SEC Filing - Universal Health Services Inc.

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Universal Health Services Inc--Form 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 1, 2007 (February 28, 2007)

UNIVERSAL HEALTH SERVICES, INC.

(Exact name of registrant as specified in its charter)

DELAWARE

1-10765

23-2077891

(State or other jurisdiction of

Incorporation or Organization)

(Commission File Number)

(I.R.S. Employer

Identification No.)

UNIVERSAL CORPORATE CENTER

367 SOUTH GULPH ROAD

KING OF PRUSSIA, PENNSYLVANIA 19406

(Address of principal executive office) (Zip Code)

Registrant’s telephone number, including area code (610) 768-3300

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02

Results of Operations and Financial Condition

On February 28, 2007, Universal Health Services, Inc. issued the press release attached hereto as Exhibit 99.1.

Item 9.01

Financial Statements and Exhibits

(d) Exhibits. 99.1 Universal Health Services, Inc., press release, dated February 28, 2007.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	Universal Health Services, Inc.

	By:	/s/ Alan B. Miller
	Name:	Alan B. Miller
	Title:	Chairman of the Board, President and Chief Executive Officer

	By:	/s/ Steve Filton
	Name:	Steve Filton
	Title:	Senior Vice President and Chief Financial Officer

Date: March 1, 2007

Exhibit Index


Exhibit No.		Exhibit
99.1		Universal Health Services, Inc., press release, dated February 28, 2007

Press Release

Exhibit 99.1

FOR IMMEDIATE RELEASE


CONTACT:	Steve Filton
	Chief Financial Officer	February 28, 2007
	610-768-3300

UNIVERSAL HEALTH SERVICES, INC. REPORTS

2006 FOURTH QUARTER AND FULL YEAR EARNINGS AND 2007 GUIDANCE

KING OF PRUSSIA, PA – Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income was $34.2 million, or $.63 per diluted share, during the fourth quarter of 2006 as compared to $12.3 million, or $.23 per diluted share, during the comparable prior year quarter. Reported net income was $259.5 million, or $4.56 per diluted share, during the twelve months ended December 31, 2006 as compared to $240.8 million, or $4.00 per diluted share, during 2005.

Reported income from continuing operations was $34.2 million, or $.63 per diluted share, during the fourth quarter of 2006 as compared to $9.0 million, or $.17 per diluted share, during the fourth quarter of 2005. Reported income from continuing operations was $259.6 million, or $4.57 per diluted share, during the twelve-month period ended December 31, 2006 as compared to $109.8 million, or $1.91 per diluted share, during 2005.

As indicated on the attached Schedules of Non-GAAP Supplemental Consolidated Statements of Income Information (“Supplemental Schedules”), our income from continuing operations and net income, for the three and/or twelve-month periods ended December 31, 2006 and 2005, include various items such as: (i) hurricane related expenses, net of minority interests and income taxes; (ii) hurricane related insurance recoveries, net of minority interests and income taxes; (iii) retroactive effect of supplemental reimbursements earned in certain states and contractual settlements, net of income taxes; (iv) a reserve recorded in connection with a lawsuit; (v) a charge incurred to record the aggregate present value of the future funding of a portion of a gift to The College of William & Mary (“William & Mary Funding”) on behalf of our Chairman of the Board of Directors, Chief Executive Officer and President; (vi) favorable income tax adjustment to reduce reserves due to the expiration of statute of limitations in a foreign jurisdiction, and; (vii) gains on divestitures, net of income taxes (included in net income for the three and twelve-month periods ended December 31, 2005).

After adjusting for the items discussed above applicable to each period presented, as indicated on the attached Supplemental Schedules, our adjusted net income during the three-month period ended December 31, 2006 was $32.4 million, or $.60 per diluted share, as compared to $27.2 million, or $.50 per diluted share, during the fourth quarter of

2005. Our adjusted net income during the twelve-month period ended December 31, 2006 was $157.3 million, or $2.79 per diluted share, as compared to $154.8 million, or $2.62 per diluted share, during the comparable prior year twelve-month period.

