1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-10454
UNIVERSAL HEALTH SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23-2077891
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) 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
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common shares outstanding, as
of April 30, 1998:
Class A 2,059,927
Class B 30,376,281
Class C 207,230
Class D 31,286
Page One of Thirteen Pages
2
UNIVERSAL HEALTH SERVICES, INC.
INDEX
PART I. FINANCIAL INFORMATION.................................................... PAGE NO.
--------
Item 1. Financial Statements
Consolidated Statements of Income -
Three Months Ended March 31, 1998 and 1997.................................. Three
Condensed Consolidated Balance Sheets - March 31, 1998
and December 31, 1997....................................................... Four
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997.................................. Five
Notes to Condensed Consolidated Financial Statements........................... Six & Seven
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................... Eight, Nine, Ten & Eleven
PART II. OTHER INFORMATION....................................................... Twelve
SIGNATURE......................................................................... Thirteen
Page Two of Thirteen Pages
3
PART I. FINANCIAL INFORMATION
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(000s omitted except per share amounts)
(unaudited)
THREE MONTHS
ENDED MARCH 31,
--------------------------
1998 1997
--------------------------
Net revenues $ 463,117 $ 340,170
Operating charges:
Operating expenses 180,951 130,056
Salaries and wages 161,125 119,747
Provision for doubtful accounts 37,266 23,663
Depreciation and amortization 24,436 19,028
Lease and rental expense 11,405 9,121
Interest expense, net 6,307 4,956
--------- ---------
421,490 306,571
--------- ---------
Income before minority interests and income taxes 41,627 33,599
Minority interests in earnings of consolidated entities 1,748 (382)
--------- ---------
Income before income taxes 39,879 33,981
Provision for income taxes 14,229 12,451
--------- ---------
NET INCOME $ 25,650 $ 21,530
========= =========
Earnings per common share - basic $ 0.79 $ 0.67
========= =========
Earnings per common share - diluted $ 0.77 $ 0.65
========= =========
Weighted average number of common shares - basic 32,516 32,218
Weighted average number of common share equivalents 794 749
--------- ---------
Weighted average number of common shares and equivalents - diluted 33,310 32,967
========= =========
See accompanying notes to these condensed consolidated financial statements.
Page Three of Thirteen Pages
4
UNIVERSAL HEALTH SERVICES,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted)
MARCH 31, DECEMBER 31,
--------- ------------
1998 1997
---- ----
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,379 $ 332
Accounts receivable, net 259,679 180,252
Supplies 36,397 28,214
Deferred income taxes 9,760 11,105
Other current assets 14,063 10,119
----------- -----------
Total current assets 328,278 230,022
----------- -----------
Property and equipment 1,129,810 950,961
Less: accumulated depreciation (346,908) (328,881)
----------- -----------
782,902 622,080
Funds restricted for construction 41,600 41,031
----------- -----------
824,502 663,111
----------- -----------
OTHER ASSETS:
Excess of cost over fair value of net
assets acquired 268,313 149,814
Deferred charges 12,588 10,852
Other 31,023 31,550
----------- -----------
311,924 192,216
----------- -----------
$ 1,464,704 $ 1,085,349
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 5,853 $ 5,655
Accounts payable and accrued liabilities 192,487 153,094
Federal and state taxes 5,330 1,707
----------- -----------
Total current liabilities 203,670 160,456
----------- -----------
Other noncurrent liabilities 222,186 125,286
----------- -----------
Long-term debt, net of current maturities 419,458 272,466
----------- -----------
Deferred Income taxes 22,981 534
----------- -----------
COMMON STOCKHOLDERS' EQUITY:
Class A Common Stock, 2,059,929 shares
outstanding in 1998, 2,059,929 in 1997 21 21
Class B Common Stock, 30,366,960 shares
outstanding in 1998, 30,122,479 in 1997 304 301
Class C Common Stock, 207,230 shares
outstanding in 1998, 207,230 in 1997 2 2
Class D Common Stock, 31,559 shares
outstanding in 1998, 32,063 in 1997 -- --
Capital in excess of par, net of deferred
compensation of $401,000 in 1998
and $295,000 in 1997 210,635 200,656
Retained earnings 385,447 325,627
----------- -----------
596,409 526,607
----------- -----------
$ 1,464,704 $ 1,085,349
=========== ===========
See accompanying notes to these condensed consolidated financial statements.
