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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 June 30, 1995
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.
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(Exact name of registrant as specified in its charter)
DELAWARE 23-2077891
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(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
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(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 July 31, 1995.
Class A 1,090,527
Class B 12,626,680
Class C 109,622
Class D 21,081
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Page One of Thirteen Pages
2
UNIVERSAL HEALTH SERVICES, INC.
I N D E X
PART I. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE NO.
--------
Item 1. Financial Statements
Condensed Consolidated Statements of Income -
Three Months Ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . Three
Six Months Ended June 30, 1995 and 1994
Condensed Consolidated Balance Sheets - June 30, 1995
and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Four
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . Five
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . Six & Seven
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . . . 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
(000's omitted except per share amounts)
(unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
---------------------------- ----------------------------
1995 1994 1995 1994
---------------------------- ----------------------------
Net revenues $ 214,165 $ 192,199 $ 434,880 $ 386,631
Operating charges:
Operating expenses 84,092 75,675 168,561 150,002
Salaries and wages 77,617 70,212 155,638 140,082
Provision for doubtful accounts 16,057 12,778 33,242 25,986
Depreciation and amortization 11,748 10,316 23,058 20,236
Lease and rental expense 8,776 8,505 17,548 16,996
Interest expense, net 1,427 1,356 3,041 3,178
-------------- ------------ ------------ ------------
199,717 178,842 401,088 356,480
-------------- ------------ ------------ ------------
Income before income taxes 14,448 13,357 33,792 30,151
Provision for income taxes 4,893 5,204 12,396 11,711
-------------- ------------ ------------ ------------
NET INCOME $ 9,555 $ 8,153 $ 21,396 $ 18,440
============== ============ ============ ============
Earnings per common
and common equivalent share: $ 0.68 $ 0.57 $ 1.53 $ 1.29
============== ============ ============ ============
Weighted average number of
common shares and equivalents: 14,012 14,395 13,977 14,578
============== ============ ============ ============
See accompanying notes to these condensed consolidated financial statements.
Page Three of Thirteen Pages
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UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted)
JUNE 30, DECEMBER 31,
-------- ------------
1995 1994
---- ----
(UNAUDITED)
-----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,809 $ 780
Accounts receivable, net 71,233 84,818
Supplies 15,903 15,723
Deferred income taxes 14,428 12,942
Other current assets 4,089 4,126
--------------- --------------
Total current assets 109,462 118,389
--------------- --------------
Property and equipment 628,322 596,702
Less: accumulated depreciation (280,767) (265,059)
--------------- --------------
347,555 331,643
--------------- --------------
OTHER ASSETS:
Excess of cost over fair value of net
assets acquired 37,170 38,762
Deferred income taxes 12,687 2,742
Deferred charges 1,614 1,527
Other 31,138 28,429
--------------- ---------------
82,609 71,460
--------------- ---------------
$ 539,626 $ 521,492
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 7,568 $ 7,236
Accounts payable and accrued liabilities 104,402 92,129
Federal and state taxes 2,770 4,417
--------------- ---------------
Total current liabilities 114,740 103,782
--------------- ---------------
Other noncurrent liabilities 75,428 71,956
--------------- ---------------
Long-term debt, net of current maturities 66,820 85,125
--------------- ---------------
COMMON STOCKHOLDERS' EQUITY:
Class A Common Stock, 1,090,527 shares
outstanding in 1995, 1,090,527 in 1994 11 11
Class B Common Stock, 12,626,316 shares
outstanding in 1995, 12,591,854 in 1994 126 126
Class C Common Stock, 109,622 shares
outstanding in 1995, 109,622 in 1994 1 1
Class D Common Stock, 21,140 shares
outstanding in 1995, 22,769 in 1994 0 0
Capital in excess of par, net of deferred
compensation of $326,000 in 1995
and $414,000 in 1994 88,908 88,295
Retained earnings 193,592 172,196
--------------- ---------------
282,638 260,629
--------------- ---------------
$ 539,626 $ 521,492
=============== ===============
See accompanying notes to these condensed consolidated financial statements.
