<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: September 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________
Commission file Number: 333-49743
UNIVERSAL HOSPITAL SERVICES, INC.
---------------------------------
(Exact Name of Registrant as specified in its charter)
Minnesota 41-0760940
------------------------------ ------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1250 Northland Plaza
3800 West 80/th/ Street
Bloomington, Minnesota 55431-4442
---------------------------------
(Address of principal executive offices)
(Zip Code)
952-893-3200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Universal Hospital Services, Inc.
STATEMENTS OF OPERATIONS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Equipment rentals $ 23,170 $ 18,574 $ 68,987 $ 57,931
Sales of supplies and equipment, and other 2,929 2,833 9,057 8,883
-------- -------- -------- --------
Total revenues 26,099 21,407 78,044 66,814
Costs of rentals and sales:
Cost of equipment rentals 6,418 5,440 18,902 16,036
Rental equipment depreciation 5,825 4,655 16,417 12,960
Cost of supplies and equipment sales 1,983 2,044 6,296 6,104
-------- -------- -------- --------
Total costs of rentals and sales 14,226 12,139 41,615 35,100
-------- -------- -------- --------
Gross profit 11,873 9,268 36,429 31,714
Selling, general and administrative 8,932 6,789 25,944 21,719
-------- -------- -------- --------
Operating income 2,941 2,479 10,485 9,995
Interest expense 5,174 4,569 15,396 13,148
-------- -------- -------- --------
Loss before income taxes (2,233) (2,090) (4,911) (3,153)
(Benefit) provision for income taxes (72) 1,017 (163) (280)
-------- -------- -------- --------
Net loss ($ 2,161) ($ 3,107) ($ 4,748) ($ 2,873)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the unaudited financial
statements.
2
<PAGE>
Universal Hospital Services, Inc.
BALANCE SHEETS
(dollars in thousands except share and per share information)
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
2000 1999
--------- ---------
(unaudited)
<S> <C> <C>
Current assets:
Accounts receivable, less allowance for doubtful accounts of $1,450
at September 30, 2000 and December 31, 1999 $ 25,305 $ 27,338
Inventories 3,086 3,527
Deferred income taxes 1,063 1,063
Other current assets 928 839
--------- ---------
Total current assets 30,382 32,767
Property and equipment:
Rental equipment, at cost less accumulated depreciation 98,518 91,953
Property and office equipment, at cost less accumulated depreciation 5,117 4,804
--------- ---------
Total property and equipment, net 103,635 96,757
Intangible and other assets:
Goodwill, less accumulated amortization 37,719 39,704
Other primarily deferred financing costs, less accumulated
amortization 6,485 7,508
--------- ---------
Total assets $ 178,221 $ 176,736
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities:
Current portion of long-term debt $ 264 $ 305
Accounts payable 11,489 9,419
Accrued compensation and pension 4,744 3,350
Accrued interest 1,809 4,925
Other accrued expenses 1,020 725
Bank overdrafts 914 2,506
--------- ---------
Total current liabilities 20,240 21,230
Long-term debt, less current portion 194,102 187,157
Deferred compensation and pension 2,499 2,232
Deferred income taxes 1,162 1,326
Series B, 13% Cumulative Preferred Stock, $0.01 par value; 25,000 shares
authorized, 6,246 shares issued and outstanding at September 30, 2000
and December 31, 1999, net of unamortized discount, including accrued
stock dividends 6,909 6,207
Commitments and contingencies
Shareholders' deficiency:
Common Stock, $0.01 par value; 50,000,000 authorized,
16,089,214 and 16,063,240 shares issued and outstanding at
September 30, 2000 and December 31, 1999, respectively 161 161
Additional paid-in capital 2,335 2,242
Accumulated deficit (49,187) (43,819)
--------- ---------
Total shareholders' deficiency (46,691) (41,416)
--------- ---------
Total liabilities and shareholders' deficiency $ 178,221 $ 176,736
========= =========
</TABLE>
The accompanying notes are an integral part of the unaudited financial
statements.
3
<PAGE>
Universal Hospital Services, Inc.
STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($ 4,748) ($ 2,873)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 17,428 13,657
Amortization of intangibles 3,145 2,845
Provision for doubtful accounts 897 598
Loss on sale of equipment 351 770
Deferred income taxes (164) (299)
Changes in operating assets and liabilities, net of impact of acquisitions:
Accounts receivable 849 (3,853)
Inventories and other operating assets 352 (1,087)
Accounts payable and accrued expenses 1,066 4,413
-------- --------
Net cash provided by operating activities 19,176 14,171
-------- --------
Cash flows from investing activities:
Rental equipment purchases (23,112) (35,891)
Property and office equipment purchases (1,341) (1,744)
Proceeds from disposition of rental equipment 403 1,505
Acquisitions (845)
Other 203 (616)
-------- --------
Net cash used in investing activities (23,847) (37,591)
-------- --------
Cash flows from financing activities:
Proceeds under loan agreements 36,600 70,375
Payments under loan agreements (30,430) (41,898)
Prepayment of deferred loan costs (1,185)
Repurchase of common stock (55) (8)
Proceeds from issuance of common stock, net of offering costs 148
Change in book overdraft (1,592) (2,130)
-------- --------
Net cash provided by financing activities 4,671 25,154
-------- --------
Net change in cash and cash equivalents --- 1,734
Cash and cash equivalents at beginning of period --- ---
-------- --------
Cash and cash equivalents at end of period $ --- $ 1,734
======== ========
Supplemental cash flow information:
Interest paid $18,033 $15,017
======== ========
Rental equipment purchases included in accounts payable $ 3,323 $ 1,323
======== ========
Income taxes received $ 26 $ 213
======== ========
</TABLE>
The accompanying notes are an integral part of the unaudited financial
statements.
4
<PAGE>
Universal Hospital Services, Inc.
NOTES TO UNAUDITED QUARTERLY REPORT FINANCIAL STATEMENTS
1. Basis of Presentation:
The condensed financial statements included in this Form 10-Q have been
prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed, or omitted, pursuant to such rules and
regulations. These condensed financial statements should be read in
conjunction with the financial statements and related notes included in
the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 29, 2000.
The interim financial statements presented herein as of September 30,
2000 and 1999, and for the three and nine months ended September 30,
2000 and 1999, reflect, in the opinion of management, all adjustments
necessary for a fair presentation of financial position and the results
of operations for the periods presented. These adjustments are all of a
normal, recurring nature. The results of operations for any interim
period are not necessarily indicative of results for the full year.
The December 31, 1999 Balance Sheet data was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles.
2. Acquisitions
Vital Choice Medical Systems, Inc.
On October 26, 1999, the Company acquired Vital Choice Medical Systems,
Inc. (VC) pursuant to a Stock Purchase Agreement among the Company and
the shareholders of VC. Under the agreement, the Company acquired all
of the outstanding capital stock of VC for approximately $5.5 million,
including the repayment of approximately $2.1 million of outstanding
indebtedness of VC. The source of funds was from the Senior Revolving
Credit Facility.
VC rents medical equipment to hospitals and alternate care facilities
from three locations in central and northern California--Oakland,
Fresno, and Sacramento. VC also supplies disposable medical products
used in connection with rental equipment and provides a variety of
biomedical services.
Express Medical Supply, Inc.
On March 31, 1999, the Company acquired certain assets of Express
Medical Supply, Inc. (EMS) for approximately $0.8 million. The source
of funds was from the Senior Revolving Credit Facility.
EMS rents respiratory equipment to hospitals and home care providers in
Nashville. EMS also supplies disposable respiratory products used in
connection with the respiratory equipment.
Proforma Information
The following summarizes unaudited proforma results of operations for
the nine months ended September 30, 1999 assuming the acquisitions of
VC and EMS occurred as of January 1, 1999.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1999 September 30, 1999
------------------ --------------------
<S> <C> <C>
Total Revenue $21,946,000 $68,952,000
Net loss ($2,980,000) ($2,327,000)
</TABLE>
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following should be read in conjunction with the accompanying financial
statements and notes.
