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): October 30, 2013 (October 25, 2013)

 

 

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))

 

 

 

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Item 1.01 Entry into a Material Definitive Agreement

On October 25, 2013, Universal Health Services, Inc. (the “Company”) and certain of its subsidiaries amended their existing accounts receivable securitization facility (the “Receivables Facility”) with a group of conduit lenders, liquidity banks, and PNC Bank, National Association, as administrative agent. The Receivables Facility, which was due to expire on October 25, 2013, provides for borrowings of up to $275,000,000 outstanding from time to time by certain of the Company’s subsidiaries in exchange for an undivided security interests in their respective accounts receivable.

The parties to the Receivables Facility entered into Amendment No. 2 (the “Amendment”) to the Amended and Restated Credit and Security Agreement, dated as of October 27, 2010 (the “Credit and Security Agreement”), pursuant to which, among other things, (i) the term of the Receivables Facility was extended through October 25, 2016, (ii) Market Street Funding LLC ceased to be a party to the Original Credit Agreement, (iii) an additional hospital subsidiary of the Company, Temecula Valley Hospital, Inc., as an Originator, and its wholly-owned special purpose entity, Temecula Valley Hospital Receivables, L.L.C., as a Borrower, became parties to the Receivables Facility, and (iv) and certain defined terms were added and amended. Concurrently with the execution of the Amendment, Temecula Valley Hospital, Inc. and Temecula Valley Hospital Receivables, L.L.C. entered into a Receivables Sale Agreement on substantially the same terms as the original parties to the Receivables Facility. In addition, the interest rate spread and commitment fee were reduced in connection with the Amendment. Substantially all other provisions of the Receivables Facility remain unchanged.

The foregoing summary description of the Amendment and the transactions contemplated thereby is not intended to be complete and is qualified in its entirety by the complete text of the Amendment, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference as it were fully set forth herein.

Item 2.02 Results of Operations and Financial Condition

On October 29, 2013, Universal Health Services, Inc. issued the press release attached hereto as Exhibit 99.1.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

The information provided in Item 1.01 of this Current Report on Form 8-K is hereby incorporated into this Item 2.03 by reference.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits.

 

10.1		Second Amendment to Amended and Restated Credit and Security Agreement, dated as of October 25, 2013.
99.1		Universal Health Services, Inc., press release, dated October 29, 2013.

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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.

 

Date: October 30, 2013

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Exhibit Index

 

Exhibit Number		Exhibit Description
10.1		Second Amendment to Amended and Restated Credit and Security Agreement, dated as of October 25, 2013.
99.1		Universal Health Services, Inc., press release, dated October 29, 2013.

Exhibit 10.1

SECOND AMENDMENT

TO

AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

This SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT (this “Amendment”), dated as of October 25, 2013, is entered into by and among the following parties:

 

(i)

the Borrowers identified on the signature pages hereto;

 

(ii)

UHS Receivables Corp., as Collection Agent;

 

(iii)

UHS of Delaware, Inc., as Servicer;

 

(iv)

Universal Health Services, Inc., as Performance Guarantor;

 

(v)

Victory Receivables Corporation, as a Conduit;

 

(vi)

The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as Liquidity Bank, LC Participant and Co-Agent for Victory’s Lender Group;

 

(vii)

SunTrust Bank (“SunTrust”), as Liquidity Bank, LC Participant and new Co-Agent (in such capacity, the “New SunTrust Co-Agent”) for SunTrust’s Lender Group;

 

(viii)

SunTrust Robinson Humphrey, Inc. (“STRH”), as prior Co-Agent for SunTrust’s Lender Group (in such capacity, the “Prior SunTrust Co-Agent”);

 

(ix)

Market Street Funding LLC (“Market Street”), as a Conduit and as Assignor (as defined below); and

 

(x)

PNC Bank, National Association (“PNC”), as Liquidity Bank, LC Participant, Co-Agent, LC Bank, Administrative Agent and as Assignee (as defined below).

Capitalized terms used but not otherwise defined herein have the respective meanings set forth in the Credit and Security Agreement defined below.

BACKGROUND

1. The parties hereto have entered into that certain Amended and Restated Credit and Security Agreement, dated as of October 27, 2010 (as amended, supplemented and otherwise modified from time to time, the “Credit and Security Agreement”).

2. Market Street, as the assignor (in such capacity, the “Assignor”), desires to sell, assign and delegate to PNC, as the assignee (in such capacity, the “Assignee”), all of the Assignor’s rights under, interest in, title to and obligations under the Credit and Security Agreement and the other Transaction Documents (collectively, the “Assigned Documents”), and the Assignee desires to purchase and assume from the Assignor all of the Assignor’s rights under, interest in, title to and obligations under the Assigned Documents.

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3. After giving effect to the assignment and assumption contemplated in Section 1 of this Amendment, each of the parties hereto desires that Market Street cease to be a party to the Credit and Security Agreement and each of the other Assigned Documents to which it is a party and to be discharged from its duties and obligations under the Credit and Security Agreement and each of the other Assigned Documents.

4. Concurrently herewith, the parties hereto (other than the Performance Guarantor and Market Street) are entering into that certain Amended and Restated Fee Letter, dated as of the date hereof (the “Amendment Fee Letter”).

5. The parties hereto desire to amend the Credit and Security Agreement as set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1. PNC Assignment and Assumption.

(a) Sale and Assignment by Assignor to Assignee. At or before 2:00 pm (New York time) on the date hereof, the Assignee shall pay to the Assignor, in immediately available funds, (i) the amount set forth on Schedule I hereto (such amount, the “Principal Payment”) representing 100.00% of the aggregate outstanding principal amount of the Assignor’s Loans under the Credit and Security Agreement on the date hereof and (ii) the amount set forth on Schedule I hereto representing all accrued but unpaid (whether or not then due) CP Costs, fees and other costs and expenses payable in respect of such Loans to but excluding the date hereof (such amount, the “CP Costs and Other Costs”; together with the Principal Payment, collectively, the “Payoff Amount”). Upon the Assignor’s receipt of the Payoff Amount in its entirety, the Assignor hereby sells, transfers, assigns and delegates to the Assignee, without recourse, representation or warranty except as otherwise provided herein, and the Assignee hereby irrevocably purchases, receives, accepts and assumes from the Assignor, all of the Assignor’s rights under, interest in, title to and all its obligations under the Credit and Security Agreement and the other Assigned Documents. Without limiting the generality of the foregoing, the Assignor hereby assigns to the Assignee all of its right, title and interest in the Collateral.

Payment of each portion of the Payoff Amount shall be made by wire transfer of immediately available funds in accordance with the payment instructions set forth on Schedule II hereto.

(b) Removal of Assignor. From and after the Effective Date (as defined below), the Assignor shall cease to be a party to the Credit and Security Agreement and each of the other Assigned Documents to which it was a party and shall no longer have any rights or obligations under the Credit and Security Agreement or any other Assigned Document (other than such rights which by their express terms survive termination thereof).

 

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(c) Limitation on Liability. Notwithstanding anything to the contrary set forth in this Amendment, the Assignee does not accept or assume any liability or responsibility for any breach, failure or other act or omission on the part of the Assignor, or any indemnification or other cost, fee or expense related thereto, in each case which occurred or directly or indirectly arose out of an event which occurred prior to the Effective Date.

(d) Acknowledgement and Agreement. Each of the parties and signatories hereto (i) hereby acknowledges and agrees to the sale, assignment and assumption set forth in clause (a) above and (ii) expressly waives any notice or other applicable requirements set forth in any Transaction Document as a prerequisite or condition precedent to such sale, assignment and assumption (other than as set forth herein).

SECTION 2. SunTrust Assignment, Assumption and Joinder.

