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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2019

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                      

Commission file number 1-9321

 

UNIVERSAL HEALTH REALTY INCOME TRUST

(Exact name of registrant as specified in its charter)

 

 

Maryland

 

23-6858580

(State or other jurisdiction of

incorporation or organization)

 

(I. R. S. Employer

Identification No.)

 

 

 

UNIVERSAL CORPORATE CENTER

367 SOUTH GULPH ROAD

KING OF PRUSSIA, Pennsylvania

 

19406

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code (610265-0688

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

 

Trading Symbol(s)

 

Name of each exchange on which registered

Shares of beneficial interest, $0.01 par value

 

UHT

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated Filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Number of common shares of beneficial interest outstanding at July 31, 2019—13,756,539

 

 

 

 

 


UNIVERSAL HEALTH REALTY INCOME TRUST

INDEX

 

 

 

 

 

PAGE NO.

PART I. FINANCIAL INFORMATION (unaudited)

 

 

Item 1.

 

Financial Statements

 

 

 

 

Condensed Consolidated Statements of Income—Three and Six Months Ended June 30, 2019 and 2018

 

3

 

 

Condensed Consolidated Statements of Comprehensive Income—Three and Six Months Ended June 30, 2019 and 2018

 

4

 

 

Condensed Consolidated Balance Sheets—June 30, 2019 and December 31, 2018

 

5

 

 

Condensed Consolidated Statements of Changes in Equity—Three and Six Months Ended June 30, 2019 and 2018

 

6 through 7

 

 

Condensed Consolidated Statements of Cash Flows—Six Months Ended June 30, 2019 and 2018

 

8

 

 

Notes to Condensed Consolidated Financial Statements

 

9 through 18

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

19 through 29

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

29

Item 4.

 

Controls and Procedures

 

29 through 30

PART II. OTHER INFORMATION

 

31

Item 6.

 

Exhibits

 

31

EXHIBIT INDEX

 

32

 

 

 

 

 

Signatures

 

33

 

 

 

This Quarterly Report on Form 10-Q is for the quarter ended June 30, 2019. In this Quarterly Report, “we,” “us,” “our” and the “Trust” refer to Universal Health Realty Income Trust and its subsidiaries.

As disclosed in this Quarterly Report, including in Note 2 to the condensed consolidated financial statements—Relationship with Universal Health Services, Inc. (“UHS”) and Related Party Transactions, a wholly-owned subsidiary of UHS (UHS of Delaware, Inc.) serves as our Advisor pursuant to the terms of an annually renewable Advisory Agreement dated December 24, 1986, and as amended and restated as of January 1, 2019. Our officers are all employees of UHS through its wholly-owned subsidiary, UHS of Delaware, Inc. In addition, three of our hospital facilities are leased to subsidiaries of UHS, and subsidiaries of UHS are tenants of seventeen medical office buildings or free-standing emergency departments, that are either wholly or jointly-owned by us. Any reference to “UHS” or “UHS facilities” in this report is referring to Universal Health Services, Inc.’s subsidiaries, including UHS of Delaware, Inc.

In this Quarterly Report, the term “revenues” does not include the revenues of the four unconsolidated limited liability companies (“LLCs”) in which we have various non-controlling equity interests ranging from 33% to 95%. We currently account for our share of the income/loss from these investments by the equity method (see Note 5 to the condensed consolidated financial statements included herein).

 

 

 

 


 

Part I. Financial Information

Item I. Financial Statements

Universal Health Realty Income Trust

Condensed Consolidated Statements of Income

For the Three and Six Months Ended June 30, 2019 and 2018

(amounts in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Lease revenue - UHS facilities (a.)

 

$

5,651

 

 

$

5,619

 

 

$

11,444

 

 

$

11,354

 

  Lease revenue- Non-related parties

 

 

13,178

 

 

 

12,392

 

 

 

25,909

 

 

 

24,899

 

  Other revenue - UHS facilities

 

 

209

 

 

 

75

 

 

 

422

 

 

 

137

 

  Other revenue - Non-related parties

 

 

288

 

 

 

2,025

 

 

 

663

 

 

 

2,260

 

 

 

 

19,326

 

 

 

20,111

 

 

$

38,438

 

 

$

38,650

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Depreciation and amortization

 

 

6,426

 

 

 

6,111

 

 

 

13,134

 

 

 

12,398

 

  Advisory fees to UHS

 

 

982

 

 

 

948

 

 

 

1,952

 

 

 

1,852

 

  Other operating expenses

 

 

5,330

 

 

 

5,445

 

 

 

10,540

 

 

 

10,653

 