Page Four of Thirteen Pages
5
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
------------------
MARCH 31,
---------
1998 1997
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 25,650 $ 21,530
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization 24,436 19,028
Provision for self-insurance reserves 1,324 4,516
Changes in assets & liabilities, net of effects from
acquisitions and dispositions:
Accounts receivable (23,430) (9,588)
Accrued interest (1,683) (3,159)
Accrued and deferred income taxes 10,144 12,070
Other working capital accounts 16,295 7,916
Other assets and deferred charges (3,114) (1,929)
Other (1,633) 983
Payments made in settlement of self-insurance claims (2,243) (2,354)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 45,746 49,013
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions, net (19,974) (30,558)
Proceeds received from partial sale transaction 23,084 --
Acquisition of business (186,080) --
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (182,970) (30,558)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term debt -- (17,488)
Additional borrowings 144,144 --
Issuance of common stock 1,127 1,026
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 145,271 (16,462)
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 8,047 1,993
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 332 288
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,379 $ 2,281
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 7,990 $ 8,115
========= =========
Income taxes paid, net of refunds $ 4,085 $ 381
========= =========
See accompanying notes to these condensed consolidated financial statements.
Page Five of Thirteen Pages
6
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
The consolidated financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission and reflect all adjustments which, in the opinion of the
Company, are necessary to fairly present results for the interim periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the accompanying disclosures are adequate to make the
information presented not misleading. It is suggested that these financial
statements be read in conjunction with the financial statements, accounting
policies and the notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
Certain prior year amounts have been reclassified to conform with current year
financial statement presentation.
(2) EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share" (SFAS 128). SFAS 128 establishes standards for
computing and presenting earnings per share (EPS). Basic earnings per share are
based on the weighted average number of common shares outstanding during the
year. Diluted earnings per share are based on the weighted average number of
common shares outstanding during the year adjusted to give effect to common
stock equivalents. The per share amounts for the three months ended March 31,
1997 have been restated to conform to SFAS 128.
(3) OTHER LIABILITIES
Other noncurrent liabilities include the long-term portion of the Company's
professional and general liability and workers' compensation reserves. Effective
January 1, 1998, the Company is covered under commercial insurance policies
which provide for a self-insured retention limit for professional and general
liability claims for most of its subsidiaries up to $1 million per occurrence,
with an average annual aggregate for covered subsidiaries of $4 million through
2001. These subsidiaries maintain excess coverage up to $100 million with major
insurance carriers. The Company's remaining facilities are fully insured under
commercial policies with excess coverage up to $100 million maintained with
major insurance carriers. During 1996 and 1997, most of the Company's
subsidiaries were self-insured for professional and general liability claims up
to $5 million per occurrence, with excess coverage maintained up to $100 million
with major insurance carriers.
(4) COMMITMENT AND CONTINGENCIES
Under certain agreements, the Company has committed or guaranteed an aggregate
of $53 million related principally to the Company's self-insurance programs and
as support for various debt instruments and loan guarantees, including a $40
million letter of credit related to the Company's 1997 acquisition of an 80%
interest in The George Washington University Hospital.
Page Six of Thirteen Pages
7
(5) ACQUISITIONS
During the first quarter of 1998, the Company acquired three hospitals located
in Puerto Rico for an aggregate purchase price of $186 million. The hospitals
acquired are located in Bayamon (430-beds), Rio Piedras (160-beds) and Fajardo
(180-beds).
