UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

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 1-10765

UNIVERSAL HEALTH SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware	23-2077891
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

UNIVERSAL CORPORATE CENTER

367 SOUTH GULPH ROAD

KING OF PRUSSIA, Pennsylvania 19406

(Address of principal executive offices) (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class B Common Stock, $0.01 par value	UHS	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer		☐
Non-accelerated filer	☐	Smaller reporting company		☐
			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ 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, 2023:

Class A	6,577,100
Class B	62,140,309
Class C	661,688
Class D	14,045

UNIVERSAL HEALTH SERVICES, INC.

INDEX

	PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Income – Three and Six Months Ended June 30, 2023 and 2022	3
Condensed Consolidated Statements of Comprehensive Income – Three and Six Months Ended June 30, 2023 and 2022	4
Condensed Consolidated Balance Sheets – June 30, 2023 and December 31, 2022	5
Condensed Consolidated Statements of Changes in Equity – Three and Six Months Ended June 30, 2023 and 2022	6
Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2023 and 2022	8
Notes to Condensed Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk	58
Item 4. Controls and Procedures	58
PART II. Other Information
Item 1. Legal Proceedings	59
Item 1A. Risk Factors	59
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 5. Other Information	59
Item 6. Exhibits	60
Signatures	61

This Quarterly Report on Form 10-Q is for the quarter ended June 30, 2023. This Report modifies and supersedes documents filed prior to this Report. Information that we file with the Securities and Exchange Commission (the “SEC”) in the future will automatically update and supersede information contained in this Report.

In this Quarterly Report, “we,” “us,” “our” “UHS” and the “Company” refer to Universal Health Services, Inc. and its subsidiaries. UHS is a registered trademark of UHS of Delaware, Inc., the management company for, and a wholly-owned subsidiary of Universal Health Services, Inc. Universal Health Services, Inc. is a holding company and operates through its subsidiaries including its management company, UHS of Delaware, Inc. All healthcare and management operations are conducted by subsidiaries of Universal Health Services, Inc. To the extent any reference to “UHS” or “UHS facilities” in this report including letters, narratives or other forms contained herein relates to our healthcare or management operations it is referring to Universal Health Services, Inc.’s subsidiaries including UHS of Delaware, Inc. Further, the terms “we,” “us,” “our” or the “Company” in such context similarly refer to the operations of Universal Health Services Inc.’s subsidiaries including UHS of Delaware, Inc. Any reference to employees or employment contained herein refers to employment with or employees of the subsidiaries of Universal Health Services, Inc. including UHS of Delaware, Inc.

2

PART I. FINANCIAL INFORMATION

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share amounts)

(unaudited)

	Three months ended June 30,						Six months ended June 30,
	2023			2022			2023			2022
Net revenues	$	3,548,138		$	3,323,407		$	7,015,656		$	6,616,363
Operating charges:
Salaries, wages and benefits		1,770,271			1,691,472			3,523,606			3,383,742
Other operating expenses		938,314			867,885			1,817,265			1,688,819
Supplies expense		380,294			354,993			760,283			726,066
Depreciation and amortization		143,744			143,850			285,365			287,634
Lease and rental expense		35,387			31,773			70,309			63,811
		3,268,010			3,089,973			6,456,828			6,150,072
Income from operations		280,128			233,434			558,828			466,291
Interest expense, net		48,831			25,676			99,707			47,349
Other (income) expense, net		6,602			(1,972	)		20,325			9,229
Income before income taxes		224,695			209,730			438,796			409,713
Provision for income taxes		55,393			50,949			107,119			99,911
Net income		169,302			158,781			331,677			309,802
Less: Net income (loss) attributable to noncontrolling interests		(2,011	)		(5,281	)		(2,751	)		(8,173	)
Net income attributable to UHS	$	171,313		$	164,062		$	334,428		$	317,975
Basic earnings per share attributable to UHS	$	2.44		$	2.22		$	4.75		$	4.27
Diluted earnings per share attributable to UHS	$	2.42		$	2.20		$	4.70		$	4.22
Weighted average number of common shares - basic		70,073			73,682			70,304			74,356
Add: Other share equivalents		766			753			859			882
Weighted average number of common shares and    equivalents - diluted		70,839			74,435			71,163			75,238