 

 

 

12,738

 

 

 

12,504

 

 

 

25,626

 

 

 

24,903

 

Income before equity in income of unconsolidated limited liability companies ("LLCs"), interest expense, hurricane insurance recovery proceeds and gain

 

 

6,588

 

 

 

7,607

 

 

 

12,812

 

 

 

13,747

 

  Equity in income of unconsolidated LLCs

 

 

454

 

 

 

425

 

 

 

884

 

 

 

854

 

  Hurricane insurance recovery proceeds in excess of damaged property write-downs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,535

 

  Hurricane business interruption insurance recovery proceeds

 

 

-

 

 

 

194

 

 

 

-

 

 

 

1,162

 

  Gain on sale of land

 

 

-

 

 

 

-

 

 

 

250

 

 

 

-

 

Interest expense, net

 

 

(2,781

)

 

 

(2,421

)

 

 

(5,473

)

 

 

(4,889

)

Net income

 

$

4,261

 

 

$

5,805

 

 

$

8,473

 

 

$

15,409

 

Basic and diluted earnings per share

 

$

0.31

 

 

$

0.42

 

 

$

0.62

 

 

$

1.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding - Basic

 

 

13,730

 

 

 

13,720

 

 

 

13,729

 

 

 

13,719

 

Weighted average number of shares outstanding - Diluted

 

 

13,749

 

 

 

13,720

 

 

 

13,748

 

 

 

13,719

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a.) Includes bonus rental on UHS hospital facilities of $1,352 and $1,204 for the three-month periods ended June 30, 2019 and 2018, respectively, and $2,746 and $2,530 for the six-month periods ended June 30, 2019 and 2018, respectively.

 

 

See accompanying notes to these condensed consolidated financial statements.

 

 

3


 

Universal Health Realty Income Trust

Condensed Consolidated Statements of Comprehensive Income

For the Three and Six Months Ended June 30, 2019 and 2018

(dollar amounts in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

4,261

 

 

$

5,805

 

 

$

8,473

 

 

$

15,409

 

Other comprehensive (loss)/income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized derivative (loss)/gain on interest rate caps

 

 

-

 

 

 

6

 

 

 

(132

)

 

 

154

 

Total other comprehensive (loss)/income:

 

 

-

 

 

 

6

 

 

 

(132

)

 

 

154

 

Total comprehensive income

 

$

4,261

 

 

$

5,811

 

 

$

8,341

 

 

$

15,563

 

 

See accompanying notes to these condensed consolidated financial statements.

 

 

4


 

Universal Health Realty Income Trust

Condensed Consolidated Balance Sheets

(dollar amounts in thousands, except share data)

(unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Assets:

 

 

 

 

 

 

 

 

Real Estate Investments:

 

 

 

 

 

 

 

 

Buildings and improvements and construction in progress

 

$

560,089

 

 

$

557,650

 

Accumulated depreciation

 

 

(183,857

)

 

 

(173,316

)

 

 

 

376,232

 

 

 

384,334

 

Land

 

 

53,396

 

 

 

53,396

 

               Net Real Estate Investments

 

 

429,628

 

 

 

437,730

 

Investments in limited liability companies ("LLCs")

 

 

4,962

 

 

 

5,019

 

Other Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

6,072

 

 

 

5,036

 

Lease and other receivables from UHS

 

 

2,806

 

 

 

2,739

 

Lease receivable - other

 

 

7,070

 

 

 

7,469

 

Intangible assets (net of accumulated amortization of $24.7 million and

   $27.6 million, respectively)

 

 

15,754

 

 

 

17,407

 

Right-of-use land assets, net

 

 

8,862

 

 

 

-

 

Deferred charges and other assets, net

 

 

7,597

 

 

 

8,356

 

               Total Assets

 

$

482,751

 

 

$

483,756

 

Liabilities:

 

 

 

 

 

 

 

 

Line of credit borrowings

 

$

191,550

 

 

$

196,400

 

Mortgage notes payable, non-recourse to us, net

 

 

61,562

 

 

 

64,881

 

Accrued interest

 

 

422

 

 

 

450

 

Accrued expenses and other liabilities

 

 

11,139

 

 

 

11,765

 

Dividends payable

 

 

9,354

 

 

 

-

 

Ground lease liabilities, net

 

 

8,862

 

 

 

-

 

Tenant reserves, deposits and deferred and prepaid rents

 

 

11,322

 

 

 

11,650

 

               Total Liabilities

 

 

294,211

 

 

 

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 - 13,756,531;

   2018 - 13,746,803

 

 

138

 

 

 

137

 

Capital in excess of par value

 

 

266,252

 

 

 

266,031

 

Cumulative net income

 

 

650,789

 

 

 

642,316

 

Cumulative dividends

 

 

(728,639

)

 

 

(710,006

)

Accumulated other comprehensive income

 

 

-

 

 

 

132

 

     Total Equity

 

 

188,540

 

 

 

198,610

 

               Total Liabilities and Equity

 

$

482,751

 

 

$

483,756

 

See accompanying notes to these condensed consolidated financial statements.

