On February 26, 2020 Universal Health Services, Inc. (NYSE: UHS) reported that its reported net income attributable to UHS was $245.2 million, or $2.79 per diluted share, during the fourth quarter of 2019 as compared to $158.1 million, or $1.70 per diluted share, during the comparable quarter of 2018 (Press release, Universal Health Services, FEB 26, 2020, View Source [SID1234554827]). Net revenues increased 5.1% to $2.896 billion during the fourth quarter of 2019 as compared to $2.754 billion during the fourth quarter of 2018.

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Included in our reported, and our adjusted, net income attributable to UHS during the fourth quarter of 2019 is a pre-tax unrealized gain of $16.7 million, or $.15 per diluted share (included in "Other (income), expense, net"), resulting from an increase in the market value of shares of certain marketable securities held for investment and classified as available for sale. Included in our reported, and our adjusted, net income attributable to UHS during the fourth quarter of 2018 is a pre-tax unrealized loss of $12.5 million, or $.10 per diluted share, resulting from a decrease in the market value of these shares.

As indicated on the attached Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule"), there were no significant adjustments made to our reported net income attributable to UHS during the fourth quarter of 2019.

As reflected on the Supplemental Schedule, our adjusted net income attributable to UHS during the fourth quarter of 2018 was $220.1 million, or $2.37 per diluted share, Included in our reported results during the fourth quarter of 2018, is a net aggregate unfavorable after-tax impact of $62.0 million, or $.67 per diluted share, consisting primarily of the following: (i) an unfavorable after-tax impact of $24.5 million, or $.26 per diluted share, resulting from a $31.9 million pre-tax increase in the reserve established in connection with the civil aspects of the government’s investigation of our behavioral health care facilities ("DOJ Reserve"), as discussed below, and; (ii) an unfavorable after-tax impact of $37.7 million, or $.41 per diluted share, resulting from a $49.3 million provision for intangible asset impairment, as discussed below.

As calculated on the attached Supplemental Schedule, our earnings before interest, taxes, depreciation & amortization ("EBITDA net of NCI", NCI is net income attributable to noncontrolling interests), was $485.1 million during the fourth quarter of 2019 as compared to $359.9 million during the fourth quarter of 2018. Our adjusted earnings before interest, taxes, depreciation & amortization ("Adjusted EBITDA net of NCI"), which excludes the impacts of other (income) expense, net, as well as the unfavorable impact of the above-mentioned increase in the DOJ Reserve and provision for asset impairment, was $465.8 million during the fourth quarter of 2019 as compared to $453.6 million during the fourth quarter of 2018.

Consolidated Results of Operations, As Reported and As Adjusted – Twelve-month periods ended December 31, 2019 and 2018:
Reported net income attributable to UHS was $814.9 million, or $9.13 per diluted share, during the twelve-month period ended December 31, 2019 as compared to $779.7 million, or $8.31 per diluted share, during the comparable twelve-month period of 2018. Net revenues increased 5.6% to $11.378 billion during 2019 as compared to $10.772 billion during 2018.

Included in our reported, and our adjusted, net income attributable to UHS are pre-tax unrealized gains of $4.1 million, or $.04 per diluted share, during the twelve-month period ended December 31, 2019, and $6.0 million, or $.05 per diluted share, during the twelve-month period ended December 31, 2018. As discussed above, these unrealized gains resulted from increases in the market value of shares of certain marketable securities held for investment and classified as available for sale.

For the twelve-month period ended December 31, 2019, our adjusted net income attributable to UHS, as calculated on the attached Supplemental Schedule, was $891.8 million, or $9.99 per diluted share, as compared to $894.4 million, or $9.53 per diluted share, during the twelve-month period of 2018.

As reflected on the Supplemental Schedule, included in our reported results during the twelve-month period ended December 31, 2019, is an aggregate net unfavorable after-tax impact of $77.0 million, or $.86 per diluted share, resulting from: (i) an unfavorable after-tax impact of $74.6 million, or $.84 per diluted share, resulting from a $97.6 million provision for asset impairment, as discussed below; (ii) an unfavorable after-tax impact of $14.6 million, or $.16 per diluted share, resulting from an increase in the DOJ Reserve and the net estimated federal and state income taxes due on the portion of the DOJ Reserve that is estimated to be non-deductible for income tax purposes, as discussed below, and; (iii) a favorable after-tax impact of $12.2 million, or $.14 per diluted share, resulting from our adoption of ASU 2016-09, "Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09").

As reflected on the Supplemental Schedule, included in our reported results during the twelve-month period ended December 31, 2018, is a net aggregate unfavorable after-tax impact of $114.6 million, or $1.22 per diluted share, consisting of: (i) an unfavorable after-tax impact of $78.2 million, or $.83 per diluted share, resulting from a $102.3 million pre-tax increase in the DOJ Reserve, as discussed below; (ii) an unfavorable after-tax impact of $37.7 million, or $.40 per diluted share, resulting from a $49.3 million provision for intangible asset impairment, as discussed below, partially offset by; (iii) a favorable after-tax impact of $1.2 million, or $.01 per diluted share, resulting from our adoption of ASU 2016-09.

