UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended March 31, 2012

or

o 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)

7700 France Avenue S, Suite 275

Edina, MN 55435-5228

(Former name, former address, and former fiscal year, if changed since last report)

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 o No x

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  (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No x

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x	Smaller reporting company o
(Do not check if a smaller reporting company)

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

Number of shares of common stock outstanding as of May 1, 2012:  1,000

Universal Hospital Services, Inc.

Table of Contents

		Page
PART I - FINANCIAL INFORMATION		1
ITEM 1.	Financial Statements	1
	Consolidated Balance Sheets — March 31, 2012 and December 31, 2011	1
	Consolidated Statements of Operations and Consolidated Statements of Other Comprehensive Income (Loss) —Three months ended March 31, 2012 and 2011	2
	Consolidated Statements of Cash Flows — Three months ended March 31, 2012 and 2011	3
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	35
ITEM 4.	Controls and Procedures	36
PART II - OTHER INFORMATION		36
ITEM 1.	Legal Proceedings	36
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	38
ITEM 6.	Exhibits	38
Signatures		40

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements – Unaudited

Consolidated Balance Sheets

(in thousands, except share and per share information)

(unaudited)

	March 31,			December 31,
	2012			2011
Assets
Current assets:
Cash and cash equivalents	$	202		$	1,161
Accounts receivable, less allowance for doubtful accounts of $1,946 at March 31, 2012 and $1,922 at December 31, 2011	77,632			70,592
Inventories	8,011			6,023
Deferred income taxes	10,599			12,328
Other current assets	6,206			4,392
Total current assets	102,650			94,496
Property and equipment, net:
Medical equipment, net	239,117			235,887
Property and office equipment, net	30,388			28,460
Total property and equipment, net	269,505			264,347
Other long-term assets:
Goodwill	335,073			326,618
Other intangibles, net	243,028			241,440
Other, primarily deferred financing costs, net	12,041			13,106
Total assets	$	962,297		$	940,007
Liabilities and Equity
Current liabilities:
Current portion of long-term debt	$	5,686		$	5,627
Interest rate swap	1,922			4,755
Book overdrafts	565			3,614
Accounts payable	32,880			31,359
Accrued compensation	16,328			11,571
Accrued interest	18,779			4,937
Dividend payable	780			771
Other accrued expenses	10,543			9,720
Total current liabilities	87,483			72,354
Long-term debt, less current portion	673,903			665,470
Pension and other long-term liabilities	13,492			12,981
Payable to Parent	19,472			19,019
Deferred income taxes	75,126			75,657
Commitments and contingencies (Note 9)
Equity
Common stock, $0.01 par value; 1,000 shares authorized, issued and outstanding at March 31, 2012 and December 31, 2011	—			—
Additional paid-in capital	214,294			214,294
Accumulated deficit	(111,769		)	(108,327		)
Accumulated other comprehensive loss	(10,107		)	(11,827		)
Total Universal Hospital Services, Inc. equity	92,418			94,140
Non controlling interest	403			386
Total equity	92,821			94,526
Total liabilities and equity	$	962,297		$	940,007

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

1

Consolidated Statements of Operations

(in thousands)

(unaudited)

	Three Months Ended
	March 31,
	2012			2011
Revenue
Medical equipment outsourcing	$	80,037		$	66,238
Technical and professional services	20,129			10,870
Medical equipment sales and remarketing	6,368			5,606
Total revenues	106,534			82,714
Cost of Sales
Cost of medical equipment outsourcing	31,976			24,435
Cost of technical and professional services	15,768			7,884
Cost of medical equipment sales and remarketing	4,753			4,300
Medical equipment depreciation	16,906			17,166
Total costs of medical equipment outsourcing, technical and professional services and medical equipment sales and remarketing	69,403			53,785
Gross margin	37,131			28,929
Selling, general and administrative	27,659			22,381
Acquisition and integration expenses	104			774
Operating income	9,368			5,774
Interest expense	15,499			11,706
Loss before income taxes and non controlling interest	(6,131		)	(5,932		)
Provision (benefit) for income taxes	(2,871		)	214
Consolidated net loss	$	(3,260	)	$	(6,146	)
Net income attributable to non controlling interest	182			—
Net loss attributable to Universal Hospital Services, Inc.	$	(3,442	)	$	(6,146	)