Our adjusted income from continuing operations during the three-month period ended December 31, 2006 was $32.4 million, or $.60 per diluted share, as compared to $24.8 million, or $.45 per diluted share, during the three-month period ended December 31, 2005. Our adjusted income from continuing operations during the twelve-month period ended December 31, 2006 was $157.5 million, or $2.80 per diluted share, as compared to $151.1 million, or $2.56 per diluted share, during the comparable prior year twelve-month period.

Net revenues increased 10% to $1.07 billion during the fourth quarter of 2006 as compared to $967 million during the fourth quarter of 2005. Net revenues increased 7% to $4.19 billion during the twelve months ended December 31, 2006 as compared to $3.94 billion during the prior year twelve-month period. Impacting our net revenues during 2006 was the loss of revenues generated at our acute care facilities in Louisiana which were damaged and closed since the third quarter of 2005 as a result of Hurricane Katrina. On a combined basis, these facilities generated net revenues of $166 million during the eight months of 2005 prior to closure. Also, on January 1^st of this year, we implemented a formal company-wide uninsured discount policy which has had the effect of lowering both net revenues and the provision for doubtful accounts by approximately $15 million and $61 million during the three and twelve-month periods ended December 31, 2006, respectively. The implementation of this uninsured discount policy did not have a significant impact on our 2006 net income.

Our consolidated operating margin, as calculated on the attached Supplemental Schedules, was 12.3% and 12.2% during the three-month periods ended December 31, 2006 and 2005, respectively. Our consolidated operating margin was 13.1% and 13.5% during the twelve-month periods ended December 31, 2006 and 2005, respectively.

At our acute care hospitals owned during both periods (“same facility basis”), inpatient admissions increased 2.4% and patient days increased 5.3% during the fourth quarter of 2006 as compared to the comparable 2005 quarter. The operating margin at our acute care hospitals owned during both periods remained unchanged at 12.1% during each of the fourth quarters of 2006 and 2005. On a same facility basis, inpatient admissions increased 1.7% and patient days increased 3.1% during the twelve-month period ended December 31, 2006 as compared to 2005. The operating margin at these acute care hospitals decreased to 13.4% during the twelve months ended December 31, 2006 as compared to 13.8% during the twelve months ended December 31, 2005. Since our acute care facilities located in Louisiana have been closed since the third quarter of 2005, the inpatient statistics for those facilities have been excluded from 2005.

On a same facility basis, inpatient admissions at our behavioral health facilities increased 3.7% and patient days increased 1.4% during the fourth quarter of 2006 as compared to the comparable 2005 quarter. The operating margin at these behavioral

health facilities increased to 23.5% during the fourth quarter of 2006 from 19.7% during the comparable quarter of the prior year. On a same facility basis, inpatient admissions at our behavioral health facilities increased 3.7% and patient days increased 1.7% during the twelve-month period ended December 31, 2006 as compared to 2005. The operating margin at these behavioral health facilities increased to 25.0% during the twelve months ended December 31, 2006 as compared to 22.8% during 2005.

Our provision for doubtful accounts as a percentage of net revenues was 8.3% and 9.0% during the three-month periods ended December 31, 2006 and 2005, respectively, and 8.3% and 9.4% during the twelve-month periods ended December 31, 2006 and 2005, respectively. Exclusive of the impact of the uninsured discount implemented at the beginning of this year, as a percentage of net revenues, the provision for doubtful accounts would have been 9.6% during each of the three and twelve-month periods ended December 31, 2006.

Effective July 1, 2006, the pharmacy services for our acute care facilities were brought in-house from an outsourced vendor and as a result of this change, during the three and twelve-month periods ended December 31, 2006, we experienced an increase in our supplies expense and salaries, wages and benefits expense and a decrease in our other operating expenses. The transition of our pharmacy services did not have a significant impact on our operating margin or net income during 2006.

During the fourth quarter of 2006, we used $80.8 million of cash flow in operating activities while during the fourth quarter of 2005 net cash provided by operating activities was $69.0 million. The $149.8 million unfavorable change resulted primarily from the payment of $168.1 million of income taxes during the fourth quarter of 2006 (as compared to $500,000 during the fourth quarter of 2005), approximately $95.0 million of which, as previously disclosed, was deferred pursuant to an Internal Revenue Service postponement granted to companies that owned businesses in the parishes of Louisiana that were most severely impacted by Hurricane Katrina. Also contributing to the unfavorable change in net cash provided by operating activities during the fourth quarter of 2006, as compared to the comparable quarter of the prior year, was an unfavorable change of $29.7 million in accounts receivable. The unfavorable change in accounts receivable related primarily to revenues earned during the fourth quarter of 2006 in connection with supplemental programs in which our acute care hospitals located in Texas participate. The majority of these revenues are scheduled to be paid to us prior to June 30, 2007.