As calculated on the attached Supplemental Schedule, our EBITDA net of NCI, was $1.707 billion during the twelve-month period ended December 31, 2019 as compared to $1.624 billion during the twelve-month period ended December 31, 2018. Our Adjusted EBITDA net of NCI, which excludes the impacts of other (income) expense, net, as well as the unfavorable impacts of the above-mentioned provisions for asset impairment and increases in the DOJ Reserve, was $1.802 billion during the twelve-month period ended December 31, 2019 as compared to $1.762 billion during the twelve-month period ended December 31, 2018.

Acute Care Services – Three and twelve-month periods ended December 31, 2019 and 2018:
During the fourth quarter of 2019, at our acute care hospitals owned during both periods ("same facility basis"), adjusted admissions (adjusted for outpatient activity) increased 2.1% and adjusted patient days increased 6.0%, as compared to the fourth quarter of 2018. At these facilities, net revenue per adjusted admission increased 5.3% while net revenue per adjusted patient day increased 1.4% during the fourth quarter of 2019 as compared to the fourth quarter of 2018. Net revenues from our acute care services on a same facility basis increased 7.9% during the fourth quarter of 2019 as compared to the fourth quarter of 2018.

During the twelve-month period ended December 31, 2019, at our acute care hospitals on a same facility basis, adjusted admissions increased 4.8% and adjusted patient days increased 5.7%, as compared to the full year of 2018. At these facilities, net revenue per adjusted admission increased 2.5% while net revenue per adjusted patient day increased 1.7% during the twelve-month period ended December 31, 2019 as compared to the full year of 2018. Net revenues from our acute care services on a same facility basis increased 7.7% during 2019 as compared to 2018.

Behavioral Health Care Services – Three and twelve-month periods ended December 31, 2019 and 2018:
During the fourth quarter of 2019, at our behavioral health care facilities on a same facility basis, adjusted admissions increased 0.8% while adjusted patient days increased 0.9% as compared to the fourth quarter of 2018. At these facilities, net revenue per adjusted admission increased 4.0% while net revenue per adjusted patient day increased 3.9% during the fourth quarter of 2019 as compared to the comparable quarter in 2018. On a same facility basis, our behavioral health care services’ net revenues increased 4.5% during the fourth quarter of 2019 as compared to the fourth quarter of 2018.

During the twelve-month period ended December 31, 2019, at our behavioral health care facilities on a same facility basis, adjusted admissions increased 1.2% while adjusted patient days increased 0.6% as compared to the full year of 2018. At these facilities, net revenue per adjusted admission increased 2.2% while net revenue per adjusted patient day increased 2.7% during the full year of 2019 as compared to 2018. On a same facility basis, our behavioral health care services’ net revenues increased 3.1% during the twelve-month period ended December 31, 2019 as compared to the full year of 2018.

Net Cash Provided by Operating Activities and Share Repurchase Program:
For the twelve months ended December 31, 2019, our net cash provided by operating activities increased to $1.438 billion as compared to $1.275 billion generated during the full year of 2018. The $164 million net increase was due to: (i) a favorable change of $110 million resulting from an increase in net income plus/minus depreciation and amortization expense, stock-based compensation expense, provision for asset impairment, net gains on sale of assets and costs related to extinguishment of debt; (ii) a favorable change of $29 million in accrued and deferred income taxes, and; (iii) $25 million of other combined net favorable changes.

In conjunction with our January 1, 2019 adoption of ASU 2017-12, "Targeted Improvements to Accounting for Hedging Activities", we have included the net cash outflows/inflows, which were paid/received in connection with foreign exchange contracts that hedge our investment in the U.K., in investing cash flows on the consolidated statements of cash flows. During the twelve-month period ended December 31, 2019, in connection with foreign exchange contracts that hedge our investment in the U.K., we had $19.8 million of net cash outflows, as compared to $66.2 million of net cash inflows during the year ended December 31, 2018. Prior to 2019, these net outflows/inflows were included in operating cash flows. Prior period amounts have been reclassified to conform with current year presentation on the consolidated statements of cash flows included herein.

In July, 2019, our Board of Directors authorized a $1.0 billion increase to our stock repurchase program, which increased the aggregate authorization to $2.7 billion from the previous $1.7 billion authorization approved in various increments since 2014. Pursuant to this program, which had an aggregate available repurchase authorization of $756.1 million as of December 31, 2019, shares of our Class B Common Stock may be repurchased, from time to time as conditions allow, on the open market or in negotiated private transactions.

