Universal Health Services, Inc.

Good day and thank you for standing by. Welcome to the Universal Health Services second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 on your telephone. I would now like to hand the conference over to Steve Filton, CFO. Please go ahead, sir.

Thank you, and good morning. Mark Miller is also joining us this morning, and we both welcome you to this review of Universal Health Services results for the second quarter, ended June 30, 2021. During the conference call, we will be using words such as believes, expects, anticipates, estimates, and similar words that represent forecasts, projections, and forward-looking statements. I recommend a careful reading of the section on risk factors, and forward-looking statements and risk factors in our Form 10-K for the year ended December 31, 2020, and our Form 10-Q for the quarter ended March 31, 2021. We'd like to highlight just a couple of developments in business trends before opening the call up to questions. As discussed in our press release last night, the company reported net income attributable to UHS per diluted share of $3.79 for the second quarter of 2021. After adjusting for the impact of the items reflected on the supplemental schedule as included with the press release, our adjusted net income attributable to UHS per diluted share was $3.76 for the quarter ended June 30, 2021. In last night's press release, we identified three specific items, including supplemental Kentucky Medicaid reimbursements, an increase to our self-insured professional and general liability reserves, and the receipt of insurance proceeds. On a combined basis, these items had a net favorable impact on after-tax earnings of approximately $30 million during the second quarter of 2021. Even if one chooses to ignore the favorable impact entirely, our earnings during the quarter still exceeded our internal forecast by a wide margin. For most of the second quarter, we experienced a continued decline in the number of COVID-19 patients being treated in our hospitals and a corresponding recovery in the number of non-COVID patients. As a result, most of our key volume metrics, including acute and behavioral patient days, emergency room visits, and surgical cases grew to levels approaching those that we were tracking before the pandemic began. This robust recovery in volumes exceeded the pace of our original forecast and drove the favorable operating results, even in the face of continuing labor pressures in both of our business segments. Our cash generated from operating activities was $119 million during the second quarter of 2021 as compared to $1.45 billion during the same period in 2020. The decline in cash provided by operating activities was driven by the previously announced early repayment of $695 million of Medicare accelerated payments which were received by us during 2020 and repaid to the government during the first quarter of 2021. We spent $482 million on capital expenditures during the first six months of 2021. At June 30, 2021, our ratio of debt to total capitalization declined to 35.7% as compared to 38.3% at June 30, 2020. As previously announced, we resumed our share repurchase program in the second quarter of 2021 after suspending it in April 2020 as the COVID volume surged for the first time. During the second quarter of 2021, we repurchased approximately 2.21 million shares at an aggregate cost of $350 million. And yesterday, our board of directors authorized a $1.0 billion increase to our stock repurchase program leaving $1.2 billion remaining authorization. We were extremely pleased with our second quarter 2021 operating results, which we noted were well ahead of our internal forecast. As a consequence, we also raised our full-year earnings guidance, including an approximately 6% to 8% increase in our full-year forecasted adjusted EBITDA. I would note that during the past four to six weeks, many of our hospitals have experienced significant surges in the number of COVID patients, and it is not evident that this surge has yet reached its peak. Given the uncertain impact of this most recent surge on non-COVID volumes and on labor shortages, we based our guidance for the second half of the year primarily on our original internal forecast. Mark and I would be pleased to answer your questions at this time.

As a reminder, if you'd like to ask a question, simply press star followed by the number one on your telephone keypad. Again, that is star one for any questions. Our first question will come from the line of Kevin Fishbeck with Bank of America.