Universal Hospital Services, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2012			2011
Consolidated net loss	$	(3,260	)	$	(6,146	)
Other comprehensive income:
Gain on cash flow hedge, net of tax	1,720			1,701
Total other comprehensive income	1,720			1,701
Comprehensive loss	(1,540		)	(4,445		)
Comprehensive income attributable to non controlling interest	182			—
Comprehensive loss attributable to Universal Hospital Services, Inc.	$	(1,722	)	$	(4,445	)

2

Universal Hospital Services, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Three Months Ended
	March 31,
	2012			2011
Cash flows from operating activities:
Consolidated net loss	$	(3,260	)	$	(6,146	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	19,574			19,296
Amortization of intangibles, deferred financing costs and bond premium	4,749			4,035
Provision for doubtful accounts	168			164
Provision for inventory obsolescence	55			22
Non-cash stock-based compensation expense	1,075			1,098
Non-cash gain on trade-in of recalled equipment	(1,356		)	(710		)
Gain on sales and disposals of equipment	(436		)	(302		)
Deferred income taxes	(2,279		)	2,941
Changes in operating assets and liabilities:
Accounts receivable	(6,245		)	(29		)
Inventories	(1,244		)	34
Other operating assets	(1,633		)	(493		)
Accounts payable	(1,692		)	(1,590		)
Other operating liabilities	16,554			6,862
Net cash provided by operating activities	24,030			25,182
Cash flows from investing activities:
Medical equipment purchases	(12,560		)	(25,188		)
Property and office equipment purchases	(1,639		)	(1,833		)
Proceeds from disposition of property and equipment	958			538
Acquisitions, net of cash acquired	(11,445		)	—
Net cash used in investing activities	(24,686		)	(26,483		)
Cash flows from financing activities:
Proceeds under senior secured credit facility	31,600			21,500
Payments under senior secured credit facility	(23,100		)	(20,200		)
Payments of principal under capital lease obligations	(1,813		)	—
Payoff of acquired debt	(3,163		)	(1,090		)
Distributions to non controlling interests	(182		)	—
Contributions from new members to limited liability companies	17			—
Proceeds from exercise of parent company stock options	150			—
Dividend and equity distribution payments	(763		)	—
Change in book overdrafts	(3,049		)	1,091
Net cash provided by (used by) financing activities	(303		)	1,301
Net change in cash and cash equivalents	(959		)	—
Cash and cash equivalents at the beginning of period	1,161			—
Cash and cash equivalents at the end of period	$	202		$	—
Supplemental cash flow information:
Interest paid	$	965		$	1,090
Income taxes paid	$	487		$	87
Non-cash activities:
Medical equipment purchases included in accounts payable (at end of period)	$	10,551		$	13,533
Capital lease additions	$	2,070		$	1,150

3

Universal Hospital Services, Inc.

NOTES TO CONSOLIDATED UNAUDITED QUARTERLY FINANCIAL STATEMENTS

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. (“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 2011 Annual Report on Form 10-K filed with the SEC.

Acquisitions are described in Note 3, Acquisitions, and results of acquisitions are included in UHS’s consolidated results of operations since the date of acquisition.

The interim consolidated financial statements presented herein as of March 31, 2012, 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.

The December 31, 2011 balance sheet amounts were derived from audited financial statements.

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 2011 Annual Report on Form 10-K. There have been no material changes to these policies for the quarter ended March 31, 2012.

Principles of Consolidation

The consolidated financial statements include the accounts of UHS and its wholly owned subsidiary, UHS Surgical Services, Inc. (“Surgical Services”) since the acquisition of its predecessor companies, Emergent Group, Inc. (“Emergent”) and PRI Medical Technologies, Inc. on April 1, 2011. 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

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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

Standard Adopted

In September 2011, the FASB issued an amendment to the authoritative guidance on goodwill impairment testing. The objective of this amendment is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendment permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350, Intangibles — Goodwill and Other. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. The adoption of this amendment did not have a material effect on our consolidated financial statements.

3.Acquisitions

On January 3, 2012, we completed the acquisition of all of the outstanding stock of a Florida-based laser surgical laser equipment service provider for total consideration of approximately $16.1 million. The consideration total consists of $11.0 of cash paid at closing, $3.2 million of debt assumed that was paid off upon closing, and $1.9 million of holdback amounts expected to be paid by January 2013.  The acquisition was funded through our $195.0 million Senior Secured Credit Facility.

