10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2018

or

☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from                    to                  

Commission File Number: 000-20086

UNIVERSAL HOSPITAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware	41-0760940
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

6625 West 78th Street, Suite 300

Minneapolis, Minnesota 55439-2604

(Address of principal executive offices, including 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 ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
(Do not check if a smaller reporting company)		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

Number of shares of common stock outstanding as of August 13, 2018:  1,000

Universal Hospital Services, Inc. and Subsidiaries

Table of Contents

		Page
PART I -  FINANCIAL INFORMATION
ITEM 1.	Consolidated Financial Statements (unaudited)
	Consolidated Balance Sheets —June 30, 2018 and December 31, 2017	2
	Consolidated Statements of Operations—Three and six months ended June 30, 2018 and 2017	3
	Consolidated Statements of Comprehensive Income (Loss) —Three and six months ended June 30, 2018 and 2017	4
	Consolidated Statements of Cash Flows —Six months ended June 30, 2018 and 2017	5
	Notes to Consolidated Financial Statements	6
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	36
ITEM 4.	Controls and Procedures	37
PART II - OTHER INFORMATION
ITEM 1.	Legal Proceedings	37
ITEM 1A.	Risk Factors	37
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
ITEM 3.	Defaults Upon Senior Securities	37
ITEM 4.	Mine Safety Disclosures	37
ITEM 5.	Other Information	37
ITEM 6.	Exhibits	38
Signatures		39

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PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements — Unaudited

Universal Hospital Services, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share and per share information)

(unaudited)

	June 30,		December 31,
	2018		2017
Assets
Current assets:
Cash	$	178	$	—
Accounts receivable, less allowance for doubtful accounts of  $1,225 at June 30, 2018 and $1,234 at December 31, 2017		94,404		89,637
Inventories		9,995		9,760
Other current assets		7,034		6,836
Total current assets		111,611		106,233
Property and equipment:
Medical equipment		657,316		629,193
Property and office equipment		108,559		105,341
Accumulated depreciation		(560,818)		(536,520)
Total property and equipment, net		205,057		198,014
Other long-term assets:
Goodwill		346,168		346,168
Other intangibles, net		147,945		151,921
Other		10,576		3,109
Total assets	$	821,357	$	805,445
Liabilities and Deficit
Current liabilities:
Current portion of long-term debt	$	5,214	$	5,043
Book overdrafts		—		5,367
Accounts payable		27,428		36,689
Accrued compensation		25,131		21,498
Accrued interest		18,809		18,671
Other accrued expenses		18,221		17,763
Total current liabilities		94,803		105,031
Long-term debt, less current portion		687,664		698,065
Pension and other long-term liabilities		10,948		11,385
Deferred income taxes, net		35,506		35,342
Commitments and contingencies (Note 9)
Deficit
Common stock, $0.01 par value; 1,000 shares authorized, issued and outstanding at June 30, 2018 and December 31, 2017		—		—
Additional paid-in capital		250,661		250,018
Accumulated deficit		(252,204)		(287,998)
Accumulated other comprehensive loss		(6,214)		(6,638)
Total Universal Hospital Services, Inc. and Subsidiaries deficit		(7,757)		(44,618)
Noncontrolling interest		193		240
Total deficit		(7,564)		(44,378)
Total liabilities and deficit	$	821,357	$	805,445

The accompanying notes are an integral part of the unaudited consolidated financial statements.

2

Universal Hospital Services, Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands)

(unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Revenues	$	140,707	$	128,210	$	283,062	$	258,863
Cost of revenues		90,534		86,195		181,396		171,080
Gross margin		50,173		42,015		101,666		87,783
Selling, general and administrative		34,742		30,618		67,782		64,575
Gain on legal settlement		(23,474)		—		(23,474)		—
Operating income		38,905		11,397		57,358		23,208
Interest expense		13,537		13,415		26,988		26,894
Income (loss) before income taxes and noncontrolling interest		25,368		(2,018)		30,370		(3,686)
Provision for income taxes		369		275		631		497
Consolidated net income (loss)		24,999		(2,293)		29,739		(4,183)
Net income attributable to noncontrolling interest		81		98		166		170
Net income (loss) attributable to Universal Hospital Services, Inc. and Subsidiaries	$	24,918	$	(2,391)	$	29,573	$	(4,353)

The accompanying notes are an integral part of the unaudited consolidated financial statements.

3

Universal Hospital Services, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Consolidated net income (loss)	$	24,999	$	(2,293)	$	29,739	$	(4,183)
Other comprehensive income:
Gain on minimum pension liability, net of tax of $0		214		192		424		371
Total other comprehensive income		214		192		424		371
Comprehensive income (loss)		25,213		(2,101)		30,163		(3,812)
Comprehensive income attributable to noncontrolling interest		81		98		166		170
Comprehensive income (loss) attributable to Universal Hospital Services, Inc. and Subsidiaries	$	25,132	$	(2,199)	$	29,997	$	(3,982)

The accompanying notes are an integral part of the unaudited consolidated financial statements.

4

Universal Hospital Services, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended
	June 30,
	2018		2017
Cash flows from operating activities:
Consolidated net income (loss)	$	29,739	$	(4,183)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		33,645		35,664
Gain on legal settlement		(21,474)		—
Amortization of intangibles, contract costs, deferred financing costs and bond premium		5,013		5,460
Provision for doubtful accounts		406		73
Provision for inventory obsolescence		319		122
Non-cash share-based compensation expense		1,507		1,551
Gain on sales and disposals of equipment		(1,050)		(1,046)
Deferred income taxes		164		204
Interest on note receivable		(21)		(11)
Changes in operating assets and liabilities:
Accounts receivable		(5,173)		158
Inventories		(554)		495
Other operating assets		38		(414)
Accounts payable		209		(3,639)
Other operating liabilities		3,057		(3,381)
Net cash provided by operating activities		45,825		31,053
Cash flows from investing activities:
Medical equipment purchases		(23,273)		(24,296)
Property and office equipment purchases		(4,316)		(3,309)
Proceeds from disposition of property and equipment		1,813		2,091
Issuance of note receivable from officer		(581)		(936)
Acquisition and refund of escrow		—		(1,923)
Net cash used in investing activities		(26,357)		(28,373)
Cash flows from financing activities:
Proceeds under senior secured credit facility		104,448		83,200
Payments under senior secured credit facility		(113,598)		(79,692)
Payments of principal under capital lease obligations		(3,072)		(3,419)
Holdback payment related to acquisition		(624)		—
Distributions to noncontrolling interests		(213)		(133)
Proceeds from exercise of parent company stock options		285		29
Contribution from Parent		—		1,900
Shares forfeited for taxes		(1,149)		—
Change in book overdrafts		(5,367)		(4,565)
Net cash used in financing activities		(19,290)		(2,680)
Net change in cash and cash equivalents		178		—
Cash and cash equivalents at the beginning of period		—		—
Cash and cash equivalents at the end of period	$	178	$	—
Supplemental cash flow information:
Interest paid	$	26,332	$	26,345
Income taxes paid		676		533
Non-cash activities:
Medical equipment purchases included in accounts payable (at end of period)	$	3,920	$	4,493
Capital lease additions		1,858		3,179

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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Universal Hospital Services, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.Basis of Presentation

The interim consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared by Universal Hospital Services, Inc. and Subsidiaries (“we”, “our”, “us”, the “Company”, or “UHS”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).  Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted, pursuant to such rules and regulations.  These consolidated financial statements should be read in conjunction with the financial statements and related notes included in the Company’s 2017 Annual Report on Form 10-K filed with the SEC.

The interim consolidated financial statements presented herein as of June 30, 2018, reflect, in the opinion of management, all adjustments necessary for a fair presentation of the financial position and the results of operations and cash flows 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.

We are required to make estimates and assumptions about future events in preparing consolidated financial statements in conformity with GAAP.  These estimates and assumptions affect the amounts of assets, liabilities, revenues and expenses at the date of the unaudited consolidated financial statements.  While we believe that our past estimates and assumptions have been materially accurate, our current estimates are subject to change if different assumptions as to the outcome of future events are made.  We evaluate our estimates and judgments on an ongoing basis and predicate those estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances.  We make adjustments to our assumptions and judgments when facts and circumstances dictate.  Since future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates used in preparing the accompanying unaudited consolidated financial statements.

A description of our significant accounting policies is included in our 2017 Annual Report on Form 10-K. There have been no material changes to these policies for the quarter ended June 30, 2018, except for the adoption of ASU 2014-09, see Note 3, Revenue Recognition.

Historically, the Company reported under three segments.  Medical Equipment Solutions included supplemental and peak needs usage solutions, customized equipment agreement solutions, 360 On-site managed solutions, specialty medical equipment sale, distribution and disposable sales.  Clinical Engineering Solutions included supplemental maintenance, repair and remediation solutions, on-site biomed services, health care technology solutions, federal governmental services and clinical engineering capital sales.  Surgical Services included on-demand and scheduled usage solutions, on-site solutions for hospital and multi-facility health systems and disposable only sales.

Effective January 1, 2018, the Company changed its segment reporting to report its financial information under one reporting segment. The change in reporting was made to conform to the way the Company is currently managing and executing the business. Specifically, the chief operating decision maker (“CODM”) is making operating decisions and assessing performance using discrete financial information from one reportable segment, as our resources and infrastructure are shared and our go to market strategy have evolved with our Equipment Value Management (“EVM”) strategy. The current financial information is based upon the transformation of the business model that has occurred and the development of the new commercial framework – EVM.  EVM is an end-to-end approach to medical equipment management that helps hospitals recover cost and time that today are wasted through inefficient medical equipment processes.  EVM integrates customers supply chain, patient care and clinical engineering teams, connecting these siloed groups to streamline processes to improve stakeholder productivity and satisfaction while optimizing equipment utilization and lowering the total cost of ownership.  EVM provides the customer with the equipment they need, when they need it, with the assets serviced to the highest quality standards in the industry. EVM combines the capabilities of all service offerings.  The EVM solution links all of our service offerings at UHS. The Company has a similar compliment of services, type of customer for the Company’s services, method of distribution for the Company’s services and the regulatory environment is similar across the United States. Accordingly, we concluded that we operate as one

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reporting segment.  Finally, the Company analyzed its goodwill for potential impairment before and after the change in segments and concluded that there was no impairment.

Current year presentation of one reporting segment resulted in disaggregated revenue categories of Equipment Solutions which includes supplemental and peak needs usage solutions, surgical services on-demand and scheduled usage solutions, specialty medical equipment sale, distribution and disposable sales, clinical engineering capital sales and surgical disposable only sales.  Clinical Engineering includes supplemental maintenance, repair and remediation solutions, on-site biomed services, health care technology solutions and federal governmental services.  On-site Managed Services includes 360 On-site managed solutions and surgical services on-site solutions for hospital and multi-facility health systems.

The Company operates in one geographic region, the United States. As the Company is now reporting as one segment which equals the total Company’s results as reflected in the Consolidated Statement of Operations, restatement of prior periods was not necessary.

Principles of Consolidation

The consolidated financial statements include the accounts of Universal Hospital Services, Inc and its 100%-owned subsidiaries, UHS Surgical Services, Inc. (“Surgical Services” or “SS”) and Radiographic Equipment Services, Inc. (“RES”). In addition, in accordance with guidance issued by the Financial Accounting Standards Board (“FASB”), we have accounted for our equity investments in entities in which we are the primary beneficiary under the full consolidation method. All significant intercompany transactions and balances have been eliminated through consolidation. As the primary beneficiary, we consolidate the limited liability companies (“LLCs”) referred to in Note 11, Limited Liability Companies, as we effectively receive the majority of the benefits from such entities and we provide equipment lease guarantees for such entities.

2.Recent Accounting Pronouncements

Standards Adopted

In May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU replaced most existing revenue recognition guidance in GAAP when it became effective. The new standard is effective beginning after December 15, 2017 and interim periods within those years as stated in ASU 2015-14. The standard permits the use of either the full retrospective or cumulative effect (modified retrospective) transition method. We adopted this guidance on January 1, 2018 and selected the cumulative effect transition method.

We have performed a review of the requirements of the new guidance, codified by FASB in ASC Topic 606, and have applied the five-step model of the new standard to our contracts and have compared the results to our previous accounting practices under ASC Topic 605. Based on this analysis, the new standard did not have a material impact on the results of operations or cash flows of the Company. However, amendments to ASC Topic 340, Other Assets and Deferred Costs, require the capitalization of costs to obtain and fulfill customer contracts, which were previously expensed as incurred. The assets recognized for the costs to obtain and/or fulfill a contract will be amortized on a systematic basis that is consistent with the transfer of the services to which the asset relates. Accordingly, $6.2 million of prior year costs were capitalized as an asset upon adoption of this standard (effective January 1, 2018) and are being amortized over a period of five years.

In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The ASU became effective for annual and interim periods for fiscal years beginning after December 15, 2017.  The adoption of this standard did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01 Business Combination (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to

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assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. The ASU became effective for annual and interim periods for fiscal years beginning after December 15, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07 Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-01”). ASU 2017-07 requires that a company present service cost separately from the other components of the net benefit cost.  This ASU became effective for annual and interim periods for fiscal years beginning after December 15, 2017. We adopted ASU 2017-07 on January 1, 2018 and retrospectively applied this ASU to all periods presented. As a result, $0.2 and $0.4 million of pension costs were reclassified from selling, general and administrative to interest expense for the three and six months ended June 30, 2017.

In May 2017, the FASB issued ASU No. 2017-09 Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 clarifies what constitutes a modification of a share-based payment award. This ASU became effective for annual and interim periods for fiscal years beginning after December 15, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements.

Standards Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02 on Leases (ASC Topic 842)(“ASU 2016-02”). ASU 2016-02 was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liability on the balance sheet and disclosing key information about leasing arrangements. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted. We have completed our internal evaluation and believe the adoption of this standard will have a material impact on our consolidated balance sheets.

In February 2018, the FASB issued ASU No. 2018-02 Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on our consolidated financial statements due to valuation allowance.

In March 2018, the FASB issued ASU No. 2018-05 Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU 2018-05”). ASU 2018-05 adds various SEC paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin No. 118. See Note 12, Income Taxes.

In June 2018, the FASB issued ASU No. 2018-07 Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 expands the scope of Topic 718 to include share based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permittedbut no earlier than an entity’s adoption date of Topic 606. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

3.Revenue Recognition

The Company adopted ASU 2014-09, Revenue from Contracts with Customers, effective January 1, 2018, herein referred as ASC Topic 606. ASC Topic 606 is a comprehensive new revenue recognition model that requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. The Company adopted ASU 2014-09 using the cumulative effect (also known as the modified retrospective) method by recognizing the cumulative effect of initially applying the ASU as an adjustment to the opening balance of Accumulated Deficit at January 1, 2018. Therefore, the comparative information for the second quarter and six months ended June 30, 2017 has not been adjusted and continues

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to be reported under the previous accounting standards (ASC Topic 605). The details of the changes to our accounting policies and the quantitative impact of the changes are set out below.

Customer arrangements typically have multiple performance obligations to provide equipment solutions, clinical engineering and/or on-site equipment managed services on a per use and/or over time basis.  Equipment Solutions primarily consists of supplemental, peak needs and surgical equipment usage solutions. Clinical Engineering consists of supplemental maintenance, repair and remediation solutions, health care technology solutions, and federal government services.  On-site Managed Services consists of 360 on-site managed solutions in both our historical A360 program (using UHS-owned equipment) and our newer M360 program (managing customer-owned equipment).  Consideration paid by the customer for each performance obligation is billed within the month the service is performed, and contractual prices are established within our customer arrangements that are representative of the stand-alone selling price. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. There are no differences between revenue being earned under Topic 606 and the previous standard (ASC Topic 605).

The Company reports only its portion of revenues earned under certain revenue share arrangements in accordance with ASC Topic 606-10-55-36 to 606-10-55-40 “Principal versus Agent Considerations,” because, among other factors, the equipment manufacturer retains title to the equipment, maintains general inventory and physical loss risk of equipment on rental and because we earn a fixed percentage of the billings to customers.

In the following table, revenue is disaggregated by major service type.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Equipment Solutions	$	62,992	$	58,038	$	125,434	$	118,695
Clinical Engineering		39,303		34,413		79,048		67,754
On-Site Managed Services		38,412		35,759		78,580		72,414
	$	140,707	$	128,210	$	283,062	$	258,863

Concurrent with the adoption of Topic 606 on January 1, 2018, the Company also adopted amendments to ASC Topic 340, Other Assets and Deferred Costs, which requires the costs to obtain and fulfill customer contracts to be capitalized, which were previously expensed as incurred. The Company incurs costs related to obtaining new contracts. Management expects those costs attributable to new revenue production are recoverable and therefore the Company capitalized them as contract costs in accordance with ASC Topic 340 and is amortizing them over the anticipated period of the new revenue production.

The Company capitalized the estimated costs to obtain a contract in the amount of $6.2 million at January 1, 2018 with a corresponding adjustment to accumulated deficit for the “Impact of Change in Accounting Policy”.  The Contract Asset included in other long-term assets in the Consolidated Balance Sheet at June 30, 2018 is $7.1 million.  Capitalized costs are amortized over the expected life of the related contracts which is estimated to be five years. Amortization is computed on a straight-line basis which coincides with the predominant expected life of the underlying contracts. Amortization costs are reflected in selling, general and administrative expenses. The amount of amortization was $0.5 and $0.9 million for the three and six months ended June 30, 2018, respectively There was no impairment loss in relation to the costs capitalized during the three and six months ended June 30, 2018.

4.Fair Value Measurements

Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2018 and December 31, 2017 are summarized in the following table by type of inputs applicable to the fair value measurements:

	Fair Value at June 30, 2018								Fair Value at December 31, 2017
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Contingent Consideration	$	—	$	—	$	200	$	200	$	—	$	—	$	133	$	133

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A description of the inputs used in the valuation of assets and liabilities is summarized as follows:

Level 1 — Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets.

Level 2 — Inputs include directly or indirectly observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that are considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves that are observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 — Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities or related observable inputs that can be corroborated at the measurement date. Measurements of non-exchange traded derivative contract assets and liabilities are primarily based on valuation models, discounted cash flow models or other valuation techniques that are believed to be used by market participants. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in pricing assets or liabilities.

During 2017, we recorded a contingent consideration liability, in the form of an earn-out payment, related to our December 6, 2017 acquisition in the total amount of $0.1 million. Additionally, $0.07 million of an earn-out liability was recorded during the quarter ended June 30, 2018. The contingent consideration is based on achieving certain revenue results. The fair value of the liability was estimated using a discounted cash flow approach with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement.  The significant inputs in the Level 3 measurement not supported by market activity included our assessments of expected future cash flows during the earn-out period related to the assets acquired, appropriately discounted considering the uncertainties associated with the obligation, and calculated based on estimated revenues in accordance with the terms of the agreement. There were no earn-out payments for the three and six months ended June 30, 2018.

The assumptions used in preparing the discounted cash flow analyses included estimates of interest rates and the timing and amount of incremental cash flows.

A reconciliation of the beginning and ending balance for the Level 3 measurement are as follows:

(in thousands)
Balance at December 31, 2017	$	133
Addition		67
Balance at June 30, 2018	$	200

Fair Value of Other Financial Instruments

The Company considers that the carrying amount of financial instruments, including accounts receivable, accounts payable, accrued liabilities and senior secured credit facility, approximates fair value due to their short maturities. The fair value of our outstanding Original Notes and Add-on Notes (each as defined in Note 8, Long-Term Debt) as of June 30, 2018 and December 31, 2017, based on the quoted market price for the same or similar issues of debt, which represents a Level 2 fair value measurement, is approximately:

	June 30, 2018				December 31, 2017
	Carrying		Fair		Carrying		Fair
(in thousands)	Value		Value		Value		Value
Original Notes - 7.625% (1)	$	422,397	$	425,000	$	421,772	$	426,063
Add-on Notes - 7.625% (2)		223,588		220,000		224,338		220,550

(1) The carrying value of the Original Notes - 7.625% is net of unamortized deferred financing costs of $2.6 and $3.2 million as of June 30, 2018 and December 31, 2017, respectively.

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(2) The carrying value of the Add-on  Notes - 7.625% is net of unamortized deferred financing costs of $1.1 and $1.3 million as of June 30, 2018 and December 31, 2017, respectively, and includes unamortized bond premium of $4.7 and $5.7 million as of June 30, 2018 and December 31, 2017, respectively.

5.Goodwill and Other Intangible Assets

Our reporting segment has a negative carrying amount at June 30, 2018 and December 31, 2017. There were no impairments recorded in the three months and six months ended June 30, 2018 and 2017.

Our other intangible assets as of June 30, 2018 and December 31, 2017 consist of the following:

	June 30, 2018								December 31, 2017
			Accumulated								Accumulated
(in thousands)	Cost		Amortization		Impairment		Net		Cost		Amortization		Impairment		Net
Finite-life intangibles
Customer relationship	$	125,828	$	(109,701)	$	—	$	16,127	$	125,828	$	(105,911)	$	—	$	19,917
Non-compete agreements		2,101		(1,383)		—		718		2,101		(1,197)		—		904
Total finite-life intangibles		127,929		(111,084)		—		16,845		127,929		(107,108)		—		20,821
Indefinite-life intangibles
Trade names		166,000		—		(34,900)		131,100		166,000		—		(34,900)		131,100
Total intangible assets	$	293,929	$	(111,084)	$	(34,900)	$	147,945	$	293,929	$	(107,108)	$	(34,900)	$	151,921

Total amortization expense related to intangible assets was $2.0 and $2.3 million for the three months ended June 30, 2018 and 2017, respectively, and $4.0 and $5.3 million for the six months ended June 30, 2018 and 2017, respectively.

The estimated future amortization expense for identifiable intangible assets during the remainder of 2018 and the next five years is as follows:

(in thousands)
Remainder of 2018	$	3,619
2019		5,005
2020		2,765
2021		2,106
2022		1,376
2023		503

6.Deficit

The following tables represent changes in deficit that are attributable to our shareholder and noncontrolling interests for the six month periods ended June 30, 2018 and 2017.

					Accumulated
	Additional				Other
	Paid-in		Accumulated		Comprehensive		Noncontrolling		Total
(in thousands)	Capital		Deficit		Loss		Interests		Deficit
Balance at December 31, 2017	$	250,018	$	(287,998)	$	(6,638)	$	240	$	(44,378)
Impact of change in accounting policy		—		6,221		—		—		6,221
Net income		—		29,573		—		166		29,739
Other comprehensive income		—		—		424		—		424
Share-based compensation		1,507		—		—		—		1,507
Stock options exercised		285		—		—		—		285
Shares forfeited for taxes		(1,149)		—		—		—		(1,149)
Cash distributions to noncontrolling interests		—		—		—		(213)		(213)
Balance at June 30, 2018	$	250,661	$	(252,204)	$	(6,214)	$	193	$	(7,564)

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					Accumulated
	Additional				Other
	Paid-in		Accumulated		Comprehensive		Noncontrolling		Total
(in thousands)	Capital		Deficit		Loss		Interests		Deficit
Balance at December 31, 2016	$	244,986	$	(296,826)	$	(7,826)	$	181	$	(59,485)
Net (loss) income		—		(4,353)		—		170		(4,183)
Other comprehensive income		—		—		371		—		371
Contribution from Parent		1,900		—		—		—		1,900
Share-based compensation		1,551		—		—		—		1,551
Stock options exercised		29		—		—		—		29
Cash distributions to noncontrolling interests		—		—		—		(133)		(133)
Balance at June 30, 2017	$	248,466	$	(301,179)	$	(7,455)	$	218	$	(59,950)

7.Share-Based Compensation

During the six months ended June 30, 2018, activity under the 2007 Stock Option Plan (the “2007 Stock Option Plan”), of UHS Holdco, Inc., our parent company (“Parent”), was as follows:

						Weighted
						average
		Weighted		Aggregate		remaining
	Number of	average		intrinsic		contractual
(in thousands, except exercise price and years)	options	exercise price		value		term (years)
Outstanding at December 31, 2017	37,673	$	0.79	$	40,875	6.8
Granted	715		1.87
Exercised	(398)		0.72	$	459
Forfeited or expired	(264)		0.79
Outstanding at June 30, 2018	37,726	$	0.81	$	40,131	6.4
Exercisable at June 30, 2018	23,246	$	0.75	$	26,060	6.4
Remaining authorized options available for issue	5,317

The exercise price of the stock option award is equal to the market value of Parent’s common stock on the grant date as determined reasonably and in good faith by Parent’s Board of Directors and compensation committee and based on an analysis of a variety of factors, including peer group multiples, merger and acquisition multiples, and discounted cash flow analyses.

The intrinsic value of a stock award is the amount by which the market value of the underlying stock exceeds the exercise price of the award.

We determine the fair value of stock options using the Black-Scholes option pricing model. The estimated fair value of options, including the effect of estimated forfeitures, is recognized as an expense on a straight-line basis over the options’ expected vesting periods. The following assumptions were used in determining the fair value of stock options granted during the six months ended June 30, 2018 and 2017 under the Black-Scholes model.

	Six Months Ended
	June 30,
	2018			2017
Risk-free interest rate		1.62	%		1.62	%
Expected volatility		29.0	%		29.0	%
Dividend yield		N/A			N/A
Expected option life (years)		4.60			4.62
Black-Scholes Value of options	$	0.50		$	0.32

Expected volatility is based on an independent valuation of the stock of companies within our peer group. Given the lack of a true comparable company, the peer group consists of selected public health care companies representing our suppliers, customers and competitors within certain product lines. The risk free-interest rate is based on the U.S. 

12

Treasury yield curve in effect at the grant date based on the expected option life. The expected option life is estimated based on foreseeable trends.

At June 30, 2018, unearned non-cash share-based compensation that we expect to recognize as expense over a weighted average period of 1.6 years totals approximately $3.5 million, net of our estimated forfeiture rate of 2.0%. The expense could be accelerated upon the sale of Parent or the Company.

In April 2015, Parent granted the Company’s Chief Executive Officer 7.0 million restricted stock units which vest over four years. Total compensation expense related to this grant was $0.3 million and $0.3 million for the three months ended June 30, 2018 and 2017, respectively, and $0.6 million and $0.6 million for the six months ended June 30, 2018 and 2017, respectively.

Although Parent grants stock options and restricted stock units, the Company recognizes compensation cost, primarily included in Selling, General and Administrative expense, related to these options and units since the services are performed for its benefit.

