Universal Health Realty Income Trust Reports Financial Results for Three and Six Months Ended June 30, 2012

Consolidated Results of Operations, Three-Month Periods Ended June 30, 2012 and 2011:

Jul 24, 2012, 17:01 ET from Universal Health Realty Income Trust

KING OF PRUSSIA, Pa., July 24, 2012 /PRNewswire/ -- Universal Health Realty Income Trust (NYSE: UHT) announced today that for the three-month period ended June 30, 2012, reported net income was $2.5 million, or $.19 per diluted share, as compared to $3.7 million, or $.29 per diluted share, during the second quarter of 2011.

After giving effect to the $129,000, or $.01 per diluted share, of transaction costs recorded during the second quarter of 2012, and as reflected on the attached Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule"), our adjusted net income decreased $1.1 million, or $.09 per diluted share, during the second quarter of 2012 as compared to the comparable quarter of 2011, as follows:

  • a decrease of $1.6 million resulting from the increased depreciation and amortization expense incurred during the second quarter of 2012 resulting from the fair value recognition of the assets and liabilities related to eleven limited liability companies ("LLCs") of which we purchased the third-party minority ownership interests during the fourth quarter of 2011, as discussed below in Consolidation of LLCs;
  • a decrease of approximately $800,000 resulting from an increase in interest expense due primarily to an increase in the average borrowing rate and average outstanding borrowings pursuant to our revolving credit facility and the interest expense incurred on approximately $29 million of third-party debt assumed as part of acquisitions completed during the fourth quarter of 2011 and the first quarter of 2012 (this increase in interest expense excludes approximately $800,000 of interest expense recorded during the second quarter of 2012 resulting from the consolidation of the previously unconsolidated LLCs of which we purchased the third-party minority ownership interests, as discussed below in Consolidation of LLCs);
  • an increase of approximately $700,000 from the increased income (before interest expense) generated during the second quarter of 2012 at five MOBs and clinics acquired during 2011 and the first quarter of 2012, and;
  • an increase of approximately $600,000 in other combined net favorable changes resulting primarily from the increased income generated at a number of our properties.             

As calculated on the Supplemental Schedule, our adjusted funds from operations increased approximately 6% to $8.4 million, or $.66 per diluted share, during the second quarter of 2012, as compared to $7.9 million, or $.63 per diluted share, during the second quarter of 2011. The increase of approximately $500,000 in adjusted funds from operations during the second quarter of 2012, as compared to the comparable quarter of 2011, was attributable to a $1.6 million increase in the add-back of depreciation and amortization expense, partially offset by the $1.1 million decrease in adjusted net income, as discussed above.  The increase in the depreciation and amortization expense during the second quarter of 2012 resulted primarily from the above-mentioned fair value recognition of the assets and liabilities related to eleven LLCs of which we purchased the third-party minority ownership interests during the fourth quarter of 2011.  

Consolidated Results of Operations, Six-Month Periods Ended June 30, 2012 and 2011:

For the six-month period ended June 30, 2012, reported net income was $12.0 million, or $.95 per diluted share, as compared to $7.8 million, or $.62 per diluted share, during the six-month period ended June 30, 2011.

As indicated on the attached Supplemental Schedule, included in our reported net income during the six-month period ended June 30, 2012, was a net favorable impact of $6.7 million, or $.53 per diluted share, consisting of the following:

  • a gain of $7.4 million recorded in connection with the divestiture of a medical office building during the first quarter by an LLC in which we previously held a non-controlling, 95% ownership interest, and;
  • transaction costs of $649,000 incurred primarily in connection with the acquisition (in January, 2012) of the PeaceHealth Medical Clinic located in Bellingham, Washington, as discussed below.

