As filed with the Securities and Exchange Commission on May __, 1996
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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 Number)
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PENNSYLVANIA 19406
(610) 768-3300
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
ALAN B. MILLER, PRESIDENT
UNIVERSAL HEALTH SERVICES, INC.
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PENNSYLVANIA 19406
(610) 768-3300
(Name, address and telephone number of Agent for Service)
Copies of all communications, including all communications sent to
the agent for service, should be sent to:
Anthony Pantaleoni, Esq. Frederick W. Kanner, Esq.
Fulbright & Jaworski L.L.P. Dewey Ballantine
666 Fifth Avenue 1301 Avenue of the Americas
New York, New York 10103 New York, New York 10019
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box:
|-|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: |_| _______
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: |_| _______
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: |X|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed
Title of each class of securities Amount of Maximum Proposed Maximum Amount of
to be registered Shares to be Aggregate Price Aggregate Offering Registration Fee
Registered(1) per Share(2) Price(2)
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<S> <C> <C> <C> <C>
Class B Common Stock, $.01 par value $______________$_______________ $_______________ $________________
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</TABLE>
(1) Includes ______ shares which the Underwriters have the option to purchase
from the Company to cover over-allotments, if any.
(2) Pursuant to Rule 457(c), the Proposed Maximum Aggregate Price per Share and
the Proposed Maximum Aggregate Offering Price have been calculated on the
basis of the average of the high and low sale prices of the Class B Common
Stock as reported by the New York Stock Exchange on May ___, 1996.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that the Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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<PAGE>
PROSPECTUS
4,400,000 Shares
Universal Health Services, Inc.
Class B Common Stock
---------------
Of the 4,400,000 shares of Class B Common Stock, $.01 par value per share
("Class B Common Stock" or the "Shares") offered hereby (the "Offering"),
4,000,000 are being sold by Universal Health Services, Inc. ("UHS" or the
"Company") and 400,000 are being sold by Alan B. Miller (the "Selling
Stockholder"). The Company will not receive any of the proceeds from the sale of
Shares by the Selling Stockholder. The Class B Common Stock has limited voting
rights with respect to the election of directors and certain other matters.
The Company's Class B Common Stock is traded on the New York Stock
Exchange (the "NYSE") under the symbol "UHS". The closing price of the Company's
Class B Common Stock on the NYSE on May 20, 1996 was $_______ per share.
See "Risk Factors" on pages ___ to ___ for certain information that
should be considered by prospective investors in connection with an investment
in the Class B Common Stock offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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Underwriting
Discounts and Proceeds to Proceeds to
Price to Public Commissions(1) Company (2) Selling Stockholder
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<S> <C> <C> <C> <C>
Per Share.... $________ $___________ $_____________ $____________
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Total(3)..... $________ $___________ $_____________ $____________
=======================================================================================
</TABLE>
(1) For information regarding indemnification of the Underwriters, see
"Underwriting".
(2) Before deducting estimated expenses of this Offering of $____________
payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
660,000 additional shares of Class B Common Stock solely to cover
overallotments, if any. See "Underwriting". If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $__________, $__________ and $__________,
respectively.
---------------
The shares of Class B Common Stock are offered by the several
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions. It is expected that certificates for the
shares of Class B Common Stock offered hereby will be available for delivery on
or about ____________, 1996 at the offices of Smith Barney Inc., 333 West 34th
Street, New York, New York 10001.
---------------
Smith Barney Inc.
Dillon, Read & Co. Inc.
Donaldson Lufkin & Jenrette Securities Corporation
J. P. Morgan & Co.
Bear, Stearns & Co. Inc.
____________, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
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AVAILABLE INFORMATION
UHS is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by UHS may be inspected and copied at the public reference facilities
maintained by the Commission, 450 Fifth Street, N.W., Judiciary Plaza, Room
1024, Washington, D.C. 20549; and at regional offices of the Commission at the
Northwestern Atrium Center, 500 West Madison, Suite 1400, Chicago, Illinois
60661 and at 7 World Trade Center, New York, New York 10048. Copies of such
material may be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such material may also be inspected and copied at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
As permitted by the rules and regulations of the Commission, this Prospectus
omits certain information contained in the Registration Statement on Form S-3
(the "Registration Statement") of which this Prospectus is a part. For such
information, reference is made to the Registration Statement and the exhibits
thereto. Statements made in this Prospectus as to the contents of any contract,
agreement or other document are not necessarily complete; with respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement or incorporated by reference herein, reference is made to
such contract, agreement or other document for a more complete description of
the matter involved, and each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
UHS hereby incorporates by reference in this Prospectus the following
documents previously filed with the Commission pursuant to the Exchange Act: (i)
the Company's Prospectus, dated July 18, 1995 as supplemented by a Supplement
dated August 1, 1995, filed pursuant to Rule 424 under the Act relating to
securities registered on Form S-3, File No. 33-60289, declared effective on July
18, 1995, (ii) the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 and (iii) the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996.
Each document filed by UHS pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Class B Common Stock pursuant hereto shall be
deemed to be incorporated by reference in this Prospectus and to be a part of
this Prospectus from the date of filing of such document. Any statement
contained in this Prospectus or in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to the
extent that a statement contained in this Prospectus or in any subsequently
filed document that also is or deemed to be incorporated by reference in this
Prospectus modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus.
UHS will provide without charge to each person to whom this Prospectus is
delivered, upon the written or oral request of any such person, a copy of any or
all of the documents that are incorporated by reference in this Prospectus,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests should be directed to
Investor Relations, Universal Health Services, Inc., Universal Corporate Center,
367 South Gulph Road, P.O. Box 61558, King of Prussia, Pennsylvania 19406-0958,
telephone (610) 768-3300.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus or incorporated by reference
herein. Unless otherwise indicated, all information in this Prospectus gives
effect to a 2 for 1 Stock split effected on May 17, 1996.
The Company
The principal business of Universal Health Services, Inc. (together with
its subsidiaries, "UHS" or the "Company") is owning and operating acute care
hospitals, behavioral health centers, ambulatory surgery centers and radiation
oncology centers. The Company's strategy to enhance its profitability and to
continue to provide high quality, cost-effective healthcare services includes
the following key elements: (i) establish and maintain market leadership
positions in small and medium-sized markets with favorable demographics; (ii)
develop or participate in the leading integrated healthcare delivery system in
each of its hospital's markets; (iii) develop and maintain strong relationships
with physicians; (iv) maintain a low cost structure while providing high quality
care; and (v) attract managed care contracts. Consistent with its strategy, the
Company recently acquired three acute care hospitals which are market leaders.
In July 1995, the Company acquired Aiken Regional Medical Centers ("Aiken"), a
225-bed medical complex, located in Aiken, South Carolina. In August 1995, the
Company acquired Manatee Memorial Hospital ("Manatee"), a 512-bed acute care
hospital, located in Bradenton, Florida. In May 1996, the Company acquired
Northwest Texas Health Systems ("Northwest Texas Health"), a 360-bed medical
complex, located in Amarillo, Texas, for $125 million plus an additional amount
based on the hospital's earnings before depreciation, interest and taxes for a
seven year period after the closing date. See "Managements Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
Presently, the Company operates 35 hospitals, consisting of 16 acute care
hospitals and 19 behavioral health centers, in Arkansas, California, Florida,
Georgia, Illinois, Louisiana, Massachusetts, Michigan, Missouri, Nevada,
Oklahoma, Pennsylvania, South Carolina, Texas and Washington. The Company, as
part of its Ambulatory Treatment Centers Division owns outright, or in
partnership with physicians, and operates or manages 26 surgery and radiation
oncology centers located in 15 states.
Services provided by the Company's hospitals include general surgery,
internal medicine, obstetrics, emergency room care, radiology, oncology,
diagnostic care, coronary care, pediatric services and psychiatric services. The
Company provides capital resources as well as a variety of management services
to its facilities, including central purchasing, data processing, finance and
control systems, facilities planning, physician recruitment services,
administrative personnel management, marketing and public relations.
Recent Events
The Company plans to acquire or develop a number of additional hospitals.
In April 1996, the Company entered into an agreement to acquire four behavioral
health centers, all located in Pennsylvania, as well as management contracts for
seven other behavioral health centers and 33 acres of land adjacent to the
Company's Wellington Regional Medical Center (collectively, the "First Hospital
Facilities") for $36.5 million and up to $8 million which is contingent on
future operating performance. See "Managements Discussion and Analysis of
Financial Condition and Results of Operations Liquidity and Capital Resources."
Each of the First Hospital facilities is the leading provider of behavioral
health services in its market. The combination of the four owned facilities and
their related outpatient activities plus the four managed units in Pennsylvania
create a comprehensive behavioral health network in Pennsylvania. The company
believes its historical success in operating behavioral health facilities, when
coupled with the acquired contract management business for First Hospital, will
make it an effective competitor for new contracts to manage behavioral health
units of hospitals.
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The Company is developing, with the participation of Howard Hughes
Corporation, a medical complex including a 129-bed acute care hospital, an
ambulatory surgery center, a medical office building and a diagnostic center in
the community of Summerlin, Nevada, in western Las Vegas. When completed, this
facility will enhance the Company's market presence in Las Vegas, which is
located in the fastest growing MSA in the nation.
In January 1996, the Company broke ground on a 100-bed acute care hospital
in Edinburg, Texas. Edinburg, located in close proximity to McAllen, Texas, will
enhance the Company's market leadership in McAllen, which is located in the
fourth fastest growing MSA in the nation.
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<PAGE>
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Summary Income Statement Data
<TABLE>
<CAPTION>
(Unaudited)
Years Ended Three Months Ended
December 31 March 31,
1995 1996
Pro Pro
1992 1993 1994 1995 forma(1) 1995 1996 forma(1)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Net revenues ............ $ 731,227 $ 761,544 $ 782,199 $ 931,126 $1,200,348 $ 220,715 $ 271,616 $ 320,137
Costs and expenses:
Operating expenses ...... 285,922 299,645 298,108 361,049 472,937 84,469 102,335 122,796
Salaries and wages ...... 265,017 280,041 286,297 329,939 419,137 78,021 94,500 112,194
Provision for doubtful
accounts ............... 45,008 55,409 58,347 76,905 96,968 17,185 21,767 25,091
Depreciation an
amortization ........... 49,059 39,599 42,383 51,371 67,887 11,310 14,783 17,263
Lease and rental expense 33,854 34,281 34,097 36,068 36,979 8,772 9,405 --
Interest expense, net ... 11,414 8,645 6,275 11,195 23,804 1,614 4,648 5,451
Nonrecurring charges .... -- 8,828 9,763 11,610 14,200 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating charges 690,274 726,448 735,270 878,137 1,131,912 201,371 247,438 292,541
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes 40,953 35,096 46,929 52,989 68,436 19,344 24,178 27,596
Provision for income taxes 20,933 11,085 18,209 17,505 25,364 7,503 8,677 9,984
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income .............. $ 20,020 $ 24,011 $ 28,720 $ 35,484 $ 43,072 $ 11,841 $ 15,501 $ 17,611
========== ========== ========== ========== ========== ========== ========== ==========
Per Share Data:
Net income .............. $ .72 $ .86 $ 1.01 $ 1.26 $ 1.34 $ .43 $ .54 $ .54
Average number of
shares outstanding.. 29,940,000 29,638,000 28,778,000 28,158,000 32,158,000 27,884,000 28,712,000 32,712,000
</TABLE>
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(1) The pro forma financial data for the indicated periods assumes (i) the
acquisition of the First Hospital facilities, and reflects the acquisitions
of Aiken Regional Medical Centers, Manatee Memorial Hospital and Northwest
Texas Health Systems, (ii) the dispositions of Westlake Medical Center and
Dallas Family Hospital and (iii) the application of the net proceeds
received by the Company from this Offering to repay debt incurred to fund
the acquisitions of Northwest Texas Health Systems and First Hospital. Pro
forma Statement of Operations information and Per Share Data were prepared
as if the acquisitions and related transactions occurred on the first day
of the period presented. See "Pro Forma Financial Information."
Summary Balance Sheet Data
(Unaudited) at March 31,
1996
1996 Pro forma(1)
---- ------------
Working capital ........................... $ 16,125 $ 36,543
Total assets .............................. 767,942 949,928
Long-term borrowings ...................... 230,401 294,696
Total debt ................................ 237,381 301,676
Total stockholders' equity ................ 315,826 420,596
(1) The pro forma balance sheet data for the indicated period assumes (i) the
acquisition of the First Hospital facilities, and reflects the acquisition
of Northwest Texas Health Systems and (ii) the application of the net
proceeds received by the Company from this Offering to repay debt incurred
to fund the acquisitions of Northwest Texas Health Systems and First
Hospital. Pro forma balance sheet data was prepared as if the acquisitions
and related transactions occurred on the last day of the period. See "Pro
Forma Financial Information."
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Selected Operating Data
The following table shows the bed utilization and occupancy rates for the
hospitals currently operated by the Company for the periods indicated.
Accordingly, the information is presented on a basis different from that used in
preparing the historical financial information included herein and included or
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
(Unaudited)
Years Ended Three Months Ended
December 31, March 31,
1995 1996
Pro Pro
1992 1993 1994 1995 Forma(1) 1995 1996 forma(1)
---- ---- ---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Licensed
Beds
Acute Care
Hospitals ........................ 2,645 2,730 2,788 2,808 3,168 2,789 2,797 3,154
Behavioral Health
Centers .......................... 1,206 1,216 1,227 1,265 1,631 1,265 1,267 1,633
Hospital Admissions
Acute Care
Hospitals ........................ 83,826 87,174 92,911 100,004 113,476 25,704 27,551 2,767
Behavioral Health
Centers .......................... 13,505 15,560 16,804 17,888 24,848 4,197 4,298 1,618
Average Length of
Patient Stay
(Days)
Acute Care
Hospitals ........................ 5.8 5.6 5.3 5.1 5.2 5.2 5.1 5.1
Behavioral Health
Centers .......................... 15.7 13.0 11.6 11.2 12.3 12.0 12.1 13.1
Patient Days(2)
Acute Care
Hospitals ........................ 485,015 486,291 496,462 511,487 585,328 134,470 140,088 158,726
Behavioral Health
Centers .......................... 211,390 202,047 195,004 200,857 304,800 50,553 52,083 78,659
</TABLE>
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(1) The year ended December 31, 1995 (Pro forma) assumes that the acquisitions
of Northwest Texas Health Systems, the First Hospital facilities, Aiken
Regional Medical Centers and Manatee Memorial Hospital and the dispositions
of Westlake Medical Center, Dallas Family Hospital and Universal Medical
Center occurred on January 1, 1995.