On May 9, 2018, Parent adopted the 2018 Executive Management Stock Option Plan (the “2018 Plan”). Pursuant to the 2018 Plan, awards may be in the form of Non-Qualified Stock Options. The maximum number of shares for which options may be granted is 2,500,000 under the 2018 Plan. In the second quarter of 2018, 2,499,000 shares of common stock were issued to certain UHS executives, including Named Executive Officers other than the Chief Executive Officer pursuant to the 2018 Plan.

Options granted pursuant to the 2018 Plan have an exercise price of $0.71 per share and may only be exercised within 30 days after the signing of a binding agreement for the Company to undergo a Change in Control (as defined in the 2018 Plan) event.  No expense has been recorded for this plan in 2018.  Additionally, all awards of options granted pursuant to the 2018 Plan provide for a claw back of all proceeds received for such options in the event an award recipient voluntarily terminates his or her employment with the Company without Good Reason or has his or her employment terminated by the Company for Cause (as such terms are defined in the Company’s Executive Severance Pay Plan) within one year following a Change in Control of the Company. 

8.Long-Term Debt

Long-term debt consists of the following:

	June 30,		December 31,
(in thousands)	2018		2017
Original Notes - 7.625% (1)	$	422,397	$	421,772
Add-on Notes - 7.625% (2)		223,588		224,338
Senior secured credit facility (3)		30,054		38,944
Capital lease obligations		16,839		18,054
		692,878		703,108
Less: Current portion of long-term debt		(5,214)		(5,043)
Total long-term debt	$	687,664	$	698,065

(1) The carrying value of the Original Notes - 7.625% is net of unamortized deferred financing costs of $2.6 and $3.2 million as of June 30, 2018 and December 31, 2017, respectively.

(2) The carrying value of the Add-on Notes - 7.625% is net of unamortized deferred financing costs of $1.1 and $1.3 million as of June 30, 2018 and December 31, 2017, respectively, and includes unamortized bond premium of $4.7 and $5.7 million as of June 30, 2018 and December 31, 2017, respectively.

(3) The carrying value of the senior secured credit facility is net of unamortized deferred financing costs of $1.0 and $1.3 million as of June 30, 2018 and December 31, 2017, respectively.

Original Notes and Add-on Notes — 7.625%. On August 7, 2012, we issued $425.0 million in aggregate principal amount of 7.625% Second Lien Senior Secured Notes due 2020 (the “Original Notes”) under an indenture dated as of August 7, 2012 (the “2012 Indenture”). On February 12, 2013, we issued $220.0 million in aggregate principal amount

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of 7.625% Second Lien Senior Secured Notes due 2020 (the “Add-on Notes”, and along with the Original Notes, the “2012 Notes”) as “additional notes” pursuant to the 2012 Indenture. The 2012 Notes mature on August 15, 2020.

The 2012 Indenture provides that the 2012 Notes are our second lien senior secured obligations and are fully and unconditionally guaranteed on a second lien senior secured basis by our existing and certain of our future 100%-owned domestic subsidiaries.

Interest on the 2012 Notes is payable entirely in cash, semiannually, in arrears, on February 15 and August 15 of each year, beginning on February 15, 2013. We may redeem some or all of the 2012 Notes at the redemption price of 101.906% before August 15, 2018, thereafter the redemption price is 100% as set forth in the 2012 Indenture (expressed as percentage of principal amount).  If we sell certain assets or undergo certain kinds of changes of control, we must offer to repurchase the 2012 Notes.

Our 2012 Notes are subject to certain debt covenants which are described below under the heading “2012 Indenture”.

Senior Secured Credit Facility.  On November 24, 2015, we entered into a Third Amended and Restated Credit Agreement with Bank of America, N.A., as agent for the lenders, and the lenders party thereto (the “Third Amended Credit Agreement”), which amended our then-existing senior secured credit facility originally dated as of May 31, 2007 and amended and restated as of May 6, 2010 and as of July 31, 2012.  We refer to the third amended and restated senior secured credit facility as the “senior secured credit facility.” The senior secured credit facility is a first lien senior secured asset based revolving credit facility that is available for working capital and general corporate purposes, including permitted investments, capital expenditures and debt repayments, on a fully revolving basis, subject to the terms and conditions set forth in the credit documents in the form of revolving loans, swing line loans and letters of credit. The Third Amended Credit Agreement extended the maturity date of the revolving loans to the earliest of (i) November 24, 2020 and (ii) 90 days prior to the maturity of the 2012 Notes, and reduced (a) the interest rate applicable to borrowings under the Third Amended Credit Agreement to a per annum rate, determined based on our usage of the credit facility as provided in the Third Amended Credit Agreement, ranging from 1.50% to 2.00% above the adjusted LIBOR rate used by the agent or, at our option, 0.50% to 1.00% above the Base Rate as defined in the Third Amended Credit Agreement and (b) the unused line fee rate to 0.25%.  Our obligations under the Third Amended Credit Agreement are secured by a first priority security interest in substantially all of the assets of the Company, Parent, Surgical Services and RES, excluding a pledge of the Company’s and its subsidiaries’ stock, any joint ventures and certain other exceptions. Our obligations under the Third Amended Credit Agreement are unconditionally guaranteed by the Parent, Surgical Services and RES.

Our senior secured credit facility provides the aggregate amount we may borrow under revolving loans up to $235.0 million, subject to our borrowing base.

As of June 30, 2018, we had $138.5 million of availability under the senior secured credit facility based on a borrowing base of $174.8 million less borrowings of $31.1 million and after giving effect to $5.3 million used for letters of credit.

The senior secured credit facility requires our compliance with various affirmative and negative covenants. Pursuant to the affirmative covenants, we and Parent agreed to, among other things, deliver financial and other information to the administrative agent, provide notice of certain events (including events of default), pay our obligations, maintain our properties, maintain the security interest in the collateral for the benefit of the administrative agent and the lenders and maintain insurance.

Among other restrictions, and subject to certain definitions and exceptions, the senior secured credit facility restricts our ability to:

· incur indebtedness;

· create or permit liens;

· declare or pay dividends and certain other restricted payments;

· consolidate, merge or recapitalize;

· acquire or sell assets;

· make certain investments, loans or other advances;

· enter into transactions with affiliates;

· change our line of business; and

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· enter into hedging transactions.

The senior secured credit facility also contains a financial covenant that is triggered if our available borrowing capacity is less than $20.0 million for a certain period, which consists of a minimum ratio of trailing four-quarter Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) to cash interest expense, as such terms are defined in the senior secured credit facility.

The senior secured credit facility specifies certain events of default, including, among others, failure to pay principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, bankruptcy events, certain ERISA-related events, cross-defaults to other material agreements, change of control events and invalidity of guarantees or security documents.  Some events of default will be triggered only after certain cure periods have expired, or will provide for materiality thresholds.  If such a default occurs, the lenders under the senior secured credit facility would be entitled to take various actions, including all actions permitted to be taken by a secured creditor and the acceleration of amounts due under the senior secured credit facility.

At June 30, 2018, we had $31.1 million of borrowings outstanding of which $28.0 million was accruing interest at a rate of 4.1% and $3.1 million was accruing interest at a rate of 6.0%.

We were in compliance with all financial debt covenants for all periods presented.

2012 Indenture. Our 2012 Notes are guaranteed, jointly and severally, on a second priority senior secured basis, by Surgical Services and RES, and are also similarly guaranteed by certain of our future 100%-owned domestic subsidiaries. The 2012 Notes are our second priority senior secured obligations and rank (i) equal in right of payment with all of our existing and future unsubordinated indebtedness, and effectively senior to any such unsecured indebtedness to the extent of the value of collateral; (ii) senior in right of payment to all of our and our guarantors’ existing and future subordinated indebtedness; (iii) effectively junior to our senior secured credit facility; and (iv) structurally subordinated to any indebtedness and other liabilities (including trade payables) of any of our future subsidiaries that are not guarantors.

The 2012 Indenture governing the 2012 Notes contains covenants that limit our and our guarantors’ ability, subject to certain definitions and exceptions, and certain of our future subsidiaries’ ability to:

· incur additional indebtedness;

· pay cash dividends or distributions on our capital stock or repurchase our capital stock or subordinated debt;

· issue redeemable stock or preferred stock;

· issue stock of subsidiaries;

· make certain investments;

· transfer or sell assets;

· create liens on our assets to secure debt;

· enter into transactions with affiliates; and

· merge or consolidate with another company.

The 2012 Indenture specifies certain events of default, including among others, failure to pay principal, interest or premium, violation of covenants and agreements, cross-defaults to other material agreements, bankruptcy events, invalidity of guarantees, and a default in the performance by us of the security documents relating to the 2012 Indenture. Some events of default will be triggered only after certain grace or cure periods have expired, or provide for materiality thresholds. In the event certain bankruptcy-related defaults occur, the 2012 Notes will become due and payable immediately. If any other default occurs, the Trustee (and in some cases the noteholders) would be entitled to take various actions, including acceleration of amounts due under the 2012 Indenture.

We were in compliance with all financial debt covenants for all periods presented.

9.Commitments and Contingencies

The Company, in the ordinary course of business, is subject to liability claims related to employees and the equipment that it rents and services. Asserted claims are subject to many uncertainties and the outcome of individual matters is not

15

predictable. Certain claims where the loss is probable, a provision is recorded based on the Company’s best estimate. While the ultimate resolution of these actions may have an impact on the Company’s financial results for a particular reporting period, management believes that any such resolution would not have a material adverse effect on the financial position, results of operations or cash flows of the Company and the chance of a negative outcome on outstanding litigation is considered remote.

On January 13, 2015, the Company filed suit in the Western District of Texas against Hill-Rom Holdings, Inc., Hill-Rom Company, Inc. and Hill-Rom Services, Inc. (the “Defendants”). On March 7, 2018, the Company entered into a confidential settlement agreement resolving all disputes and legal claims of the parties associated with the suit filed by the Company against the Defendants. In consideration for this release, terms of the confidential settlement agreement called for the Company to receive legal title to certain medical equipment of the Defendants as specified in the agreement on May 1, 2018. The Company recorded a gain on legal settlement of approximately $23.5 million during the second quarter of 2018 based on the fair value of the assets received, measured using inputs of replacement cost and market data, which are considered a Level 3 fair value measurement. The gain did not result in a discrete tax charge during the second quarter of 2018, as the expected tax expense from the gain was offset by the reduction of our valuation allowance.

10.Related Party Transactions

On May 31, 2007, we and affiliates of Irving Place Capital (together with its affiliates, “IPC”) entered into a professional services agreement pursuant to which IPC provides general advisory and management services to us with respect to financial and operating matters.  IPC is a principal owner of Parent, and each of Robert Juneja, Bret Bowerman and Keith Zadourian are members of our board of directors and are associated with IPC. The professional services agreement requires us to pay an annual fee for ongoing advisory and management services equal to the greater of $0.5 million or 0.75% of our Adjusted EBITDA (as defined in the professional services agreement) for the immediately preceding fiscal year, payable in quarterly installments. The professional services agreement provides that IPC will be reimbursed for its reasonable out-of-pocket expenses in connection with certain activities undertaken pursuant to the professional services agreement and will be indemnified for liabilities incurred in connection with its role under the professional services agreement, other than for liabilities resulting from its gross negligence or willful misconduct. The term of the professional services agreement commenced on May 31, 2007 and will remain in effect unless and until either party notifies the other of its desire to terminate, we are sold to a third-party purchaser or we consummate a qualified initial public offering, as defined in the professional services agreement. Total professional services fees incurred to IPC were $0.3 and $0.3 million for the three month periods ended June 30, 2018 and 2017, respectively, and $0.6 and $0.5 million for the six month periods ended June 30, 2018 and 2017, respectively.

In connection with the Restricted Stock Unit Award Agreement, dated as of April 13, 2015, between an officer and the Company, we entered into promissory note agreements with the officer dated April 13, 2016 for a total amount of $1.0 million, dated April 13, 2017 for a total amount of $0.9 million and dated April 13, 2018 for a total amount of $0.6 million which are included in other long-term assets in the Consolidated Balance Sheets. These note receivables bear annual interest at 1.45%-2.72%. The principal and accrued interest of these notes are due on the earliest of (i) the seventh anniversary of the date of this loan, (ii) any event with respect to borrower, which, in any such case of the loan were to remain outstanding on and after such date, would result in violation of Section 402 of the Sarbanes-Oxley Act of 2002, (iii) and certain events of default or (iv) a change in control. Interest income for these notes was $0.012 and $0.007 million for the three month periods ended June 30, 2018 and 2017, respectively, and $0.021 and $0.011 million for the six month periods ended June 30, 2018 and 2017, respectively.

11.Limited Liability Companies

We participate with others in the formation of LLCs in which the Company becomes a partner and shares the financial interest with the other investors. The Company is the primary beneficiary of these LLCs. These LLCs acquire certain medical equipment for use in their respective business activities, which generally focus on surgical procedures. The LLCs will acquire medical equipment for rental purposes under equipment financing leases. At June 30, 2018, the LLCs had approximately $0.8 million of total assets. The third party investors in each respective LLC generally provide the lease financing company with individual proportionate lease guarantees based on their respective ownership percentages in the LLCs. In addition, the Company will provide such financing companies with its corporate guarantee based on its respective ownership interest in each LLC. In certain instances, the Company has provided such financing companies

16

with an overall corporate guarantee in connection with equipment financing transactions. In such instances, the individual investors in each respective LLC will generally indemnify us against losses, if any, incurred in connection with its corporate guarantee. Additionally, we provide operational and administrative support to the LLCs in which it is a partner. As of June 30, 2018, we held interests in four active LLCs.

In accordance with guidance issued by the FASB, we account for equity investments in LLCs (in which we are the primary beneficiary) under the full consolidation method whereby transactions between the Company and the LLCs have been eliminated through consolidation.

12.Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We evaluate the recoverability of our deferred tax assets by scheduling the expected reversals of deferred tax assets and liabilities in order to determine whether net operating loss carry forwards are recoverable prior to expiration and have established a valuation allowance in accordance with ASC Topic 740,  “Income Taxes”. The tax expense for the three and six months ended June 30, 2018 primarily relates to state income taxes and tax amortization of indefinite-life intangibles. The expected tax expense from operating income during the three and six months ended June 30, 2018 was offset by the reduction of our valuation allowance. In future reporting periods, we will continue to assess the likelihood that deferred tax assets will be realizable.

In connection with our initial analysis of the impact of the Tax Cuts and Jobs Act, we recorded a provisional income tax benefit of approximately $18.3 million at December 31, 2017 for the revaluation of our net deferred tax liability. There were no changes recorded in the second quarter of 2018 to the provisional income tax benefit.

At June 30, 2018, the Company had available unused federal net operating loss carryforwards of approximately $171.8 million. The net operating loss carryforwards will expire at various dates from 2019 through 2038.

13.Consolidating Financial Statements

In accordance with the provisions of the 2012 Indenture, as 100%-owned subsidiaries of UHS, Surgical Services 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.

17

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Balance Sheets

(in thousands, except share and per share  information)

(unaudited)

	June 30, 2018
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Assets
Current assets:
Cash	$	(755)	$	933	$	—	$	178
Accounts receivable, less allowance for doubtful accounts		81,424		12,980		—		94,404
Due from affiliates		27,138		—		(27,138)		—
Inventories		4,205		5,790		—		9,995
Other current assets		6,078		956		—		7,034
Total current assets		118,090		20,659		(27,138)		111,611
Property and equipment:
Medical equipment		589,813		67,503		—		657,316
Property and office equipment		95,671		12,888		—		108,559
Accumulated depreciation		(505,799)		(55,019)		—		(560,818)
Total property and equipment, net		179,685		25,372		—		205,057
Other long-term assets:
Goodwill		283,141		63,027		—		346,168
Investment in subsidiary		79,770		—		(79,770)		—
Other intangibles, net		134,985		12,960		—		147,945
Other		8,930		1,646		—		10,576
Total assets	$	804,601	$	123,664	$	(106,908)	$	821,357
Liabilities and (Deficit) Equity
Current liabilities:
Current portion of long-term debt	$	3,554	$	1,660	$	—	$	5,214
Due to affiliates		—		27,138		(27,138)		—
Accounts payable		21,185		6,243		—		27,428
Accrued compensation		21,439		3,692		—		25,131
Accrued interest		18,809		—		—		18,809
Other accrued expenses		17,327		894		—		18,221
Total current liabilities		82,314		39,627		(27,138)		94,803
Long-term debt, less current portion		684,507		3,157		—		687,664
Pension and other long-term liabilities		10,942		6		—		10,948
Deferred income taxes, net		34,580		926		—		35,506
Commitments and contingencies
(Deficit) Equity
Common stock		—		—		—		—
Additional paid-in capital		250,676		76,003		(76,018)		250,661
Accumulated deficit		(255,956)		3,752		—		(252,204)
Accumulated loss in subsidiary		3,752		—		(3,752)		—
Accumulated other comprehensive loss		(6,214)		—		—		(6,214)
Total Universal Hospital Services, Inc. and Subsidiaries  (deficit) equity		(7,742)		79,755		(79,770)		(7,757)
Noncontrolling interest		—		193		—		193
Total (deficit) equity		(7,742)		79,948		(79,770)		(7,564)
Total liabilities and (deficit) equity	$	804,601	$	123,664	$	(106,908)	$	821,357

18

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Balance Sheets

(in thousands, except share and per share  information)

(unaudited)

	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 loss in subsidiary		588		—		(588)		—
Accumulated other comprehensive loss		(6,638)		—		—		(6,638)
Total Universal Hospital Services, Inc. and Subsidiaries (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

19

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Statements of Operations

(in thousands)

(unaudited)

	Three Months Ended June 30, 2018
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Revenues	$	113,789	$	26,918	$	—	$	140,707
Cost of revenues		72,901		17,633		—		90,534
Gross margin		40,888		9,285		—		50,173
Selling, general and administrative		27,857		6,885		—		34,742
Gain on legal settlement		(23,474)		—		—		(23,474)
Operating income		36,505		2,400		—		38,905
Equity in earnings of subsidiary		(1,310)		—		1,310		—
Interest expense		13,028		509		—		13,537
Income before income taxes and noncontrolling interest		24,787		1,891		(1,310)		25,368
(Benefit) provision for income taxes		(212)		581		—		369
Consolidated net income		24,999		1,310		(1,310)		24,999
Net income attributable to noncontrolling interest		—		81		—		81
Net income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	24,999	$	1,229	$	(1,310)	$	24,918

20

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Statements of Operations

(in thousands)

(unaudited)

	Three Months Ended June 30, 2017
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Revenues	$	104,786	$	23,424	$	—	$	128,210
Cost of revenues		71,273		14,922		—		86,195
Gross margin		33,513		8,502		—		42,015
Selling, general and administrative		24,410		6,208		—		30,618
Operating income		9,103		2,294		—		11,397
Equity in earnings of subsidiary		(929)		—		929		—
Interest expense		12,781		634		—		13,415
(Loss) income before income taxes and noncontrolling interest		(2,749)		1,660		(929)		(2,018)
(Benefit) provision for income taxes		(456)		731		—		275
Consolidated net (loss) income		(2,293)		929		(929)		(2,293)
Net income attributable to noncontrolling interest		—		98		—		98
Net (loss) income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	(2,293)	$	831	$	(929)	$	(2,391)

21

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Statements of Operations

(in thousands)

(unaudited)

	Six Months Ended June 30, 2018
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Revenues	$	230,986	$	52,076	$	—	$	283,062
Cost of revenues		147,096		34,300				181,396
Gross margin		83,890		17,776		—		101,666
Selling, general and administrative		54,576		13,206		—		67,782
Gain on legal settlement		(23,474)		—		—		(23,474)
Operating income		52,788		4,570		—		57,358
Equity in earnings of subsidiary		(2,428)		—		2,428		—
Interest expense		25,920		1,068		—		26,988
Income before income taxes and noncontrolling interest		29,296		3,502		(2,428)		30,370
(Benefit) provision for income taxes		(443)		1,074		—		631
Consolidated net income		29,739		2,428		(2,428)		29,739
Net income attributable to noncontrolling interest		—		166		—		166
Net income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	29,739	$	2,262	$	(2,428)	$	29,573

22

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Statements of Operations

(in thousands)

(unaudited)

	Six Months Ended June 30, 2017
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Revenues	$	212,735	$	46,128	$		$	258,863
Cost of revenues		141,188		29,892		—		171,080
Gross margin		71,547		16,236		—		87,783
Selling, general and administrative		51,947		12,628		—		64,575
Operating income		19,600		3,608		—		23,208
Equity in earnings of subsidiary		(1,342)		—		1,342		—
Interest expense		25,714		1,180		—		26,894
(Loss) income before income taxes and noncontrolling interest		(4,772)		2,428		(1,342)		(3,686)
(Benefit) provision for income taxes		(589)		1,086		—		497
Consolidated net (loss) income		(4,183)		1,342		(1,342)		(4,183)
Net income attributable to noncontrolling interest		—		170		—		170
Net (loss) income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	(4,183)	$	1,172	$	(1,342)	$	(4,353)

23

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

	Three Months Ended June 30, 2018								Six Months Ended June 30, 2018
	Parent		Subsidiary						Parent		Subsidiary
	Issuer		Guarantors		Consolidating				Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated		UHS		SS & RES		Adjustments		Consolidated
Consolidated net income	$	24,999	$	1,310	$	(1,310)	$	24,999	$	29,739	$	2,428	$	(2,428)	$	29,739
Other comprehensive income:
Gain on minimum pension liability, net of tax		214		—		—		214		424		—		—		424
Total other comprehensive income		214		—		—		214		424		—		—		424
Comprehensive income		25,213		1,310		(1,310)		25,213		30,163		2,428		(2,428)		30,163
Comprehensive income attributable to noncontrolling interest		—		81		—		81		—		166		—		166
Comprehensive income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	25,213	$	1,229	$	(1,310)	$	25,132	$	30,163	$	2,262	$	(2,428)	$	29,997

	Three Months Ended June 30, 2017								Six Months Ended June 30, 2017
	Parent		Subsidiary						Parent		Subsidiary
	Issuer		Guarantors		Consolidating				Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated		UHS		Surgical Services		Adjustments		Consolidated
Consolidated net (loss) income	$	(2,293)	$	929	$	(929)	$	(2,293)	$	(4,183)	$	1,342	$	(1,342)	$	(4,183)
Other comprehensive income:
Gain on minimum pension liability, net of tax		192		—		—		192		371		—		—		371
Total other comprehensive income		192		—		—		192		371		—		—		371
Comprehensive (loss) income		(2,101)		929		(929)		(2,101)		(3,812)		1,342		(1,342)		(3,812)
Comprehensive income attributable to noncontrolling interest		—		98		—		98		—		170		—		170
Comprehensive (loss) income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	(2,101)	$	831	$	(929)	$	(2,199)	$	(3,812)	$	1,172	$	(1,342)	$	(3,982)

24

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended June 30, 2018
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Cash flows from operating activities:
Consolidated net income	$	29,739	$	2,428	$	(2,428)	$	29,739
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		28,795		4,850		—		33,645
Gain on legal settlement		(21,474)		—		—		(21,474)
Amortization of intangibles, contract costs, deferred financing costs and bond premium		2,505		2,508		—		5,013
Equity in earnings of subsidiary		(2,428)		—		2,428		—
Provision for doubtful accounts		324		82		—		406
Provision for inventory obsolescence		144		175		—		319
Non-cash share-based compensation expense		1,256		251		—		1,507
Gain on sales and disposals of equipment		(1,025)		(25)		—		(1,050)
Deferred income taxes		454		(290)		—		164
Interest on note receivable		(21)		—		—		(21)
Changes in operating assets and liabilities:
Accounts receivable		(5,655)		482		—		(5,173)
Due from affiliates		4,703		—		(4,703)		—
Inventories		(549)		(5)		—		(554)
Other operating assets		129		(91)		—		38
Accounts payable		(1,962)		2,171		—		209
Other operating liabilities		2,701		356		—		3,057
Net cash provided by operating activities		37,636		12,892		(4,703)		45,825
Cash flows from investing activities:
Medical equipment purchases		(17,872)		(5,401)		—		(23,273)
Property and office equipment purchases		(4,205)		(111)		—		(4,316)
Proceeds from disposition of property and equipment		1,654		159		—		1,813
Issuance of note receivable from officer		(581)		—		—		(581)
Net cash used in investing activities		(21,004)		(5,353)		—		(26,357)
Cash flows from financing activities:
Proceeds under senior secured credit facility		104,448		—		—		104,448
Payments under senior secured credit facility		(113,598)		—		—		(113,598)
Payments of principal under capital lease obligations		(2,028)		(1,044)		—		(3,072)
Holdback payment related to acquisition		—		(624)		—		(624)
Distributions to noncontrolling interests		—		(213)		—		(213)
Proceeds from exercise of parent company stock options		285		—		—		285
Shares forfeited for taxes		(1,149)		—		—		(1,149)
Due to affiliates		—		(4,703)		4,703		—
Change in book overdrafts		(5,345)		(22)		—		(5,367)
Net cash used in financing activities		(17,387)		(6,606)		4,703		(19,290)
Net change in cash and cash equivalents		(755)		933		—		178
Cash and cash equivalents at the beginning of period		—		—		—		—
Cash and cash equivalents at the end of period	$	(755)	$	933	$	—	$	178

25

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended June 30, 2017
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Cash flows from operating activities:
Consolidated net (loss) income	$	(4,183)	$	1,342	$	(1,342)	$	(4,183)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		31,538		4,126		—		35,664
Amortization of intangibles, deferred financing costs and bond premium		2,929		2,531		—		5,460
Equity in earnings of subsidiary		(1,342)		—		1,342		—
Provision for doubtful accounts		85		(12)		—		73
Provision for inventory obsolescence		(10)		132		—		122
Non-cash share-based compensation expense		1,305		246		—		1,551
Gain on sales and disposals of equipment		(992)		(54)		—		(1,046)
Deferred income taxes		788		(584)		—		204
Interest on note receivable		(11)		—		—		(11)
Changes in operating assets and liabilities:
Accounts receivable		(466)		624		—		158
Due from affiliates		(5,731)		—		5,731		—
Inventories		14		481		—		495
Other operating assets		(134)		(280)		—		(414)
Accounts payable		(2,435)		(1,204)		—		(3,639)
Other operating liabilities		(2,430)		(951)		—		(3,381)
Net cash provided by operating activities		18,925		6,397		5,731		31,053
Cash flows from investing activities:
Medical equipment purchases		(19,105)		(5,191)		—		(24,296)
Property and office equipment purchases		(3,206)		(103)		—		(3,309)
Proceeds from disposition of property and equipment		2,010		81		—		2,091
Issuance of note receivable from officer		(936)		—		—		(936)
Acquisition and refund of escrow		3,691		(5,614)		—		(1,923)
Net cash used in investing activities		(17,546)		(10,827)		—		(28,373)
Cash flows from financing activities:
Proceeds under senior secured credit facility		83,200		—		—		83,200
Payments under senior secured credit facility		(79,692)		—		—		(79,692)
Payments of principal under capital lease obligations		(2,623)		(796)		—		(3,419)
Distributions to noncontrolling interests		—		(133)		—		(133)
Proceeds from exercise of parent company stock options		29		—		—		29
Contribution from Parent		1,900		—				1,900
Due to affiliates		—		5,731		(5,731)		—
Change in book overdrafts		(4,193)		(372)		—		(4,565)
Net cash (used in) provided by financing activities		(1,379)		4,430		(5,731)		(2,680)
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	$	—	$	—	$	—	$	—

26

14.Concentration

One customer, Memorial Hermann Health System, accounted for approximately 13% and 15% of total revenue for the six months ended June 30, 2018 and 2017, respectively. The Company is operating under multi-year agreements with customary terms and conditions with this customer.