Results of Operations
The following table provides information on the percentages of certain items of
selected financial data bear to total revenues and also indicates the percentage
increase or decrease of this information over the prior comparable period:
<TABLE>
<CAPTION>
Percent of Total Revenues Percent Increase (Decrease)
------------------------- ---------------------------
Three Months Ended Nine Months Ended Qtr 3 Nine Months
September 30, September 30, 2000 2000
Over Qtr 3 Over Nine
2000 1999 2000 1999 1999 Months 1999
---------------------- ------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Equipment rentals 88.8% 86.8% 88.4% 86.7% 24.7% 19.1%
Sales of supplies and equipment,
and other 11.2% 13.2% 11.6% 13.3% 3.4% 2.0%
---------------------- ------------------------
Total revenues 100.0% 100.0% 100.0% 100.0% 21.9% 16.8%
Costs of rentals and sales:
Cost of equipment rentals 24.6% 25.4% 24.2% 24.0% 18.0% 17.9%
Rental equipment depreciation 22.3% 21.7% 21.0% 19.4% 25.1% 26.7%
Cost of supplies and equipment
sales 7.6% 9.6% 8.1% 9.1% (3.0%) 3.2%
---------------------- ------------------------
Total costs of rentals
and sales 54.5% 56.7% 53.3% 52.5% 17.2% 18.6%
---------------------- ------------------------
Gross profit 45.5% 43.3% 46.7% 47.5% 28.1% 14.9%
Selling, general and administrative 34.2% 31.7% 33.3% 32.5% 31.6% 19.5%
---------------------- ------------------------
Operating income 11.3% 11.6% 13.4% 15.0% 18.6% 4.9%
Interest expense 19.9% 21.3% 19.7% 19.7% 13.2% 17.1%
---------------------- ------------------------
Loss before income taxes (8.6%) (9.7%) (6.3%) (4.7%) NM NM
(Benefit) provision for income taxes (0.3%) 4.8% (0.2%) (0.4%) NM NM
---------------------- ------------------------
Net loss (8.3%) (14.5%) (6.1%) (4.3%) NM NM
====================== ========================
</TABLE>
6
<PAGE>
General
We are a leading nationwide provider of moveable medical equipment to more than
5,200 hospitals and alternate care providers through our equipment rental and
outsourcing programs.
The following discussion addresses our financial condition as of September 30,
2000 and the results of operations and cash flows for the three and nine months
ended September 30, 2000 and 1999. This discussion should be read in conjunction
with the financial statements included elsewhere herein and the Management's
Discussion and Analysis and Financial sections included in our Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 29, 2000.
Safe Harbor Statements under the Private Securities Litigation Reform Act of
1995: We believe statements in this Form 10-Q looking forward in time involve
risks and uncertainties. The following factors, among others, could adversely
affect our business, operations and financial condition causing our actual
results to differ materially from those expressed in any forward-looking
statements: our substantial outstanding debt and high degree of leverage and the
continued availability, terms and deployment of capital, including our ability
to service or refinance debt; restrictions imposed by the terms of our debt;
adverse regulatory developments affecting, among other things, the ability of
our customers to obtain reimbursement of payments made to us; changes and trends
in customer preferences, including increased purchasing of movable medical
equipment; difficulties or delays in our continued expansion into certain
markets and development of new markets; unanticipated costs or difficulties or
delays in implementing the components of our strategy and plan and possible
adverse consequences relating to our ability to successfully integrate recent
acquisitions; effect of and changes in economic conditions, including inflation
and monetary conditions; actions by competitors and availability of and ability
to retain qualified personnel. For a more complete discussion see the caption
"Industry Assessment" and in our Form 10-K filing filed with the Securities and
Exchange Commission on March 29, 2000 under the caption "Business--Risk
Factors."
Industry Assessment
Our business may be significantly affected by, and the success of our growth
strategies depends on, the availability and nature of reimbursements to
hospitals and other health care providers for their medical equipment costs
under federal programs such as Medicare and by other third party payors. Our
customers, primarily hospitals and alternate care providers, have been and
continue to be faced with cost containment pressures and uncertainties with
respect to health care reform and reimbursement. There has been, and we believe
there will continue to be, a transition toward fixed, per-capita payment systems
and other risk-sharing mechanisms. Under its prospective payment system, the
Health Care Financing Administration, which determines Medicare reimbursement
levels, reimburses hospitals for medical treatment at fixed rates according to
diagnostic related groups without regard to the individual hospital's actual
cost. In July 1998, HCFA changed the way it reimburses nursing homes to a
similar prospective payment system. The Balanced Budget Act of 1997
significantly reduced the growth in federal spending on Medicare and Medicaid
over the next five years.
