16. Consolidating Financial Statements

In accordance with the provisions of the 2012 Indenture, as 100%-owned subsidiaries of UHS, Surgical Services (“SS”) and RES have jointly and severally guaranteed all the Company’s Obligations (as defined in the 2012 Indenture) on a full and unconditional basis. Consolidating financial information of UHS and the guarantors is presented on the following pages.

Universal Hospital Services, Inc.

Consolidating Balance Sheets

(in thousands, except share and per share information)


	December 31, 2017
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Assets
Current assets:
Accounts receivable, less allowance for doubtful accounts	$	76,093	$	13,544	$	—	$	89,637
Due from affiliates		31,590		—		(31,590)		—
Inventories		3,800		5,960		—		9,760
Other current assets		6,127		709		—		6,836
Total current assets		117,610		20,213		(31,590)		106,233
Property and equipment:
Medical equipment		564,316		64,877		—		629,193
Property and office equipment		92,414		12,927		—		105,341
Accumulated depreciation		(485,960)		(50,560)		—		(536,520)
Total property and equipment, net		170,770		27,244		—		198,014
Other long-term assets:
Goodwill		283,141		63,027		—		346,168
Investment in subsidiary		76,606		—		(76,606)		—
Other intangibles, net		136,563		15,358		—		151,921
Other		2,411		698		—		3,109
Total assets	$	787,101	$	126,540	$	(108,196)	$	805,445
Liabilities and (Deficit) Equity
Current liabilities:
Current portion of long-term debt	$	3,451	$	1,592	$	—	$	5,043
Book overdrafts		5,345		22		—		5,367
Due to affiliates		—		31,590		(31,590)		—
Accounts payable		29,842		6,847		—		36,689
Accrued compensation		18,696		2,802		—		21,498
Accrued interest		18,671		—		—		18,671
Other accrued expenses		16,018		1,745		—		17,763
Total current liabilities		92,023		44,598		(31,590)		105,031
Long-term debt, less current portion		694,171		3,894		—		698,065
Pension and other long-term liabilities		11,384		1		—		11,385
Deferred income taxes, net		34,126		1,216		—		35,342
Commitments and contingencies
(Deficit) Equity
Common stock		—		—		—		—
Additional paid-in capital		250,033		76,003		(76,018)		250,018
Accumulated deficit		(288,586)		588		—		(287,998)
Accumulated earnings in subsidiary		588		—		(588)		—
Accumulated other comprehensive loss		(6,638)		—		—		(6,638)
Total Universal Hospital Services, Inc. (deficit) equity		(44,603)		76,591		(76,606)		(44,618)
Noncontrolling interest		—		240		—		240
Total (deficit) equity		(44,603)		76,831		(76,606)		(44,378)
Total liabilities and (deficit) equity	$	787,101	$	126,540	$	(108,196)	$	805,445

Universal Hospital Services, Inc.

Consolidating Balance Sheets

(in thousands, except share and per share information)


