests in six majority-owned limited liability companies (“LLCs”), offset by $198,000 ($.02 per diluted share) of transaction costs incurred during the quarter. After neutralizing the impact of these items, as calculated on the attached Schedule of Non-GAAP Supplemental Information (“Supplemental Schedule”), our adjusted net income increased $393,000, or $.02 per diluted share, during the third quarter of 2015 as compared to the third quarter of 2014. Contributing to the increase in net income during the third quarter of 2015 was the income generated at properties acquired during 2015.

As calculated on the Supplemental Schedule, our adjusted funds from operations (“AFFO”), which excludes the impact of gains, depreciation and amortization incurred by us and our unconsolidated affiliates, and transaction costs, were $9.4 million, or $.71 per diluted share, during the third quarter of 2015, as compared to $8.9 million, or $.69 per diluted share during the third quarter of 2014.

 

Consolidated Results of Operations - Nine-Month Periods Ended September 30, 2015 and 2014:

For the nine-month period ended September 30, 2015, reported net income was $19.3 million, or $1.45 per diluted share, as compared to $35.3 million, or $2.74 per diluted share, during the comparable nine-month period of 2014.  

Included in our net income during the first nine months of 2015 was an $8.7 million gain ($.66 per diluted share) recorded in connection with a property exchange transaction, as discussed below. Included in our net income during the first nine months of 2014 was an aggregate $25.4 million gain ($1.97 per diluted share) on fair value recognition resulting from the purchase of minority interests in majority-owned LLCs. As reflected on the attached Supplemental Schedule, after adjusting the reported results for each of the nine-month periods ended September 30, 2015 and 2014, for the impact of the gains and transaction costs recorded during each period, our adjusted net income increased $586,000, or $.02 per diluted share, during the first nine months of 2015 as compared to the first nine

 


months of 2014. Contributing to the increase in net income during the first nine months of 2015 was the income generated at properties acquired during 2015.  

As calculated on the Supplemental Schedule, our AFFO were $28.6 million, or $2.15 per diluted share, during the first nine months of 2015, as compared to $26.7 million, or $2.07 per diluted share, during the first nine months of 2014.  

 

Dividend Information:

The third quarter dividend of $.64 per share was paid on September 30, 2015.

 

Capital Resources Information:

At September 30, 2015, we had $114.4 million of borrowings outstanding pursuant to the terms of our $185 million revolving credit agreement and $65.5 million of available borrowing capacity, net of outstanding borrowings and letters of credit.

 

Property Exchange Transaction:

In May, 2015, in exchange for the real property of Sheffield Medical Building (“Sheffield”), a 73,446 square foot medical office building (“MOB”) located in Atlanta, Georgia, we received, from an unrelated party, $2 million in cash and the real property of two MOBs located in Sandy Springs and Vinings, Georgia. In connection with the two MOBs acquired in this transaction, triple net, master lease agreements applicable to 100% of the combined 36,700 rentable square feet of these properties were executed with the counterparty. These master lease agreements have initial terms of 15 years and provide for 3% annual rent increases. Based upon the fair value of the assets exchanged, this transaction resulted in an $8.7 million gain which is included in our financial results for the nine-month period ended September 30, 2015.

 

Purchase of Minority Interests and Consolidation of LLCs:

On August 1, 2014, we purchased the minority ownership interests held by a third-party member in six LLCs in which we previously held noncontrolling, majority ownership interests ranging from 85% to 95%. As a result of these transactions, we now own 100% of each of these LLCs and began accounting for each on a consolidated basis effective August 1, 2014.

These six LLCs were included in our consolidated financial statements for the quarter ended September 30, 2014 on an unconsolidated basis during the one-month period ended July 31, 2014, and on a consolidated basis thereafter. During the month of July, 2014, these LLCs had combined revenues of $523,000, operating expenses of $241,000, depreciation and amortization expense of $106,000, interest expense of $94,000 and net income of $82,000.

These six LLCs were included in our consolidated financial statements for the nine-month period ended September 30, 2014 on an unconsolidated basis during the seven months ended July 31, 2014, and on a consolidated basis thereafter. During the first seven months of 2014, these LLCs had combined revenues of approximately $3.6 million, operating expenses of approximately $1.6 million, depreciation and amortization expense of $732,000, interest expense of $654,000 and net income of $551,000.