In conjunction with our stock repurchase program, during the fourth quarter of 2019, we have repurchased approximately 1.29 million shares at an aggregate cost of $181.2 million (approximately $141 per share). During the full year of 2019, we have repurchased approximately 5.40 million shares at an aggregate cost of $706.2 million (approximately $131 per share). Since inception of the program in 2014 through December 31, 2019, we have repurchased approximately 16.07 million shares at an aggregate cost of approximately $1.94 billion (approximately $121 per share).

Agreement in Principle with DOJ’s Civil Division and DOJ Reserve:
As previously disclosed on July 25, 2019, we have reached an agreement in principle with the DOJ’s Civil Division, and on behalf of various states’ attorneys general offices, to resolve the civil aspect of the government’s investigation of our behavioral health care facilities for $127 million subject to requisite approvals and preparation and execution of definitive settlement and related agreements. At that time, we also disclosed that we were further advised that the previously disclosed investigations being conducted by the DOJ’s Criminal Frauds Section in connection with these matters had been closed.

In connection with the agreement in principle with the DOJ’s Civil Division, during the twelve-month period ended December 31, 2019, we recorded a pre-tax increase of approximately $11.0 million in the DOJ Reserve, which includes related fees and costs due to or on behalf of third-parties. There was no change to the DOJ Reserve during the fourth quarter of 2019. The aggregate pre-tax DOJ Reserve amounted to approximately $134 million as of December 31, 2019. As of December 31, 2018, the aggregate pre-tax DOJ Reserve amounted to approximately $123 million, including pre-tax increases of $31.9 million and $102.3 million recorded during the three and twelve-month periods ended December 31, 2018, respectively.

In late August, 2019, we received the initial draft of the settlement agreement from the DOJ’s Civil Division. Negotiations regarding the terms and conditions of the settlement agreement continue. Based upon the terms and provisions included in the draft settlement agreement, and related subsequent discussions, our financial statements for the twelve-month period ended December 31, 2019 include an unfavorable provision for income taxes of $6.2 million resulting from the net estimated federal and state income taxes due on the portion of the aggregate pre-tax DOJ Reserve that is estimated to be non-deductible for income tax purposes.

Since the agreement in principle with the DOJ’s Civil Division is subject to certain required approvals and negotiation and execution of definitive settlement agreements, as well as finalization and execution of a corporate integrity agreement with the Office of Inspector General for the United States Department of Health and Human Services, we can provide no assurance that definitive agreements will ultimately be finalized. We therefore can provide no assurance that final amounts paid in settlement or otherwise, or associated costs, or the income tax deductibility of such payments, will not differ materially from our established reserve and assumptions related to income tax deductibility. Please see Item 3-Legal Proceedings in our Form 10-K for the year ended December 31, 2019 for additional disclosure in connection with this matter.

Provision for Asset Impairment – Foundations Recovery Network
Our financial results for twelve-month period ended December 31, 2019, include an aggregate pre-tax provision for asset impairment of $97.6 million recorded in connection with Foundations Recovery Network, L.L.C. ("Foundations"), which was acquired by us in 2015. This pre-tax provision for asset impairment includes: (i) a $74.9 million impairment provision to write-off the carrying value of the Foundations’ tradename intangible asset, and; (ii) a $22.7 million impairment provision to reduce the carrying value of real property assets of certain Foundations’ facilities.

Our financial results for the three and twelve-month periods ended December 31, 2018, include a pre-tax provision for asset impairment of $49.3 million to reduce the carrying value of a tradename intangible asset to approximately $75 million from approximately $124 million as originally recorded in connection with our acquisition of Foundations.

These provision for asset impairments, which are included in other operating expenses in our consolidated statements of income for the all applicable periods, were recorded after evaluation of the estimated fair value of the Foundations’ tradename as well as certain related real property assets. The provisions for asset impairments were impacted by the following: (i) decisions made by management during 2019 to cancel the opening of future planned de novo facilities; (ii) reductions in projected future patient volumes, revenues and cash flows based upon the operating trends and financial results experienced by existing facilities that significantly lagged expectations, and; (iii) competitive pressures experienced in certain markets that were deemed to be permanent.

2020 Operating Results Forecast:
Reflected below is our 2020 guidance range for consolidated net revenues, earnings before interest, taxes, depreciation & amortization, and the impacts of other income/expense and net income attributable to noncontrolling interests ("Adjusted EBITDA net of NCI"), adjusted net income attributable to UHS per diluted share ("Adjusted EPS-diluted") and capital expenditures.

Adjusted EPS-diluted and Adjusted EBITDA net of NCI, are non-GAAP financial measures and should be examined in connection with net income determined in accordance with GAAP as presented in the consolidated financial statements and notes thereto in this report or in our filings with the Securities and Exchange Commission including our Report on Form 10-K for the year ended December 31, 2019. Please see the Supplemental Non-GAAP Disclosures – 2020 Operating Results Forecast schedule as included herein for additional information and a reconciliation to the financial forecasts as computed in accordance with GAAP.