Page Four of Thirteen Pages
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UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted - unaudited)
Six Months Ended
----------------
June 30,
--------
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $21,396 $18,440
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization 23,058 20,236
Provision for self-insurance reserves 6,666 4,977
Changes in assets & liabilities, net of effects from
acquisitions and dispositions:
Accounts receivable 15,006 661
Accrued interest (1,923) (2,107)
Accrued and deferred income taxes (13,078) (9,238)
Other working capital accounts 12,347 5,507
Other assets and deferred charges (4,041) (924)
Other 940 3,468
Payments made in settlement of self-insurance claims (3,203) (5,844)
---------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 57,168 35,176
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions, net (31,233) (20,858)
Acquisition of businesses (4,696) (1,898)
Advances under long-term notes receivable 0 (4,147)
---------- ---------
NET CASH USED IN INVESTING ACTIVITIES (35,929) (26,903)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional borrowings 0 10,614
Reduction of long-term debt (18,711) (16,195)
Issuance of common stock 501 397
---------- ---------
NET CASH USED IN FINANCING ACTIVITIES (18,210) (5,184)
---------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 3,029 3,089
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 780 569
---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $3,809 $3,658
========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $4,964 $5,285
========== =========
Income taxes paid, net of refunds $25,474 $20,949
========== =========
See accompanying notes to these condensed consolidated financial statements.
Page Five of Thirteen Pages
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UNIVERSAL HEALTH SERVICES, INC.
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, 1994.
(2) EARNINGS PER SHARE
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. In April 1994, the Company redeemed the debentures which reduced
the fully diluted number of shares outstanding by 451,233. The earnings per
share for the first three months of the six month period ended June 30, 1994
have been adjusted to reflect the assumed conversion of the Company's
convertible debentures.
(3) UNUSUAL ITEMS
Included in net revenues for the three month period ended June 30, 1995 was
$3.3 million of additional revenues received from special Medicaid
reimbursements received by one of the Company's acute care facilities which
participates in the Texas Medical Assistance Program. Upon meeting certain
conditions of participation and serving a disproportionally high share of the
state's low income patients, the hospital became eligible and received
additional reimbursement from the state's disproportionate share hospital fund.
This program is scheduled to terminate in August, 1995 and the Company cannot
predict whether this program will continue beyond the scheduled termination
date. However, management of the Company believes that if the programs are
renewed under the terms as currently proposed, the annual reimbursement will
not exceed the Company's cost of care administered to qualifying patients under
the terms of this program, estimated to be approximately $4 million per year.
Included in operating expenses for the three months ended June 30, 1995 is a
$2.7 million pre-tax charge related to the Company's divestiture of two acute
care hospitals in connection with the acquisition of a 225-bed acute and
psychiatric hospital located in Aiken, South Carolina (see Note 7). Operating
expenses during the second quarter of 1995 were favorably impacted by
reductions in certain reserve balances totalling $1.9 million.
Included in net revenues for the three month period ended June 30, 1994 is $3.0
million of additional revenues received from special Medicaid reimbursement
programs mentioned above. Included in operating expenses for the three months
ended June 30, 1994 is a $2.8 million write-down recorded against the book
value of the real property of a psychiatric hospital owned by the Company and
leased to an unaffiliated third party, which is currently in default under the
terms of the lease. Also included in operating expenses during the second
quarter of 1994 is a $1.1 million favorable adjustment made to reduce the
Company's worker's compensation reserves.
Included in net revenues for the six month period ended June 30, 1995 is $6.5
million of additional revenues received from special Medicaid reimbursement
programs mentioned above. Included in operating expenses during the 1995 six
month period is the $2.7 million pre-tax charge related to the Company's
divestiture of two acute care hospitals in connection with the acquisition of
the 225-bed acute and psychiatric hospital located in Aiken, South Carolina and
the $1.9 million reduction in reserves mentioned above.
Page Six of Thirteen Pages
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Included in net revenues for the six month period ended June 30, 1994 is $6.0
of additional revenues received from special Medicaid reimbursement programs.
Included in operating expenses for the six months ended June 30, 1994 is the
$2.8 million property write-down and $1.1 million favorable adjustment made to
reduce the Company's workers' compensation reserves and $2.5 million of
expenses related to the disposition of businesses.
(4) OTHER LIABILITIES
Other noncurrent liabilities include the long-term portion of the Company's
professional and general liability and workers' compensation reserves.
(5) COMMITMENT AND CONTINGENCIES
Under certain agreements, the Company has committed or guaranteed an aggregate
of $19,000,000 related principally to the Company's self-insurance programs and
as support for various debt instruments and loan guarantees.
(6) ACQUISITIONS
During the second quarter of 1995, the Company acquired an 82-bed psychiatric
hospital located in South Attleboro, Massachusetts for approximately $3
million. The Company also purchased for approximately $2 million, a majority
interest in two separate partnerships which own and operate outpatient surgery
centers located in Fayetteville, Arkansas and Somersworth, New Hampshire.