(a) Assignment by Prior SunTrust Co-Agent to New SunTrust Co-Agent and Joinder. Effective as of the Effective Date, the Prior SunTrust Co-Agent hereby transfers, assigns and delegates to the New SunTrust Co-Agent, and the New SunTrust Co-Agent hereby irrevocably, receives, accepts and assumes from the Prior SunTrust Co-Agent, all of the Prior SunTrust Co-Agent’s rights under, interest in, title to and all its duties and obligations under the Credit and Security Agreement and the other Transaction Documents. From and after the date hereof, SunTrust shall be a Co-Agent party to the Credit and Security Agreement, for all purposes of the Credit and Security Agreement and the other Transaction Documents as if SunTrust were an original party to the Credit and Security Agreement in such capacity, and SunTrust assumes all related rights and agrees to be bound by all of the terms and provisions applicable to Co-Agents contained in the Credit and Security Agreement and the other Transaction Documents.

(b) Removal of STRH. From and after the Effective Date, STRH shall cease to be a party to the Credit and Security Agreement and each of the other Transaction Documents to which it was a party and shall no longer have any rights or obligations under the Credit and Security Agreement or any other Transaction Document (other than such rights which by their express terms survive termination thereof).

(c) Acknowledgement and Agreement; Consent to Joinder. Each of the parties and signatories hereto (i) hereby acknowledges and agrees to the assignment, assumption and joinder of SunTrust as a party to the Credit and Security Agreement in the capacity of a Co-Agent set forth in clause (a) above and (ii) expressly waives any notice or other applicable requirements set forth in any Transaction Document as a prerequisite or condition precedent to such assignment, assumption and joinder (other than as set forth herein).

SECTION 3. Joinder of Temecula Valley Hospital Receivables, L.L.C.

(a) Temecula Valley Hospital Receivables, L.L.C. as a Borrower. From and after the date hereof, Temecula Valley Hospital Receivables, L.L.C., a Delaware limited liability company (“Temecula Valley Receivables”) shall be a Borrower party to the Credit and Security Agreement, for all purposes of the Credit and Security Agreement

 

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and the other Transaction Documents as if Temecula Valley Receivables were an original party to the Credit and Security Agreement in such capacity, and Temecula Valley Receivables assumes all related rights and agrees to be bound by all of the terms and provisions applicable to Borrowers contained in the Credit and Security Agreement and the other Transaction Documents. For the avoidance of doubt, Temecula Valley Receivables hereby acknowledges and agrees that pursuant to Section 13.1 of the Credit and Security Agreement, it has granted and hereby grants to the Administrative Agent, for the benefit of the Secured Parties, a security interest in all of Temecula Valley Receivables’ right, title and interest, whether now owned and existing or hereafter arising in and to the Collateral. Temecula Valley Receivables hereby acknowledges and agrees that it has received copies of the Credit and Security Agreement and each of the other Transaction Documents.

(b) Consent to Joinder. Each of the parties hereto consents to the foregoing joinder of Temecula Valley Receivables to the Credit and Security Agreement in the capacity of a “Borrower” and any otherwise applicable conditions precedent thereto under the Credit and Security Agreement and the other Transaction Documents (other than as set forth herein) are hereby waived.

SECTION 4. Amendments to the Credit and Security Agreement. The Credit and Security Agreement is hereby amended as of the date hereof as follows:

(a) Each reference to the phrase “Market Street’s Lender Group” in the Credit and Security Agreement is replaced with a reference to the phrase “PNC’s Lender Group”.

(b) Section 1.1(a)(ii)(B) of the Credit and Security Agreement is replaced in its entirety with the following:

(B) if such Conduit declines to make any such Loan, the Liquidity Banks in such Lender Group shall make Loans in an aggregate principal amount equal to the related Lender Group’s Percentage of such requested Advance;

provided, however, that each of the parties hereto hereby acknowledges and agrees that (i) from and after the First Amendment Date, the SunTrust Lender Group shall not include a Conduit (unless and until a Conduit shall later join such Lender Group pursuant to the terms hereof) and (ii) from and after the Second Amendment Date, the PNC Lender Group shall not include a Conduit (unless and until a Conduit shall later join such Lender Group pursuant to the terms hereof), and each request by the Collection Agent, on behalf of the Borrowers, of Advances from the Conduits pursuant to Section 1.2 shall be deemed to be a request that the Liquidity Banks in SunTrust’s Lender Group or PNC’s Lender Group, as applicable, make Loans in an aggregate principal amount equal to such Lender Group’s Percentage of such requested Advance.

 

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(c) The following provision is hereby added to the end of Section 1.3 of the Credit and Security Agreement:

Notwithstanding the forgoing, at any time on or after January 1, 2015 or such later date that any Lender is required to comply with any “liquidity coverage ratio” under or in connection with Basel III, the Collection Agent shall not provide any Reduction Notice, if after giving effect thereto, the Aggregate Principal plus the Adjusted LC Participation Amount at such time would be less than an amount equal to the lesser of (a) 50.0% of the Aggregate Commitment at such time and (b) 50% of the Borrowing Base at such time (such amount, the “Threshold”); provided, however, that the Collection Agent may, at its sole discretion, elect to be exempt from the forgoing requirement set forth in this sentence for a single period of thirty (30) continuous days during each calendar year by providing advance written notice thereof to the Administrative Agent and each Co-Agent; provided, further, however, that the Collection Agent hereby covenants and agrees to promptly, but in any event within thirty (30) days following any reduction of the Aggregate Principal below the Threshold pursuant to this Section 1.3 or Section 1.4, to request either an Advance or the issuance of a Letter of Credit such that the Aggregate Principal plus the Adjusted LC Participation Amount at such time would be no less than an amount equal to the lesser of (a) 50.0% of the Aggregate Commitment at such time and (b) 50% of the Borrowing Base at such time; it being understood and agreed that each Advance or issuance of a Letter of Credit under this Agreement are subject to the conditions precedent set forth in Article VI.

(d) The first sentence of Section 11.8(b) of the Credit and Security Agreement is replaced in its entirety with the following:

The Administrative Agent acts, or may in the future act: (i) as a Co-Agent, (ii) as LC Bank and/or as an LC Participant, (iii) as a Liquidity Bank for any Conduit, (iv) as administrative agent for any Conduit, (v) as issuing and paying agent for any Conduit’s Commercial Paper, (vi) to provide credit or liquidity enhancement for the timely payment for any Conduit’s Commercial Paper and (vii) to provide other services from time to time for any Conduit (collectively, the “Administrative Agent Roles”).

(e) The following new defined term and definition thereof is added to Exhibit I to the Credit and Security Agreement in appropriate alphabetical order:

“Second Amendment Date” means October 25, 2013.

 

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(f) The definition of “Co-Agent Account” set forth in Exhibit I to the Credit and Security Agreement is replaced in its entirety with the following:

 

(i)

for PNC’s Lender Group:

 

(A)

with respect to the “Amendment Fee” as set forth in the Fee Letter:

PNC Bank, National Association

ABA No: 043 000 096

DDA No: 1-188375

Reference: Cost Center 0087001

Account Name: PNC Capital Markets LLC

Attention: Charlene Wilson

 

(B)

with respect to all other payments, fees and expenses:

PNC Bank, National Association

ABA No: 043 000 096

AC No: 130760016803

Reference: UHS Receivables Corp.

Account Name: Commercial Loan Department

 

(ii)

for Victory’s Lender Group:

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

ABA No: 026-009-632

AC No: 310-051-428

Acct. Name: VRC

Reference: UHS

 

(iii)

for SunTrust’s Lender Group:

SunTrust Bank

Atlanta, Georgia

ABA No. 061000104

AC No: 1000022220783

Credit: Agency Services Operating Account

Reference: UHS Receivables

Attention: Doug Weltz

(g) The following new defined term and definition thereof is hereby added to the Credit and Security Agreement in appropriate alphabetical order:

“Basel III” means the agreements reached by the Basel Committee on Banking Supervision in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” (as amended, supplemented or otherwise modified or replaced from time to time).