Our 2020 guidance contains a number of assumptions including, but not limited to, the following:

The 2020 forecasted amounts exclude the impact of future items, if applicable, that are nonrecurring or non-operational in nature including items such as changes in the DOJ Reserve (including the income tax deductibility assumptions) established in connection with the agreement in principle with the Department of Justice-Civil Division (see below for additional disclosure), pre-tax unrealized gains/losses resulting from increases/decreases in the market value of shares of certain marketable securities held for investment and classified as available for sale, our adoption of ASU 2016-09, and other potential material items including, but not limited to, reserves for various matters including settlements, legal judgments and lawsuits, potential impacts of non-ordinary course acquisitions, divestitures, joint ventures or other strategic transactions, costs related to extinguishment of debt, gains/losses on sales of assets and businesses, impairment of long-lived and intangible assets, other amounts that may be reflected in the current financial statements that relate to prior periods, and the impact of share repurchases that differ from included assumptions. It is also subject to certain conditions including those as set forth below in General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures.
Our net revenues are estimated to be approximately $11.960 billion to $12.116 billion representing an increase of approximately 5.1% to 6.5% over our 2019 net revenues of approximately $11.378 billion.
Our Adjusted EBITDA net of NCI is estimated to be approximately $1.823 billion to $1.902 billion representing an increase of approximately 1.1% to 5.5% over our 2019 Adjusted EBITDA net of NCI of $1.802 billion.
The Adjusted EPS-diluted guidance range of $10.30 per diluted share to $11.00 per diluted share represents an increase of approximately 3.1% to 10.1% over our adjusted net income attributable to UHS of $9.99 per diluted share for the year ended December 31, 2019, as calculated on the attached Supplemental Schedule.
Conference call information:
We will hold a conference call for investors and analysts at 9:00 a.m. eastern time on February 27, 2020. The dial-in number is 1-877-648-7971.

A live broadcast of the conference call will be available on our website at www.uhsinc.com. Also, a replay of the call will be available following the conclusion of the live call and will be available for one full year.

Adoption of ASU 2016-02, "Leases (Topic 842): Amendments to the FASB Accounting Standards Codification":
Effective January 1, 2019, we adopted ASU 2016-02 which requires companies to, among other things, recognize lease assets and lease liabilities on the balance sheet. Our consolidated balance sheet as of December 31, 2019 includes right of use assets-operating leases and operating lease liabilities (current and noncurrent) recorded in connection with our adoption of ASU 2016-02. Prior period financial statements were not adjusted for the effects of this new standard.

General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures:
One of the nation’s largest and most respected providers of hospital and healthcare services, Universal Health Services, Inc. has built an impressive record of achievement and performance. Growing steadily since our inception into an esteemed Fortune 500 corporation, our annual revenues were $11.378 billion during 2019. In 2020, UHS was again recognized as one of the World’s Most Admired Companies by Fortune; in 2019 ranked #293 on the Fortune 500; and in 2017, listed #275 in Forbes inaugural ranking of America’s Top 500 Public Companies.

Our operating philosophy is as effective today as it was 40 years ago, enabling us to provide compassionate care to our patients and their loved ones. Our strategy includes building or acquiring high quality hospitals in rapidly growing markets, investing in the people and equipment needed to allow each facility to thrive, and becoming the leading healthcare provider in each community we serve.

Headquartered in King of Prussia, PA, UHS has more than 90,000 employees and through its subsidiaries operates 26 acute care hospitals, 328 behavioral health facilities, 42 outpatient facilities and ambulatory care access points, an insurance offering, a physician network and various related services located in 37 U.S. states, Washington, D.C., Puerto Rico and the United Kingdom. It acts as the advisor to Universal Health Realty Income Trust, a real estate investment trust (NYSE:UHT). For additional information on the Company, visit our web site: View Source

On February 26, 2020 Universal Health Realty Income Trust (NYSE: UHT) reported that for the three-month period ended December 31, 2019, reported net income was $5.8 million, or $.42 per diluted share, as compared to $4.4 million, or $.32 per diluted share, during the fourth quarter of 2018 (Press release, Universal Health Services, FEB 26, 2020, View Source [SID1234554827]).

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As calculated on the attached Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule"), our funds from operations ("FFO"), were $10.7 million, or $.78 per diluted share, during the fourth quarter of 2019, as compared to $10.8 million, or $.79 per diluted share, during the fourth quarter of 2018.