(2) "Patient Days" is the aggregate sum for all patients of the number of days
that hospital care is provided to each patient.
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The Offering
<TABLE>
<S> <C>
Class B Common Stock to be offered by the Company............................. 4,000,000 shares
Class B Common Stock to be offered by the Selling Stockholder................. 400,000 shares
Class B Common Stock to be outstanding after the Offering..................... [ ] shares(1)
Use of proceeds............................................................... For repayment of debt incurred to fund
acquisitions.
NYSE symbol................................................................... UHS
</TABLE>
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(1) Based on the number of shares of Class B Common Stock outstanding on
____________, 1996. Does not include __________ shares issuable upon
exercise of outstanding options. Also does not include __________ shares of
Class A Common Stock, _________ shares of Class C Common Stock and
__________ shares of Class D Common Stock, all of which are outstanding on
____________, 1996. All of such shares are convertible, on a
share-for-share basis, into Class B Common Stock. See "Description of
Common Stock."
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RISK FACTORS
This Prospectus contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed below, as
well as those discussed elsewhere in the Prospectus.
Concentration of Revenues
McAllen Medical Center contributed 19% and 21% of the Company's net
revenues and 36% and 35% of the Company's earnings before interest, income
taxes, depreciation, amortization, lease and rental expense and non-recurring
transactions ("EBITDAR"), for the two years ended December 31, 1995 and 1994,
respectively, excluding the effect of the special Medicaid reimbursements
received at one of the Company's Texas acute care hospitals of $10.4 million and
$12.4 million for the years ended December 31, 1995 and 1994, respectively (the
"Indigent Care Reimbursements"). On a pro forma basis, assuming that the
acquisitions of Northwest Texas Health (acquired in May 1996), the First
Hospital facilities, Aiken (acquired in July 1995) and Manatee (acquired in
August 1995), and the dispositions of Dallas Family Hospital and Westlake
Medical Center (both disposed of in July 1995) and the disposition of Universal
Medical Center (disposed of in October 1995) occurred on January 1, 1995 (the
"Adjustments"), and excluding the Indigent Care Reimbursements, McAllen Medical
Center would have contributed [__]% of the Company's net revenues for the year
ended December 31, 1995 and [__]% of the Company's EBITDAR for such period.
Valley Hospital Medical Center ("Valley Hospital") contributed 17% and 19%
of the Company's net revenues and 30% and 35% of the Company's EBITDAR, for the
years ended December 31, 1995 and 1994, excluding the Indigent Care
Reimbursements. On a pro forma basis, taking into account the Adjustments and
excluding the Indigent Care Reimbursements, Valley Hospital would have
contributed [__]% of the Company's net revenues for the year ended December 31,
1995 and [__]% of the Company's EBITDAR for such period.
Assuming the Adjustments and excluding the Indigent Care Reimbursements,
Manatee would have contributed [__]% of the Company's net revenues for the year
ended December 31, 1995 and [__]% of the Company's EBITDAR for such period.
Assuming the Adjustments and excluding the Indigent Care Reimbursements,
Aiken would have contributed [ ]% of the Company's net revenues for the year
ended December 31, 1995 and [ ]% of the Company's EBITDAR for such period.
Assuming the Adjustments and excluding the Indigent Care Reimbursements,
Northwest Texas Health would have contributed [__]% of the Company's net
revenues for the year ended December 31, 1995, and [__]% of the Company's
EBITDAR for such period. See "Prospectus Summary -- The Company."
Any adverse change in the condition or in the results of operations of
these hospitals could have a material adverse effect on the Company.
Competition
The healthcare industry has been characterized in recent years by
increased competition for patients and staff physicians, excess capacity at
general hospitals, a shift from inpatient to outpatient settings, a decrease in
patients' average length of stay, and increased consolidation. The principal
factors contributing to these trends are advances in medical technology,
cost-containment efforts by managed care payors, employers and traditional
health insurers, changes in regulations and reimbursement policies, increases in
the number and type of competing healthcare providers and changes in physician
practice patterns. With a few exceptions, physicians are not employees of the
Company's hospitals and members of the medical staffs of the Company's hospitals
also serve on the medical staffs of hospitals not owned by the Company and may
terminate their affiliation with the Company's hospitals at any time. The
Company's future success will depend, in part, on the ability of the Company's
hospitals to continue to attract and maintain staff physicians, and to organize
and structure integrated healthcare delivery
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<PAGE>
systems with other healthcare providers and physician practice groups. There can
be no assurance that the Company's hospitals will continue to be able, on terms
favorable to the Company, to attract physicians to their staffs, or to organize
and structure integrated healthcare delivery systems, for which other healthcare
companies with greater financial resources or a wider range of services may be
competing.
Limits on Reimbursement
The Company derives a substantial portion of its net revenues from
third-party payors, including the Medicare and Medicaid programs. See "Business
- -- Sources of Revenue." Changes in government reimbursement programs have
resulted in limitations on the growth rates of the reimbursement programs and,
in some cases, in reduced levels of reimbursement for healthcare services, and
additional changes are anticipated. Such changes are likely to result in further
limitations on reimbursement levels. See "Risk Factors -- Healthcare Reform
Legislation." In addition, private payors, including managed care payors,
increasingly are demanding discounted fee structures or the assumption by
healthcare providers of all or a portion of the financial risk through prepaid
capitation arrangements. Inpatient utilization, average lengths of stay and
occupancy rates continue to be negatively affected by payor-required
pre-admission authorization and utilization review and by payor pressure to
maximize outpatient and alternative healthcare delivery services for less
acutely ill patients. In addition, efforts to impose reduced allowances, greater
discounts and more stringent cost controls by government and other payors are
expected to continue. The Company is unable to predict the effect that these
changes will have on its operations. Furthermore, limits on the scope of
services reimbursed or on reimbursement rates and fees could have a material
adverse effect on the financial results of the Company's operations.
Health Reform Legislation
In recent years, an increasing number of legislative initiatives have been
introduced or proposed in Congress and in state legislatures that would effect
major changes in the healthcare system, either nationally or at the state level.
Among the proposals that have been introduced are price controls on hospitals,
insurance market reforms to increase the availability of group health insurance
to small businesses, requirements that all businesses offer health insurance
coverage to their employees and the creation of a government health insurance
plan or plans that would cover all citizens and increase payments by
beneficiaries. 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.
Liability Insurance
Most of the Company's subsidiaries are self-insured for general liability
risks for claims limited to $5 million per occurrence and for professional
liability risks for claims limited to $25 million per occurrence. Effective
January 1, 1996, the Company's self-insured subsidiaries purchased general and
professional liability insurance coverage for a three year term with a
commercial insurer. These policies include coverage for claims in excess of $5
million and limited to $25 million per occurrence and have an unlimited
aggregate. Coverage in excess of these limits up to $100 million is maintained
with major insurance carriers. These policies include coverage up to $25 million
per occurrence for general and professional liability risks.
Control By Principal Stockholder
Alan B. Miller, the Company's Chairman of the Board, President and Chief
Executive Officer, controls approximately 83% and, upon consummation of this
Offering, will control approximately ___% of the general voting power of UHS.
Mr. Miller also owns an aggregate of ___% of Class A Common Stock and Class C
Common Stock and upon consummation of the Offering will own ___% of Class A
Common Stock and ___% of Class C Common Stock. As such, Mr. Miller can elect 80%
of the Board of
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<PAGE>
Directors of UHS and accomplish a merger, sale, transfer of assets or other
significant transaction without the approval of UHS' other stockholders.
USE OF PROCEEDS
The net proceeds to the Company from the sale of Shares being offered by
it in this Offering, after deducting underwriting discounts and the estimated
expenses of this Offering, are estimated to be $____ million ($____ million if
the Underwriter's over-allotment option is exercised in full). Such proceeds
will be used by the Company for the repayment of borrowings under the Company's
revolving credit facility, which totaled approximately $____ million as of
____________, 1996, which were incurred to fund the purchases of Northwest Texas
Health and the First Hospital facilities. Borrowings under the Company's
revolving credit facility bear interest at either (i) the prime rate or the sum
of the certificate of deposit rate and between 0.625% to 1.125%, or (ii) in the
case of Eurodollar loans, the sum of the Eurodollar rate and between 0.500% to
1.000%. The revolving credit facility matures in March 2000. After application
of the proceeds from this Offering, $____ million will be available to the
Company under the revolving credit facility. The Company expects to borrow under
the revolving credit facility as needed in connection with acquisitions,
although the Company has no understandings or agreements with respect to such
acquisition and other corporate purposes.
-11-
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1996, and such capitalization, as adjusted, to give effect to the
acquisitions of Northwest Texas Health and the First Hospital facilities and the
sale of the Shares offered hereby and the application of the net proceeds
therefrom as described in "Use of Proceeds".
<TABLE>
<CAPTION>
March 31, 1996
--------------
Actual As Adjusted
------ -----------
(In thousands)
<S> <C> <C>
Long-Term Debt:
Notes payable (including obligations under capitalized leases of $12,783 at
December 31, 1995) with varying maturities through 2001; weighted average
interest of 6.9% at December 31, 1995 $ $
Mortgages payable, interest at 6.0% to 11.0% with varying maturities
through 2000
Revolving credit and demand notes
Commercial paper
Revenue bonds:
Interest at floating rates ranging from 4.1% to 4.5% and one at a fixed rate
of 8.3% at December 31, 1995 with varying maturities through 2015
8 3/4% Senior Notes due 2005, net of unamortized discount of
$1,112
----- -----
Total Long-Term Debt
Less: Amounts due within one year
----- -----
$ $
----- -----
Common Stockholders' Equity:
Class A Common Stock, voting, $.01 par value; authorized 12,000 shares; issued
and outstanding 1,090 shares at December 31, 1995
Class B Common Stock, limited voting, $.01 par value; authorized 50,000 shares;
issued and outstanding 12,592 shares at December 31, 1995
Class C Common Stock, voting, $.01 par value; authorized 1,200 shares; issued
and outstanding 110 shares at December 31, 1995
Class D Common Stock, limited voting, $.01 par value; authorized 5,000 shares;
issued and outstanding 22 shares at December 31, 1995
Capital in excess of par value, net of deferred compensation of $332
at December 31, 1995
Retained earnings
----- -----
Total Stockholders' Equity
----- -----
Total Capitalization $ $
===== =====
</TABLE>
-12-
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The Company has entered into an agreement to purchase substantially all of
the assets and operations of four behavioral health centers, located in
Pennsylvania, as well as management contracts for seven other behavioral health
centers and 33 acres of land adjacent to the Company's Wellington Regional
Medical Center, for $36.5 million and up to $8 million which is contingent on
future operating performance. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital Resources."
In May 1996, the Company acquired substantially all of the assets and
operations of Northwest Texas Health Systems, a 360-bed medical complex located
in Amarillo, Texas for $12 million in cash. The assets acquired include the real
and personal property, working capital and tangible assets, plus an additional
amount based on the hospital's earnings before depreciation, interest and taxes.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources."
During 1995, the Company acquired substantially all of the assets and
operations of Manatee Memorial Hospital and Aiken Regional Medical Centers. In
addition, during 1995, in connection with the acquisition of Aiken Regional
Medical Centers, the Company divested substantially all of the assets and
operations of Westlake Medical Center and Dallas Family Hospital and, in a
separate transaction, sold substantially all of the assets of Universal Medical
Center. See the notes to these pro forma financial statements included elsewhere
in this Prospectus.
The Pro Forma Consolidated Statements of Income were prepared as if the
foregoing transactions occurred as of January 1, 1995. The Pro Forma Condensed
Consolidated Balance Sheet was prepared as if the foregoing transactions
occurred on December 31, 1995. These pro forma financial statements should be
read in connection with the historical financial statements and notes thereto
included elsewhere or incorporated by reference in this Prospectus.
The pro forma financial information is unaudited and is not necessarily
indicative of the consolidated results which actually would have occurred if the
transactions had been consummated at the beginning of the periods presented, nor
does it purport to present the future financial position and results of
operations for future periods.
-13-
<PAGE>
UNIVERSAL HEALTH SERVICES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
1996 Acquisitions
-----------------
The Northwest The
Company Texas First Other Company
Historical Health(A) Hospital(B) Adjustments Pro Forma
---------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $762 ($125,565) ($43,500) $169,065(C) $762
Accounts receivable, net 116,400 16,764 6,171 139,335
Other current assets 23,892 9,816 588 34,296
Deferred income taxes 15,304 0 0 15,304
----------- ------------ ------------- ------------ ------------
TOTAL CURRENT ASSETS 156,358 (98,985) (36,741) 169,065 189,697
----------- ------------ ------------- ------------ ------------
Property and equipment, net 411,215 85,785 32,000 529,000
Other Assets:
Excess of cost over fair
value of assets acquired 134,421 22,362 1,500 158,283
Deferred income taxes 18,717 0 0 18,717
Deferred charges and other 47,231 0 7,000 54,231
----------- ------------ ------------- ------------ ------------
TOTAL ASSETS $767,942 $9,162 $3,759 $169,065 $949,928
=========== ============ ============= ============ ============
LIABILITIES AND
STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of debt $6,980 $0 $0 $6,980
Accounts payable and accrued
expenses 126,871 9,162 3,759 139,762
Federal and state taxes 6,382 0 0 6,382
----------- ------------ ------------- ------------ ------------
TOTAL CURRENT LIABILITIES 140,233 9,162 3,759 0 153,154
----------- ------------ ------------- ------------ ------------
Other non-current liabilities 81,482 0 0 81,482
Long-term debt, net of
current maturities 230,401 0 0 64,295(D) 294,696
Common stockholders' equity 315,826 0 0 104,770(E) 420,596
----------- ------------ ------------- ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $767,942 $9,162 $3,759 $169,065 $949,928
=========== ============ ============= ============ ============
</TABLE>
The accompanying notes and management's assumptions are an integral part of this
statement.
-14-
<PAGE>
UNIVERSAL HEALTH SERVICES, INC.
