Feb 28 2011
United Surgical Partners International, Inc. ("USPI" or the "Company") today announced results for the fourth quarter and year ended December 31, 2010.
“We are pleased with our fourth quarter volume growth and acquisition activity, and we believe it is representative of favorable momentum going into 2011.”
Fourth Quarter Financial Results
For the quarter ended December 31, 2010, consolidated net revenues increased 3.5% to $154.2 million compared with $149.0 million in the prior year period. Operating income for the fourth quarter was $53.0 million as compared with $50.9 million for the prior year period. Operating income margin for the fourth quarter of 2010 was 34.3% versus 34.2% in the prior year period. For the quarter, adjusted EBITDA less noncontrolling interests was $55.4 million compared with $51.8 million in the prior year period.
The financial results for the fourth quarter were driven by systemwide revenue growth of 13%, consisting of 8% U.S. same-facility revenue growth and the remainder being due to acquisition activity.
Cash flows from operating activities for the fourth quarter totaled $31.3 million compared with $38.6 million for the prior year period. During the fourth quarter, the Company and its consolidated subsidiaries invested approximately $3.7 million in maintenance capital expenditures and an additional $8.4 million to develop new facilities and expand existing facilities.
Full Year Financial Results
For the year ended December 31, 2010, consolidated net revenues were $576.7 million compared with $593.5 million in the prior year. On a year-over-year basis, consolidated net revenues were reduced by $14.6 million due to the deconsolidation of facilities that are now accounted for under the equity method. Operating income for 2010 was $210.5 million as compared with $198.3 million for 2009. Operating income margin for the year ended December 31, 2010, increased 310 basis points to 36.5% from 33.4% in the prior year. For the year, adjusted EBITDA less controlling interests was $200.2 million as compared with $194.0 million in the prior year period.
The financial results for the year were driven by systemwide revenue growth of 7%, consisting of 5% U.S. same-facility revenue growth and the remainder being due to acquisition activity.
Cash flows from operating activities for the year ended December 31, 2010, totaled $169.1 million compared with $180.6 million for the prior year. This decrease was primarily due to non-recurring expenses and an increase in cash tax payments. During 2010, the Company and its consolidated subsidiaries invested approximately $18.7 million in maintenance capital expenditures and an additional $21.3 million to develop new facilities and expand existing facilities.
Systemwide Financial Results
Due to the Company's partnerships with physicians and not-for-profit healthcare systems, the Company does not consolidate the financial results of the majority of its facilities. While revenues of the Company's unconsolidated facilities are not recorded as revenues by USPI, equity in earnings of unconsolidated affiliates is a significant and growing portion of the Company's overall earnings. To help analyze results of operations, management uses systemwide operating measures such as systemwide revenue growth, which includes revenues of both consolidated and unconsolidated facilities. In addition to overall systemwide revenue growth, USPI calculates growth rates and operating margins for the facilities that were operational in both the current and prior year periods, a group the Company refers to as same-store or same-facility. This group also consists of both consolidated and unconsolidated facilities. At December 31, 2010, 130 of the 189 facilities the Company operated were not consolidated.
Revenue Analysis
For the full year, the systemwide revenues of the facilities operated by the Company increased 7%, while consolidated revenues decreased. Consolidated and unconsolidated revenues were also affected by certain transactions and a stronger U.S. dollar. The table below lists the key drivers of year-over-year changes in revenues.
Development Activity
During the year, the Company added 27 facilities and completed the sale of its interest in three facilities. In addition, the Company sold its subsidiary, American Endoscopy Services, in December. At December 31, 2010, the Company had six facilities under development, of which five were under construction. In addition to the three divestitures, the Company deconsolidated the financial results of two facilities that it continues to operate.
Other Items
In the prior year ended December 31, 2009, the Company's tax provision included the recognition of a $31.2 million U.S. income tax benefit. This benefit, which encompasses the Company's net operating loss carryforwards and most other U.S. deferred tax assets, was recognized because the Company considers it more likely than not that taxable income will be generated in the future to allow those assets to be realized.
In order to analyze operating results, various expenses have been identified below in order to assist in understanding the Company's operating and full year results. These items are discussed further in the Company's 2010 Form 10-K.
Summary
Commenting on the results, William H. Wilcox, USPI's chief executive officer, said, "We are pleased with our fourth quarter volume growth and acquisition activity, and we believe it is representative of favorable momentum going into 2011."