 

General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures:

Universal Health Realty Income Trust, a real estate investment trust, invests in healthcare and human service related facilities including acute care hospitals, rehabilitation hospitals, sub-acute care

 


facilities, surgery centers, free-standing emergency departments, childcare centers and medical office buildings. We have investments in sixty-two properties located in eighteen states.

This press release contains forward-looking statements based on current management expectations. Numerous factors, including those disclosed herein, those related to healthcare and healthcare real estate 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-K for the year ended December 31, 2014 and in Item 2-Forward-Looking Statements and Certain Risk Factors in our Form 10-Q for the quarterly period ended June 30, 2015), may cause the results to differ materially from those anticipated in the forward-looking statements. Many of the factors that will determine our future results are beyond our capability to control or predict. 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.

We believe that adjusted net income and adjusted net income per diluted share (as reflected on the attached Supplemental Schedules), 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 in each year of material items that are nonrecurring or non-operational in nature including items such as, but not limited to, gains on divestitures of real property, gains on fair value recognition resulting from the purchase of minority interests in majority-owned LLCs and transaction costs.

Funds from operations (“FFO”) is a widely recognized measure of performance for Real Estate Investment Trusts (“REITs”). We believe that FFO and FFO per diluted share, and adjusted funds from operations (“AFFO”) and AFFO per diluted share, which are non-GAAP financial measures, are helpful to our investors as measures of our operating performance. We compute FFO, as reflected on the attached Supplemental Schedules, in accordance with standards established by the National Association of Real Estate Investment Trusts (“NAREIT”), which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than we interpret the definition. FFO adjusts for the effect of the gain on property exchange transaction (during 2015) and for the effect of the gains on fair value recognition resulting from the purchase of minority interests in majority-owned LLCs (during 2014). AFFO was also computed for the three and nine month-periods ended September 30, 2015 and 2014, as reflected on the Supplemental Schedules and discussed herein, and includes the adjustments made to FFO, as mentioned above, as well as for transaction costs related to acquisitions. FFO/AFFO do not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income determined in accordance with GAAP. In addition, FFO/AFFO should not be used as: (i) an indication of our financial performance determined in accordance with GAAP; (ii) an alternative to cash flow from operating activities determined in accordance with GAAP; (iii) a measure of our liquidity, or; (iv) an indicator of funds available for our cash needs, including our ability to make cash distributions to shareholders. A reconciliation of our reported net income to FFO/AFFO is reflected on the Supplemental Schedules included below.

To obtain a complete understanding of our financial performance these measures should be examined in connection with net income, determined in accordance with GAAP, 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 Report on Form 10-K for the year ended December 31, 2014. 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.

(more)

 


Universal Health Realty Income Trust

Consolidated Statements of Income

For the Three and Nine Months Ended September 30, 2015 and 2014

(amounts in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Base rental - UHS facilities

 

$

4,019

 

 

$

3,864

 

 

$

11,916

 

 

$

11,694

 

  Base rental - Non-related parties

 

 

8,763

 

 

 

8,235

 

 

 

26,438

 

 

 

22,506

 

  Bonus rental - UHS facilities

 

 

1,085

 

 

 

1,157

 

 

 

3,453

 

 

 

3,529

 

  Tenant reimbursements and other - Non-related parties

 

 

1,620

 

 

 

1,804

 

 

 

5,523

 

 

 

5,585

 

  Tenant reimbursements and other - UHS facilities

 

 

199

 

 

 

198

 

 

 

607

 

 

 

549

 

 

 

 

15,686

 

 

 

15,258

 

 

 

47,937

 

 

 

43,863

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Depreciation and amortization

 

 

5,424

 

 

 

5,247

 

 

 

16,817

 

 

 

14,855

 

  Advisory fees to UHS

 

 

708

 

 

 

653

 

 

 

2,067

 

 

 

1,883

 

  Other operating expenses

 

 

4,461

 

 

 

4,462

 

 

 

13,921

 

 

 

12,529

 

  Transaction costs

 

 

-

 

 

 

198

 

 

 

204

 

 

 

301

 

 

 

 

10,593

 

 

 

10,560

 

 

 

33,009

 

 

 

29,568

 

Income before equity in income of unconsolidated limited

   liability companies ("LLCs"), interest expense and gains

 

 

5,093

 

 

 

4,698

 

 

 

14,928

 

 

 

14,295

 

  Equity in income of unconsolidated LLCs

 

 

561

 

 

 

499

 

 

 

1,826

 

 

 

1,771

 

  Gain on property exchange

 

 

-

 

 

 

-

 

 

 