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
(In thousands, except Per Share Data)
<TABLE>
<CAPTION>
1996 Acquisitions
----------------------------
1995 The
The Acquisitions Northwest Other Company
Company and Texas First Adjust- Pro
Historical Divestitures(A) Health(B) Hospital(C) ments Forma
------------ -------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Revenues $931,126 $75,311 $148,804 $45,107 $1,200,348
Operating charges:
Operating expenses 361,049 31,884 67,137 12,867 472,937
Salaries and wages 329,939 17,560 50,890 20,748 419,137
Provision for
doubtful accounts 76,905 6,497 11,712 1,854 96,968
Depreciation and
amortization 51,371 6,595 7,789 2,132 67,887
Lease and rental
expense 36,068 151 605 155 36,979
Interest expense, net 11,195 8,904 0 0 3,705(E) 23,804
Non-recurring charges 11,610 2,590 0 0 14,200
------------ -------------- ----------- ----------- ---------- ----------
Total expenses 878,137 74,181 138,133 37,756 3,705 1,131,912
------------ -------------- ----------- ----------- ---------- ----------
Income before income
taxes 52,989 1,130 10,671 7,351 (3,705) 68,436
Provision for income
taxes 17,505 822 0 1,573 5,464(F) 25,364
------------ -------------- ----------- ----------- ---------- ----------
Net income $35,484 $308 $10,671 $5,778 ($9,169) $43,072
============ ============== =========== =========== ========== ==========
Earnings per common
and common
equivalent share $1.26 $1.34
============ ==========
Weighted average
number of common
shares and
equivalents 28,158,000 32,158,000
============ ===========
</TABLE>
The accompanying notes and management's assumptions are an integral part of
this statement.
-15-
<PAGE>
UNIVERSAL HEALTH SERVICES, INC.
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE QUARTER ENDED MARCH 31, 1996
(Unaudited)
(In thousands, except Per Share Data)
<TABLE>
<CAPTION>
1996 Acquisitions
------------------------------
The Northwest The
Company Texas First Other Company
Historical Health(B) Hospital (C) Adjustments Pro Forma
----------- ------------ ------------- ------------- ----------
<S> <C> <C> <C> <C>
Net Revenues $271,616 36,369 $12,152 $320,137
Operating charges:
Operating expenses 102,335 17,195 3,511 (245) (D) 122,796
Salaries and wages 94,500 12,346 5,348 112,194
Provision for doubtful
accounts 21,767 2,726 598 25,091
Depreciation and amortization 14,783 1,947 533 17,263
Lease and rental expense 9,405 188 133 9,726
Interest expense, net 4,648 0 0 823 (E) 5,451
----------- ------------ ------------- ------------- ----------
Total expenses 247,438 34,402 10,123 578 292,541
----------- ------------ ------------- ------------- ----------
Income before income taxes 24,178 1,967 2,029 (578) 27,596
Provision for income taxes 8,677 0 405 902 (F) 9,984
----------- ------------ ------------- ------------- ----------
Net income $15,501 $1,967 $1,624 ($1,481) 17,611
=========== ============ ============= ============= ==========
Earnings per common and common
equivalent share $0.54 $0.54
=========== ==========
Weighted average number of
common shares and
equivalents 28,712,000 32,712,000
=========== ==========
</TABLE>
The accompanying notes and management's assumptions are an integral part of this
statement.
-16-
<PAGE>
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation:
The accompanying pro forma financial statements of the Company have been
prepared to reflect the completion of the Northwest Texas Health System and
First Hospital transactions as described in the introductory note to these pro
forma financial statements.
In October 1995, the Company sold the real and personal property and
substantially all of the operating assets of Universal Medical Center, a 202-bed
acute care hospital located in Plantation, Florida for approximately $19.5
million in cash.
In August 1995, the Company acquired Manatee Memorial Hospital, a 512-bed acute
care hospital located in Bradenton, Florida, for $139 million in cash. The
acquired assets include the real and personal property, working capital and
intangible assets.
In July 1995, the Company acquired the fixed assets of Aiken Regional Medical
Centers ("Aiken"), including Aiken Regional Medical Center, The Carolina Cancer
Center and the Aurora Pavilion from a subsidiary of Columbia/HCA Healthcare
Corporation ("Columbia"). The acquired assets include the real property and
moveable equipment together with intangible assets and certain working capital
accounts, excluding accounts receivable.
All of the acquisitions have been accounted for as purchases by the Company and
the operating results of the entities have been included in the Company's
historical operating results from their respective dates of acquisition.
-17-
<PAGE>
Adjustments to Pro Forma Balance Sheet
(A) Northwest Texas Health Acquisition:
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------------
Northwest
Texas Assets and Allocation Northwest
Health Liabilities of Purchase Texas Health
Historical (1) not Acquired (2) Price (3) Acquisition
------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $33,200 ($33,200) ($125,565) ($125,565)
Accounts receivable, net 16,764 16,764
Other current assets 46,518 (36,702) 9,816
Deferred income taxes 0
------------- -------------- ------------ ------------
TOTAL CURRENT ASSETS 96,482 (69,902) (125,565) (98,985)
------------- -------------- ------------ ------------
Property and equipment, net 65,176 20,609 85,785
Other Assets:
Excess of cost over fair
value of assets acquired 22,362 22,362
Deferred income taxes 0
Deferred charges and other 4,132 (4,132) 0
------------- -------------- ------------ ------------
TOTAL ASSETS $165,790 ($74,034) ($82,594) $9,162
============= ============== ============ ============
LIABILITIES AND
STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of debt $1,375 ($1,375) 0
Accounts payable and accrued
expenses 14,954 (5,792) 9,162
Federal and state taxes 0
------------- -------------- ------------ ------------
TOTAL CURRENT LIABILITIES 16,329 (7,167) 0 9,162
Other non-current liabilities 592 (592) 0
Long-term debt, net of
current maturities 6,205 (6,205) 0
Common stockholders' equity 142,664 (60,070) (82,594) 0
------------- -------------- ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $165,790 ($74,034) ($82,594) $9,162
============= ============== ============ ============
</TABLE>
(1) To reflect the historical cost basis of the assets and liabilities of the
Northwest Texas Healthcare System.
(2) To eliminate assets and liabilities not being acquired or assumed.
(3) To allocate purchase price based on fair value of assets acquired.
-18-
<PAGE>
(B) First Hospital Acquisition
<TABLE>
<CAPTION>
Pro Forma Adjustments
-------------------------------
First Assets and Allocation First
Hospital Liabilities of Purchase Hospital
Historical(1) not Acquired (2) Price (3) Acquisition
------------ -------------- ------------ -------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $521 ($521) ($43,500) ($43,500)
Accounts receivable, net 9,156 (2,985) 6,171
Other current assets 7,740 (7,152) 588
Deferred income taxes 0 0
------------ -------------- ------------ -------------
TOTAL CURRENT ASSETS 17,417 (10,658) (43,500) (36,741)
------------ -------------- ------------ -------------
Property and equipment, net 20,209 11,791 32,000
Other Assets:
Excess of cost over fair
value of assets acquired 277 (277) 1,500 1,500
Deferred income taxes 0 0
Deferred charges and other 9,656 (9,656) 7,000 7,000
------------ -------------- ------------ -------------
TOTAL ASSETS $47,559 ($20,591) ($23,209) $3,759
============ ============== ============ =============
LIABILITIES AND
STOCKHOLDER'S EQUITY
CURRENT LIABILITIES: 0
Current maturities of debt 2,486 (2,486) 0
Accounts payable and accrued
expenses 4,537 (778) 3,759
Federal and state taxes 420 (420) 0
------------ -------------- ------------ -------------
TOTAL CURRENT LIABILITIES 7,443 (3,684) 0 3,759
Other non-current liabilities 0 0
Long-term debt, net of
current maturities 15,432 (15,432) 0
Common stockholders' equity 24,684 (1,475) (23,209) 0
------------ -------------- ------------ -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $47,559 ($20,591) ($23,209) $3,759
============ ============== ============ =============
</TABLE>
(1) To reflect the historical cost basis of the assets and liabilities of First
Hospital Corporation.
(2) To eliminate assets and liabilities not being acquired or assumed.
(3) To allocate purchase price based on fair value of assets acquired.
- ------------------------------------------------------------
<TABLE>
<S> <C>
(C) To record the cash proceeds from the issuance of common stock and borrowings $169,065
(D) To record the net borrowings necessary to finance the 1996 transactions 64,295
(E) To record the issuance of 2,000,000 shares at $55, net of offering costs 104,770
</TABLE>
-19-
<PAGE>
Adjustments to Pro Forma Consolidated Statements of Income
(A) To reflect the historical revenues and expenses of the hospitals
acquired and divested as part of the Manatee, Aiken and Universal Medical
Transactions. The revenues and expenses of Manatee, Aiken, Westlake, Dallas
Family and Universal Medical Center reflected in the table below are for
the period from January 1, 1995 through the respective dates of acquisition
or divestiture.
<TABLE>
<CAPTION>
Year Ended December 31, 1995
The Aiken Transaction
------------------------------------------------------
Pro
Universal Forma 1995
Dallas Medical Adjust- Transactions,
Manatee Aiken Westlake Family Center ments net
---------- -------- ----------- --------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenues $86,133 $44,233 ($16,032) ($10,523) ($23,665) ($4,835)(1) $75,311
Operating
charges:
Operating
expenses 35,469 20,247 (7,965) (4,691) (11,843) 667(2) 31,884
Salaries and
wages 26,368 12,474 (7,061) (4,354) (9,867) 17,560
Provision for
doubtful
accounts 5,945 5,638 (1,775) (2,228) (1,083) 6,497
Depreciation
and
amortization 3,980 1,907 (1,295) (884) (1,375) 4,262(3) 6,595
Lease and
rental expense 1,174 576 (1,813) (562) (417) 1,193(4) 151
Interest
expense, net 7,334 92 0 0 0 1,478(5) 8,904
Non-recurring
charges 0 0 0 0 5,251 (2,661)(6) 2,590
Management
fees 2,446 1,299 0 (3,745)(7) 0
---------- -------- ----------- --------- ----------- ---------- ------------
Total expenses 82,716 42,233 (19,909) (12,719) (19,334) 1,194 74,181
---------- -------- ----------- --------- ----------- ---------- ------------
Income (loss)
before
income taxes 3,417 2,000 (3,877) (2,196) 4,331 (6,029) 1,130
Provision
(benefit)
for income
taxes 0 822 822
---------- -------- ----------- --------- ----------- ---------- ------------
Net income (loss) $3,417 $1,178 ($3,877) ($2,196) $4,331 ($6,029) $308
========== ======== =========== ========= =========== ========== ============
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
Year Ended
December 31, 1995
-----------------
<S> <C>
(1) Adjustments to Net Revenues -
o To eliminate nonoperating income at Manatee ($3,335)
o To eliminate management fees charged by UHS to Manatee (1,500)
-------
Total adjustments to Net Revenues (4,835)
-------
(2) To adjust operating expenses at manatee for state and local taxes
and other operating expenses 667
-------
(3) Adjustments to Depreciation and amortization -
o To eliminate historical depreciation expense at Manatee and Aiken (5,887)
o To record historical depreciation and amortization expense based on
average depreciable lives of 20 years for buildings and improvements,
5 years for equipment and 15 years for the amortization of good will
at Manatee and Aiken 10,574
o To adjust historical depreciation expense on the real property
transferred to UHT as part of the Aiken transaction (425)
-------
Total adjustments to Depreciation and amortization 4,262
-------
(4) To record lease and rental expense relating to the assets transferred
from UHS to UHT 1,193
-------
(5) Adjustment to interest expense -
o To eliminate historical interest expense at Manatee and Aiken (7,426)
o To record interest savings on UMC proceeds (1,100)
o To record interest on borrowings to finance the purchase transactions using
borrowings generated from the Company's $135 million Senior Notes,
commercial paper and revolving credit facilities 10,004 10,004
-------
Total adjustments to Interest expense 1,478
-------
(6) To eliminate the loss on the Aiken transaction recorded in 1995 (2,661)
-------
(7) To eliminate management fees paid to affiliates (3,745)
-------
</TABLE>
-21-
<PAGE>
(B) Northwest Texas Health Pro Forma
<TABLE>
<CAPTION>
Year Ended December
31, 1995
---------------------
Northwest Northwest
Texas Texas
Health Pro Forma Health
Historical Adjustments Pro Forma
--------------- ------------- -------------
<S> <C> <C> <C>
Net Revenues $152,717 ($3,913)(1) $148,804
Operating charges:
Operating expenses 62,487 4,650(2) 67,137
Salaries and wages 50,890 50,890
Provision for doubtful accounts 11,712 11,712
Depreciation and amortization 8,724 (935)(3) 7,789
Lease and rental expense 605 605
Interest expense, net 636 (636)(4) 0
--------------- ------------- -------------
Total expenses 135,054 3,079 138,133
--------------- ------------- -------------
Income (loss) before income taxes 17,633 (6,992) 10,671
Provision (benefit) for income taxes 0 0
--------------- ------------- -------------
Net income (loss) $17,663 ($6,992) $10,671
=============== ============= =============
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1996
----------------------------------
Northwest Northwest
Texas Texas
Health Pro Forma Health
Historical Adjustments Pro Forma
--------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Revenues $37,519 ($1,150)(1) $36,369
Operating charges:
Operating expenses 16,419 776(2) 17,195
Salaries and wages 12,346 12,346
Provision for doubtful accounts 2,726 2,726
Depreciation and amortization 2,091 (144)(3) 1,947
Lease and rental expense 188 188
Interest expense, net 112 (112)(4) 0
--------------- ------------- -------------
Total expenses 33,882 520 34,402
--------------- ------------- -------------
Income (loss) before income taxes 3,637 (1,670) 1,967
Provision (benefit) for income taxes 0 0
--------------- ------------- -------------
Net income (loss) $3,637 ($1,670) $1,967
=============== ============= =============
</TABLE>
-22-
<PAGE>
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1995 March 31, 1995
----------------- --------------
<S> <C> <C>
(1) Adjustments to Net Revenues -
o To eliminate nonoperating income ($3,689) ($1,066)
o To eliminate ad valorem tax revenue at
Northwest Texas Health (8,224) (2,084)
o To record indigent care receipts at Northwest
Texas Health 8,000 2,000
----- -----
Total adjustments to Net Revenues (3,913) (1,150)
------- -------
(2) To adjust operating expenses at Northwest
Texas Health for state and local taxes and
other operating expenses 4,650 776
----- ---
(3) Adjustments to Depreciation and amortization
expense -
o To eliminate historical depreciation expense at
Northwest Texas Health (8,724) (2,091)
o To record historical depreciation and
amortization expense based on average
depreciable lives of 25 years for buildings
and improvements, 7 years for equipment and
15 years for the amortization of goodwill at
Northwest Texas Health 7,789 1,947
----- -----
Total adjustments to Depreciation and
amortization (935) (144)
----- -----
(4) To eliminate historical interest expense (636) (112)
----- -----
</TABLE>
-23-
<PAGE>
(C) First Hospital Pro Forma
<TABLE>
<CAPTION>
December 31, 1995
-----------------
First First
Hospital Pro Forma Hospital
Historical Adjustments Pro Forma
--------------- -------------- ------------
<S> <C> <C> <C>
Net Revenues $45,107 $45,107
Operating charges:
Operating expenses 12,867 12,867
Salaries and wages 20,748 20,748
Provision for doubtful accounts 1,854 1,854
Depreciation and amortization 1,830 $302(1) 2,132
Lease and rental expense 155 155
Interest expense, net 1,876 (1,876)(2) 0
Management fees 2,751 (2,751)(3) 0
--------------- -------------- ------------
Total expenses 42,081 (4,325) 37,756
--------------- -------------- ------------
Income (loss) before income taxes 3,026 4,325 7,351
Provision (benefit) for income taxes 1,573 1,573
--------------- -------------- ------------
Net income (loss) $1,453 $4,325 $5,778
=============== ============== ============
</TABLE>
<TABLE>
<CAPTION>
Three Months ended March 31, 1996
---------------------------------
First First
Hospital Pro Forma Hospital
Historical Adjustments Pro Forma
--------------- -------------- ------------
<S> <C> <C> <C>
Net Revenues $12,152 $12,152
Operating charges:
Operating expenses 3,511 3,511
Salaries and wages 5,348 5,348
Provision for doubtful accounts 598 598
Depreciation and amortization 452 81(1) 533
Lease and rental expense 133 133
Interest expense, net 542 (542)(2) 0
Management fees 561 (561)(3) 0
--------------- -------------- ------------
Total expenses 11,145 (1,022) 10,123
--------------- -------------- ------------
Income (loss) before income taxes 1,007 1,022 2,029
Provision (benefit) for income taxes 405 405
--------------- -------------- ------------
Net income (loss) $602 $1,022 $1,624
=============== ============== ============
</TABLE>
-24-
<PAGE>
<TABLE>
<S> <C> <C>
(1) Adjustments to depreciation and amortization
expense
o To eliminate historical depreciation expense at ($1,830) ($ 425)
First Hospital
o To record historical depreciation and
amortization expense based on average
depreciable lives of 25 years for buildings
and improvements, 7 years for equipment and
15 years for the amortization of goodwill at
First Hospital 2,132 533
----- ---
Total adjustments to Depreciation and 302 81
--- --
amortization
(2) To eliminate historical interest expense (1,876) (542)
------- -----
(3) To eliminate management fees paid to First (2,751) (561)
Hospital ------- -----
- --------------------------------------------------
(D) To eliminate acquisition costs incurred by
UHS related to Northwest Texas Health and
First Hospital (245)
-----
(E) Adjustments to interest expense-
o To record interest on borrowings to finance
the purchase transactions using borrowings
under the Company's revolving credit facility
at an average rate of 6.77% and 6.13%,
respectively 4,353 985
o To record interest income on the $7,000,000
loan to First Hospital (648) (162)
----- -----
Total adjustments to interest expense 3,705 823
----- ---
(F) To adjust income tax expense 5,464 902
----- ---
</TABLE>
-25-
<PAGE>
SELECTED FINANCIAL DATA
The selected consolidated financial and other data presented below for, and
as of the end of, each of the five years in the period ended December 31, 1995,
have been derived from the consolidated financial statements of the Company,
which have been audited by Arthur Andersen LLP. The selected consolidated
financial data presented below for, and as of the end of the three-month periods
ended March 31, 1995 and 1996 have been prepared on the same basis as the
audited financial statements of the Company and include all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the information set forth therein. This data should be read in conjunction with
the consolidated financial statements, related notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other financial information included elsewhere or incorporated by reference in
this Prospectus.