15.Subsequent Events

On August 9, 2018, we and IPC entered into a Second Amended and Restated Professional Services Agreement (the “Amended PSA”).  Pursuant to the Amended PSA, in addition to the services previously provided under the original agreement, IPC will provide services related to a possible transaction resulting in a qualified public offering or change of control and will receive a fee of $10 million payable upon the consummation of such transaction.  The Amended PSA also removes the acceleration of the advisory fee in the event of a sale of the Company or qualified public offering.  Additionally, the Amended PSA amends the agreement to terminate on the earliest of (a) consummation of a qualified public offering, (b) consummation of a change in control and (c) the tenth anniversary of the date of the Amended PSA, provided, however, that if no qualified public offering or change of control has been consummated prior to such tenth anniversary, the Amended PSA will automatically extend on a year to year basis until either party provides written notice of its desire to terminate the Amended PSA or at such time as a qualified public offering or change of control has been consummated.  The Amended PSA is attached as Exhibit 10.1 and incorporated herein by reference.

On August 9, 2018, the board of directors of the Parent approved and adopted an amendment to the 2018 Executive Management Stock Option Plan, dated May 9, 2018 (the “2018 Plan”) (a copy of which has been filed as Exhibit 10.1 on our Form 10-Q with the SEC on May 14, 2018) to confirm that any options granted under the 2018 Plan will only be exercisable upon a Change of Control of Parent (“Plan Amendment”). A copy of the Plan Amendment is filed with this Form 10-Q as Exhibit 10.2.

On August 13, 2018, Parent and Federal Street Acquisition Corp. (“FSAC”) entered into a definitive Merger Agreement.

For further information on the proposed Merger Agreement, please refer to our Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (“SEC”) on August 13, 2018.

The transaction is expected to close in the fourth quarter of calendar year 2018 and is subject to customary and other closing conditions, including regulatory approvals and FSAC stockholder approval.

27

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following should be read in conjunction with the accompanying consolidated financial statements and notes.

BUSINESS OVERVIEW

Our Company

Universal Hospital Services, Inc. and Subsidiaries (“we”, “our”, “us”, the “Company”, or “UHS”) is a leading nationwide provider of end-to-end health care technology management and service solutions to the United States health care industry. We provide our customers access to high quality health care technology and implement comprehensive medical equipment management and service solutions to reduce capital and operating expenses, increase medical equipment and staff productivity and support improved patient safety and outcomes.

Universal Hospital Services, Inc. commenced operations in 1939, originally incorporated in Minnesota in 1954 and reincorporated in Delaware in 2001. All of our outstanding capital stock is owned by UHS Holdco, Inc. (“Parent”), which acquired the Company in a recapitalization in May 2007.  Parent is controlled by affiliates of Irving Place Capital (together with its affiliates, “IPC”).

As of June 30, 2018, we owned or managed more than 800,000 units of medical equipment consisting of over 350,000 units of owned medical equipment and over 450,000 units of customer-owned equipment. Our diverse customer base includes approximately 7,000 active national, regional and local acute care hospitals and alternate site providers (such as long-term acute care hospitals, skilled nursing facilities, surgery centers, specialty hospitals and home care providers). We also have relationships with more than 200 medical device manufacturers, many of the nation’s largest group purchasing organizations (“GPOs”) and many health system integrated delivery networks (“IDNs”).  We deliver our solutions through our nationwide network of 86 service centers and five Centers of Excellence. Our fees are paid directly by our customers rather than by direct reimbursement from third-party payors, such as private insurers, Medicare or Medicaid.

Historically, the Company reported under three segments.  Medical Equipment Solutions included supplemental and peak needs usage solutions, customized equipment agreement solutions, 360 On-site managed solutions, specialty medical equipment sale, distribution and disposable sales.  Clinical Engineering Solutions included supplemental maintenance, repair and remediation solutions, on-site biomed services, health care technology solutions, federal governmental services and clinical engineering capital sales.  Surgical Services included on-demand and scheduled usage solutions, on-site solutions for hospital and multi-facility health systems and disposable only sales.

Effective January 1, 2018, the Company changed its segment reporting to report its financial information under one reporting segment. The change in reporting was made to conform to the way the Company is currently managing and executing the business. Specifically, the chief operating decision maker (“CODM”) is making operating decisions and assessing performance using discrete financial information from one reportable segment, as our resources and infrastructure are shared and our go to market strategy have evolved with our Equipment Value Management (“EVM”) strategy. The current financial information is based upon the transformation of the business model that has occurred and the development of the new commercial framework – EVM.  EVM is an end to end approach to medical equipment management that helps hospitals recover cost and time that today are wasted through inefficient medical equipment processes.  EVM integrates customers supply chain, patient care and clinical engineering teams, connecting these siloed groups to streamline processes to improve stakeholder productivity and satisfaction while optimizing equipment utilization and lowering the total cost of ownership.  EVM provides the customer with the equipment they need, when they need it, with the assets serviced to the highest quality standards in the industry. EVM combines the capabilities of all service offerings.  The EVM solution links all of our service offerings at UHS. The Company has a similar compliment of services, type of customer for the Company’s services, method of distribution for the Company’s services and the regulatory environment is similar across the United States. Accordingly, we concluded that we operate as one reporting segment.  Finally, the Company analyzed its goodwill for potential impairment before and after the change in segments and concluded that there was no impairment.

Current year presentation of one reporting segment resulted in disaggregated revenue categories of Equipment Solutions which includes supplemental and peak needs usage solutions, surgical services on-demand and scheduled

28

usage,solutions, specialty medical equipment sale, distribution and disposable sales, clinical engineering capital sales and surgical disposable only sales.  Clinical Engineering includes supplemental maintenance, repair and remediation solutions, on-site biomed services, health care technology solutions and federal governmental services.  On-site Managed Services includes 360 On-site managed solutions and surgical services on-site solutions for hospital and multi-facility health systems.

The Company operates in one geographic region, the United States. As the Company is now reporting as one segment which equals the total Company’s results as reflected in the Consolidated Statement of Operations, restatement of prior periods was not necessary.

Our service lines consist of Equipment Solutions, Clinical Engineering and On-site Managed Services. 

Equipment Solutions primarily consists of providing supplemental, peak needs and surgical equipment usage solutions to approximately 7,000 acute care hospitals and alternate site providers in the United States, including some of the nation’s premier health care institutions.  These solutions are provided primarily to hospitals and other acute care providers for use through their facilities, including the emergency room, operating room, critical care, intensive care, rehabilitation and general patient care areas. 

Clinical Engineering consists of supplemental maintenance, repair and remediation solutions, health care technology solutions and the federal government services.  We offer a broad range of inspection, preventive maintenance, repair, logistic and consulting services through our team of more than 400 technicians and professionals located throughout the United States in our nationwide network of service centers.  We managed more than 400,000 units of customer owned equipment as of June 30, 2018.

On-site Managed Services provide solutions that allow our customers to fully outsource the responsibilities and costs of effectively managing categories of medical equipment at their facilities, with the added benefit of enhancing equipment utilization and clinical support. With our 360 solutions, medical equipment types and quantities are adjusted to meet changes in patient census and acuity. Our employees work at the customers’ sites to integrate our equipment management process and proprietary management software technology tools into the customers’ day-to-day operations.  We assume full responsibility for having equipment where and when it is needed at the customer’s facility, removing equipment that is no longer in use and decontaminating, testing and repairing equipment as needed between each patient use. We also perform required training and ‘‘in service’’ sessions to keep our customers’ staffs fully-trained and knowledgeable about the use and operation of medical equipment covered by the 360 solutions. We provide 360 solutions in both our historical A360 program (using UHS-owned equipment) and our newer growing M360 program (managing customer owned equipment).

RESULTS OF OPERATIONS

The following discussion addresses:

· our financial condition as of June 30, 2018;  and

· the results of operations for the three-month and six-month periods ended June 30, 2018 and 2017.

This discussion should be read in conjunction with the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and the Management’s Discussion and Analysis of Financial Condition and Results of Operations section included in our 2017 Annual Report on Form 10-K, filed with the Securities and Exchange Commission.

The following table provides information on the percentages of certain items of selected financial data compared to total revenues for the three-month and six-month periods ended June 30, 2018 and 2017.  As previously discussed in this Report, revenues, cost of revenues and selling, general and administrative expense for the first six months of 2018 were determined in accordance with ASC Topic 606, while comparative results for the first six months of 2017 were determined in accordance with ASC Topic 605. There are no differences for revenues and cost of revenues between ASC Topic 606 and the previous standard ASC Topic 605. For selling, general and administrative expense, the Company is now capitalizing certain contract costs that were previously expensed. See Note 3, Revenue Recognition, for discussion regarding contract costs.

29

	Percent to Total Revenues				Percent to Total Revenues
	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Revenues	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenues	64.3		67.2		64.1		66.1
Gross margin	35.7		32.8		35.9		33.9
Selling, general and administrative	24.7		23.8		23.9		24.9
Gain on legal settlement	(16.7)		—		(8.3)		—
Operating income	27.7		9.0		20.3		9.0
Interest expense	9.6		10.5		9.5		10.4
Income (loss) before income taxes and noncontrolling interest	18.1		(1.5)		10.8		(1.4)
Provision for income taxes	0.3		0.2		0.2		0.2
Consolidated net income (loss)	17.8	%	(1.7)	%	10.6	%	(1.6)	%

Consolidated Results of Operations for the three months ended June 30, 2018 compared to the three months ended June 30, 2017

Total Revenue

The following table presents revenues by major service type for the three months ended June 30, 2018 and 2017 (in thousands).

	Three Months Ended
	June 30,
	2018		2017		% Change
Equipment Solutions	$	62,992	$	58,038	8.5	%
Clinical Engineering		39,303		34,413	14.2
On-Site Managed Services		38,412		35,759	7.4
Total Revenue	$	140,707	$	128,210	9.7	%

Total revenue for the three months ended June 30, 2018 was $140.7 million, compared to $128.2 million for the three months ended June 30, 2017, an increase of $12.5 million or 9.7%.  Equipment Solutions revenue increased 8.5% primarily driven by new customer contracts signed and implemented in the second quarter of 2018. These new contract signings include our traditional supplemental rental services as well as our surgical solutions.  Clinical Engineering revenue increased 14.2% as we continue to see strong growth within this solution as a direct result of our continued success in signing and implementing new business contracts over the last few quarters, including the sizeable contract we disclosed in the third quarter of 2017.  Finally, our On-site Managed Services revenue increased 7.4% with the majority of growth coming from our managed only solution where we manage equipment owned by the customer.

Cost of Revenue

Total cost of revenue for the three months ended June 30, 2018 was $90.5 million compared to $86.2 million for the three months ended June 30, 2017, an increase of $4.3 million or 5.0%.  On a percentage of revenue basis, cost of revenue declined from 67.2% of revenue in 2017 to 64.3% in 2018.  The decline was driven primarily from revenue growth as we were able to leverage our fixed cost infrastructure resulting in our expenses growing at a lower rate than revenue growth.  In addition, as we continue to reduce our capital expenditures as a percentage of revenue, our depreciation expense declined in 2018 versus the comparable period in 2017.  We continue to make necessary investments to support the growth in our Clinical Engineering solutions and technician labor and vendor expenses increased primarily to support our new clinical engineering programs. 

Gross Margin

Total gross margin for the three months ended June 30, 2018 was $50.2 million, or 35.7% of total revenues, compared to $42.0 million, or 32.8% of total revenues, for the three months ended June 30, 2017, an increase of $8.2 million or 19.5%.  The increase in gross margin as a percent of revenue for the quarter was primarily impacted by positive leverage from volume growth in our three major service types as well as from a  reduction in depreciation expense as a result of

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our continued efforts to lower the level of capital expenditures as a percentage of revenue as we shift the mix of business to a lower capital intensity.

Selling, General and Administrative, Gain on Legal Settlement and Interest Expense

(in thousands)

	Three Months Ended
	June 30,
	2018		2017		Change		% Change
Selling, general and administrative	$	34,742	$	30,618	$	4,124	13.5	%
Gain on legal settlement		(23,474)		—		(23,474)	*
Interest expense		13,537		13,415		122	0.9

Selling, General and Administrative

Selling, general and administrative expense increased $4.1 million, or 13.5%, to $34.7 million for the second quarter of 2018 as compared to the same period of 2017. Selling, general and administrative expense as a percentage of total revenue was 24.7% and 23.8% for the quarters ended June 30, 2018 and 2017, respectively. The increase of $4.1 million and as a percentage of revenue was primarily due to higher incentive related costs based upon the Company’s financial performance for 2018.

Gain on Legal Settlement

Gain on legal settlement of $23.5 million for the second quarter of 2018 was related to a litigation settlement with Hill Rom. See Note 9, Commitments and Contingencies.

Interest Expense

Interest expense increased $0.1 million to $13.5 million for the second quarter of 2018 as compared to the same period of 2017.

Income Taxes

Income taxes were an expense of $0.4 and $0.3 million for the three months ended June 30, 2018 and 2017, respectively. The tax expense for the three months ended June 30, 2018 and 2017 primarily related to state minimum fees and tax amortization of indefinite-life intangibles. The expected tax expense from operating income during the three months ended June 30, 2018 was offset by the reduction of our valuation allowance. In future reporting periods, we will continue to assess the likelihood that deferred tax assets will be realizable. See Note 12, Income Taxes. 

Consolidated Net Income

Consolidated net income increased $27.3 million to $25.0 million in the second quarter of 2018 as compared to the same period of 2017.  Net income was impacted primarily by the increase in revenues and gain on legal settlement during the second quarter of 2018.

Consolidated Results of Operations for the six months ended June 30, 2018 compared to the six months ended June 30, 2017

Total Revenue

The following table presents revenues by major service type for the six months ended June 30, 2018 and 2017 (in thousands).

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	Six Months Ended
	June 30,
	2018		2017		% Change
Equipment Solutions	$	125,434	$	118,695	5.7	%
Clinical Engineering		79,048		67,754	16.7
On-Site Managed Services		78,580		72,414	8.5
Total Revenue	$	283,062	$	258,863	9.3	%

Total revenue for the six months ended June 30, 2018 was $283.1 million, compared to $258.9 million for the six months ended June 30, 2017, an increase of $24.2 million or 9.3%.  Equipment Solutions revenue increased 5.7% primarily driven by new customer contracts signed and implemented in the second quarter of 2018 and a favorable impact from a stronger flu season. These new contract signings include our traditional supplemental rental services as well as our surgical solutions.  Clinical Engineering revenue increased 16.7% as we continue to see strong growth within this solution as a direct result of our continued success in signing and implementing new business contracts over the last few quarters, including the sizeable contract we disclosed in the third quarter of 2017.  Finally, our On-site Managed Services increased 8.5% with the majority of growth coming from our managed only solution where we manage equipment owned by the customer as well as a favorable impact from a stronger flu season. 

Cost of Revenue

Total cost of revenue for the six months ended June 30, 2018 was $181.4 million compared to $171.1 million for the six months ended June 30, 2017, an increase of $10.3 million or 6.0%.  On a percentage of revenue basis, cost of revenue declined from 66.1% of revenue in 2017 to 64.1% in 2018.  The decline was driven primarily from revenue growth as we were able to leverage our fixed cost infrastructure resulting in our expenses growing at a lower rate than revenue growth.  In addition, as we continue to reduce our capital expenditures as a percentage of revenue, our depreciation expense declined in 2018 versus the comparable period in 2017.  We continue to make necessary investments to support the growth in our Clinical Engineering solutions and technician labor and vendor expenses increased primarily to support our new clinical engineering programs. 

Gross Margin

Total gross margin for the six months ended June 30, 2018 was $101.7 million, or 35.9% of total revenues, compared to $87.8 million, or 33.9% of total revenues, for the six months ended June 30, 2017, an increase of $13.9 million or 15.8%.  The increase in gross margin as a percent of revenue for the quarter was primarily impacted by positive leverage from volume growth in our three major service types as well as from a reduction in depreciation expense as a result of our continued efforts to lower the level of capital expenditures as a percentage of revenue as we shift the mix of business to a lower capital intensity.

Selling, General and Administrative, Gain on Legal Settlement and Interest Expense

(in thousands)

	Six Months Ended
	June 30,
	2018		2017		Change		% Change
Selling, general and administrative	$	67,782	$	64,575	$	3,207	5.0	%
Gain on legal settlement		(23,474)		—		(23,474)	*
Interest expense		26,988		26,894		94	0.3

*Not meaningful

Selling, General and Administrative

Selling, general and administrative expense increased $3.2 million, or 5.0%, to $67.8 million for the first six months of 2018 as compared to the same period of 2017. The increase of $3.2 million was primarily due to higher incentive related costs based upon the Company’s actual/forecasted financial performance for 2018. Selling, general and administrative expense as a percentage of total revenue was 23.9% and 24.9% for the six months ended June 30, 2018 and 2017, respectively.

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Gain on Legal Settlement

Gain on legal settlement of $23.5 million for the first six months of 2017 was related to a  litigation settlement with Hill Rom. See Note 9, Commitments and Contingencies.

Interest Expense

Interest expense increased $0.1 million to $27.0 million for the first six months of 2018 as compared to the same period of 2017.

Income Taxes

Income taxes were an expense of $0.6 and $0.5 million for the six months ended June 30, 2018 and 2017, respectively. The tax expense for the six months ended June 30, 2018 and 2017 primarily related to state minimum fees and tax amortization of indefinite-life intangibles. The expected tax expense from operating income during the six months ended June 30, 2018 was offset by the reduction of our valuation allowance. In future reporting periods, we will continue to assess the likelihood that deferred tax assets will be realizable. See Note 12, Income Taxes.

Consolidated Net Income

Consolidated net income increased $33.9 million to $29.7 million in the first six months of 2018 as compared to the same period of 2017.  Net income was impacted primarily by the increase in revenues and gain on legal settlement.

Adjusted EBITDA

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) was $77.2 and $69.1 million for the six months ended June 30, 2018 and 2017, respectively.  Adjusted EBITDA for the six months ended June 30, 2018 was higher primarily due to the increase in revenue.

Adjusted EBITDA is defined as earnings attributable to UHS before interest expense, income taxes, depreciation and amortization and excludes non-cash share-based compensation expense, management, board and other nonrecurring gain, expenses or loss.  In addition to using Adjusted EBITDA internally as a measure of operational performance, we disclose it externally to assist analysts, investors and lenders in their comparisons of operational performance, valuation and debt capacity across companies with differing capital, tax and legal structures. Adjusted EBITDA, however, is not a measure of financial performance under accounting principles generally accepted in the United States of America (“GAAP”) and should not be considered as an alternative to, or more meaningful than, net income as a measure of operating performance or to cash flows from operating, investing or financing activities or as a measure of liquidity.  Since Adjusted EBITDA is not a measure determined in accordance with GAAP and is thus susceptible to varying interpretations and calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Adjusted EBITDA does not represent an amount of funds that is available for management’s discretionary use. A reconciliation of net income (loss) attributable to UHS to Adjusted EBITDA is included below:

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	Six Months Ended
	June 30,
(in thousands)	2018		2017
Net income (loss) attributable to Universal Hospital Services, Inc. and Subsidiaries	$	29,573	$	(4,353)
Interest expense		26,988		26,894
Provision for income taxes		631		497
Depreciation and amortization of intangibles and contract costs		38,523		40,927
EBITDA		95,715		63,965
Gain on legal settlement		(23,474)		—
Non-cash share-based compensation expense		1,507		1,551
Management, board and other		3,500		3,608
Adjusted EBITDA	$	77,248	$	69,124
Other Financial Data:
Net cash provided by operating activities	$	45,825	$	31,053
Net cash used in investing activities		(26,357)		(28,373)
Net cash used in financing activities		(19,290)		(2,680)
Other Operating Data (as of end of period):
Medical equipment (approximate number of owned outsourcing units)		252,000		242,000
District service centers		86		86
Centers of Excellence		5		5

SEASONALITY

Quarterly operating results are typically affected by seasonal factors.  Historically, our first and fourth quarters are the strongest, reflecting increased customer utilization during the fall and winter months.

LIQUIDITY AND CAPITAL RESOURCES

Original Notes and Add-on Notes — 7.625%. On August 7, 2012, we issued $425.0 million in aggregate principal amount of 7.625% Second Lien Senior Secured Notes due 2020 (the “Original Notes”) under an indenture dated as of August 7, 2012 (the “2012 Indenture”).  On February 12, 2013, we issued $220.0 million in aggregate principal amount of 7.625% Second Lien Senior Secured Notes due 2020 (the “Add-on Notes”, and along with the Original Notes, the “2012 Notes”) as “additional notes” pursuant to the 2012 Indenture. The 2012 Notes mature on August 15, 2020.

The 2012 Indenture provides that the 2012 Notes are our second lien senior secured obligations and are fully and unconditionally guaranteed on a second lien senior secured basis by our existing and certain of our future 100%-owned domestic subsidiaries.

Our principal sources of liquidity are expected to be cash flows from operating activities and borrowings under our senior secured credit facility, which provides for loans in an amount of up to $235.0 million, subject to our borrowing base. See Note 8, Long-Term Debt, for details related to our senior secured credit facility. It is anticipated that our principal uses of liquidity will be to fund capital expenditures related to purchases of medical equipment, provide working capital, meet debt service requirements and finance our strategic plans.

We require substantial cash to operate our health care technology solutions and service our debt.  Our health care technology solutions require us to invest a significant amount of cash in medical equipment purchases.  To the extent that such expenditures cannot be funded from our operating cash flow, borrowing under our senior secured credit facility or other financing sources, we may not be able to conduct our business or grow as currently planned.

If we are unable to generate sufficient cash flow from operations in order to service our debt, we will be forced to take actions, such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing our debt, or seeking additional equity capital.  This, to a certain extent, is subject to general economic, financial, competitive, legislative,

34

regulatory and other factors that are beyond our control.  If we are unable to repay our debt at maturity, we may have to obtain alternative financing, which may not be available to us.

Net cash provided by operating activities was $45.8 and $31.1 million for the six months ended June 30, 2018 and 2017, respectively. The increase in net cash provided by operating activities was primarily due to higher earnings, higher incentive accrual and the timing of accounts payable payments in the first six months of 2018 compared to the same period in 2017

Net cash used in investing activities was $26.4 and $28.4 million for the six months ended June 30, 2018 and 2017, respectively. The decrease in  net cash used in investing activities was primarily due to a previous year acquisition.

Net cash used in financing activities was $19.3 and $2.7 million for the six months ended June 30, 2018 and 2017, respectively.  The increase in net cash used in financing activities was primarily due to higher payments on our senior secured credit facility.

Based on the level of operating performance expected in 2018, we believe our cash from operations and additional borrowings under our senior secured credit facility will meet our liquidity needs for the foreseeable future, exclusive of any borrowings that we may make to finance potential acquisitions.  However, if during that period or thereafter we are not successful in generating sufficient cash flows from operations or in raising additional capital when required in sufficient amounts and on terms acceptable to us, our business could be adversely affected.  As of June 30, 2018, we had $138.5 million of availability under the senior secured credit facility based on a borrowing base of $174.8 million less borrowings of $31.1 million and after giving effect to $5.3 million used for letters of credit.  As of June 30, 2017, we had $110.5 million of availability under the senior secured credit facility based on a borrowing base of $164.6 million less borrowings of $49.2 million and after giving effect to $4.9 million used for letters of credit.

Our levels of borrowing are further restricted by the financial covenants set forth in our senior secured credit facility agreement and the 2012 Indenture governing our 2012 Notes, as described in Note 8, Long-Term Debt.

The Company was in compliance with all financial covenants for all periods presented.

RECENT ACCOUNTING PRONOUNCEMENT

See Item 1 of Part I, Note 2, Recent Accounting Pronouncements.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements.

SAFE HARBOR STATEMENT

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: We believe statements in this Quarterly Report on 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 competitors’ activities;

· our customers’ patient census or service needs;

· global economic conditions’ effect on our customers;

· our ability to maintain existing contracts or contract terms and enter into new contracts with customers;

· uncertainties as to the effect of non-renewal of existing contracts;

· consolidation in the health care industry and its effect on prices;

· our relationships with key suppliers;

· our ability to change the manner in which health care providers procure medical equipment;

· the absence of long-term commitments and cancellations by or disputes with customers;

· our dependence on key personnel;

· our ability to identify and manage acquisitions;

35

· increases in expenses related to our pension plan;

· our cash flow fluctuation;

· the increased credit risks associated with doing business with home care providers and nursing homes;

· the risk of claims associated with medical equipment we outsource and service;

· increased costs we cannot pass through;

· the failure of any management information system;

· the inherent limitations on internal controls of our financial reporting;

· the uncertainty surrounding health care reform initiatives;

· the federal Privacy law risks;

· the federal Anti-Kickback law risks;

· changes to third-party payor reimbursement for health care items and services;

· potential other new health care laws or regulations;

· our customers operate in a highly regulated environment;

· our fleet’s risk of recalls or obsolescence;

· our substantial debt service obligations;

· our need for substantial cash to operate and expand our business as planned; and

· our history of net losses and substantial interest expense.