We believe our Pay-Per-Use(TM) and other rental programs respond favorably to
the current industry environment by providing high quality equipment through
programs which help health care providers improve their efficiency while
effectively matching costs to patient needs, wherever that care is being
provided. While our strategic focus appears consistent with health care
providers' efforts to contain costs and improve efficiencies, there can be no
assurances as to how health care reform will ultimately evolve and the impact it
will have on us.
Because the capital equipment procurement decisions of health care providers are
significantly influenced by the regulatory and political environment for health
care, our operating results historically have been adversely affected in periods
when significant health care reform initiatives were under consideration and
uncertainty remained as to their likely outcome. To the extent general cost
containment pressures on health care spending and reimbursement reform, or
uncertainty as to possible reform, causes hospitals and alternate care providers
to defer the procurement of medical equipment, reduce their capital expenditures
or change significantly their utilization of medical equipment, there could be a
material adverse effect on our business's financial condition and results of
operations.
7
<PAGE>
Completed Acquisitions (See footnote 2 to the financial statements).
On October 26, 1999, we completed the purchase of Vital Choice Medical Systems,
Inc. (VC), a privately held company headquartered in Visalia, California.
On March 31, 1999, we completed the purchase of Express Medical Supply, Inc.
(EMS), a privately held company headquartered in Nashville, Tennessee. The
impact of the acquisition of EMS was not material to the financial position and
results of operations and is not addressed in the following discussion.
Equipment Rental Revenues
Equipment rental revenues were $23.2 million for the third quarter of 2000,
representing a $4.6 million or 24.7% increase from equipment rental revenues of
$18.6 million for the same period of 1999. Assuming the acquisition of VC
occurred on January 1, 1999, equipment rental revenues would have increased
21.5% for the third quarter of 2000, compared to the same period in the prior
year. For the first nine months of 2000, equipment rental revenues were $69.0
million, representing an $11.1 million, or 19.1% increase from rental revenues
of $57.9 million for the same period of 1999. Assuming the acquisition of VC
occurred on January 1, 1999, equipment rental revenue would have increased 15.6%
for the first nine months of 2000, compared to the same period in the prior
year. The rental revenue increase resulted from rental equipment additions, more
efficient utilization of existing rental equipment and growth in our customer
base. Year to date, the strong growth in rental revenues was partially offset by
price concessions to certain Group Purchasing Organizations (GPO) to achieve
preferred vendor relationships. These GPO agreements started during the first
quarter of 1999 and are for terms of two to three years.
Sales of Supplies and Equipment, and Other
Sales of supplies and equipment and other were $2.9 million for the third
quarter of 2000, representing a $0.1 million, or 3.4%, increase from sales of
supplies and equipment and other of $2.8 million for the same period of 1999.
For the first nine months of 2000, sales of supplies and equipment and other was
$9.1 million, representing a $0.2 million, or 2.0%, increase from sales of
supplies and equipment and other of $8.9 million for the same period of 1999.
Cost of Equipment Rentals
Cost of equipment rentals was $6.4 million for the third quarter of 2000,
representing a $1.0 million, or 18.0%, increase from cost of equipment rentals
of $5.4 million for the same period of 1999. For the first nine months of 2000,
cost of equipment rentals was $18.9 million, representing a $2.9 million, or
17.9% increase from cost of equipment rentals of $16.0 million for the same
period of 1999. These results are in line with the increase in equipment rental
revenues supplemented by cost efficiencies. Cost of equipment rentals, as a
percentage of equipment rental revenues, decreased to 27.7% for the third
quarter of 2000 from 29.3% for the same period of 1999. For the first nine
months of 2000, cost of equipment rentals, as a percentage of equipment rental
revenues, decreased to 27.4% from 27.7% for the same period of 1999. These
decreases are a result of rental revenues growing at a faster rate than the
related cost of equipment rentals.
Rental Equipment Depreciation
Rental equipment depreciation was $5.8 million for the third quarter of 2000,
representing a $1.1 million or 25.1% increase from rental equipment depreciation
of $4.7 million for the same period of 1999. For the first nine months of 2000,
rental equipment depreciation was $16.4 million, representing a $3.4 million, or
26.7% increase from rental equipment depreciation of $13.0 million for the same
period of 1999, and is the result of equipment purchases during 1999 and 2000.
Rental equipment depreciation as a percentage of equipment rental revenues
remained at 25.1% in the third quarter of 2000 and 1999. For the first nine
months of 2000, rental equipment depreciation as a percentage of equipment
rental revenues increased to 23.8% from 22.4% for the same period of 1999. This
increase is due to the strong equipment additions during the past 12 months, and
the result of GPO agreements disclosed above.
