Universal Health Realty Income Trust Reports 2019 Third Quarter Financial Results

KING OF PRUSSIA, Pa., Oct. 25, 2019 /PRNewswire/ -- Universal Health Realty Income Trust UHT announced today that for the three-month period ended September 30, 2019, reported net income was $4.7 million, or $.34 per diluted share, as compared to $4.4 million, or $.32 per diluted share, during the third quarter of 2018. 

As calculated on the attached Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule"), our funds from operations ("FFO"), were $11.4 million, or $.83 per diluted share, during the third quarter of 2019, as compared to $10.7 million, or $.78 per diluted share, during the third quarter of 2018. 

Consolidated Results of Operations - Nine-Month Periods Ended September 30, 2019 and 2018:

For the nine-month period ended September 30, 2019, our reported net income was $13.1 million, or $.95 per diluted share, as compared to $19.8 million, or $1.44 per diluted share, during the first nine months of 2018.

As also calculated on the Supplemental Schedule, our FFO were $33.3 million, or $2.42 per diluted share, during the first nine months of 2019, as compared to $34.2 million, or $2.49 per diluted share, during the first nine months of 2018.

As reflected on the attached Supplemental Schedule, our financial results for the nine-month period ended September 30, 2019 included a gain of $250,000, or $.01 per diluted share, related to the sale of a parcel of land located at one of our buildings. Our financial results for the nine-month period ended September 30, 2018 included $4.5 million, or $.33 per diluted share, of hurricane insurance recoveries in excess of damaged property write-downs received in connection with damage sustained from Hurricane Harvey which occurred in August, 2017. Excluding the impact of these items from each respective nine-month period, and as calculated on the Supplemental Schedule, our adjusted net income was $12.9 million, or $.94 per diluted share, during the nine-month period ended September 30, 2019, as compared to $15.2 million, or $1.11 per diluted share, during the nine-month period ended September 30, 2018. 

Our net income, adjusted net income and FFO for the nine months ended September 30, 2018 included a net increase of approximately $1.3 million, or $.10 per diluted share, related to the favorable impact from a lease termination agreement entered into during the second quarter of 2018 ($1.7 million, or $.12 per diluted share), partially offset by the unfavorable impact of the non-recurring repairs and remediation expenses incurred at one of our medical office buildings ($400,000, or $.02 per diluted share). In addition, our net income, adjusted net income and FFO during the nine months ended September 30, 2018 included the favorable impact of approximately $1.2 million, or $.08 per diluted share, resulting from business interruption insurance recovery proceeds recorded during the nine-month period ended September 30, 2018.  Included in this amount, which covered the period of late August, 2017 through June 30, 2018 (after satisfaction of the applicable deductibles), was approximately $500,000, or $.04 per diluted share, related to the period of August, 2017 through December 31, 2017.

Dividend Information:

The third quarter dividend of $.68 per share, or $9.4 million in the aggregate, was declared on September 4, 2019 and paid on September 30, 2019.

Capital Resources Information:

At September 30, 2019, we had $205.7 million of borrowings outstanding pursuant to the terms of our $300 million credit agreement and $94.3 million of available borrowing capacity. The credit agreement has a scheduled maturity date of March, 2022, however, we have the option to extend the maturity date for up to two additional six-month periods.

Lease Expirations/Vacancies of Two Hospital Facilities:

As disclosed in our Form 10-K for the year ended December 31, 2018, and our Forms 10-Q for the quarters ended March 31, 2019 and June 30, 2019, the tenants in two of our hospital facilities had provided notice to us that they did not intend to renew the leases upon the scheduled expiration of the respective facilities. The combined revenues generated from the leases on these two hospital facilities comprised approximately 2% of our consolidated revenues during each of the years ended December 31, 2018 and 2017.

The leases on these two hospital facilities, located in Evansville, Indiana, and Corpus Christi, Texas, expired on May 31, 2019 and June 1, 2019, respectively. The Evansville, Indiana hospital tenant entered into a short-term lease with us (which expired on September 30, 2019), at a substantially increased lease rate as compared to the original lease rate. The lease revenue generated from this facility amounted to $842,000 during the three-month period ended September 30, 2019 (as compared to $178,000 per quarter pursuant to the terms of the original lease). The tenant that occupied the hospital in Evansville, Indiana, vacated the property on September 30, 2019 and the tenant that occupied the hospital in Corpus Christi, Texas, vacated the property on June 1, 2019.  

Although we are in the process of marketing each property for lease to new tenants, should these properties remain vacant for an extended period of time, or should we experience decreased lease rates on future leases, as compared to prior/expired lease rates, or incur substantial renovation costs to make the properties suitable for other operators/tenants, our future results of operations could be materially unfavorably impacted.            

