SOURCE: University General Health System, Inc.

University General Health System, Inc.

August 16, 2011 06:04 ET

University General Health System, Inc. Reports Increased Second Quarter Revenues and Assets

Net Revenues Up 24%; Assets Increase by $47 Million

HOUSTON, TX--(Marketwire - Aug 16, 2011) - University General Health System, Inc. (OTCQB: UGHS) (PINKSHEETS: UGHS), a diversified, integrated multi-specialty health delivery system, today announced its financial results for the second quarter and six months ended June 30, 2011.

Highlights for the second quarter 2011:

  • Net revenues increased 24% to $18.2 million, compared with $14.7 million in the year-earlier quarter, resulting from increased inpatient volumes and revenues from Hyperbaric Wound Care Center and free standing emergency rooms;

  • Average daily patient census at Company's acute care hospital reached a record 65%, while senior living segment reported 91% occupancy in most recent quarter;

  • Assets increased to $116.8 million, a $47 million improvement since December 31, 2010;

  • Operating income decreased to $899 thousand in the second quarter compared with $1.7 million in the prior-year quarter. The decrease in operating income was attributable to costs associated with acquisitions and staffing of new free standing emergency rooms, as well as costs of going public;

  • Net loss for the quarter approximated $228 thousand, or $0.00 per share, compared with net income of $427 thousand, or $0.00 per share, in second quarter of 2010, and EBITDA for the quarter totaled $2.66 million compared with $3.43 million in the second quarter of 2010;

  • Collection rates improved nearly two percentage points on accounts receivable due to higher payment rates on inpatient accounts.

Highlights for the six months ended June 30, 2011:

  • Net revenues increased 34% to $34.0 million, compared with net revenues of $25.3 million in the first half of 2010;

  • Operating income improved 494% to $1.7 million, compared with $290 thousand in the first half of 2010;

  • Net loss for the six months totaled $668 thousand, or $0.00 per share, compared with a net loss of $2.5 million, or $0.03 per share, in the year-earlier six-month period;

  • EBITDA reflected $5.2 million, compared with $3.8 million in the corresponding period of the previous year.

"We are pleased with the improvements in our financial results," stated Dr. Hassan Chahadeh, M.D., Chairman and Chief Executive Officer of University General Health System, Inc. "Our full-service general acute care hospital, University General Hospital in Houston, Texas, recorded the highest average daily patient census in its history, and we continued to improve our accounts receivable collection rates during the most recent quarter."

"While second quarter profitability was affected by costs associated with our becoming a public company, along with increased staffing expenses related to our facilities expansion strategy, we believe six-month results demonstrate that our strategy of creating greater synergies between our acquisitions and the hospital is working. We reduced our net loss by 74% during the first half of 2011, and reported EBITDA of $5.2 million for the period as well.

"Our balance sheet improved significantly during the first half of 2011," continued Dr. Chahadeh. "The Company's total assets increased by 67% to $116.8 million as of June 30, 2011, compared with $70.0 million at December 31, 2010, following the acquisitions of TrinityCare Senior Living communities; TrinityCare Senior Living, LLC; Autimis, LLC; and Autimis Medical Billing, LLC. Shareholders' equity totaled $624,044 at the end of our second quarter, compared with a shareholders' deficit of approximately $34.6 million on December 31, 2011, an improvement of $35.2 million."

"We look towards the future with great optimism as we continue to implement our strategic growth plan. This plan includes focusing on 100 key markets in the U.S. wherein the Company has the potential to provide regional health care solutions involving general acute care hospitals, ambulatory surgical centers, diagnostic imaging services and senior living communities. In addition, we are evaluating the potential acquisition of hospitals that were unsuccessful in completing the requirements necessary to qualify for the Whole Hospital Exemption under the Health Care Reform Act, which was passed into law in March 2010. Our initial expansion will target the southwestern United States, with national expansion to follow as opportunities arise," concluded Dr. Chahadeh.

Use of Non-GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA is a measure of operating performance that is not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). Adjusted EBITDA should not be considered in isolation or as a substitute for net income (loss), income from operations or cash flows provided by or used in operations, as determined in accordance with GAAP. Adjusted EBITDA is a key measure of the Company's operating performance used by management to focus on operating performance and management without mixing in items of income and expense that relate to the financing and capitalization of the business. The Company defines Adjusted EBITDA as net income (loss) before provision (benefit) for income taxes, non-operating (income) expense items, (gain) loss on sale of assets, depreciation and amortization (including non-cash impairment charges), amortization of deferred gain, non-cash stock-based compensation expense.