During the fourth quarter of 2006, we spent $108.1 million on capital expenditures including additional costs related to the construction of a new 170-bed acute care hospital located in Las Vegas, Nevada, which is scheduled to be completed and opened during the fourth quarter of 2007, and a new 171-bed acute care hospital located in Palmdale, California, which is scheduled to be completed and opened during the fourth quarter of 2008. Also during the fourth quarter of 2006, we repurchased 2.34 million shares of our Class B Common Stock for an aggregate repurchase price of $130.0 million.

During 2007, based upon current trends and subject to the provisions set forth below, we estimate that we will achieve earnings per diluted share from continuing operations of approximately $3.00 to $3.05 on projected net revenues of $4.78 billion.

We will hold a conference call for investors and analysts at 9:00 a.m. Eastern Time on March 1, 2007. The dial-in number is 1-877-648-7971. A digital recording of the conference call will be available two hours after the completion of the conference call on March 1, 2007 and will continue through midnight on March 8, 2007. The recording can be accessed by calling 1-800-642-1687 and entering the conference ID number 7407164.

This call will also be available live over the internet at our web site at www.uhsinc.com. It will also be distributed over CCBN’s Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN’s individual investor center at http://www.companyboardroom.com or by visiting any of the investor sites in CCBN’s Individual Investor Network. Institutional investors can access the call via CCBN’s password-protected event management site, StreetEvents (www.streetevents.com).

Universal Health Services, Inc. is one of the nation’s largest hospital companies, operating acute care and behavioral health hospitals and ambulatory centers nationwide and in Puerto Rico. 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: http://www.uhsinc.com.

This press release contains forward-looking statements based on current management expectations. Numerous factors, including those disclosed herein, those related to healthcare 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 and Risk Factors in our Form 10-K for the year ended December 31, 2006), may cause 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 operating income, operating margin, adjusted income from continuing operations, adjusted income from continuing operations per diluted share, adjusted net income, adjusted net income per diluted share, adjusted operating income and adjusted operating margin, 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

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 items that are nonrecurring or non-operational in nature including items such as, but not limited to, gains on sales of assets and businesses, reserves for lawsuits, hurricane-related expenses and insurance recoveries, the William & Mary Funding, and other amounts reflected in the current or prior year financial statements that relate to prior periods. 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, 2006. 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.

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Universal Health Services, Inc.

Consolidated Statements of Income

(in thousands, except per share amounts)


	Three months ended December 31,					Twelve months ended December 31,
	2006			2005		2006			2005
Net revenues	$	1,065,881		$	967,175	$	4,191,300		$	3,935,480

Operating charges:
Salaries, wages and benefits		461,500			415,821		1,797,587			1,625,996
Other operating expenses		228,026			226,127		936,958			921,118
Supplies expense		156,431			120,212		556,702			489,999
Provision for doubtful accounts		88,940			87,438		349,030			368,058
Depreciation and amortization		43,334			39,242		163,694			155,478
Lease and rental expense		15,813			15,347		64,060			60,790
Hurricane related expenses, net		(640	)		36,133		13,792			165,028
Hurricane insurance recoveries		—			—		(13,792	)		(81,709	)

		993,404			940,320		3,868,031			3,704,758

Income before interest expense, hurricane insurance recoveries in excess of expenses, minority interests and income taxes		72,477			26,855		323,269			230,722

Interest expense, net		9,196			8,403		32,558			32,933
Hurricane insurance recoveries in excess of expenses		—			—		(167,999	)		—
Minority interests in earnings of consolidated entities		8,621			5,786		46,238			25,645

Income before income taxes		54,660			12,666		412,472			172,144
Provision for income taxes		20,458			3,624		152,878			62,301

Income from continuing operations		34,202			9,042		259,594			109,843

(Loss) income from discontinued operations, net of income tax (benefit)/expense (a)		(32	)		3,232		(136	)		131,002

Net income	$	34,170		$	12,274	$	259,458		$	240,845


Basic earnings (loss) per share: (b)
From continuing operations	$	0.63		$	0.17	$	4.76		$	1.98
From discontinued operations		—			0.06		—			2.35

Total basic earnings per share	$	0.63		$	0.23	$	4.76		$	4.33


Diluted earnings (loss) per share: (b)
From continuing operations	$	0.63		$	0.17	$	4.57		$	1.91
From discontinued operations		—			0.06		(0.01	)		2.09

Total diluted earnings per share	$	0.63		$	0.23	$	4.56		$	4.00

Universal Health Services, Inc.