In addition, the Company contributed substantially all of the assets,
liabilities and operations of Valley Hospital Medical Center, a 417-bed acute
care facility, and its newly-constructed Summerlin Hospital, a 148-bed acute
care facility for a 72.5% interest in a series of newly-formed limited liability
companies ("LLCs"). Quorum Health Group, Inc. ("Quorum") holds the remaining
interest in the LLCs. Quorum obtained its 27.5% interest by contributing
substantially all of the assets, liabilities and operations of Desert Springs
Hospital, a 241-bed acute care facility, and $23 million in cash to the LLCs. As
a result of this partial sale transaction, the Company recorded a pre-tax gain
of approximately $55 million ($34 million after-tax) that was recorded as a
capital contribution to the Company in accordance with the Securities and
Exchange Commission's Staff Accounting Bulletin No. 51. The Company does not
expect this transaction to have a material impact on its 1998 results of
operations.
Page Seven of Thirteen Pages
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
Net revenues increased 36% to $463 million for the three months ended March 31,
1998 as compared to $340 million for the three months ended March 31, 1997. The
$123 million increase in net revenues during the 1998 first quarter as compared
to the comparable 1997 quarter was due primarily to: (i) the acquisition of an
80% interest in a 501-bed acute care facility during the third quarter of 1997,
the opening of a newly constructed 148-bed acute care facility which opened
during the fourth quarter of 1997 and four acute care facilities acquired during
the first quarter of 1998 (see Note 5) ($88 million), and; (ii) revenue growth
at acute care and behavioral health care facilities owned during both periods
($25 million).
Earnings before interest, income taxes, depreciation, amortization, lease and
rental expense and minority interests in earnings of consolidated entities
(EBITDAR) increased 26% or $17 million to $84 million for the three months ended
March 31, 1998 as compared to $67 million during the three months ended March
31, 1997. Overall operating margins were 18.1% during the 1998 first quarter as
compared to 19.6% during the 1997 comparable quarter. The decrease in the
Company's overall operating margin in 1998 first quarter as compared to 1997
first quarter was due primarily to lower operating margins at the acute care
facilities acquired within the last twelve months and the opening of a newly
constructed 129-bed acute care facility located in Edinburg, Texas during the
third quarter of 1997 and the opening of a newly constructed 148-bed acute care
facility in Summerlin, Nevada which opened during the fourth quarter of 1997.
ACUTE CARE SERVICES
Net revenues from the Company's acute care hospitals, ambulatory treatment
centers and specialized women's health centers accounted for 88% and 85% of
consolidated net revenues for the three months ended March 31, 1998 and 1997,
respectively. Net revenues at the Company's acute care facilities owned in both
periods increased 8% in the 1998 first quarter as compared to the 1997 first
quarter due primarily to an increase in admissions and patient days at these
facilities. Inpatient admissions and patient days at these facilities increased
6% and 2%, respectively, during the first quarter of 1998 over the comparable
prior year period while the average length of stay decreased 4% to 4.8 days
during the three months ended March 31, 1998 as compared to 5.0 days during the
three months ended March 31, 1997.
The decrease in the average length of stay at the Company's facilities during
the past three years was due primarily to improvement in case management of
Medicare and Medicaid patients and an increasing shift of patients into managed
care plans which generally have lower lengths of stay. In addition to an
increase in inpatient admissions and patient days, the Company's outpatient
activity continues to increase as gross outpatient revenues at acute care
facilities owned during both periods increased 12% for the three months ended
March 31, 1998 as compared to the comparable 1997 period and comprised 25% of
the Company's acute care gross patient revenues in both periods.
Page Eight of Thirteen Pages
9
The increase in outpatient revenues is primarily the result of advances in
medical technologies and pharmaceutical improvements, which allow more services
to be provided on an outpatient basis, and increased pressure from Medicare,
Medicaid, health maintenance organizations (HMOs), preferred provider
organizations (PPOs) and insurers to reduce hospital stays and provide services,
where possible, on a less expensive outpatient basis. The hospital industry in
the United States as well as the Company's acute care facilities continue to
have significant unused capacity which has created substantial competition for
patients. Inpatient utilization continues to be negatively affected by
payor-required, pre-admission authorization and by payor pressure to maximize
outpatient and alternative healthcare delivery services for less acutely ill
patients. The Company expects the increased competition, admission constraints
and payor pressures to continue.
