United Surgical Partners International Announces Fourth Quarter and Year-End 2007 Results

DALLAS -- For the quarter ended Dec. 31, 2007, United Surgical Partners International reports net revenues were $168.6 million, up 9 percent from $154.7 million in the prior year period. Operating income from continuing operations for the fourth quarter was $54.9 million, up 27 percent from $43.3 million for the prior year period.

For the combined year ended Dec. 31, 2007, net revenues were $651.5 million, up 13 percent from $574.6 million in the prior year period. Operating income from continuing operations for the period was $162.3 million, including $25.4 million in costs associated with the merger, compared with $159.2 million for the prior year period.

Companywide same-facility net revenue for the fourth quarter also increased 9 percent over the prior year period, driven primarily by 14 percent growth at unconsolidated facilities.

Same-facility revenue growth of 14 percent at the company’s unconsolidating facilities was a result of 7 percent case growth and 6 percent net revenue per case. These facilities have higher case growth than facilities that the company consolidates, primarily because they are typically in key markets, joint ventures with a prominent not-for-profit hospital, and tend to be younger as most new facilities the company develops are unconsolidated.

Company-wide operating margins were up primarily due to substantial improvement in margins in the U.K. hospitals, where capital investments made in 2006 began to generate returns. U.S. same-facility margins were lower by 260 basis points, primarily because the company’s unconsolidating hospital margins (eight of its 11 U.S. hospitals do not consolidate) were lower by 900 basis points. This large reduction is primarily due to an expansion of USPI’s largest facility and an increase in emergency room capabilities at seven of its U.S. hospitals. Margins at the company’s ambulatory surgery centers decreased 90 basis points.

Cash flows from operating activities for the fourth quarter totaled $12.8 million, compared with $21.2 million for the prior year period. During the fourth quarter, the company and its consolidated subsidiaries invested approximately $1.6 million in maintenance capital expenditures and an additional $2.1 million to develop new facilities and expand existing facilities. The decline in cash flows from operating activities compared with the fourth quarter of 2006 was primarily due to an increase of $34.5 million in interest payments.

Cash flows from operating activities for the combined year ended Dec. 31, 2007, totaled $98.2 million, compared with $102.1 million for the prior year period. During the combined year ended Dec. 31, 2007, the company and its consolidated subsidiaries invested approximately $9.6 million in maintenance capital expenditures and an additional $8.5 million to develop new facilities and expand existing facilities. The year-over-year decrease in cash flows from operating activities is due to an increase in interest payments of approximately $40.1 million.

The company added 20 facilities in 2007; 11 de novo facilities and nine acquisitions. Of these facilities, 14 were in partnership with a health system and four were in the St. Louis market. In 2007, the company also ceased operating six facilities that were either performing poorly or in markets with limited growth opportunities. The company currently has 10 facilities in development with eight under construction. In 2008, the company expects to add 12 to 15 facilities and purchase additional ownership in six of its facilities in the St. Louis market.

Commenting on the results, William H. Wilcox, United Surgical Partners International’s chief executive officer, said, “During 2007, the company celebrated its 10th year of operations and its first year as a private company after being public for six years. USPI’s success to date is attributable to its strategy of providing excellence in patient care and focusing on growth in key markets; 2007 exemplified both aspects of that strategy. Our success is due in large part to the extraordinary efforts of our employee team members who assisted physicians in providing excellent care to more than 650,000 patients in 2007. In addition, our focus on growing our key markets in conjunction with our partners resulted in the addition of 20 facilities during 2007 to the USPI network, strengthening our foundation for continued growth.”

Source: United Surgical Partners International

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