New Construction Projects:

Behavioral Health Hospital - Clive, Iowa

In late July, 2019, a wholly-owned subsidiary of ours entered into an agreement to build and lease a newly constructed 108-bed behavioral health care hospital located in Clive, Iowa. The lease on this facility, which is triple net and has an initial term of 20 years with five, 10-year renewal options, was executed with Clive Behavioral Health, LLC, a joint venture between Universal Health Services, Inc. ("UHS") and Catholic Health Initiatives-Iowa, Corp. (d/b/a Mercy One Des Moines Medical Center).

Construction of this hospital, for which we have engaged a wholly-owned subsidiary of UHS to act as project manager, is expected to be completed in the fall of 2020. The hospital lease will commence upon issuance of the certificate of occupancy. The approximate cost of the project is estimated at $37.5 million and the initial annual rent is estimated to be approximately $2.7 million.

Medical Office Building - Denison, Texas

In September, 2019, we entered into an agreement whereby we will own a 95% ownership interest in Grayson Properties II LP, which will develop, construct, own and operate the Texoma Medical Plaza II, a 75,000 rentable square feet medical office building ("MOB") located in Denison, Texas. This MOB, which is scheduled to be completed in late 2020, will be located on the campus of Texoma Medical Center, a hospital that is owned and operated by a wholly-owned subsidiary of UHS.  A 10-year master flex lease has been executed with the wholly-owned subsidiary of UHS for approximately 50% of the rentable square feet of the MOB, which is subject to reduction contingent upon future occupancy of the building. We have committed to invest up to $17.9 million in equity or member loans in the development and construction of this MOB.

Adoption of ASU 2016-02, "Leases (Topic 842): Amendments to the FASB Accounting Standards Codification":

Effective January 1, 2019, we adopted ASU 2016-02 which requires lessees to, among other things, recognize right-of-use assets and lease liabilities on the balance sheet. As a result of our adoption of ASU 2016-02, in connection with ground leases where we are the lessee, our consolidated balance sheet as of September 30, 2019 includes right-of-use land assets ($9.0 million) and ground lease liabilities ($9.0 million). Prior period financial statement amounts were not adjusted for the effects of this new standard.    

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, medical/office buildings, free-standing emergency departments and childcare centers. We have investments in seventy-one properties located in twenty states, including two that are currently under construction.   

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, 2018 and in Item 2 – Forward-Looking Statements and Certain Risk Factors in our Form 10-Q for the quarterly period ended June 30, 2019), 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 non-recurring or non-operational in nature including items such as, but not limited to, gains on transactions and hurricane proceeds in excess of damaged property write-downs.

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, 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 effects of gains, such as gains on transactions and hurricane recovery proceeds in excess of damaged property write-downs during the periods presented.  To the extent a REIT recognizes a gain or loss with respect to the sale of incidental assets, such as the sale of land peripheral to operating properties, the REIT has the option to exclude or include such gains and losses in the calculation of FFO.  We have opted to exclude gains and losses from sales of incidental assets in our calculation of FFO.  FFO does 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 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 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, 2018 and our report on Form 10-Q for the quarterly period ended June 30, 2019. 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 Nine Months Ended September 30, 2019 and 2018

(amounts in thousands, except per share amounts)

(unaudited)





















Three Months Ended





Nine Months Ended







September 30,





September 30,







2019





2018





2019





2018



Revenues:

































  Lease revenue - UHS facilities (a.)



$

5,821





$

5,633





$

17,265





$

16,987



  Lease revenue- Non-related parties





13,555







12,886







39,464







37,785



  Other revenue - UHS facilities





230







78







652







215



  Other revenue - Non-related parties





260







231







923







2,491









19,866







18,828





$

58,304





$

57,478



Expenses:

































  Depreciation and amortization





6,430







6,232







19,564







18,630



  Advisory fees to UHS





1,011







975







2,963







2,827



  Other operating expenses





5,566







5,118







16,106







15,771









13,007







12,325







38,633







37,228



Income before equity in income of unconsolidated limited

liability companies ("LLCs"), interest expense, hurricane

insurance recovery proceeds and gain





6,859







6,503







19,671







20,250



  Equity in income of unconsolidated LLCs





453







351







1,337







1,205



  Hurricane insurance recovery proceeds in excess of   

  damaged property write-downs





-







-







-







4,535



  Hurricane business interruption insurance recovery

  proceeds





-







-







-







1,162



  Gain on sale of land





-







-







250







-



Interest expense, net





(2,659)







(2,480)







(8,132)







(7,369)



Net income



$

4,653





$

4,374





$

13,126





$

19,783



Basic earnings per share



$

0.34





$

0.32





$

0.96





$

1.44



Diluted earnings per share



$

0.34





$

0.32





$

0.95





$

1.44





































Weighted average number of shares outstanding - Basic





13,735







13,726







13,731







13,721



Weighted average number of shares outstanding - Diluted





13,757







13,726







13,751







13,721





































(a.) Includes bonus rental on UHS hospital facilities of $1,428 and $1,216 for the three-month periods ended September 30, 2019 and 2018, respectively, and $4,174 and $3,746 for the nine-month periods ended September 30, 2019 and 2018, respectively.