8,742

 

 

 

-

 

  Gains on fair value recognition resulting from the

      purchase of minority interests in majority-owned

      LLCs

 

 

-

 

 

 

25,093

 

 

 

-

 

 

 

25,409

 

Interest expense, net

 

 

(2,015

)

 

 

(2,149

)

 

 

(6,157

)

 

 

(6,152

)

Net income

 

$

3,639

 

 

$

28,141

 

 

$

19,339

 

 

$

35,323

 

Basic earnings per share

 

$

0.27

 

 

$

2.18

 

 

$

1.46

 

 

$

2.74

 

Diluted earnings per share

 

$

0.27

 

 

$

2.18

 

 

$

1.45

 

 

$

2.74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding - Basic

 

 

13,298

 

 

 

12,911

 

 

 

13,289

 

 

 

12,887

 

Weighted average number of share equivalents

 

 

4

 

 

 

7

 

 

 

8

 

 

 

6

 

Weighted average number of shares and equivalents

   outstanding - Diluted

 

 

13,302

 

 

 

12,918

 

 

 

13,297

 

 

 

12,893

 

 


Universal Health Realty Income Trust

Schedule of Non-GAAP Supplemental Information (“Supplemental Schedule”)

For the three months ended September 30, 2015 and 2014

(in thousands, except per share amounts)

(unaudited)

Calculation of Adjusted Net Income

 

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

September 30, 2015

 

 

September 30, 2014

 

 

 

Amount

 

 

Per

Diluted Share

 

 

Amount

 

 

Per

Diluted Share

 

Net income

 

$

3,639

 

 

$

0.27

 

 

$

28,141

 

 

$

2.18

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Gains on fair value recognition resulting from the purchase of minority interests in majority-owned LLCs

 

 

-

 

 

 

-

 

 

 

(25,093

)

 

 

(1.95

)

Transaction costs

 

 

-

 

 

 

-

 

 

 

198

 

 

 

0.02

 

Subtotal adjustments to net income

 

 

-

 

 

 

-

 

 

 

(24,895

)

 

 

(1.93

)

Adjusted net income

 

$

3,639

 

 

$

0.27

 

 

$

3,246

 

 

$

0.25

 

 

 

Calculation of Funds From Operations (“FFO”) and Adjusted Funds From Operations (“AFFO”)

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

September 30, 2015

 

 

September 30, 2014

 

 

 

Amount

 

 

Per

Diluted Share

 

 

Amount

 

 

Per

Diluted Share

 

Net income

 

$

3,639

 

 

$

0.27

 

 

$

28,141

 

 

$

2.18

 

Plus: Depreciation and amortization expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated investments

 

 

5,332

 

 

 

0.40

 

 

 

5,165

 

 

 

0.40

 

Unconsolidated affiliates

 

 

433

 

 

 

0.04

 

 

 

499

 

 

 

0.04

 

Less: Gains on fair value recognition resulting from the purchase of minority interests in majority-owned LLCs

 

 

-

 

 

 

-

 

 

 

(25,093

)

 

 

(1.95

)

FFO

 

 

9,404

 

 

 

0.71

 

 

 

8,712

 

 

 

0.67

 

Transaction costs

 

 

-

 

 

 

-

 

 

 

198

 

 

 

0.02

 

AFFO

 

$

9,404

 

 

$

0.71

 

 

$

8,910

 

 

$

0.69

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend paid per share

 

 

 

 

 

$

0.640

 

 

 

 

 

 

$

0.630

 

 


Universal Health Realty Income Trust

Schedule of Non-GAAP Supplemental Information (“Supplemental Schedule”)

For the nine months ended September 30, 2015 and 2014

(in thousands, except per share amounts)

(unaudited)

Calculation of Adjusted Net Income

 

 

 

Nine Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2015

 

 

September 30, 2014

 

 

 

Amount

 

 

Per

Diluted Share

 

 

Amount

 

 

Per

Diluted Share

 

Net income

 

$

19,339

 

 

$

1.45

 

 

$

35,323

 

 

$

2.74

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:  Gain on property exchange

 

 

(8,742

)

 

 

(0.66

)

 

 

-

 

 

 

-

 

Gains on fair value recognition resulting from the purchase of minority interests in majority-owned LLCs

 

 

-

 

 

 

-

 

 

 

(25,409

)

 

 

(1.97

)

Transaction costs

 

 

204

 

 

 

0.02

 

 

 

301

 

 

 

0.02

 