	December 31, 2016
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Assets
Current assets:
Accounts receivable, less allowance for doubtful accounts	$	71,802	$	12,462	$	—	$	84,264
Due from affiliates		28,523		—		(28,523)		—
Inventories		4,754		6,331		—		11,085
Other current assets		10,501		597		—		11,098
Total current assets		115,580		19,390		(28,523)		106,447
Property and equipment:
Medical equipment		562,422		55,630		—		618,052
Property and office equipment		83,716		11,130		—		94,846
Accumulated depreciation		(462,167)		(42,082)		—		(504,249)
Total property and equipment, net		183,971		24,678		—		208,649
Other long-term assets:
Goodwill		283,141		60,625		—		343,766
Investment in subsidiary		72,624		—		(72,624)		—
Other intangibles, net		140,944		16,427		—		157,371
Other		1,397		493		—		1,890
Total assets	$	797,657	$	121,613	$	(101,147)	$	818,123
Liabilities and (Deficit) Equity
Current liabilities:
Current portion of long-term debt	$	3,990	$	1,464	$	—	$	5,454
Book overdrafts		9,834		866		—		10,700
Due to affiliates		—		28,523		(28,523)		—
Accounts payable		31,586		7,233		—		38,819
Accrued compensation		17,196		2,710		—		19,906
Accrued interest		18,696		—		—		18,696
Other accrued expenses		15,426		1,250		—		16,676
Total current liabilities		96,728		42,046		(28,523)		110,251
Long-term debt, less current portion		698,050		3,813		—		701,863
Pension and other long-term liabilities		12,274		3		—		12,277
Deferred income taxes, net		50,256		2,961		—		53,217
Commitments and contingencies
(Deficit) Equity
Common stock		—		—		—		—
Additional paid-in capital		245,001		75,799		(75,814)		244,986
Accumulated deficit		(293,636)		(3,190)		—		(296,826)
Accumulated loss in subsidiary		(3,190)		—		3,190		—
Accumulated other comprehensive loss		(7,826)		—		—		(7,826)
Total Universal Hospital Services, Inc. (deficit) equity		(59,651)		72,609		(72,624)		(59,666)
Noncontrolling interest		—		181		—		181
Total (deficit) equity		(59,651)		72,790		(72,624)		(59,485)
Total liabilities and (deficit) equity	$	797,657	$	121,613	$	(101,147)	$	818,123

Universal Hospital Services, Inc.

Consolidating Statements of Operations

(in thousands)


	Year Ended December 31, 2017
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Revenue
Medical equipment solutions	$	299,156	$	—	$	—	$	299,156
Clinical engineering solutions		120,769		20,160		—		140,929
Surgical services		—		74,698		—		74,698
Total revenues		419,925		94,858		—		514,783
Cost of Revenue
Cost of medical equipment solutions		133,042		—		—		133,042
Cost of clinical engineering solutions		96,104		14,279		—		110,383
Cost of surgical services		—		39,753		—		39,753
Medical equipment depreciation		52,711		7,139		—		59,850
Total costs of revenues		281,857		61,171		—		343,028
Gross margin		138,068		33,687		—		171,755
Selling, general and administrative		101,948		24,722		—		126,670
Operating income		36,120		8,965		—		45,085
Equity in earnings of subsidiary		(4,192)		—		4,192		—
Interest expense		50,652		2,350		—		53,002
(Loss) income before income taxes and noncontrolling interest		(10,340)		6,615		(4,192)		(7,917)
(Benefit) provision for income taxes		(19,582)		2,423		—		(17,159)
Consolidated net income		9,242		4,192		(4,192)		9,242
Net income attributable to noncontrolling interest		—		414		—		414
Net income attributable to Universal Hospital Services, Inc.	$	9,242	$	3,778	$	(4,192)	$	8,828

Universal Hospital Services, Inc.

Consolidating Statements of Operations

(in thousands)


	Year Ended December 31, 2016
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Revenue
Medical equipment solutions	$	303,664	$	—	$	—	$	303,664
Clinical engineering solutions		105,770		1,981		—		107,751
Surgical services		—		68,086		—		68,086
Total revenues		409,434		70,067		—		479,501
Cost of Revenue
Cost of medical equipment solutions		138,205		—		—		138,205
Cost of clinical engineering solutions		84,397		1,325		—		85,722
Cost of surgical services		—		36,565		—		36,565
Medical equipment depreciation		56,258		5,899		—		62,157
Total costs of revenues		278,860		43,789		—		322,649
Gross margin		130,574		26,278		—		156,852
Selling, general and administrative		100,760		19,351		—		120,111
(Gain) on settlement		(3,074)		—		—		(3,074)
Operating income		32,888		6,927		—		39,815
Equity in earnings of subsidiary		(2,754)		—		2,754		—
Interest expense		50,181		2,140		—		52,321
(Loss) income before income taxes and noncontrolling interest		(14,539)		4,787		(2,754)		(12,506)
(Benefit) provision for income taxes		(1,087)		2,033		—		946
Consolidated net (loss) income		(13,452)		2,754		(2,754)		(13,452)
Net income attributable to noncontrolling interest		—		308		—		308
Net (loss) income attributable to Universal Hospital Services, Inc.	$	(13,452)	$	2,446	$	(2,754)	$	(13,760)

Universal Hospital Services, Inc.