Footnotes to Consolidated Statements of Income

(in thousands, except per share amounts)


	Three months ended December 31,						Twelve months ended December 31,
	2006			2005			2006			2005
(a) Calculation of income from discontinued operations, net of income tax:

(Loss) income from operations	$	(52	)	$	747		$	(217	)	$	3,355
Gains on divestitures		—			4,338			—			190,558

(Loss) income from discontinued operations, pre-tax		(52	)		5,085			(217	)		193,913
Income tax benefit (provision)		20			(1,853	)		81			(62,911	)

(Loss) income from discontinued operations, net of income tax expense	$	(32	)	$	3,232		$	(136	)	$	131,002


(b) Earnings per share calculation:

Basic:
Income from continuing operations	$	34,202		$	9,042		$	259,594		$	109,843
Less: Dividends on unvested restricted stock, net of taxes		(26	)		(23	)		(89	)		(104	)

Income from continuing operations—basic	$	34,176		$	9,019		$	259,505		$	109,739
(Loss) income from discontinued operations		(32	)		3,232			(136	)		131,002

Net income—basic	$	34,144		$	12,251		$	259,369		$	240,741

Weighted average number of common shares—basic		53,936			54,002			54,557			55,658


Basic earnings (loss) per share:
From continuing operations	$	0.63		$	0.17		$	4.76		$	1.98
From discontinued operations		—			0.06			—			2.35

Total basic earnings per share	$	0.63		$	0.23		$	4.76		$	4.33


Diluted:
Income from continuing operations	$	34,202		$	9,042		$	259,594		$	109,843
Less: Dividends on unvested restricted stock, net of taxes		(26	)		(23	)		(89	)		(104	)
Add: Debenture interest, net of taxes		—			—			4,887			9,628

Income from continuing operations—diluted	$	34,176		$	9,019		$	264,392		$	119,367
(Loss) income from discontinued operations		(32	)		3,232			(136	)		131,002

Net income—diluted	$	34,144		$	12,251		$	264,256		$	250,369

Weighted average number of common shares		53,936			54,002			54,557			55,658
Add: Shares for conversion of convertible debentures		—			—			3,117			6,577
Other share equivalents		255			222			234			412

Weighted average number of common shares and equiv.—diluted		54,191			54,224			57,908			62,647


Diluted earnings (loss) per share:
From continuing operations	$	0.63		$	0.17		$	4.57		$	1.91
From discontinued operations		—			0.06			(0.01	)		2.09

Total diluted earnings per share	$	0.63		$	0.23		$	4.56		$	4.00

Universal Health Services, Inc.

Condensed Consolidated Balance Sheets

(in thousands)


	December 31, 2006		December 31, 2005
Assets:
Cash and cash equivalents	$	14,939	$	7,963
Accounts receivable, net		595,009		499,726
Other current assets		118,558		100,609
Property, plant and equipment, net		1,685,085		1,429,653
Other assets		863,451		820,758

Total Assets	$	3,277,042	$	2,858,709


Liabilities and Stockholders’ Equity:
Current portion of long-term debt	$	1,938	$	5,191
Other current liabilities		500,513		518,979
Other noncurrent liabilities		340,815		289,195
Long-term debt		821,363		637,654
Deferred income taxes		35,888		42,713
Minority interest		174,061		159,879
Stockholders’ equity		1,402,464		1,205,098

Total Liabilities and Stockholders’ Equity	$	3,277,042	$	2,858,709

Universal Health Services, Inc.