Subtotal adjustments to net income

 

 

(8,538

)

 

 

(0.64

)

 

 

(25,108

)

 

 

(1.95

)

Adjusted net income

 

$

10,801

 

 

$

0.81

 

 

$

10,215

 

 

$

0.79

 

Calculation of Funds From Operations (“FFO”) and Adjusted Funds From Operations (“AFFO”)

 

 

 

Nine Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2015

 

 

September 30, 2014

 

 

 

Amount

 

 

Per

Diluted Share

 

 

Amount

 

 

Per

Diluted Share

 

Net income

 

$

19,339

 

 

$

1.45

 

 

$

35,323

 

 

$

2.74

 

Plus: Depreciation and amortization expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated investments

 

 

16,520

 

 

 

1.24

 

 

 

14,620

 

 

 

1.13

 

Unconsolidated affiliates

 

 

1,261

 

 

 

0.10

 

 

 

1,881

 

 

 

0.15

 

Less: Gain on property exchange

 

 

(8,742

)

 

 

(0.66

)

 

 

-

 

 

 

-

 

Gains on fair value recognition resulting from the purchase of minority interests in majority-owned LLCs

 

 

-

 

 

 

-

 

 

 

(25,409

)

 

 

(1.97

)

FFO

 

 

28,378

 

 

 

2.13

 

 

 

26,415

 

 

 

2.05

 

Transaction costs

 

 

204

 

 

 

0.02

 

 

 

301

 

 

 

0.02

 

AFFO

 

$

28,582

 

 

$

2.15

 

 

$

26,716

 

 

$

2.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend paid per share

 

 

 

 

 

$

1.915

 

 

 

 

 

 

$

1.885

 

 


Universal Health Realty Income Trust

Consolidated Balance Sheets

(dollar amounts in thousands)

(unaudited)

 

 

September 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Assets:

 

 

 

 

 

 

 

 

Real Estate Investments:

 

 

 

 

 

 

 

 

Buildings and improvements

 

$

468,566

 

 

$

451,005

 

Accumulated depreciation

 

 

(117,054

)

 

 

(106,480

)

 

 

 

351,512

 

 

 

344,525

 

Land

 

 

41,724

 

 

 

35,584

 

               Net Real Estate Investments

 

 

393,236

 

 

 

380,109

 

Investments in limited liability companies ("LLCs"), net

 

 

7,811

 

 

 

8,605

 

Other Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

3,651

 

 

 

3,861

 

Base and bonus rent receivable from UHS

 

 

2,015

 

 

 

2,086

 

Rent receivable - other

 

 

4,414

 

 

 

4,219

 

Intangible assets (net of accumulated amortization of $24.0 million and

   $19.7 million at September 30, 2015 and December 31, 2014, respectively)

 

 

20,865

 

 

 

23,123

 

Deferred charges and other assets, net

 

 

6,660

 

 

 

6,863

 

               Total Assets

 

$

438,652

 

 

$

428,866

 

Liabilities:

 

 

 

 

 

 

 

 

Line of credit borrowings

 

$

114,350

 

 

$

89,750

 

Mortgage and other notes payable, non-recourse to us (including net debt

   premium of $354 and $523 at September 30, 2015 and December 31, 2014,

   respectively)

 

 

115,853

 

 

 

123,405

 

Accrued interest

 

 

470

 

 

 

545

 

Accrued expenses and other liabilities

 

 

5,806

 

 

 

8,522

 

Tenant reserves, escrows, deposits and prepaid rents

 

 

2,932

 

 

 

2,063

 

               Total Liabilities

 

 

239,411

 

 

 

224,285

 

Equity:

 

 

 

 

 

 

 

 

Preferred shares of beneficial interest,

   $.01 par value; 5,000,000 shares authorized;

   none issued and outstanding

 

 

-

 

 

 

-

 

Common shares, $.01 par value;

   95,000,000 shares authorized; issued and outstanding: 2015 - 13,325,658;

   2014 - 13,301,204

 

 

133

 

 

 

133

 

Capital in excess of par value

 

 

241,675

 

 

 

240,835

 

Cumulative net income

 

 

550,934

 

 

 

531,595

 

Cumulative dividends

 

 

(593,388

)

 

 

(567,894

)

Accumulated other comprehensive loss

 

 

(113

)

 

 

(88

)

     Total Equity

 

 

199,241

 

 

 

204,581

 

               Total Liabilities and Equity

 

$

438,652

 

 

$

428,866