Also during the 1995 second quarter, the Company executed an asset purchase
agreement to acquire a 512-bed acute care hospital located in Bradenton,
Florida for approximately $139 million in cash. The closing of this transaction
is expected to occur during the third quarter of 1995.
(7) SUBSEQUENT EVENTS
Subsequent to the 1995 second quarter, the Company completed the acquisition of
Aiken Regional Medical Centers, a 225-bed acute and psychiatric care facility
located in Aiken, South Carolina for approximately $44 million in cash, a
104-bed acute care hospital and a 126-bed acute care hospital. The majority of
the real estate assets of the 126-bed facility were being leased from Universal
Health Realty Income Trust (the "Trust") pursuant to the terms of an operating
lease which was scheduled to expire in 2000. In exchange for the real estate
assets of the 126-bed acute care hospital, the Company exchanged substitution
properties consisting of additional real estate assets owned by the Company but
related to three acute care facilities owned by the Trust and operated by the
Company. As a result of the divestiture of the two acute care hospitals in
connection with the acquisition of Aiken Regional Medical Centers, the Company
recorded a $2.7 million pre-tax charge during the second quarter of 1995.
During the third quarter of 1995, the Company completed a $135 million bond
issuance. The Senior Notes have an 8.75% coupon rate (9.3% effective rate) and
are due in 2005. The notes can be redeemed at a premium on or after August 15,
2000 through August 15, 2002 after which time the notes are redeemable at par.
The interest on the bonds will be paid semiannually in arrears on February 15
and August 15 of each year. The net proceeds generated from the bond issuance
totaled approximately $131 million.
Page Seven of Thirteen Pages
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net revenues for the three and six months ended June 30, 1995 increased $22
million or 11% and $48 million or 12% over the comparable prior year periods,
respectively, due primarily to revenue growth at facilities owned during both
periods and the acquisition of a 112-bed acute care hospital in November of
1994. Net revenues at hospital facilities owned during both periods increased
$10 million or 5% for the three months ended June 30, 1995 and $25 million or
7% for the six months ended June 30, 1995 over the comparable prior year
periods, excluding the additional revenues received from the special Medicaid
reimbursements received by one of the Company's acute care facilities which
participates in the Texas Medical Assistance Program. Upon meeting certain
conditions of participation and serving a disproportionally high share of the
state's low income patients, the hospital became eligible and received
additional reimbursements from the state's hospital fund totaling $3.3 million
and $3.0 million for the three months ended June 30, 1995 and 1994 and $6.5
million and $6.0 million for the six months ended June 30, 1995 and 1994,
respectively. These programs are scheduled to terminate in August, 1995 and
the Company cannot predict whether these programs will continue beyond the
scheduled termination date. However, management of the Company believes that
if the programs are renewed under the terms as currently proposed, the annual
reimbursement will not exceed the Company's cost of care administered to
qualifying patients under the terms of this plan, estimated to be
approximately $4 million per year.
Excluding the net revenue effect of the special Medicare reimbursement programs
mentioned above and the expense items included in the three and six month
periods ended June 30, 1995 and 1994 described below, earnings before interest,
income taxes, depreciation, amortization and lease rental expense (EBITDAR)
increased 7% or $2.4 million and 5% or $3.7 million during the three and six
month periods ended June 30, 1995 over the comparable prior year periods,
respectively. Included in operating expenses for the three and six months ended
June 30, 1995 is a $2.7 million pre-tax charge related to the Company's
divestiture of two acute care hospitals in connection with the acquisition of a
225-bed acute care hospital located in Aiken, South Carolina. Included in
operating expenses for the three months ended June 30, 1994 is a $2.8 million
write-down recorded against the book value of the real property of a
psychiatric hospital owned by the Company and leased to an unaffiliated third
party which is in default of the lease. In addition to the property
write-down, also included in operating expenses for the six months ended June
30, 1994 is approximately $2.5 million of expenses related to the disposition
of businesses. Overall operating margins, excluding the special Medicaid
reimbursements and unusual expense items mentioned above, were 17.0% and 17.6%
for the three month periods ended June 30, 1995 and 1994 and 17.2% and 18.3%
for the six month periods ended June 30, 1995 and 1994, respectively. The
margin decline resulted primarily from deterioration in payor mix and general
industry trends. Pressure on operating margins is expected to continue due to
the industry-wide trend away from charge based payors which limits the
Company's ability to increase its prices.