 

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(h) The definition of “Conduit” set forth in Exhibit I to the Credit and Security Agreement is replaced in its entirety with the following:

“Conduit” means each commercial paper conduit that is a party to this Agreement, as a lender, or that becomes a party to this Agreement, as a lender pursuant to an Assignment Agreement or otherwise. As of the date hereof, the Conduits are Market Street and Victory. As of the Second Amendment Date, Victory is the only Conduit.

(i) The definition of “Facility Termination Date” set forth in Exhibit I to the Credit and Security Agreement is hereby amended by replacing the date “October 25, 2013” where it appears therein with the date “October 25, 2016”.

(j) The definition of “Lender Group” set forth in Exhibit I to the Credit and Security Agreement is replaced in its entirety with the following:

“Lender Group” means, (A) with respect to any Conduit, (i) such Conduit, (ii) its Liquidity Bank(s), (iii) its Co-Agent and (iv) it’s LC Participant(s), (B) with respect to PNC, PNC as (i) a Liquidity Bank, (ii) a Co-Agent, (iii) an LC Participant, (iv) the LC Bank and (v) the Administrative Agent and (C) with respect to SunTrust, (i) SunTrust as a Liquidity Bank, (ii) STRH as its Co-Agent and (iii) SunTrust as an LC Participant.

(k) Clause (A) of the definition of “LIBO Rate” set forth in Exhibit I to the Credit and Security Agreement is replaced in its entirety with the following:

(A) for any Lender in either the SunTrust Lender Group or the PNC Lender Group, for any day during any Interest Period, the one-month rate for U.S. dollar deposits as reported on the Reuters Screen LIBOR01 Page or any other page that may replace such page from time to time for the purpose of displaying offered rates of leading banks for London interbank deposits in United States dollars, as of 11:00 a.m. (London time) for such day, or if such day is not a Business Day, then the immediately preceding Business Day (or if not so reported, then as determined by the Administrative Agent from another recognized source for London interbank quotation), in each case, changing when and as such rate changes and

(l) The definition of “Originator” set forth in Exhibit I to the Credit and Security Agreement is hereby amended by (i) deleting “Auburn Regional Medical Center, Inc.,” where it appears therein and (ii) inserting “Temecula Valley Hospital, Inc.,” in appropriate alphabetic order.

(m) Exhibit III to the Credit and Security Agreement is hereby replaced in its entirety with Exhibit A attached hereto.

 

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SECTION 5. Acknowledgments and Agreements. After giving effect to this Amendment, the initial Interest Rate for each outstanding Loan on the date hereof by PNC shall be the LIBO Rate (unless the Default Rate is then applicable).

SECTION 6. Representations and Warranties. Each Borrower, the Collection Agent, the Servicer and the Performance Guarantor hereby represents and warrants to the Lenders, the Co-Agents, the Administrative Agent and the Assignee as follows:

(a) Representations and Warranties. The representations and warranties made by such Person in the Transaction Documents are true and correct as of the date hereof and after giving effect to this Amendment (unless stated to relate solely to an earlier date, in which case such representations or warranties were true and correct as of such earlier date).

(b) Enforceability. The execution and delivery by such Person of this Amendment, and the performance of each of its obligations under this Amendment and the other Transaction Documents to which such Person is a party, as amended hereby, are within each of its organizational powers and have been duly authorized by all necessary organizational action on its part. This Amendment and the other Transaction Documents to which such Person is a party, as amended hereby, are such Person’s valid and legally binding obligations, enforceable in accordance with its terms.

(c) No Amortization Event. After giving effect to this Amendment and the transactions contemplated hereby, no Amortization Event or Unmatured Amortization Event has occurred and is continuing.

SECTION 7. Effectiveness. This Amendment shall become effective on the date hereof (the “Effective Date”) upon (a) payment of the “Amendment Fee” (under and as defined in the Amendment Fee Letter) in accordance with the terms of the Amendment Fee Letter, (b) receipt by the Assignor of the Payoff Amount in its entirety in accordance with Section 1 of this Amendment and (c) receipt by the Administrative Agent of each of the items listed on Exhibit B attached hereto, in each case in form and substance acceptable to the Administrative Agent.

SECTION 8. CHOICE OF LAW; CONSENT TO JURISDICTION.

(a) THIS AMENDMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

(b) EACH PARTY TO THIS AMENDMENT HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AMENDMENT OR ANY DOCUMENT EXECUTED BY SUCH PERSON PURSUANT TO THIS AMENDMENT, AND EACH SUCH PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW

 

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OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF ANY AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY LOAN PARTY AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AMENDMENT OR ANY DOCUMENT EXECUTED BY SUCH LOAN PARTY PURSUANT TO THIS AMENDMENT SHALL BE BROUGHT ONLY IN A COURT IN THE BOROUGH OF MANHATTAN, NEW YORK.

SECTION 9. Effect of Amendment. All provisions of the Credit and Security Agreement, as expressly amended and modified by this Amendment, shall remain in full force and effect. After this Amendment becomes effective, all references in the Credit and Security Agreement (or in any other Transaction Document) to “this Agreement”, “hereof”, “herein” or words of similar effect referring to the Credit and Security Agreement shall be deemed to be references to the Credit and Security Agreement as amended by this Amendment. This Amendment shall not be deemed, either expressly or impliedly, to waive, amend or supplement any provision of the Credit and Security Agreement other than as set forth herein.

SECTION 10. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each counterpart shall be deemed to be an original, and all such counterparts shall together constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Amendment.

SECTION 11. Transaction Document. This Amendment shall constitute a Transaction Document for all purposes.

SECTION 12. Section Headings. The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, the Credit and Security Agreement or any provision hereof or thereof.

SECTION 13. Further Assurances. Each of the Borrowers, the Collection Agent, the Servicer and the Performance Guarantor hereby agrees to do all such things and execute all such documents and instruments, at the Borrowers’ sole expense, as the Assignee may reasonably consider necessary or desirable to give full effect to the assignment and assumption set forth in Section 1 of this Amendment.

SECTION 14. Severability. If any one or more of the agreements, provisions or terms of this Amendment shall for any reason whatsoever be held invalid or unenforceable, then such agreements, provisions or terms shall be deemed severable from the remaining agreements, provisions and terms of this Amendment and shall in no way affect the validity or enforceability of the provisions of this Amendment or the Credit and Security Agreement.

 

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SECTION 15. No Proceedings. Each of the parties hereto hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of Market Street, it will not institute against, or join any other Person in instituting against, Market Street any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. This Section 15 shall survive termination of the Credit and Security Agreement.

SECTION 16. Ratification. After giving effect to this Amendment and each of the other agreements, documents and instruments contemplated in connection herewith, the Performance Undertaking, along with each of the provisions thereof, remains in full force and effect and is hereby ratified and reaffirmed by the Performance Guarantor and each of the other parties hereto.

[Signature pages follow.]