 

 

Universal Health Realty Income Trust

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

For the Three Months Ended September 30, 2019 and 2018

 (in thousands, except per share amounts)

(unaudited)



Calculation of Adjusted Net Income







Three Months Ended





Three Months Ended







September 30, 2019





September 30, 2018







Amount





Per

Diluted Share





Amount





Per

Diluted Share



Net income



$

4,653





$

0.34





$

4,374





$

0.32



Adjustments:

































Subtotal adjustments to net income





-







-







-







-



Adjusted net income



$

4,653





$

0.34





$

4,374





$

0.32



 

 

Calculation of Funds From Operations ("FFO")







Three Months Ended





Three Months Ended







September 30, 2019





September 30, 2018







Amount





Per

Diluted Share





Amount





Per

Diluted Share



Net income



$

4,653





$

0.34





$

4,374





$

0.32



Plus: Depreciation and amortization expense:

































Consolidated investments





6,430







0.47







6,065







0.44



Unconsolidated affiliates





280







0.02







254







0.02



FFO



$

11,363





$

0.83





$

10,693





$

0.78



Dividend paid per share











$

0.680













$

0.670



 

 

Universal Health Realty Income Trust

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

For the Nine Months Ended September 30, 2019 and 2018

 (in thousands, except per share amounts)

(unaudited)



Calculation of Adjusted Net Income







Nine Months Ended





Nine Months Ended







September 30, 2019





September 30, 2018







Amount





Per

Diluted Share





Amount





Per

Diluted Share



Net income



$

13,126





$

0.95





$

19,783





$

1.44



Adjustments:

































Less:  Hurricane insurance recovery proceeds in excess of

damaged property write-downs





-







-







(4,535)







(0.33)



Less: Gain on sale of land





(250)







(0.01)







-







-



Subtotal adjustments to net income





(250)







(0.01)







(4,535)







(0.33)



Adjusted net income



$

12,876





$

0.94





$

15,248





$

1.11



 

 

Calculation of Funds From Operations ("FFO")







































Nine Months Ended





Nine Months Ended







September 30, 2019





September 30, 2018







Amount





Per

Diluted Share





Amount





Per

Diluted Share



Net income



$

13,126





$

0.95





$

19,783





$

1.44



Plus: Depreciation and amortization expense:

































Consolidated investments





19,564







1.42







18,175







1.32



Unconsolidated affiliates





854







0.06







779







0.06



Less: Hurricane insurance recovery proceeds in excess of

damaged property write-downs





-







-







(4,535)







(0.33)



Less: Gain on sale of land





(250)







(0.01)







-







-



FFO



$

33,294





$

2.42





$

34,202





$

2.49



Dividend paid per share











$

2.035













$

2.005



 

 

Universal Health Realty Income Trust

Consolidated Balance Sheets

(dollar amounts in thousands, except share data)

(unaudited)







September 30,





December 31,





















2019





2018



Assets:

















Real Estate Investments:

















Buildings and improvements and construction in progress



$

563,760





$

557,650



Accumulated depreciation





(189,330)







(173,316)









374,430







384,334



Land





54,726







53,396



               Net Real Estate Investments





429,156







437,730



Investments in limited liability companies ("LLCs")





5,120







5,019



Other Assets:

















Cash and cash equivalents





6,515







5,036



Lease and other receivables from UHS





3,011







2,739



Lease receivable - other





7,080







7,469



Intangible assets (net of accumulated amortization of $25.5 million and 

     
$27.6 million, respectively)





14,944







17,407



Right-of-use land assets, net





8,951







-



Deferred charges and other assets, net





9,103







8,356



               Total Assets



$

483,880





$

483,756



Liabilities:

















Line of credit borrowings



$

205,650





$

196,400



Mortgage notes payable, non-recourse to us, net





61,153







64,881



Accrued interest





370







450



Accrued expenses and other liabilities





12,103







11,765



Ground lease liabilities, net





8,951







-



Tenant reserves, deposits and deferred and prepaid rents





11,028







11,650



               Total Liabilities





299,255







285,146



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: 2019 - 13,757,059; 

     
2018 - 13,746,803





138







137



Capital in excess of par value





266,478







266,031



Cumulative net income





655,442







642,316



Cumulative dividends





(737,994)







(710,006)



Accumulated other comprehensive income





561







132



     Total Equity





184,625







198,610



               Total Liabilities and Equity



$

483,880





$

483,756



 

Cision View original content:http://www.prnewswire.com/news-releases/universal-health-realty-income-trust-reports-2019-third-quarter-financial-results-300945244.html

SOURCE Universal Health Realty Income Trust

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