Supplemental Condensed Consolidating Financial Information

3 Months Ended

Mar. 31, 2014

Supplemental Condensed Consolidating Financial Information

(11) Supplemental Condensed Consolidating Financial Information

Certain of our senior notes are guaranteed by a group of subsidiaries (the “Guarantors”). The Guarantors, each of which is a 100% directly owned subsidiary of Universal Health Services, Inc., fully and unconditionally guarantee the senior notes on a joint and several basis, subject to certain customary release provisions.

The following financial statements present condensed consolidating financial data for (i) Universal Health Services, Inc. (on a parent company only basis), (ii) the combined Guarantors, (iii) the combined non guarantor subsidiaries (all other subsidiaries), (iv) an elimination column for adjustments to arrive at the information for the parent company, Guarantors, and non guarantors on a consolidated basis, and (v) the parent company and our subsidiaries on a consolidated basis.

Investments in subsidiaries are accounted for by the parent company and the Guarantors using the equity method for this presentation. Results of operations of subsidiaries are therefore classified in the parent company’s and Guarantors’ investment in subsidiaries accounts. The elimination entries set forth in the following condensed consolidating financial statements eliminate distributed and undistributed income of subsidiaries, investments in subsidiaries, and intercompany balances and transactions between the parent, Guarantors, and non guarantors.

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2014

(amounts in thousands)

	Parent			Guarantors			Non Guarantors			Consolidating Adjustments			Total Consolidated Amounts
Net revenues before provision for doubtful accounts	$	0		$	1,463,920		$	671,587		$	(7,157	)	$	2,128,350
Less: Provision for doubtful accounts		0			135,986			72,198			0			208,184
Net revenues		0			1,327,934			599,389			(7,157	)		1,920,166
Operating charges:
Salaries, wages and benefits		0			669,253			266,112			0			935,365
Other operating expenses		0			240,176			148,525			(6,941	)		381,760
Supplies expense		0			131,475			84,323			0			215,798
EHR incentive income		0			(430	)		0			0			(430	)
Depreciation and amortization		0			67,714			25,645			0			93,359
Lease and rental expense		0			14,349			9,205			(216	)		23,338
		0			1,122,537			533,810			(7,157	)		1,649,190
Income from operations		0			205,397			65,579			0			270,976
Interest expense		33,573			824			796			0			35,193
Interest (income) expense, affiliate		0			22,112			(22,112	)		0			0
Equity in net income of consolidated affiliates		(158,801	)		(42,952	)		0			201,753			0
Income before income taxes		125,228			225,413			86,895			(201,753	)		235,783
Provision for income taxes		(12,850	)		78,753			18,028			0			83,931
Net income		138,078			146,660			68,867			(201,753	)		151,852
Less: Income attributable to noncontrolling interests		0			0			13,774			0			13,774
Net income attributable to UHS	$	138,078		$	146,660		$	55,093		$	(201,753	)	$	138,078

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2013

(amounts in thousands)

	Parent			Guarantors			Non Guarantors			Consolidating Adjustments			Total Consolidated Amounts
Net revenues before provision for doubtful accounts	$	0		$	1,421,852		$	663,206		$	(6,710	)	$	2,078,348
Less: Provision for doubtful accounts		0			149,768			96,948			0			246,716
Net revenues		0			1,272,084			566,258			(6,710	)		1,831,632
Operating charges:
Salaries, wages and benefits		0			645,594			256,702			0			902,296
Other operating expenses		0			244,419			143,203			(6,615	)		381,007
Supplies expense		0			128,710			75,932			0			204,642
Depreciation and amortization		0			55,779			24,033			0			79,812
Lease and rental expense		0			15,675			9,085			(95	)		24,665
EHR incentive income		0			(3,116	)		(1,596	)		0			(4,712	)
		0			1,087,061			507,359			(6,710	)		1,587,710
Income from operations		0			185,023			58,899			0			243,922
Interest expense		37,946			854			1,138			0			39,938
Interest (income) expense, affiliate		0			24,391			(24,391	)		0			0
Equity in net income of consolidated affiliates		(143,206	)		(31,781	)		0			174,987			0
Income before income taxes		105,260			191,559			82,152			(174,987	)		203,984
Provision for income taxes		(14,524	)		65,323			23,250			0			74,049
Net income		119,784			126,236			58,902			(174,987	)		129,935
Less: Income attributable to noncontrolling interests		0			0			10,151			0			10,151
Net income attributable to UHS	$	119,784		$	126,236		$	48,751		$	(174,987	)	$	119,784

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2014

(amounts in thousands)

