Universal Health Realty Income Trust (NYSE: UHT) announced today that for the quarter ended December 31, 2007, net income was $4.0 million, or $.33 per diluted share, as compared to $7.1 million, or $.60 per diluted share, during the same quarter in the prior year.
Favorably impacting net income during the quarter ended December 31, 2006 was a gain of $2.7 million, or $.23 per diluted share, related to the recovery of replacement real estate assets in connection with the July, 2006, Chalmette Medical Center asset exchange and substitution agreement.
Funds from operations were $7.0 million, or $.59 per diluted share, during the three months ended December 31, 2007 as compared to $7.1 million, or $.60 per diluted share, during the comparable quarter of the prior year. The fourth quarter dividend of $.58 per share was paid on December 31, 2007.
For the year ended December 31, 2007, net income was $22.2 million, or $1.87 per diluted share, as compared to $34.7 million, or $2.92 per diluted share, during the prior year. Income from continuing operations was $19.7 million, or $1.66 per diluted share, during the year ended December 31, 2007 as compared to $34.4 million, or $2.90 per diluted share, during the prior year. Included in net income during the year ended December 31, 2007 was a combined gain of $4.3 million, or $.36 per diluted share, consisting of: (i) a gain of $1.7 million, or $.15 per diluted share, related to the recovery of replacement real estate assets in connection with the Chalmette asset exchange and substitution agreement; (ii) a gain of $2.3 million, or $.19 per diluted share, realized on the sale of a medical office building (included in income from discontinued operations), and; (iii) a gain of $264,000, or $.02 per diluted share, resulting from the sale of real property by an unconsolidated limited liability company ("LLC"). Included in net income during the year ended December 31, 2006 was a combined gain of $15.9 million, or $1.34 per diluted share, consisting of: (i) a gain of $14.0 million, or $1.18 per diluted share, related to the recovery of replacement real estate assets in connection with the Chalmette asset exchange and substitution agreement, and; (ii) the recognition of a previously deferred gain of $1.9 million, or $.16 per diluted share, resulting from the sale our interest in an unconsolidated LLC.
FFO were $29.1 million, or $2.45 per diluted share, during the year ended December 31, 2007 as compared to $28.9 million, or $2.44 per diluted share, during the prior year.
During the fourth quarter of 2007, three newly constructed medical office buildings, which are owned by LLCs in which we hold 95%, non-controlling ownership interests, were completed and opened as follows: (i) Canyon Springs Medical Plaza located in Gilbert, Arizona; (ii) Phoenix Children's East Valley Care Center located in Gilbert, Arizona, and; (iii) Centennial Hills Medical Office Building I located in Las Vegas, Nevada. On a combined basis, the financial results of these properties, including interest expense on third- party debt that is non-recourse to us, unfavorably impacted our net income by $231,000, or $.02 per diluted share, during the three and twelve month periods ended December 31, 2007. On a combined basis, the financial results of these properties unfavorably impacted our FFO by $102,000, or $.01 per diluted share, during the three and twelve month periods ended December 31, 2007. Also, during the fourth quarter of 2007, we purchased a 95% non-controlling ownership interest in a LLC that owns the Cobre Valley Medical Plaza located in Globe, Arizona.
In addition, we hold 95%, non-controlling ownership interests in LLCs that own the following medical office buildings that are currently under construction and scheduled to be completed and opened at various times during 2008: (i) Palmdale Medical Plaza located in Palmdale, California; (ii) Deer Valley Medical Office Building III located in Phoenix, Arizona, and; (iii) Summerlin Medical Office Building III located in Las Vegas, Nevada.
At December 31, 2007, our shareholders' equity was $160.3 million and our liabilities for borrowed funds were $36.6 million, including mortgage debt of consolidated entities, which is non-recourse to us, totaling $19.8 million.
During the fourth quarter of 2006, as a result of the expiration of the master lease arrangements between subsidiaries of Universal Health Services, Inc., and two LLCs in which we own non-controlling ownership interests of 95% and 99%, we began recording the financial results of these LLCs on an unconsolidated basis. Prior to the fourth quarter of 2006, these LLCs were included in our financial results on a consolidated basis in accordance with Financial Interpretation No. 46R - Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, ("FIN 46R"). Accordingly, commencing in the fourth quarter of 2006, the revenues and expenses of these LLCs were no longer included in our consolidated revenues and expenses, but instead, the net income generated from each of these LLCs is included in our consolidated statements of income as "Equity in income of unconsolidated LLCs". For comparative purposes, during the period that these LLCs were recorded on a consolidated basis during 2006, these entities generated, on a combined basis, approximately $3.8 million of revenue, $736,000 of depreciation and amortization expense, $1.6 million of other operating expenses and $715,000 of interest expense. There was no impact on our net income or income from continuing operations as a result of recording these LLCs on an unconsolidated basis.
Universal Health Realty Income Trust, a real estate investment trust, invests in healthcare and human service related facilities including acute care hospitals, behavioral healthcare facilities, rehabilitation hospitals, sub-acute care facilities, surgery centers, childcare centers and medical office buildings. We have forty-six real estate investments in fourteen states.
Funds from operations, is a widely recognized measure of REIT performance. Although FFO is a non-GAAP financial measure, we believe that information regarding FFO is helpful to shareholders and potential investors. We compute FFO 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. To facilitate a clear understanding of our historical operating results, FFO should be examined in conjunction with net income determined in accordance with GAAP. 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) as an alternative to cash flow from operating activities determined in accordance with GAAP; (iii) as a measure of our liquidity; (iv) nor is FFO 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 shown below. -- Universal Health Realty Income Trust
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