We have preliminarily allocated the following asset and liability amounts related to the acquisition within our March 31, 2012 consolidated balance sheet:  holdback amounts payable $1.9 million, other working capital items $0.4 million, fixed assets $5.4 million, identifiable intangible assets $5.3 million, non-deductible goodwill $8.4 million, deferred income tax liabilities $3.4 million and long-term debt (paid off subsequent to closing) $3.2 million. We will utilize additional information, particularly as it relates to intangible assets and income taxes, as it becomes available in order to finalize this purchase price allocation as soon as practicable, but no later than January 1, 2013, one year from the acquisition date.

5

On March 31, 2012 we completed the acquisition of certain assets of the southern California equipment rental division of a medical equipment manufacturer. Total purchase price of the transaction was approximately $0.8 million, including approximately $0.4 million in contingent consideration to be paid over four years based on future revenues. Assets acquired consist of medical equipment of $0.4 million and customer relationship intangibles of $0.3 million.

Acquistions completed during the first quarter of 2012 are not material individually or in the aggregate.

On April 1, 2011, we completed our acquisition of Emergent Group, which was, at December 31, 2011, merged into its principal operating subsidiary, PRI Medical, whose name was subsequently changed to UHS Surgical Services, Inc., and which we refer to as “Surgical Services”. Surgical Services is a provider of laser and mobile surgical equipment services primarily for the urology community.

We acquired Surgical Services (previously, Emergent Group), for a total purchase price of approximately $65.3 million, which represents the sum of $60.0 million of cash paid for equity, $4.8 million of capital lease liability assumed and $2.0 million of transaction costs, less cash acquired of $1.5 million. All outstanding shares were purchased at a price of $8.46 per share. The acquisition was funded primarily by drawings under our $195.0 million Senior Secured Credit Facility, which is described below in Note 8, Long-Term Debt.

As of March 31, 2012, we were substantially complete with our purchase price allocation, with the exception of income taxes, for which we will utilize additional information as we complete and file our related tax returns. We expect to finalize all aspects of the valuation and complete the purchase price allocation in the second quarter of fiscal 2012.

6

The amounts of revenue and net income of Surgical Services included in the Company’s consolidated statements of operations from the April 1, 2011 to March 31, 2012 are as follows:

	Revenue and income included in the Consolidated Statements of Operations from:
(in thousands)	January 1, 2012 to March 31, 2012			April 1, 2011 to December 31, 2011
Revenue	$	11,841		$	25,421
Net income attributable to Emergent Group	(178		)	(1,718		)

The following unaudited supplemental pro forma information presents the financial results as if the acquisition of Emergent Group had occurred on January 1, 2011 for the three months ended March 31, 2011. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been made on January 1, 2011, nor are they indicative of any future results.

	Three Months Ended
(in thousands)	March 31, 2011
Revenue	$	90,542
Net loss attributable to Universal Hospital Services, Inc.	(8,723		)

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Emergent Group to reflect the additional depreciation, amortization and interest that would have been charged assuming the fair value adjustments primarily to medical equipment and intangible assets, and draws on the line of credit to fund the acquisition had been applied on January 1, 2011, as applicable, together with the consequential tax effects.

4.Fair Value Measurements

Financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2012 and December 31, 2011, in accordance with Accounting Standards Codification (“ASC”) Topic 820, are summarized in the following table by type of inputs applicable to the fair value measurements:

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	Fair Value at March 31, 2012								Fair Value at December 31, 2011
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Interest Rate Swap	$	—	$	1,922	$	—	$	1,922	$	—	$	4,755	$	—	$	4,755
Contingent Consideration	$	—	$	—	$	345	$	345	$	—	$	—	$	—	$	—

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, including interest rates and yield curves that are observable at commonly quoted intervals. The level 2 inputs used to determine the fair value of our interest rate swap include interest rates and yield curves that are observable at commonly quoted intervals.

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 nonexchange 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.

At March 31, 2012, we recorded a contingent consideration liability, in the form of an earn-out payment, related to our acquisition of certain assets of the southern California equipment rental division of a medical equipment manufacturer in the amount of $0.3 million. The contingent consideration payments are 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 as defined in the FASB’s ASC Topic 820. 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. These inputs are classified as level 3 inputs.