8
<PAGE>
Gross Profit
Gross profit was $11.9 million for the third quarter of 2000, representing a
$2.6 million or 28.1% increase from gross profit of $9.3 million for the same
period of 1999. For the first nine months of 2000, gross profit was $36.4
million, representing a $4.7 million, or 14.9% increase from gross profit of
$31.7 million for the same period of 1999. The increase in gross profit is due
to rental revenue growth partially offset by the increased cost of equipment
rentals and rental equipment depreciation discussed above.
Gross profit on rentals represents equipment rental revenues reduced by the cost
of equipment rentals and rental equipment depreciation. Gross profit on rentals
increased to 47.2% of equipment rental revenues for the third quarter of 2000
from 45.7% for the same period in 1999. The increased margin for the third
quarter reflects increased revenue growth and equipment utilization. For the
first nine months of 2000, gross profit on rental revenue decreased to 48.8%
from 49.9% for the same period of 1999. The decline in the margin was
predominately due to the impact of GPO pricing commencing late in the first
quarter of 1999 as well as increased cost of equipment rentals, and higher
depreciation from capital equipment purchases predominately in the first
quarter, which was partially offset by growth in rental revenues.
Gross margin on sales of supplies and equipment and other increased to 32.3% in
the third quarter of 2000 from 27.8% for the same period of 1999. For the first
nine months of 2000, gross profit on sales of supplies and equipment and other
decreased to 30.5% from 31.3%.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $8.9 million in the third
quarter of 2000, representing a $2.1 million, or 31.6% increase from selling,
general and administrative expenses of $6.8 million for the same period of 1999.
For the first nine months of 2000, selling, general and administrative expenses
were $25.9 million, representing a $4.2 million, or 19.5% increase from $21.7
million for the same period of 1999. The increase was due to additional
employees and compensation in third quarter 2000 over the same period in 1999,
amortization of goodwill from acquisitions and debt financing costs, bad debt
expense, and employee related insurance costs. Selling, general and
administrative expenses as a percentage of total revenue increased to 34.2% for
the third quarter of 2000 from 31.7% for the same period of 1999, because of the
previously mentioned items. For the first nine months of 2000, selling, general
and administrative expenses as a percentage of total revenue increased to 33.3%
from 32.5% for the same period in 1999.
Interest Expense
Interest expense was $5.2 million for the third quarter of 2000, representing a
$0.6 million, or 13.2% increase from interest expense of $4.6 million in the
same period of 1999. For the first nine months of 2000, interest expense was
$15.4 million, representing a $2.3 million, or 17.1% increase from $13.1 million
for the same period of 1999. These increases primarily reflect our incremental
borrowings associated with capital equipment additions and the acquisitions of
VC and EMS as well as an increase in our effective interest rate. Average
borrowings increased to $194.0 million during the third quarter of 2000 from
$177.9 million for the same period in 1999 and from $170.8 million during the
first nine months of 1999 to $194.2 million for the first nine months of 2000.
Income Taxes
Our effective income tax rate for the first nine months of 2000 was 3.3%
compared to a statutory federal income tax rate of 34.0%, primarily due to
amortization of goodwill that is not deductible for income tax purposes and the
establishment of a valuation allowance related to our net deferred tax asset
primarily resulting from net operating loss carry forwards. The effective income
tax rate for the first nine months of 2000 is management's estimate of the full
year 2000 effective rate.
9
<PAGE>
Net Loss
We incurred a net loss of $2.2 million during the third quarter of 2000,
compared to a net loss of $3.1 million in the same period of 1999. The first
nine months of 2000 resulted in a net loss of $4.7 million, compared to a net
loss of $2.9 million in the same period of 1999.
EBITDA
We believe earnings before interest, taxes, depreciation, and amortization
("EBITDA") to be a measurement of operating performance. EBITDA for the third
quarter of 2000 was $10.2 million versus $8.3 million for the same period of
1999. For the first nine months of 2000, EBITDA was $31.1 million versus $26.5
million for the same period of 1999. EBITDA as a percentage of total revenue
increased to 39.1% for the third quarter of 2000 from 38.9% for the same period
of 1999. For the first nine months of 2000, EBITDA as a percentage of total
revenue increased to 39.8% from 39.7% for the same period in 1999.