BEHAVIORAL HEALTH SERVICES
Net revenues from the Company's behavioral health facilities accounted for 12%
of consolidated net revenues for the three months ended March 31, 1998 and 14%
of consolidated net revenues for the three months ended March 31, 1997. Net
revenues at the Company's behavioral health facilities owned in both periods
increased 8% in the 1998 first quarter as compared to the 1997 first quarter.
Admissions at these facilities increased 11% during the three month period ended
March 31, 1998 as compared to the comparable prior year period. Patient days at
the Company's behavioral health facilities owned during both periods increased
6% in the 1998 first quarter as compared to the 1997 first quarter and the
average length of stay decreased 5% to 11.0 days in the 1998 quarter as compared
to 11.6 days in the 1997 quarter.
The continued reduction in the average length of stay is a result of changing
practices in the delivery of behavioral health services and continued cost
containment pressures from payors which includes a greater emphasis on the
utilization of outpatient services. Management of the Company has responded to
these trends by continuing to develop and market new outpatient treatment
programs. The shift to outpatient care is reflected in higher revenues from
outpatient services, as gross outpatient revenues at the Company's behavioral
health services facilities owned in both periods increased 10% in the 1998 first
quarter as compared to the comparable 1997 quarter and comprised 18% of
behavioral health gross patient revenues in both periods.
OTHER OPERATING RESULTS
The Company recorded minority interest expense/(income) in earnings/losses of
consolidated entities amounting to $1.7 million for the three months ended March
31, 1998 and ($400,000) for the three months ended March 31, 1997. The minority
interest expense recorded during the 1998 quarter includes the minority
ownership share of three acute care facilities located in Las Vegas, Nevada, The
George Washington University Hospital in Washington, DC and various outpatient
surgery and radiation therapy centers and specialized women's health centers.
The minority interest income recorded during the 1997 quarter includes the
minority interest share of various outpatient surgery and radiation therapy
centers and specialized women's health centers.
Depreciation and amortization expense increased 28% or $5 million for the three
months ended March 31, 1998 as compared to the comparable prior year period due
primarily to the 1997 and 1998 acquisitions mentioned above and the opening of
the newly constructed acute care facilities during the third and fourth quarters
of 1997.
Interest expense increased 27% or $1 million during the 1998 first quarter as
compared to the comparable 1997 period due to the increased borrowings used to
partially finance the 1997 and 1998 acquisitions mentioned above.
The effective tax rate was 36% and 37% for the three months ended March 31, 1998
and 1997. respectively.
Page Nine of Thirteen Pages
10
GENERAL TRENDS
An increased proportion of the Company's revenue is derived from fixed payment
services, including Medicare and Medicaid which accounted for 48% and 51% of the
Company's net patient revenues for the three months ended March 31, 1998 and
1997, respectively. The Medicare program reimburses the Company's hospitals
primarily based on established rates by a diagnosis related group for acute care
hospitals and by cost based formula for behavioral health facilities.
Historically, rates paid under Medicare's prospective payment system ("PPS") for
inpatient services have increased, however, these increases have been less than
cost increases. Pursuant to the terms of The Balanced Budget Act of 1997 (the
"1997 Act"), there will be no increases in the rates paid to hospitals for
inpatient care through September 30, 1998. Reimbursement for bad debt expense
and capital costs as well as other items have been reduced. The Company does not
expect the changes mandated by the 1997 Act to result in a material adverse
effect on its operating results. While the Company is unable to predict what, if
any, future health reform legislation may be enacted at the federal or state
level, the Company expects continuing pressure to limit expenditures by
governmental healthcare programs. Further changes in the Medicare or Medicaid
programs and other proposals to limit healthcare spending could have a material
adverse impact upon the Company and the healthcare industry.
In Texas, a law has been passed which mandates that the state senate apply for a
waiver from current Medicaid regulations to allow the state to require that
certain Medicaid participants be serviced through managed care providers. The
Company is unable to predict whether Texas will be granted such a waiver or the
effect on the Company's business of such a waiver. Upon meeting certain
conditions, and serving a disproportionately high share of Texas' and South
Carolina's low income patients, three of the Company's facilities located in
Texas and one facility located in South Carolina became eligible and received
additional reimbursements from each state's disproportionate share hospital
fund. Included in the Company's financial results was an aggregate of $8.6
million for the three months ended March 31, 1998 and $8.1 million for the three
months ended March 31, 1997 received pursuant to the terms of these programs.