<TABLE>
<CAPTION>
(Unaudited)
Years Ended December 31, Three Months
Ended March 31,
------------------------------------------------------------ ---------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Net revenues $691,619 $731,227 $761,544 $782,199 $931,126 $220,715 $271,616
Costs and expenses:
Operating expenses 283,511 285,922 299,645 298,108 361,049 84,469 102,335
Salaries and wages 255,067 265,017 280,041 286,297 329,939 78,021 94,500
Provision for doubtful
accounts 44,832 45,008 55,409 58,347 76,905 17,185 21,767
Depreciation and
amortization 35,022 49,059 39,599 42,383 51,371 11,310 14,783
Lease and rental
expense 34,479 33,854 34,281 34,097 36,068 8,772 9,405
Interest expense, net 8,150 11,414 8,645 6,275 11,195 1,614 4,648
Nonrecurring charges -- -- 8,828 9,763 11,610 -- --
-------- -------- -------- -------- -------- -------- --------
Total operating charges 661,061 690,274 726,448 735,270 878,137 201,371 247,438
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes 30,558 40,953 35,096 46,929 52,989 19,344 24,178
Provision for income
taxes 10,239 20,933 11,085 18,209 17,505 7,503 8,677
-------- -------- -------- -------- -------- -------- --------
Net income $ 20,319 $ 20,020 $ 24,011 $ 28,720 $ 35,484 $ 11,841 $ 15,501
Per Share Data:
Net income $ .73 $ .72 $ .86 $ 1.01 $ 1.26 $ .43 $ .54
Weighted Average
number of shares
outstanding 29,984,000 29,940,000 29,638,000 28,778,000 28,158,000 27,884,000 28,712,000
Balance Sheet Data:
Working capital $ 14,345 $ 33,716 $ 15,500 $ 14,607 $ 21,905 $ 15,593 $ 16,125
Total assets 500,706 472,427 460,422 521,492 748,051 539,232 767,942
Long-term borrowing 127,235 114,959 75,081 85,125 237,086 75,038 230,401
Total debt 179,872 118,696 79,394 92,361 244,211 82,213 237,381
Total stockholders'
equity 184,353 202,903 224,488 260,629 297,700 272,888 315,826
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Three Months of 1996 Compared to Three Months of 1995 (Consolidated)
Net revenues increased 23% ($51 million) for the three months ended March
31, 1996 over the comparable prior year period due primarily to the acquisitions
of a 225-bed acute care facility and a 512-bed acute care facility acquired
during the third quarter of 1995, net of revenue effects of three acute care
facilities divested during the third and fourth quarter of 1995, and revenue
growth at facilities owned during both periods. Net revenues at hospital
facilities owned during both periods increased 4% ($8 million) for the three
months ended March 31, 1996 over the comparable prior year period, excluding the
additional revenues received from the special Medicaid reimbursements received
by two of the Company's acute care facilities which participate in the Texas
Medical Assistance Program. Upon meeting certain conditions of participation and
serving a disproportionately high share of the state's low income patients, the
hospitals became eligible and received additional reimbursements totaling $1.8
million during the first quarter of 1996 and $3.8 million during the first
quarter of 1995. These programs are scheduled to terminate in August, 1996 and
the Company cannot predict whether these programs will continue beyond the
scheduled termination date.
Excluding the net revenue effects of the special Medicaid reimbursement
programs mentioned above, earnings before interest, income taxes, depreciation,
amortization and lease and rental expense ("EBITDAR") increased 37% or $14
million for the three months ended March 31, 1996 as compared to $37 million in
the comparable prior year period. Overall operating margins, excluding the
special Medicaid reimbursements, were 19.0% for the three months ended March 31,
1996 as compared to $37 million in the comparable prior year period. Overall
operating margins, excluding the spacial Medicaid reimbursements, were 19.0% for
the three months ended March 31, 1996 as compared to 17.2% in the comparable
prior year period.
Acute Care Services
Net revenues from the Company's acute care hospitals and ambulatory
treatment centers accounted for 88% and 86% of the consolidated net revenues for
the three month periods ended March 31, 1996 and 1995, respectively. Net
revenues at the Company's acute care hospitals owned during both periods
increased 6% after excluding the revenues received from the special Medicaid
reimbursements described above. Despite the continued shift in the delivery of
healthcare services to outpatient care, the Company's acute care hospitals owned
during both periods experienced a 6% increase in inpatient admissions and a 4%
increase in patient days in 1996 as compared to 1995. Outpatient activity at the
Company's acute care hospitals continues to increase as a result of advances in
medical technologies, 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. To accommodate the increased utilization of
outpatient services, the Company has expanded or redesigned several of its
outpatient facilities and services.
Behavioral Health Services
Net revenues from the Company's behavioral health services facilities
accounted for 12% and 14% of the consolidated net revenues for the three month
periods ended March 31, 1996 and 1995, respectively. Net revenues at the
Company's psychiatric hospitals owned during both periods decreased 6% during
the three months ended March 31, 1996 as compared to the comparable prior year
period. Although the admissions, patient days and length of stay at these
facilities increased approximately 1% during the 1996 quarter as compared to the
1995 quarter, the decrease in net revenues resulted primarily from the fact that
residential treatment days, which reimburse the Company at lower rates per day
as compared to other behavioral health care services, constituted a greater
percentage of patient days than in the prior year period. The Company's
behavioral health care facilities have continued to be effected by changes in
the delivery of psychiatric 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 developing
and marketing new outpatient treatment programs.
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Other Operating Results
Depreciation and amortization expense increased 31% to $3.5 million for
the three months ended March 31, 1996 as compared to the comparable prior year
period due primarily to the Company's acquisition of two acute care hospitals in
July and August of 1995 partially offset by the effect of three acute care
facilities divested in July and October of 1995.
Interest expense increased $3.0 million for the three month period ended
March 31, 1996 over the 1995 quarter due primarily to increased borrowings used
to finance the purchase of two acute care hospitals during the third quarter of
1995.
The effective tax rate was 36% and 39% for the three month periods ended
March 31, 1996 and 1995, respectively. The decrease in the effective rate was
due primarily to the financing of employee benefit programs.
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
43% of the Company's net patient revenues for the three months ended March 31,
1996 and 1995, respectively, excluding the additional revenues from 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 cost based formula for psychiatric hospitals.
In addition 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 to grow, including HMOs, PPOs and
Medicare and Medicaid beneficiaries enrolled in such programs. 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 business. Both the House of Representatives and the
Senate are considering legislation providing for substantial Medicare savings
over an extended period, including reductions in payments to hospitals, which
would limit the rate of growth of the program. The Company can not predict what
new legislation may ultimately be enacted, and if enacted, 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 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
waiver. See "Risk Factors - Health Reform Legislation."
1995 Compared to 1994 and 1993 (Consolidated)
Net revenues increased 19% ($149 million) to $931 million in 1995 over
1994 and 3% ($21 million) to $782 million in 1994 as compared to 1993. The
increase during 1995 was primarily attributable to revenues generated at two
acute care facilities acquired by the Company during 1995 net of the revenue
effects of the three acute care facilities divested during the year ($58
million), revenue growth at acute care facilities owned during both years ($44
million) and a full year of revenue generated at an acute care facility acquired
by the Company in November 1994 ($29 million). The increase in net revenues in
1994 as compared to 1993 resulted primarily from revenue growth at facilities
owned during both years and the acquisition and development of ambulatory
treatment centers.
Net revenues at hospital facilities owned during all three periods
increased by 7% ($47 million) in 1995 over 1994 and 7% ($42 million) in 1994
over 1993, excluding the additional revenues received by two of the Company's
acute care facilities which participate in the Texas Medical Assistance Program.
Upon meeting certain conditions of participation and serving a
disproportionately high share of the state's low income patients, these two
hospitals became eligible and received additional reimbursements totalling $12.6
million in 1995, $12.7 million in 1994 and $13.5 million in 1993. These programs
are scheduled to terminate in August 1996 and the Company cannot predict whether
these programs will continue beyond the scheduled termination date. The Company
acquired a 225-bed acute care hospital in July 1995
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<PAGE>
and a 512-bed acute care hospital in August 1995 which contributed combined net
revenues of $89 million during 1995. The Company divested three acute care
hospitals during 1995 and two acute care hospitals during 1993 which contributed
combined net revenues of $50 million, $81 million and $115 million during 1995,
1994 and 1993, respectively. Net revenues at the Company's ambulatory treatment
centers increased to $23 million in 1995 from $17 million in 1994 and $11
million in 1993.
Excluding the revenue effects of the special Medicaid reimbursement
programs, EBITDAR increased to $151 million in 1995 from $127 million in 1994
and $113 million in 1993. The Company's consolidated operating margins were
16.4% in 1995, 16.5% in 1994 and 15.1% in 1993. While operating margins at the
Company's acute care and behavioral health services facilities owned during both
1995 and 1994 increased, the Company's consolidated margin was lower in 1995 as
compared to 1994 due to losses sustained at the three acute care facilities
divested during 1995. The improvement in the Company's consolidated operating
margins in 1994 compared to 1993 was due primarily to the divestiture of two low
margin acute care facilities in 1993 and lower insurance expense in 1994 as
compared to 1993.
Acute Care Services
Net revenues from the Company's acute care hospitals and ambulatory
treatment centers accounted for 86%, 85% and 84% of consolidated net revenues in
1995, 1994 and 1993, respectively.
Net revenues at the Company's acute care hospitals owned during each of
the last three years increased 9% in 1995 over 1994 and 10% in 1994 over 1993,
after excluding the revenues received from the special Medicaid reimbursements
described above. Despite the continued shift in the delivery of healthcare
services to outpatient care, the Company's acute care hospitals experienced a 9%
increase in inpatient admissions and a 5% increase in patient days in 1995 as
compared to 1994 due primarily to increased impatient volume at two of the
Company's larger facilities. Admissions and patient days at acute care
facilities owned during each of the last three years increased 10% and 8%,
respectively, in 1994 as compared to 1993 due primarily to additional capacity
and expansion of service lines at two of the Company's larger facilities.
Outpatient activity at the Company's acute care hospitals continues to increase
as gross outpatient revenues at these hospitals increased 17% in 1995 over 1994
and 15% in 1994 over 1993 and comprised 22% of the Company's gross patient
revenues in each of the last three years. The increase is primarily the result
of advances in medical technologies, which allow more services to be provided on
an outpatient basis, and increased pressure from Medicare, Medicaid, HMOs, PPOs
and insurers to reduce hospital stays and provide services, where possible, on a
less expensive outpatient basis. To accommodate the increased utilization of
outpatient services, the Company has expanded or redesigned several of its
outpatient facilities and services.
