This excerpt taken from the UHT 8-K filed Feb 27, 2009.
REPORTS 2008 FOURTH QUARTER AND FULL YEAR FINANCIAL RESULTS
Fourth quarter of 2008 as compared to 2007:
KING OF PRUSSIA, PA- Universal Health Realty Income Trust (NYSE:UHT) announced today that for the quarter ended December 31, 2008, its reported net loss was $870,000, or $.07 per diluted share, as compared to reported net income of $4.0 million, or $.33 per diluted share, during the comparable quarter in the prior year. Included in net income during the three and twelve-month periods ended December 31, 2008 is an asset impairment charge of $4.6 million, or $.39 per diluted share, recorded in connection with a medical office building complex located in Riverdale, Georgia, as discussed below. Also unfavorably impacting our net income/loss during the three and twelve-month periods of 2008 was an increase in other operating expenses, including higher than anticipated building maintenance and repairs expense at one of our medical office buildings amounting to $250,000, or $.02 per diluted share.
After adjusting for the asset impairment charge, as indicated on the attached Supplemental Schedule of Adjusted Income from Continuing Operations and Net Income (Supplemental Schedule), our adjusted net income during the fourth quarter of 2008 was $3.7 million, or $.31 per diluted share.
During the fourth quarter of 2008, our funds from operations (FFO), as adjusted for the impact of the asset impairment, increased 2% to $7.2 million, or $.61 per diluted share, as compared to $7.0 million, or $.59 per diluted share, during the comparable quarter of 2007.
The fourth quarter dividend of $.59 per share was paid on December 31, 2008. At December 31, 2008, our shareholders equity was $144.9 million and our liabilities for borrowed funds were $71.7 million, including mortgage and other debt of consolidated entities, which is non-recourse to us, totaling $32.7 million.
Provision for asset impairment:
During the fourth quarter of 2008, we recorded an asset impairment charge of $4.6 million on two medical office buildings located on a medical campus in Clayton County (Riverdale), Georgia. This asset impairment charge was recorded after evaluation of property and location-specific factors including: (i) the future expiration of a master lease which is scheduled to occur in June, 2010; (ii) the current and projected occupancy of the buildings, and; (iii) the anticipated unfavorable impact on the region and the properties resulting from the loss of the school districts accreditation during 2008.
Twelve months of 2008 as compared to 2007:
For the year ended December 31, 2008, reported net income was $11.7 million, or $.98 per diluted share, as compared to $22.2 million, or $1.87 per diluted share, during 2007. Reported income from continuing operations for the year ended December 31, 2008 was $11.7 million, or $.98 per diluted share, as compared to $19.7 million, or $1.66 per diluted share, during 2007. Included in our reported net income and income from continuing operations during the year ended December 31, 2007 were various gains, as discussed below and as indicated on the Supplemental Schedule.
Adjusted net income for the year ended December 31, 2008 was $16.2 million, or $1.37 per diluted share, as compared to $17.9 million, or $1.51 per diluted share, during 2007. The decrease in adjusted net income and adjusted net income per diluted share during the year ended December 31, 2008, as compared to 2007, was primarily attributable to additional depreciation expense recorded in connection with our properties (including unconsolidated LLCs), including newly constructed properties that were completed and opened during 2007 and 2008.
For the year ended December 31, 2008, our FFO, as adjusted for the impact of the asset impairment, increased 2% to $29.6 million, or $2.49 per diluted share, as compared to $29.1 million, or $2.45 per diluted share, during 2007.
Favorably impacting net income during the twelve-month period ended December 31, 2007 was a combined gain of $4.3 million, or $.36 per diluted share, consisting of: (i) a gain of $2.3 million, or $.19 per diluted share, realized on the sale of a medical office building (included in income from discontinued operations); (ii) a gain of $1.7 million, or $.15 per diluted share, related to the recovery of replacement real estate assets in connection with the previously disclosed Chalmette Medical Center asset exchange and substitution transaction, and; (iii) a gain of $264,000, or $.02 per diluted share, resulting from the sale of real property by an unconsolidated LLC.
Acquisitions and newly constructed properties:
During 2008, we acquired or completed construction and opened several properties including the following: (i) purchased the Kindred Hospital; Corpus Christi, a sub-acute care hospital located in Corpus Christi, Texas; (ii) purchased the Vista Medical Terrace and The Sparks Medical Building located in Sparks, Nevada, consisting of two medical office buildings (MOBs) located on the campus of Northern Nevada Medical Center, an acute care hospital owned and operated by a wholly-owned subsidiary of Universal Health Services, Inc. (UHS), and; (iii) completed and opened the newly constructed Palmdale Medical Plaza in Palmdale, California, a MOB located on the campus of an acute care hospital currently under construction by a wholly-owned subsidiary of UHS.
As of December 31, 2008, construction continued on three MOBs, which are owned by LLCs in which we hold non-controlling majority ownership interests, as follows: (i) Summerlin Hospital Medical Office Building III located in Las Vegas, Nevada, on the campus of an acute care hospital owned and operated by a wholly-owned subsidiary of UHS, which was completed and opened during the first quarter of 2009; (ii) Deer Valley Medical Office Building III located in Phoenix, Arizona, which is scheduled to be completed and opened during the first quarter of 2009, and; (iii) Auburn Medical Office Building II located in Auburn, Washington, on the campus of an acute care hospital owned and operated by a wholly-owned subsidiary of UHS, which is scheduled to be completed and opened during the fourth quarter of 2009.
General Information, Forward-Looking Statements 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 forty-nine real estate investments or commitments in fifteen states.
We believe that funds from operations, adjusted income from continuing operations, adjusted income from continuing operations per diluted share, adjusted net income and adjusted net income 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. In addition, we believe that 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 items that are nonrecurring or non-operational in nature including items such as, but not limited to, provisions for asset impairments and gains on sales of assets. Funds from operations, is a widely recognized measure of REIT performance. We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT), except for the adjustments made to the 2008 periods presented to neutralize the impact of the provision for asset impairment, 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 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) as an alternative to cash flow from operating activities determined in accordance with GAAP; (iii) as a measure of our liquidity; (iv) nor is FFO 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 shown 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-Q for the quarter ended September 30, 2008 and Report on Form 10-K for the year ended December 31, 2007. 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.
The matters discussed in this report, as well as the news releases issued from time to time by us, include certain statements containing the words believes, anticipates, intends, expects and words of similar import, which constitute forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers should not place undue reliance on such forward-looking statements which reflect managements 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.