SOURCE: University General Health System, Inc.

University General Health System, Inc.

August 15, 2012 08:28 ET

University General Health System Reports Quarterly Net Income of $5.1 Million on 63% Revenue Increase

HOUSTON, TX--(Marketwire - Aug 15, 2012) - University General Health System, Inc. (OTCQB: UGHS) (PINKSHEETS: UGHS), a diversified, integrated multi-specialty health delivery system, today announced significantly improved operating results for the second quarter and first half of 2012. The Company will host an investor conference call at 11:15 a.m. Eastern Time today to discuss its operating results and other topics of interest (see details below).

Highlights for the quarter ended June 30, 2012:

  • The Company recorded net income attributable to common shareholders of $5.1 million, or $0.02 per share, in the most recent quarter, compared with a net loss attributable to common shareholders of ($227,736), or ($0.00) per share, in the comparable quarter of 2011.
  • Net patient revenue increased 48.3% to approximately $26.5 million, compared with approximately $17.9 million in the quarter ended June 30, 2011. Average daily inpatient census at University General Hospital increased by 12.2% relative to prior-year levels, reflecting an average occupancy rate of 53.6%. The increase in net patient revenue was primarily attributable to the ongoing execution of the Company's physician-centric, integrated health delivery system strategy.
  • Resident revenue for the senior living business segment approximated $1.9 million, support services revenue totaled $0.4 million, and other revenue totaled $0.25 million in the most recent quarter. The senior living properties reported continued stable utilization, with an overall occupancy rate in excess of 93% in the second quarter of 2012.
  • Total revenue rose 63% to $29.1 million, compared with $17.9 million in the second quarter of 2011. Total revenue in the 2011 quarter did not include revenue from senior living and support services, as these business segments were acquired during the second half of last year.
  • Net patient revenue (less provision for bad debt) from Medicare and Medicaid accounted for approximately 32.9% of total net patient revenue, compared with approximately 34.5% in the prior-year quarter. Net patient revenue from commercial and managed care providers accounted for approximately 66.6% of total net patient revenue for the quarter ended June 30, 2012, versus 62.1% in the second quarter of 2011. Self-pay revenue increased from 5.3% of total net patient revenue in the quarter ended June 30, 2011 to 11.0% in the quarter ended June 30, 2012. The provision for doubtful accounts approximated 10.5% in the most recent quarter, versus 1.9% in the comparable 2011 period.
  • Operating income improved 996% to approximately $9.8 million in the three months ended June 30, 2012, versus approximately $0.9 million in the prior-year quarter, primarily due to the increase in revenue, along with cost containment measures implemented in the fourth quarter of 2011. Operating income in the second quarter of 2012 included approximately $2.8 million in gains related to the extinguishment of liabilities, compared with similar gains of $0.2 million in the prior-year period.
  • Adjusted EBITDA for the six months ended June 30, 2012 increased 193% to approximately $15.4 million, versus approximately $5.2 million in the first half of 2011 (EBITDA is a non-GAAP measure that is reconciled with GAAP results in a table at the end of this press release).
  • Total equity improved to $14.1 million at June 30, 2012, compared with a negative shareholders' equity of ($0.6 million) at December 31, 2011.

"University General Health System continues to execute on its physician-centric growth strategy by providing best-in-class medical care," stated Hassan Chahadeh, M.D., the Company's Chairman and Chief Executive Officer. "During the second quarter, the strong financial results of our integrated health delivery model demonstrated exceptional returns for our shareholders. Importantly, we reported significant net income for the quarter, as profitability continues to benefit from acquisitions, along with increased patient revenue at our flagship hospital."

"In addition to our organic growth, we have also been successful in the execution of our expansion plans through opportunistic, accretive acquisitions that have enhanced our position in the Houston market," added Donald Sapaugh, President of University General Health System. "Our long-term objective is to replicate our regional health delivery model in additional geographical markets, and we are currently reviewing a number of opportunities that are consistent with this goal."

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, and 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.