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. As of December 31, 1995, the Company
operated or managed twenty-five outpatient treatment centers, including three
added during 1995, 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.
Excluding the revenues received from the special Medicaid reimbursements
described above, operating margins (EBITDAR) at the Company's acute care
hospitals owned during all three years were 22.6%, 22.1% and 21.3% in 1995, 1994
and 1993, respectively. The improvement in 1995 over 1994 was primarily the
result of increased operating margins at certain of the Company's acute care
facilities. The margin improvement in 1994 over 1993 resulted primarily from
lower insurance expense. Although the Company's acute care operating margins
have increased during the last three years, 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.
Behavioral Health Services
Net revenues from the Company's behavioral health services hospitals
accounted for 13%, 14% and 15% of consolidated net revenues in 1995, 1994 and
1993, respectively. Net revenues at the Company's behavioral health hospitals
owned during each of the last three years increased 1% in 1995 over 1994 and
decreased 7% in 1994 as compared to 1993. The increase in 1995 over 1994
resulted primarily from a 4% increase in admissions and a 2% increase in patient
days while the average length of stay decreased 2% to 13.5 days in 1995 from
13.8 days in 1994.
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<PAGE>
During 1994 admissions increased 12% over 1993 while patient days decreased 3%
due to a 13% decrease in the average length of stay to 13.8 days in 1994 from
15.8 days in 1993. The reduction in the average length of stay during the last
three years is a result of changing practices in the delivery of psychiatric
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 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
behavioral health services hospitals increased 10% in 1995 over 1994 and 17% in
1994 over 1993 and now comprises 16% of the Company's behavioral health services
gross patient revenues as compared to 15% in 1994 and 13% in 1993.
Operating margins (EBITDAR) at the facilities owned during all three years
were 19.7% in 1995, 15.8% in 1994 and 21.5% in 1993. The increase in the profit
margin in 1995 as compared to 1994 was caused by an increase in admissions,
stabilization in length of stay and cost reductions implemented in response to
the managed care environment. The decrease in the profit margin in 1994 as
compared to 1993 was primarily caused by the decrease in net revenues at certain
facilities which declined due to an increase in Medicaid denials, a decrease in
days of care delivered and a decline in the net revenue per day.
Other Operating Results
During 1995, the Company recorded $11.6 million of net nonrecurring
charges which consists of: (i) a $14.2 million pre-tax charge due to impairment
of long-lived assets; (ii) a $2.7 million loss on disposal of two acute care
facilities which were exchanged along with $44 million of cash for a 225-bed
acute care hospital; and (iii) a $5.3 million pre-tax gain realized on the sale
of a 202-bed acute care hospital which was divested during the fourth quarter of
1995 for cash proceeds of $19.5 million.
As discussed elsewhere, changes in third party payment methods, advances
in medical technologies, legislative and regulatory initiatives at the Federal
and state levels along with increased competition from other providers have
impacted operating margins at the Company's facilities in recent years. These
industry conditions have adversely impacted certain of the Company's specialized
facilities and certain of the Company's smaller facilities in more competitive
markets.
In conjunction with the development of the Company's operating plan and
1996 budget, management assessed the current competitive position of these
facilities and estimated future cash flows expected from these facilities. As a
result, the Company recorded a $14.2 million pre-tax charge during 1995 to
write-down the carrying value of certain intangible and tangible assets at these
facilities. In measuring the impairment loss, the Company estimated fair value
by discounting expected future cash flows from each facility using the Company's
internal hurdle rate. The impairment loss primarily related to four facilities
in the Company's behavioral health services division and three facilities in its
ambulatory treatment center division.
During 1995, the impact of managed care was most dramatically felt at the
Company's free standing chemical dependency and residential treatment centers.
The Company operates two chemical dependency facilities with combined 1995 net
revenues of $8.6 million. Substantially all of the non-Medicare business at
these facilities is now managed to a large degree by third-party payors. The
increased penetration of managed care into this segment has resulted in a
continued shift from inpatient care as the primary treatment model to a
detoxification/partial hospitalization program resulting in fewer admissions and
patient days. Combined with increasing emphasis by payors on price as the most
important variable among providers and the increased competition resulting from
acute care providers expanding to offer dual diagnosis and ambulatory
detoxification services, the Company has determined that both profit margins and
volumes at these facilities have been permanently impaired. In addition, CHAMPUS
patients account for a significant portion of the Company's net revenue at its
two residential treatment centers which had combined net revenues of $10.9
million in 1995. Changes in CHAMPUS regulations and managed care penetration
into this segment of the business have driven down lengths of stay dramatically.
At these facilities, whose profitability is largely dependent on very long
lengths of stay, the decline in the average length of stay has resulted in a
permanent impairment.
Within the Company's ambulatory treatment center division, three centers
with combined 1995 net revenues of $3.7 million, are located in highly
competitive markets which have become heavily penetrated with managed care. As a
result, net revenues per case and case volumes at these centers have decreased
11% and 7%, respectively, in 1995 as
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<PAGE>
compared to 1994 due primarily to increased influence of payors, increased
monitoring of outpatient services and willingness of hospitals to compete with
ambulatory treatment centers on price. The Company expects these unfavorable
trends to continue within these two geographical markets resulting in a
permanent impairment.
During 1994, nonrecurring charges of $9.8 million were recorded consisting
of the following: (i) a $4.3 million estimated loss on the disposal of two acute
care facilities mentioned above; (ii) a $2.8 write-down of the carrying value 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 agreement;
(iii) a $1.4 million write-down recorded against the book value of the real
property of a behavioral health services hospital; and (iv) $1.3 million of
expenses related to the disposition of a non-strategic business. Included in the
$8.8 million of nonrecurring charges recorded in 1993 in $4.4 million loss on
disposal of two acute care facilities divested during the fourth quarter of 1993
and $4.4 million related to the winding down or disposition of non-strategic
businesses.
Depreciation and amortization expense increased $9.0 million in 1995 over
1994 due primarily to the Company's acquisition of two acute care hospitals in
July and August of 1995, net of effects of three acute care facilities divested
during the year ($5.6 million), a full year of depreciation expense of an acute
care hospital acquired in November of 1994 ($1.1 million) and the increased
depreciation expense related to capital expenditures and acquisition of
outpatient treatment centers ($2.3 million). Depreciation and amortization
expense increased $2.8 million in 1994 over 1993 due primarily to $1.9 million
of such expenses related to the Company's acquisition of outpatient treatment
centers and the increased depreciation expense related to capital expenditures
made in the Company's acute care division.
Interest expense increased $4.9 million or 78% during 1995 over 1994 due
primarily to borrowings used to finance the purchase of two acute care hospitals
during 1995. The Company issued $135 million of Senior Notes during 1995 which
have a coupon rate of 8.75% (9.2% effective rate including amortization of
interest rate swap termination fees and amortization of bond discount). The $131
million of net proceeds generated from the issuance of these notes were used to
finance the cash purchase price of the two acute care hospitals acquired during
1995 while the excess of the purchase price over the net proceeds ($52 million)
was financed from operating cash flows and borrowings under the Company's
commercial paper and revolving credit facilities. Interest expense decreased
$2.4 million or 27% in 1994 as compared to 1993 was due to lower average
outstanding borrowings.
The effective tax rate was 33%, 39% and 32% in 1995, 1994 and 1993,
respectively. The decrease in effective tax rate in 1995 as compared to 1994 was
due to: (i) the deductibility of previously non-deductible goodwill amortization
resulting from the sale of three acute care hospitals; and (ii) the financing of
employee benefit programs. The increase in the effective tax rate for 1994 as
compared to 1993 was due to the 1993 tax provision containing a reduction in the
state tax provision.
Inflation
The healthcare industry is very labor-intensive and salaries and benefits
are subject to inflationary pressures, as are supply costs which tend to
escalate as vendors pass on the rising costs through price increases. Although
the Company cannot predict its ability to continue to cover future costs
increases, management believes that through the adherence to cost containment
policies, labor management and reasonable price increases, the effects of
inflation, which has not had a material impact on the results of operations
during the last three years, on future operating margins should be manageable.
However, the Company's ability to pass on these increased costs associated with
providing healthcare to Medicare and Medicaid patients may be limited since
although these fixed payments rates are indexed for inflation annually, the
increases have historically lagged behind actual inflation.
Liquidity and Capital Resources
Net cash provided by operating activities was $32.7 million for the three
months ended March 31, 1996 and $24.1 million for the three moths ended March
31, 1995. The $8.6 million increase during the 1996 quarter as compared to the
1995 comparable period was primarily due to a $5.7 million increase in the net
income plus the addback of the non-cash charges (depreciation, amortization and
provision for self-insurance reserves). In addition, cash flow from operating
activities in the first quarter of 1995 was adversely impacted by an increase in
accounts receivable resulting from a temporary decline in cash collections due
to information systems conversions at the Company's hospitals. Partially
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<PAGE>
offsetting these changes was a $2.7 million increase in payments made in
settlement of self-insurance claims. The net cash provided by operating
activities substantially exceeded the scheduled maturities of long-term debt.
During the first three months of 1996, the Company used $25.7 million of
its operating cash flow to finance capital expenditures (including $7 million
spent on the construction of a new medical complex in Summerlin, Nevada) and
$6.8 million to reduce outstanding debt.
Subsequent to the end of the 1996 first quarter, the Company executed a
purchase agreement to acquire four behavioral health care hospitals located in
Pennsylvania and seven contracts to manage behavioral health programs. This
purchase transaction, which is subject to regulatory approval, is expected to be
completed in June, 1996. The total purchase price for the acquisition of these
hospitals and management contracts is $36.5 million in cash for the operations
and the property, plant and equipment and up to an additional $5 million which
is contingent upon the future operating performance of the acquired assets. In
May of 1996, the Company advanced $36.5 million to the seller pursuant to a term
note, which is secured by the stock of the subsidiaries to be acquired by the
Company, which matures upon the earlier of the granting of regulatory approval
and the closing of the purchase transaction, or October 31, 1996. Also in
connection with this transaction, the Company entered into a $7 million loan
agreement which is secured by the stock of the subsidiaries to be acquired by
the Company. The $7 million note, the term of which may be extended upon closing
of the above mentioned purchase transaction, is scheduled to mature upon the
earlier of the granting of regulatory approval and the closing of the purchase
transaction described above, or October 31, 1996.
In May, 1996 the Company completed the acquisition of Northwest Texas
Healthcare System located in Amarillo, Texas for approximately $125 million in
cash. Northwest Texas Healthcare System consists of a 360 licensed bed full
service acute care hospital and free standing behavioral health hospital, two
urgent care clinics and other operations. The funds used to finance the above
mentioned transactions were borrowed on the Company's resolving credit facility.
The Company expects to finance all capital expenditures and acquisitions
with internally generated funds, borrowed funds or the sale of debt or equity
securities. As of March 31, 1996, after including the $168.5 million of
additional borrowings for the purchase transactions described above, the Company
had $42 million of unused borrowing capacity under its commercial paper and
revolving credit facilities.
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BUSINESS
General
The principal business of the Company is owning and operating acute care
hospitals, behavioral health centers, ambulatory surgery centers and radiation
oncology centers. Presently, the Company operates 35 hospitals, consisting of 16
acute care hospitals and 19 behavioral health centers, in Arkansas, California,
Florida, Georgia, Illinois, Louisiana, Massachusetts, Michigan, Missouri,
Nevada, Oklahoma, Pennsylvania, South Carolina, Texas and Washington. The
Company, as part of its Ambulatory Treatment Centers Division owns outright, or
in partnership with physicians, and operates or manages 26 surgery and radiation
oncology centers located in 15 states.
Services provided by the Company's hospitals include general surgery,
internal medicine, obstetrics, emergency room care, radiology, oncology,
diagnostic care, coronary care, pediatric services and psychiatric services. The
Company provides capital resources as well as a variety of management services
to its facilities, including central purchasing, data processing, finance and
control systems, facilities planning, physician recruitment services,
administrative personnel management, marketing and public relations.
Industry Overview
Healthcare is one of the largest industries in the United States,
representing total expenditures of approximately $938.3 billion, or 13.9% of
gross domestic product, in 1994 according to the Federal Healthcare Financing
Administration ("HCFA"). Increases in healthcare expenditures, including
hospital expenditures, historically have outpaced inflation due to, among other
factors, the aging of the population and the increased availability and use of
high-technology treatments and tests. According to HCFA, healthcare expenditures
increased by approximately 6.1% in 1994 from approximately $884.0 billion in
1993.
In response to escalating healthcare costs, government and private
purchasers of healthcare services have undertaken substantial revisions in their
payment methodologies and have increased significantly the degree to which they
monitor the utilization of services. Additionally, payors increasingly are
utilizing HMOs and PPOs as cost-effective alternatives to traditional
fee-for-service health insurance plans. Under these systems, hospitals bear the
financial risk of providing healthcare services since they receive a specific,
fixed reimbursement for each treatment, or specific fixed periodic payments
based on the number of members of the HMO or PPO served or eligible for service
by that hospital, regardless of the actual costs of providing the care. These
payment systems have resulted in increased contractual allowances and discounts
to hospitals' standard charges for services and a shift from inpatient to
outpatient care.
These changes in payment methodologies have created many changes in the
provision of healthcare. A significant shift from inpatient to outpatient care
has resulted in significant unused hospital capacity and increases in the
utilization of outpatient services and greater outpatient revenues. As a result,
in part, of the changes in the industry, there has been significant
consolidation in the hospital industry over the past few years. In response to
payor trends, integrated healthcare networks have been established to provide a
continuum of patient care in a cost-effective framework.
Business Strategy
The Company's strategy to enhance its profitability and to continue to
provide high quality, cost-effective healthcare services includes the following
key elements:
o establish and maintain market leadership positions in small and
medium-sized markets with favorable demographics;
o develop or participate in the leading integrated healthcare delivery
system in each of its hospital's markets;
o develop and maintain strong relationships with physicians;
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<PAGE>
o maintain a low cost structure while providing high quality care; and
o attract managed care contracts.
