Universal Health Realty Income Trust Reports 2015 Second Quarter Financial Results

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

Jul 29, 2015, 17:01 ET from Universal Health Realty Income Trust

KING OF PRUSSIA, Pa., July 29, 2015 /PRNewswire/ -- Universal Health Realty Income Trust (NYSE: UHT) announced today that for the three-month period ended June 30, 2015, reported net income was $12.0 million, or $.90 per diluted share, as compared to $3.4 million, or $.26 per diluted share, during the second quarter of 2014. Included in our net income during the second quarter of 2015, was an $8.7 million gain recorded in connection with a property exchange transaction, as discussed below.

As reflected on the attached Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule"), our reported results include the above-mentioned $8.7 million gain recorded during the second quarter of 2015 as well as transaction costs incurred during each of the quarters ended June 30, 2015 and 2014. Excluding the impact of these items, as calculated on the Supplemental Schedule, our adjusted net income was $3.41 million, or $.26 per diluted share, during the second quarter of 2015 as compared to $3.45 million, or $.27 per diluted share, during the second quarter of 2014.

As calculated on the Supplemental Schedule, our adjusted funds from operations ("AFFO"), which excludes the impact of gains on property exchange transaction/fair value recognition from the purchase of minority interests in majority-owned LLCs, depreciation and amortization incurred by us and our unconsolidated affiliates, and transaction costs, were $9.6 million, or $.72 per diluted share, during the second quarter of 2015, as compared to $8.9 million, or $.69 per diluted share during the second quarter of 2014.

Consolidated Results of Operations - Six-Month Periods Ended June 30, 2015 and 2014: For the six-month period ended June 30, 2015, reported net income was $15.7 million, or $1.18 per diluted share, as compared to $7.2 million, or $.56 per diluted share, during the comparable six-month period of 2014. Our net income during the first six months of 2015 included the above-mentioned $8.7 million gain recorded in connection with a property exchange transaction and our net income during the first six months of 2014 included a $316,000 gain on fair value recognition resulting from the purchase of minority interests in majority-owned LLCs.

After adjusting the reported results for the six-month periods ended June 30, 2015 and 2014 for the net impact of the items reflected on the attached Supplemental Schedule, consisting of transaction costs and gains recorded during each period, our adjusted net income was $7.2 million, or $.54 per diluted share, during the first six months of 2015 as compared to $7.0 million, or $.54 per diluted share, during the first six months of 2014.

As calculated on the Supplemental Schedule, our AFFO were $19.2 million, or $1.44 per diluted share, during the first six months of 2015, as compared to $17.8 million, or $1.38 per diluted share, during the first six months of 2014.  

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 have been executed with Piedmont Healthcare. These master lease agreements have initial terms of 15 years and provide for 3% annual rent increases. Based upon the fair value of the consideration received in exchange for the real property of Sheffield, this transaction resulted in an $8.7 million gain which is included in our financial results for the three and six-month periods ended June 30, 2015.

Dividend Information: The second quarter dividend of $.64 per share was paid on June 30, 2015.

Capital Resources Information: At June 30, 2015, we had $115.3 million of borrowings outstanding pursuant to the terms of our $185 million revolving credit agreement and $64.6 million of available borrowing capacity, net of outstanding borrowings and letters of credit.

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.

For the quarter ended June 30, 2014, these six LLCs had combined revenues of approximately $1.6 million, operating expenses of $702,000, depreciation and amortization expense of $315,000, interest expense of $279,000 and net income of $263,000.  For the six-months ended June 30, 2014, these six LLCs had combined revenues of approximately $3.1 million, operating expenses of approximately $1.4 million, depreciation and amortization expense of $626,000, interest expense of $560,000 and net income of $469,000.

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 March 31, 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 six month periods ended June 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.

 

Universal Health Realty Income Trust

Consolidated Statements of Income

For the Three and Six Months Ended June 30, 2015 and 2014

(amounts in thousands, except per share amounts)

(unaudited)

Three Months 

Six Months 

Ended June 30,

Ended June 30,

2015

2014

2015

2014

Revenues:

  Base rental - UHS facilities

$3,991

$3,916

$7,897

$7,830

  Base rental - Non-related parties

8,806

7,045

17,675

14,271

  Bonus rental - UHS facilities

1,150

1,222

2,368

2,372

  Tenant reimbursements and other - Non-related parties

1,894

1,948

3,903

3,781

  Tenant reimbursements and other - UHS facilities

208

186

408

351

16,049

14,317

32,251

28,605

Expenses:

  Depreciation and amortization

5,870

4,782

11,393

9,608

  Advisory fees to UHS

693

620

1,359

1,230

  Other operating expenses

4,738

4,134

9,460

8,067

  Transaction costs

147

41

204

103

11,448

9,577

22,416

19,008

Income before equity in income of unconsolidated limited liability companies ("LLCs"),

     interest expense and gains

4,601

4,740

9,835

9,597

  Equity in income of unconsolidated LLCs

673

679

1,265

1,272

  Gain on property exchange

8,742

-

8,742

-

  Gains on fair value recognition resulting from the purchase of minority

     interests in majority-owned LLCs

-

-

-

316

Interest expense, net

(2,012)

(2,011)