For further information on risks applicable to us, please see the disclosure regarding the risk factors as set forth in Item 1A of Part II of this Quarterly Report on Form 10-Q.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk arising from adverse changes in interest rates, fuel costs and pension valuation.  We do not enter into derivatives or other financial instruments for speculative purposes.

Interest Rates

We use both fixed and variable rate debt as sources of financing.  At June 30, 2018, we had approximately $697.6 million of total debt outstanding before netting with deferred financing costs, of which $31.1 million was bearing interest at variable rates. Based on variable debt levels at June 30, 2018, a 1.0 percentage point change in interest rates on variable rate debt would have resulted in annual interest expense fluctuating by approximately $0.3 million.

Fuel Costs

We are also exposed to market risks related to changes in the price of gasoline used to fuel our fleet of delivery and sales vehicles.  A hypothetical 10% increase in the first six months of 2018 average price of unleaded gasoline, assuming gasoline usage levels for the six months ended June 30, 2018, would lead to an annual increase in fuel costs of approximately $0.4 million.

Pension

Our pension plan assets, which were approximately $22.2 million at December 31, 2017, are subject to volatility that can be caused by fluctuations in general economic conditions. Continued market volatility and disruption could cause declines in asset values, and if this occurs, we may need to make additional pension plan contributions and our pension expense in future years may increase. A hypothetical 10% decrease in the fair value of plan assets at December 31, 2017 would lead to a decrease in the funded status of the plan of approximately $2.2 million.

Other Market Risk

As of June 30, 2018, we have no other material exposure to market risk.

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Item 4.  Controls and Procedures

(a) Evaluation of disclosure controls and procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2018.

(b) Changes in internal control over financial reporting

Beginning January 1, 2018, we implemented ASU 2014-09. Although the adoption of the new revenue standard had no significant impact on our results of operations, cash flows, or financial position, we did implement changes to our controls related to revenue. These included the development of new policies based on the five-step model provided in the new revenue standard, enhanced contract review requirements and other ongoing monitoring activities. These controls were designed to provide assurance at a reasonable level of the fair presentation of our condensed consolidated financial statements and related disclosures. There was no other change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.Legal Proceedings

The Company, in the ordinary course of business, is subject to liability claims related to employees and the equipment that it rents and services. Asserted claims are subject to many uncertainties and the outcome of individual matters is not predictable. While the ultimate resolution of these actions may have an impact on the Company’s financial results for a particular reporting period, management believes that any such resolution would not have a material adverse effect on the financial position, results of operations or cash flows of the Company and the chance of a negative outcome on outstanding litigation is considered remote. See the additional information in Item 1 of Part I, Note 9, Commitments and Contingencies.

Item 1A.  Risk Factors

Our business is subject to various risks and uncertainties.  Any of the risks discussed elsewhere in this Quarterly Report on Form 10-Q or our other filings with the Securities and Exchange Commission, including the risk factors set forth in our 2017 Annual Report on Form 10-K, could materially adversely affect our business, financial condition or results of operations.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.Defaults upon Senior Securities

None.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5.Other Information

On August 9, 2018, we and IPC entered into a Second Amended and Restated Professional Services Agreement (the “Amended PSA”).  Pursuant to the Amended PSA, in addition to the services previously provided under the original

37

agreement, IPC will provide services related to a possible transaction resulting in a qualified public offering or change of control and will receive a fee of $10,000,000 payable upon the consummation of such transaction.  The Amended PSA also removes the acceleration of the advisory fee in the event of a sale of the Company or qualified public offering.  Additionally, the Amended PSA amends the agreement to terminate on the earliest of (a) consummation of a qualified public offering, (b) consummation of a change in control and (c) the tenth anniversary of the date of the Amended PSA, provided, however, that if no qualified public offering or change of control has been consummated prior to such tenth anniversary, the Amended PSA will automatically extend on a year to year basis until either party provides written notice of its desire to terminate the Amended PSA or at such time as a qualified public offering or change of control has been consummated.  The Amended PSA is attached as Exhibit 10.1 and incorporated herein by reference.

On August 9, 2018, the board of directors of the Parent approved and adopted an amendment to the 2018 Executive Management Stock Option Plan, dated May 9, 2018 (the “2018 Plan”) (a copy of which has been filed as Exhibit 10.1 on our Form 10-Q with the SEC on May 14, 2018) to confirm that any options granted under the 2018 Plan will only be exercisable upon a Change of Control of Parent (“Plan Amendment”). A copy of the Plan Amendment is filed with this Form 10-Q as Exhibit 10.2.

Item 6.Exhibits

Number	Description
10.1	Second Amended and Restated Professional Services Agreement dated August 9, 2018 between Irving Place Capital Management, L.P. and Universal Hospital Services, Inc.
10.2	Amendment No. 1 to the Executive Management Stock Option Plan dated August 9, 2018.
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
32.2	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
101	Financial Statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2018, formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements.

* Furnished, not filed

38

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:  August 13, 2018

Universal Hospital Services, Inc.
By	/s/ Thomas J. Leonard
Thomas J. Leonard
Chief Executive Officer
(Principal Executive Officer and Duly Authorized Officer)
By	/s/ James B. Pekarek
James B. Pekarek
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

39

EX-10.1

SECOND AMENDED AND RESTATED PROFESSIONAL SERVICES AGREEMENT

This Second Amended and Restated Professional Services Agreement (this “Agreement”) is made as of August 9, 2018, by and between Irving Place Capital Management, L.P., a Delaware limited partnership (together with its successors (“IPC”)), and Universal Hospital Services, Inc. (the “Company”), a Delaware corporation and amends and restates the Amended and Restated Professional Services Agreement made as of February 1, 2008 (the “Amended and Restated Agreement”). Certain capitalized terms used herein are defined in Section 9 below.

WHEREAS, the Company, UHS Holdco, Inc., a Delaware corporation (“Holdco”), UHS Merger Sub, Inc., a Delaware corporation, and J.W. Childs Equity Partners III, L.P., in its capacity as a representative of the stockholders of the Company, are parties to an Agreement and Plan of Merger, dated as of April 15, 2007 (the “Merger Agreement”);

WHEREAS, in connection with the transactions contemplated by the Merger Agreement, the Company and IPC Manager III, L.P. (formerly known as Bear Stearns Merchant Manager III, L.P.), a Delaware limited partnership  (together with its successors “IPC Manager”) entered into that certain Professional Services Agreement, dated May 31, 2007 (the “Original Agreement”);

WHEREAS, the Company and IPC Manager entered into the Amended and Restated Agreement in order that IPC Manager could provide to the Company Merchant Banking Strategic Services (as defined herein) in exchange for a portion of the fees currently payable by the Company to IPC as Advisory Fees;

WHEREAS, IPC Manager transferred and assigned to IPC, and IPC assumed IPC Manager’s rights and obligations under, the Original Agreement pursuant to that certain Assignment and Assumption Agreement, dated as of October 31, 2008;

WHEREAS, the parties entered into that certain Amendment No. 1 to the Amended and Restated Agreement, dated November 10, 2012, in order to provide for the reimbursement of certain expenses by IPC that were incurred in connection with the performance of services hereunder (“Amendment No. 1”);

WHEREAS, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto desire to amend and restate the Amended and Restated Agreement as provided herein; and

WHEREAS, Section 14 (Entire Agreement; Modification; Governing Law) of the Amended and Restated Agreement provides for its modification where approved in writing by an authorized representative of the party against whom the terms of the modifications are binding.

NOW, THEREFORE, the parties, each intending to be legally bound, agree as follows:

1. Term.  This Agreement shall commence on the date hereof and shall terminate (except as provided in the immediately following sentence) on the earliest to occur of (a) the consummation of a Qualified Public Offering (as defined herein), (b) the consummation of a Change of Control (as defined herein), and (c) the tenth (10th) anniversary of the date hereof (the “Term”); provided,  

that if no Qualified Public Offering or Change of Control has been consummated prior to the tenth (10th) anniversary of the date hereof, the Term shall be automatically extended thereafter on a year to year basis unless (i) the Company provides written notice to IPC of its desire to terminate this Agreement or (ii) IPC provides written notice to the Company of its desire to terminate this Agreement, in each case 90 days prior to the expiration of the Term or any extension thereof, or at such time as a Qualified Public Offering or Change of Control is consummated. The provisions of Sections 3(c), 7 through 15, and obligations to pay any outstanding unpaid fees hereunder and accrued interest thereon shall survive the termination of this Agreement.

2. Services. IPC shall perform or cause to be performed (by any designee of IPC) such services for the Company and its subsidiaries as mutually agreed by IPC and the Company, which may include, without limitation, the following:

(a) general advisory and management services;

(b) business development functions, including, without limitation, identification, support, negotiation and analysis of acquisitions and dispositions by the Company or its subsidiaries;

(c) finance functions, including assistance in the preparation of financial projections, and monitoring of compliance with financing agreements;

(d) marketing functions, including, without limitation, monitoring of marketing plans and strategies;

(e) human resource functions, including, without limitation, searching, identifying and hiring of executives and directors; and

(f) other services for the Company and its subsidiaries upon which the Company and IPC agree;

and, at the time and in the manner in which IPC and the Company shall agree, IPC shall provide such of the following services for the Company and its subsidiaries as agreed upon by IPC and the Company, which may include:

(g) (i) review of the Company’s and its subsidiaries’ existing insurance, health benefits, executive services, purchasing programs and practices; (ii) identification of potential opportunities for the Company and its subsidiaries to achieve cost savings in purchasing goods and services in certain common or shared expenditure categories from third party suppliers or providers (“Suppliers”) introduced by IPC; (iii) negotiation on behalf of the Company and its subsidiaries of certain service or supply agreements with Suppliers (“Supply Agreements”) to provide such goods and services to the Company and its subsidiaries at rates or on terms and conditions that are advantageous to the Company and its subsidiaries; (iv) monitoring of performance by certain Suppliers under the relevant Supply Agreements; (v) assistance to the Company and its subsidiaries in resolving certain disputes that may arise under any Supply Agreements; (vi) calculation and reporting to the Company of estimated annual cost savings achieved by the Company and its subsidiaries under certain Supply Agreements; and (vii) provision to the Company on a periodic basis of (A) updates on current and pending Merchant Banking Strategic Services initiatives of IPC, and (B) information regarding, and access to, IPC’s

2

network of senior executives, including current and former executives of current and former IPC portfolio companies, IPC and applicable service providers and vendors.

The Services described in Sections 2(a) through 2(f) shall be hereinafter referred to as “Advisory Services” and the Services described in Section 2(g) shall hereinafter be referred to as “Merchant Banking Strategic Services” or “MBSS”.

3. Advisory Fee.

(a) In consideration of IPC’s undertaking to provide advisory services hereunder, the Company shall pay IPC an annual advisory fee (the “Advisory Fee”) in an amount for each fiscal year equal to the greater of (x) $500,000 and (y) 0.75% of Adjusted EBITDA of the Company and its subsidiaries for the immediately preceding fiscal year, calculated as provided below and payable in advance in quarterly installments, for the period beginning on the date hereof and ending upon the termination of this Agreement as provided in Section 1 hereof. The Advisory Fees shall be payable by the Company whether or not the Company actually requests that IPC provide the services described in Section 2 above. All Advisory Fees shall be fully earned when paid.

(b) Except as otherwise provided in Section3(c) or 3(d) hereof, all subsequent payments of the Advisory Fee shall be in quarterly installments, payable on March 31, June 30, September 30 and December 31 of each year, in an amount equal to the greater of (x) $125,000 or (y) the product of (i) 25% and (ii) 0.75% of Adjusted EBITDA of the Company and its subsidiaries for the immediately preceding fiscal year. Each scheduled installment of the Advisory Fee payable pursuant to this Section 3(b) will be reduced by the amount of the corresponding scheduled installment of the MBSS Fee on a dollar for dollar basis, if any. Advisory Fees and MBSS Fees will be invoiced or accounted for separately.

(c) Notwithstanding anything to the contrary contained herein, the Company shall accrue but not pay the Advisory Fee or MBSS Fee if and for so long as (i) any such payment would constitute a default (or any event which might, with the lapse of time or the giving of notice or both, constitute a default) under the Company’s financing agreements (a “Default”); provided, that the Company shall be obligated to pay any accrued Advisory Fees or MBSS Fees deferred under this clause (i) to the extent that such payment would not constitute a Default or (ii) IPC instructs the Company not to pay all or any portion of the Advisory Fee or MBSS Fee during any fiscal year. Interest will accrue on all due and unpaid Advisory Fees or MBSS Fees not paid pursuant to clause (i) of the preceding sentence at the Default Rate until such Advisory Fees or MBSS Fees are paid, and such interest shall compound annually.

(d) In addition to the Advisory Fee and MBSS Fee, the Company shall reimburse IPC, promptly upon request, for all reasonable out-of-pocket expenses incurred in the ordinary course of business by IPC in connection with IPC’s obligations hereunder and the services rendered prior to or subsequent to the date hereof, including fees and expenses paid to consultants, subcontractors (including members of the board of directors or similar governing bodies of the Company) and other third parties, and all reasonable expenses for meals and car travel incurred outside of normal business hours, each in connection with such obligations.

3

(e) In consideration for the Merchant Banking Strategic Services being provided by IPC, the Company will pay IPC an annual fee (the “MBSS Fee”), equal to an amount determined by IPC at or prior to the commencement of the fiscal year to represent the fair market value of Merchant Banking Strategic Services to be provided by IPC during the coming fiscal year. In no event shall the MBSS Fee exceed the amount that would have been payable by Company to IPC as Advisory Fees under the Original Agreement for the same period. The MBSS Fee shall be payable in advance on each day on which as Advisory Fee is payable pursuant to Section 3(b) above for the period beginning on the date hereof and ending on the termination of this Agreement. All MBSS Fees shall be fully earned when paid, and shall not be refundable, in whole or in part, regardless of whether or to what extent actual savings are realized under any Supply Agreement or all Supply Agreements in the aggregate. As and to the extent provided in Section 3(b), Advisory Fees payable under this Agreement will be reduced by MBSS Fees payable under this Agreement on a dollar for dollar basis.

4. Subsequent Fee.  During the Term, IPC will advise and provide services, guidance and support to the Company in connection with securing, structuring and negotiating a possible transaction resulting in a Qualified Public Offering or Change of Control involving the Company or any of its direct or indirect subsidiaries (however structured). In the event of a Change of Control or a Qualified Public Offering, the Company will pay to IPC an aggregate fee of $10,000,000 (“Subsequent Fee”). The Subsequent Fee shall be due and payable, as a condition to closing, at the closing of such transaction, provided,  that the Company shall not pay the Subsequent Fee if and for so long as any such payment would constitute a Default; provided, that the Company shall be obligated to pay any Subsequent Fee deferred under this Section 4: (i) to the extent that such payment would not constitute a Default or (ii) IPC instructs the Company not to pay all or any portion of the Subsequent Fee during any fiscal year. Interest will accrue on all of the due and unpaid Subsequent Fee not paid pursuant to this Section 4 at the Default Rate until such Subsequent Fee is paid, and such interest shall compound annually. For the avoidance of doubt, the Subsequent Fee is in addition to any other fees payable by the Company hereunder.

5. Personnel. IPC shall provide and devote to the performance of this Agreement such partners, employees and agents of IPC as IPC shall deem appropriate to the furnishing of the services required.

6. Liability.  None of IPC, any of its affiliates nor their respective partners, members, employees or agents (collectively, the “IPC Group”) shall be liable to the Company or its subsidiaries or affiliates for any loss, liability, damage or expense (collectively, a “Loss”) arising out of or in connection with the performance of services contemplated by this Agreement, unless and then only to the extent that such Loss is determined by a court in a final order from which no appeal can be taken, to have resulted solely from the gross negligence or willful misconduct on the part of such member of the IPC Group. IPC makes no representations or warranties, express or implied, in respect of the services to be provided by the IPC Group. Except as IPC may otherwise agree in writing on or after the date hereof: (a) each member of the IPC Group shall have the right to, and shall have no duty (contractual or otherwise) not to, directly or indirectly: (i) engage in the same or similar business activities or lines of business as the Company or its subsidiaries and (ii) do business with any client, customer, supplier, lender or investor of, to or in the Company or its subsidiaries; (b) no member of the IPC Group shall be liable to the Company or its subsidiaries or affiliates for breach of any duty (contractual or otherwise) by reason of any

4

such activities or of such person’s participation therein; and (c) in the event that any member of the IPC Group acquires knowledge of a potential transaction or matter that may be a corporate opportunity for both (A) the Company or any of its subsidiaries, on the one hand, and (B) IPC, on the other hand, or any other person, no member of the IPC Group shall have any duty (contractual or otherwise) to communicate or present such corporate opportunity to the Company or its subsidiaries and, notwithstanding any provision of this Agreement to the contrary, shall not be liable to the Company, its subsidiaries or any of their affiliates for breach of any duty (contractual or otherwise) by reasons of the fact that any member of the IPC Group directly or indirectly pursues or acquires such opportunity for itself, directs such opportunity to another person, or does not present such opportunity to the Company, its subsidiaries or any of their affiliates. In no event will any of the parties hereto be liable to any other party hereto for any punitive, exemplary, indirect, special, incidental or consequential damages, including lost profits or savings, whether or not such damages are foreseeable, or in respect of any liabilities relating to any third party claims (whether based in contract, tort or otherwise), other than for the Claims (as defined in Section 7) relating to the services which may be provided by IPC hereunder.

7. Indemnity. The Company and its subsidiaries shall defend, indemnify and hold harmless each member of the IPC Group from and against any and all Losses arising from any claim by any person with respect to, or in any way related to, this Agreement (including attorneys’ fees) (collectively, “Claims”) resulting from any act or omission of any member of the IPC Group except to the extent that such Loss is determined by a court in a final order from which no appeal can be taken to have resulted solely from the gross negligence or willful misconduct of such member of the IPC Group. The Company and its subsidiaries shall defend at its own cost and expense any and all suits or actions (just or unjust) which may be brought against the Company and its subsidiaries or any member of the IPC Group, or in which any member of the IPC Group may be impleaded with others upon any Claims, or upon any matter, directly or indirectly, related to or arising out of this Agreement or the performance of the obligations hereunder by the IPC Group, except that if such damage shall be proven to result solely from gross negligence or willful misconduct by a member of the IPC Group, then such member of the IPC Group shall reimburse the Company and its subsidiaries for the costs of defense and other costs incurred by the Company and its subsidiaries.

8. Notices. All notices hereunder shall be in writing and shall be delivered personally or mailed by United States mail, postage prepaid, addressed to the parties as follows:

to the Company:

Universal Hospital Services, Inc.

7700 France Avenue South, Suite 275
Edina, Minnesota 55435-5228
Attention: Chief Executive Officer
Fax: (952) 893-3227

with copies, which shall not constitute notice, to:

Irving Place Capital Management, L.P.

c/o Irving Place Capital

5

745 Fifth Avenue, Seventh Floor 
New York, New York 10151 
Attention: Eve Mongiardo 
Tel.: 212-551-4500
Fax: 212-551-4520

to IPC:

Irving Place Capital Management, L.P.

c/o Irving Place Capital

745 Fifth Avenue, Seventh Floor
New York, New York 10151
Attention: Eve Mongiardo
Tel.: 212-551-4500
Fax: 212-551-4520

with a copy, which shall not constitute notice, to:

Weil Gotshal & Manges LLP
767 5th Avenue
New York, NY 10153

Attention: Harvey Eisenberg and Christopher Machera

Tel.: 212-310-8000
Fax: 212-310-8007

9. Certain Definitions. For purposes of this Agreement,

“Adjusted EBITDA” means, with respect to the Company and its subsidiaries, on a consolidated basis, for any fiscal year, the sum of: (i) the net income for such fiscal year (before the payment of any dividends and excluding the effect of any extraordinary gains or losses during such period and the effect of any purchase accounting adjustments as a result of the acquisition of the Company by Holdco), plus (ii) interest expense, federal, state, foreign and local income, franchise, and other similar taxes, depreciation and amortization for such fiscal year, plus (iii) the Advisory Fees paid under this Agreement, any management fees paid to any other institutional investor that owns shares of Common Stock, plus (iv) any non-cash charges to the extent that such charges will not result in a cash charge in any future period (including any non-cash expenses relating to the options under FAS 123(R)) during such fiscal year, plus (or minus) (v) any unusual and non-recurring losses (or gains) for such fiscal year, minus (vi) any non-cash gains during such fiscal year, in each case, as determined in accordance with United States generally accepted accounting principles and as set forth on the Company’s financial statements for such fiscal year which have been approved by the board of directors of Holdco.

“Change of Control” means any transaction or  a series of transactions (other than pursuant to a public offering) involving the Company or Holdco and an independent third party or affiliated group of independent third parties pursuant to which (i) such party or parties acquires a  majority of the outstanding shares of capital stock of the Company or Holdco,  (ii) such party or parties acquires all or substantially all of the assets of the Company or Holdco, as determined on a consolidated basis (in either case of (i) or (ii), whether by merger, consolidation, sale, exchange, issuance, transfer or redemption of equity securities, by sale, exchange or transfer of the

6

Company’s consolidated assets, or otherwise), or (iii) IPC and/or its affiliates ceases to own, directly or indirectly, at least a majority of the outstanding shares of capital stock of the Company or Holdco.

“Default Rate” means 10.0% per annum.

“Qualified Public Offering”  means an underwritten sale to the public of the equity securities of the Company or any of its subsidiaries (or any of their respective successors) pursuant to an effective registration statement filed with the Securities and Exchange Commission on Form S-l (or any successor form) which results in proceeds (net of underwriting discounts and selling commissions) of an aggregate (together with proceeds from all previous Public Offerings) of at least $100,000,000 and after which such equity securities are listed on a national securities exchange or the NASDAQ Stock Market; provided that a Qualified Public Offering shall not include any issuance of equity securities in any merger or other business combination, and shall not include any registration of the issuance of securities to existing securityholders or employees of the Company and its subsidiaries on Form S-4 or Form S-8 (or any successor form).

10. Assignment.  No party hereto may assign any obligations hereunder to any other party without the prior written consent of the other parties (which consent shall not be unreasonably withheld); provided, that IPC may, without the consent of the Company, assign its rights under this Agreement to any of its affiliates.

11. No Waiver. The failure of a party to this Agreement to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing.

12. Successors. This Agreement and all the obligations and benefits hereunder shall inure to the successors and permitted assigns of the parties.

13. Counterparts. This Agreement may be executed and delivered by each party hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original and all of which taken together shall constitute but one and the same agreement.

14. Entire Agreement; Modification; Governing Law. The terms and conditions hereof constitute the entire agreement between the parties hereto with respect to the subject matter of this Agreement and supersede all previous communications, either oral or written, representations or warranties of any kind whatsoever, except as expressly set forth herein. No modifications of this Agreement nor waiver of the terms or conditions thereof shall be binding upon either party unless approved in writing by an authorized representative of such party. All issues concerning this agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the State of New York.

15. WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (A) ARISING UNDER

7

THIS AGREEMENT OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. EACH PARTY TO THIS AGREEMENT HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

8

IN WITNESS WHEREOF, the parties have executed this Second Amended and Restated Professional Services Agreement as of the date first written above.

UNIVERSAL HOSPITAL SERVICES INC.

By:/s/ James Pekarek

Name: James Pekarek

Title: Chief Financial Officer

IRVING PLACE CAPITAL MANAGEMENT, L.P.

By: IPCM GP, LLC, its general partner

By:/s/ Eve Mongiardo

Name: Eve Mongiardo

Title: Chief Operating Officer and Partner

9

EX-10.2

AMENDMENT NO. 1 TO
THE EXECUTIVE MANAGEMENT STOCK OPTION PLAN

WHEREAS, the Board of Directors (the “Board”) of UHS Holdco, Inc. (the “Company”) adopted the 2018 Executive Management Stock Option Plan (the “Plan”), effective May 9, 2018; and

WHEREAS, options under the Plan are intended to be compliant with Code Section 409A and the final regulations thereunder; and

WHEREAS, the Company desires to amend Section 8(c) of the Plan to clarify the treatment of options issued under the Plan in connection with a Change of Control (as defined under the Plan); and

WHEREAS, Section 11 of the Plan permits the Board of the Company to amend the Plan, from time to time in such manner as it may deem advisable; and 

WHEREAS, the Board of the Company on August 9, 2018 approved an amendment of the Plan to clarify the treatment of Options upon a Change of Control and authorized Company officers to prepare documentation regarding such amendment.

NOW, THEREFORE, the Plan is hereby amended, effective August 9, 2018, as follows:

1.Section 8(c) of the Plan is hereby amended and restated in its entirety as follows:

“(c)Exercise. An Option issued under this Plan may only be exercised upon a Change of Control.  In the event any Option, or any portion of an Option, is not exercised within that period, such Option or portion thereof shall immediately expire without compensation to the Optionee; provided that in connection with a Change of Control, provision may be made for a payment upon a Change of Control to Optionees in consideration for Options which may equal the excess, if any, of the value of the consideration to be paid in the transaction to holders of the same number of Shares subject to such Options (or if no consideration is paid in any such transaction, the fair market value of Shares subject to such Awards) over the aggregate Option Price, if any, of such Options.”

2.Except as set forth herein, the Plan, shall remain in full force and effect following the date of this Amendment.

EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Thomas J. Leonard, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Universal Hospital Services, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2018	/s/ Thomas J. Leonard
	Thomas J. Leonard
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, James B. Pekarek, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Universal Hospital Services, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2018	/s/ James B. Pekarek
	James B. Pekarek
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Universal Hospital Services, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2018, as filed with the Securities and Exchange Commission (the “Report”), I,  Thomas J. Leonard, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 13, 2018	/s/ Thomas J. Leonard
	Thomas J. Leonard
	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Universal Hospital Services, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2018, as filed with the Securities and Exchange Commission (the “Report”), I, James B. Pekarek, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 13, 2018	/s/ James B. Pekarek
	James B. Pekarek
	Executive Vice President and
	Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 13, 2018
Document and Entity Information
Entity Registrant Name	UNIVERSAL HOSPITAL SERVICES INC
Entity Central Index Key	0000886171
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		1,000
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Current assets:
Cash	$ 178
Accounts receivable, less allowance for doubtful accounts of $1,225 at June 30, 2018 and $1,234 at December 31, 2017	94,404	$ 89,637
Inventories	9,995	9,760
Other current assets	7,034	6,836
Total current assets	111,611	106,233
Property and equipment:
Medical equipment	657,316	629,193
Property and office equipment	108,559	105,341
Accumulated depreciation	(560,818)	(536,520)
Total property and equipment, net	205,057	198,014
Other long-term assets:
Goodwill	346,168	346,168
Other intangibles, net	147,945	151,921
Other	10,576	3,109
Total assets	821,357	805,445
Current liabilities:
Current portion of long-term debt	5,214	5,043
Book overdrafts		5,367
Accounts payable	27,428	36,689
Accrued compensation	25,131	21,498
Accrued interest	18,809	18,671
Other accrued expenses	18,221	17,763
Total current liabilities	94,803	105,031
Long-term debt, less current portion	687,664	698,065
Pension and other long-term liabilities	10,948	11,385
Deferred income taxes, net	35,506	35,342
Commitments and contingencies (Note 9)
Deficit
Common stock, $0.01 par value; 1,000 shares authorized, issued and outstanding at June 30, 2018 and December 31, 2017
Additional paid-in capital	250,661	250,018
Accumulated deficit	(252,204)	(287,998)
Accumulated other comprehensive loss	(6,214)	(6,638)
Total Universal Hospital Services, Inc. and Subsidiaries deficit	(7,757)	(44,618)
Noncontrolling interest	193	240
Total deficit	(7,564)	(44,378)	$ (59,950)	$ (59,485)
Total liabilities and deficit	$ 821,357	$ 805,445

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Consolidated Balance Sheets
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 1,225	$ 1,234
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	1,000	1,000
Common stock, shares issued	1,000	1,000
Common stock, shares outstanding	1,000	1,000

XML

Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Consolidated Statements of Operations
Revenues	$ 140,707	$ 128,210	$ 283,062	$ 258,863
Cost of revenues	90,534	86,195	181,396	171,080
Gross margin	50,173	42,015	101,666	87,783
Selling, general and administrative	34,742	30,618	67,782	64,575
Gain on legal settlement	(23,474)		(23,474)
Operating income	38,905	11,397	57,358	23,208
Interest expense	13,537	13,415	26,988	26,894
Income (loss) before income taxes and noncontrolling interest	25,368	(2,018)	30,370	(3,686)
Provision for income taxes	369	275	631	497
Consolidated net income (loss)	24,999	(2,293)	29,739	(4,183)
Net income attributable to noncontrolling interest	81	98	166	170
Net income (loss) attributable to Universal Hospital Services, Inc. and Subsidiaries	$ 24,918	$ (2,391)	$ 29,573	$ (4,353)

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Consolidated Statements of Comprehensive Income (Loss)
Consolidated net income (loss)	$ 24,999	$ (2,293)	$ 29,739	$ (4,183)
Other comprehensive income:
Gain on minimum pension liability, net of tax of $0	214	192	424	371
Total other comprehensive income	214	192	424	371
Comprehensive income (loss)	25,213	(2,101)	30,163	(3,812)
Comprehensive income attributable to noncontrolling interest	81	98	166	170
Comprehensive income (loss) attributable to Universal Hospital Services, Inc. and Subsidiaries	$ 25,132	$ (2,199)	$ 29,997	$ (3,982)

XML

Consolidated Statements of Comprehensive Loss (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Consolidated Statements of Comprehensive Income (Loss)
Gain on minimum pension liability, tax	$ 0	$ 0	$ 0	$ 0

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash flows from operating activities:
Consolidated net income (loss)	$ 29,739	$ (4,183)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation	33,645	35,664
Gain on legal settlement	(21,474)
Amortization of intangibles, contract costs, deferred financing costs and bond premium	5,013	5,460
Provision for doubtful accounts	406	73
Provision for inventory obsolescence	319	122
Non-cash share-based compensation expense	1,507	1,551
Gain on sales and disposals of equipment	(1,050)	(1,046)
Deferred income taxes	164	204
Interest on note receivable	(21)	(11)
Changes in operating assets and liabilities:
Accounts receivable	(5,173)	158
Inventories	(554)	495
Other operating assets	38	(414)
Accounts payable	209	(3,639)
Other operating liabilities	3,057	(3,381)
Net cash provided by operating activities	45,825	31,053
Cash flows from investing activities:
Medical equipment purchases	(23,273)	(24,296)
Property and office equipment purchases	(4,316)	(3,309)
Proceeds from disposition of property and equipment	1,813	2,091
Issuance of note receivable from officer	(581)	(936)
Acquisitions and refund of escrow		(1,923)
Net cash used in investing activities	(26,357)	(28,373)
Cash flows from financing activities:
Proceeds under senior secured credit facility	104,448	83,200
Payments under senior secured credit facility	(113,598)	(79,692)
Payments of principal under capital lease obligations	(3,072)	(3,419)
Holdback payment related to acquisition	(624)
Distributions to noncontrolling interests	(213)	(133)
Proceed from exercise of parent company stock options	285	29
Contribution from Parent		1,900
Shares forfeited for taxes	1,149
Change in book overdrafts	(5,367)	(4,565)
Net cash used in financing activities	(19,290)	(2,680)
Net change in cash and cash equivalents	178	0
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period	178
Supplemental cash flow information:
Interest paid	26,332	26,345
Income taxes paid	676	533
Non-cash activities:
Medical equipment purchases included in accounts payable (at end of period)	3,920	4,493
Capital lease additions	$ 1,858	$ 3,179

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Basis of Presentation

6 Months Ended

Jun. 30, 2018

Basis of Presentation

Basis of Presentation

1.Basis of Presentation

The interim consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared by Universal Hospital Services, Inc. and Subsidiaries (“we”, “our”, “us”, the “Company”, or “UHS”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).  Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted, pursuant to such rules and regulations.  These consolidated financial statements should be read in conjunction with the financial statements and related notes included in the Company’s 2017 Annual Report on Form 10-K filed with the SEC.

The interim consolidated financial statements presented herein as of June 30, 2018, reflect, in the opinion of management, all adjustments necessary for a fair presentation of the financial position and the results of operations and cash flows 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.

We are required to make estimates and assumptions about future events in preparing consolidated financial statements in conformity with GAAP.  These estimates and assumptions affect the amounts of assets, liabilities, revenues and expenses at the date of the unaudited consolidated financial statements.  While we believe that our past estimates and assumptions have been materially accurate, our current estimates are subject to change if different assumptions as to the outcome of future events are made.  We evaluate our estimates and judgments on an ongoing basis and predicate those estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances.  We make adjustments to our assumptions and judgments when facts and circumstances dictate.  Since future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates used in preparing the accompanying unaudited consolidated financial statements.

A description of our significant accounting policies is included in our 2017 Annual Report on Form 10-K. There have been no material changes to these policies for the quarter ended June 30, 2018, except for the adoption of ASU 2014-09, see Note 3, Revenue Recognition.

Historically, the Company reported under three segments.  Medical Equipment Solutions included supplemental and peak needs usage solutions, customized equipment agreement solutions, 360 On-site managed solutions, specialty medical equipment sale, distribution and disposable sales.  Clinical Engineering Solutions included supplemental maintenance, repair and remediation solutions, on-site biomed services, health care technology solutions, federal governmental services and clinical engineering capital sales.  Surgical Services included on-demand and scheduled usage solutions, on-site solutions for hospital and multi-facility health systems and disposable only sales.

Effective January 1, 2018, the Company changed its segment reporting to report its financial information under one reporting segment. The change in reporting was made to conform to the way the Company is currently managing and executing the business. Specifically, the chief operating decision maker (“CODM”) is making operating decisions and assessing performance using discrete financial information from one reportable segment, as our resources and infrastructure are shared and our go to market strategy have evolved with our Equipment Value Management (“EVM”) strategy. The current financial information is based upon the transformation of the business model that has occurred and the development of the new commercial framework – EVM.  EVM is an end-to-end approach to medical equipment management that helps hospitals recover cost and time that today are wasted through inefficient medical equipment processes.  EVM integrates customers supply chain, patient care and clinical engineering teams, connecting these siloed groups to streamline processes to improve stakeholder productivity and satisfaction while optimizing equipment utilization and lowering the total cost of ownership.  EVM provides the customer with the equipment they need, when they need it, with the assets serviced to the highest quality standards in the industry. EVM combines the capabilities of all service offerings.  The EVM solution links all of our service offerings at UHS. The Company has a similar compliment of services, type of customer for the Company’s services, method of distribution for the Company’s services and the regulatory environment is similar across the United States. Accordingly, we concluded that we operate as one reporting segment.  Finally, the Company analyzed its goodwill for potential impairment before and after the change in segments and concluded that there was no impairment.

Current year presentation of one reporting segment resulted in disaggregated revenue categories of Equipment Solutions which includes supplemental and peak needs usage solutions, surgical services on-demand and scheduled usage solutions, specialty medical equipment sale, distribution and disposable sales, clinical engineering capital sales and surgical disposable only sales.  Clinical Engineering includes supplemental maintenance, repair and remediation solutions, on-site biomed services, health care technology solutions and federal governmental services.  On-site Managed Services includes 360 On-site managed solutions and surgical services on-site solutions for hospital and multi-facility health systems.

The Company operates in one geographic region, the United States. As the Company is now reporting as one segment which equals the total Company’s results as reflected in the Consolidated Statement of Operations, restatement of prior periods was not necessary.

Principles of Consolidation

The consolidated financial statements include the accounts of Universal Hospital Services, Inc and its 100%-owned subsidiaries, UHS Surgical Services, Inc. (“Surgical Services” or “SS”) and Radiographic Equipment Services, Inc. (“RES”). In addition, in accordance with guidance issued by the Financial Accounting Standards Board (“FASB”), we have accounted for our equity investments in entities in which we are the primary beneficiary under the full consolidation method. All significant intercompany transactions and balances have been eliminated through consolidation. As the primary beneficiary, we consolidate the limited liability companies (“LLCs”) referred to in Note 11, Limited Liability Companies, as we effectively receive the majority of the benefits from such entities and we provide equipment lease guarantees for such entities.

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2018

Recent Accounting Pronouncements

Recent Accounting Pronouncements

2.Recent Accounting Pronouncements

Standards Adopted

In May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU replaced most existing revenue recognition guidance in GAAP when it became effective. The new standard is effective beginning after December 15, 2017 and interim periods within those years as stated in ASU 2015-14. The standard permits the use of either the full retrospective or cumulative effect (modified retrospective) transition method. We adopted this guidance on January 1, 2018 and selected the cumulative effect transition method.

We have performed a review of the requirements of the new guidance, codified by FASB in ASC Topic 606, and have applied the five-step model of the new standard to our contracts and have compared the results to our previous accounting practices under ASC Topic 605. Based on this analysis, the new standard did not have a material impact on the results of operations or cash flows of the Company. However, amendments to ASC Topic 340, Other Assets and Deferred Costs, require the capitalization of costs to obtain and fulfill customer contracts, which were previously expensed as incurred. The assets recognized for the costs to obtain and/or fulfill a contract will be amortized on a systematic basis that is consistent with the transfer of the services to which the asset relates. Accordingly, $6.2 million of prior year costs were capitalized as an asset upon adoption of this standard (effective January 1, 2018) and are being amortized over a period of five years.

In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The ASU became effective for annual and interim periods for fiscal years beginning after December 15, 2017.  The adoption of this standard did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01 Business Combination (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. The ASU became effective for annual and interim periods for fiscal years beginning after December 15, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07 Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-01”). ASU 2017-07 requires that a company present service cost separately from the other components of the net benefit cost.  This ASU became effective for annual and interim periods for fiscal years beginning after December 15, 2017. We adopted ASU 2017-07 on January 1, 2018 and retrospectively applied this ASU to all periods presented. As a result, $0.2 and $0.4 million of pension costs were reclassified from selling, general and administrative to interest expense for the three and six months ended June 30, 2017.

In May 2017, the FASB issued ASU No. 2017-09 Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 clarifies what constitutes a modification of a share-based payment award. This ASU became effective for annual and interim periods for fiscal years beginning after December 15, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements.

Standards Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02 on Leases (ASC Topic 842)(“ASU 2016-02”). ASU 2016-02 was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liability on the balance sheet and disclosing key information about leasing arrangements. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted. We have completed our internal evaluation and believe the adoption of this standard will have a material impact on our consolidated balance sheets.

In February 2018, the FASB issued ASU No. 2018-02 Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on our consolidated financial statements due to valuation allowance.

In March 2018, the FASB issued ASU No. 2018-05 Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU 2018-05”). ASU 2018-05 adds various SEC paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin No. 118. See Note 12, Income Taxes.

In June 2018, the FASB issued ASU No. 2018-07 Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 expands the scope of Topic 718 to include share based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permittedbut no earlier than an entity’s adoption date of Topic 606. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

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Revenue Recognition

6 Months Ended

Jun. 30, 2018

Revenue Recognition

Revenue Recognition

3.Revenue Recognition

The Company adopted ASU 2014-09, Revenue from Contracts with Customers, effective January 1, 2018, herein referred as ASC Topic 606. ASC Topic 606 is a comprehensive new revenue recognition model that requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. The Company adopted ASU 2014-09 using the cumulative effect (also known as the modified retrospective) method by recognizing the cumulative effect of initially applying the ASU as an adjustment to the opening balance of Accumulated Deficit at January 1, 2018. Therefore, the comparative information for the second quarter and six months ended June 30, 2017 has not been adjusted and continues to be reported under the previous accounting standards (ASC Topic 605). The details of the changes to our accounting policies and the quantitative impact of the changes are set out below.

Customer arrangements typically have multiple performance obligations to provide equipment solutions, clinical engineering and/or on-site equipment managed services on a per use and/or over time basis.  Equipment Solutions primarily consists of supplemental, peak needs and surgical equipment usage solutions. Clinical Engineering consists of supplemental maintenance, repair and remediation solutions, health care technology solutions, and federal government services.  On-site Managed Services consists of 360 on-site managed solutions in both our historical A360 program (using UHS-owned equipment) and our newer M360 program (managing customer-owned equipment).  Consideration paid by the customer for each performance obligation is billed within the month the service is performed, and contractual prices are established within our customer arrangements that are representative of the stand-alone selling price. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. There are no differences between revenue being earned under Topic 606 and the previous standard (ASC Topic 605).

The Company reports only its portion of revenues earned under certain revenue share arrangements in accordance with ASC Topic 606-10-55-36 to 606-10-55-40 “Principal versus Agent Considerations,” because, among other factors, the equipment manufacturer retains title to the equipment, maintains general inventory and physical loss risk of equipment on rental and because we earn a fixed percentage of the billings to customers.

In the following table, revenue is disaggregated by major service type.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Equipment Solutions	$	62,992	$	58,038	$	125,434	$	118,695
Clinical Engineering		39,303		34,413		79,048		67,754
On-Site Managed Services		38,412		35,759		78,580		72,414
	$	140,707	$	128,210	$	283,062	$	258,863

Concurrent with the adoption of Topic 606 on January 1, 2018, the Company also adopted amendments to ASC Topic 340, Other Assets and Deferred Costs, which requires the costs to obtain and fulfill customer contracts to be capitalized, which were previously expensed as incurred. The Company incurs costs related to obtaining new contracts. Management expects those costs attributable to new revenue production are recoverable and therefore the Company capitalized them as contract costs in accordance with ASC Topic 340 and is amortizing them over the anticipated period of the new revenue production.

The Company capitalized the estimated costs to obtain a contract in the amount of $6.2 million at January 1, 2018 with a corresponding adjustment to accumulated deficit for the “Impact of Change in Accounting Policy”.  The Contract Asset included in other long-term assets in the Consolidated Balance Sheet at June 30, 2018 is $7.1 million.  Capitalized costs are amortized over the expected life of the related contracts which is estimated to be five years. Amortization is computed on a straight-line basis which coincides with the predominant expected life of the underlying contracts. Amortization costs are reflected in selling, general and administrative expenses. The amount of amortization was $0.5 and $0.9 million for the three and six months ended June 30, 2018, respectively There was no impairment loss in relation to the costs capitalized during the three and six months ended June 30, 2018.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2018

Fair Value Measurements

Fair Value Measurements

4.Fair Value Measurements

Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2018 and December 31, 2017 are summarized in the following table by type of inputs applicable to the fair value measurements:

	Fair Value at June 30, 2018								Fair Value at December 31, 2017
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Contingent Consideration	$	—	$	—	$	200	$	200	$	—	$	—	$	133	$	133

A description of the inputs used in the valuation of assets and liabilities is summarized as follows:

Level 1 — Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets.

Level 2 — Inputs include directly or indirectly observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that are considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves that are observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 — Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities or related observable inputs that can be corroborated at the measurement date. Measurements of non-exchange traded derivative contract assets and liabilities are primarily based on valuation models, discounted cash flow models or other valuation techniques that are believed to be used by market participants. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in pricing assets or liabilities.

During 2017, we recorded a contingent consideration liability, in the form of an earn-out payment, related to our December 6, 2017 acquisition in the total amount of $0.1 million. Additionally, $0.07 million of an earn-out liability was recorded during the quarter ended June 30, 2018. The contingent consideration is based on achieving certain revenue results. The fair value of the liability was estimated using a discounted cash flow approach with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement.  The significant inputs in the Level 3 measurement not supported by market activity included our assessments of expected future cash flows during the earn-out period related to the assets acquired, appropriately discounted considering the uncertainties associated with the obligation, and calculated based on estimated revenues in accordance with the terms of the agreement. There were no earn-out payments for the three and six months ended June 30, 2018.

The assumptions used in preparing the discounted cash flow analyses included estimates of interest rates and the timing and amount of incremental cash flows.

A reconciliation of the beginning and ending balance for the Level 3 measurement are as follows:

(in thousands)
Balance at December 31, 2017	$	133
Addition		67
Balance at June 30, 2018	$	200

Fair Value of Other Financial Instruments

The Company considers that the carrying amount of financial instruments, including accounts receivable, accounts payable, accrued liabilities and senior secured credit facility, approximates fair value due to their short maturities. The fair value of our outstanding Original Notes and Add-on Notes (each as defined in Note 8, Long-Term Debt) as of June 30, 2018 and December 31, 2017, based on the quoted market price for the same or similar issues of debt, which represents a Level 2 fair value measurement, is approximately:

	June 30, 2018				December 31, 2017
	Carrying		Fair		Carrying		Fair
(in thousands)	Value		Value		Value		Value
Original Notes - 7.625% (1)	$	422,397	$	425,000	$	421,772	$	426,063
Add-on Notes - 7.625% (2)		223,588		220,000		224,338		220,550

(1) The carrying value of the Original Notes - 7.625% is net of unamortized deferred financing costs of $2.6 and $3.2 million as of June 30, 2018 and December 31, 2017, respectively.

(2) The carrying value of the Add-on Notes - 7.625% is net of unamortized deferred financing costs of $1.1 and $1.3 million as of June 30, 2018 and December 31, 2017, respectively, and includes unamortized bond premium of $4.7 and $5.7 million as of June 30, 2018 and December 31, 2017, respectively.

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Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2018

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

5.Goodwill and Other Intangible Assets

Our reporting segment has a negative carrying amount at June 30, 2018 and December 31, 2017. There were no impairments recorded in the three months and six months ended June 30, 2018 and 2017.

Our other intangible assets as of June 30, 2018 and December 31, 2017 consist of the following:

	June 30, 2018								December 31, 2017
			Accumulated								Accumulated
(in thousands)	Cost		Amortization		Impairment		Net		Cost		Amortization		Impairment		Net
Finite-life intangibles
Customer relationship	$	125,828	$	(109,701)	$	—	$	16,127	$	125,828	$	(105,911)	$	—	$	19,917
Non-compete agreements		2,101		(1,383)		—		718		2,101		(1,197)		—		904
Total finite-life intangibles		127,929		(111,084)		—		16,845		127,929		(107,108)		—		20,821
Indefinite-life intangibles
Trade names		166,000		—		(34,900)		131,100		166,000		—		(34,900)		131,100
Total intangible assets	$	293,929	$	(111,084)	$	(34,900)	$	147,945	$	293,929	$	(107,108)	$	(34,900)	$	151,921

Total amortization expense related to intangible assets was $2.0 and $2.3 million for the three months ended June 30, 2018 and 2017, respectively, and $4.0 and $5.3 million for the six months ended June 30, 2018 and 2017, respectively.

The estimated future amortization expense for identifiable intangible assets during the remainder of 2018 and the next five years is as follows:

(in thousands)
Remainder of 2018	$	3,619
2019		5,005
2020		2,765
2021		2,106
2022		1,376
2023		503

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Deficit

6 Months Ended

Jun. 30, 2018

Deficit

Deficit

6.Deficit

The following tables represent changes in deficit that are attributable to our shareholder and noncontrolling interests for the six month periods ended June 30, 2018 and 2017.

					Accumulated
	Additional				Other
	Paid-in		Accumulated		Comprehensive		Noncontrolling		Total
(in thousands)	Capital		Deficit		Loss		Interests		Deficit
Balance at December 31, 2017	$	250,018	$	(287,998)	$	(6,638)	$	240	$	(44,378)
Impact of change in accounting policy		—		6,221		—		—		6,221
Net income		—		29,573		—		166		29,739
Other comprehensive income		—		—		424		—		424
Share-based compensation		1,507		—		—		—		1,507
Stock options exercised		285		—		—		—		285
Shares forfeited for taxes		(1,149)		—		—		—		(1,149)
Cash distributions to noncontrolling interests		—		—		—		(213)		(213)
Balance at June 30, 2018	$	250,661	$	(252,204)	$	(6,214)	$	193	$	(7,564)

					Accumulated
	Additional				Other
	Paid-in		Accumulated		Comprehensive		Noncontrolling		Total
(in thousands)	Capital		Deficit		Loss		Interests		Deficit
Balance at December 31, 2016	$	244,986	$	(296,826)	$	(7,826)	$	181	$	(59,485)
Net (loss) income		—		(4,353)		—		170		(4,183)
Other comprehensive income		—		—		371		—		371
Contribution from Parent		1,900		—		—		—		1,900
Share-based compensation		1,551		—		—		—		1,551
Stock options exercised		29		—		—		—		29
Cash distributions to noncontrolling interests		—		—		—		(133)		(133)
Balance at June 30, 2017	$	248,466	$	(301,179)	$	(7,455)	$	218	$	(59,950)

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Share-Based Compensation

6 Months Ended

Jun. 30, 2018

Share-Based Compensation

Share-Based Compensation

7.Share-Based Compensation

During the six months ended June 30, 2018, activity under the 2007 Stock Option Plan (the “2007 Stock Option Plan”), of UHS Holdco, Inc., our parent company (“Parent”), was as follows:

						Weighted
						average
		Weighted		Aggregate		remaining
	Number of	average		intrinsic		contractual
(in thousands, except exercise price and years)	options	exercise price		value		term (years)
Outstanding at December 31, 2017	37,673	$	0.79	$	40,875	6.8
Granted	715		1.87
Exercised	(398)		0.72	$	459
Forfeited or expired	(264)		0.79
Outstanding at June 30, 2018	37,726	$	0.81	$	40,131	6.4
Exercisable at June 30, 2018	23,246	$	0.75	$	26,060	6.4
Remaining authorized options available for issue	5,317

The exercise price of the stock option award is equal to the market value of Parent’s common stock on the grant date as determined reasonably and in good faith by Parent’s Board of Directors and compensation committee and based on an analysis of a variety of factors, including peer group multiples, merger and acquisition multiples, and discounted cash flow analyses.

The intrinsic value of a stock award is the amount by which the market value of the underlying stock exceeds the exercise price of the award.

We determine the fair value of stock options using the Black-Scholes option pricing model. The estimated fair value of options, including the effect of estimated forfeitures, is recognized as an expense on a straight-line basis over the options’ expected vesting periods. The following assumptions were used in determining the fair value of stock options granted during the six months ended June 30, 2018 and 2017 under the Black-Scholes model.

	Six Months Ended
	June 30,
	2018			2017
Risk-free interest rate		1.62	%		1.62	%
Expected volatility		29.0	%		29.0	%
Dividend yield		N/A			N/A
Expected option life (years)		4.60			4.62
Black-Scholes Value of options	$	0.50		$	0.32

Expected volatility is based on an independent valuation of the stock of companies within our peer group. Given the lack of a true comparable company, the peer group consists of selected public health care companies representing our suppliers, customers and competitors within certain product lines. The risk free-interest rate is based on the U.S. Treasury yield curve in effect at the grant date based on the expected option life. The expected option life is estimated based on foreseeable trends.

At June 30, 2018, unearned non-cash share-based compensation that we expect to recognize as expense over a weighted average period of 1.6 years totals approximately $3.5 million, net of our estimated forfeiture rate of 2.0%. The expense could be accelerated upon the sale of Parent or the Company.

In April 2015, Parent granted the Company’s Chief Executive Officer 7.0 million restricted stock units which vest over four years. Total compensation expense related to this grant was $0.3 million and $0.3 million for the three months ended June 30, 2018 and 2017, respectively, and $0.6 million and $0.6 million for the six months ended June 30, 2018 and 2017, respectively.

Although Parent grants stock options and restricted stock units, the Company recognizes compensation cost, primarily included in Selling, General and Administrative expense, related to these options and units since the services are performed for its benefit.

On May 9, 2018, Parent adopted the 2018 Executive Management Stock Option Plan (the “2018 Plan”). Pursuant to the 2018 Plan, awards may be in the form of Non-Qualified Stock Options. The maximum number of shares for which options may be granted is 2,500,000 under the 2018 Plan. In the second quarter of 2018, 2,499,000 shares of common stock were issued to certain UHS executives, including Named Executive Officers other than the Chief Executive Officer pursuant to the 2018 Plan.

Options granted pursuant to the 2018 Plan have an exercise price of $0.71 per share and may only be exercised within 30 days after the signing of a binding agreement for the Company to undergo a Change in Control (as defined in the 2018 Plan) event.  No expense has been recorded for this plan in 2018.  Additionally, all awards of options granted pursuant to the 2018 Plan provide for a claw back of all proceeds received for such options in the event an award recipient voluntarily terminates his or her employment with the Company without Good Reason or has his or her employment terminated by the Company for Cause (as such terms are defined in the Company’s Executive Severance Pay Plan) within one year following a Change in Control of the Company. 