 

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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

 

AIKEN REGIONAL RECEIVABLES, L.L.C., DISTRICT HOSPITAL PARTNERS RECEIVABLES, L.L.C., FORT DUNCAN MEDICAL RECEIVABLES, L.L.C., LANCASTER HOSPITAL RECEIVABLES, L.L.C., LAREDO REGIONAL RECEIVABLES, L.L.C., MANATEE MEMORIAL RECEIVABLES, L.L.C., MCALLEN HOSPITALS RECEIVABLES, L.L.C., NORTHWEST TEXAS HEALTHCARE RECEIVABLES, L.L.C., SPARKS FAMILY HOSPITAL RECEIVABLES, L.L.C., SUMMERLIN HOSPITAL RECEIVABLES, L.L.C., TEMECULA VALLEY HOSPITAL RECEIVABLES, L.L.C., TEXOMA HEALTHCARE SYSTEM RECEIVABLES, L.L.C., UHS OF OKLAHOMA RECEIVABLES, L.L.C., UHS-CORONA RECEIVABLES, L.L.C., RANCHO SPRINGS RECEIVABLES, L.L.C., VALLEY HEALTH SYSTEM RECEIVABLES, L.L.C. AND WELLINGTON REGIONAL RECEIVABLES, L.L.C., AS BORROWERS

 

By:		/s/ Cheryl K. Ramagano
Name:		Cheryl K. Ramagano
Title:		Treasurer

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UHS RECEIVABLES CORP.,
AS COLLECTION AGENT
By:		/s/ Cheryl K. Ramagano
Name:		Cheryl K. Ramagano
Title:		Treasurer
UHS OF DELAWARE, INC.,
AS SERVICER
By:		/s/ Cheryl K. Ramagano
Name:		Cheryl K. Ramagano
Title:		Vice President and Treasurer
UNIVERSAL HEALTH SERVICES, INC.,
AS PERFORMANCE GUARANTOR
By:		/s/ Cheryl K. Ramagano
Name:		Cheryl K. Ramagano
Title:		Vice President and Treasurer

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THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH, AS LIQUIDITY BANK AND LC PARTICIPANT FOR VICTORY’S LENDER GROUP
By:		/s/ B. McNany
Name:		B. McNany
Title:		Vice-President
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH, AS CO-AGENT FOR VICTORY’S LENDER GROUP
By:		/s/ Luna Mills
Name:		Luna Mills
Title:		Director
VICTORY RECEIVABLES CORPORATION, AS A CONDUIT
By:		/s/ David V. DeAngelis
Name:		David V. DeAngelis
Title:		Vice President

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SUNTRUST ROBINSON HUMPHREY, INC., AS PRIOR SUNTRUST CO-AGENT
By:		/s/ Pawan Churiwal
Name:		Pawan Churiwal
Title:		Vice President
SUNTRUST BANK,
AS LIQUIDITY BANK AND LC PARTICIPANT FOR SUNTRUST’S LENDER GROUP AND AS NEW SUNTRUST CO-AGENT
By:		/s/ Michael Peden
Name:		Michael Peden
Title:		Vice President

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PNC BANK, NATIONAL ASSOCIATION,
AS LC PARTICIPANT, LIQUIDITY BANK AND AS LC BANK
By:		/s/ Mark S. Falcione
Name:		Mark S. Falcione
Title:		Executive Vice President
PNC BANK, NATIONAL ASSOCIATION,
AS CO-AGENT, ADMINISTRATIVE AGENT AND AS ASSIGNEE
By:		/s/ Mark S. Falcione
Name:		Mark S. Falcione
Title:		Executive Vice President
MARKET STREET FUNDING LLC,
AS A CONDUIT AND AS ASSIGNOR
By:		/s/ Evelyn Echevarria
Name:		Evelyn Echevarria
Title:		Vice President

Exhibit 99.1

FOR IMMEDIATE RELEASE

 

CONTACT:		Steve Filton
		Chief Financial Officer		October 29, 2013
		610-768-3300

UNIVERSAL HEALTH SERVICES, INC. REPORTS FINANCIAL RESULTS FOR THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND INCREASES 2013 FULL YEAR GUIDANCE

Consolidated Results of Operations, As Reported – Three and nine-month periods ended September 30, 2013 and 2012:

KING OF PRUSSIA, PA – Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income attributable to UHS was $114.6 million, or $1.15 per diluted share, during the third quarter of 2013 as compared to $71.8 million, or $.73 per diluted share, during the comparable quarter of 2012. Net revenues increased 8.1% to $1.82 billion during the third quarter of 2013 as compared to $1.68 billion during the third quarter of 2012.

The state of Texas has recently finalized its 2013 state fiscal year Medicaid disproportionate share hospital (“DSH”) payment rule and published updated DSH payment recommendations for the programs covering the period of October 1, 2012 through September 30, 2013. The revised DSH estimates and related data also favorably impacted our Texas Medicaid Waiver uncompensated care payment estimates for the same period. In connection with these revised payment recommendations, our acute care hospitals located in Texas earned additional revenues pursuant to these programs amounting to approximately $21 million which are applicable to the state’s 2013 fiscal year. Included in our reported net income attributable to UHS during the three-month period ended September 30, 2013 was approximately $13 million (after-tax), or $.13 per diluted share, earned in connection with these programs, of which, approximately $10 million (after-tax), or $.10 per diluted share, related to the period of October 1, 2012 through June 30, 2013.

Reported net income attributable to UHS was $386.2 million, or $3.89 per diluted share, during the first nine months of 2013 as compared to $308.0 million, or $3.15 per diluted share, during the comparable period of 2012. Net revenues increased 5.5% to $5.48 billion during the nine-month period ended September 30, 2013 as compared to $5.20 billion during the comparable nine-month period of 2012.

Consolidated Results of Operations, As Adjusted – Three and nine-month periods ended September 30, 2013 and 2012:

For the three-month period ended September 30, 2013, our adjusted net income attributable to UHS, as calculated on the attached Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information (“Supplemental Schedule”), was $109.5 million, or $1.10 per diluted share, as compared to $88.6 million, or $.91 per diluted share, during the third quarter of 2012. Included in the adjusted net income attributable to UHS for the three-month period ended September 30, 2013, is the after-tax impact of approximately $10 million, or $.10 per diluted share, resulting from the above-mentioned additional Texas Medicaid revenues applicable to the period of October 1, 2012 through June 30, 2013.

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As reflected on the Supplemental Schedule, included in our reported results during the third quarter of 2013 was a net favorable after-tax impact of approximately $5.1 million, or $.05 per diluted share, related to the incentive income and expenses recorded in connection with the implementation of electronic health records (“EHR”) applications at our acute care hospitals (as discussed below in Accounting for HITECH Act incentive income and EHR expenses).

As reflected on the Supplemental Schedule, included in our reported results during the third quarter of 2012, was an aggregate net unfavorable after-tax impact of $16.8 million, or $.18 per diluted share, consisting of: (i) an after-tax charge of $18.1 million ($29.2 million pre-tax), or $.19 per diluted share, resulting from the write-off of deferred financing costs related to the portion of our Term Loan B credit facility that was extinguished during the third quarter of 2012, and; (ii) a net favorable after-tax impact of approximately $1.3 million, or $.01 per diluted share, related to the incentive income and expenses recorded in connection with the implementation of EHR applications.

Included in our reported results during the nine-month period ended September 30, 2013 was a net favorable after-tax impact of $37.8 million, or $.38 per diluted share, resulting from a reduction to our professional and general liability self-insurance reserves relating to years prior to 2013, based upon a reserve analysis. During the nine-month period ended September 30, 2013, the pre-tax incentive income of $27.9 million earned in connection with the implementation of EHR applications was essentially offset by EHR-related expenses incurred during the period.

Included in our reported results during the first nine months of 2012 was a net unfavorable after-tax impact of approximately $3.6 million, or $.03 per diluted share, recorded in connection with the implementation of EHR applications, as well as a net aggregate favorable after-tax impact of $3.2 million, or $.03 per diluted share, consisting of the following: (i) an after-tax charge of $18.1 million resulting from the write-off of deferred financing costs related to the portion of our Term Loan B credit facility that was extinguished during the third quarter of 2012; (ii) a favorable after-tax impact of $18.8 million resulting from an industry-wide settlement with the United States Department of Health and Human Services, the Secretary of Health and Human Services, and the Centers for Medicare and Medicaid Services, related to underpayments of Medicare inpatient prospective payments during a number of years prior to 2012; (iii) a favorable after-tax impact of $4.3 million representing the 2011 portion of the net Medicaid supplemental reimbursements recorded pursuant to the Oklahoma Supplemental Hospital Offset Payment Program; (iv) an aggregate unfavorable after-tax impact of $5.1 million resulting from the revised Supplemental Security Income ratios utilized for calculating Medicare disproportionate share hospital reimbursements for federal fiscal years 2006 through 2009 ($2.4 million unfavorable after-tax impact), and the write-off of receivables related to revenues recorded during 2011 at two of our acute care hospitals located in Florida resulting from reductions in certain county reimbursements due to reductions in federal matching Inter-Governmental Transfer funds ($2.7 million unfavorable after-tax impact), and; (v) a net favorable after-tax impact of $3.4 million consisting primarily of the 2011 portion of net Medicaid supplemental revenues recorded during the second quarter.