 

 


 

5


 

Universal Health Realty Income Trust

Condensed Consolidated Statements of Changes in Equity

For the Six Months Ended June 30, 2019

(dollar amounts in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

 

 

 

 

Accumulated other

 

 

 

 

 

 

 

Number

 

 

 

 

 

 

excess of

 

 

Cumulative

 

 

Cumulative

 

 

comprehensive

 

 

Total

 

 

 

of Shares

 

 

Amount

 

 

par value

 

 

net income

 

 

dividends

 

 

income/(loss)

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1, 2019

 

 

13,747

 

 

$

137

 

 

$

266,031

 

 

$

642,316

 

 

$

(710,006

)

 

$

132

 

 

$

198,610

 

Shares of Beneficial Interest:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued, net

 

 

10

 

 

 

1

 

 

 

(110

)

 

 

 

 

 

 

 

 

 

 

 

(109

)

Restricted stock-based compensation expense

 

 

 

 

 

 

 

 

331

 

 

 

 

 

 

 

 

 

 

 

 

331

 

Dividends ($1.355/share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,633

)

 

 

 

 

 

(18,633

)

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

8,473

 

 

 

 

 

 

 

 

 

8,473

 

Unrealized loss on interest rate cap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(132

)

 

 

(132

)

Subtotal - comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,473

 

 

 

 

 

 

 

(132

)

 

 

8,341

 

June 30, 2019

 

 

13,757

 

 

$

138

 

 

$

266,252

 

 

$

650,789

 

 

$

(728,639

)

 

$

-

 

 

$

188,540

 

 

Universal Health Realty Income Trust

Condensed Consolidated Statements of Changes in Equity

For the Three Months Ended June 30, 2019

(dollar amounts in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

 

 

 

 

Accumulated other

 

 

 

 

 

 

 

Number

 

 

 

 

 

 

excess of

 

 

Cumulative

 

 

Cumulative

 

 

comprehensive

 

 

Total

 

 

 

of Shares

 

 

Amount

 

 

par value

 

 

net income

 

 

dividends

 

 

income/(loss)

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

April 1, 2019

 

 

13,748

 

 

$

137

 

 

$

266,247

 

 

$

646,528

 

 

$

(719,285

)

 

$

-

 

 

$

193,627

 

Shares of Beneficial Interest:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued, net

 

 

9

 

 

 

1

 

 

 

(167

)

 

 

 

 

 

 

 

 

 

 

 

(166

)

Restricted stock-based compensation expense

 

 

 

 

 

 

 

 

172

 

 

 

 

 

 

 

 

 

 

 

 

172

 

Dividends ($.68/share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,354

)

 

 

 

 

 

(9,354

)

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

4,261

 

 

 

 

 

 

 

 

 

4,261

 

Unrealized loss on interest rate cap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Subtotal - comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,261

 

 

 

 

 

 

 

-

 

 

 

4,261

 

June 30, 2019

 

 

13,757

 

 

$

138

 

 

$

266,252

 

 

$

650,789

 

 

$

(728,639

)

 

$

-

 

 

$

188,540

 

 

See accompanying notes to these condensed consolidated financial statements.

 

 

 

 

 

 

 

6


 

Universal Health Realty Income Trust

Condensed Consolidated Statements of Changes in Equity

For the Six Months Ended June 30, 2018

(dollar amounts in thousands)

(unaudited)

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

 

 

 

 

Accumulated other

 

 

 

 

 

 

 

Number

 

 

 

 

 

 

excess of

 

 

Cumulative

 

 

Cumulative

 

 

comprehensive

 

 

Total

 

 

 

of Shares

 

 

Amount

 

 

par value

 

 

net income

 

 

dividends

 

 

income/(loss)

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1, 2018

 

 

13,735

 

 

$

137

 

 

$

265,335

 

 

$

618,120

 

 

$

(673,175

)

 

$

144

 

 

$

210,561

 

Shares of Beneficial Interest:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued, net

 

 

9

 

 

 

 

 

 

(45

)

 

 

 

 

 

 

 

 

 

 

 

(45

)

Restricted stock-based compensation expense