	Parent			Guarantors		Non Guarantors		Consolidating Adjustments			Total Consolidated Amounts
Net income	$	138,078		$	146,660	$	68,867	$	(201,753	)	$	151,852
Other comprehensive income (loss):
Unrealized derivative gains on cash flow hedges		3,745			0		0		0			3,745
Amortization of terminated hedge		(84	)		0		0		0			(84	)
Other comprehensive income before tax		3,661			0		0		0			3,661
Income tax expense related to items of other comprehensive income		1,354			0		0		0			1,354
Total other comprehensive income, net of tax		2,307			0		0		0			2,307
Comprehensive income		140,385			146,660		68,867		(201,753	)		154,159
Less: Comprehensive income attributable to noncontrolling interests		0			0		13,774		0			13,774
Comprehensive income attributable to UHS	$	140,385		$	146,660	$	55,093	$	(201,753	)	$	140,385

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2013

(amounts in thousands)

	Parent			Guarantors		Non Guarantors		Consolidating Adjustments			Total Consolidated Amounts
Net income	$	119,784		$	126,236	$	58,902	$	(174,987	)	$	129,935
Other comprehensive income (loss):
Unrealized derivative gains on cash flow hedges		4,535			0		0		0			4,535
Amortization of terminated hedge		(84	)		0		0		0			(84	)
Other comprehensive income before tax		4,451			0		0		0			4,451
Income tax expense related to items of other comprehensive income		1,678			0		0		0			1,678
Total other comprehensive income, net of tax		2,773			0		0		0			2,773
Comprehensive income		122,557			126,236		58,902		(174,987	)		132,708
Less: Comprehensive income attributable to noncontrolling interests		0			0		10,151		0			10,151
Comprehensive income attributable to UHS	$	122,557		$	126,236	$	48,751	$	(174,987	)	$	122,557

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF MARCH 31, 2014

(amounts in thousands)

	Parent		Guarantors			Non Guarantors			Consolidating Adjustments			Total Consolidated Amounts
Assets
Current assets:
Cash and cash equivalents	$	0	$	7,719		$	8,542		$	0		$	16,261
Accounts receivable, net		0		864,487			348,107			0			1,212,594
Supplies		0		63,952			38,324			0			102,276
Other current assets		0		85,134			12,551			0			97,685
Deferred income taxes		71,108		43,189			0			0			114,297
Total current assets		71,108		1,064,481			407,524			0			1,543,113
Investments in subsidiaries		6,537,300		1,519,863			0			(8,057,163	)		0
Intercompany receivable		205,674		0			443,751			(649,425	)		0
Intercompany note receivable		0		0			1,104,881			(1,104,881	)		0
Property and equipment		0		4,171,728			1,617,665			0			5,789,393
Less: accumulated depreciation		0		(1,532,857	)		(788,364	)		0			(2,321,221	)
		0		2,638,871			829,301			0			3,468,172
Other assets:
Goodwill		0		2,553,615			500,051			0			3,053,666
Deferred charges		45,425		5,683			2,413			0			53,521
Other		7,923		243,381			61,609			0			312,913
	$	6,867,430	$	8,025,894		$	3,349,530		$	(9,811,469	)	$	8,431,385
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt	$	101,903	$	916		$	822		$	0		$	103,641
Accounts payable and accrued liabilities		38,901		822,487			93,514			0			954,902
Federal and state taxes		49,753		2,152			0			0			51,905
Total current liabilities		190,557		825,555			94,336			0			1,110,448
Intercompany payable		0		649,425			0			(649,425	)		0
Other noncurrent liabilities		4,202		200,091			77,880			0			282,173
Long-term debt		3,079,123		5,109			24,926			0			3,109,158
Intercompany note payable		0		1,104,881			0			(1,104,881	)		0
Deferred income taxes		201,429		55,915			0			0			257,344
Redeemable noncontrolling interests		0		0			228,107			0			228,107
UHS common stockholders’ equity		3,392,119		5,184,918			2,872,245			(8,057,163	)		3,392,119
Noncontrolling interest		0		0			52,036			0			52,036
Total equity		3,392,119		5,184,918			2,924,281			(8,057,163	)		3,444,155
	$	6,867,430	$	8,025,894		$	3,349,530		$	(9,811,469	)	$	8,431,385

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2013

(amounts in thousands)