Consolidating Statements of Operations

(in thousands)


	Year Ended December 31, 2015
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Revenue
Medical equipment solutions	$	285,059	$	—	$	—	$	285,059
Clinical engineering solutions		99,188		—		—		99,188
Surgical services		—		64,434		—		64,434
Total revenues		384,247		64,434		—		448,681
Cost of Revenue
Cost of medical equipment solutions		123,664		—		—		123,664
Cost of clinical engineering solutions		78,988		—		—		78,988
Cost of surgical services		—		34,459		—		34,459
Medical equipment depreciation		60,465		6,313		—		66,778
Total costs of revenues		263,117		40,772		—		303,889
Gross margin		121,130		23,662		—		144,792
Selling, general and administrative		104,193		18,261		—		122,454
Restructuring		2,321		—		—		2,321
(Gain) on settlement		(5,718)		—		—		(5,718)
Operating income		20,334		5,401		—		25,735
Equity in earnings of subsidiary		(1,692)		—		1,692		—
Interest expense		51,086		2,109		—		53,195
(Loss) income before income taxes and noncontrolling interest		(29,060)		3,292		(1,692)		(27,460)
(Benefit) provision for income taxes		(844)		1,600		—		756
Consolidated net (loss) income		(28,216)		1,692		(1,692)		(28,216)
Net income attributable to noncontrolling interest		—		432		—		432
Net (loss) income attributable to Universal Hospital Services, Inc.	$	(28,216)	$	1,260	$	(1,692)	$	(28,648)

Universal Hospital Services, Inc.

Consolidating Statements of Comprehensive Income (Loss)

(in thousands)


	Year Ended December 31, 2017
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Consolidated net income	$	9,242	$	4,192	$	(4,192)	$	9,242
Other comprehensive income:
Gain on minimum pension liability, net of tax		1,188		—		—		1,188
Total other comprehensive income		1,188		—		—		1,188
Comprehensive income		10,430		4,192		(4,192)		10,430
Comprehensive income attributable to noncontrolling interest		—		414		—		414
Comprehensive income attributable to Universal Hospital Services, Inc.	$	10,430	$	3,778	$	(4,192)	$	10,016

Universal Hospital Services, Inc.

Consolidating Statements of Comprehensive Income (Loss)

(in thousands)


	Year Ended December 31, 2016
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Consolidated net (loss) income	$	(13,452)	$	2,754	$	(2,754)	$	(13,452)
Other comprehensive income:
Gain on minimum pension liability, net of tax		339		—		—		339
Total other comprehensive income		339		—		—		339
Comprehensive (loss) income		(13,113)		2,754		(2,754)		(13,113)
Comprehensive income attributable to noncontrolling interest		—		308		—		308
Comprehensive (loss) income attributable to Universal Hospital Services, Inc.	$	(13,113)	$	2,446	$	(2,754)	$	(13,421)

Universal Hospital Services, Inc.

Consolidating Statements of Comprehensive Income (Loss)

(in thousands)


	Year Ended December 31, 2015
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Consolidated net (loss) income	$	(28,216)	$	1,692	$	(1,692)	$	(28,216)
Other comprehensive income:
Gain on minimum pension liability, net of tax		897		—		—		897
Total other comprehensive income		897		—		—		897
Comprehensive (loss) income		(27,319)		1,692		(1,692)		(27,319)
Comprehensive income attributable to noncontrolling interest		—		432		—		432
Comprehensive (loss) income attributable to Universal Hospital Services, Inc.	$	(27,319)	$	1,260	$	(1,692)	$	(27,751)

Universal Hospital Services, Inc.