These programs are scheduled to terminate in the third quarter of 1998 and the
Company cannot predict whether these programs will continue beyond their
scheduled termination date. In addition to the Medicare and Medicaid programs,
other payors continue to actively negotiate the amounts they will pay for
services performed. In general, the Company expects the percentage of its
business from managed care programs, including HMOs and PPOs to grow. The
consequent growth in managed care networks and the resulting impact of these
networks on the operating results of the Company's facilities vary among the
markets in which the Company operates.
The Company recognizes the need to ensure its operations will not be adversely
impacted by year 2000 software failures. In 1997, the Company began establishing
processes for evaluating and managing the risks and costs associated with this
problem. These processes include arrangements with the Company's major
outsourcing vendor to modify its computer system programming to allow for year
2000 processing capability. Such modifications are expected to be completed by
the end of 1998. Spending for these modifications has been and will be expensed
as incurred and is not expected to have a significant impact on the Company's
ongoing results of operations. The Company also expects that certain medical and
related equipment that cannot be made year 2000 compliant will need to be
replaced, but does not expect the cost of such replacement to be material.
Page Ten of Thirteen Pages
11
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $46 million for the three months
ended March 31, 1998 and $49 million for the three months ended March 31, 1997.
The $3 million decrease during the 1998 three month period as compared to the
comparable prior year period was primarily attributable to a $13 million
increase in accounts receivable partially offset by a $6 million increase in the
net income plus the addback of the non-cash charges (depreciation, amortization,
provision for self-insurance reserves and other non-cash charges) and $4 million
of other favorable net working capital changes.
During the first quarter of 1998, the Company completed its acquisition of three
acute care hospitals located in Puerto Rico for a combined purchase price of
$186 million. The hospitals acquired are located in Bayamon (430-beds), Rio
Piedras (160-beds) and Fajardo (180-beds). These acquisitions were financed with
funds borrowed under the Company's revolving credit facility. Also during the
first quarter of 1998, the Company contributed substantially all of the assets,
liabilities and operations of Valley Hospital Medical Center, a 417-bed acute
care facility, and its newly-constructed Summerlin Hospital Medical Center, a
148-bed acute care facility in exchange for a 72.5% interest in a series of
newly-formed limited liability companies ("LLCs"). Quorum Health Group, Inc.
("Quorum") holds the remaining 27.5% interest in the LLCs. Quorum obtained its
interest by contributing substantially all of the assets, liabilities and
operations of Desert Springs Hospital, a 241-bed acute care facility and $23
million of cash to the LLCs. As a result of this partial sale transaction, the
Company recorded a pre-tax gain of approximately $55 million (approximately $34
million after-tax) that was recorded as a capital contribution to the Company in
accordance with the Securities and Exchange Commission's Staff Accounting
Bulletin No. 51. The Company does not expect this transaction to have a material
impact on its 1998 results of operations. Also during the first quarter of 1998,
the Company spent approximately $20 million to finance capital expenditures at
its existing hospitals.
As of March 31, 1998 the Company had approximately $79 million of unused
borrowing capacity under the terms of its $300 million revolving credit facility
which matures in July 2002 and no unused borrowing capacity under the terms of
its $75 million commercial paper credit facility.
The Company expects to finance all capital expenditures and acquisitions with a
combination of internally generated funds and funds raised from outside sources.
Additional funds may be obtained either through refinancing the existing
revolving credit agreement, the commercial paper facility or the issuance of
securities.