Investor Conference Call

Management of University General Health System will host a conference call Wednesday August 15, 2012 -- at 11:15 am EDT. Shareholders and other interested parties may participate in the conference call by dialing 877-374-8416 (international participants dial 412-317-6716) and requesting participation in the "University General Health System Conference Call" at least five minutes before 11:15 am EDT.

A replay of the conference call will be available one hour after the call through August 22, 2012 at 9:00 am EDT by dialing 877-344-7529 (international participants dial 412-317-0088) and entering the conference ID# 10017521. A transcript will also be posted on the investor section of the Company's website at http://www.ughs.net.

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 ambulatory surgical centers, two diagnostic imaging centers, two physical therapy clinics, a sleep clinic, and a Hyperbaric Wound Care Center in the Houston area. Also, University General owns three senior living facilities, manages six senior living facilities, and owns a Support Services company that provides revenue cycle and luxury facilities management services.

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 Form 10-K, Form 10-Q and other periodic filings with the Securities and Exchange Commission.

(Financial Highlights Follow)

   
   
UNIVERSITY GENERAL HEALTH SYSTEM, INC.  
Consolidated Balance Sheets  
   
    June 30,     December 31,  
    2012     2011  
                 
ASSETS                
Current assets                
  Cash and cash equivalents   $ 475,885     $ 538,018  
  Accounts receivables, net     17,175,814       10,913,361  
  Inventories     1,878,266       1,908,177  
  Receivables from related parties     1,084,021       658,764  
  Prepaid expenses and other assets     1,315,319       1,275,104  
    Total current assets     21,929,305       15,293,424  
                 
Investments in unconsolidated affiliates     767,323       687,323  
Property and equipment, net     66,841,636       66,437,316  
Intangible assets     7,198,000       7,649,000  
Goodwill     28,900,818       22,199,874  
Other assets     1,883,224       2,234,985  
    Total assets   $ 127,520,306     $ 114,501,922  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)                
Current liabilities                
  Accounts payable   $ 10,535,040     $ 11,874,720  
  Payables to related parties     2,089,287       2,493,088  
  Accrued expenses     5,339,916       7,516,940  
  Accrued acquisition cost     521,401       1,007,380  
  Taxes Payable     5,149,799       4,171,826  
  Income Taxes Payable     3,840,809       -  
  Deferred revenue     248,954       314,876  
  Lines of credit     8,451,025       8,451,025  
  Notes payable, current portion     25,528,386       28,982,331  
  Notes payable to related parties, current portion     2,164,527       2,798,783  
  Capital lease obligations, current portion     4,633,186       5,943,685  
  Capital lease obligation to related party, current portion     253,397       239,409  
    Total current liabilities     68,755,727       73,794,063  
                 
Lines of credit     -       -  
Notes payable, less current portion     13,707,523       8,459,474  
Notes payable to related parties, less current portion     -       1,983,514  
Capital lease obligations, less current portion     331,153       34,893  
Capital lease obligation payable to related party, less current portion     30,671,750       30,803,450  
      Total liabilities     113,466,153       115,075,394  
                 
Commitments and contingencies     -       -  
                 
Shareholders' 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; 324,326,655 and 283,440,226 shares issued and outstanding     324,326       283,440  
  Additional paid in capital     58,900,069       49,078,223  
  Shareholders' receivables     (2,409,069 )     (2,219,068 )
  Accumulated deficit     (47,883,491 )     (53,049,030 )
    Total shareholders' deficit     8,931,842       (5,906,432 )
  Non-controlling interest     5,122,311       5,332,960  
      Total equity (deficit)     14,054,153       (573,472 )
      Total liabilities and shareholders' equity (deficit)   $ 127,520,306     $ 114,501,922  
         
                 
   
   
UNIVERSITY GENERAL HEALTH SYSTEM, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
   