ACUTE CARE SERVICES
Net revenues from the Company's acute care hospitals and ambulatory treatment
centers accounted for 85% of the consolidated net revenues for each of the
three and six month periods ended June 30, 1995 and 84% of the consolidated net
revenues for each of the three and six month periods ended June 30, 1994. Net
revenues at the Company's acute care hospitals owned during both periods
increased 7% during the three months ended June 30, 1995 and 8% during the six
months ended June 30, 1995 over the comparable prior year periods, after
excluding the revenues received from the special Medicaid reimbursements
described above. Despite the continued shift in the delivery of healthcare
services to
Page Eight of Thirteen Pages
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outpatient care, the Company's acute care hospitals owned during both periods
experienced a 5% increase in admissions for the three months ended June 30,
1995 and an 8% increase in admissions for the six months ended June 30, 1995
over the comparable prior year periods, and a 2% increase in patient days
during the three months ended June 30, 1995 and a 3% increase in patient days
during the six months ended June 30, 1995 over the comparable 1994 periods,
respectively. Outpatient activity at the Company's acute care hospitals
continues to increase as gross outpatient revenues at these hospitals increased
17% during each of the three and six month periods ended June 30, 1995 over the
comparable prior year periods and comprised 25% and 24% of the Company's gross
patient revenues for the three months ended June 30, 1995 and 1994 and 24% and
23% of the gross patient revenues for the six months ended June 30, 1995 and
1994, respectively. The increase is primarily the result of advances in
medical technologies, which allow more services to be provided on an outpatient
basis, 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 and the acquisition of several physician practices. To
accommodate the increased utilization of outpatient services, the Company has
expanded or redesigned several of its outpatient facilities and services.
In addition, to take advantage of the trend toward increased outpatient
services, the Company has continued to invest in the acquisition and
development of outpatient surgery and radiation therapy centers. The Company
currently operates or manages twenty-four outpatient treatment centers, which
have contributed to the increase in the Company's outpatient revenues. The
Company expects the growth in outpatient services to continue, although the
rate of growth may be moderated in the future.
BEHAVIORAL HEALTH SERVICES
Net revenues from the Company's behavioral health services accounted for 14% of
the consolidated net revenues for each of the three and six month periods ended
June 30, 1995 and 15% of the consolidated net revenues for each of the three
and six month periods ended June 30, 1994. Net revenues at the Company's
psychiatric hospitals owned during both periods decreased 3% for the three
months ended June 30, 1995 and 1% for the six months ended June 30, 1995 as
compared to the comparable prior year periods. Admissions at the Company's
psychiatric hospitals owned during both periods decreased 2% during the three
months ended June 30, 1995 and increased 5% during the six months ended June
30, 1995 as compared to the comparable 1994 periods. The average length of
stay at the Company's behavioral health facilities has continued to decline as
a result of changing practices in the delivery of psychiatric care 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 developing and marketing 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 psychiatric hospitals owned during both periods increased 6% and 15%
for the three and six months ended June 30, 1995 over the comparable prior year
periods and comprised 16% of the Company's behavioral health services gross
patient revenues for each of the three and six month periods ended June 30,
1995 as compared to 15% and 14% in the comparable prior year periods.
OTHER OPERATING RESULTS
Depreciation and amortization expense increased $1.4 million and $2.8 million
for the three and six months ended June 30, 1995 over the comparable prior year
periods, respectively, due primarily to the acquisition of a 112-bed acute care
hospital in November of 1994 and additional depreciation expense related to
capital expenditures and expansions made in the Company's acute care division.
The effective tax rate was 34% and 39% for the three months ended June 30, 1995
and 1994 and 37% and 39% for the six months ended June 30, 1995 and 1994,
respectively. The reduction in the
Page Nine of Thirteen Pages
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Company's effective tax rate in the 1995 periods as compared to the comparable
1994 periods was attributable to two factors; (i) the financing of employee
benefit programs and (ii) the deductibility of previously non-deductible
goodwill amortization resulting from the sale of two hospitals.
GENERAL TRENDS
An increased proportion of the Company's revenue is derived from fixed payment
services, including Medicare and Medicaid which accounted for 47% and 46% of
the Company's net patient revenues for the three months ended June 30, 1995 and
1994 and 45% and 44% of the Company's net patient revenues for the six months
ended June 30, 1995 and 1994, respectively, excluding the additional revenues
from the special Medicaid reimbursement programs. The Medicare program
reimburses the Company's hospitals primarily based on established rates by a
diagnosis related group for acute care hospitals and by a cost based formula
for psychiatric hospitals.