The Company believes Adjusted EBITDA is useful to investors in evaluating our performance, results of operations and financial position for the following reasons:

  • It is helpful in identifying trends in day-to-day performance because the items excluded have little or no significance to day-to-day operations;
  • It provides an assessment of controllable expenses and affords management the ability to make decisions that are expected to facilitate meeting current financial goals and achieve optimal financial performance; and
  • It is an indication of whether adjustments to current spending decisions are necessary.

About University General Health System, Inc.

University General Health System, Inc. ("University General") is a diversified, integrated multi-specialty health care provider that delivers concierge physician- and patient-oriented services by providing timely, innovative health solutions that are uniquely competitive, efficient, and adaptive in today's health care delivery environment. The Company currently operates one hospital, two free-standing emergency rooms, and one ambulatory surgical center in the Houston area. Also, University General owns three senior living facilities and manages six senior living facilities, and it plans to complete multiple additional acquisitions in 2011 and future years in Houston and other markets.

Forward-Looking Statements

The information in this news release includes certain forward-looking statements that are based upon assumptions that in the future may prove not to have been accurate and are subject to significant risks and uncertainties, including statements related to the future financial performance of the Company. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct. Factors that could cause results to differ include, but are not limited to, successful execution of growth strategies, product development and acceptance, the impact of competitive services and pricing, general economic conditions, and other risks and uncertainties described in the Company's periodic filings with the Securities and Exchange Commission.