FORWARD-LOOKING STATEMENTS
The matters discussed in this report as well as the news releases issued from
time to time by the Company include certain statements containing the words
"believes", "anticipates", "intends", "expects" and words of similar import,
which constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance achievements of the Company or industry results
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, the following: that the majority of the Company's revenues
are produced by a small number of its total facilities, possible changes in the
levels and terms of reimbursement for the Company's charges by government
programs, including Medicare or Medicaid or other third party payers, the
ability to attract and retain qualified personnel, including physicians, the
ability of the Company to successfully integrate its recent acquisitions and the
Company's ability to finance growth on favorable terms. Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements. The Company disclaims any obligation to
update any such factors or to publicly announce the result of any revisions to
any of the forward-looking statements contained herein to reflect future events
or developments.
Page Eleven of Thirteen Pages
12
PART II. OTHER INFORMATION
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Supplemental Indenture Dated as of January 1, 1998 to Indenture
Dated as of July 15, 1995 between Universal Health Services, Inc. and PNC BANK,
National Association, Trustee.
27. Financial Data Schedule
(b) Reports on Form 8-K
None
11. Statement re computation of per share earnings is set forth on Page six in
Note 2 of the Notes to Condensed Consolidated Financial Statements.
All other items of this Report are inapplicable.
Page Twelve of Thirteen Pages
13
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
SIGNATURE
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 thereunto duly authorized.
Universal Health Services, Inc.
(Registrant)
Date: May 13, 1998 /s/ Kirk E. Gorman
------------------
Kirk E. Gorman, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer).
Page Thirteen of Thirteen Pages
1
EXHIBIT 10.1
- --------------------------------------------------------------------------------
UNIVERSAL HEALTH SERVICES, INC.
and
PNC BANK, National Association, Trustee
-------------------------------
SUPPLEMENTAL INDENTURE
Dated as of January 1, 1998
to
INDENTURE
Dated as of July 15, 1995
-------------------------------
Debt Securities
- --------------------------------------------------------------------------------
2
SUPPLEMENTAL INDENTURE, dated as of January 1, 1998 between Universal
Health Services, Inc., a Delaware corporation (the "Company"), and PNC Bank,
National Association, a national banking association incorporated and existing
under the laws of the United States of America, as Trustee (the "Trustee").
Capitalized terms used but not defined herein shall have the meanings assigned
to such terms in the Indenture, dated as of July 15, 1995, between the Company
and the Trustee (the "Indenture").
RECITALS
WHEREAS, the Company and the Trustee previously duly executed, and the
Company duly delivered to the Trustee, the Indenture, relating to $135,000,000
principal amount at maturity of the Company's 8 3/4% Senior Notes due 2005 (the
"Securities");
WHEREAS, pursuant to Section 9.02 of the Indenture, the Company and the
Trustee have obtained the consent of the Holders of at least a majority in
principal amount of the outstanding Securities to the amendment made hereby;
WHEREAS, the Board of Directors of the Company has authorized the
execution of this Supplemental Indenture and its delivery to the Trustee;
WHEREAS, the Company has delivered an Officers' Certificate and Opinion of
Counsel to the Trustee pursuant to Section 10.04 of the Indenture; and
WHEREAS, all other actions necessary to make this Supplemental Indenture a
legal, valid and binding obligation of the parties hereto in accordance with
its terms and the terms of the Indenture have been performed;
NOW, THEREFORE, in consideration of the promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company and the Trustee hereby mutually covenant and
agree for the equal and proportionate benefit of all Holders of the Securities
as follows:
ARTICLE I
AMENDMENT
SECTION 1.01. Section 2(b)(vii) of the Authorizing Resolution adopted by
the Pricing Committee of the Board of Directors of the Company on August 1, 1995
(the "Authorizing Resolution") is hereby amended by deleting the words
"(excluding guarantees of obligations (as defined in paragraph 3(bb) below)
under the Credit Agreement by Subsidiaries of UHS)."
-2-
3
SECTION 1.02. Section 2(b)(viii) of the Authorizing Resolution is
hereby deleted in its entirety and replaced with the following:
"(viii) the incurrence by any Subsidiary of UHS of:
"(a) any existing Indebtedness of any Person at the time such Person
becomes a Subsidiary and not created in contemplation of such event;
"(b) any Indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring or developing any
asset; provided that such Indebtedness is incurred concurrently with
or within 90 days after the acquisition thereof;
"(c) any Indebtedness of any Person existing at the time such Person
is merged with or into or consolidated with or into the Subsidiary and
not created in contemplation of such event; or
"(d) any Indebtedness secured by the Lien existing on any asset prior
to the acquisition thereof by the Borrower or a Subsidiary and not
created in contemplation of such acquisition;
"provided in each such case that the fair market value of the assets of
such Person or such asset acquired or developed exceeds the amount of
Indebtedness incurred or assumed;".