Consolidated Statements of Cash Flows

(in thousands)


	Year Ended December 31,
	2006			2005
Cash Flows from Operating Activities:
Net income	$	259,458		$	240,845
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation & amortization		163,694			163,714
Accretion of discount on convertible debentures		6,364			12,644
Gains on sales of assets and businesses, net of losses		—			(196,393	)
Hurricane related expenses		13,792			165,028
Hurricane insurance recoveries accrued		(181,791	)		(81,709	)
Hurricane insurance recoveries received for operating expenses		43,929			—
Provision for asset impairment		—			3,105
Changes in assets & liabilities, net of effects from acquisitions and dispositions:
Accounts receivable		(93,552	)		12,976
Accrued interest		796			1,504
Accrued and deferred income taxes		(111,438	)		64,825
Other working capital accounts		18,090			19,893
Other assets and deferred charges		2,524			(5,037	)
Payment of hurricane related expenses		(14,889	)		(30,733	)
Other		15,126			637
Minority interest in earnings of consolidated entities, net of distributions		15,536			3,477
Accrued insurance expense, net of commercial premiums paid		76,456			82,774
Payments made in settlement of self-insurance claims		(44,856	)		(32,124	)

Net cash provided by operating activities		169,239			425,426


Cash Flows from Investing Activities:
Property and equipment additions, net of disposals		(341,140	)		(241,412	)
Proceeds received from sales of assets and businesses		—			401,207
Acquisition of businesses		(81,800	)		(280,828	)
Hurricane insurance recoveries received		144,571			75,000

Net cash used in investing activities		(278,369	)		(46,033	)


Cash Flows from Financing Activities:
Additional borrowings		494,353			7,823
Reduction of long-term debt		(34,898	)		(157,710	)
Repurchase of common shares		(350,372	)		(249,055	)
Dividends paid		(17,445	)		(17,885	)
Issuance of common stock		5,637			13,487
Financing costs		(2,020	)		(1,215	)
Net cash received for termination of derivatives		3,393			—
Capital contributions from minority member		17,458			—

Net cash provided by (used in) financing activities		116,106			(404,555	)


Increase (Decrease) in cash and cash equivalents		6,976			(25,162	)
Cash and cash equivalents, beginning of period		7,963			33,125

Cash and cash equivalents, end of period	$	14,939		$	7,963


Supplemental Disclosures of Cash Flow Information:
Interest paid	$	35,474		$	23,009

Income taxes paid, net of refunds	$	263,465		$	60,426

Universal Health Services, Inc.

Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information (“Supplemental Schedule”)

For the Three Months Ended December 31, 2006 and 2005

(in thousands, except per share amounts)

(unaudited)


	Three months ended December 31, 2006						Three months ended December 31, 2005
Net revenues	$	1,065,881			100.0	%	$	967,175			100.0	%

Operating charges:
Salaries, wages and benefits		461,500			43.3	%		415,821			43.0	%
Other operating expenses		228,026			21.4	%		226,127			23.4	%
Supplies expense		156,431			14.7	%		120,212			12.4	%
Provision for doubtful accounts		88,940			8.3	%		87,438			9.0	%

		934,897			87.7	%		849,598			87.8	%

Operating income/margin		130,984			12.3	%		117,577			12.2	%

Lease and rental expense		15,813						15,347
Minority interests in earnings of consolidated entities		8,621						5,786

Earnings before hurricane related expenses, hurricane insurance recoveries, depreciation and amortization, interest expense, and income taxes (“EBITDA”)		106,550						96,444

Hurricane related expenses, net		(640	)					36,133
Depreciation and amortization		43,334						39,242
Interest expense, net		9,196						8,403

Income before income taxes		54,660						12,666
Provision for income taxes		20,458						3,624

Income from continuing operations		34,202						9,042
(Loss) income from discontinued operations, net of income taxes		(32	)					3,232

Net income	$	34,170					$	12,274


	Three months ended December 31, 2006						Three months ended December 31, 2005
	Amount			Per Diluted Share			Amount			Per Diluted Share
Calculation of Adjusted Income from Continuing Operations
Income from continuing operations	$	34,202		$	0.63		$	9,042		$	0.17
Plus/minus adjustments:
Hurricane related expenses, net of recoveries, minority interests and income taxes		(233	)		—			20,978			0.39
Retroactive effect of supplemental reimbursements earned in certain states and contractual settlements, net of income taxes		(6,280	)		(0.12	)		—			—
Reserve for lawsuit, net of income taxes		4,704			0.09			—			—
Gain on sale of land, net of income taxes		—			—			(3,711	)		(0.07	)
Other combined net favorable adjustments								(1,531	)		(0.04	)