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Long-Term Debt

6 Months Ended

Jun. 30, 2018

Long-Term Debt

Long-Term Debt

8.Long-Term Debt

Long-term debt consists of the following:

	June 30,		December 31,
(in thousands)	2018		2017
Original Notes - 7.625% (1)	$	422,397	$	421,772
Add-on Notes - 7.625% (2)		223,588		224,338
Senior secured credit facility (3)		30,054		38,944
Capital lease obligations		16,839		18,054
		692,878		703,108
Less: Current portion of long-term debt		(5,214)		(5,043)
Total long-term debt	$	687,664	$	698,065

(1) The carrying value of the Original Notes - 7.625% is net of unamortized deferred financing costs of $2.6 and $3.2 million as of June 30, 2018 and December 31, 2017, respectively.

(2) The carrying value of the Add-on Notes - 7.625% is net of unamortized deferred financing costs of $1.1 and $1.3 million as of June 30, 2018 and December 31, 2017, respectively, and includes unamortized bond premium of $4.7 and $5.7 million as of June 30, 2018 and December 31, 2017, respectively.

(3) The carrying value of the senior secured credit facility is net of unamortized deferred financing costs of $1.0 and $1.3 million as of June 30, 2018 and December 31, 2017, respectively.

Original Notes and Add-on Notes — 7.625%. On August 7, 2012, we issued $425.0 million in aggregate principal amount of 7.625% Second Lien Senior Secured Notes due 2020 (the “Original Notes”) under an indenture dated as of August 7, 2012 (the “2012 Indenture”). On February 12, 2013, we issued $220.0 million in aggregate principal amount of 7.625% Second Lien Senior Secured Notes due 2020 (the “Add-on Notes”, and along with the Original Notes, the “2012 Notes”) as “additional notes” pursuant to the 2012 Indenture. The 2012 Notes mature on August 15, 2020.

The 2012 Indenture provides that the 2012 Notes are our second lien senior secured obligations and are fully and unconditionally guaranteed on a second lien senior secured basis by our existing and certain of our future 100%-owned domestic subsidiaries.

Interest on the 2012 Notes is payable entirely in cash, semiannually, in arrears, on February 15 and August 15 of each year, beginning on February 15, 2013. We may redeem some or all of the 2012 Notes at the redemption price of 101.906% before August 15, 2018, thereafter the redemption price is 100% as set forth in the 2012 Indenture (expressed as percentage of principal amount).  If we sell certain assets or undergo certain kinds of changes of control, we must offer to repurchase the 2012 Notes.

Our 2012 Notes are subject to certain debt covenants which are described below under the heading “2012 Indenture”.

Senior Secured Credit Facility.  On November 24, 2015, we entered into a Third Amended and Restated Credit Agreement with Bank of America, N.A., as agent for the lenders, and the lenders party thereto (the “Third Amended Credit Agreement”), which amended our then-existing senior secured credit facility originally dated as of May 31, 2007 and amended and restated as of May 6, 2010 and as of July 31, 2012.  We refer to the third amended and restated senior secured credit facility as the “senior secured credit facility.” The senior secured credit facility is a first lien senior secured asset based revolving credit facility that is available for working capital and general corporate purposes, including permitted investments, capital expenditures and debt repayments, on a fully revolving basis, subject to the terms and conditions set forth in the credit documents in the form of revolving loans, swing line loans and letters of credit. The Third Amended Credit Agreement extended the maturity date of the revolving loans to the earliest of (i) November 24, 2020 and (ii) 90 days prior to the maturity of the 2012 Notes, and reduced (a) the interest rate applicable to borrowings under the Third Amended Credit Agreement to a per annum rate, determined based on our usage of the credit facility as provided in the Third Amended Credit Agreement, ranging from 1.50% to 2.00% above the adjusted LIBOR rate used by the agent or, at our option, 0.50% to 1.00% above the Base Rate as defined in the Third Amended Credit Agreement and (b) the unused line fee rate to 0.25%.  Our obligations under the Third Amended Credit Agreement are secured by a first priority security interest in substantially all of the assets of the Company, Parent, Surgical Services and RES, excluding a pledge of the Company’s and its subsidiaries’ stock, any joint ventures and certain other exceptions. Our obligations under the Third Amended Credit Agreement are unconditionally guaranteed by the Parent, Surgical Services and RES.

Our senior secured credit facility provides the aggregate amount we may borrow under revolving loans up to $235.0 million, subject to our borrowing base.

As of June 30, 2018, we had $138.5 million of availability under the senior secured credit facility based on a borrowing base of $174.8 million less borrowings of $31.1 million and after giving effect to $5.3 million used for letters of credit.

The senior secured credit facility requires our compliance with various affirmative and negative covenants. Pursuant to the affirmative covenants, we and Parent agreed to, among other things, deliver financial and other information to the administrative agent, provide notice of certain events (including events of default), pay our obligations, maintain our properties, maintain the security interest in the collateral for the benefit of the administrative agent and the lenders and maintain insurance.

Among other restrictions, and subject to certain definitions and exceptions, the senior secured credit facility restricts our ability to:

· incur indebtedness;

· create or permit liens;

· declare or pay dividends and certain other restricted payments;

· consolidate, merge or recapitalize;

· acquire or sell assets;

· make certain investments, loans or other advances;

· enter into transactions with affiliates;

· change our line of business; and

· enter into hedging transactions.

The senior secured credit facility also contains a financial covenant that is triggered if our available borrowing capacity is less than $20.0 million for a certain period, which consists of a minimum ratio of trailing four-quarter Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) to cash interest expense, as such terms are defined in the senior secured credit facility.

The senior secured credit facility specifies certain events of default, including, among others, failure to pay principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, bankruptcy events, certain ERISA-related events, cross-defaults to other material agreements, change of control events and invalidity of guarantees or security documents.  Some events of default will be triggered only after certain cure periods have expired, or will provide for materiality thresholds.  If such a default occurs, the lenders under the senior secured credit facility would be entitled to take various actions, including all actions permitted to be taken by a secured creditor and the acceleration of amounts due under the senior secured credit facility.

At June 30, 2018, we had $31.1 million of borrowings outstanding of which $28.0 million was accruing interest at a rate of 4.1% and $3.1 million was accruing interest at a rate of 6.0%.  

We were in compliance with all financial debt covenants for all periods presented.

2012 Indenture. Our 2012 Notes are guaranteed, jointly and severally, on a second priority senior secured basis, by Surgical Services and RES, and are also similarly guaranteed by certain of our future 100%-owned domestic subsidiaries. The 2012 Notes are our second priority senior secured obligations and rank (i) equal in right of payment with all of our existing and future unsubordinated indebtedness, and effectively senior to any such unsecured indebtedness to the extent of the value of collateral; (ii) senior in right of payment to all of our and our guarantors’ existing and future subordinated indebtedness; (iii) effectively junior to our senior secured credit facility; and (iv) structurally subordinated to any indebtedness and other liabilities (including trade payables) of any of our future subsidiaries that are not guarantors.

The 2012 Indenture governing the 2012 Notes contains covenants that limit our and our guarantors’ ability, subject to certain definitions and exceptions, and certain of our future subsidiaries’ ability to:

· incur additional indebtedness;

· pay cash dividends or distributions on our capital stock or repurchase our capital stock or subordinated debt;

· issue redeemable stock or preferred stock;

· issue stock of subsidiaries;

· make certain investments;

· transfer or sell assets;

· create liens on our assets to secure debt;

· enter into transactions with affiliates; and

· merge or consolidate with another company.

The 2012 Indenture specifies certain events of default, including among others, failure to pay principal, interest or premium, violation of covenants and agreements, cross-defaults to other material agreements, bankruptcy events, invalidity of guarantees, and a default in the performance by us of the security documents relating to the 2012 Indenture. Some events of default will be triggered only after certain grace or cure periods have expired, or provide for materiality thresholds. In the event certain bankruptcy-related defaults occur, the 2012 Notes will become due and payable immediately. If any other default occurs, the Trustee (and in some cases the noteholders) would be entitled to take various actions, including acceleration of amounts due under the 2012 Indenture.

We were in compliance with all financial debt covenants for all periods presented.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies.

Commitments and Contingencies

9.Commitments and Contingencies

The Company, in the ordinary course of business, is subject to liability claims related to employees and the equipment that it rents and services. Asserted claims are subject to many uncertainties and the outcome of individual matters is not predictable. Certain claims where the loss is probable, a provision is recorded based on the Company’s best estimate. While the ultimate resolution of these actions may have an impact on the Company’s financial results for a particular reporting period, management believes that any such resolution would not have a material adverse effect on the financial position, results of operations or cash flows of the Company and the chance of a negative outcome on outstanding litigation is considered remote.

On January 13, 2015, the Company filed suit in the Western District of Texas against Hill-Rom Holdings, Inc., Hill-Rom Company, Inc. and Hill-Rom Services, Inc. (the “Defendants”). On March 7, 2018, the Company entered into a confidential settlement agreement resolving all disputes and legal claims of the parties associated with the suit filed by the Company against the Defendants. In consideration for this release, terms of the confidential settlement agreement called for the Company to receive legal title to certain medical equipment of the Defendants as specified in the agreement on May 1, 2018. The Company recorded a gain on legal settlement of approximately $23.5 million during the second quarter of 2018 based on the fair value of the assets received, measured using inputs of replacement cost and market data, which are considered a Level 3 fair value measurement. The gain did not result in a discrete tax charge during the second quarter of 2018, as the expected tax expense from the gain was offset by the reduction of our valuation allowance.

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Related Party Transactions

6 Months Ended

Jun. 30, 2018

Related Party Transactions

Related Party Transactions

10.Related Party Transactions

On May 31, 2007, we and affiliates of Irving Place Capital (together with its affiliates, “IPC”) entered into a professional services agreement pursuant to which IPC provides general advisory and management services to us with respect to financial and operating matters.  IPC is a principal owner of Parent, and each of Robert Juneja, Bret Bowerman and Keith Zadourian are members of our board of directors and are associated with IPC. The professional services agreement requires us to pay an annual fee for ongoing advisory and management services equal to the greater of $0.5 million or 0.75% of our Adjusted EBITDA (as defined in the professional services agreement) for the immediately preceding fiscal year, payable in quarterly installments. The professional services agreement provides that IPC will be reimbursed for its reasonable out-of-pocket expenses in connection with certain activities undertaken pursuant to the professional services agreement and will be indemnified for liabilities incurred in connection with its role under the professional services agreement, other than for liabilities resulting from its gross negligence or willful misconduct. The term of the professional services agreement commenced on May 31, 2007 and will remain in effect unless and until either party notifies the other of its desire to terminate, we are sold to a third-party purchaser or we consummate a qualified initial public offering, as defined in the professional services agreement. Total professional services fees incurred to IPC were $0.3 and $0.3 million for the three month periods ended June 30, 2018 and 2017, respectively, and $0.6 and $0.5 million for the six month periods ended June 30, 2018 and 2017, respectively.

In connection with the Restricted Stock Unit Award Agreement, dated as of April 13, 2015, between an officer and the Company, we entered into promissory note agreements with the officer dated April 13, 2016 for a total amount of $1.0 million, dated April 13, 2017 for a total amount of $0.9 million and dated April 13, 2018 for a total amount of $0.6 million which are included in other long-term assets in the Consolidated Balance Sheets. These note receivables bear annual interest at 1.45%-2.72%. The principal and accrued interest of these notes are due on the earliest of (i) the seventh anniversary of the date of this loan, (ii) any event with respect to borrower, which, in any such case of the loan were to remain outstanding on and after such date, would result in violation of Section 402 of the Sarbanes-Oxley Act of 2002, (iii) and certain events of default or (iv) a change in control. Interest income for these notes was $0.012 and $0.007 million for the three month periods ended June 30, 2018 and 2017, respectively, and $0.021 and $0.011 million for the six month periods ended June 30, 2018 and 2017, respectively.

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Limited Liability Companies

6 Months Ended

Jun. 30, 2018

Limited Liability Companies.

Limited Liability Companies

11.Limited Liability Companies

We participate with others in the formation of LLCs in which the Company becomes a partner and shares the financial interest with the other investors. The Company is the primary beneficiary of these LLCs. These LLCs acquire certain medical equipment for use in their respective business activities, which generally focus on surgical procedures. The LLCs will acquire medical equipment for rental purposes under equipment financing leases. At June 30, 2018, the LLCs had approximately $0.8 million of total assets. The third party investors in each respective LLC generally provide the lease financing company with individual proportionate lease guarantees based on their respective ownership percentages in the LLCs. In addition, the Company will provide such financing companies with its corporate guarantee based on its respective ownership interest in each LLC. In certain instances, the Company has provided such financing companies with an overall corporate guarantee in connection with equipment financing transactions. In such instances, the individual investors in each respective LLC will generally indemnify us against losses, if any, incurred in connection with its corporate guarantee. Additionally, we provide operational and administrative support to the LLCs in which it is a partner. As of June 30, 2018, we held interests in four active LLCs.

In accordance with guidance issued by the FASB, we account for equity investments in LLCs (in which we are the primary beneficiary) under the full consolidation method whereby transactions between the Company and the LLCs have been eliminated through consolidation.

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Income Taxes

6 Months Ended

Jun. 30, 2018

Income Taxes

Income Taxes

12.Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We evaluate the recoverability of our deferred tax assets by scheduling the expected reversals of deferred tax assets and liabilities in order to determine whether net operating loss carry forwards are recoverable prior to expiration and have established a valuation allowance in accordance with ASC Topic 740, “Income Taxes”. The tax expense for the three and six months ended June 30, 2018 primarily relates to state income taxes and tax amortization of indefinite-life intangibles. The expected tax expense from operating income during the three and six months ended June 30, 2018 was offset by the reduction of our valuation allowance. In future reporting periods, we will continue to assess the likelihood that deferred tax assets will be realizable.

In connection with our initial analysis of the impact of the Tax Cuts and Jobs Act, we recorded a provisional income tax benefit of approximately $18.3 million at December 31, 2017 for the revaluation of our net deferred tax liability. There were no changes recorded in the second quarter of 2018 to the provisional income tax benefit.

At June 30, 2018, the Company had available unused federal net operating loss carryforwards of approximately $171.8 million. The net operating loss carryforwards will expire at various dates from 2019 through 2038.

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Consolidating Financial Statements

6 Months Ended

Jun. 30, 2018

Consolidating Financial Statements

Consolidating Financial Statements

13.Consolidating Financial Statements

In accordance with the provisions of the 2012 Indenture, as 100%-owned subsidiaries of UHS, Surgical Services 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. and Subsidiaries

Consolidating Balance Sheets

(in thousands, except share and per share  information)

(unaudited)

	June 30, 2018
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Assets
Current assets:
Cash	$	(755)	$	933	$	—	$	178
Accounts receivable, less allowance for doubtful accounts		81,424		12,980		—		94,404
Due from affiliates		27,138		—		(27,138)		—
Inventories		4,205		5,790		—		9,995
Other current assets		6,078		956		—		7,034
Total current assets		118,090		20,659		(27,138)		111,611
Property and equipment:
Medical equipment		589,813		67,503		—		657,316
Property and office equipment		95,671		12,888		—		108,559
Accumulated depreciation		(505,799)		(55,019)		—		(560,818)
Total property and equipment, net		179,685		25,372		—		205,057
Other long-term assets:
Goodwill		283,141		63,027		—		346,168
Investment in subsidiary		79,770		—		(79,770)		—
Other intangibles, net		134,985		12,960		—		147,945
Other		8,930		1,646		—		10,576
Total assets	$	804,601	$	123,664	$	(106,908)	$	821,357
Liabilities and (Deficit) Equity
Current liabilities:
Current portion of long-term debt	$	3,554	$	1,660	$	—	$	5,214
Due to affiliates		—		27,138		(27,138)		—
Accounts payable		21,185		6,243		—		27,428
Accrued compensation		21,439		3,692		—		25,131
Accrued interest		18,809		—		—		18,809
Other accrued expenses		17,327		894		—		18,221
Total current liabilities		82,314		39,627		(27,138)		94,803
Long-term debt, less current portion		684,507		3,157		—		687,664
Pension and other long-term liabilities		10,942		6		—		10,948
Deferred income taxes, net		34,580		926		—		35,506
Commitments and contingencies
(Deficit) Equity
Common stock		—		—		—		—
Additional paid-in capital		250,676		76,003		(76,018)		250,661
Accumulated deficit		(255,956)		3,752		—		(252,204)
Accumulated loss in subsidiary		3,752		—		(3,752)		—
Accumulated other comprehensive loss		(6,214)		—		—		(6,214)
Total Universal Hospital Services, Inc. and Subsidiaries  (deficit) equity		(7,742)		79,755		(79,770)		(7,757)
Noncontrolling interest		—		193		—		193
Total (deficit) equity		(7,742)		79,948		(79,770)		(7,564)
Total liabilities and (deficit) equity	$	804,601	$	123,664	$	(106,908)	$	821,357

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Balance Sheets

(in thousands, except share and per share  information)

(unaudited)

	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 loss in subsidiary		588		—		(588)		—
Accumulated other comprehensive loss		(6,638)		—		—		(6,638)
Total Universal Hospital Services, Inc. and Subsidiaries (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. and Subsidiaries

Consolidating Statements of Operations

(in thousands)

(unaudited)

	Three Months Ended June 30, 2018
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Revenues	$	113,789	$	26,918	$	—	$	140,707
Cost of revenues		72,901		17,633		—		90,534
Gross margin		40,888		9,285		—		50,173
Selling, general and administrative		27,857		6,885		—		34,742
Gain on legal settlement		(23,474)		—		—		(23,474)
Operating income		36,505		2,400		—		38,905
Equity in earnings of subsidiary		(1,310)		—		1,310		—
Interest expense		13,028		509		—		13,537
Income before income taxes and noncontrolling interest		24,787		1,891		(1,310)		25,368
(Benefit) provision for income taxes		(212)		581		—		369
Consolidated net income		24,999		1,310		(1,310)		24,999
Net income attributable to noncontrolling interest		—		81		—		81
Net income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	24,999	$	1,229	$	(1,310)	$	24,918

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Statements of Operations

(in thousands)

(unaudited)

	Three Months Ended June 30, 2017
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Revenues	$	104,786	$	23,424	$	—	$	128,210
Cost of revenues		71,273		14,922		—		86,195
Gross margin		33,513		8,502		—		42,015
Selling, general and administrative		24,410		6,208		—		30,618
Operating income		9,103		2,294		—		11,397
Equity in earnings of subsidiary		(929)		—		929		—
Interest expense		12,781		634		—		13,415
(Loss) income before income taxes and noncontrolling interest		(2,749)		1,660		(929)		(2,018)
(Benefit) provision for income taxes		(456)		731		—		275
Consolidated net (loss) income		(2,293)		929		(929)		(2,293)
Net income attributable to noncontrolling interest		—		98		—		98
Net (loss) income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	(2,293)	$	831	$	(929)	$	(2,391)

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Statements of Operations

(in thousands)

(unaudited)

	Six Months Ended June 30, 2018
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Revenues	$	230,986	$	52,076	$	—	$	283,062
Cost of revenues		147,096		34,300				181,396
Gross margin		83,890		17,776		—		101,666
Selling, general and administrative		54,576		13,206		—		67,782
Gain on legal settlement		(23,474)		—		—		(23,474)
Operating income		52,788		4,570		—		57,358
Equity in earnings of subsidiary		(2,428)		—		2,428		—
Interest expense		25,920		1,068		—		26,988
Income before income taxes and noncontrolling interest		29,296		3,502		(2,428)		30,370
(Benefit) provision for income taxes		(443)		1,074		—		631
Consolidated net income		29,739		2,428		(2,428)		29,739
Net income attributable to noncontrolling interest		—		166		—		166
Net income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	29,739	$	2,262	$	(2,428)	$	29,573

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Statements of Operations

(in thousands)

(unaudited)

	Six Months Ended June 30, 2017
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Revenues	$	212,735	$	46,128	$		$	258,863
Cost of revenues		141,188		29,892		—		171,080
Gross margin		71,547		16,236		—		87,783
Selling, general and administrative		51,947		12,628		—		64,575
Operating income		19,600		3,608		—		23,208
Equity in earnings of subsidiary		(1,342)		—		1,342		—
Interest expense		25,714		1,180		—		26,894
(Loss) income before income taxes and noncontrolling interest		(4,772)		2,428		(1,342)		(3,686)
(Benefit) provision for income taxes		(589)		1,086		—		497
Consolidated net (loss) income		(4,183)		1,342		(1,342)		(4,183)
Net income attributable to noncontrolling interest		—		170		—		170
Net (loss) income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	(4,183)	$	1,172	$	(1,342)	$	(4,353)

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

	Three Months Ended June 30, 2018								Six Months Ended June 30, 2018
	Parent		Subsidiary						Parent		Subsidiary
	Issuer		Guarantors		Consolidating				Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated		UHS		SS & RES		Adjustments		Consolidated
Consolidated net income	$	24,999	$	1,310	$	(1,310)	$	24,999	$	29,739	$	2,428	$	(2,428)	$	29,739
Other comprehensive income:
Gain on minimum pension liability, net of tax		214		—		—		214		424		—		—		424
Total other comprehensive income		214		—		—		214		424		—		—		424
Comprehensive income		25,213		1,310		(1,310)		25,213		30,163		2,428		(2,428)		30,163
Comprehensive income attributable to noncontrolling interest		—		81		—		81		—		166		—		166
Comprehensive income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	25,213	$	1,229	$	(1,310)	$	25,132	$	30,163	$	2,262	$	(2,428)	$	29,997

	Three Months Ended June 30, 2017								Six Months Ended June 30, 2017
	Parent		Subsidiary						Parent		Subsidiary
	Issuer		Guarantors		Consolidating				Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated		UHS		Surgical Services		Adjustments		Consolidated
Consolidated net (loss) income	$	(2,293)	$	929	$	(929)	$	(2,293)	$	(4,183)	$	1,342	$	(1,342)	$	(4,183)
Other comprehensive income:
Gain on minimum pension liability, net of tax		192		—		—		192		371		—		—		371
Total other comprehensive income		192		—		—		192		371		—		—		371
Comprehensive (loss) income		(2,101)		929		(929)		(2,101)		(3,812)		1,342		(1,342)		(3,812)
Comprehensive income attributable to noncontrolling interest		—		98		—		98		—		170		—		170
Comprehensive (loss) income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	(2,101)	$	831	$	(929)	$	(2,199)	$	(3,812)	$	1,172	$	(1,342)	$	(3,982)

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended June 30, 2018
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Cash flows from operating activities:
Consolidated net income	$	29,739	$	2,428	$	(2,428)	$	29,739
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		28,795		4,850		—		33,645
Gain on legal settlement		(21,474)		—		—		(21,474)
Amortization of intangibles, contract costs, deferred financing costs and bond premium		2,505		2,508		—		5,013
Equity in earnings of subsidiary		(2,428)		—		2,428		—
Provision for doubtful accounts		324		82		—		406
Provision for inventory obsolescence		144		175		—		319
Non-cash share-based compensation expense		1,256		251		—		1,507
Gain on sales and disposals of equipment		(1,025)		(25)		—		(1,050)
Deferred income taxes		454		(290)		—		164
Interest on note receivable		(21)		—		—		(21)
Changes in operating assets and liabilities:
Accounts receivable		(5,655)		482		—		(5,173)
Due from affiliates		4,703		—		(4,703)		—
Inventories		(549)		(5)		—		(554)
Other operating assets		129		(91)		—		38
Accounts payable		(1,962)		2,171		—		209
Other operating liabilities		2,701		356		—		3,057
Net cash provided by operating activities		37,636		12,892		(4,703)		45,825
Cash flows from investing activities:
Medical equipment purchases		(17,872)		(5,401)		—		(23,273)
Property and office equipment purchases		(4,205)		(111)		—		(4,316)
Proceeds from disposition of property and equipment		1,654		159		—		1,813
Issuance of note receivable from officer		(581)		—		—		(581)
Net cash used in investing activities		(21,004)		(5,353)		—		(26,357)
Cash flows from financing activities:
Proceeds under senior secured credit facility		104,448		—		—		104,448
Payments under senior secured credit facility		(113,598)		—		—		(113,598)
Payments of principal under capital lease obligations		(2,028)		(1,044)		—		(3,072)
Holdback payment related to acquisition		—		(624)		—		(624)
Distributions to noncontrolling interests		—		(213)		—		(213)
Proceeds from exercise of parent company stock options		285		—		—		285
Shares forfeited for taxes		(1,149)		—		—		(1,149)
Due to affiliates		—		(4,703)		4,703		—
Change in book overdrafts		(5,345)		(22)		—		(5,367)
Net cash used in financing activities		(17,387)		(6,606)		4,703		(19,290)
Net change in cash and cash equivalents		(755)		933		—		178
Cash and cash equivalents at the beginning of period		—		—		—		—
Cash and cash equivalents at the end of period	$	(755)	$	933	$	—	$	178

Universal Hospital Services, Inc. and Subsidiaries

Consolidating Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended June 30, 2017
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Cash flows from operating activities:
Consolidated net (loss) income	$	(4,183)	$	1,342	$	(1,342)	$	(4,183)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		31,538		4,126		—		35,664
Amortization of intangibles, deferred financing costs and bond premium		2,929		2,531		—		5,460
Equity in earnings of subsidiary		(1,342)		—		1,342		—
Provision for doubtful accounts		85		(12)		—		73
Provision for inventory obsolescence		(10)		132		—		122
Non-cash share-based compensation expense		1,305		246		—		1,551
Gain on sales and disposals of equipment		(992)		(54)		—		(1,046)
Deferred income taxes		788		(584)		—		204
Interest on note receivable		(11)		—		—		(11)
Changes in operating assets and liabilities:
Accounts receivable		(466)		624		—		158
Due from affiliates		(5,731)		—		5,731		—
Inventories		14		481		—		495
Other operating assets		(134)		(280)		—		(414)
Accounts payable		(2,435)		(1,204)		—		(3,639)
Other operating liabilities		(2,430)		(951)		—		(3,381)
Net cash provided by operating activities		18,925		6,397		5,731		31,053
Cash flows from investing activities:
Medical equipment purchases		(19,105)		(5,191)		—		(24,296)
Property and office equipment purchases		(3,206)		(103)		—		(3,309)
Proceeds from disposition of property and equipment		2,010		81		—		2,091
Issuance of note receivable from officer		(936)		—		—		(936)
Acquisition and refund of escrow		3,691		(5,614)		—		(1,923)
Net cash used in investing activities		(17,546)		(10,827)		—		(28,373)
Cash flows from financing activities:
Proceeds under senior secured credit facility		83,200		—		—		83,200
Payments under senior secured credit facility		(79,692)		—		—		(79,692)
Payments of principal under capital lease obligations		(2,623)		(796)		—		(3,419)
Distributions to noncontrolling interests		—		(133)		—		(133)
Proceeds from exercise of parent company stock options		29		—		—		29
Contribution from Parent		1,900		—				1,900
Due to affiliates		—		5,731		(5,731)		—
Change in book overdrafts		(4,193)		(372)		—		(4,565)
Net cash (used in) provided by financing activities		(1,379)		4,430		(5,731)		(2,680)
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	$	—	$	—	$	—	$	—

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Concentration

6 Months Ended

Jun. 30, 2018

Concentration

Concentration

14.Concentration

One customer, Memorial Hermann Health System, accounted for approximately 13% and 15% of total revenue for the six months ended June 30, 2018 and 2017, respectively. The Company is operating under multi-year agreements with customary terms and conditions with this customer.

