KING OF PRUSSIA, Pa., Feb. 27 /PRNewswire-FirstCall/ -- Universal Health Realty Income Trust announced today that for the quarter ended December 31, 2007, net income was $4.0 million, or $.33 per diluted share, as compared to $7.1 million, or $.60 per diluted share, during the same quarter in the prior year. Favorably impacting net income during the quarter ended December 31, 2006 was a gain of $2.7 million, or $.23 per diluted share, related to the recovery of replacement real estate assets in connection with the July, 2006, Chalmette Medical Center ("Chalmette") asset exchange and substitution agreement.
Funds from operations ("FFO") were $7.0 million, or $.59 per diluted share, during the three months ended December 31, 2007 as compared to $7.1 million, or $.60 per diluted share, during the comparable quarter of the prior year. The fourth quarter dividend of $.58 per share was paid on December 31, 2007.
For the year ended December 31, 2007, net income was $22.2 million, or $1.87 per diluted share, as compared to $34.7 million, or $2.92 per diluted share, during the prior year. Income from continuing operations was $19.7 million, or $1.66 per diluted share, during the year ended December 31, 2007 as compared to $34.4 million, or $2.90 per diluted share, during the prior year. Included in net income during the year ended December 31, 2007 was a combined gain of $4.3 million, or $.36 per diluted share, consisting of: (i) a gain of $1.7 million, or $.15 per diluted share, related to the recovery of replacement real estate assets in connection with the Chalmette asset exchange and substitution agreement; (ii) 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), and; (iii) a gain of $264,000, or $.02 per diluted share, resulting from the sale of real property by an unconsolidated limited liability company ("LLC"). Included in net income during the year ended December 31, 2006 was a combined gain of $15.9 million, or $1.34 per diluted share, consisting of: (i) a gain of $14.0 million, or $1.18 per diluted share, related to the recovery of replacement real estate assets in connection with the Chalmette asset exchange and substitution agreement, and; (ii) the recognition of a previously deferred gain of $1.9 million, or $.16 per diluted share, resulting from the sale our interest in an unconsolidated LLC.
FFO were $29.1 million, or $2.45 per diluted share, during the year ended December 31, 2007 as compared to $28.9 million, or $2.44 per diluted share, during the prior year.
During the fourth quarter of 2007, three newly constructed medical office buildings, which are owned by LLCs in which we hold 95%, non-controlling ownership interests, were completed and opened as follows: (i) Canyon Springs Medical Plaza located in Gilbert, Arizona; (ii) Phoenix Children's East Valley Care Center located in Gilbert, Arizona, and; (iii) Centennial Hills Medical Office Building I located in Las Vegas, Nevada. On a combined basis, the financial results of these properties, including interest expense on third- party debt that is non-recourse to us, unfavorably impacted our net income by $231,000, or $.02 per diluted share, during the three and twelve month periods ended December 31, 2007. On a combined basis, the financial results of these properties unfavorably impacted our FFO by $102,000, or $.01 per diluted share, during the three and twelve month periods ended December 31, 2007. Also, during the fourth quarter of 2007, we purchased a 95% non-controlling ownership interest in a LLC that owns the Cobre Valley Medical Plaza located in Globe, Arizona.
In addition, we hold 95%, non-controlling ownership interests in LLCs that own the following medical office buildings that are currently under construction and scheduled to be completed and opened at various times during 2008: (i) Palmdale Medical Plaza located in Palmdale, California; (ii) Deer Valley Medical Office Building III located in Phoenix, Arizona, and; (iii) Summerlin Medical Office Building III located in Las Vegas, Nevada.
At December 31, 2007, our shareholders' equity was $160.3 million and our liabilities for borrowed funds were $36.6 million, including mortgage debt of consolidated entities, which is non-recourse to us, totaling $19.8 million.
During the fourth quarter of 2006, as a result of the expiration of the master lease arrangements between subsidiaries of Universal Health Services, Inc., and two LLCs in which we own non-controlling ownership interests of 95% and 99%, we began recording the financial results of these LLCs on an unconsolidated basis. Prior to the fourth quarter of 2006, these LLCs were included in our financial results on a consolidated basis in accordance with Financial Interpretation No. 46R - Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, ("FIN 46R"). Accordingly, commencing in the fourth quarter of 2006, the revenues and expenses of these LLCs were no longer included in our consolidated revenues and expenses, but instead, the net income generated from each of these LLCs is included in our consolidated statements of income as "Equity in income of unconsolidated LLCs". For comparative purposes, during the period that these LLCs were recorded on a consolidated basis during 2006, these entities generated, on a combined basis, approximately $3.8 million of revenue, $736,000 of depreciation and amortization expense, $1.6 million of other operating expenses and $715,000 of interest expense. There was no impact on our net income or income from continuing operations as a result of recording these LLCs on an unconsolidated basis.
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-six real estate investments in fourteen states.
Funds from operations, is a widely recognized measure of REIT performance. Although FFO is a non-GAAP financial measure, we believe that information regarding FFO is helpful to shareholders and potential investors. We compute FFO 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. To facilitate a clear understanding of our historical operating results, FFO should be examined in conjunction with net income determined in accordance with GAAP. 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.