After giving effect to the above-mentioned adjustments (as reflected on the Supplemental Schedule), our adjusted net income decreased $2.6 million, or $.20 per diluted share, during the first six months of 2012 as compared to the comparable period of 2011.  The decrease was due to:

  • a decrease of $3.3 million resulting from the increased depreciation and amortization expense incurred during the first six months of 2012 resulting from the fair value recognition of the assets and liabilities related to eleven LLCs, as discussed below in Consolidation of LLCs;
  • a decrease of approximately $1.5 million resulting from an increase in interest expense due primarily to an increase the average borrowing rate and average outstanding borrowings pursuant to our revolving credit facility and the interest expense incurred on approximately $29 million of third-party debt assumed as part of acquisitions completed during the fourth quarter of 2011 and the first quarter of 2012 (this increase in interest expense excludes approximately $1.7 million of interest expense recorded during the first six months of 2012 resulting from the consolidation of the previously unconsolidated LLCs of which we purchased the third-party minority ownership interests, as discussed below in Consolidation of LLCs);
  • an increase of approximately $1.3 million from the increased income (before interest expense) generated during the first six months of 2012 at five MOBs and clinics acquired during 2011 and the first quarter of 2012, and;
  • an increase of approximately $900,000 in other combined net favorable changes resulting primarily from the increased income generated at a number of our properties.             

As calculated on the Supplemental Schedule, our adjusted funds from operations increased approximately 5% to $17.1 million, or $1.35 per diluted share, during the first six months of 2012, as compared to $16.2 million, or $1.28 per diluted share, during the comparable period of 2011. The increase of approximately $900,000 in adjusted funds from operations during the first six months of 2012, as compared to the comparable period of 2011, was attributable to a $3.4 million increase in the add-back of depreciation and amortization expense, partially offset by the $2.6 million decrease in adjusted net income, as discussed above.  The increase in the depreciation and amortization expense during the first six months of 2012 resulted primarily from the above-mentioned fair value recognition of the assets and liabilities related to eleven LLCs of which we purchased the third-party minority ownership interests during the fourth quarter of 2011.       

Dividend Information: The second quarter dividend of $.615 per share was paid on June 29, 2012.

Capital Resources Information: At June 30, 2012, we had $81.2 million of borrowings outstanding under our $150 million revolving credit agreement and $56.8 million of available borrowing capacity, net of outstanding borrowings and letters of credit.

At June 30, 2012, we had $25.9 million of gross proceeds remaining for issuance pursuant to our $50 million at-the-market equity issuance program. There were no shares issued pursuant to the program during the first six months of 2012.   

Acquisition and Divestiture Activity: During the first six months of 2012, we completed the following previously disclosed transactions:

  • In January, 2012, we purchased, as part of a planned, like-kind exchange transaction pursuant to Section 1031 of the Internal Revenue Code, the PeaceHealth Medical Clinic, a single-tenant medical office building consisting of approximately 99,000 rentable square feet, located in Bellingham, Washington. The property was purchased for approximately $30.4 million, including the assumption of approximately $22.4 million of third-party financing.
  • In February, 2012, Canyon Healthcare Properties, an LLC in which we owned a 95% non-controlling ownership interest, completed the divestiture of the Canyon Springs Medical Plaza. The divestiture by this LLC generated approximately $8.1 million of cash proceeds to us, net of the buyer's assumption of the property's third-party mortgage, closing costs and the minority members' share of the proceeds.  This divestiture resulted in a gain of $7.4 million which is included in our financial results during the first six months of 2012. 

Consolidation of LLCs: As mentioned above, in December, 2011, we purchased the third-party minority ownership interests in eleven LLCs of which we previously held non-controlling, majority ownership interests ranging from 85% to 99%.  As a result, we now own 100% of each of these entities and began recording their financial results in our financial statements on a consolidated basis. Prior to December, 2011, the financial results of these LLCs were included in our financial statements on an unconsolidated basis under the equity method of accounting. Other than no longer providing for the third-party's share of the operating results of these entities, there was no material impact to our net income as a result of the consolidation of these entities. 

Reflected below are the aggregate operating results for these entities for the three and six-month periods ended June 30, 2012 (amounts in thousands). As noted above, included in the depreciation and amortization expense for the three and six-month periods ended June 30, 2012, was $1.6 million and $3.3 million, respectively, of additional expense resulting from the fair value recognition of the assets and liabilities related to these LLCs at the time of our purchase of the third-party minority ownership interests.