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Subsequent Event

6 Months Ended

Jun. 30, 2018

Subsequent Event

Subsequent Event

15.Subsequent Events

On August 9, 2018, we and IPC entered into a Second Amended and Restated Professional Services Agreement (the “Amended PSA”).  Pursuant to the Amended PSA, in addition to the services previously provided under the original agreement, IPC will provide services related to a possible transaction resulting in a qualified public offering or change of control and will receive a fee of $10 million payable upon the consummation of such transaction.  The Amended PSA also removes the acceleration of the advisory fee in the event of a sale of the Company or qualified public offering.  Additionally, the Amended PSA amends the agreement to terminate on the earliest of (a) consummation of a qualified public offering, (b) consummation of a change in control and (c) the tenth anniversary of the date of the Amended PSA, provided, however, that if no qualified public offering or change of control has been consummated prior to such tenth anniversary, the Amended PSA will automatically extend on a year to year basis until either party provides written notice of its desire to terminate the Amended PSA or at such time as a qualified public offering or change of control has been consummated.  The Amended PSA is attached as Exhibit 10.1 and incorporated herein by reference.

On August 9, 2018, the board of directors of the Parent approved and adopted an amendment to the 2018 Executive Management Stock Option Plan, dated May 9, 2018 (the “2018 Plan”) (a copy of which has been filed as Exhibit 10.1 on our Form 10-Q with the SEC on May 14, 2018) to confirm that any options granted under the 2018 Plan will only be exercisable upon a Change of Control of Parent (“Plan Amendment”). A copy of the Plan Amendment is filed with this Form 10-Q as Exhibit 10.2.

On August 13, 2018, Parent and Federal Street Acquisition Corp. (“FSAC”) entered into a definitive Merger Agreement.

For further information on the proposed Merger Agreement, please refer to our Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (“SEC”) on August 13, 2018.

The transaction is expected to close in the fourth quarter of calendar year 2018 and is subject to customary and other closing conditions, including regulatory approvals and FSAC stockholder approval.

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2018

Revenue Recognition

Summary of revenue disaggregated

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Equipment Solutions	$	62,992	$	58,038	$	125,434	$	118,695
Clinical Engineering		39,303		34,413		79,048		67,754
On-Site Managed Services		38,412		35,759		78,580		72,414
	$	140,707	$	128,210	$	283,062	$	258,863

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Measurements

Schedule of fair value of assets and liabilities measured on a recurring basis

	Fair Value at June 30, 2018								Fair Value at December 31, 2017
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Contingent Consideration	$	—	$	—	$	200	$	200	$	—	$	—	$	133	$	133

Schedule of reconciliation of the beginning and ending balance for the Level 3 measurement

(in thousands)
Balance at December 31, 2017	$	133
Addition		67
Balance at June 30, 2018	$	200

Schedule of fair value of debt instruments

	June 30, 2018				December 31, 2017
	Carrying		Fair		Carrying		Fair
(in thousands)	Value		Value		Value		Value
Original Notes - 7.625% (1)	$	422,397	$	425,000	$	421,772	$	426,063
Add-on Notes - 7.625% (2)		223,588		220,000		224,338		220,550

(1) The carrying value of the Original Notes - 7.625% is net of unamortized deferred financing costs of $2.6 and $3.2 million as of June 30, 2018 and December 31, 2017, respectively.

(2) The carrying value of the Add-on Notes - 7.625% is net of unamortized deferred financing costs of $1.1 and $1.3 million as of June 30, 2018 and December 31, 2017, respectively, and includes unamortized bond premium of $4.7 and $5.7 million as of June 30, 2018 and December 31, 2017, respectively.

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Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2018

Goodwill and Other Intangible Assets

Schedule of other intangible assets

	June 30, 2018								December 31, 2017
			Accumulated								Accumulated
(in thousands)	Cost		Amortization		Impairment		Net		Cost		Amortization		Impairment		Net
Finite-life intangibles
Customer relationship	$	125,828	$	(109,701)	$	—	$	16,127	$	125,828	$	(105,911)	$	—	$	19,917
Non-compete agreements		2,101		(1,383)		—		718		2,101		(1,197)		—		904
Total finite-life intangibles		127,929		(111,084)		—		16,845		127,929		(107,108)		—		20,821
Indefinite-life intangibles
Trade names		166,000		—		(34,900)		131,100		166,000		—		(34,900)		131,100
Total intangible assets	$	293,929	$	(111,084)	$	(34,900)	$	147,945	$	293,929	$	(107,108)	$	(34,900)	$	151,921

Schedule of estimated future amortization expense for identifiable intangible assets

(in thousands)
Remainder of 2018	$	3,619
2019		5,005
2020		2,765
2021		2,106
2022		1,376
2023		503

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Deficit (Tables)

6 Months Ended

Jun. 30, 2018

Deficit

Schedule of changes in equity that are attributable to shareholders and noncontrolling interests

					Accumulated
	Additional				Other
	Paid-in		Accumulated		Comprehensive		Noncontrolling		Total
(in thousands)	Capital		Deficit		Loss		Interests		Deficit
Balance at December 31, 2017	$	250,018	$	(287,998)	$	(6,638)	$	240	$	(44,378)
Impact of change in accounting policy		—		6,221		—		—		6,221
Net income		—		29,573		—		166		29,739
Other comprehensive income		—		—		424		—		424
Share-based compensation		1,507		—		—		—		1,507
Stock options exercised		285		—		—		—		285
Shares forfeited for taxes		(1,149)		—		—		—		(1,149)
Cash distributions to noncontrolling interests		—		—		—		(213)		(213)
Balance at June 30, 2018	$	250,661	$	(252,204)	$	(6,214)	$	193	$	(7,564)

					Accumulated
	Additional				Other
	Paid-in		Accumulated		Comprehensive		Noncontrolling		Total
(in thousands)	Capital		Deficit		Loss		Interests		Deficit
Balance at December 31, 2016	$	244,986	$	(296,826)	$	(7,826)	$	181	$	(59,485)
Net (loss) income		—		(4,353)		—		170		(4,183)
Other comprehensive income		—		—		371		—		371
Contribution from Parent		1,900		—		—		—		1,900
Share-based compensation		1,551		—		—		—		1,551
Stock options exercised		29		—		—		—		29
Cash distributions to noncontrolling interests		—		—		—		(133)		(133)
Balance at June 30, 2017	$	248,466	$	(301,179)	$	(7,455)	$	218	$	(59,950)

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Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2018

Share-Based Compensation

Schedule of activity of parent company under the 2007 Stock Option Plan

						Weighted
						average
		Weighted		Aggregate		remaining
	Number of	average		intrinsic		contractual
(in thousands, except exercise price and years)	options	exercise price		value		term (years)
Outstanding at December 31, 2017	37,673	$	0.79	$	40,875	6.8
Granted	715		1.87
Exercised	(398)		0.72	$	459
Forfeited or expired	(264)		0.79
Outstanding at June 30, 2018	37,726	$	0.81	$	40,131	6.4
Exercisable at June 30, 2018	23,246	$	0.75	$	26,060	6.4
Remaining authorized options available for issue	5,317

Schedule of assumptions used in determining the fair value of stock options granted under the Black-Scholes model

	Six Months Ended
	June 30,
	2018			2017
Risk-free interest rate		1.62	%		1.62	%
Expected volatility		29.0	%		29.0	%
Dividend yield		N/A			N/A
Expected option life (years)		4.60			4.62
Black-Scholes Value of options	$	0.50		$	0.32

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Long-Term Debt (Tables)

6 Months Ended

Jun. 30, 2018

Long-Term Debt

Schedule of long-term debt

	June 30,		December 31,
(in thousands)	2018		2017
Original Notes - 7.625% (1)	$	422,397	$	421,772
Add-on Notes - 7.625% (2)		223,588		224,338
Senior secured credit facility (3)		30,054		38,944
Capital lease obligations		16,839		18,054
		692,878		703,108
Less: Current portion of long-term debt		(5,214)		(5,043)
Total long-term debt	$	687,664	$	698,065

(1) The carrying value of the Original Notes - 7.625% is net of unamortized deferred financing costs of $2.6 and $3.2 million as of June 30, 2018 and December 31, 2017, respectively.

(2) The carrying value of the Add-on Notes - 7.625% is net of unamortized deferred financing costs of $1.1 and $1.3 million as of June 30, 2018 and December 31, 2017, respectively, and includes unamortized bond premium of $4.7 and $5.7 million as of June 30, 2018 and December 31, 2017, respectively.

(3) The carrying value of the senior secured credit facility is net of unamortized deferred financing costs of $1.0 and $1.3 million as of June 30, 2018 and December 31, 2017, respectively.

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Consolidating Financial Statements (Tables)

6 Months Ended

Jun. 30, 2018

Consolidating Financial Statements

Schedule of Consolidating Balance Sheets

	June 30, 2018
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Assets
Current assets:
Cash	$	(755)	$	933	$	—	$	178
Accounts receivable, less allowance for doubtful accounts		81,424		12,980		—		94,404
Due from affiliates		27,138		—		(27,138)		—
Inventories		4,205		5,790		—		9,995
Other current assets		6,078		956		—		7,034
Total current assets		118,090		20,659		(27,138)		111,611
Property and equipment:
Medical equipment		589,813		67,503		—		657,316
Property and office equipment		95,671		12,888		—		108,559
Accumulated depreciation		(505,799)		(55,019)		—		(560,818)
Total property and equipment, net		179,685		25,372		—		205,057
Other long-term assets:
Goodwill		283,141		63,027		—		346,168
Investment in subsidiary		79,770		—		(79,770)		—
Other intangibles, net		134,985		12,960		—		147,945
Other		8,930		1,646		—		10,576
Total assets	$	804,601	$	123,664	$	(106,908)	$	821,357
Liabilities and (Deficit) Equity
Current liabilities:
Current portion of long-term debt	$	3,554	$	1,660	$	—	$	5,214
Due to affiliates		—		27,138		(27,138)		—
Accounts payable		21,185		6,243		—		27,428
Accrued compensation		21,439		3,692		—		25,131
Accrued interest		18,809		—		—		18,809
Other accrued expenses		17,327		894		—		18,221
Total current liabilities		82,314		39,627		(27,138)		94,803
Long-term debt, less current portion		684,507		3,157		—		687,664
Pension and other long-term liabilities		10,942		6		—		10,948
Deferred income taxes, net		34,580		926		—		35,506
Commitments and contingencies
(Deficit) Equity
Common stock		—		—		—		—
Additional paid-in capital		250,676		76,003		(76,018)		250,661
Accumulated deficit		(255,956)		3,752		—		(252,204)
Accumulated loss in subsidiary		3,752		—		(3,752)		—
Accumulated other comprehensive loss		(6,214)		—		—		(6,214)
Total Universal Hospital Services, Inc. and Subsidiaries  (deficit) equity		(7,742)		79,755		(79,770)		(7,757)
Noncontrolling interest		—		193		—		193
Total (deficit) equity		(7,742)		79,948		(79,770)		(7,564)
Total liabilities and (deficit) equity	$	804,601	$	123,664	$	(106,908)	$	821,357

	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 loss in subsidiary		588		—		(588)		—
Accumulated other comprehensive loss		(6,638)		—		—		(6,638)
Total Universal Hospital Services, Inc. and Subsidiaries (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

Schedule of Consolidating Statements of Operations

	Three Months Ended June 30, 2018
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Revenues	$	113,789	$	26,918	$	—	$	140,707
Cost of revenues		72,901		17,633		—		90,534
Gross margin		40,888		9,285		—		50,173
Selling, general and administrative		27,857		6,885		—		34,742
Gain on legal settlement		(23,474)		—		—		(23,474)
Operating income		36,505		2,400		—		38,905
Equity in earnings of subsidiary		(1,310)		—		1,310		—
Interest expense		13,028		509		—		13,537
Income before income taxes and noncontrolling interest		24,787		1,891		(1,310)		25,368
(Benefit) provision for income taxes		(212)		581		—		369
Consolidated net income		24,999		1,310		(1,310)		24,999
Net income attributable to noncontrolling interest		—		81		—		81
Net income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	24,999	$	1,229	$	(1,310)	$	24,918

	Three Months Ended June 30, 2017
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Revenues	$	104,786	$	23,424	$	—	$	128,210
Cost of revenues		71,273		14,922		—		86,195
Gross margin		33,513		8,502		—		42,015
Selling, general and administrative		24,410		6,208		—		30,618
Operating income		9,103		2,294		—		11,397
Equity in earnings of subsidiary		(929)		—		929		—
Interest expense		12,781		634		—		13,415
(Loss) income before income taxes and noncontrolling interest		(2,749)		1,660		(929)		(2,018)
(Benefit) provision for income taxes		(456)		731		—		275
Consolidated net (loss) income		(2,293)		929		(929)		(2,293)
Net income attributable to noncontrolling interest		—		98		—		98
Net (loss) income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	(2,293)	$	831	$	(929)	$	(2,391)

	Six Months Ended June 30, 2018
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Revenues	$	230,986	$	52,076	$	—	$	283,062
Cost of revenues		147,096		34,300				181,396
Gross margin		83,890		17,776		—		101,666
Selling, general and administrative		54,576		13,206		—		67,782
Gain on legal settlement		(23,474)		—		—		(23,474)
Operating income		52,788		4,570		—		57,358
Equity in earnings of subsidiary		(2,428)		—		2,428		—
Interest expense		25,920		1,068		—		26,988
Income before income taxes and noncontrolling interest		29,296		3,502		(2,428)		30,370
(Benefit) provision for income taxes		(443)		1,074		—		631
Consolidated net income		29,739		2,428		(2,428)		29,739
Net income attributable to noncontrolling interest		—		166		—		166
Net income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	29,739	$	2,262	$	(2,428)	$	29,573

	Six Months Ended June 30, 2017
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Revenues	$	212,735	$	46,128	$		$	258,863
Cost of revenues		141,188		29,892		—		171,080
Gross margin		71,547		16,236		—		87,783
Selling, general and administrative		51,947		12,628		—		64,575
Operating income		19,600		3,608		—		23,208
Equity in earnings of subsidiary		(1,342)		—		1,342		—
Interest expense		25,714		1,180		—		26,894
(Loss) income before income taxes and noncontrolling interest		(4,772)		2,428		(1,342)		(3,686)
(Benefit) provision for income taxes		(589)		1,086		—		497
Consolidated net (loss) income		(4,183)		1,342		(1,342)		(4,183)
Net income attributable to noncontrolling interest		—		170		—		170
Net (loss) income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	(4,183)	$	1,172	$	(1,342)	$	(4,353)

Schedule of Consolidating Statements of Comprehensive Income (Loss)

	Three Months Ended June 30, 2018								Six Months Ended June 30, 2018
	Parent		Subsidiary						Parent		Subsidiary
	Issuer		Guarantors		Consolidating				Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated		UHS		SS & RES		Adjustments		Consolidated
Consolidated net income	$	24,999	$	1,310	$	(1,310)	$	24,999	$	29,739	$	2,428	$	(2,428)	$	29,739
Other comprehensive income:
Gain on minimum pension liability, net of tax		214		—		—		214		424		—		—		424
Total other comprehensive income		214		—		—		214		424		—		—		424
Comprehensive income		25,213		1,310		(1,310)		25,213		30,163		2,428		(2,428)		30,163
Comprehensive income attributable to noncontrolling interest		—		81		—		81		—		166		—		166
Comprehensive income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	25,213	$	1,229	$	(1,310)	$	25,132	$	30,163	$	2,262	$	(2,428)	$	29,997

	Three Months Ended June 30, 2017								Six Months Ended June 30, 2017
	Parent		Subsidiary						Parent		Subsidiary
	Issuer		Guarantor		Consolidating				Issuer		Guarantor		Consolidating
	UHS		SS & RES		Adjustments		Consolidated		UHS		Surgical Services		Adjustments		Consolidated
Consolidated net (loss) income	$	(2,293)	$	929	$	(929)	$	(2,293)	$	(4,183)	$	1,342	$	(1,342)	$	(4,183)
Other comprehensive income:
Gain on minimum pension liability, net of tax		192		—		—		192		371		—		—		371
Total other comprehensive income		192		—		—		192		371		—		—		371
Comprehensive (loss) income		(2,101)		929		(929)		(2,101)		(3,812)		1,342		(1,342)		(3,812)
Comprehensive income attributable to noncontrolling interest		—		98		—		98		—		170		—		170
Comprehensive (loss) income attributable to Universal Hospital Services, Inc. and Subsidiaries	$	(2,101)	$	831	$	(929)	$	(2,199)	$	(3,812)	$	1,172	$	(1,342)	$	(3,982)

Schedule of Consolidating Statements of Cash Flows

	Six Months Ended June 30, 2018
	Parent		Subsidiary
	Issuer		Guarantors		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Cash flows from operating activities:
Consolidated net income	$	29,739	$	2,428	$	(2,428)	$	29,739
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		28,795		4,850		—		33,645
Gain on legal settlement		(21,474)		—		—		(21,474)
Amortization of intangibles, contract costs, deferred financing costs and bond premium		2,505		2,508		—		5,013
Equity in earnings of subsidiary		(2,428)		—		2,428		—
Provision for doubtful accounts		324		82		—		406
Provision for inventory obsolescence		144		175		—		319
Non-cash share-based compensation expense		1,256		251		—		1,507
Gain on sales and disposals of equipment		(1,025)		(25)		—		(1,050)
Deferred income taxes		454		(290)		—		164
Interest on note receivable		(21)		—		—		(21)
Changes in operating assets and liabilities:
Accounts receivable		(5,655)		482		—		(5,173)
Due from affiliates		4,703		—		(4,703)		—
Inventories		(549)		(5)		—		(554)
Other operating assets		129		(91)		—		38
Accounts payable		(1,962)		2,171		—		209
Other operating liabilities		2,701		356		—		3,057
Net cash provided by operating activities		37,636		12,892		(4,703)		45,825
Cash flows from investing activities:
Medical equipment purchases		(17,872)		(5,401)		—		(23,273)
Property and office equipment purchases		(4,205)		(111)		—		(4,316)
Proceeds from disposition of property and equipment		1,654		159		—		1,813
Issuance of note receivable from officer		(581)		—		—		(581)
Net cash used in investing activities		(21,004)		(5,353)		—		(26,357)
Cash flows from financing activities:
Proceeds under senior secured credit facility		104,448		—		—		104,448
Payments under senior secured credit facility		(113,598)		—		—		(113,598)
Payments of principal under capital lease obligations		(2,028)		(1,044)		—		(3,072)
Holdback payment related to acquisition		—		(624)		—		(624)
Distributions to noncontrolling interests		—		(213)		—		(213)
Proceeds from exercise of parent company stock options		285		—		—		285
Shares forfeited for taxes		(1,149)		—		—		(1,149)
Due to affiliates		—		(4,703)		4,703		—
Change in book overdrafts		(5,345)		(22)		—		(5,367)
Net cash used in financing activities		(17,387)		(6,606)		4,703		(19,290)
Net change in cash and cash equivalents		(755)		933		—		178
Cash and cash equivalents at the beginning of period		—		—		—		—
Cash and cash equivalents at the end of period	$	(755)	$	933	$	—	$	178

	Six Months Ended June 30, 2017
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		SS & RES		Adjustments		Consolidated
Cash flows from operating activities:
Consolidated net (loss) income	$	(4,183)	$	1,342	$	(1,342)	$	(4,183)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		31,538		4,126		—		35,664
Amortization of intangibles, deferred financing costs and bond premium		2,929		2,531		—		5,460
Equity in earnings of subsidiary		(1,342)		—		1,342		—
Provision for doubtful accounts		85		(12)		—		73
Provision for inventory obsolescence		(10)		132		—		122
Non-cash share-based compensation expense		1,305		246		—		1,551
Gain on sales and disposals of equipment		(992)		(54)		—		(1,046)
Deferred income taxes		788		(584)		—		204
Interest on note receivable		(11)		—		—		(11)
Changes in operating assets and liabilities:
Accounts receivable		(466)		624		—		158
Due from affiliates		(5,731)		—		5,731		—
Inventories		14		481		—		495
Other operating assets		(134)		(280)		—		(414)
Accounts payable		(2,435)		(1,204)		—		(3,639)
Other operating liabilities		(2,430)		(951)		—		(3,381)
Net cash provided by operating activities		18,925		6,397		5,731		31,053
Cash flows from investing activities:
Medical equipment purchases		(19,105)		(5,191)		—		(24,296)
Property and office equipment purchases		(3,206)		(103)		—		(3,309)
Proceeds from disposition of property and equipment		2,010		81		—		2,091
Issuance of note receivable from officer		(936)		—		—		(936)
Acquisition and refund of escrow		3,691		(5,614)		—		(1,923)
Net cash used in investing activities		(17,546)		(10,827)		—		(28,373)
Cash flows from financing activities:
Proceeds under senior secured credit facility		83,200		—		—		83,200
Payments under senior secured credit facility		(79,692)		—		—		(79,692)
Payments of principal under capital lease obligations		(2,623)		(796)		—		(3,419)
Distributions to noncontrolling interests		—		(133)		—		(133)
Proceeds from exercise of parent company stock options		29		—		—		29
Contribution from Parent		1,900		—				1,900
Due to affiliates		—		5,731		(5,731)		—
Change in book overdrafts		(4,193)		(372)		—		(4,565)
Net cash (used in) provided by financing activities		(1,379)		4,430		(5,731)		(2,680)
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	$	—	$	—	$	—	$	—

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Basis of Presentation (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2018 USD ($) segment item	Dec. 31, 2017 segment
Number of reporting segments | segment	1	3
Number of regions | item	1
Impairment of goodwill | $	$ 0
Ownership interest in subsidiary (as a percent)	100.00%
Surgical Services
Ownership interest in subsidiary (as a percent)	100.00%
RES
Ownership interest in subsidiary (as a percent)	100.00%

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Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jan. 01, 2018
New Accounting Pronouncements or Change in Accounting Principle
Capitalized costs					$ 6,200
Capitalized costs amortization period			5 years
Selling, general and administrative	$ 34,742	$ 30,618	$ 67,782	$ 64,575
Interest expense	$ 13,537	13,415	$ 26,988	26,894
Accounting Standards Update 2014-09
New Accounting Pronouncements or Change in Accounting Principle
Capitalized costs					$ 6,200
Capitalized costs amortization period			5 years
Accounting Standards Update 2017-07
New Accounting Pronouncements or Change in Accounting Principle
Selling, general and administrative		(200)		(400)
Interest expense		$ 200		$ 400

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Revenue Recognition (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jan. 01, 2018
Disaggregation of Revenue [Line Items]
Revenue	$ 140,707	$ 128,210	$ 283,062	$ 258,863
Capitalized costs					$ 6,200
Contract asset	7,100		$ 7,100
Capitalized costs amortization period			5 years
Cost amortization	500		$ 900
Impairment loss	0		0
Equipment Solutions
Disaggregation of Revenue [Line Items]
Revenue	62,992	58,038	125,434	118,695
Clinical Engineering
Disaggregation of Revenue [Line Items]
Revenue	39,303	34,413	79,048	67,754
On-Site Managed Services
Disaggregation of Revenue [Line Items]
Revenue	$ 38,412	$ 35,759	$ 78,580	$ 72,414

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Fair Value Measurements (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Fair value measurements
Earn-out payments paid	$ 0	$ 0
Reconciliation of the beginning and ending balance for the Level 3 measurement
Balance at the beginning of the period		133
Additions		67
Balance at the end of the period	200	200
Recurring basis
Fair value measurements
Contingent Consideration	200	200	$ 133
Recurring basis | Level 3
Fair value measurements
Contingent Consideration	$ 200	$ 200	$ 133

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Fair Value Measurements - Other Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Feb. 12, 2013	Aug. 07, 2012
Fair Value of Other Financial Instruments
Carrying value	$ 692,878	$ 703,108
Original notes - 7.625%
Fair Value of Other Financial Instruments
Carrying value	422,397	421,772
Fair Value	$ 425,000	$ 426,063
Interest rate (as a percent)	7.625%	7.625%		7.625%
Unamortized deferred financing costs	$ 2,600	$ 3,200
Add-on notes - 7.625%
Fair Value of Other Financial Instruments
Carrying value	223,588	224,338
Fair Value	$ 220,000	$ 220,550
Interest rate (as a percent)	7.625%	7.625%	7.625%
Unamortized deferred financing costs	$ 1,100	$ 1,300
Unamortized bond premium	$ 4,700	$ 5,700