Consolidating Statements of Cash Flows

(in thousands)


	Year Ended December 31, 2017
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Cash flows from operating activities:
Consolidated net income	$	9,242	$	4,192	$	(4,192)	$	9,242
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		61,918		8,814		—		70,732
Amortization of intangibles, deferred financing costs and bond premium		4,744		5,131		—		9,875
Equity in earnings of subsidiary		(4,192)		—		4,192		—
Provision for doubtful accounts		347		12		—		359
Provision for inventory obsolescence		475		238		—		713
Non-cash share-based compensation expense		2,556		483		—		3,039
Gain on sales and disposals of equipment		(2,400)		(43)		—		(2,443)
Deferred income taxes		(16,130)		(1,745)		—		(17,875)
Interest on note receivable		(29)		—		—		(29)
Changes in operating assets and liabilities:
Accounts receivable		(4,638)		(1,094)		—		(5,732)
Due from affiliates		(2,584)		—		2,584		—
Inventories		479		191		—		670
Other operating assets		420		(317)		—		103
Accounts payable		622		(651)		—		(29)
Other operating liabilities		2,365		(371)		—		1,994
Net cash provided by operating activities		53,195		14,840		2,584		70,619
Cash flows from investing activities:
Medical equipment purchases		(38,434)		(8,078)		—		(46,512)
Property and office equipment purchases		(8,592)		(244)		—		(8,836)
Proceeds from disposition of property and equipment		3,789		63		—		3,852
Issuance of note receivable from offier		(936)		—		—		(936)
Acquisitions and refund of escrow		3,701		(6,393)		—		(2,692)
Net cash used in investing activities		(40,472)		(14,652)		—		(55,124)
Cash flows from financing activities:
Proceeds under senior secured credit facility		139,223		—		—		139,223
Payments under senior secured credit facility		(144,715)		—		—		(144,715)
Payments of principal under capital lease obligations		(4,735)		(1,573)		—		(6,308)
Distributions to noncontrolling interests		—		(355)		—		(355)
Proceeds from exercise of parent company stock options		93		—		—		93
Contribution from Parent		1,900		—		—		1,900
Due to affiliates		—		2,584		(2,584)		—
Change in book overdrafts		(4,489)		(844)		—		(5,333)
Net cash used in financing activities		(12,723)		(188)		(2,584)		(15,495)
Net change in cash and cash equivalents		—		—		—		—
Cash and cash equivalents at the beginning of period		—		—		—		—
Cash and cash equivalents at the end of period	$	—	$	—	$	—	$	—

Universal Hospital Services, Inc.

Consolidating Statements of Cash Flows

(in thousands)