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(amounts in thousands, unaudited)

	Three months ended June 30,						Six months ended June 30,
	2023			2022			2023			2022
Net income	$	169,302		$	158,781		$	331,677		$	309,802
Other comprehensive income (loss):
Foreign currency translation adjustment		19,730			(28,232	)		23,928			(46,702	)
Other comprehensive income (loss) before tax		19,730			(28,232	)		23,928			(46,702	)
Income tax expense (benefit) related to items of other    comprehensive income (loss)		1,255			68			831			(876	)
Total other comprehensive income (loss), net of tax		18,475			(28,300	)		23,097			(45,826	)
Comprehensive income		187,777			130,481			354,774			263,976
Less: Comprehensive income (loss) attributable to noncontrolling    interests		(2,011	)		(5,281	)		(2,751	)		(8,173	)
Comprehensive income attributable to UHS	$	189,788		$	135,762		$	357,525		$	272,149

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, unaudited)

	June 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	79,451		$	102,818
Accounts receivable, net		2,103,478			2,017,722
Supplies		215,380			218,517
Other current assets		226,405			198,283
Total current assets		2,624,714			2,537,340
Property and equipment		11,441,608			11,085,852
Less: accumulated depreciation		(5,413,892	)		(5,167,394	)
		6,027,716			5,918,458
Other assets:
Goodwill		3,929,722			3,909,456
Deferred income taxes		109,773			68,397
Right of use assets-operating leases		446,618			454,650
Deferred charges		5,858			6,264
Other		587,908			599,623
Total Assets	$	13,732,309		$	13,494,188
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt	$	111,357		$	81,447
Accounts payable and other liabilities		1,843,379			1,760,588
Operating lease liabilities		73,649			67,776
Federal and state taxes		6,962			4,608
Total current liabilities		2,035,347			1,914,419
Other noncurrent liabilities		571,206			487,669
Operating lease liabilities noncurrent		387,709			395,522
Long-term debt		4,605,075			4,726,533
Redeemable noncontrolling interests		4,213			4,695
Equity:
UHS common stockholders’ equity		6,087,182			5,920,582
Noncontrolling interest		41,577			44,768
Total equity		6,128,759			5,965,350
Total Liabilities and Stockholders’ Equity	$	13,732,309		$	13,494,188

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three and Six Months ended June 30, 2023

(amounts in thousands, unaudited)

																			Accumulated			UHS
	Redeemable																		Other			Common
	Noncontrolling			Class A		Class B			Class C		Class D		Cumulative			Retained			Comprehensive			Stockholders'			Noncontrolling
	Interest			Common		Common			Common		Common		Dividends			Earnings			Income (Loss)			Equity			Interest			Total
Balance, April 1, 2023	$	4,269		$	66	$	633		$	7	$	0	$	(618,326	)	$	6,634,774		$	(5,046	)	$	6,012,108		$	40,309		$	6,052,417
Common Stock
Issued/(converted)		—			—		3			—		—		—			3,608			—			3,611			—			3,611
Repurchased, including excise tax		—			—		(8	)		—		—		—			(125,843	)		—			(125,851	)		—			(125,851	)
Restricted share-based compensation expense		—			—		—			—		—		—			5,769			—			5,769			—			5,769
Dividends paid and accrued		—			—		—			—		—		(14,147	)		—			—			(14,147	)		—			(14,147	)
Stock option expense		—			—		—			—		—		—			15,904			—			15,904			—			15,904
Distributions to noncontrolling interests		(300	)		—		—			—		—		—			—			—			—			(290	)		(290	)
Purchase (sale) of ownership interests by (from) minority members		—			—		—			—		—		—			—			—			—			3,814			3,814
Comprehensive income:
Net income (loss) to UHS / noncontrolling interests		244			—		—			—