 

Three

Six

months ended

months ended

June 30, 2012

June 30, 2012

Revenues:

  Base rental - UHS facilities

$483

$959

  Base rental - Non-related parties

2,976

5,948

  Tenant reimbursements and other - Non-related    

  parties

1,024

2,057

  Tenant reimbursements and other - UHS facilities

92

168

4,575

9,132

Expenses:

  Depreciation and amortization

2,600

5,468

  Other operating expenses

2,030

3,755

4,630

9,223

Loss before interest expense

(55)

(91)

Interest expense, net

(813)

(1,700)

Net loss

($868)

($1,791)

 

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, behavioral healthcare facilities, rehabilitation hospitals, sub-acute care facilities, surgery centers, childcare centers and medical office buildings.  We have investments in fifty-four properties located in fifteen 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, 2011 and in Item 2-Forward-Looking Statements and Risk Factors in our Form 10-Q for the quarterly period ended March 31, 2012), 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.

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 ("GAAP" is Generally Accepted Accounting Principles in the United States of America), 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. AFFO was also computed for the three and six-month periods ended June 30, 2012, as reflected on the Supplemental Schedules and discussed herein, since we believe it is helpful to our investors since it adjusts for the effect of a gain on divestiture of property owned by an unconsolidated LLC and transaction costs related to an acquisition, both of which occurred during the first six months of 2012. 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, 2011 and our Report on Form 10-Q for the quarterly period ended March 31, 2012. 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, 2012 and 2011

(amounts in thousands, except per share amounts)

(unaudited)

Three Months 

Ended June 30,

Six Months 

Ended June 30,

2012

2011

2012

2011

Revenues:

  Base rental - UHS facilities

$3,732

$3,261

$7,488

$6,522

  Base rental - Non-related parties

6,910

2,064

13,642

4,051

  Bonus rental - UHS facilities

1,038

1,092

2,154

2,204

  Tenant reimbursements and other - Non-related parties

1,875

332

3,525

638

  Tenant reimbursements and other - UHS facilities

111

17

208

27

13,666

6,766

27,017

13,442

Expenses:

  Depreciation and amortization

5,001

1,539

10,221

3,042

  Advisory fees to UHS

521

480

1,054

951

  Other operating expenses

4,196

1,414

7,666

2,385

  Transaction costs

129

-

649

-

9,847

3,433

19,590

6,378

    

Income before equity in income of unconsolidated limited liability companies ("LLCs"), interest expense and gain, net

3,819

3,333

7,427

7,064

  Equity in income of unconsolidated LLCs

604

727

1,158

1,502

Gain on divestiture of property owned by an unconsolidated LLC, net

-

-

7,375

-

Interest expense, net

(1,956)

(368)

(3,979)

(746)

Net income

$2,467

$3,692

$11,981

$7,820

Basic earnings per share

$0.19

$0.29

$0.95

$0.62

Diluted earnings per share

$0.19

$0.29

$0.95

$0.62

Weighted average number of shares outstanding - Basic

12,658

12,642

12,655

12,640

Weighted average number of share equivalents

6

9

5

7

Weighted average number of shares and equivalents outstanding - Diluted

12,664

12,651

12,660

12,647

Universal Health Realty Income Trust

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

For the three months ended June 30, 2012 and 2011

(in thousands, except per share amounts)

(unaudited)

Calculation of Adjusted Net Income

Three months ended

Three months ended

June 30, 2012

June 30, 2011

Per

Per

Amount

Diluted Share

Amount

Diluted Share

Net income

$2,467

$0.19

$3,692

$0.29

Adjustments:

  Less: Gain on divestiture of property owned by an unconsolidated LLC, net

-

-

-

-

   Transaction costs

129

0.01

-

-

Subtotal adjustments to net income

129

0.01

-

-

Adjusted net income

$2,596

$0.20

$3,692

$0.29

Calculation of Adjusted Funds From Operations ("AFFO")