Establish and Maintain Leadership Positions in Small and Medium-Sized Markets
with Favorable Demographics
The Company believes that small and medium-sized markets provide the
Company with strong opportunities for profitability since such markets typically
are less competitive than major metropolitan markets and have lower cost
structures. The Company strives to enhance its leadership position in its
existing markets by improving the hospital's physical plant, by improving and
increasing the services offered by the hospital and by making complementary
acquisitions or constructing additional facilities. In determining whether to
enter new markets, the Company considers, among other factors, the competitive
situation and demographic profile.
Examples of the Company's development and expansion of operations in small
and medium-sized markets is the Company's recent acquisition and development
activities. In Las Vegas, which is located in the fastest growing MSA in the
nation, the Company owns the 398-bed Valley Hospital. At Valley Hospital, the
Company recently developed an outpatient surgery center, conducted a major
renovation of its emergency room and is establishing a neonatal intensive care
unit. In addition, to further enhance the Company's leadership in Las Vegas, the
Company is developing, with the Howard Hughes Corporation, a medical complex,
including a 129-bed acute care hospital, an ambulatory surgery center, a medical
office building, and a diagnostic center in the community of Summerlin, Nevada,
in western Las Vegas. Howard Hughes Corporation has granted to the Company the
exclusive right to operate medical facilities in Summerlin.
In McAllen, Texas, to complement the Company's market leading 428-bed
McAllen Medical Center, the Company recently acquired Edinburg Hospital, located
in Edinburg, north of McAllen. McAllen is in the third fastest growing MSA in
the nation. The Company is further expanding its presence in the McAllen market
by building a new 100-bed acute care hospital in Edinburg and converting the
existing property to a nursing and rehabilitation facility.
The Company's recent acquisitions of Aiken and Manatee in 1995 provide the
Company with two market leaders in markets with favorable demographics. Aiken, a
225-bed medical complex located in Aiken, South Carolina, is the only hospital
located in Aiken County, South Carolina. In addition, to acquire Aiken, the
Company exchanged Dallas Family Hospital and Westlake Medical Center, two
hospitals which are not leaders in their markets and which the Company was
unable to link to their respective market leaders. Manatee, a 512-bed acute care
hospital, is one of two hospitals in Manatee County, Florida.
The Company's recent acquisition of Northwest Texas Health also provides
the Company with a market leader. Northwest Texas Health is one of two hospitals
located in Amarillo, Texas. Amarillo is located 90 miles from the next largest
city. The Company intends to position Northwest Texas Health as the hub of a
health care delivery system. Amarillo is a market of 286,000 people growing 20%
faster than the population of the U.S. as a whole. Northwest Texas Health Care
is a full service tertiary health care system with market leading cardiac,
obstetrics, pediatrics, trauma, and behavioral health services. In addition to
the acute care and behavioral health hospitals, Northwest Texas also operates
two fully equipped outpatient urgent care clinics and the county's only
ambulance and only rescue helicopter services. The System had been government
operated. The Company expects to improve the operating performance of the System
by adding services, more aggressively marketing existing capabilities, reducing
supply expenses, reducing the expense of purchased services, and reducing labor
costs.
The majority of the Company's behavioral health centers are either the
first or second largest facility in their respective markets, ranked by
beds/revenues. In April 1996, the Company entered into an agreement to acquire
First Hospital. This acquisition will augment the Company's presence in
Pennsylvania. Each of the First Hospital facilities is the leading provider of
behavioral health services in its market. The combination of the four owned
facilities and their related outpatient activities plus the four managed units
in Pennsylvania create a comprehensive behavioral health network in
Pennsylvania. The company believes its historical success in operating
behavioral health facilities, when coupled with the acquired contract management
business of First Hospital, will make it an effective competitor for new
contracts to manage behavioral health units of hospitals.
-34-
<PAGE>
The Company has also established market leadership positions with most of
its ambulatory surgery centers and radiation oncology centers. The majority of
the Company's surgery centers are the sole free standing providers in their
respective markets and all except one of the Company's free standing radiation
centers are the sole providers. The Company seeks to acquire ambulatory surgery
centers and radiation oncology centers which are the sole free standing
providers in a market since these centers provide a cost-effective alternative
to the local hospital.
Develop Integrated Healthcare Delivery Systems
In each of its hospital's markets, the Company has established or is
developing an integrated healthcare delivery system to offer a full range of
patient care on a cost-effective basis. Through the development of integrated
healthcare delivery systems, the Company believes that it will augment revenues
and market share by attracting an increasing share of large, sophisticated
governmental and private sector managed care contracts. The Company believes
that hospitals are the logical hubs for the development of integrated healthcare
delivery systems due to their highly developed infrastructure, extensive base of
services, sophisticated equipment and skilled personnel. The Company believes
that the development of integrated healthcare delivery systems is accomplished
by (i) maintaining a single hospital's leadership in its market or (ii)
coordinating the services of its hospital with the market leader.
In certain markets where the Company is a market leader, for example Las
Vegas, Nevada, and McAllen, Texas, the Company has positioned its hospitals as
the center of healthcare delivery systems by responding to community needs and
developing new services. In Las Vegas, for example, the Company developed an
outpatient surgery center, conducted a major renovation of its emergency room
and is establishing a neonatal intensive care unit. In the Las Vegas and McAllen
markets, the Company has also undertaken development activities. In addition, as
a market leader, the Company intends to position Northwest Texas Health as the
center of a healthcare delivery system. See "Prospectus Summary -- Recent
Events."
To increase the presence of the Company's behavioral health centers in
southeastern Massachusetts, the Company recently acquired Fuller Memorial
Psychiatric Hospital. Fuller, which is located in close proximity to two of the
Company's other behavioral health centers and its 11 day-treatment clinics, will
augment the Company's ability to serve additional patients in southeastern
Massachusetts.
In markets where the Company is not by itself a market share leader, the
Company attempts to link its hospitals with the market leader. The Company has
effected such a linkage in New Orleans where its hospitals are linked with
Methodist Hospital and East Jefferson Hospital, both of which are their
respective market leaders.
Develop and Maintain Strong Relationships with Physicians
The Company believes that its success will depend in large part on
maintaining strong relationships with physicians, and has, therefore, devoted
substantial management effort and resources to establish and maintain such
relationships and to foster a physician-friendly culture at each of its
hospitals. The Company attracts physicians to its hospitals by equipping its
hospitals with sophisticated equipment, constructing medical office buildings
adjacent to many of its hospitals, providing physicians with a large degree of
independence in conducting their hospital practice, supplying a quality nursing
and technical staff and sponsoring training programs to educate physicians on
advanced medical procedures. These efforts help develop and maintain strong
relationships with physicians and better serve the needs of patients. In
addition, consistent with the Company's goal of establishing integrated
healthcare delivery systems, the Company is expanding its alliances with
physicians to create long term hospital/physician linkages. These arrangements
will allow physicians to participate in the delivery of healthcare at the
network level. For example, in Nevada, the Company has established Universal
Health Network, a PPO with approximately 125,000 covered lives.
Maintain a Low Cost Structure While Providing High Quality Care
The Company has taken steps to create a low cost structure, which the
Company believes will enable it to continue to compete effectively in each of
its current markets. The Company has established standardized management
information systems which provide accurate clinical and financial data for use
by hospital staff, physicians and corporate management. In addition, the Company
closely monitors departmental staffing and has established staffing level
targets for each hospital based on the amount and type of services provided. The
Company reviews compliance with these
-35-
<PAGE>
staffing targets on a monthly basis. The Company also reviews patient length of
stay, service utilization, cash flow, accounts receivable collection, inventory
levels and outside purchases. To reduce the cost of supplies, the Company has
entered into national purchasing contracts.
While maintaining its commitment to a low cost structure, the Company has
developed and implemented a continuous quality improvement program designed to
assess all levels of patient care provided in its hospitals. While the basics of
the program are mandated by federal, state and Joint Commission on Accreditation
of Healthcare Organizations ("JCAHO") regulations and standards, the objective
of the program is to meet or exceed the mandates by focusing on hospital
systems, patient, physician and employee concerns. The quality improvement
program is managed by a multidisciplinary committee consisting of physicians,
nurses, ancillary managers and administration. The committee performs peer
review, monitoring all functions within the hospital, identifying opportunities
to improve, recommending actions and following up on the changes to assure
improvement. The committee and its administrative support department, quality
management and the corporate quality improvement services department meet
regularly to address specific problems, program integrity, and ways to improve
patients care under a "Total Quality Management System." Continual review,
analysis and training provided through the quality improvement program provides
patients, physicians and third party payors assurance that efficient, quality
patient care receives the highest priority at each of the Company's hospitals.
The Company's efforts in maintaining high quality care have been recognized.
Recent awards include (i) the 1994 Quality and Productivity Award given by the
United States Senate to Valley Hospital Medical Center, (ii) Keystone Center,
Chalmette Medical Center, Turning Point Hospital, HRI Hospital and The Arbour
receiving JCAHO Accreditation with Commendation (awarded to only 5% of
hospitals, nationally) and (iii) the Company being recognized by the
Pennsylvania Council of Excellence for quality management accomplishment.
Attract Managed Care Contracts
The Company has extensive experience in working with managed care
providers. Pressures to control healthcare costs have resulted in a continuing
increase in the percentage of the United States population that is covered by
managed healthcare plans. To increase the cost-effectiveness of healthcare
delivery, managed care payors have introduced new utilization review systems and
have increased the use of discounted and capitated fee arrangements. Further,
managed care payors have attempted, where appropriate, to direct patients to
less intensive alternatives along the continuum of patient care. Management has
responded to this trend by increasing the outpatient services offered at its
hospitals and behavioral health centers. In addition, the Company also continues
to add to its Ambulatory Treatment Centers Division, acquiring nine facilities
in 1994, and four facilities in 1995. In determining with which providers to
contract, payors consider, among other factors, the quality of care provided,
the range of services, the geographic coverage and the cost-effectiveness of the
care provided. The Company believes that the development and expansion of its
integrated healthcare delivery systems will enable it to better compete for
managed care contracts with payors, which, in turn, should allow it to expand
its patient volume and cash flow, notwithstanding the reduced rates at which
services are provided.
Operations
After giving effect to the recent acquisition of Northwest Texas Health,
the Company will derive the majority of its revenue from Valley Hospital,
McAllen Medical Center, Manatee Memorial Hospital, Aiken Regional Medical
Centers and Northwest Texas Health Systems. Following is a brief discussion of
these facilities and their respective geographic areas and certain of the
Company's other operations:
Las Vegas, Nevada. The Company's Valley Hospital is a 398-bed hospital
located in Las Vegas. Las Vegas is in the fastest growing MSA in the country. On
a pro forma basis, assuming the Adjustments and excluding the Indigent Care
Reimbursements, Valley Hospital would have contributed [ ]% of the Company's net
revenues for the year ended December 31, 1995, and [ ]% of the Company's EBITDAR
for such periods. To enhance its competitive position in the Las Vegas market,
Valley Hospital recently underwent a major expansion of its emergency room
facility, established an outpatient surgery center and is establishing a
neonatal intensive care unit.
The Company has begun construction of a new facility in Summerlin, Nevada
which is a master planned community located in western Las Vegas. The new
Summerlin Medical Center will be completed in three phases and will consist of a
100,000 square foot medical building, an outpatient surgery and diagnostic
center and a 129-bed acute
-36-
<PAGE>
care hospital. Howard Hughes Corporation has granted to the Company the
exclusive right to operate medical facilities in Summerlin. See "Prospectus
Summary -- Recent Events."
McAllen, Texas. McAllen, located in the Rio Grande Valley area of Texas,
is the center of a 200 mile wide consumer market area with more than ten million
people. McAllen and its surrounding communities are in the fourth fastest
growing MSA in the country. Furthermore, the population in McAllen increases
significantly in the winter months with the inflow of retirees from the northern
states. The Company's McAllen Medical Center, a 464-bed facility, is the largest
hospital in the Rio Grande Valley and is the hub of a five hospital delivery
network organized by the Company. The medical center offers a wide range of
services including general medical/surgical care, a 24-hour emergency room,
oncology care, cardiac care, obstetric, pediatric and neonatal care and laser
surgery. On a pro forma basis, assuming the Adjustments and excluding the
Indigent Care Reimbursements, McAllen Medical Center would have contributed [ ]%
of the Company's net revenues for the year ended December 31, 1995, and [ ]% of
the Company's EBITDAR for such period.
The Company acquired Edinburg Hospital in 1994, a 112-bed acute care
facility. Located eight miles north of McAllen, this facility enhances the
Company's delivery network in this rapidly growing area. The Company is further
expanding its presence in the McAllen market by building a new 100-bed acute
care hospital in Edinburg and converting the existing property to a nursing and
rehabilitation facility.
Manatee County, Florida. Manatee County is located approximately 50 miles
south of Tampa on the Gulf Coast of Florida. The County has a current population
of approximately 250,000. The Company's Manatee Memorial Hospital ("Manatee"), a
512-bed facility, has a location which will benefit from the continuing eastern
expansion of the County. Manatee offers a wide range of services from primary
medical and surgical procedures to obstetric, pediatric, psychiatric and a broad
range of specialized programs. The Manatee Heart Center offers the full range of
cardiac care from catheterization and non-invasive procedures to open heart
surgery. The Manatee Center for Women's Health offers neonatal care in addition
to its obstetric and gynecological services. The Emergency Care Center is a
state-of-the-art facility servicing 90% of the trauma cases in the County.
Manatee also offers a full range of outpatient services to the community. It is
the only hospital in the County to operate a Life Management inpatient and
outpatient program for mentally ill individuals. Recently, Manatee opened its
new Surgery and Outpatient Services Center which provides outpatient services to
the community through twelve new surgical suites and arrays of diagnostic tests
and surgical procedures.
Assuming the Adjustments and excluding the Indigent Care Reimbursements,
Manatee would have contributed [ ]% of the Company's net revenues for the year
ended December 31, 1995, and [ ]% of the Company's EBITDAR for such period.
Aiken, South Carolina. Aiken Regional Medical Centers ("Aiken"), a 225-bed
medical complex, is the only hospital located in Aiken County, South Carolina.
Aiken County, which is located in west central South Carolina, has a population
of approximately 130,000 people. Aiken serves Aiken County, as well as three
other counties in South Carolina with a total market of approximately 180,000
people. Aiken's facilities include a modern, full service acute care hospital
and a behavioral health center.
Assuming the Adjustments and excluding the Indigent Care Reimbursements,
Aiken would have contributed [ ]% of the Company's net revenues for the year
ended December 31, 1995, and [ ]% of the Company's EBITDAR for such period.