Acute Care Services – Three and nine-month periods ended September 30, 2013 and 2012:

During the third quarter of 2013, at our acute care hospitals owned during both periods (“same facility basis”), adjusted admissions (adjusted for outpatient activity) increased 3.6% and adjusted

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patient days increased 4.1%, as compared to the third quarter of 2012. Net revenues at these facilities, excluding approximately $16 million of the above-mentioned additional revenues earned in connection with the Texas Medicaid DSH and uncompensated care programs covering the period of October 1, 2012 through June 30, 2013, increased 6.6% during the third quarter of 2013 as compared to the comparable quarter of 2012. At these facilities, net revenue per adjusted admission increased 2.9% while net revenue per adjusted patient day increased 2.5% during the third quarter of 2013 as compared to the third quarter of 2012. On a same facility basis, excluding the above-mentioned $16 million of additional revenues earned in connection with the Texas Medicaid DSH and uncompensated care programs covering the period of October 1, 2012 through June 30, 2013, the operating margin at our acute care hospitals decreased to 12.8% during the third quarter of 2013 as compared to 13.4% during the third quarter of 2012. We define operating margin as net revenues less salaries, wages and benefits, other operating expenses and supplies expense (excluding the impact of the items mentioned above and as indicated on the Supplemental Schedule).

During the first nine months of 2013, at our acute care hospitals on a same facility basis, adjusted admissions increased 1.3% and adjusted patient days increased 1.8%, as compared to the first nine months of 2012. Net revenues at these facilities increased 4.6% during the nine-month period ended September 30, 2013 as compared to the comparable period in 2012. At these facilities, net revenue per adjusted admission increased 3.3% while net revenue per adjusted patient day increased 2.8% during the first nine months of 2013 as compared to the comparable period in 2012. On a same facility basis, the operating margin at our acute care hospitals decreased to 15.1% during the first nine months of 2013 as compared to 16.2% during the first nine months 2012.

We provide care to patients who meet certain financial or economic criteria without charge or at amounts substantially less than our established rates. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in net revenues or in accounts receivable, net. Our acute care hospitals provided charity care and uninsured discounts, based on charges at established rates, amounting to approximately $276 million and $259 million during the three-month periods ended September 30, 2013 and 2012, respectively, and approximately $766 million and $840 million during the nine-month periods ended September 30, 2013 and 2012, respectively. In addition, the provision for doubtful accounts at our acute care hospitals increased to approximately $291 million during the third quarter of 2013 as compared to approximately $167 million during the third quarter of 2012 and increased to approximately $725 million during the first nine months of 2013 as compared to approximately $456 million during the comparable period of 2012.

Behavioral Health Care Services – Three and nine-month periods ended September 30, 2013 and 2012:

During the third quarter of 2013, at our behavioral health care facilities on a same facility basis, adjusted admissions increased 5.8% while adjusted patient days increased 1.5%, as compared to the third quarter of 2012. Net revenues at these facilities increased 3.4% during the third quarter of 2013, as compared to the comparable quarter in 2012. At these facilities, net revenue per adjusted admission decreased 2.2% while net revenue per adjusted patient day increased 1.9% during the third quarter of 2013 over the comparable quarter in 2012. The operating margin at our behavioral health care facilities owned during both periods was 27.5% during the three-month period ended September 30, 2013 and 27.9% during the comparable quarter of 2012.

During the first nine months of 2013, at our behavioral health care facilities on a same facility basis, adjusted admissions increased 3.8% while adjusted patient days increased 1.0%, as compared to

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the first nine months of 2012. Net revenues at these facilities increased 3.0% during the nine-month period ended September 30, 2013, as compared to the comparable period in 2012. At these facilities, net revenue per adjusted admission decreased 0.8% while net revenue per adjusted patient day increased 2.0% during the first nine months of 2013 over the comparable period in 2012. The operating margin at our behavioral health care facilities owned during both periods increased to 28.2% during the nine-month period ended September 30, 2013, as compared to 27.8% during the comparable period in 2012.

Accounting for HITECH Act incentive income and EHR expenses:

The health information technology provisions of the American Recovery and Reinvestment Act (referred to as the “HITECH Act”) established criteria related to the “meaningful use” of electronic health records (“EHR”) for acute care hospitals and established requirements for the Medicare and Medicaid EHR payment incentive programs.

During 2011, we began implementing EHR applications at certain of our acute care hospitals and continued to do so, on a hospital-by-hospital basis, until completion which occurred at the end of June, 2013. Our acute care hospitals are eligible for Medicare and Medicaid EHR incentive payments upon implementation of the EHR application, once they have demonstrated meaningful use of certified EHR technology for the applicable stage or have completed attestations to their adoption or implementation of certified EHR technology. With the exception of the newly constructed and recently opened Temecula Valley Hospital (as discussed below), we believe that all of our acute care hospitals have met the stage 1, year one meaningful use criteria.

As reflected on the Supplemental Schedule, in connection with the implementation of EHR applications, our consolidated results of operations include the net favorable after-tax impact of $5.1 million ($8.2 million pre-tax) during the third quarter of 2013 and $1.3 million ($2.2 million pre-tax) during the third quarter of 2012. In connection with the implementation of EHR applications, our consolidated results of operations include the net unfavorable after-tax impact of $127,000 ($203,000 pre-tax) during the first nine months of 2013 and $3.6 million ($5.9 million pre-tax) during the comparable nine-month period of 2012.

2013 Full Year Guidance Increase:

Based upon the operating trends and financial results experienced during the first nine months of 2013, we are increasing our estimated range of adjusted net income attributable to UHS, for the year ended December 31, 2013, to $4.52 to $4.58 per diluted share. This revised guidance, which excludes the expected net favorable EHR impact for the year as well as the impact of the other item reflected on the Supplemental Schedule for the nine months ended September 30, 2013, represents an increase of approximately 2% to 4% from the previously provided range of $4.35 to $4.50 per diluted share.

This guidance range also excludes the impact of future items, if applicable, 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 settlements, legal judgments and lawsuits and other material amounts that may be reflected in our financial statements that relate to prior periods. 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.

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Opening of the newly constructed Temecula Valley Hospital:

In October, 2013, we opened the newly constructed Temecula Valley Hospital, an acute care facility located in Temecula, California. With 140 private patient rooms, Temecula Valley Hospital offers emergency care, advanced cardiac and stroke care, orthopedics and general medical care, along with surgical specialties. The new hospital is our fourth located in Riverside County, which is one of the fastest-growing counties in the United States.

Conference call information:

We will hold a conference call for investors and analysts at 10:00 a.m. eastern time on October 30, 2013. 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. A replay of the call will follow shortly after conclusion of the live call and will be available for one full year.

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

Universal Health Services, Inc. (“UHS”) is one of the nation’s largest hospital companies, operating acute care and behavioral health hospitals and ambulatory centers nationwide and in Puerto Rico and the U.S. Virgin Islands. 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, 2012 and in Item 2-Forward-Looking Statements and Risk Factors in our Form 10-Q for the quarterly period ended June 30, 2013), may cause the results to differ materially from those anticipated in the forward-looking statements. The operating pressures that we continue to experience in many of our acute care markets has increased the volatility of our financial results making estimation of future results more challenging. 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.