Subtotal after-tax adjustments to income from continuing operations		(1,809	)		(0.03	)		15,736			0.28

Adjusted income from continuing operations	$	32,393		$	0.60		$	24,778		$	0.45


Calculation of Adjusted Net Income
Net income	$	34,170		$	0.63		$	12,274		$	0.23
After-tax adjustments to income from continuing operations, as indicated above		(1,809	)		(0.03	)		15,736			0.28
Gain on divestitures, net of income taxes		—			—			(784	)		(0.01	)

Adjusted net income	$	32,361		$	0.60		$	27,226		$	0.50

Universal Health Services, Inc.

Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information (“Supplemental Schedule”)

For the Twelve Months Ended December 31, 2006 and 2005

(in thousands, except per share amounts)

(unaudited)


	Twelve months ended December 31, 2006						Twelve months ended December 31, 2005
Net revenues	$	4,191,300			100.0	%	$	3,935,480			100.0	%

Operating charges:
Salaries, wages and benefits		1,797,587			42.9	%		1,625,996			41.3	%
Other operating expenses		936,958			22.4	%		921,118			23.4	%
Supplies expense		556,702			13.3	%		489,999			12.5	%
Provision for doubtful accounts		349,030			8.3	%		368,058			9.4	%

		3,640,277			86.9	%		3,405,171			86.5	%

Operating income/margin		551,023			13.1	%		530,309			13.5	%

Lease and rental expense		64,060						60,790
Minority interests in earnings of consolidated entities		46,238						25,645

Earnings before hurricane related expenses, hurricane insurance recoveries, depreciation and amortization, interest expense, and income taxes (“EBITDA”)		440,725						443,874

Hurricane related expenses, net		13,792						165,028
Hurricane insurance recoveries		(181,791	)					(81,709	)
Depreciation and amortization		163,694						155,478
Interest expense, net		32,558						32,933

Income before income taxes		412,472						172,144
Provision for income taxes		152,878						62,301

Income from continuing operations		259,594						109,843
(Loss) income from discontinued operations, net of income taxes		(136	)					131,002

Net income	$	259,458					$	240,845


	Twelve months ended December 31, 2006						Twelve months ended December 31, 2005
	Amount			Per Diluted Share			Amount			Per Diluted Share
Calculation of Adjusted Income from Continuing Operations
Income from continuing operations	$	259,594		$	4.57		$	109,843		$	1.91
Plus/minus adjustments:
Hurricane related expenses, net of minority interests and income taxes		7,572			0.13			99,042			1.58
Hurricane related insurance recoveries, net of minority interests and income taxes		(107,480	)		(1.86	)		(48,663	)		(0.78	)
Retroactive effect of supplemental reimbursements earned in certain states and contractual settlements, net of income taxes		(10,059	)		(0.18	)		(5,225	)		(0.08	)
William & Mary Funding		4,466			0.08			—			—
Favorable tax reserve adjustment		(2,900	)		(0.05	)		—			—
Reserve for lawsuit, net of income taxes		6,273			0.11
Gain on sale of land, net of income taxes		—			—			(3,711	)		(0.06	)
Other combined net favorable adjustments		—			—			(203	)		(0.01	)

Subtotal after-tax adjustments to income from continuing operations		(102,128	)		(1.77	)		41,240			0.65

Adjusted income from continuing operations	$	157,466		$	2.80		$	151,083		$	2.56


Calculation of Adjusted Net Income
Net income	$	259,458		$	4.56		$	240,845		$	4.00
After-tax adjustments to income from continuing operations, as indicated above		(102,128	)		(1.77	)		41,240			0.65
Gain on divestitures, net of income taxes		—			—			(127,246	)		(2.03	)

Adjusted net income	$	157,330		$	2.79		$	154,839		$	2.62

Universal Health Services, Inc.