Amarillo, Texas. Amarillo is located in the Texas panhandle, has a current
population of approximately 200,000 and is located 90 miles from the next
largest city. Northwest Texas Health Systems ("Northwest Texas Health"), a 360-
bed medical complex, includes a full service acute care hospital offering
primary medical and surgical procedures and specialized programs. The hospital
is the leading provider of emergency trauma, obstetrics, neonatal and pediatric
care in the market. Northwest Texas Health is one of two hospitals in Amarillo
and is the teaching facility of Texas Tech University.
-37-
<PAGE>
Assuming the Adjustments and excluding the Indigent Care Reimbursements,
Northwest Texas Health would have contributed [ ]% of the Company's net revenues
for the year ended December 31, 1995, and [ ]% of the Company's EBITDAR for such
period.
The majority of the Company's behavioral health centers are either the
first or second largest facility in their respective markets, ranked by
beds/revenues.
The Company has also established market leadership positions with most of
its ambulatory surgery centers and radiation oncology centers. The majority of
the Company's surgery centers are the sole free standing providers in their
respective markets and all except one of the Company's free standing radiation
centers are the sole providers. The Company seeks to acquire ambulatory surgery
centers and radiation oncology centers which are the sole free standing
providers in a market since these centers provide a cost-effective alternative
to the local hospital.
The Company recently has constructed and opened its first combined women's
hospital and Obstetrician physician practice management center in Edmond,
Oklahoma a suburb of Oklahoma City. The strategy of Renaissance Centers For
Women is to develop and manage fully integrated specialty hospitals and
physician clinic practices of obstetricians. The hospitals house the most modern
LDRP suites, operating rooms, laboratory, and imaging capabilities generally
available to this physician specialty. The company may construct additional
centers and manage additional OB/GYN practices in the future.
Facilities
The following tables set forth the name, location, type of facility and,
for acute care hospitals and behavioral health centers, the number of beds, for
each of the Company's facilities:
<TABLE>
<CAPTION>
Acute Care Hospitals
Number
Name of Facility Location of Beds Interest
<S> <C> <C> <C>
Aiken Regional Medical Centers Aiken, South Carolina 225 Owned
Auburn General Hospital Auburn, Washington 149 Owned
Chalmette Medical Center(1) Chalmette, Louisiana 118 Leased
Doctors' Hospital of Shreveport(2) Shreveport, Louisiana 136 Leased
Edinburg Hospital Edinburg, Texas 112 Owned
Inland Valley Regional Medical Wildomar, California 80 Leased
Center(1)
Manatee Memorial Hospital Bradenton, Florida 512 Owned
McAllen Medical Center(1) McAllen, Texas 464 Leased
Northern Nevada Medical Center(3) Sparks, Nevada 150 Owned
Northwest Texas Health Systems Amarillo, Texas 360 Owned
Renaissance Women's Center Edmond, Oklahoma [ ] Owned
River Parishes Hospitals(4) LaPlace and 216 Leased/Owned
Chalmette,
Louisiana
Valley Hospital Medical Center Las Vegas, Nevada 398 Owned
Victoria Regional Medical Center Victoria, Texas 147 Owned
Wellington Regional Medical Center(1) West Palm Beach, 120 Leased
Florida
</TABLE>
-38-
<PAGE>
<TABLE>
<CAPTION>
Behavioral Health Centers
Number
Name of Facility Location of Beds Ownership
<S> <C> <C> <C>
The Arbour Hospital Boston, Massachusetts 118 Owned
The BridgeWay(1) North Little Rock, 70 Leased
Arkansas
Clarion Psychiatric Center Clarion, Pennsylvania 52 Acquisition
Pending
Del Amo Hospital Torrance, California 166 Owned
Forest View Hospital Grand Rapids, Michigan 62 Owned
Fuller Memorial Psychiatric Hospital South Attleboro, 82 Owned
Massachusetts
Glen Oaks Hospital Greenville, Texas 54 Owned
The Horsham Clinic Ambler, Pennsylvania 138 Acquisition
Pending
HRI Hospital Brookline, Massachusetts 68 Owned
KeyStone Center(5) Wallingford, Pennsylvania 84 Owned
La Amistad Residential Treatment Center Maitland, Florida 56 Owned
Meridell Achievement Center(1) Austin, Texas 114 Leased
The Meadows Psychiatric Center Centre Hall, Pennsylvania 101 Acquisition
Pending
The Pavilion Champaign, Illinois 46 Owned
River Crest Hospital San Angelo, Texas 80 Owned
River Oaks Hospital New Orleans, Louisiana 126 Owned
Roxbury Psychiatric Center Shippensburg, 71 Acquisition
Pennsylvania Pending
Turning Point Hospital(5) Moultrie, Georgia 59 Owned
Two Rivers Psychiatric Hospital Kansas City, Missouri 80 Owned
</TABLE>
-39-
<PAGE>
<TABLE>
<CAPTION>
Ambulatory Surgery Centers
Name of Facility(7) Location
<S> <C>
Arkansas Surgery Center of Fayetteville Fayetteville, Arkansas
Goldring Surgical and Diagnostic Center Las Vegas, Nevada
M.D. Physicians Surgicenter of Midwest City Midwest City, Oklahoma
Outpatient Surgical Center of Ponca City Ponca City, Oklahoma
St. George Surgical Center St. George, Utah
Seacoast Outpatient Surgical Center Somersworth, New
Hampshire
Surgery Centers of the Desert Rancho Mirage, California
Palm
Springs, California
The Surgery Center of Chalmette Chalmette, Louisiana
Surgery Center of Littleton Littleton, Colorado
Surgery Center of Springfield Springfield, Missouri
Surgery Center of Texas Odessa, Texas
Surgical Center of New Albany New Albany, Indiana
Surgery Center of Corona Corona, California
Surgery Center of Waltham Waltham, MA
</TABLE>
<TABLE>
<CAPTION>
Radiation Oncology Centers
Name of Facility Location
<S> <C>
Auburn Regional Center for Cancer Care Auburn, Washington
Bowling Green Radiation Oncology Associates(6) Bowling Green,
Kentucky
Blue Grass Regional Cancer Center(6) Frankfort, Kentucky
Columbia Radiation Oncology Washington, D.C.
Danville Radiation Therapy Center(6) Danville, Kentucky
Glasgow Radiation Oncology Associates(6) Glasgow, Kentucky
Louisville Radiation Oncology(6) Louisville, KY
Madison Radiation Oncology Associates(8) Madison, Indiana
McAllen Medical Center Cancer Institute McAllen, Texas
Regional Cancer Center at Wellington West Palm Beach,
Florida
Southern Indiana Radiation Therapy(8) Jeffersonville, Indiana
</TABLE>
- ----------
(1) Real property leased from UHT.
(2) Real property leased with an option to purchase.
(3) General partnership interest in limited partnership.
-40-
<PAGE>
(4) Includes Chalmette Hospital, a 114-bed rehabilitation facility. The Company
owns the LaPlace real property and leases the Chalmette real property from
UHT.
(5) Addictive disease facility.
(6) Managed Facility. A partnership, in which the Company is the general
partner, owns the real property.
(7) Each facility other than Goldring Surgical and Diagnostic Center and The
Surgery Center of Chalmette are owned in partnership form with the Company
owning general and limited partnership interests in a limited partnership.
The real property is leased from third parties.
(8) A partnership in which the Company is the general partner owns the real
property.
Bed Utilization and Occupancy Rates
The following table shows the bed utilization and occupancy rates for the
hospitals currently operated by the Company for the years indicated.
Accordingly, the information is presented on a basis different from that used in
preparing the historical financial information included or incorporated by
reference in this Prospectus. 1995 (Pro forma) assumes the effect of the
Adjustments as if they occurred on January 1, 1995.
1995
1991 1992 1993 1994 1995 (Pro Forma)
---- ---- ---- ---- ---- -----------
Average Licensed Beds
Acute Care Hospitals 2,645 2,730 2,791 2,808
Behavioral Health Centers 1,206 1,216 1,224 1,256
Average Available Beds (1)
Acute Care Hospitals 2,364 2,495 2,560 2,616
Behavioral Health Centers 1,197 1,214 1,224 1,250
Hospital Admissions
Acute Care Hospitals 83,826 87,174 92,911 100,004
Behavioral Health Centers 13,505 15,560 16,804 17,888
Average Length of Patient
Stay
(Days)
Acute Care Hospitals 5.8 5.6 5.3 5.1
Behavioral Health Centers 15.6 13.0 11.6 11.2
Patient Days (2)
Acute Care Hospitals 485,015 486,291 496,462 511,487
Behavioral Health Centers 211,390 202,047 195,004 200,857
Occupancy Rate (3):
Licensed Beds
Acute Care Hospitals 50% 49% 49% 50%
Behavioral Health Centers 48% 45% 44% 43%
Available Beds
Acute Care Hospitals 56% 53% 53% 54%
Behavioral Health Centers 48% 46% 44% 44%
- ----------
(1) "Average Available Beds" is the number of beds which are actually in
service at any given time for immediate patient use with the necessary
equipment and staff available for patient care. A hospital may have
appropriate licenses for more beds than are in service for a number of
reasons, including lack of demand, incomplete construction, and
anticipation of future needs.
(2) "Patient Days" is the aggregate sum for all patients of the number of days
that hospital care is provided to each patient.
(3) "Occupancy Rate" is calculated by dividing average patient days (total
patient days divided by the total number of days in the period) by the
number of average beds, either available or licensed.
-41-
<PAGE>
Sources of Revenue
The Company receives payment for services rendered from private insurers,
including managed care plans, the Federal government under the Medicare program,
state governments under their respective Medicaid programs and directly from
patients. All of the Company's acute care hospitals and most of the Company's
behavioral health centers are certified as providers of Medicare and Medicaid
services by the appropriate governmental authorities. The requirements for
certification are subject to change and, in order to remain qualified for such
programs, it may be necessary for the Company to make changes from time to time
in its facilities, equipment, personnel and services. Although the Company
intends to continue in such programs, there is no assurance that it will
continue to qualify for participation.
The sources of the Company's hospital revenues are charges related to the
services provided by the hospitals and their staffs, such as radiology,
operating rooms, pharmacy, physiotherapy and laboratory procedures, and basic
charges for the hospital room and related services such as general nursing care,
meals, maintenance and housekeeping. Hospital revenues depend upon the occupancy
for inpatient routine services, the extent to which ancillary services and
therapy programs are ordered by physicians and provided to patients, the volume
of out-patient procedures and the charges or negotiated payment rates for such
services. Charges and reimbursement rates for inpatient routine services vary
depending on the type of bed occupied (e.g., medical/surgical, intensive care or
psychiatric) and the geographic location of the hospital.
The following tables show approximate percentages of net revenue derived
by the Company's acute care hospitals and behavioral health centers which are
currently owned. 1995 (Pro forma) assumes the effect of the Adjustments as if
they occurred on January 1, 1995.
Percentage of Net Revenues of Acute Care Hospitals
1995
1991 1992 1993 1994 1995 (Pro Forma)
---- ---- ---- ---- ---- -----------
Payors:
Medicare 44.4% 44.3% 43.8% 41.7% --% %
Medicaid 8.5% 11.0% 12.0% 12.8% --% %
Other Sources (including
Blue Cross) 47.1% 44.7% 44.2% 45.5% --% %
------ ------ ------ ------ ------ ------
Total: 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ====== ======
Percentage of Net Revenues of Behavioral Health Centers
1995
1991 1992 1993 1994 1995 (Pro Forma)
---- ---- ---- ---- ---- -----------
Payors:
Medicare 17.6% 20.9% 22.1% 25.2% --% %
Medicaid 4.8% 5.4% 14.2% 20.0% --% %
Other Sources (including
Blue Cross 77.6% 73.7% 63.7% 54.8% --%
------ ------ ------ ------ ------ ------
Total: 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ====== ======
Net revenues of the Company are reported at the estimated net realizable
amounts from patients, third-party payors, and others for services rendered,
including estimated retroactive adjustments under reimbursement agreements with
third-party payors. [The Company does not record net revenue by payor other than
for Medicare and Medicaid. These net revenues are accrued on an estimated basis
in the period the related services are rendered and adjusted in future periods
as final settlements are determined. Medicare and Medicaid net revenues
represented 43%, 44%, __% and __% of net patient revenues for the years 1993,
1994 and 1995 and 1995 (pro forma), respectively, excluding the Indigent Care
Reimbursements.]
-42-
<PAGE>
SELLING STOCKHOLDER
<TABLE>
<CAPTION>
Number of Shares of
Shares Beneficially Class B Common Shares Beneficially
Name of Selling Stockholder Owned Before Offering Stock Offered for Sale Owned After Offering
- --------------------------- --------------------- ---------------------- --------------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Alan B. Miller
Class A Common Stock........ 0
Class B Common Stock(1)(2).. 400,000
Class C Common Stock........ 0
Class D Common Stock........ 0
</TABLE>
- ----------
(1) Include shares issuable upon conversion of Classes A, C and/or D Common
Stock.
(2) Includes __________ shares of Class B Common Sock issuable upon the
exercise of stock options exercisable within 60 days of the date hereof.
DESCRIPTION OF COMMON STOCK
The Company's authorized capital stock consists of 12,000,000 shares of
Class A Common Stock, $.01 par value per share, 50,000,000 shares of Class B
Common Stock, $.01 par value per share, 1,200,000 shares of Class C Common
Stock, $.01 par value per share, and 5,000,000 shares of Class D Common Stock,
$.01 par value per share.
Class A Common Stock, Class B Common Stock, Class C Common Stock and Class D
Common Stock are substantially similar except that each class has different
voting rights. Each share of Class A Common Stock has one vote per share; each
share of Class B Common Stock has one-tenth vote per share; each share of Class
C Common Stock has one hundred votes per share; and each share of Class D Common
Stock has ten votes per share. Notwithstanding the foregoing, if a holder of
Class C or Class D Common Stock holds a number of shares of Class A or Class B
Common Stock, respectively, which is less than ten times the number of shares of
Class C or Class D Common Stock, respectively, that such holder holds, then such
holder will only be entitled to one vote per share of Class C Common Stock and
one-tenth vote per share of Class D Common Stock.
The holders of Class B and Class D Common Stock, voting together, with each
share of Class B and Class D Common Stock having one vote per share, are
entitled to elect the greater of 20% of the Company's Board of Directors or one
director. The holders of Class B and Class D Common Stock are also permitted to
vote together as a separate class with respect to certain other matters or as
required by applicable law.