As reflected on the Supplemental Schedule, our financial results for the three-month period ended December 31, 2019 include a gain of $1.7 million, or $.12 per diluted share, related to the sale of the Kings Crossing II medical office building, as discussed below. After adjusting the reported results for the three-month period ended December 31, 2019 for the $1.7 million gain, our adjusted net income was $4.1 million, or $.30 per diluted share, during the fourth quarter of 2019, as compared to $4.4 million, or $.32 per diluted share, during the fourth quarter of 2018.

The decrease in our adjusted net income and FFO during the fourth quarter of 2019, as compared to the fourth quarter of 2018, was primarily due to the previously disclosed vacancies that occurred as of June 1, 2019 and September 30, 2019, at two hospital facilities located in Corpus Christi, Texas, and Evansville, Indiana, respectively. These two properties generated a combined net operating loss of $244,000 during the fourth quarter of 2019, as compared to generating combined net operating income of $361,000 during the fourth quarter of 2018. See below for additional disclosure regarding these properties.

Consolidated Results of Operations – Twelve-Month Periods Ended December 31, 2019 and 2018:

For the twelve-month period ended December 31, 2019, our reported net income was $19.0 million, or $1.38 per diluted share, as compared to $24.2 million, or $1.76 per diluted share, during the twelve-month period of 2018.

As calculated on the Supplemental Schedule, our FFO were $44.0 million, or $3.20 per diluted share, during the twelve-month period of 2019, as compared to $45.0 million, or $3.28 per diluted share, during the twelve-month period of 2018.

As reflected on the Supplemental Schedule, our financial results for the twelve-month period ended December 31, 2019 included a combined gain of $2.0 million, or $.14 per diluted share, related to the sale of the Kings Crossing II medical office building and the sale of a parcel of land located at one of our buildings.

Our financial results for the twelve-month period ended December 31, 2018 included $4.5 million, or $.33 per diluted share, of hurricane insurance recoveries in excess of damaged property write-downs received in connection with damage sustained from Hurricane Harvey which occurred in August, 2017.

Excluding the impact of these items from each respective twelve-month period, and as calculated on the Supplemental Schedule, our adjusted net income was $17.0 million, or $1.24 per diluted share, during the twelve-month period ended December 31, 2019, as compared to $19.7 million, or $1.43 per diluted share, during the twelve-month period ended December 31, 2018.

Our net income, adjusted net income and FFO for the twelve months ended December 31, 2018 included a net favorable impact of approximately $1.3 million, or $.10 per diluted share, related to the favorable impact from a lease termination agreement entered into during the second quarter of 2018 ($1.7 million, or $.12 per diluted share), partially offset by the unfavorable impact of the non-recurring repairs and remediation expenses incurred at one of our medical office buildings ($400,000, or $.02 per diluted share). In addition, our net income, adjusted net income and FFO during the twelve months ended December 31, 2018 included the favorable impact of approximately $1.2 million, or $.08 per diluted share, resulting from business interruption insurance recovery proceeds recorded during the twelve-month period ended December 31, 2018. Included in this amount, which covered the period of late August, 2017 through June 30, 2018, was approximately $500,000, or $.04 per diluted share, related to the period of August, 2017 through December 31, 2017.

Dividend Information:

The fourth quarter dividend of $.685 per share, or $9.4 million in the aggregate, was declared on December 4, 2019 and paid on December 31, 2019.

Capital Resources Information:

At December 31, 2019, we had $213.0 million of borrowings outstanding pursuant to the terms of our $300 million credit agreement and $87.0 million of available borrowing capacity. The credit agreement has a scheduled maturity date of March, 2022, however, we have the option to extend the maturity date for up to two additional six-month periods.

Acquisition and Divestiture During the Fourth Quarter of 2019:

In November, 2019, we acquired the Bellin Health Family Medicine Center located in Escanaba, Michigan for a purchase price of approximately $5.1 million. This building, which consists of approximately 18,600 rentable square feet, is 100% leased under the terms of a triple net lease with a remaining initial lease term of approximately eight years, with four, five-year renewal options.

In December, 2019, we sold the Kings Crossing II medical office building, located in Kingwood Texas for a sale price of approximately $2.5 million, net of closing costs. This divestiture resulted in a $1.7 million gain which is included in our financial results for the three and twelve months ended December 31, 2019.

Lease Expirations/Vacancies of Two Hospital Facilities:

As disclosed in our Form 10-K for the year ended December 31, 2018, and our Forms 10-Q for each of the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019, the tenants in two of our hospital facilities had provided notice to us that they did not intend to renew the leases upon the scheduled expiration of the respective facilities. The combined revenues generated from the leases on these two hospital facilities comprised approximately 2% of our consolidated revenues during each of the years ended December 31, 2018 and 2017.