As mentioned above, our acute care hospitals are eligible for Medicare and Medicaid EHR incentive payments upon implementation of the EHR application, once they have demonstrated meaningful use of certified EHR technology for the applicable stage or have completed attestations to their adoption or implementation of certified EHR technology. However, there may be timing differences in the recognition of the incentive income and expenses recorded in connection with the implementation of the EHR application which may cause material period-to-period changes in our future results of operations. Hospitals that do not qualify as a meaningful user of EHR by 2015 are subject to a reduced market basket update to the inpatient prospective payment system standardized amount in 2015 and each subsequent fiscal year. Although we believe that our acute care hospitals will be in compliance with the EHR standards by 2015, there can be no assurance that all of our facilities will be in compliance and therefore not subject to the penalty provision of the HITECH Act.

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We believe that operating income, operating margin, adjusted net income attributable to UHS, adjusted net income attributable to UHS per diluted share and earnings before interest, taxes, depreciation and amortization (“EBITDA”), 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 nonrecurring or non-operational in nature including items such as, but not limited to, costs related to extinguishment of debt, gains on sales of assets and businesses, reserves for settlements, legal judgments and lawsuits and other amounts that may be 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, 2012 and report on Form 10-Q for the quarterly period ended June 30, 2013. 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)

(unaudited)

 

		Three months ended September 30,								Nine months ended September 30,
		2013				2012				2013				2012
Net revenues before provision for doubtful accounts		$	2,134,740			$	1,869,263			$	6,294,750			$	5,718,676
Less: Provision for doubtful accounts			318,371				188,910				811,774				522,203
Net revenues			1,816,369				1,680,353				5,482,976				5,196,473
Operating charges:
Salaries, wages and benefits			903,212				838,075				2,702,842				2,565,052
Other operating expenses			393,549				362,687				1,100,118				1,059,048
Supplies expense			206,995				191,747				613,981				594,924
Depreciation and amortization			86,971				77,032				248,465				221,807
Lease and rental expense			23,904				23,481				72,651				70,906
Electronic health records incentive income			(23,148	)			(10,551	)			(27,943	)			(12,506	)
Costs related to extinguishment of debt			0				29,170				0				29,170
			1,591,483				1,511,641				4,710,114				4,528,401
Income from operations			224,886				168,712				772,862				668,072
Interest expense, net			32,314				45,207				110,488				137,805
Income before income taxes			192,572				123,505				662,374				530,267
Provision for income taxes			69,473				42,132				241,537				188,880
Net income			123,099				81,373				420,837				341,387
Less: Income attributable to noncontrolling interests			8,512				9,556				34,625				33,402
Net income attributable to UHS		$	114,587			$	71,817			$	386,212			$	307,985
Basic earnings per share attributable to UHS (a)		$	1.17			$	0.74			$	3.94			$	3.18
Diluted earnings per share attributable to UHS (a)		$	1.15			$	0.73			$	3.89			$	3.15

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Universal Health Services, Inc.

Footnotes to Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)

 

		Three months ended September 30,								Nine months ended September 30,
		2013				2012				2013				2012
(a) Earnings per share calculation:
Basic and diluted:
Net income attributable to UHS		$	114,587			$	71,817			$	386,212			$	307,985
Less: Net income attributable to unvested restricted share grants			(43	)			(85	)			(200	)			(379	)
Net income attributable to UHS - basic and diluted		$	114,544			$	71,732			$	386,012			$	307,606
Weighted average number of common shares - basic			98,151				96,817				97,965				96,701
Basic earnings per share attributable to UHS:		$	1.17			$	0.74			$	3.94			$	3.18
Weighted average number of common shares			98,151				96,817				97,965				96,701
Add: Other share equivalents			1,436				794				1,158				1,010
Weighted average number of common shares and equiv. - diluted			99,587				97,611				99,123				97,711
Diluted earnings per share attributable to UHS:		$	1.15			$	0.73			$	3.89			$	3.15

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Universal Health Services, Inc.

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

For the three months ended September 30, 2013 and 2012

(in thousands, except per share amounts)

(unaudited)

Calculation of “EBITDA”

 

		Three months ended September 30, 2013								Three months ended September 30, 2012
Net revenues before provision for doubtful accounts		$	2,134,740							$	1,869,263
Less: Provision for doubtful accounts			318,371								188,910
Net revenues			1,816,369				100.0	%			1,680,353				100.0	%
Operating charges:
Salaries, wages and benefits			903,212				49.7	%			838,075				49.9	%
Other operating expenses			393,549				21.7	%			362,687				21.6	%
Supplies expense			206,995				11.4	%			191,747				11.4	%
EHR incentive income			(23,148	)			-1.3	%			(10,551	)			-0.6	%
			1,480,608				81.5	%			1,381,958				82.2	%
Operating income/margin (“EBITDAR”)			335,761				18.5	%			298,395				17.8	%
Lease and rental expense			23,904								23,481
Income attributable to noncontrolling interests			8,512								9,556
Earnings before, depreciation and amortization, interest expense, and income taxes (“EBITDA”)			303,345				16.7	%			265,358				15.8	%
Depreciation and amortization			86,971								77,032
Costs related to extinguishment of debt			0								29,170
Interest expense, net			32,314								45,207
Income before income taxes			184,060								113,949
Provision for income taxes			69,473								42,132
Net income attributable to UHS		$	114,587							$	71,817

Calculation of Adjusted Net Income Attributable to UHS

 

		Three months ended September 30, 2013								Three months ended September 30, 2012
		Amount				Per Diluted Share				Amount				Per Diluted Share
Calculation of Adjusted Net Income Attributable to UHS - including and excluding EHR impact:
Net income attributable to UHS		$	114,587			$	1.15			$	71,817			$	0.73
Plus/minus adjustments:
Costs related to extinguishment of debt, net of income taxes			—				—				18,126				0.19
Adjusted net income attributable to UHS - including Electronic Health Records (“EHR”) impact		$	114,587			$	1.15			$	89,943			$	0.92
Plus/minus impact of EHR implementation:
EHR-related incentive income, pre-tax			(23,148	)							(10,551	)
EHR-related salaries, wages and benefits, pre-tax			4,753								2,779
EHR-related other operating costs, pre-tax			(893	)							(82	)
EHR-related depreciation & amortization, pre-tax			10,916								4,575
EHR-related minority interest in earnings of consolidated entities, pre-tax			147								1,122
Income tax provision on EHR-related items			3,098								817
After-tax impact of EHR-related items			(5,127	)			(0.05	)			(1,340	)			(0.01	)
Adjusted net income attributable to UHS		$	109,460			$	1.10			$	88,603				0.91

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Universal Health Services, Inc.