(4,142)

(4,003)

Net income

$12,004

$3,408

$15,700

$7,182

Basic earnings per share

$0.90

$0.26

$1.18

$0.56

Diluted earnings per share

$0.90

$0.26

$1.18

$0.56

Weighted average number of shares outstanding - Basic

13,286

12,902

13,284

12,875

Weighted average number of share equivalents

10

6

11

6

Weighted average number of shares and equivalents outstanding - Diluted

13,296

12,908

13,295

12,881

                                                                                                                                               

                                                                               

Universal Health Realty Income Trust

Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule")

For the three months ended June 30, 2015 and 2014

(in thousands, except per share amounts)

(unaudited)

Calculation of Adjusted Net Income

Three months ended

Three months ended

June 30, 2015

June 30, 2014

Per

Per

Amount

Diluted Share

Amount

Diluted Share

Net income 

$12,004

$0.90

$3,408

$0.26

Adjustments:

  Less: Gain on property exchange

(8,742)

(0.66)

-

0.00

   Transaction costs

147

0.02

41

0.01

Subtotal adjustments to net income

(8,595)

(0.64)

41

0.01

Adjusted net income 

$3,409

$0.26

$3,449

$0.27

Calculation of Funds From Operations ("FFO") and Adjusted Funds From Operations ("AFFO")

Three months ended

Three months ended

June 30, 2015

June 30, 2014

Per

Per

Amount

Diluted Share

Amount

Diluted Share

Net income 

$12,004

$0.90

$3,408

$0.26

Plus: Depreciation and amortization expense:

   Consolidated investments

5,778

0.44

4,703

0.37

   Unconsolidated affiliates

418

0.03

709

0.05

  Less: Gain on property exchange

(8,742)

(0.66)

-

-

FFO

9,458

0.71

8,820

0.68

   Transaction costs

147

0.01

41

0.01

AFFO

$9,605

$0.72

$8,861

$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 six months ended June 30, 2015 and 2014

(in thousands, except per share amounts)

(unaudited)

Calculation of Adjusted Net Income

Six months ended

Six months ended

June 30, 2015

June 30, 2014

Per

Per

Amount

Diluted Share

Amount

Diluted Share

Net income 

$15,700

$1.18

$7,182

$0.56

Adjustments:

  Less: Gain on property exchange

(8,742)

(0.66)

-

-

  Less: Gains on fair value recognition resulting from the purchase of minority

           interests in majority-owned LLCs

-

-

(316)

(0.03)

   Transaction costs

204

0.02

103

0.01

Subtotal adjustments to net income

(8,538)

(0.64)

(213)

(0.02)

Adjusted net income 

$7,162

$0.54

$6,969

$0.54

Calculation of Funds From Operations ("FFO") and Adjusted Funds From Operations ("AFFO")

Six months ended

Six months ended

June 30, 2015

June 30, 2014

Per

Per

Amount

Diluted Share

Amount

Diluted Share

Net income 

$15,700

$1.18

$7,182

$0.56

Plus: Depreciation and amortization expense:

   Consolidated investments

11,188

0.85

9,455

0.74

   Unconsolidated affiliates

828

0.06

1,382

0.10

  Less: Gain on property exchange

(8,742)

(0.66)

-

-

  Less: Gains on fair value recognition resulting from the purchase of minority

           interests in majority-owned LLCs

-

-

(316)

(0.03)

FFO

18,974

1.43

17,703

1.37

   Transaction costs

204

0.01

103

0.01

AFFO

$19,178

$1.44

$17,806

$1.38

Dividend paid per share

$1.275

$1.255

 

Universal Health Realty Income Trust

Consolidated Balance Sheets

(dollar amounts in thousands)

(unaudited)

June 30,

December 31,

Assets:

2015

2014

Real Estate Investments:

Buildings and improvements

$468,334

$451,005

Accumulated depreciation

(113,087)

(106,480)

355,247

344,525

Land

41,724

35,584

               Net Real Estate Investments

396,971

380,109

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

8,150

8,605

Other Assets:

Cash and cash equivalents

4,350

3,861

Base and bonus rent receivable from UHS

2,080

2,086

Rent receivable - other

4,173

4,219

Intangible assets (net of accumulated amortization of $22.7 million and $19.7 million

    at June 30, 2015 and  December 31, 2014, respectively)

22,173

23,123

Deferred charges and other assets, net

6,455

6,863

               Total Assets

$444,352

$428,866

Liabilities:

Line of credit borrowings

$115,275

$89,750

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

   of $412 and $523 at June 30, 2015 and December 31, 2014, respectively)

116,735

123,405

Accrued interest

482

545

Accrued expenses and other liabilities

5,843

8,522

Tenant reserves, escrows, deposits and prepaid rents

2,434

2,063

               Total Liabilities

240,769

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 - 13,312,792

      2014 -13,301,204

133

133

Capital in excess of par value

241,136

240,835

Cumulative net income

547,295

531,595

Cumulative dividends 

(584,860)

(567,894)

Accumulated other comprehensive loss

(121)

(88)

     Total Equity

203,583

204,581

               Total Liabilities and Equity

$444,352

$428,866

 

 

SOURCE Universal Health Realty Income Trust