SECTION 1.03. Section 3(k) of the Authorizing Resolution is hereby
deleted in its entirety and replaced by "3(k) Intentionally omitted."
ARTICLE II
MISCELLANEOUS
SECTION 2.01. For all purposes of this Supplemental Indenture, except
as otherwise herein expressly provided or unless the context otherwise
requires: (A) the terms and expressions used herein shall have the same
meanings as corresponding terms and expressions used in the Indenture and (B)
the words "herein," "hereof" and "hereby" and other words of similar import
used in this Supplemental Indenture refer to this Supplemental Indenture as a
whole and not any particular Article, Section or other subdivision.
SECTION 2.02. Upon execution of this Supplemental Indenture, the
Indenture shall be modified in accordance therewith, but except as expressly
amended hereby, the Indenture is in all respects ratified and confirmed and all
the terms, conditions and provisions thereof shall remain in full force and
effect.
-3-
4
SECTION 2.03. Upon execution, this Supplemental Indenture shall form a part
of the Indenture and the Supplemental Indenture and the Indenture shall be read,
taken and construed as one and the same instrument for all purposes, and every
holder of Securities heretofore or hereafter authenticated and delivered under
the Indenture shall be bound hereby.
SECTION 2.04. This Supplemental Indenture shall become effective as of the
date first above written.
SECTION 2.05. The Trustee accepts the amendment to the Indenture effected
by this Supplemental Indenture and agrees to execute the trust created by the
Indenture, as hereby amended, but only upon the terms and conditions set forth
in the Indenture, as hereby amended, including the terms and provisions defining
and limiting the liabilities and responsibilities of the Trustee, which terms
and provisions shall in like manner define and limit the Trustee's liabilities
in the performance of the trust created by the Indenture, as hereby amended.
Without limiting the generality of the foregoing, the Trustee has no
responsibility for the correctness of the recitals of fact herein contained
which shall be taken as the statements of the Company and makes no
representations as to the validity or sufficiency of this Supplemental
Indenture, except as to the due and valid execution hereof by the Trustee, and
shall incur no liability or responsibility in respect of the validity thereof.
The Trustee's execution of this Supplemental Indenture should not be construed
to be an approval or disapproval of the advisability of the amendments to the
Indenture provided herein.
SECTION 2.06. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS
SUPPLEMENTAL INDENTURE AND THE SECURITIES WITHOUT REGARDED TO THE PRINCIPLES OF
CONFLICTS OF LAW.
SECTION 2.07. This Supplemental Indenture may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
and all such counterparts shall together constitute one and the same instrument.
SECTION 2.08. The Company shall compensate and indemnify the Trustee in
respect of this Supplemental Indenture to the same extent as set forth in
Section 7.07 of the Indenture.
-4-
5
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the date first written above.
[SEAL] UNIVERSAL HEALTH SERVICES, INC.
By: /s/ Kirk E. Gorman
-------------------------------
Name: Kirk E. Gorman
Title: Sr. Vice President & CFO
Attest:
/s/ Cheryl K. Ramagano
- ------------------------
[SEAL] PNC BANK, National Association
By: /s/ C. Hromych
-------------------------------
Name: C. Hromych
Title: Vice President
Attest:
/s/
- ------------------------
-5-
5
1,000
U.S DOLLARS
3-MOS
DEC-31-1998
JAN-01-1998
MAR-31-1998
1
8,379
0
259,679
0
36,397
328,278
1,171,410
346,908
1,464,704
203,670
419,458
0
0
327
596,082
1,464,704
0
463,117
0
342,076
37,589
37,266
6,307
39,879
14,229
25,650
0
0
0
25,650
0.79
0.77