	Year Ended December 31, 2016
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Cash flows from operating activities:
Consolidated net (loss) income	$	(13,452)	$	2,754	$	(2,754)	$	(13,452)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		65,738		7,427		—		73,165
Amortization of intangibles, deferred financing costs and bond premium		8,063		3,525		—		11,588
Equity in earnings of subsidiary		(2,754)		—		2,754		—
Provision for doubtful accounts		141		74		—		215
Provision for inventory obsolescence		287		213		—		500
Non-cash share-based compensation expense		2,549		517		—		3,066
(Gain) loss on sales and disposals of equipment		(3,923)		182		—		(3,741)
Deferred income taxes		819		(561)		—		258
Interest on note receivable		(10)		—		—		(10)
Changes in operating assets and liabilities:
Accounts receivable		(9,655)		(1,516)		—		(11,171)
Due from affiliates		1,139		—		(1,139)		—
Inventories		(508)		214		—		(294)
Other operating assets		(4,871)		(667)		—		(5,538)
Accounts payable		2,608		(757)		—		1,851
Other operating liabilities		(1,840)		125		—		(1,715)
Net cash provided by operating activities		44,331		11,530		(1,139)		54,722
Cash flows from investing activities:
Medical equipment purchases		(47,957)		(8,460)		—		(56,417)
Property and office equipment purchases		(6,556)		(107)		—		(6,663)
Proceeds from disposition of property and equipment		10,147		57		—		10,204
Issuance of note receivable from officer		(983)		—		—		(983)
Acquisition		(15,795)		—		—		(15,795)
Net cash used in investing activities		(61,144)		(8,510)		—		(69,654)
Cash flows from financing activities:
Proceeds under senior secured credit facility		166,042		—		—		166,042
Payments under senior secured credit facility		(148,350)		—		—		(148,350)
Payments of principal under capital lease obligations		(4,792)		(1,538)		—		(6,330)
Payments of deferred financing costs		(109)		—		—		(109)
Holdback payment related to acquisition		—		(500)		—		(500)
Distributions to noncontrolling interests		—		(367)		—		(367)
Dividend and equity distribution payments		(24)		—		—		(24)
Proceeds from exercise of parent company stock option		87		—		—		87
Due to affiliates		—		(1,139)		1,139		—
Change in book overdrafts		3,959		524		—		4,483
Net cash provided by (used in) financing activities		16,813		(3,020)		1,139		14,932
Net change in cash and cash equivalents		—		—		—		—
Cash and cash equivalents at the beginning of period		—		—		—		—
Cash and cash equivalents at the end of period	$	—	$	—	$	—	$	—

Universal Hospital Services, Inc.

Consolidating Statements of Cash Flows

(in thousands)


	Year Ended December 31, 2015
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Cash flows from operating activities:
Consolidated net (loss) income	$	(28,216)	$	1,692	$	(1,692)	$	(28,216)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		68,957		7,631		—		76,588
Asset impairment charges		3,287		—		—		3,287
Amortization of intangibles, deferred financing costs and bond premium		9,638		3,372		—		13,010
Equity in earnings of subsidiary		(1,692)		—		1,692		—
Provision for doubtful accounts		(12)		81		—		69
Provision for inventory obsolescence		428		65		—		493
Non-cash share-based compensation expense		2,435		—		—		2,435
Gain on sales and disposals of equipment		(4,440)		(147)		—		(4,587)
Deferred income taxes		1,676		(1,442)		—		234
Changes in operating assets and liabilities:
Accounts receivable		(2,112)		(556)		—		(2,668)
Due from affiliates		(444)		—		444		—
Inventories		(692)		(316)		—		(1,008)
Other operating assets		892		163		—		1,055
Accounts payable		642		1,655		—		2,297
Other operating liabilities		9,587		(292)		—		9,295
Net cash provided by operating activities		59,934		11,906		444		72,284
Cash flows from investing activities:
Medical equipment purchases		(51,166)		(6,614)		—		(57,780)
Property and office equipment purchases		(4,753)		35		—		(4,718)
Proceeds from disposition of property and equipment		12,267		225		—		12,492
Acquisition		—		(2,600)		—		(2,600)
Net cash used in investing activities		(43,652)		(8,954)		—		(52,606)
Cash flows from financing activities:
Proceeds under senior secured credit facility		127,952		—		—		127,952
Payments under senior secured credit facility		(138,952)		—		—		(138,952)
Payments of principal under capital lease obligations		(6,211)		(1,132)		—		(7,343)
Payments of deferred financing costs		(1,382)		—		—		(1,382)
Distributions to noncontrolling interests		—		(460)		—		(460)
Contributions from new members to limited liability company		—		70		—		70
Dividend and equity distribution payments		(38)		—		—		(38)
Purchases of noncontrolling interests		—		(25)		—		(25)
Due to affiliates		—		444		(444)		—
Change in book overdrafts		2,349		(1,849)		—		500
Net cash used in financing activities		(16,282)		(2,952)		(444)		(19,678)
Net change in cash and cash equivalents		—		—		—		—
Cash and cash equivalents at the beginning of period		—		—		—		—
Cash and cash equivalents at the end of period	$	—	$	—	$	—	$	—