Three months ended

Three months ended

June 30, 2012

June 30, 2011

Per

Per

Amount

Diluted Share

Amount

Diluted Share

Net income

$2,467

$0.19

$3,692

$0.29

Plus: Depreciation and amortization expense:

   Consolidated investments

4,956

0.39

1,503

0.12

   Unconsolidated affiliates

822

0.07

2,718

0.22

Less: Gain on divestiture of property owned by an unconsolidated LLC, net

-

-

-

-

Funds From Operations ("FFO")

8,245

$0.65

7,913

$0.63

   Transaction costs

129

0.01

-

-

AFFO

$8,374

$0.66

$7,913

$0.63

Dividend paid per share

$0.615

$0.605

 

Universal Health Realty Income Trust

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

For the six months ended June 30, 2012 and 2011

(in thousands, except per share amounts)

(unaudited)

Calculation of Adjusted Net Income

Six months ended

Six months ended

June 30, 2012

June 30, 2011

Per

Per

Amount

Diluted Share

Amount

Diluted Share

Net income 

$11,981

$0.95

$7,820

$0.62

Adjustments:

  Less: Gain on divestiture of property owned by an unconsolidated LLC, net

(7,375)

(0.58)

-

-

   Transaction costs

649

0.05

-

-

Subtotal adjustments to net income

(6,726)

(0.53)

-

-

Adjusted net income 

$5,255

$0.42

$7,820

$0.62

Calculation of Adjusted Funds From Operations ("AFFO")

Six months ended

Six months ended

June 30, 2012

June 30, 2011

Per

Per

Amount

Diluted Share

Amount

Diluted Share

Net income 

$11,981

$0.95

$7,820

$0.62

Plus: Depreciation and amortization expense:

   Consolidated investments

10,138

0.80

2,969

0.23

   Unconsolidated affiliates

1,680

0.13

5,405

0.43

Less: Gain on divestiture of property owned by an unconsolidated LLC, net

(7,375)

(0.58)

-

-

FFO

16,424

1.30

16,194

1.28

   Transaction costs

649

0.05

-

-

AFFO

$17,073

$1.35

$16,194

$1.28

Dividend paid per share

$1.225

$1.210

 

 

Universal Health Realty Income Trust

Consolidated Balance Sheets

(dollar amounts in thousands)

(unaudited)

June 30,

December 31,

Assets:

2012

2011

Real Estate Investments:

Buildings and improvements

$365,667

$338,648

Accumulated depreciation

(81,043)

(74,865)

284,624

263,783

Land

27,058

24,850

Net Real Estate Investments

311,682

288,633

Investments in and advances to limited liability companies ("LLCs")

38,257

33,057

Other Assets:

Cash and cash equivalents

3,211

11,649

Base and bonus rent receivable from UHS

2,046

1,982

Rent receivable - other

2,479

2,056

Intangible assets (net of accumulated amortization of $5.2 million and $1.2  million

    at June 30, 2012 and  December 31, 2011, respectively)

27,717

28,081

Deferred charges, notes receivable and other assets, net

5,386

5,471

Total Assets

$390,778

$370,929

Liabilities:

Line of credit borrowings

$81,150

$77,150

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

   of $867,000 and $1.1 million at June 30, 2012 and December 31, 2011, respectively)

116,273

97,686

Accrued interest

578

473

Accrued expenses and other liabilities

4,824

4,984

Tenant reserves, escrows, deposits and prepaid rents

2,214

1,691

Total Liabilities

205,039

181,984

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: 2012 - 12,683,428

      2011 -12,666,824

127

127

Capital in excess of par value

213,912

213,566

Cumulative net income

459,379

447,398

Cumulative dividends 

(487,757)

(472,230)

     Total Universal Health Realty Income Trust Shareholders' Equity 

185,661

188,861

Non-controlling equity interest

78

84

     Total Equity

185,739

188,945

                   Total Liabilities and Equity

$390,778

$370,929

 

 

SOURCE Universal Health Realty Income Trust