Supplemental Statistical Information

(un-audited)


Same Facility:	% Change Quarter Ended 12/31/2006		% Change 12 months ended 12/31/2006
Acute Care Hospitals
Revenues	7.0	%	6.4	%
Adjusted Admissions	2.1	%	1.6	%
Adjusted Patient Days	5.0	%	3.2	%
Revenue Per Adjusted Admission	4.8	%	4.7	%
Revenue Per Adjusted Patient Day	1.9	%	3.1	%

Behavioral Health Hospitals
Revenues	8.2	%	8.4	%
Adjusted Admissions	4.2	%	2.6	%
Adjusted Patient Days	1.4	%	0.5	%
Revenue Per Adjusted Admission	3.8	%	5.6	%
Revenue Per Adjusted Patient Day	6.7	%	7.8	%


	Fourth Quarter Ended						Twelve months Ended
UHS Consolidated	12/31/2006			12/31/2005			12/31/2006			12/31/2005
Revenues	$	1,065,881		$	967,175		$	4,191,300		$	3,935,480
EBITDA (1)		106,550			96,444			440,725			443,874
EBITDA Margin (1)		10.0	%		10.0	%		10.5	%		11.3	%

Cash Flow From Operations		(80,781	)		68,983			169,239			425,426
Days Sales Outstanding		51			48			51			47
Capital Expenditures		108,132			70,069			341,140			241,412

Debt					—			823,301		$	642,845
Shareholders Equity					—			1,402,464		$	1,205,098
Debt / Total Capitalization					—			37.0	%		34.8	%
Debt / EBITDA (2)					—			1.87			1.45
Debt / Cash From Operations (2)					—			4.86			1.51

Acute Care EBITDAR Margin (3) (4)		12.1	%		12.1	%		13.5	%		13.8	%
Behavioral Health EBITDAR Margin (3) (4)		22.6	%		18.7	%		23.3	%		22.8	%

(1)	Net of Minority Interest

(2)	Latest 4 quarters

(3)	Before Corporate overhead allocation and minority interest

(4)	Excluding discontinued operations

UNIVERSAL HEALTH SERVICES, INC.

SELECTED HOSPITAL STATISTICS

FOR THE THREE MONTHS ENDED

DECEMBER 31, 2006


AS REPORTED:

	ACUTE (1) (2)								BEHAVIORAL HEALTH
	12/31/06			12/31/05			% change		12/31/06			12/31/05			% change
Hospitals owned and leased		24			26		-7.7	%		79			72		9.7	%
Average licensed beds		5,139			5,557		-7.5	%		6,927			5,996		15.5	%
Patient days		275,664			261,720		5.3	%		469,340			441,347		6.3	%
Average daily census		2,996.3			2,844.8		5.3	%		5,101.5			4,797.3		6.3	%
Occupancy-licensed beds		58.3	%		51.2	%	13.9	%		73.6	%		80.0	%	-7.9	%
Admissions		62,055			60,628		2.4	%		27,211			25,931		4.9	%
Length of stay		4.4			4.3		2.9	%		17.2			17.0		1.3	%

Inpatient revenue	$	1,910,457		$	1,707,385		11.9	%	$	418,770		$	389,872		7.4	%
Outpatient revenue		729,711			661,321		10.3	%		51,848			47,732		8.6	%
Total patient revenue		2,640,168			2,368,706		11.5	%		470,618			437,604		7.5	%
Other revenue		12,859			12,635		1.8	%		8,115			8,096		0.2	%
Gross hospital revenue		2,653,027			2,381,341		11.4	%		478,733			445,700		7.4	%

Total deductions		1,870,180			1,658,437		12.8	%		217,182			212,278		2.3	%

Net hospital revenue	$	782,847		$	722,904		8.3	%	$	261,551		$	233,422		12.1	%

SAME FACILITY:

	ACUTE (1) (3)								BEHAVIORAL HEALTH (4)
	12/31/06			12/31/05			% change		12/31/06			12/31/05			% change
Hospitals owned and leased		23			23		0.0	%		69			69		0.0	%
Average licensed beds		5,139			5,012		2.5	%		6,193			5,920		4.6	%
Patient days		275,650			261,731		5.3	%		442,621			436,310		1.4	%
Average daily census		2,996.2			2,844.9		5.3	%		4,811.1			4,742.5		1.4	%
Occupancy-licensed beds		58.3	%		56.8	%	2.7	%		77.7	%		80.1	%	-3.0	%
Admissions		62,055			60,628		2.4	%		26,475			25,521		3.7	%
Length of stay		4.4			4.3		2.9	%		16.7			17.1		-2.2	%

(1)	Does not include hospitals located in France or discontinued operations.

