2) ACQUISITIONS AND DIVESTITURES

Year ended December 31, 2011:

2011 Acquisitions of Assets and Businesses:

During 2011, we spent $29 million on the acquisition of businesses and real property, including the following:

•

the acquisition of administrative office buildings located in Pennsylvania, Tennessee and a multi-tenant office building located in Washington D.C. (which was acquired by a limited partnership in which we hold an 80% ownership interest);

•

a deposit in connection with execution of a definitive agreement, which is subject to regulatory approvals and closing conditions, to acquire the Knapp Medical Center, including a 226-bed acute care hospital, a surgery center, physician practices and other related assets located in Weslaco, Texas, and;

•

the acquisition of a cardiology practice in Texas

The aggregate net cash expenditure related to the properties and/or businesses was allocated to assets and liabilities based on their estimated fair values as follows:


	Amount (000s)
Property, plant & equipment	$	35,000
Other assets/deposits		11,000
Debt		(17,000	)

Cash paid in 2011 for acquisitions and deposits	$	29,000

2011 Divestitures of Assets and Businesses:

During 2011, we received $68 million from the divestiture of assets and businesses, including the following:

•

the sale of three behavioral healthcare facilities (one located in Delaware and two located in Nevada) pursuant to our agreement with the Federal Trade Commission ("FTC") in connection with our acquisition of PSI;

•

sale of our majority ownership interest in a radiation oncology center located in Nevada, and;

•

the real property of a closed acute care hospital

The operating results for the three former PSI facilities located in Delaware and Nevada are reflected as discontinued operations during 2011 and 2010 (from the November 15^th dates of acquisition). Since the aggregate income from discontinued operations before income tax expense for these facilities is not material to our 2011 or 2010 consolidated financial statements, it is included as a reduction to other operating expenses. The aggregate pre-tax net gain on the divestitures of the above-mentioned facilities located in Delaware and Nevada did not have a material impact on our consolidated results of operations.

In addition, also pursuant to our agreement with the FTC in connection with our acquisition of PSI, in January, 2012, we divested the Hospital San Juan Capestrano, a 108-bed facility located in Rio Piedras, Puerto Rico. The assets and liabilities for the Hospital San Juan Capestrano are reflected as "held for sale" on our Consolidated Balance Sheet as of December 31, 2011. The pre-tax gain on the divestiture of the Hospital San Juan Capestrano, which will not have a material impact on our 2012 consolidated results of operations, will be reflected in our consolidated results of operations during the first quarter of 2012. The assets and liabilities for each of the above-mentioned facilities were reflected as "held for sale" on our Consolidated Balance Sheet as of December 31, 2010.

The following table shows the results of operations for the former PSI facilities located in Delaware and Nevada, on a combined basis, which are reflected as discontinued operations (amounts in thousands):


	Year Ended December 31,
	2011			2010			2009
Net revenues	$	33,884		$	4,155		$	—
Income from discontinued operations		7,904			859			—
Gain on divestiture		442			—			—

Income from discontinued operations, before income tax expense		8,346			859			—
Income tax expense		(3,160	)		(318	)		—

Income from discontinued operations, net of income tax expense	$	5,186		$	541		$	—

Year ended December 31, 2010:

2010 Acquisitions of Assets and Businesses:

During 2010, we spent $1.96 billion and assumed $1.08 billion of debt on the acquisition of businesses and real property, including the following:

•

the acquisition of PSI on November 15, 2010 for a total purchase price of $3.04 billion consisting of $1.96 billion in cash plus the assumption of approximately $1.08 billion of PSI's debt, the majority of which has since been refinanced, and;

•

the acquisition of substantially all of the assets of an outpatient surgery center located in Florida in which we previously held a 20% minority ownership interest. The purchase price consideration in connection with this transaction, which occurred during the first quarter, consisted of acquisition of the net assets less the assumption of the outstanding liabilities and third-party debt.

The aggregate net purchase price of the facilities was allocated to assets and liabilities based on their estimated fair values as follows:


	Amount (000s)
Working capital, net	$	60,000
Assets held for sale		67,000
Property, plant & equipment		932,000
Goodwill		1,921,000
Other assets		132,000
Income tax assets, net of deferred tax liabilities		(14,000	)
Debt		(1,082,000	)
Liabilities held for sale		(1,000	)
Redeemable noncontrolling interests		(5,000	)
Other liabilities		(52,000	)

Cash paid in 2010 for acquisitions	$	1,958,000

Goodwill of the facilities acquired is computed, pursuant to the residual method, by deducting the fair value of the acquired assets and liabilities from the total purchase price. The factors that contribute to the recognition of goodwill, which may also influence the purchase price, include the following for each of the acquired facilities: (i) the historical cash flows and income levels; (ii) the reputations in their respective markets; (iii) the nature of the respective operations, and; (iv) the future cash flows and income growth projections.

Assuming the acquisition of PSI occurred on January 1, 2009, our 2009 pro forma net revenues would have been approximately $7.01 billion and our pro forma net income attributable to UHS and pro form net income attributable to UHS per diluted share would have been $211 million and $2.14 per diluted share, respectively. The 2009 pro forma net income attributable to UHS and net income attributable to UHS per diluted share include the after-tax impact of the transaction costs incurred by us in connection with the acquisition of PSI amounting to $79 million or $.81 per diluted share.

Our 2010 pro forma net revenues would have been approximately $7.30 billion and our pro forma net income attributable to UHS and pro forma net income attributable to UHS per diluted share would have been $342 million and $3.47 per diluted share, respectively.

During the period of November 16, 2010 through December 31, 2010, the facilities acquired from PSI generated $227 million of net revenues which are included in our consolidated net revenues for the year ended December 31, 2010. The aggregate effect of the earnings generated by these facilities since the date of acquisition, less the cost on the borrowings utilized to finance the acquisition, was not material to our 2010 net income attributable to UHS and net income attributable to UHS per diluted share.

2010 Divestitures of Assets and Businesses:

During 2010, we received $21 million from the divestiture of assets and businesses, including the following:

•

the sale of our minority ownership interest in a healthcare technology company;

•

the sale of a portion of our ownership interest in an outpatient surgery center located in Texas, and;

•

the sale of the real property of Methodist Hospital located in Louisiana that was severely damaged and closed in 2005 as a result of Hurricane Katrina.

The pre-tax gain, net of losses, resulting from the above-mentioned transactions did not have a material impact on our 2010 financial statements.

Year ended December 31, 2009:

2009 Acquisitions of Assets and Businesses:

During 2009, we spent $12 million on the acquisition of businesses and real property, including the following:

•

the acquisition of a 72-bed behavioral health care facility located in Louisville, Colorado, and;

•

the acquisition of the real property assets of a medical office building located on the campus of one of our acute care hospitals located in Texas.

The aggregate net purchase price of the facilities was allocated to assets and liabilities based on their estimated fair values as follows:


	Amount (000s)
Working capital, net	$	1,000
Property, plant & equipment		11,000

Cash paid in 2009 for acquisitions	$	12,000

Assuming the acquisition of the behavioral health facility located in Colorado occurred on January 1, 2009, the pro forma effect on our 2009 net revenues, income from continuing operations, income from continuing operations per basic and diluted share, net income attributable to UHS and net income attributable to UHS per basic and diluted share was immaterial.

2009 Divestitures of Assets and Businesses:

During 2009, we received $10 million from the divestiture of assets and businesses, including the following:

•

the sale of the real property assets of a medical office building on the campus of a previously divested acute care facility located in Pennsylvania, and;

•

the sale of our ownership interest in an outpatient surgery center