Universal Health Realty me Trust(UHT) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 2025 and 2024, showing a decrease in net income from $5.3 million to $4.8 million and diluted earnings per share from $0.38 to $0.34 Condensed Consolidated Statements of Income (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Total Revenues | $24,548 | $25,141 | | Total Expenses | $15,514 | $15,678 | | Net Income | $4,777 | $5,300 | | Diluted Earnings Per Share | $0.34 | $0.38 | Condensed Consolidated Balance Sheets (Mar 31, 2025 vs Dec 31, 2024) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Assets | $573,482 | $580,862 | | Total Liabilities | $401,316 | $401,321 | | Total Equity | $172,166 | $179,541 | Condensed Consolidated Statements of Cash Flows (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $11,611 | $11,738 | | Net Cash used in Investing Activities | $(1,897) | $(8,945) | | Net Cash used in Financing Activities | $(9,837) | $(3,308) | Relationship with UHS and Related Party Transactions This note details the Trust's significant relationship with Universal Health Services, Inc. (UHS), including a subsidiary acting as Advisor, UHS-related tenants contributing 40% of Q1 2025 revenues, and UHS owning 5.7% of the Trust's shares - UHS-related tenants generated approximately 40% of the Trust's consolidated revenues in Q1 2025, down slightly from 41% in Q1 2024[33][50] - A wholly-owned subsidiary of UHS serves as the Advisor under an annually renewable agreement, with the advisory fee approximately $1.4 million for Q1 2025, based on 0.70% of average invested real estate assets[47][48] - UHS holds options to purchase several leased hospital facilities at their appraised fair market value upon lease term expiration or other specified events[36] - As of March 31, 2025, UHS owned 5.7% of the Trust's outstanding shares of beneficial interest[49] Summarized Financial Information of Equity Affiliates This note summarizes the Trust's equity method investments in four unconsolidated LLCs/LPs, which own medical office buildings, with the Trust's share of net income increasing to $412,000 in Q1 2025 - The Trust has investments in four unconsolidated LLCs/LPs, owning non-controlling interests of 33% to 95%[55][58] Share of Net Income from Equity Affiliates | Period | Share of Net Income (in thousands) | | :--- | :--- | | Q1 2025 | $412 | | Q1 2024 | $384 | - The combined mortgage notes payable by these unconsolidated LLCs, which are non-recourse to the Trust, totaled $14.9 million as of March 31, 2025[61] Debt and Financial Instruments This note details the Trust's $349.5 million in Credit Agreement borrowings and $19.0 million in non-recourse mortgage notes as of March 31, 2025, along with $165 million in interest rate swaps to manage variable-rate debt risk - In September 2024, the Credit Agreement was amended to increase borrowing capacity to $425 million and extend the maturity date to September 30, 2028[74] - As of March 31, 2025, outstanding borrowings under the Credit Agreement were $349.5 million, leaving $75.5 million of available capacity[78] - The Trust has three active interest rate swap agreements with a total notional amount of $165 million to hedge against variable interest rate exposure[84][85][86] - Total non-recourse mortgages notes payable were $19.0 million (net) as of March 31, 2025[81] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial results, highlighting a decrease in net income to $4.8 million and FFO to $11.9 million due to lower revenues and increased interest expense, while affirming sufficient liquidity for the next twelve months - Net income decreased by $523,000 year-over-year, attributed to a $593,000 decrease in revenues and a $122,000 increase in net interest expense[109][113] Funds From Operations (FFO) Comparison | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | FFO (in thousands) | $11,930 | $12,413 | | FFO per Diluted Share | $0.86 | $0.90 | - Net cash provided by operating activities was $11.6 million, which was sufficient to cover the $10.2 million in dividends paid during Q1 2025[115][125] - The company believes its operating cash flows, available credit ($75.5 million), and access to capital markets provide sufficient liquidity for the next twelve months[130][128] Results of Operations Q1 2025 net income decreased to $4.8 million from $5.3 million in Q1 2024, primarily due to a $0.6 million revenue drop from lower occupancy and a $122,000 increase in net interest expense, leading to a decline in FFO to $11.9 million Financial Performance Summary (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | Primary Reason | | :--- | :--- | :--- | :--- | :--- | | Net Income | $4.8M | $5.3M | -$0.5M | Lower revenue, higher interest expense | | Revenues | $24.5M | $25.1M | -$0.6M | Decreased occupancy at MOBs | | FFO | $11.9M | $12.4M | -$0.5M | Decrease in net income | - Interest expense increased by $122,000 YoY, mainly due to an $872,000 decrease in income from interest rate swaps, which was partially offset by a $615,000 decrease in interest on the Credit Agreement[114] Liquidity and Capital Resources The Trust maintained stable operating cash flow at $11.6 million in Q1 2025, covering $10.2 million in dividends, with significantly reduced investing activities and sufficient capital resources for the next year, including $75.5 million available on its credit facility - Net cash provided by operating activities was stable at $11.6 million in Q1 2025 compared to $11.7 million in Q1 2024[115][124] - Dividends paid in Q1 2025 totaled $10.2 million ($.735 per share), an increase from $10.0 million ($.725 per share) in Q1 2024[125][51] - Net cash used in investing activities was $1.9 million in Q1 2025, a sharp decrease from $8.9 million in Q1 2024, which included larger equity investments in LLCs and construction costs[115][116][117] - A shelf registration on Form S-3 for up to $100 million in securities became effective in April 2024, though no shares have been issued under it as of March 31, 2025[122][123] Quantitative and Qualitative Disclosures About Market Risk The Trust's primary market risk is interest rate fluctuations on its $349.5 million variable-rate debt, mitigated by $165 million in interest rate swaps, with a 1% rate change estimated to impact net income by $1.8 million annually - The primary market risk is interest rate changes on its $349.5 million of variable-rate debt outstanding as of March 31, 2025[152] - The Trust uses three active interest rate swap agreements on a total notional amount of $165 million to manage this risk, with the fair value of these swaps being a net asset of $4.2 million as of March 31, 2025[149][152] - A hypothetical 1% change in interest rates would impact net income by approximately $1.8 million, after accounting for the effect of the existing swaps[153] Controls and Procedures Management concluded that the Trust's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during Q1 2025 - The CEO and CFO concluded that the Trust's disclosure controls and procedures were effective as of the end of the period covered by this report[155] - There were no changes in internal control over financial reporting during the first quarter of 2025 that have materially affected, or are reasonably likely to materially affect, internal controls[156] PART II. OTHER INFORMATION Risk Factors There have been no material changes to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K - There have been no material changes in risk factors from those disclosed in the 2024 Annual Report on Form 10-K[158] Other Information No Board members or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025 - No Board members or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q1 2025[159] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - The filing includes CEO and CFO certifications as required by Rule 13a-14(a)/15d-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002[160] - Inline XBRL Instance Document and related taxonomy files are included as exhibits[160] Signatures The report was signed on May 8, 2025, by Alan B. Miller, Chairman of the Board, President and Chief Executive Officer, and Charles F. Boyle, Senior Vice President and Chief Financial Officer - The report was signed on May 8, 2025, by Alan B. Miller, Chairman of the Board, President and Chief Executive Officer, and Charles F. Boyle, Senior Vice President and Chief Financial Officer[162]