    Three Months Ended  
    June 30,  
    2012     2011  
Revenues                
Net patient service revenues, net of contractual adjustments and provision for bad debt   $ 26,518,937     $ 17,884,070  
Resident revenues     1,908,425       -  
Support services revenues     395,364       -  
Other revenues     250,351       2,971  
    Total revenues     29,073,077       17,887,041  
                 
Operating expenses                
  Salaries, benefits, and other employee costs     8,735,661       6,812,693  
  Medical supplies     3,859,736       3,103,206  
  Management fees     -       1,303,727  
  General and administrative expenses     7,667,311       4,172,194  
  Gain on extinguishment of liabilities     (2,806,787 )     (160,979 )
  Depreciation and amortization     1,769,920       1,757,509  
    Total operating expenses     19,225,841       16,988,350  
Operating income     9,847,236       898,691  
                 
Interest expense     (1,385,335 )     (1,045,427 )
Other Income     -       -  
Income (loss) before income tax     8,461,901       (146,736 )
Income tax expense     3,407,131       81,000  
Income (loss) before non-controlling interest   $ 5,054,770       (227,736 )
                 
Net income attributable to non-controlling interests     30,018       -  
Net income (loss) attributable to Company   $ 5,084,788     $ (227,736 )
                 
Basic and diluted earnings (loss) per share data:                
  Basic and diluted earnings (loss) per share   $ 0.02     $ (0.00 )
                 
  Basic and diluted weighted average shares outstanding     309,510,470       253,000,000  
                 
                 
  Basic and diluted earnings (loss) per share   $ 0.02     $ (0.00 )
                 
  Basic and diluted weighted average shares outstanding     326,817,830       253,000,000  
                 
                 
   
   
UNIVERSITY GENERAL HEALTH SYSTEM, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
   
    Six Months Ended  
    June 30,  
    2012     2011  
Revenues                
Net patient service revenues, net of contractual adjustments and provision for bad debt   $ 43,136,670     $ 33,327,303  
Resident revenues     3,776,858       -  
Support services revenues     879,064       -  
Other revenues     367,540       8,953  
    Total revenues     48,160,132       33,336,256  
                 
Operating expenses                
  Salaries, benefits, and other employee costs     17,017,652       12,947,409  
  Medical supplies     6,791,861       6,263,841  
  Management fees     -       2,693,382  
  General and administrative expenses     11,894,814       7,656,234  
  Gain on extinguishment of liabilities     (2,903,526 )     (1,464,345 )
  Depreciation and amortization     3,495,093       3,520,116  
    Total operating expenses     36,295,894       31,616,637  
Operating income     11,864,238       1,719,619  
Interest expense     (2,823,300 )     (2,225,123 )
Other Income     11,583       -  
Income (loss) before income tax     9,052,521       (505,504 )
Income tax expense     3,506,131       162,000  
Income (loss) before non-controlling interest   $ 5,546,390       (667,504 )
                 
Net income attributable to non-controlling interests     27,835       -  
Net income (loss) attributable to Company   $ 5,574,225     $ (667,504 )
                 
Basic and diluted earnings (loss) per share data:                
  Basic and diluted earnings (loss) per share   $ 0.02     $ (0.00 )
                 
  Basic and diluted weighted average shares outstanding     296,475,348       214,080,503  
                 
                 
  Basic and diluted earnings (loss) per share   $ 0.02     $ (0.00 )
                 
  Basic and diluted weighted average shares outstanding     313,782,708       214,080,503  
                 
                 
   
   
UNIVERSITY GENERAL HEALTH SYSTEM, INC.  
Adjusted EBITDA Calculation  
   
    Six Months Ended
June 30,
 
    2012     2011  
Net income (loss)   $ 5,574,225     $ (667,504 )
Provision (benefit) for income taxes     3,506,131       162,000  
Other non-operating expense (income)     (11,583 )     -  
Interest expense:                
  Debt and lease obligations     2,863,300       2,225,123  
Interest income     (40,000 )     -  
Depreciation and amortization     3,495,093       3,520,116  
Adjusted EBITDA   $ 15,387,166     $ 5,239,735  
                 

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