(2)	Does not include discontinued operations. Licensed beds from our Acute care hospitals located in New Orleans are excluded in 2006.

(3)	Discontinued operations and our three acute care hospitals located in New Orleans are excluded in current and prior years.

(4)

Academy at Canyon Creek, Ascent, Boulder Creek, Casa de Lago, Cedar Ridge RTC & Hospital,Lincoln Trail, NorthStar RTC, Northwest Academy,Spring Mountain Sahara, Tennessee Valley, Tuscoloosa Juv. Det., Triple L. Group Homes are excluded in current and prior year. King George School is included in both current and prior years from September 1st through YTD. The Keystone facilities are included in both current and prior years from October 1st through YTD. Wyaoming Behavioral is included in both current and prior years from November 1st through YTD and Center for Change is included in both current and prior years from December 1st through YTD.

UNIVERSAL HEALTH SERVICES, INC.

SELECTED HOSPITAL STATISTICS

FOR THE TWELVE MONTHS ENDED

DECEMBER 31, 2006

AS REPORTED:


	ACUTE (1) (2)								BEHAVIORAL HEALTH
	12/31/06			12/31/05			% change		12/31/06			12/31/05			% change
Hospitals owned and leased		24			26		-7.7	%		79			72		9.7	%
Average licensed beds		5,139			5,554		-7.5	%		6,607			4,849		36.3	%
Patient days		1,095,375			1,138,936		-3.8	%		1,855,306			1,446,260		28.3	%
Average daily census		3,001.0			3,120.4		-3.8	%		5,083.0			3,962.4		28.3	%
Occupancy-licensed beds		58.4	%		56.2	%	3.9	%		76.9	%		81.7	%	-5.9	%
Admissions		246,429			254,522		-3.2	%		111,490			102,683		8.6	%
Length of stay		4.4			4.5		-0.7	%		16.6			14.1		18.1	%

Inpatient revenue	$	7,518,157		$	7,246,246		3.8	%	$	1,663,509		$	1,397,256		19.1	%
Outpatient revenue		2,876,867			2,778,036		3.6	%		206,453			192,824		7.1	%
Total patient revenue		10,395,024			10,024,282		3.7	%		1,869,962			1,590,080		17.6	%
Other revenue		51,549			52,485		-1.8	%		32,207			31,897		1.0	%
Gross hospital revenue		10,446,573			10,076,767		3.7	%		1,902,169			1,621,977		17.3	%

Total deductions		7,340,190			7,002,638		4.8	%		873,202			804,537		8.5	%

Net hospital revenue	$	3,106,383		$	3,074,129		1.0	%	$	1,028,967		$	817,440		25.9	%

SAME FACILITY:

	ACUTE (1) (3)								BEHAVIORAL HEALTH (4)
	12/31/06			12/31/05			% change		12/31/06			12/31/05			% change
Hospitals owned and leased		23			23		0.0	%		69			69		0.0	%
Average licensed beds		5,070			5,009		1.2	%		4,925			4,827		2.0	%
Patient days		1,095,329			1,062,077		3.1	%		1,464,964			1,441,093		1.7	%
Average daily census		3,000.9			2,909.8		3.1	%		4,013.6			3,948.2		1.7	%
Occupancy-licensed beds		59.2	%		58.1	%	1.9	%		81.5	%		81.8	%	-0.4	%
Admissions		246,429			242,363		1.7	%		106,099			102,273		3.7	%
Length of stay		4.4			4.4		1.4	%		13.8			14.1		-2.0	%

(1)	Does not include hospitals located in France or discontinued operations.

(2)	Does not include discontinued operations. Licensed beds from our Acute care hospitals located in New Orleans are excluded in 2006.

(3)	Discontinued operations and our three acute care hospitals located in New Orleans are excluded in current and prior years.

(4)

The Keystone facilities are included in both current and prior years from October 1st through YTD.

Wyaoming Behavioral is included in both current and prior years from November 1st through YTD and Center for Change is included in both current and prior years from December 1st through YTD.