Consolidated Balance Sheet
June 30, December 31,
2011 2010
(Unaudited)
ASSETS
Current Assets
Cash and Cash equivalents $ 200,003 $ 2,291,754
Accounts receivables, net 15,260,711 11,812,184
Inventories 1,994,793 1,765,735
Receivables from related parties 621,860 633,678
Prepaid expenses and other assets 457,875 52,790
Total current assets 18,535,242 16,556,141
Investments in unconsolidated affiliates 115,000 -
Property and equipment, net 63,861,625 53,224,152
Goodwill 33,365,278 -
Other assets 908,275 266,603
Total assets $ 116,785,420 $ 70,046,896
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable $ 15,177,608 $ 14,823,508
Payables related to parties 2,023,807 4,714,951
Accrued expenses 8,385,719 7,984,109
Accrued acquisition cost 1,407,546 -
Payable to Internal Revenue Service 3,329,091 5,436,041
Deferred revenue 24,375 -
Lines of credit 8,450,000 -
Notes payable, current porion 18,870,115 8,321,298
Notes payable to related parties, current portion 2,780,683 4,027,650
Capital lease obligations, current portion 7,849,141 11,591,999
Capital lease obligation to related party, current portion 218,067 137,076
Total current liabilities 68,516,152 57,036,632
Lines of credit - 8,450,000
Notes payable, less current portion 14,136,174 5,487,939
Notes payable to related parties, less current portion 2,144,062 2,087,241
Capital lease obligations, less current portion 439,840 532,805
Capital lease obligation payable to related party, less current portion 30,925,148 31,042,859
Total liabilities 116,161,376 104,637,476
Commitments and contingencies - -
Shareholder's equity (deficit)
Preferred stock, $0.001 par value, 20,000,000 shares authorized, 3,000 shares issued and outstanding 3 3
Common stock, $0.001 par value, 480,000,000 shares authorized; 274,895,895 and 151,498,884 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively 274,896 151,499
Additional paid in capital 46,177,453 12,069,750
Shareholders' receivables (2,130,000 ) -
Accumulated deficit (47,479,336 ) (46,811,832 )
Total shareholders' equity (deficit) (3,156,984 ) (34,590,580 )
Noncontrolling interest 3,781,028 -
Total equity (deficit) 624,044 (34,590,580 )
Total liabilities and shareholders' equity (deficit) $ 116,785,420 $ 70,046,896
UNIVERSITY GENERAL HEALTH SYSTEM, INC.
Consolidated Statement of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2011 2010 2011 2010
Revenues
Net patient service revenues, net of contractual adjustments $ 18,218,417 $ 14,714,965 $ 33,952,453 $ 25,294,693
Other revenues 2,971 4,031 8,953 30,224
Total revenues 18,221,388 14,718,996 33,961,406 25,324,917
Operating expenses
Salaries, benefits, and other employee costs 6,812,693 4,668,054 12,947,409 9,019,346
Medical supplies 3,103,206 2,953,307 6,263,841 5,718,867
Management fees 1,303,727 685,922 2,693,382 1,159,747
General and administrative expenses 4,172,194 2,988,608 7,656,234 5,808,818
Bad debt expense 334,347 725,363 625,150 1,569,411
Gain on extinguishment of liabilities (160,979 ) (735,978 ) (1,464,345 ) (1,723,136 )
Depreciation and amortization 1,757,509 1,739,934 3,520,116 3,482,224
Total operating expenses 17,322,697 13,025,210 32,241,787 25,035,277
Operating income (loss) 898,691 1,693,786 1,719,619 289,640
Interest expense (1,045,427 ) (1,206,905 ) (2,225,123 ) (2,635,306 )
Income (loss) before income tax (146,736 ) 486,881 (505,504 ) (2,345,666 )
State income tax expense (benefit) 81,000 60,000 162,000 175,000
Net income (loss) (227,736 ) 426,881 (667,504 ) (2,520,666 )
Net income (loss) per common share - basic and diluted
Net income (loss) per common share - - - (0.03 )
Weighted average shares outstanding 253,000,000 91,132,160 214,080,503 91,132,160
UNIVERSITY GENERAL HEALTH SYSTEM, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
2011 2010
Operating activities
Net loss $ (667,503 ) $ (2,520,665 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Bad debt expense 625,150 1,569,411
Depreciation and amortization 3,520,116 3,482,224
Loss (gain) on disposal of property and equipment - -
Gain on extinguishment of liabilities (1,464,345 ) (1,723,136 )
Net changes in other operating assets and liabilities:
Accounts receivable (3,483,770 ) (329,980 )
Related party receivables and payables (136,326 ) (3,227,711 )
Inventories (229,058 ) 10,888
Prepaid expenses and other assets (105,114 ) (99,567 )
Accounts payable, accrued expenses, and payable to Internal Revenue Service (2,029,333 ) 4,787,517
Net cash provided by (used in) operating activities (4,150,183 ) 1,948,981
Investing activities
Purchase of property and equipment (368,012 ) (206,268 )
Investments in unconsolidated affiliates (115,000 ) -
Net cash provided by (used in) investing activities (483,012 ) (206,268 )
Financing activities
Redemption of common stock (50,000 ) -
Issuance of common stock 7,120,000 -
Business acquisitions, net of cash acquired 198,526 -
Borrowings under notes payable 3,500 -
Payments on notes payable (2,387,893 ) (288 )
Borrowings under notes payable to related party 3,428,250 2,202,592
Payments on notes payable to related party (1,898,396 ) (2,615,000 )
Repayment of capital lease obligation (3,835,823 ) (1,154,959 )
Payments on capital lease obligation to related party (36,720 ) (34,534 )
Net cash provided by (used in) financing activities 2,541,444 (1,602,189 )
Net increase (decrease) in cash and cash equivalents (2,091,751 ) 140,524
Cash and cash equivalents at beginning of period 2,291,754 1,640
Cash and cash equivalents at end of period 200,003 142,164
Supplemental disclosure of cash flow information
Interest paid 538,718 297,652
Taxes paid 4,828,470 495,740
Supplemental noncash financing activities
Exchange of debt for common stock on February 2011 3,500,000 -
Issuance of common stock on February 2011 2,130,000 -
Issuance of common stock to affiliate for termination of service agreement 1,000,000 -
Noncash consideration paid for acquisitions 24,753,735 -
The table below reconciles adjusted EBITDA to net income (loss) for the three and six months ended June 30, 2011 and 2010:
Adjusted EBITDA Calculation Three Months Ended Six Months Ended
June 30, June 30,
2011(1) 2010 2011(1) 2010
Net income (loss) $ (227,736 ) $ 426,881 $ (667,504 ) $ (2,520,666 )
Provision (benefit) for income taxes 81,000 60,000 162,000 175,000
Other non-operating expense (income) - - - -
Interest expense:
Debt and lease obligations 1,045,427 1,206,905 2,225,123 2,635,306
Interest income - - - -
Depreciation and amortization 1,757,509 1,739,934 3,520,116 3,482,224
Adjusted EBITDA 2,656,200 3,433,720 5,239,735 3,771,864

Contact Information

  • For Additional Information, Please Contact:

    Donald Sapaugh
    President
    (713) 375-7557

    or

    RJ Falkner & Company, Inc.
    Investor Relations Counsel
    (830) 693-4400
    info@rjfalkner.com