Quarterly Financial Information: Seasonality
Quarterly operating results are typically affected by seasonal factors.
Historically, our first and fourth quarters are the strongest, reflecting
increased hospital utilization during the fall and winter months.
Liquidity and Capital Resources
Historically, we have financed our equipment purchases through internally
generated funds and borrowings under our existing Senior Revolving Credit
Facility. As an asset intensive business, we have required continued access to
capital to support the acquisition of equipment for rental to our customers. We
purchased, on a book basis, $41.6 million, $42.6 million and $20.4 million of
rental equipment in 1999, 1998, and 1997, respectively. For the first nine
months of 2000, under generally accepted accounting principles, we purchased
$23.7 million of rental equipment compared to $29.2 million during the same
period of 1999.
During the first nine months of 2000 and 1999, net cash flows provided by
operating activities were $19.2 million and $14.2 million, respectively. Net
cash flows used in investing activities were $23.8 million and $37.6 million in
each of these periods. Net cash flows provided by financing activities were $4.7
million and $25.2 million, respectively.
Our principal sources of liquidity are expected to be cash flows from operating
activities and borrowings under our Senior Revolving Credit Facility. It is
anticipated that our principal uses of liquidity will be to fund capital
expenditures related to purchases of movable medical equipment, provide working
capital, meet debt service requirements and finance our strategic plans.
As of September 30, 2000, we were capitalized with $135.0 million of outstanding
notes and with $62.4 million outstanding loans under our $77.5 million Senior
Revolving Credit Facility. Interest on loans outstanding is payable at a rate
per annum, selected at the Company's option, equal to the Base Rate Margin (the
Bank's Base Rate plus 1.75%) or the adjusted Eurodollar Rate Margin (3.00% over
the adjusted Eurodollar Rate). The Banks Base Rate and the Eurodollar Rate used
to calculate such interest rates may be adjusted if the Company satisfies
certain leverage ratios. Our Senior Revolving Credit Facility contains
restrictive covenants which, among other things, limits us from entering into
additional indebtedness, dividends, transactions with affiliates, asset sales,
acquisitions, mergers, consolidations, liens and encumbrances and prepayments of
other indebtedness.
We believe that, based on current levels of operations and anticipated growth,
our cash from operations, together with our other sources of liquidity,
including borrowings available under the Senior Revolving Credit Facility, will
be sufficient over the next several periods to fund anticipated capital
expenditures and make required payments due on the Notes and obligations under
the Senior Revolving Credit Facility. We believe that our ability to repay the
Notes and amounts outstanding under the Senior Revolving Credit Facility at
maturity will require additional financing. There can be no assurance, however,
that any such financing will be available at such time to us, or that any such
financing will be on terms favorable to us.
10
<PAGE>
Our expansion and acquisition strategy may require substantial capital, and no
assurance can be given that sufficient funding for such acquisitions will be
available under our Senior Revolving Credit Facility, which expires October
2004, or that we will be able to raise any necessary additional funds through
bank financing or the issuance of equity or debt securities on terms acceptable
to us, if at all.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We do not have any liquid investments. Our exposure to interest rate risk is
mainly through borrowings under our secured Senior Revolving Credit Facility. We
are primarily exposed to the Eurodollar interest rate on our borrowings under
the Senior Revolving Credit Facility. We do not use derivative financial
instruments.
11
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
On September 21, 2000, the Company sold 2,000 shares of its common stock to a
member of the Company's management, for an aggregate purchase price of
$6,620.00. The sale was completed pursuant to an exemption from registration
provided under Section 4(2) of the Security Act of 1933, as amended. The
proceeds from the sale of such shares were added to the Company's general funds
and used for the Company's general corporate purposes.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
12 Ratio of Earnings to Fixed Charges
(b) Reports on Form 8-K:
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Date: November 7, 2000
Universal Hospital Services, Inc.
By /s/ David E. Dovenberg
David E. Dovenberg,
President and Chief Executive Officer
By /s/ John A. Gappa
John A. Gappa,
Senior Vice President and
Chief Financial Officer
13
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Universal Hospital Services, Inc.
EXHIBIT INDEX TO REPORT ON FORM 10-Q
Exhibit
Number Description Page
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12 Ratio of Earnings to Fixed Charges 15
14