Reference is hereby made to the Company's Restated Certificate of
Incorporation, as amended, incorporated by reference herein, for a more complete
description of the terms of the Company's Common Stock.
UNDERWRITING
Upon the terms and subject to conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below has agreed to
purchase, and the Company and the Selling Stockholder have agreed to sell to
such Underwriter, the number of shares of Class B Common Stock set forth
opposite the name of each underwriter.
-43-
<PAGE>
Number of
Underwriter Shares
- ----------- ---------
Smith Barney Inc. .....................................
------------
Dillon, Read & Co., Inc................................
------------
Donaldson Lufkin & Jenrette Securities Corporation.....
------------
J.P. Morgan Securities Inc.............................
------------
Bear Stearns & Co. Inc.................................
------------
Total............................................ [ ]
============
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Class B Common Stock are
subject to the approval of certain legal matters by counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all of the shares
offered hereby if any are taken (other than those covered by the overallotment
option described below).
The Underwriters, for whom Smith Barney Inc., Dillon, Read & Co., Inc.,
Donaldson Lufkin & Jenrette Securities Corporation, J.P. Morgan & Co. and Bear
Stearns & Co. Inc., are acting as representatives propose to offer part of the
shares directly to the public at the public offering price set forth on the
cover page hereof and part to certain dealers at a price which represents a
concession not in excess of $ per share. The Underwriters may allow, and such
dealers may reallow, a discount of not more than $ per share to other
Underwriters or certain other dealers.
The Company has granted to the Underwriters a 30-day option to purchase up
to [ ] additional shares of Class B Common Stock at the price to the public all
as set forth on the cover page of this Prospectus less the underwriting
discounts and commissions. The Underwriters may exercise such option solely for
the purpose of covering over allotments made in connection with the sale of
shares offered hereby. To the extent that such option is exercised, each
Underwriter will be obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares set forth opposite each Underwriter's name in the preceding table bears
to the total number of shares listed in such table.
The Company and its executive officers and directors have agreed that, for
a period of [ ] days from the date of this Prospectus, they will not, without
the prior written consent of Smith Barney Inc., offer, sell, contract to sell,
or otherwise dispose of, any shares of Class B Common Stock of the Company or
any securities convertible into, or exercisable or exchangeable for Class B
Common Stock of the Company, except in the case of the Company in connection
with certain permitted issuances described in the Underwriting Agreement.
In connection with the repayment of debt with a portion of the proceeds of
the Offering, see "Use of Proceeds", more than 10% of the net offering proceeds
will be paid to or for the beneficial interest of members of the National
Association of Securities Dealers, Inc. ("NASD") and affiliated and associated
persons of NASD members. Therefore, the Offering is being made in compliance
with subsection (c)(8) of the NASD's Corporate Financing Rule.
Robert H. Hotz, a director of the Company, is a Managing Director and
Co-Head of Corporate Finance at Dillon, Read & Co., Inc., a managing underwriter
of this Offering. The Company has engaged and intends in the future to engage
Dillon, Read & Co., Inc. in connection with such financial matters as it deems
appropriate.
The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the Class B Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholder by Fulbright & Jaworski L.L.P.,
666 Fifth Avenue, New York, New York 10103. Anthony Pantaleoni, a director of
the Company who owns less than one percent of the outstanding capital stock of
the Company, is a partner
-44-
<PAGE>
of Fulbright & Jaworski L.L.P. The validity of the B Common Stock offered hereby
will be passed upon for the Underwriters by Dewey Ballantine, 1301 Avenue of the
Americas, New York, New York 10019.
EXPERTS
The consolidated financial statements and schedule of Universal Health
Services, Inc. and subsidiaries as of December 31, 1995 and 1994, and for each
of the three years in the period ended December 31, 1994, and the financial
statements of Aiken Regional Medical Centers as of and for the year ended
December 31, 1994, included or incorporated by reference in this Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included or incorporated by reference herein in reliance upon the authority of
said firm as experts in giving said reports.
The combined financial statements of Manatee Hospitals and Health Systems,
Inc. at August 31, 1994 and 1995, and for the years then ended incorporated by
reference in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent Certified Public Accountants, as set forth in
their report thereon, and are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
The financial statements of Northwest Texas Healthcare Systems at
September 30, 1995, and for the [ ] year then ended appearing in this Prospectus
and Registration Statement have been audited by Clifton, Gunderson & Co.,
independent Certified Public Accountants, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing. The financial statements of Northwest Texas Healthcare
Systems at September 30, 1994, and for the year then ended appearing in this
Prospectus and Registration Statement have been audited by KPMG Peat Marwick
L.L.P., independent Certified Public Accountants, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The financial statements of [First Hospital Corporation] at [December 31,
1995,] and for the year then ended appearing in this Prospectus and Registration
Statement have been audited by Ernst and Young L.L.P., independent Certified
Public Accountants, as set forth in their report thereon appearing elsewhere
herein and in the Registration Statement, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
-45-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
Report of Independent Public Accountants
Consolidated Statements of Income for the Three Years in the Period
Ended December 31, 1995 (audited)
Consolidated Balance Sheets as of December 31, 1994 and 1995 (audited)
Consolidated Statements of Stockholders' Equity for the Three Years
Ended December 31, 1995 (audited)
Consolidated Statements of Cash Flows for the Three Years Ended
December 31, 1995 (audited)
Notes to Consolidated Financial Statements
Consolidated Statements of Income for the Three Months Ended March 31,
1996 and 1995 (audited) Condensed Consolidated Balance Sheets for
the Three Months Ended March 31, 1996, and the Year Ended December
31, 1995 (unaudited) Condensed
Consolidated Statements of Cash Flows for the Three Months Ended March
31, 1996 and 1995 (unaudited) Notes to Condensed Consolidated
Financial Statements (unaudited)
NORTHWEST TEXAS HEALTH SYSTEMS
[TO BE ADDED]
Reports of Independent Auditors
Balance Sheets for the Years Ended September 30, 1995 and 1994
(audited) and the Three Months Ended March 31, 1996 (unaudited)
Statements of Revenue and Expenses for the Years Ended September 30,
1995 and 1994 (audited) and the Three Months Ended March 31, 1996
and 1995 (unaudited)
Statements of Changes in Fund Balances for the Years Ended September
30, 1995 and 1994 (audited) and the Six Months Ended March 31, 1996
(unaudited)
Statements of Cash Flows for the Years Ended September 30, 1995 and
1994 (audited) and the Six Months Ended March 31, 1996 and 1995
(unaudited) Notes to Financial Statements.
FIRST HOSPITAL CORPORATION
[TO BE ADDED]
F-1
<PAGE>
================================================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer contained herein, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or any of the Underwriters. This Prospectus does not
constitute an offer of any securities other than those to which it relates or an
offer to sell, or a solicitation of an offer buy, those to which it relates, in
any jurisdiction where, or to any person to whom, it is not lawful. The delivery
of this Prospectus at any time does not imply that the information herein is
correct as of any time subsequent to its date.
------------
TABLE OF CONTENTS
Page
----
Available Information...................................................
Incorporation of Certain Documents
by Reference..........................................................
Prospectus Summary......................................................
Risk Factors............................................................
Price Range of Common Stock.............................................
Use of Proceeds.........................................................
Capitalization..........................................................
Pro Forma Financial Information.........................................
Selected Financial and Other Data.......................................
Management's Discussion and
Analysis of Financial Condition
and Results of Operations.............................................
Business................................................................
Selling Stockholder.....................................................
Description of Common Stock.............................................
Underwriting............................................................
Legal Matters...........................................................
Experts.................................................................
Index to Consolidated Financial
Statements............................................................ F-1
================================================================================
================================================================================
4,400,000 Shares
UNIVERSAL
HEALTH SERVICES,
INC.
Class B
Common Stock
------
PROSPECTUS
___________, 1996
------
Smith Barney Inc.
Dillon, Read & Co., Inc.
Donaldson Lufkin & Jenrette
Securities Corporation
J.P. Morgan Securities & Co.
Bear Stearns & Co. Inc.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized statement of all estimated amounts of all
expenses payable by the Registrant in connection with the registration of the
Class B Common Stock offered hereby, other than the underwriting discounts and
commissions:
Registration Fee -- Securities and Exchange Commission. $__________
Registration Fee -- National Association of Securities $__________
Dealers, Inc.
Listing Fee -- New York Stock Exchange ................ $__________
Blue Sky fees and expenses............................. $__________
Accountants' fees and expenses......................... $__________
Legal fees and expenses................................ $__________
Printing and engraving expenses........................ $__________
Miscellaneous.......................................... $__________
Total........................................... $
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware permits
indemnification of directors, officers and employees of a corporation under
certain conditions and subject to certain limitations. Section 7 of the By-Laws
of the Company contains provisions for the indemnification of directors and
officers of the Company.
ITEM 16. EXHIBITS.
1 -- Form of Underwriting Agreement.
5 -- Opinion of Fulbright & Jaworski L.L.P.
23.1 -- Consent of Arthur Andersen L.L.P.
23.2 -- Consent of Ernst & Young L.L.P.
23.3 -- Consent of Clifton, Gunderson & Co.
23.4 -- Consent of KPMG Peat Marwick L.L.P.
23.5 -- Consent of Ernst & Young L.L.P.
23.6 -- Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.)
24 -- Power of Attorney (included on signature page).
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment of this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement of any material change to such information in the registration
statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8 and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(d) The undersigned hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of King of Prussia, Commonwealth of Pennsylvania, on May ___, 1996.
UNIVERSAL HEALTH SERVICES, INC.
By:
---------------------------------
Alan B. Miller
Chairman of the Board, President
& Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alan B. Miller and Kirk E. Gorman his true and
lawful attorneys-in-fact and agents, each acting alone, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, including post-effective amendments, and to file the same, with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, and hereby ratifies
and confirms all that said attorneys-in-fact and agents, each acting alone, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
- --------- ----- ----
- ---------------------------- Chairman of the Board, May , 1996
Alan B. Miller President, Chief Executive
Officer and Director (Principal
Executive Officer)
- ---------------------------- Director May , 1996
John H. Herrell
- ---------------------------- Director May , 1996
Robert H. Hotz
II-4
<PAGE>
- ---------------------------- Director May , 1996
Martin Myerson
- ---------------------------- Director May , 1996
Sidney Miller
- ---------------------------- Director May , 1996
Anthony Pantaleoni
- ---------------------------- Director May , 1996
Paul Verkuil
- ---------------------------- Senior Vice President and Chief May , 1996
Kirk E. Gorman Financial Officer (Principal
Financial and Accounting
Officer)
- ---------------------------- Vice President and Controller May , 1996
Steve G. Filton (Principal Accounting Officer)
II-5
Exhibit 5
FULBRIGHT & JAWORSKI
L.L.P.
A REGISTERED LIMITED LIABILITY PARTNERSHIP HOUSTON
666 FIFTH AVENUE WASHINGTON, D.C.
NEW YORK, NEW YORK 10103-3198 AUSTIN
SAN ANTONIO
TELEPHONE: 212/318-3000 DALLAS
CABLE ADDRESS: NEW YORK
REAVCABLE, NEW YORK LOS ANGELES
TWX: 710-581-3676 LONDON
FACSIMILE: 212/752-5958 HONG KONG
May 20, 1996
Universal Health Services, Inc.
367 South Gulph Road
King of Prussia, PA 19406
Re: Universal Health Services, Inc.
Registration Statement on Form S-3
----------------------------------
Dear Sirs:
In connection with the Registration Statement on Form S-3 (the
"Registration Statement") to be filed by Universal Health Services, Inc., a
Delaware corporation (the "Company"), under the Securities Act of 1933, as
amended, relating to the public offering of up to an aggregate of 5,060,000
shares (the "Shares") of Common Stock, par value $.01 per share, of the Company,
including 660,000 shares which may be purchased by the underwriters if they
exercise the option granted to them by the Company to cover over-allotments, we,
as counsel for the Company, have examined such corporate records, other
documents and questions of law as we have deemed necessary or appropriate for
the purposes of this opinion.
Upon the basis of such examination, we advise you that in our opinion the
Shares have been duly and validly authorized; 400,000 of such Shares which will
be sold by a selling stockholder, are legally issued, fully paid and non-
assessable, and the remainder of the Shares, when sold in the manner
contemplated by the Underwriting Agreement filed as an exhibit to the
Registration Statement, upon receipt by the Company of payment therefor as
provided in such agreement, will be legally issued, fully paid and non-
assessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to this firm under the caption "Legal Matters" in
the Prospectus contained therein and elsewhere in the Registration Statement and
Prospectus. This consent is not to be construed as an admission that we are a
party whose consent is required to be filed with the Registration Statement
under the provisions of the Securities Act of 1933.
Very truly yours,
FULBRIGHT & JAWORSKI L.L.P.
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated February 10, 1996
on the consolidated financial statements and schedule of Universal Health
Services, Inc. and Subsidiaries (the Company) included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995; to the incorporation
by reference in this Registration Statement of our report dated June 6, 1995 on
the 1994 financial statements of Aiken Regional Medical Centers included in the
Company's Prospectus dated July 18, 1995, as supplemented by a Supplement dated
August 1, 1995, relating to securities registered on Form S-3, File 33-602087;
and to the use of our report on the financial statements of the Company and to
all references to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
May 22, 1996
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Universal Health
Services, Inc. for the registration of 4,400,000 shares of Universal Health
Services, Inc.'s Class B common stock, and to the incorporation by reference
therein of our report dated October 24, 1994, with respect to the combined
financial statements of Manatee Hospitals and Health Systems, Inc. included in
Universal Health Services, Inc.'s Registration Statement (Form S-3, Registration
No. 33-60287) filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Tampa, Florida
May 20, 1996
EXHIBIT 23.3
INDEPENDENT AUDITOR'S CONSENT
Board of Directors
Universal Health Services, Inc:
We consent to the use of our report included herein and to the reference to
our firm in the heading "Experts" in the prospectus. Our report refers to an
emphasis of the accounting reporting entity and to a change in accounting for
investment securities.
CLIFTON, GUNDERSON & CO.
Amarillo, Texas
May 21, 1996
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
Universal Health Services, Inc.
We consent to the use of our report included herein and to the reference to
our Firm under the heading "Experts" in the prospectus. Our report refers to an
emphasis of the financial reporting entity and to a change in accounting for
investment securities.
KPMG Peat Marwick LLP
Dallas, Texas
May 20, 1996