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

For the nine months ended September 30, 2013 and 2012

(in thousands, except per share amounts)

(unaudited)

Calculation of “EBITDA”

 

		Nine months ended September 30, 2013								Nine months ended September 30, 2012
Net revenues before provision for doubtful accounts		$	6,294,750							$	5,718,676
Less: Provision for doubtful accounts			811,774								522,203
Net revenues			5,482,976				100.0	%			5,196,473				100.0	%
Operating charges:
Salaries, wages and benefits			2,702,842				49.3	%			2,565,052				49.4	%
Other operating expenses			1,100,118				20.1	%			1,059,048				20.4	%
Supplies expense			613,981				11.2	%			594,924				11.4	%
EHR incentive income			(27,943	)			-0.5	%			(12,506	)			-0.2	%
			4,388,998				80.0	%			4,206,518				80.9	%
Operating income/margin (“EBITDAR”)			1,093,978				20.0	%			989,955				19.1	%
Lease and rental expense			72,651								70,906
Income attributable to noncontrolling interests			34,625								33,402
Earnings before, depreciation and amortization, interest expense, and income taxes (“EBITDA”)			986,702				18.0	%			885,647				17.0	%
Depreciation and amortization			248,465								221,807
Costs related to extinguishment of debt			0								29,170
Interest expense, net			110,488								137,805
Income before income taxes			627,749								496,865
Provision for income taxes			241,537								188,880
Net income attributable to UHS		$	386,212							$	307,985

Calculation of Adjusted Net Income Attributable to UHS

 

		Nine months ended September 30, 2013								Nine months ended September 30, 2012
		Amount				Per Diluted Share				Amount				Per Diluted Share
Calculation of Adjusted Net Income Attributable to UHS - including and excluding EHR impact:
Net income attributable to UHS		$	386,212			$	3.89			$	307,985			$	3.15
Plus/minus adjustments:
Reduction of reserves relating to prior years for professional and general liability self-insured claims, net of income taxes			(37,826	)							—
Medicare Rural Floor settlement, net of income taxes			—								(18,753	)
Oklahoma SHOPP Medicaid reimbursements related to prior years, net of income taxes			—								(4,329	)
Impact of revised SSI ratios and write-off Florida county receivables, net of income taxes			—								5,149
Net Medicaid reimbursements related to prior years, net of income taxes			—								(3,417	)
Costs related to extinguishment of debt, net of income taxes			—				—				18,126
Subtotal after-tax adjustments to net income attributable to UHS			(37,826	)			(0.38	)			(3,224	)			(0.03	)
Adjusted net income attributable to UHS - including Electronic Health Records (“EHR”) impact		$	348,386			$	3.51			$	304,761			$	3.12
Plus/minus impact of EHR implementation:
EHR-related incentive income, pre-tax			(27,943	)							(12,506	)
EHR-related salaries, wages and benefits, pre-tax			4,991								10,722
EHR-related other operating costs, pre-tax			1,125								314
EHR-related depreciation & amortization, pre-tax			23,408								8,102
EHR-related minority interest in earnings of consolidated entities, pre-tax			(1,378	)							(775	)
Income tax provision on EHR-related items			(76	)							(2,217	)
After-tax impact of EHR-related items			127				—				3,640				0.03
Adjusted net income attributable to UHS		$	348,513			$	3.51			$	308,401			$	3.15

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Universal Health Services, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

 

		Three months ended September 30,								Nine months ended September 30,
		2013				2012				2013				2012
Net income		$	123,099			$	81,373			$	420,837			$	341,387
Other comprehensive income (loss):
Unrealized derivative gains (loss) on cash flow hedges			3,054				(45	)			12,871				1,782
Amortization of terminated hedge			(84	)			(84	)			(252	)			(252	)
Other comprehensive (loss) income before tax			2,970				(129	)			12,619				1,530
Income tax (benefit) expense related to items of other comprehensive income (loss)			1,120				(47	)			4,758				585
Total other comprehensive (loss) income, net of tax			1,850				(82	)			7,861				945
Comprehensive income			124,949				81,291				428,698				342,332
Less: Comprehensive income attributable to noncontrolling interests			8,512				9,556				34,625				33,402
Comprehensive income attributable to UHS		$	116,437			$	71,735			$	394,073			$	308,930

---

Universal Health Services, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

		September 30, 2013				December 31, 2012
Assets
Current assets:
Cash and cash equivalents		$	12,122			$	23,471
Accounts receivable, net			1,166,514				1,067,197
Supplies			101,249				99,000
Deferred income taxes			132,624				104,461
Other current assets			90,771				87,936
Assets of facilities held for sale			0				25,431
Total current assets			1,503,280				1,407,496
Property and equipment			5,610,076				5,368,345
Less: accumulated depreciation			(2,185,175	)			(1,986,110	)
			3,424,901				3,382,235
Other assets:
Goodwill			3,039,169				3,036,765
Deferred charges			62,619				75,888
Other			321,774				298,459
		$	8,351,743			$	8,200,843
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt		$	88,292			$	2,589
Accounts payable and accrued liabilities			926,768				889,557
Federal and state taxes			9,257				1,062
Liabilities of facilities held for sale			0				850
Total current liabilities			1,024,317				894,058
Other noncurrent liabilities			320,214				395,355
Long-term debt			3,411,635				3,727,431
Deferred income taxes			215,026				183,747
Redeemable noncontrolling interest			218,080				234,303
UHS common stockholders’ equity			3,110,778				2,713,345
Noncontrolling interest			51,693				52,604
Total equity			3,162,471				2,765,949
		$	8,351,743			$	8,200,843

---

Universal Health Services, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

		Nine months ended September 30,
		2013				2012
Cash Flows from Operating Activities:
Net income		$	420,837			$	341,387
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation & amortization			248,648				227,641
Stock-based compensation expense			20,072				16,189
Gains on sales of assets and business, net of losses			(2,973	)			(945	)
Costs related to extinguishment of debt			0				29,170
Changes in assets & liabilities, net of effects from acquisitions and dispositions:
Accounts receivable			(99,261	)			(86,821	)
Accrued interest			10,376				11,901
Accrued and deferred income taxes			20,918				(260	)
Other working capital accounts			10,313				(42,916	)
Other assets and deferred charges			13,425				25,959
Other			5,792				5,833
Accrued insurance expense, net of commercial premiums paid			(1,406	)			66,752
Payments made in settlement of self-insurance claims			(55,009	)			(58,884	)
Net cash provided by operating activities			591,732				535,006
Cash Flows from Investing Activities:
Property and equipment additions, net of disposals			(279,751	)			(282,191	)
Proceeds received from sale of assets and businesses			37,118				56,194
Acquisition of property and businesses			(1,320	)			(25,092	)
Costs incurred for purchase and implementation of electronic health records application			(42,353	)			(41,854	)
Return of deposit on terminated purchase agreement			0				6,500
Net cash used in investing activities			(286,306	)			(286,443	)
Cash Flows from Financing Activities:
Reduction of long-term debt			(234,231	)			(1,127,829	)
Additional borrowings			1,500				906,000
Financing costs			0				(8,257	)
Repurchase of common shares			(22,186	)			(9,676	)
Dividends paid			(14,706	)			(14,519	)
Issuance of common stock			4,096				3,828
Profit distributions to noncontrolling interests			(51,248	)			(13,687	)
Net cash used in financing activities			(316,775	)			(264,140	)
Decrease in cash and cash equivalents			(11,349	)			(15,577	)
Cash and cash equivalents, beginning of period			23,471				41,229
Cash and cash equivalents, end of period		$	12,122			$	25,652
Supplemental Disclosures of Cash Flow Information:
Interest paid		$	88,430			$	104,560
Income taxes paid, net of refunds		$	218,290			$	187,899

---

Universal Health Services, Inc.