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Goodwill and Other Intangible Assets (Details)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($) segment	Jun. 30, 2017 USD ($)	Dec. 31, 2017 USD ($) segment
Goodwill
Balance at the beginning of the period			$ 346,168,000
Balance at the end of the period	$ 346,168,000		346,168,000		$ 346,168,000
Goodwill, Impairment Loss			0
Other intangible assets
Cost	127,929,000		127,929,000		127,929,000
Accumulated Amortization	(111,084,000)		(111,084,000)		(107,108,000)
Total	16,845,000		16,845,000		20,821,000
Cost	293,929,000		293,929,000		293,929,000
Accumulated Impairment	(34,900,000)		(34,900,000)		(34,900,000)
Net	147,945,000		147,945,000		$ 151,921,000
Total amortization expense	2,000,000	$ 2,300,000	$ 4,000,000	$ 5,300,000
Number of reporting segments | segment			1		3
Trade names
Other intangible assets
Cost	166,000,000		$ 166,000,000		$ 166,000,000
Net	131,100,000		131,100,000		131,100,000
Accumulated Impairment	(34,900,000)		(34,900,000)		(34,900,000)
Customer relationship
Other intangible assets
Cost	125,828,000		125,828,000		125,828,000
Accumulated Amortization	(109,701,000)		(109,701,000)		(105,911,000)
Total	16,127,000		16,127,000		19,917,000
Non-compete agreements
Other intangible assets
Cost	2,101,000		2,101,000		2,101,000
Accumulated Amortization	(1,383,000)		(1,383,000)		(1,197,000)
Total	$ 718,000		$ 718,000		$ 904,000

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Goodwill and Other Intangible Assets - Amortization (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Future estimated amortization expense
Remainder of 2018	$ 3,619
2019	5,005
2020	2,765
2021	2,106
2022	1,376
2023	$ 503

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Deficit (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Changes in shareholders equity that are attributable to shareholders and noncontrolling interests
Balance			$ (44,378)	$ (59,485)
Net income (loss)	$ 24,999	$ (2,293)	29,739	(4,183)
Other comprehensive income	214	192	424	371
Contribution from Parent				1,900
Share-based compensation			1,507	1,551
Stock option exercised			285	29
Shares forfeited for taxes			(1,149)
Cash distributions to noncontrolling interests			(213)	(133)
Balance	(7,564)	(59,950)	(7,564)	(59,950)
Additional Paid-in Capital
Changes in shareholders equity that are attributable to shareholders and noncontrolling interests
Balance			250,018	244,986
Contribution from Parent				1,900
Share-based compensation			1,507	1,551
Stock option exercised			285	29
Shares forfeited for taxes			(1,149)
Balance	250,661	248,466	250,661	248,466
Accumulated Deficit
Changes in shareholders equity that are attributable to shareholders and noncontrolling interests
Balance			(287,998)	(296,826)
Net income (loss)			29,573	(4,353)
Balance	(252,204)	(301,179)	(252,204)	(301,179)
Accumulated Other Comprehensive Loss
Changes in shareholders equity that are attributable to shareholders and noncontrolling interests
Balance			(6,638)	(7,826)
Other comprehensive income			424	371
Balance	(6,214)	(7,455)	(6,214)	(7,455)
Noncontrolling Interests
Changes in shareholders equity that are attributable to shareholders and noncontrolling interests
Balance			240	181
Net income (loss)			166	170
Cash distributions to noncontrolling interests			(213)	(133)
Balance	193	$ 218	193	$ 218
Accounting Standards Update 2014-09
Changes in shareholders equity that are attributable to shareholders and noncontrolling interests
Impact of change in accounting policy	6,221		6,221
Accounting Standards Update 2014-09 | Accumulated Deficit
Changes in shareholders equity that are attributable to shareholders and noncontrolling interests
Impact of change in accounting policy	$ 6,221		$ 6,221

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Share-Based Compensation (Details) - Parent Issuer UHS - Options - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Number of Options
Outstanding at the beginning of the period (in shares)	37,673
Granted (in shares)	715
Exercised (in shares)	(398)
Forfeited or expired (in shares)	(264)
Outstanding at the end of the period (in shares)	37,726	37,673
Exercisable at the end of the period (in shares)	23,246
Remaining authorized options available for issue	5,317
Weighted average exercise price
Outstanding at the beginning of the period (in dollars per share)	$ 0.79
Granted (in dollars per share)	1.87
Exercised (in dollars per share)	0.72
Forfeited or expired (in dollars per share)	0.79
Outstanding at the end of the period (in dollars per share)	0.81	$ 0.79
Exercisable at the end of the period (in dollars per share)	$ 0.75
Aggregate intrinsic value
Outstanding	$ 40,131	$ 40,875
Exercisable	26,060
Exercised	$ 459
Weighted average remaining contractual term
Outstanding	6 years 4 months 24 days	6 years 9 months 18 days
Exercisable	6 years 4 months 24 days

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Share-Based Compensation - Assumption (Details) - Parent Issuer UHS - Options - $ / shares	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Assumptions used in determining the fair value of stock options granted under the Black-Scholes model
Risk-free interest rate (as a percent)	1.62%	1.62%
Expected volatility (as a percent)	29.00%	29.00%
Expected option life	4 years 7 months 6 days	4 years 7 months 13 days
Black-Scholes Value of options (in dollars per share)	$ 0.50	$ 0.32

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Share-Based Compensation - Unearned Non-cash shared-based compensation (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended		6 Months Ended
	Apr. 30, 2015	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Unearned non-cash share-based compensation
Weighted average period for recognition of share-based compensation expense				1 year 7 months 6 days
Unearned non-cash share-based compensation expense expected to be recognized		$ 3.5		$ 3.5
Estimated forfeiture rate (as a percent)				2.00%
Chief Executive Officer | Restricted Stock Units (RSUs)
Unearned non-cash share-based compensation
Granted (in shares)	7,000,000
Vesting period	4 years
Compensation expense		$ 0.3	$ 0.3	$ 0.6	$ 0.6

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Share-Based Compensation - 2018 Plan (Details) - Parent Issuer UHS - 2018 Plan - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	May 09, 2018
Stock-based compensation
Shares authorized under the plan			2,500,000
Shares issued under the plan	2,499,000
Exercise price	$ 0.71	$ 0.71
Period to exercise options		30 days
Compensation expense		$ 0
Claw back period		1 year

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Long-Term Debt (Details)			6 Months Ended
	Aug. 15, 2018	Aug. 14, 2018	Jun. 30, 2018 USD ($) item	Dec. 31, 2017 USD ($)	Feb. 12, 2013 USD ($)	Aug. 07, 2012 USD ($)
Long-Term Debt
Long-term debt current and noncurrent			$ 692,878,000	$ 703,108,000
Less: Current portion of long-term debt			(5,214,000)	(5,043,000)
Total long-term debt			$ 687,664,000	698,065,000
Ownership interest in existing and certain future owned domestic subsidiaries (as a percent)			100.00%
2012 Notes | Forecast
Long-Term Debt
Redemption price (as a percent)	100.00%	101.906%
Original notes - 7.625%
Long-Term Debt
Long-term debt current and noncurrent			$ 422,397,000	$ 421,772,000
Interest rate (as a percent)			7.625%	7.625%		7.625%
Unamortized deferred financing costs			$ 2,600,000	$ 3,200,000
Aggregate outstanding principal amount						$ 425,000,000
Add-on notes - 7.625%
Long-Term Debt
Long-term debt current and noncurrent			223,588,000	224,338,000
Unamortized bond premium			$ 4,700,000	$ 5,700,000
Interest rate (as a percent)			7.625%	7.625%	7.625%
Unamortized deferred financing costs			$ 1,100,000	$ 1,300,000
Aggregate outstanding principal amount					$ 220,000,000
Senior secured credit facility
Long-Term Debt
Long-term debt current and noncurrent			30,054,000	38,944,000
Unamortized deferred financing costs			1,000,000	1,300,000
Maximum borrowing capacity			235,000,000
Available amount			138,500,000
Borrowing base			174,800,000
Borrowing outstanding			31,100,000
Letters of credit			5,300,000
Minimum available borrowing capacity required to be maintained for a certain period under financial covenants			$ 20,000,000
Minimum ratio of EBITDA to cash expense, number of quarters | item			4
Senior secured credit facility | Interest Rate Scenario 1
Long-Term Debt
Borrowing outstanding			$ 28,000,000
Debt Instrument, Interest Rate at Period End			4.10%
Senior secured credit facility | Interest Rate Scenario 2
Long-Term Debt
Borrowing outstanding			$ 3,100,000
Debt Instrument, Interest Rate at Period End			6.00%
Capital lease obligations
Long-Term Debt
Long-term debt current and noncurrent			$ 16,839,000	$ 18,054,000
Third Amended and Restated Credit Agreement
Long-Term Debt
Unused Capacity, Commitment Fee Percentage			0.25%
Period prior to maturity			90 days
Third Amended and Restated Credit Agreement | Base Rate | Minimum
Long-Term Debt
Margin over base rate (as a percent)			0.50%
Third Amended and Restated Credit Agreement | Base Rate | Maximum
Long-Term Debt
Margin over base rate (as a percent)			1.00%
Third Amended and Restated Credit Agreement | Adjusted LIBOR | Minimum
Long-Term Debt
Margin over base rate (as a percent)			1.50%
Third Amended and Restated Credit Agreement | Adjusted LIBOR | Maximum
Long-Term Debt
Margin over base rate (as a percent)			2.00%

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Commitments and Contingencies (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018
Commitments and Contingencies.
Gain (loss) on settlement	$ 23,474	$ 23,474

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Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Apr. 13, 2018	Apr. 13, 2017	Apr. 13, 2016
Related Party Transaction
Interest income			$ 21	$ 11
IPC | General Advisory And Management Services
Related Party Transaction
Specified amount of annual fees for ongoing advisory and management services			$ 500
Annual fee for ongoing advisory and management services as a percentage of adjusted EBITDA			0.75%
Amount incurred	$ 300	$ 300	$ 600	500
Executive Officer | Promissory Note Agreement
Related Party Transaction
Interest income	$ 12	$ 7	$ 21	$ 11
Executive Officer | Promissory Note Agreement | Other Noncurrent Assets
Related Party Transaction
Note receivable					$ 600	$ 900	$ 1,000
Executive Officer | Promissory Note Agreement | Minimum
Related Party Transaction
Interest rate			1.45%
Executive Officer | Promissory Note Agreement | Maximum
Related Party Transaction
Interest rate			2.72%

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Limited Liability Companies (Details) - Limited Liability Companies $ in Millions	Jun. 30, 2018 USD ($) item
Limited Liability Companies
Number of active LLCs in which the entity holds an interest | item	4
Surgical Services
Limited Liability Companies
Total assets of LLCs | $	$ 0.8

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Income Taxes - (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Jun. 30, 2018
Operating loss carryforwards
Tax Act provisional income tax benefit	$ 18.3
Federal
Operating loss carryforwards
Unused federal net operating loss carryforwards		$ 171.8

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Consolidating Financial Statements (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Consolidating Financial Statements
Ownership interest in subsidiary (as a percent)	100.00%
Current assets:
Cash	$ 178
Accounts receivable, less allowance for doubtful accounts	94,404	$ 89,637
Inventories	9,995	9,760
Other current assets	7,034	6,836
Total current assets	111,611	106,233
Property and equipment:
Medical equipment	657,316	629,193
Property and office equipment	108,559	105,341
Accumulated depreciation	(560,818)	(536,520)
Total property and equipment, net	205,057	198,014
Other long-term assets:
Goodwill	346,168	346,168
Other intangibles, net	147,945	151,921
Other	10,576	3,109
Total assets	821,357	805,445
Current liabilities:
Current portion of long-term debt	5,214	5,043
Book overdrafts		5,367
Accounts payable	27,428	36,689
Accrued compensation	25,131	21,498
Accrued interest	18,809	18,671
Other accrued expenses	18,221	17,763
Total current liabilities	94,803	105,031
Long-term debt, less current portion	687,664	698,065
Pension and other long-term liabilities	10,948	11,385
Deferred income taxes, net	35,506	35,342
Commitments and contingencies
(Deficit) Equity
Common stock
Additional paid-in capital	250,661	250,018
Accumulated deficit	(252,204)	(287,998)
Accumulated other comprehensive loss	(6,214)	(6,638)
Total Universal Hospital Services, Inc. and Subsidiaries deficit	(7,757)	(44,618)
Noncontrolling interest	193	240
Total deficit	(7,564)	(44,378)	$ (59,950)	$ (59,485)
Total liabilities and deficit	821,357	805,445
Consolidating Adjustments
Current assets:
Due from affiliates	(27,138)	(31,590)
Total current assets	(27,138)	(31,590)
Other long-term assets:
Investment in subsidiary	(79,770)	(76,606)
Total assets	(106,908)	(108,196)
Current liabilities:
Due to affiliates	(27,138)	(31,590)
Total current liabilities	(27,138)	(31,590)
(Deficit) Equity
Additional paid-in capital	(76,018)	(76,018)
Accumulated loss in subsidiary	(3,752)	(588)
Total Universal Hospital Services, Inc. and Subsidiaries deficit	(79,770)	(76,606)
Total deficit	(79,770)	(76,606)
Total liabilities and deficit	(106,908)	(108,196)
Parent Issuer UHS | Reportable Legal Entities
Current assets:
Cash	(755)
Accounts receivable, less allowance for doubtful accounts	81,424	76,093
Due from affiliates	27,138	31,590
Inventories	4,205	3,800
Other current assets	6,078	6,127
Total current assets	118,090	117,610
Property and equipment:
Medical equipment	589,813	564,316
Property and office equipment	95,671	92,414
Accumulated depreciation	(505,799)	(485,960)
Total property and equipment, net	179,685	170,770
Other long-term assets:
Goodwill	283,141	283,141
Investment in subsidiary	79,770	76,606
Other intangibles, net	134,985	136,563
Other	8,930	2,411
Total assets	804,601	787,101
Current liabilities:
Current portion of long-term debt	3,554	3,451
Book overdrafts		5,345
Accounts payable	21,185	29,842
Accrued compensation	21,439	18,696
Accrued interest	18,809	18,671
Other accrued expenses	17,327	16,018
Total current liabilities	82,314	92,023
Long-term debt, less current portion	684,507	694,171
Pension and other long-term liabilities	10,942	11,384
Deferred income taxes, net	34,580	34,126
(Deficit) Equity
Additional paid-in capital	250,676	250,033
Accumulated deficit	(255,956)	(288,586)
Accumulated loss in subsidiary	3,752	588
Accumulated other comprehensive loss	(6,214)	(6,638)
Total Universal Hospital Services, Inc. and Subsidiaries deficit	(7,742)	(44,603)
Total deficit	(7,742)	(44,603)
Total liabilities and deficit	804,601	787,101
Subsidiary Guarantors | Reportable Legal Entities
Current assets:
Cash	933
Accounts receivable, less allowance for doubtful accounts	12,980	13,544
Inventories	5,790	5,960
Other current assets	956	709
Total current assets	20,659	20,213
Property and equipment:
Medical equipment	67,503	64,877
Property and office equipment	12,888	12,927
Accumulated depreciation	(55,019)	(50,560)
Total property and equipment, net	25,372	27,244
Other long-term assets:
Goodwill	63,027	63,027
Other intangibles, net	12,960	15,358
Other	1,646	698
Total assets	123,664	126,540
Current liabilities:
Current portion of long-term debt	1,660	1,592
Book overdrafts		22
Due to affiliates	27,138	31,590
Accounts payable	6,243	6,847
Accrued compensation	3,692	2,802
Other accrued expenses	894	1,745
Total current liabilities	39,627	44,598
Long-term debt, less current portion	3,157	3,894
Pension and other long-term liabilities	6	1
Deferred income taxes, net	926	1,216
(Deficit) Equity
Additional paid-in capital	76,003	76,003
Accumulated deficit	3,752	588
Total Universal Hospital Services, Inc. and Subsidiaries deficit	79,755	76,591
Noncontrolling interest	193	240
Total deficit	79,948	76,831
Total liabilities and deficit	$ 123,664	$ 126,540

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Consolidating Financial Statements - Operations (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenue
Revenues	$ 140,707	$ 128,210	$ 283,062	$ 258,863
Cost of Revenue
Cost of revenues	90,534	86,195	181,396	171,080
Gross margin	50,173	42,015	101,666	87,783
Selling, general and administrative	34,742	30,618	67,782	64,575
Gain on legal settlement	(23,474)		(23,474)
Operating income	38,905	11,397	57,358	23,208
Interest expense	13,537	13,415	26,988	26,894
Income (loss) before income taxes and noncontrolling interest	25,368	(2,018)	30,370	(3,686)
Provision (benefit) for income taxes	369	275	631	497
Consolidated net income (loss)	24,999	(2,293)	29,739	(4,183)
Net income attributable to noncontrolling interest	81	98	166	170
Net income (loss) attributable to Universal Hospital Services, Inc. and Subsidiaries	24,918	(2,391)	29,573	(4,353)
Consolidating Adjustments
Cost of Revenue
Equity in earnings of subsidiary	1,310	929	2,428	1,342
Income (loss) before income taxes and noncontrolling interest	(1,310)	(929)	(2,428)	(1,342)
Consolidated net income (loss)	(1,310)	(929)	(2,428)	(1,342)
Net income (loss) attributable to Universal Hospital Services, Inc. and Subsidiaries	(1,310)	(929)	(2,428)	(1,342)
Parent Issuer UHS | Reportable Legal Entities
Revenue
Revenues	113,789	104,786	230,986	212,735
Cost of Revenue
Cost of revenues	72,901	71,273	147,096	141,188
Gross margin	40,888	33,513	83,890	71,547
Selling, general and administrative	27,857	24,410	54,576	51,947
Gain on legal settlement	(23,474)		(23,474)
Operating income	36,505	9,103	52,788	19,600
Equity in earnings of subsidiary	(1,310)	(929)	(2,428)	(1,342)
Interest expense	13,028	12,781	25,920	25,714
Income (loss) before income taxes and noncontrolling interest	24,787	(2,749)	29,296	(4,772)
Provision (benefit) for income taxes	(212)	(456)	(443)	(589)
Consolidated net income (loss)	24,999	(2,293)	29,739	(4,183)
Net income (loss) attributable to Universal Hospital Services, Inc. and Subsidiaries	24,999	(2,293)	29,739	(4,183)
Subsidiary Guarantors | Reportable Legal Entities
Revenue
Revenues	26,918	23,424	52,076	46,128
Cost of Revenue
Cost of revenues	17,633	14,922	34,300	29,892
Gross margin	9,285	8,502	17,776	16,236
Selling, general and administrative	6,885	6,208	13,206	12,628
Operating income	2,400	2,294	4,570	3,608
Interest expense	509	634	1,068	1,180
Income (loss) before income taxes and noncontrolling interest	1,891	1,660	3,502	2,428
Provision (benefit) for income taxes	581	731	1,074	1,086
Consolidated net income (loss)	1,310	929	2,428	1,342
Net income attributable to noncontrolling interest	81	98	166	170
Net income (loss) attributable to Universal Hospital Services, Inc. and Subsidiaries	$ 1,229	$ 831	$ 2,262	$ 1,172

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Consolidating Financial Statements - Comp Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Consolidating Financial Statements
Consolidated net income (loss)	$ 24,999	$ (2,293)	$ 29,739	$ (4,183)
Other comprehensive income:
Gain on minimum pension liability, net of tax	214	192	424	371
Total other comprehensive income	214	192	424	371
Comprehensive income (loss)	25,213	(2,101)	30,163	(3,812)
Comprehensive income attributable to noncontrolling interest	81	98	166	170
Comprehensive income (loss) attributable to Universal Hospital Services, Inc. and Subsidiaries	25,132	(2,199)	29,997	(3,982)
Consolidating Adjustments
Consolidating Financial Statements
Consolidated net income (loss)	(1,310)	(929)	(2,428)	(1,342)
Other comprehensive income:
Comprehensive income (loss)	(1,310)	(929)	(2,428)	(1,342)
Comprehensive income (loss) attributable to Universal Hospital Services, Inc. and Subsidiaries	(1,310)	(929)	(2,428)	(1,342)
Parent Issuer UHS | Reportable Legal Entities
Consolidating Financial Statements
Consolidated net income (loss)	24,999	(2,293)	29,739	(4,183)
Other comprehensive income:
Gain on minimum pension liability, net of tax	214	192	424	371
Total other comprehensive income	214	192	424	371
Comprehensive income (loss)	25,213	(2,101)	30,163	(3,812)
Comprehensive income (loss) attributable to Universal Hospital Services, Inc. and Subsidiaries	25,213	(2,101)	30,163	(3,812)
Subsidiary Guarantors | Reportable Legal Entities
Consolidating Financial Statements
Consolidated net income (loss)	1,310	929	2,428	1,342
Other comprehensive income:
Comprehensive income (loss)	1,310	929	2,428	1,342
Comprehensive income attributable to noncontrolling interest	81	98	166	170
Comprehensive income (loss) attributable to Universal Hospital Services, Inc. and Subsidiaries	$ 1,229	$ 831	$ 2,262	$ 1,172

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Consolidating Financial Statements - Cash Flows (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Cash flows from operating activities:
Consolidated net income (loss)	$ 24,999	$ (2,293)	$ 29,739	$ (4,183)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation			33,645	35,664
Gain on legal settlement			(21,474)
Amortization of intangibles, contract costs, deferred financing costs and bond premium			5,013	5,460
Provision for doubtful accounts			406	73
Provision for inventory obsolescence			319	122
Non-cash share-based compensation expense			1,507	1,551
Gain on sales and disposals of equipment			(1,050)	(1,046)
Deferred income taxes			164	204
Interest on note receivable			(21)	(11)
Changes in operating assets and liabilities:
Accounts receivable			(5,173)	158
Inventories			(554)	495
Other operating assets			38	(414)
Accounts payable			209	(3,639)
Other operating liabilities			3,057	(3,381)
Net cash provided by operating activities			45,825	31,053
Cash flows from investing activities:
Medical equipment purchases			(23,273)	(24,296)
Property and office equipment purchases			(4,316)	(3,309)
Proceeds from disposition of property and equipment			1,813	2,091
Issuance of note receivable from officer			(581)	(936)
Acquisitions and refund of escrow				(1,923)
Net cash used in investing activities			(26,357)	(28,373)
Cash flows from financing activities:
Proceeds under senior secured credit facility			104,448	83,200
Payments under senior secured credit facility			(113,598)	(79,692)
Payments of principal under capital lease obligations			(3,072)	(3,419)
Holdback payment related to acquisition			(624)
Distributions to noncontrolling interests			(213)	(133)
Proceed from exercise of parent company stock options			285	29
Contribution from Parent				1,900
Shares forfeited for taxes			1,149
Change in book overdrafts			(5,367)	(4,565)
Net cash used in financing activities			(19,290)	(2,680)
Net change in cash and cash equivalents			178	0
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period	178		178
Consolidating Adjustments
Cash flows from operating activities:
Consolidated net income (loss)	(1,310)	(929)	(2,428)	(1,342)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Equity in earnings of subsidiary	1,310	929	2,428	1,342
Changes in operating assets and liabilities:
Due from affiliates			(4,703)	5,731
Net cash provided by operating activities			(4,703)	5,731
Cash flows from financing activities:
Due to affiliates			4,703	(5,731)
Net cash used in financing activities			4,703	(5,731)
Parent Issuer UHS | Reportable Legal Entities
Cash flows from operating activities:
Consolidated net income (loss)	24,999	(2,293)	29,739	(4,183)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation			28,795	31,538
Gain on legal settlement			(21,474)
Amortization of intangibles, contract costs, deferred financing costs and bond premium			2,505	2,929
Equity in earnings of subsidiary	(1,310)	(929)	(2,428)	(1,342)
Provision for doubtful accounts			324	85
Provision for inventory obsolescence			144	(10)
Non-cash share-based compensation expense			1,256	1,305
Gain on sales and disposals of equipment			(1,025)	(992)
Deferred income taxes			454	788
Interest on note receivable			(21)	(11)
Changes in operating assets and liabilities:
Accounts receivable			(5,655)	(466)
Due from affiliates			4,703	(5,731)
Inventories			(549)	14
Other operating assets			129	(134)
Accounts payable			(1,962)	(2,435)
Other operating liabilities			2,701	(2,430)
Net cash provided by operating activities			37,636	18,925
Cash flows from investing activities:
Medical equipment purchases			(17,872)	(19,105)
Property and office equipment purchases			(4,205)	(3,206)
Proceeds from disposition of property and equipment			1,654	2,010
Issuance of note receivable from officer			(581)	(936)
Acquisitions and refund of escrow				3,691
Net cash used in investing activities			(21,004)	(17,546)
Cash flows from financing activities:
Proceeds under senior secured credit facility			104,448	83,200
Payments under senior secured credit facility			(113,598)	(79,692)
Payments of principal under capital lease obligations			(2,028)	(2,623)
Proceed from exercise of parent company stock options			285	29
Contribution from Parent				1,900
Shares forfeited for taxes			1,149
Change in book overdrafts			(5,345)	(4,193)
Net cash used in financing activities			(17,387)	(1,379)
Net change in cash and cash equivalents			(755)
Cash and cash equivalents at the end of period	(755)		(755)
Subsidiary Guarantors | Reportable Legal Entities
Cash flows from operating activities:
Consolidated net income (loss)	1,310	$ 929	2,428	1,342
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation			4,850	4,126
Amortization of intangibles, contract costs, deferred financing costs and bond premium			2,508	2,531
Provision for doubtful accounts			82	(12)
Provision for inventory obsolescence			175	132
Non-cash share-based compensation expense			251	246
Gain on sales and disposals of equipment			(25)	(54)
Deferred income taxes			(290)	(584)
Changes in operating assets and liabilities:
Accounts receivable			482	624
Inventories			(5)	481
Other operating assets			(91)	(280)
Accounts payable			2,171	(1,204)
Other operating liabilities			356	(951)
Net cash provided by operating activities			12,892	6,397
Cash flows from investing activities:
Medical equipment purchases			(5,401)	(5,191)
Property and office equipment purchases			(111)	(103)
Proceeds from disposition of property and equipment			159	81
Acquisitions and refund of escrow				(5,614)
Net cash used in investing activities			(5,353)	(10,827)
Cash flows from financing activities:
Payments of principal under capital lease obligations			(1,044)	(796)
Holdback payment related to acquisition			(624)
Distributions to noncontrolling interests			(213)	(133)
Due to affiliates			(4,703)	5,731
Change in book overdrafts			(22)	(372)
Net cash used in financing activities			(6,606)	$ 4,430
Net change in cash and cash equivalents			933
Cash and cash equivalents at the end of period	$ 933		$ 933

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Concentration (Details) - Customer concentration - item	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Concentration
Number of major customers	1	1
Total revenue | Memorial Hermann Health System
Concentration
Concentration risk (as a percent)	13.00%	15.00%

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Subsequent Event (Details) $ in Millions	Aug. 09, 2018 USD ($)
Subsequent event | IPC | Amended PSA
Subsequent event
Fee payable upon consummation of qualified public offering or change of control	$ 10