The leases on these two hospital facilities, located in Evansville, Indiana, and Corpus Christi, Texas, expired on May 31, 2019 and June 1, 2019, respectively. The Evansville, Indiana hospital tenant entered into a short-term lease with us (which commenced on June 1, 2019 and expired on September 30, 2019), at a substantially increased lease rate as compared to the original lease rate. The lease revenue generated from this facility amounted to $1.4 million during the twelve-month period ended December 31, 2019, as compared to $714,000 during the twelve-month period ended December 31, 2018 pursuant to the terms of the original lease. The tenant that occupied the hospital in Evansville, Indiana, vacated the property on September 30, 2019 and the tenant that occupied the hospital in Corpus Christi, Texas, vacated the property on June 1, 2019.

We are marketing each property for lease to new tenants. However, should these properties remain owned and vacant for an extended period of time, or should we experience decreased lease rates on future leases, as compared to prior/expired lease rates, or incur substantial renovation costs to make the properties suitable for other operators/tenants, our future results of operations could be materially unfavorably impacted.

New Construction Projects:

Behavioral Health Hospital – Clive, Iowa

In late July, 2019, a wholly-owned subsidiary of ours entered into an agreement to build and lease a newly constructed 108-bed behavioral health care hospital located in Clive, Iowa. The lease on this facility, which is triple net and has an initial term of 20 years with five, 10-year renewal options, was executed with Clive Behavioral Health, LLC, a joint venture between Universal Health Services, Inc. ("UHS") and Catholic Health Initiatives-Iowa, Corp. (d/b/a Mercy One Des Moines Medical Center).

Construction of this hospital, for which we have engaged a wholly-owned subsidiary of UHS to act as project manager, is expected to be completed in late 2020. The hospital lease will commence upon issuance of the certificate of occupancy. The approximate cost of the project is estimated at $37.5 million and the initial annual rent is estimated to be approximately $2.7 million.

Medical Office Building – Denison, Texas

In September, 2019, we entered into an agreement whereby we will own a 95% ownership interest in Grayson Properties II LP, which will develop, construct, own and operate the Texoma Medical Plaza II, a 75,000 rentable square feet medical office building ("MOB") located in Denison, Texas. This MOB, which is scheduled to be completed in late 2020, will be located on the campus of Texoma Medical Center, a hospital that is owned and operated by a wholly-owned subsidiary of UHS. A 10-year master flex lease has been executed with the wholly-owned subsidiary of UHS for approximately 50% of the rentable square feet of the MOB. The master flex lease commitment is subject to reduction upon the execution of third-party leases on up to the initial 50% of the rentable square footage of the property. The master flex lease provides for a commencement date effective with the completion of the building and issuance of a certificate of occupancy. We have committed to invest up to $17.9 million in equity or member loans in the development and construction of this MOB, which may be reduced if a third-party construction loan is obtained on the property.

Adoption of ASU 2016-02, "Leases (Topic 842): Amendments to the FASB Accounting Standards Codification":

Effective January 1, 2019, we adopted ASU 2016-02 which requires lessees to, among other things, recognize right-of-use assets and lease liabilities on the balance sheet. As a result of our adoption of ASU 2016-02, in connection with ground leases where we are the lessee, our consolidated balance sheet as of December 31, 2019 includes $8.9 million of right-of-use land assets and ground lease liabilities. Prior period financial statement amounts were not adjusted for the effects of this new standard.

General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures:

Universal Health Realty Income Trust, a real estate investment trust, invests in healthcare and human service related facilities including acute care hospitals, behavioral health care hospitals, specialty hospitals, medical/office buildings, free-standing emergency departments and childcare centers. We have investments in seventy-one properties located in twenty states, including two that are currently under construction.

This press release contains forward-looking statements based on current management expectations. Numerous factors, including those disclosed herein, those related to healthcare and healthcare real estate industry trends and those detailed in our filings with the Securities and Exchange Commission (as set forth in Item 1A – Risk Factors and in Item 7-Forward-Looking Statements in our Form 10-K for the year ended December 31, 2019), may cause the results to differ materially from those anticipated in the forward-looking statements. Many of the factors that will determine our future results are beyond our capability to control or predict. These statements are subject to risks and uncertainties and therefore actual results may differ materially. 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.

We believe that adjusted net income and adjusted net income per diluted share (as reflected on the attached Supplemental Schedules), which are non-GAAP financial measures ("GAAP" is Generally Accepted Accounting Principles in the United States of America), are helpful to our investors as measures of our operating performance. In addition, we believe that, when applicable, comparing and discussing our financial results based on these measures, as calculated, is helpful to our investors since it neutralizes the effect in each year of material items that are non-recurring or non-operational in nature including items such as, but not limited to, gains on transactions and hurricane proceeds in excess of damaged property write-downs.