Supplemental Statistical Information

(un-audited)

Same Facility:

 

		% Change Quarter Ended 9/30/2013				% Change 9 months ended 9/30/2013
Acute Care Hospitals
Revenues			6.6	%			4.6	%
Adjusted Admissions			3.6	%			1.3	%
Adjusted Patient Days			4.1	%			1.8	%
Revenue Per Adjusted Admission			2.9	%			3.3	%
Revenue Per Adjusted Patient Day			2.5	%			2.8	%
Behavioral Health Hospitals
Revenues			3.4	%			3.0	%
Adjusted Admissions			5.8	%			3.8	%
Adjusted Patient Days			1.5	%			1.0	%
Revenue Per Adjusted Admission			-2.2	%			-0.8	%
Revenue Per Adjusted Patient Day			1.9	%			2.0	%

UHS Consolidated

 

		Third Quarter Ended								Nine months Ended
		9/30/2013				9/30/2012				9/30/2013				9/30/2012
Revenues		$	1,816,369			$	1,680,353			$	5,482,976			$	5,196,473
EBITDA (1)			303,345				265,358				986,702				885,647
EBITDA Margin (1)			16.7	%			15.8	%			18.0	%			17.0	%
Cash Flow From Operations			185,730				162,144				591,732				535,006
Days Sales Outstanding			59				57				58				55
Capital Expenditures			103,807				99,840				279,751				282,191
Debt											3,499,927				3,443,461
Shareholders Equity											3,110,778				2,608,782
Debt / Total Capitalization											52.9	%			56.9	%
Debt / EBITDA (2)											2.63				2.96
Debt / Cash From Operations (2)											4.01				4.99
Acute Care EBITDAR Margin (3)			12.8	%			13.4	%			15.1	%			16.2	%
Behavioral Health EBITDAR Margin (3)			27.5	%			27.9	%			28.2	%			27.8	%

 

(1)	Net of Minority Interest

(2)	Latest 4 quarters

(3)	Same facility basis, before Corporate overhead allocation and minority interest

---

UNIVERSAL HEALTH SERVICES, INC.

SELECTED HOSPITAL STATISTICS

FOR THE THREE MONTHS ENDED

SEPTEMBER 30, 2013 AND 2012

AS REPORTED:

 

		ACUTE (1)												BEHAVIORAL HEALTH
		09/30/13				09/30/12				% change				09/30/13				09/30/12				% change
Hospitals owned and leased			23				23				0.0	%			182				176				3.4	%
Average licensed beds			5,617				5,545				1.3	%			19,930				19,177				3.9	%
Patient days			272,905				265,043				3.0	%			1,331,234				1,289,975				3.2	%
Average daily census			2,966.4				2,880.9				3.0	%			14,469.9				14,021.5				3.2	%
Occupancy-licensed beds			52.8	%			52.0	%			1.6	%			72.6	%			73.1	%			-0.7	%
Admissions			61,155				59,643				2.5	%			101,183				91,520				10.6	%
Length of stay			4.5				4.4				0.4	%			13.2				14.1				-6.7	%
Inpatient revenue		$	3,296,484			$	3,013,482				9.4	%		$	1,567,436			$	1,410,170				11.2	%
Outpatient revenue			1,712,290				1,517,261				12.9	%			179,783				151,788				18.4	%
Total patient revenue			5,008,774				4,530,743				10.6	%			1,747,219				1,561,958				11.9	%
Other revenue			33,912				25,006				35.6	%			33,921				36,303				-6.6	%
Gross hospital revenue			5,042,686				4,555,749				10.7	%			1,781,140				1,598,261				11.4	%
Total deductions			3,852,278				3,560,780				8.2	%			845,786				734,266				15.2	%
Net hospital revenue before provision for doubtful accounts		$	1,190,408			$	994,969				19.6	%		$	935,354			$	863,995				8.3	%
Provision for doubtful accounts		$	290,875			$	166,570				74.6	%		$	27,419			$	22,326				22.8	%
Net hospital revenue			899,533				828,399				8.6	%			907,935				841,669				7.9	%

SAME FACILITY:

 

		ACUTE (1)												BEHAVIORAL HEALTH (2)
		09/30/13				09/30/12				% change				09/30/13				09/30/12				% change
Hospitals owned and leased			23				23				0.0	%			171				171				0.0	%
Average licensed beds			5,617				5,545				1.3	%			18,490				18,411				0.4	%
Patient days			272,905				265,043				3.0	%			1,253,270				1,240,510				1.0	%
Average daily census			2,966.4				2,880.9				3.0	%			13,622.5				13,483.8				1.0	%
Occupancy-licensed beds			52.8	%			52.0	%			1.6	%			73.7	%			73.2	%			0.6	%
Admissions			61,155				59,643				2.5	%			95,630				90,841				5.3	%
Length of stay			4.5				4.4				0.5	%			13.1				13.7				-4.0	%

 

(1)	Auburn is excluded in both current and prior years.

(2)

Jefferson Trail, Manatee Palms Group Homes, the Peaks, San Juan Capestrano, Keys of Carolina, Garfield Park and Austin Oaks are excluded in both current and prior years. Brook Glen is include in in both current and prior years from March 1st through September 30th. John Costigan Ctr and Community BH is excluded in both current and prior years from June 1st through September 30th. Bristol Youth Academy, Gulf Coast Treatment Center and Okalooa Youth Academy is excluded in both current and prior years from July 1st through September 30th.

---

UNIVERSAL HEALTH SERVICES, INC.

SELECTED HOSPITAL STATISTICS

FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2013 AND 2012

AS REPORTED:

 

		ACUTE (1)												BEHAVIORAL HEALTH
		09/30/13				09/30/12				% change				09/30/13				09/30/12				% change
Hospitals owned and leased			23				23				0.0	%			182				176
Average licensed beds			5,617				5,544				1.3	%			19,979				19,152				4.3	%
Patient days			836,355				825,781				1.3	%			4,055,171				3,905,070				3.8	%
Average daily census			3,063.6				3,013.8				1.7	%			14,854.1				14,252.1				4.2	%
Occupancy-licensed beds			54.5	%			54.4	%			0.3	%			74.3	%			74.4	%			-0.1	%
Admissions			185,591				184,021				0.9	%			304,305				279,231				9.0	%
Length of stay			4.5				4.5				0.4	%			13.3				14.0				-4.7	%
Inpatient revenue		$	10,124,908			$	9,326,344				8.6	%		$	4,741,967			$	4,242,528				11.8	%
Outpatient revenue			5,072,065				4,606,680				10.1	%			559,288				474,623				17.8	%
Total patient revenue			15,196,973				13,933,024				9.1	%			5,301,255				4,717,151				12.4	%
Other revenue			95,784				68,827				39.2	%			95,908				109,273				-12.2	%
Gross hospital revenue			15,292,757				14,001,851				9.2	%			5,397,163				4,826,424				11.8	%
Total deductions			11,864,873				10,947,246				8.4	%			2,563,604				2,188,024				17.2	%
Net hospital revenue before provision for doubtful accounts		$	3,427,884			$	3,054,605				12.2	%		$	2,833,559			$	2,638,400				7.4	%
Provision for doubtful accounts		$	724,971			$	456,078				59.0	%		$	86,610			$	66,144				30.9	%
Net hospital revenue			2,702,913				2,598,527				4.0	%			2,746,949				2,572,256				6.8	%

SAME FACILITY:

 

		ACUTE (1)												BEHAVIORAL HEALTH (2)
		09/30/13				09/30/12				% change				09/30/13				09/30/12				% change
Hospitals owned and leased			23				23				0.0	%			172				172				0.0	%
Average licensed beds			5,617				5,544				1.3	%			18,819				18,689				0.7	%
Patient days			836,355				825,781				1.3	%			3,846,843				3,817,258				0.8	%
Average daily census			3,063.6				3,013.8				1.7	%			14,091.0				13,931.6				1.1	%
Occupancy-licensed beds			54.5	%			54.4	%			0.3	%			74.9	%			74.5	%			0.4	%
Admissions			185,591				184,021				0.9	%			286,973				276,938				3.6	%
Length of stay			4.5				4.5				0.4	%			13.4				13.8				-2.7	%

 

(1)	Auburn is excluded in both current and prior years.

(2)

Jefferson Trail, Manatee Palms Group Homes, the Peaks, San Juan Capestrano, Keys of Carolina, Garfield Park and Austin Oaks are excluded in both current and prior years. Brook Glen is include in in both current and prior years from March 1st through September 30th. John Costigan Ctr and Community BH is excluded in both current and prior years from June 1st through September 30th. Bristol Youth Academy, Gulf Coast Treatment Center and Okalooa Youth Academy is excluded in both current and prior years from July 1st through September 30th.