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.
In addition to the trends described above that continue to have an impact on
operating results, there are a number of other, more general factors affecting
the Company's businesses. The House of Representatives and the Senate each
recently passed bills which would limit the future rate of growth of the
Medicare program from 10% annually to 7% annually and in the Medicaid program
from 10% annually to 4% annually (as specified in the House of Representatives'
plan). The Company cannot predict whether any of the above proposals or any
other proposals will be adopted, and if adopted, no assurance can be given that
the implementation of such reforms will not have a material adverse effect on
the Company's business. In Texas, a law has been passed which mandates that
the State apply for a waiver from current Medicaid regulations to allow it 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 law. However, the
Company believes that the delivery of primary care, emergency care, obstetrical
services, outpatient surgery, diagnostic and radiation services and psychiatric
services will be an integral component of any strategy for controlling
healthcare costs and it also believes it is well positioned to provide these
services.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $57.2 million during the first
six months of 1995 as compared to $35.2 million in the comparable 1994 period.
The increase during the 1995 first half as compared to the comparable 1994
period was due primarily to a $7 million increase in net income plus the
addback of the non-cash charges (depreciation, amortization and provision for
self-insurance reserves), a $15 million reduction in accounts receivable during
the first six months of 1995 from the 1994 year end balance as compared to a $1
million reduction in accounts receivable during the first half of 1994 from the
1993 year end balance, and a $3 million decrease in payments made in settlement
of self-insurance claims. These favorable increases in net cash provided by
operating activities during the first half of 1995 as compared to the
comparable prior year period were partially offset by a $5 million increase in
income tax payments. The favorable change in accounts receivable during the
first six months of 1995 was due primarily to the realization of several large
Medicare cost report settlements. The net cash provided by operating
activities substantially exceeded the scheduled maturities of long-term debt.
Page Ten of Thirteen Pages
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During the first six months of 1995, the Company used $31 million of its
operating cash flow to finance capital expenditures, $5 million to purchase an
82-bed psychiatric hospital and a majority interest in two separate
partnerships which own two outpatient surgery centers and $19 million to reduce
outstanding debt.
During the second quarter of 1995, the Company executed an asset purchase
agreement to acquire a 512-bed acute care hospital located in Bradenton,
Florida for approximately $139 million in cash. The closing of this
transaction is expected to occur during the third quarter of 1995. Also, in the
third quarter of 1995, the Company acquired a 225-bed acute and psychiatric
care hospital in Aiken, South Carolina for approximately $44 million in cash
and two acute care facilities. In addition, in connection with the acquisition
of Edinburg hospital in 1994, the Company is committed to invest at least an
additional $30 million over a ten year period to renovate the existing facility
and construct an additional facility. The majority of the purchase price of
these acquisitions and other capital additions will be financed using
internally generated funds, the proceeds generated from the $135 million bond
issuance described below, and funds borrowed under the terms of the Company's
$225 million revolving credit and $50 million commercial paper facilities.
Including the additional borrowing capacity from the bond issuance and the cash
expenditures for the purchase of the 225-bed hospital in Aiken, South Carolina
and the 512-bed hospital in Bradenton, Florida, as of June 30, 1995, the
Company had approximately $193 million of unused borrowing capacity under the
terms of its bond issuance, commercial paper and revolving credit facilities.
During the third quarter of 1995, the Company completed a $135 million bond
issuance. The Senior Notes have an 8.75% coupon rate (9.3% effective rate) and
are due in 2005. The notes can be redeemed at a premium on or after August 15,
2000 through August 15, 2002 after which time the notes are redeemable at par.
The interest on the bonds will be paid semiannually in arrears on February 15
and August 15 of each year. The net proceeds generated from the bond issuance
totaled approximately $131 million.
Page Eleven of Thirteen Pages
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PART II. OTHER INFORMATION
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Authorizing Resolution adopted by the Pricing Committee of
Universal Health Services, Inc. on August 1, 1995 related to $135 million
principal amount of 8 3/4% Senior Notes due 2005.
10.2 Indenture dated as of July 15, 1995 between Universal Health
Services, Inc. and PNC Bank, National Association, Trustee.
(b) Reports on Form 8-K
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: August 10, 1995 /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