	Parent		Guarantors			Non Guarantors			Consolidating Adjustments			Total Consolidated Amounts
Assets
Current assets:
Cash and cash equivalents	$	0	$	7,990		$	9,248		$	0		$	17,238
Accounts receivable, net		0		799,898			317,063			0			1,116,961
Supplies		0		63,562			38,219			0			101,781
Deferred income taxes		76,719		43,184			0			0			119,903
Other current assets		0		63,786			12,660			0			76,446
Total current assets		76,719		978,420			377,190			0			1,432,329
Investments in subsidiaries		6,378,499		1,476,911			0			(7,855,410	)		0
Intercompany receivable		226,592		0			531,411			(758,003	)		0
Intercompany note receivable		0		0			982,568			(982,568	)		0
Property and equipment		0		4,093,914			1,597,988			0			5,691,902
Less: accumulated depreciation		0		(1,478,758	)		(770,975	)		0			(2,249,733	)
		0		2,615,156			827,013			0			3,442,169
Other assets:
Goodwill		0		2,552,190			496,826			0			3,049,016
Deferred charges		49,866		5,577			2,438			0			57,881
Other		8,411		251,365			70,552			0			330,328
	$	6,740,087	$	7,879,619		$	3,287,998		$	(9,595,981	)	$	8,311,723
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt	$	97,403		916			993			0		$	99,312
Accounts payable and accrued liabilities		28,099		837,354			87,996			0			953,449
Federal and state taxes		4,963		2,164			0			0			7,127
Total current liabilities		130,465		840,434			88,989			0			1,059,888
Intercompany payable		0		758,003			0			(758,003	)		0
Other noncurrent liabilities		7,591		199,104			77,894			0			284,589
Long-term debt		3,168,819		5,337			35,606			0			3,209,762
Intercompany note payable		0		982,568			0			(982,568	)		0
Deferred income taxes		183,233		55,915			0			0			239,148
Redeemable noncontrolling interests		0		0			218,107			0			218,107
UHS common stockholders’ equity		3,249,979		5,038,258			2,817,152			(7,855,410	)		3,249,979
Noncontrolling interest		0		0			50,250			0			50,250
Total equity		3,249,979		5,038,258			2,867,402			(7,855,410	)		3,300,229
	$	6,740,087	$	7,879,619		$	3,287,998		$	(9,595,981	)	$	8,311,723

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2014

(amounts in thousands)

	Parent			Guarantors			Non Guarantors			Consolidating Adjustments		Total Consolidated Amounts
Net cash provided by operating activities	$	70,888			51,661			72,090		$	0	$	194,639
Cash Flows from Investing Activities:
Property and equipment additions, net of disposals		0			(70,385	)		(22,002	)		0		(92,387	)
Proceeds received from sale of assets and businesses		0			11,450			0			0		11,450
Acquisition of property and businesses		0			0			(3,301	)				(3,301	)
Costs incurred for purchase and implementation of electronic health records application		0			(6,504	)		0			0		(6,504	)
Net cash used in investing activities		0			(65,439	)		(25,303	)		0		(90,742	)
Cash Flows from Financing Activities:
Reduction of long-term debt		(97,975	)		(228	)		(10,851	)		0		(109,054	)
Additional borrowings		11,900			0			0			0		11,900
Repurchase of common shares		(13,993	)		0			0			0		(13,993	)
Dividends paid		(4,933	)		0			0			0		(4,933	)
Issuance of common stock		1,445			0			0			0		1,445
Excess income tax benefits related to stock-based compensation		11,750			0			0			0		11,750
Profit distributions to noncontrolling interests		0			0			(1,989	)		0		(1,989	)
Changes in intercompany balances with affiliates, net		20,918			13,735			(34,653	)		0		0
Net cash (used in) provided by financing activities		(70,888	)		13,507			(47,493	)		0		(104,874	)
Decrease in cash and cash equivalents		0			(271	)		(706	)		0		(977	)
Cash and cash equivalents, beginning of period		0			7,990			9,248			0		17,238
Cash and cash equivalents, end of period	$	0		$	7,719		$	8,542		$	0	$	16,261

UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2013

(amounts in thousands)

	Parent			Guarantors			Non Guarantors			Consolidating Adjustments		Total Consolidated Amounts
Net cash provided by operating activities	$	64,747			35,367			78,383		$	0	$	178,497
Cash Flows from Investing Activities:
Property and equipment additions, net of disposals		0			(54,822	)		(41,097	)		0		(95,919	)
Proceeds received from sale of assets and businesses		0			4,178			2,479			0		6,657
Acquisition of property and businesses		0			0			0					0
Costs incurred for purchase and implementation of electronic health records application		0			(16,412	)		0			0		(16,412	)
Net cash used in investing activities		0			(67,056	)		(38,618	)		0		(105,674	)
Cash Flows from Financing Activities:
Reduction of long-term debt		(63,612	)		(265	)		(6,049	)		0		(69,926	)
Additional borrowings		9,500			0			0			0		9,500
Repurchase of common shares		(14,027	)		0			0			0		(14,027	)
Dividends paid		(4,870	)		0			0			0		(4,870	)
Issuance of common stock		1,232			0			0			0		1,232
Excess income tax benefits related to stock-based compensation		9,266			0			0			0		9,266
Profit distributions to noncontrolling interests		0			0			(10,074	)		0		(10,074	)
Changes in intercompany balances with affiliates, net		(2,236	)		28,322			(26,086	)		0		0
Net cash (used in) provided by financing activities		(64,747	)		28,057			(42,209	)		0		(78,899	)
Decrease in cash and cash equivalents		0			(3,632	)		(2,444	)		0		(6,076	)
Cash and cash equivalents, beginning of period		0			11,949			11,522			0		23,471
Cash and cash equivalents, end of period	$	0		$	8,317		$	9,078		$	0	$	17,395