Funds from operations ("FFO") is a widely recognized measure of performance for Real Estate Investment Trusts ("REITs"). We believe that FFO and FFO per diluted share, which are non-GAAP financial measures, are helpful to our investors as measures of our operating performance. We compute FFO, as reflected on the attached Supplemental Schedules, 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. FFO adjusts for the effects of gains, such as gains on transactions and hurricane recovery proceeds in excess of damaged property write-downs during the periods presented. We adjusted for hurricane insurance recovery proceeds in excess of damaged property write-downs for the twelve months of 2018 since we believe that this gain is similar in nature and has the same characteristics as an adjustment for gains/losses resulting from the sale of depreciable property, which are required to be excluded from FFO under NAREIT’s definition. To the extent a REIT recognizes a gain or loss with respect to the sale of incidental assets, such as the sale of land peripheral to operating properties, the REIT has the option to exclude or include such gains and losses in the calculation of FFO. We have opted to exclude gains and losses from sales of incidental assets in our calculation of FFO. 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) an alternative to cash flow from operating activities determined in accordance with GAAP; (iii) a measure of our liquidity, or; (iv) 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 reflected on the Supplemental Schedules included below.

To obtain a complete understanding of our financial performance these measures should be examined in connection with net income, determined in accordance with GAAP, as presented in the condensed consolidated financial statements and notes thereto in this report or in our other filings with the Securities and Exchange Commission including our Report on Form 10-K for the year ended December 31, 2019. Since the items included or excluded from these measures are significant components in understanding and assessing financial performance under GAAP, these measures should not be considered to be alternatives to net income as a measure of our operating performance or profitability. Since these measures, as presented, are not determined in accordance with GAAP and are thus susceptible to varying calculations, they may not be comparable to other similarly titled measures of other companies. Investors are encouraged to use GAAP measures when evaluating our financial performance.

On February 26, 2020 Scholar Rock (NASDAQ: SRRK), a clinical-stage biopharmaceutical company focused on the treatment of serious diseases in which protein growth factors play a fundamental role, reported that management will present at the Cowen 40th Annual Health Care Conference on Wednesday, March 4th, 2020 at 10:00 am ET (Press release, Scholar Rock, FEB 26, 2020, View Source [SID1234554826]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

A live webcast of the presentations may be accessed by visiting the Investors & Media section of the Scholar Rock website at View Source An archived replay of the webcasts will be available on the Company’s website for approximately 90 days following the presentation.

On February 26, 2020 Exelixis, Inc. (Nasdaq: EXEL) reported that members of Exelixis’ management team will provide a corporate overview at the following investor conferences in March (Press release, Exelixis, FEB 26, 2020, View Source [SID1234554825]):

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

Cowen & Co. 40th Annual Health Care Conference: Exelixis is scheduled to present at 10:00 AM EST / 7:00 AM PST on Tuesday, March 3, 2020 in Boston.
Barclays Global Healthcare Conference: Exelixis is scheduled to present at 9:30 AM EDT / 6:30 AM PDT on Tuesday, March 10, 2020 in Miami Beach.
Oppenheimer & Co. 30th Annual Healthcare Conference: Exelixis is scheduled to present at 10:55 AM EDT / 7:55 AM PDT on Tuesday, March 17, 2020 in New York.
To access the webcast links, log onto www.exelixis.com and proceed to the News & Events / Event Calendar page under the Investors & Media heading. Please connect to the company’s website at least 15 minutes prior to the presentation to ensure adequate time for any software download that may be required to listen to the webcasts. Replays will also be available at the same location for 14 days.

On February 26, 2020 NanoString Technologies, Inc. (NASDAQ:NSTG), a leading provider of life science tools for translational research, reported financial results for the fourth quarter and year ended December 31, 2019 (Press release, NanoString Technologies, FEB 26, 2020, View Source [SID1234554824]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

Fourth Quarter Financial Highlights

Product and service revenue of $33.6 million, 42% year-over-year growth. Pro forma growth1 was 48% and reflects the impact of the Veracyte transaction on revenue recorded for Prosigna IVD kits
Instrument revenue of $13.8 million, including $7.8 million of GeoMx Digital Spatial Profiler (DSP) instrument revenue, 136% year-over-year growth
Life Science consumable revenue of $14.9 million, 14% year-over-year growth
Total consumable revenue of $16.9 million, including $2.0 million of Prosigna, 11% year-over-year growth. Pro forma growth was 16%
Service revenue of $3.0 million, 18% year-over-year growth
Full Year 2019 Financial Highlights

Product and service revenue of $103.7 million, 24% year-over-year growth. Pro forma growth was 27%
Instrument revenue of $31.1 million, including $10.0 million of GeoMx DSP instrument revenue, 45% year-over-year growth
Life Science consumable revenue of $51.6 million, 18% year-over-year growth
Total consumable revenue of $61.0 million, including $9.4 million of Prosigna IVD kits, 14% year-over-year growth. Pro forma growth was 18%
Service revenue of $11.6 million, 32% year-over-year growth
"Our record product and service revenue in 2019 was driven by the successful launch of GeoMx DSP and the continued momentum of our core nCounter business," said Brad Gray, president and CEO of NanoString. "Customer interest in GeoMx has exceeded our expectations and we expect to see an acceleration in systems orders when we begin selling GeoMx into the basic discovery market in mid-2020."