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 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.
Universal Health Realty Income Trust Consolidated Statements of Income For the Three and Twelve Months Ended December 31, 2007 and 2006 (amounts in thousands, except per share amounts) (unaudited) Three Months Twelve Months Ended December 31, Ended December 31, 2007 2006 2007 2006 Revenues: Base rental - UHS facilities $3,062 $3,109 $12,244 $12,448 Base rental - Non-related parties 2,319 2,425 9,352 11,313 Bonus rental - UHS facilities 960 1,025 3,958 4,317 Tenant reimbursements and other - Non-related parties 579 611 2,293 3,336 Tenant reimbursements and other - UHS facilities 13 42 113 300 6,933 7,212 27,960 31,714 Expenses: Depreciation and amortization 1,373 1,283 5,209 5,436 Advisory fees to UHS 363 358 1,425 1,424 Other operating expenses 1,183 1,218 4,482 6,149 2,919 2,859 11,116 13,009 Income before equity in income of unconsolidated limited liability companies ("LLCs"), replacement property recovered from UHS (Chalmette) and interest expense 4,014 4,353 16,844 18,705 Equity in income of unconsolidated LLCs (including recognition of gain on sale of real property of $264 during the twelve months ended December 31, 2007 and a previously deferred gain of $1,860 on sale of our interest in an unconsolidated LLC for the twelve months ended December 31, 2006) 481 453 2,821 4,241 Replacement property recovered from UHS - Chalmette - 2,693 1,748 13,958 Interest expense (516) (424) (1,749) (2,476) Income from continuing operations 3,979 7,075 19,664 34,428 Income from discontinued operations, net (including gain on sale of real property of $2,270 during the twelve months ending December 31, 2007) - 57 2,527 269 Net income $3,979 $7,132 $22,191 $34,697 Basic earnings per share: From continuing operations $0.34 $0.60 $1.66 $2.92 From discontinued operations $0.00 $0.00 $0.21 $0.02 Total basic earnings per share $0.34 $0.60 $1.87 $2.94 Diluted earnings per share: From continuing operations $0.33 $0.60 $1.66 $2.90 From discontinued operations $0.00 $0.00 $0.21 $0.02 Total diluted earnings per share $0.33 $0.60 $1.87 $2.92 Weighted average number of shares outstanding - Basic 11,839 11,789 11,818 11,784 Weighted average number of share equivalents 40 88 57 82 Weighted average number of shares and equivalents outstanding - Diluted 11,879 11,877 11,875 11,866 Calculation of Funds From Operations ("FFO"): Three Months Twelve Months Ended December 31, Ended December 31, 2007 2006 2007 2006 Net income $3,979 $7,132 $22,191 $34,697 Plus: Depreciation and amortization expense: Consolidated investments 1,361 1,269 5,167 5,314 Unconsolidated affiliates 1,716 1,401 5,990 4,613 Discontinued operations - 31 - 124 Less: Gain on sale of real property - discontinued operations - - (2,270) - Gain on LLC's sale of real property (12) - (264) - Gain on asset exchange and substitution agreement with UHS - Chalmette - (2,693) (1,748) (13,958) Previously deferred gain on sale of our interest in an unconsolidated LLC - - - (1,860) Funds from operations (FFO) $7,044 $7,140 $29,066 $28,930 Funds from operations (FFO) per share - Basic $0.59 $0.61 $2.46 $2.46 Funds from operations (FFO) per share - Diluted $0.59 $0.60 $2.45 $2.44 Dividend paid per share $0.580 $0.570 $2.300 $2.260 Universal Health Realty Income Trust Consolidated Balance Sheets (dollar amounts in thousands) (unaudited) December 31, December 31, Assets: 2007 2006 Real Estate Investments: Buildings and improvements $178,655 $171,761 Accumulated depreciation (60,627) (56,935) 118,028 114,826 Land 18,258 19,317 Construction in progress 7,511 9,220 Net Real Estate Investments 143,797 143,363 Investments in and advances to limited liability companies ("LLCs") 52,030 47,223 Other Assets: Cash and cash equivalents 1,131 798 Bonus rent receivable from UHS 960 1,025 Rent receivable - other 746 814 Deferred charges and other assets, net 1,085 916 Total Assets $199,749 $194,139 Liabilities and Shareholders' Equity: Liabilities: Line of credit borrowings $16,800 $13,600 Mortgage note payable, non-recourse to us 3,717 3,849 Mortgage note payable of consolidated LLCs, non-recourse to us 16,100 8,888 Accrued interest 125 84 Accrued expenses and other liabilities 1,874 2,857 Tenant reserves, escrows, deposits and prepaid rents 741 595 Total Liabilities 39,357 29,873 Minority interest 87 69 Shareholders' 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: 2007 - 11,841,938; 2006 - 11,791,950 118 118 Capital in excess of par value 188,638 187,524 Cumulative net income 327,065 304,874 Cumulative dividends (355,516) (328,319) Total Shareholders' Equity 160,305 164,197 Total Liabilities and Shareholders' Equity $199,749 $194,139