Recent Business Highlights

GeoMx DSP Platform

Generated approximately 60 GeoMx DSP instrument orders in 2019, bringing total cumulative orders received to more than 90 instruments
Shipped a total of 44 GeoMx instruments in the second half of 2019, and recorded the first consumable orders
Accumulated 12 peer-reviewed publications of studies utilizing GeoMx DSP technology, including two recent immune-oncology publications in the journal Nature
Began offering GeoMx Cancer Transcriptome Atlas service using read-out by Next Generation Sequencing (NGS) through GeoMx Technology Access Program
Announced the development of NGS-based capabilities that are expected to enable discovery research customers to use GeoMx DSP to analyze the whole transcriptome in selected regions of interest
nCounter Platform

Grew installed base to approximately 855 nCounter Analysis Systems at December 31, 2019, representing 17% growth over the prior year
Commercialized five new gene expression panels during 2019, including CAR-T Characterization, Human Organ Transplant, Metabolic Pathways and Fibrosis panels
Surpassed 3,200 cumulative peer-reviewed publications utilizing nCounter technology
Financial

Concluded the year with approximately $157 million in cash, cash equivalents and short-term investments
Completed transaction with Veracyte, Inc. to sell assets related to Prosigna and exclusively license certain nCounter-based diagnostic assets and rights, for initial consideration totaling $50 million in cash and Veracyte stock
Reduced operating costs through the Veracyte transaction, resulting in an approximate $12 million net improvement in the company’s operating loss on an annualized, pro forma basis
The Veracyte transaction resulted in the recording of transaction-related gains and charges in the fourth quarter of 2019. These gains and charges, and the impact of other items such as collaboration revenue and stock-based compensation, may make it more challenging to compare the company’s operating results across periods. As a result, the company has elected to present selected non-GAAP, or adjusted, financial measures, including Adjusted EBITDA. A reconciliation of adjusted financial measures to the nearest comparable GAAP financial measure can be found in the notes and table at the end of this press release.

The company, based on its plans and initiatives for 2020, expects to record results approximately as follows.

Total product and service revenue of $124 to $131 million, representing growth of 20% to 26% as compared to 2019 and pro forma growth of 26% to 34% compared to 2019
GeoMx DSP revenue of $30 to $35 million, with $25 to $30 million derived from instrument sales and approximately $5 million from sales of consumables
Adjusted gross margin on product and service revenue of 54% to 55%
Adjusted research and development expenses of $46 to $48 million, representing a reduction of 24% to 27% as compared to 2019
Adjusted selling, general and administrative expenses of $76 to $78 million, representing a reduction of 6% to 8% as compared to 2019
Adjusted EBITDA loss of $46 to $51 million, an improvement of 37% to 43% as compared to 2019
Supplemental Information

Where expected future results are presented on an adjusted basis, change percentages are compared to the adjusted result from the prior year. As a supplement to the table above, the company has posted to the investor relations section of the company’s website, at www.nanostring.com, adjusted financial measures as compared to nearest comparable GAAP financial measure for each quarter of and the full year 2019.

Conference Call

Management will host a conference call today beginning at 1:30 pm PT / 4:30 pm ET to discuss these results and answer questions. Individuals interested in listening to the conference call may do so by dialing (866) 211-0364 for domestic callers, or (647) 689-6861 for international callers. Please reference Conference ID 3797821. To listen to a live webcast, please visit the investor relations section of the company’s website at www.nanostring.com. A replay of the call will be available beginning February 26, 2020 at 7:30pm ET through midnight ET on March 5, 2020. To access the replay, dial (800) 585-8367 or (416) 621-4642 and reference Conference ID: 3797821. The webcast will also be available on the company’s website for one year following the completion of the call.

Non-GAAP, or Adjusted, Financial Information

The company believes that the presentation of non-GAAP, or adjusted, financial information provides important supplemental information to management and investors regarding financial and business trends relating to the company’s financial condition and results of operations. Reconciliation of adjusted financial measures to the most directly comparable financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. A reconciliation of adjusted guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding certain expenses that may be incurred in the future. For further information regarding why the company believes that these adjusted measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to "Notes Regarding Non-GAAP Financial Information" at the end of this press release.

1 As used in this press release, "pro forma growth" percentages are calculated by comparing the applicable period-over-period financial results to reflect the impact of the Veracyte transaction as if such transaction had occurred at the beginning of each respective period. Further disclosure regarding the terms and pro forma impact of the Veracyte transaction can be obtained in the company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 4, 2019.