The assumptions used in preparing the discounted cash flow analysis included estimates of interest rates and the timing and amount of incremental cash flows. At March 31, 2012, no earn-out had been earned or paid.

Fair Value of Other Financial Instruments

The Company considers the carrying amount of financial instruments, including accounts receivable, accounts payable and accrued liabilities, as the approximate fair value due to their short maturities. We

8

use the market approach to determine the fair value of our financial liabilities. We utilize observable market information of identical assets including trade dates, price and quantities provided by a third party pricing service for the selected reporting period. These inputs are considered level 2 inputs. The fair value of our outstanding PIK Toggle Notes and Floating Rate Notes as of March 31, 2012 and December 31, 2011, based on the quoted market price for the same or similar issues of debt, is approximately:

	March 31,		December 31,
(in millions)	2012		2011
PIK Toggle Notes	$	416.1	$	417.0
Floating Rate Notes	221.4		208.2

5.Equity

The following tables represent changes in shareholders’ equity that are attributable to our shareholders and non controlling interests for the three month periods ending March 31, 2012 and 2011.

						Accumulated
	Additional					Other
(in thousands)	Paid-in		Accumulated			Comprehensive			Non controlling			Total
(unaudited)	Capital		Deficit			Loss			Interests			Equity
Balance at December 31, 2011	$	214,294	$	(108,327	)	$	(11,827	)	$	386		$	94,526
Net income (loss)	—		(3,442		)	—			182			(3,260		)
Unrealized gain on cash flow hedge, net of tax of $1,113	—		—			1,720			—			1,720
Cash distributions to non controlling interests	—		—			—			(182		)	(182		)
Contributions from new members to non controlling interests	—		—			—			17			17
Balance at March 31, 2012	$	214,294	$	(111,769	)	$	(10,107	)	$	403		$	92,821

						Accumulated
	Additional					Other
	Paid-in		Accumulated			Comprehensive			Non controlling		Total
(in thousands)	Capital		Deficit			Loss			Interests		Equity
Balance at December 31, 2010	$	248,794	$	(87,276	)	$	(14,779	)	$	—	$	146,739
Net loss	—		(6,146		)	—			—		$	(6,146	)
Unrealized gain on cash flow hedge, net of tax of $1,086	—		—			1,701			—		$	1,701
Balance at March 31, 2011	$	248,794	$	(93,422	)	$	(13,078	)	$	—	$	142,294

6.Stock-Based Compensation

During the three months ended March 31, 2012, activity under the 2007 Stock Option Plan (the “2007 Stock Option Plan”), of UHS Holdco, Inc., our parent company (“Parent”), was as follows:

9

(in thousands except exercise price)	Number of Options		Weighted average exercise price		Aggregate intrinsic value		Weighted average remaining contractual term (years)
Outstanding at December 31, 2011	38,195		$	1.05	$	25,046	5.7
Granted	—
Exercised	(150	)	$	1.00	$	107
Forfeited or expired	(190	)	$	1.07
Outstanding at March 31, 2012	37,855		$	1.05	$	24,832	5.4
Exercisable at March 31, 2012	29,756		$	1.02	$	20,440	5.3
Remaining authorized options available for issue	5,832

The exercise price of each 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 Parent’s 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 expense on a straight-line basis over the options’ expected vesting periods. There were no stock options granted during the three months ended March 31, 2012.

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 represents the result of the “simplified” method applied to “plain vanilla” options granted during the period, as provided within ASC Topic 718, “Compensation - Stock Compensation.”  Parent used the simplified method as Parent does not have sufficient historical exercise experience to provide a basis upon which to estimate the expected term.

Although Parent grants stock options, the Company recognizes compensation expense related to these options since the services are performed for its benefit.  Along with this expense, which is primarily included in selling, general and administrative expense, the Company records an offsetting payable to Parent liability which is not expected to be settled within the next twelve months.

At March 31, 2012, unearned non-cash stock-based compensation that we expect to recognize as expense over a weighted average period of 1.6 years, totals approximately $4.2 million, net of our estimated forfeiture rate of 2.0%. The expense could be accelerated upon the sale of Parent or the Company.

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7.Dividend and Equity Distribution

On June 8, 2011 the Company and Parent’s Boards of Directors declared a dividend of $0.12 per share to the Parent’s shareholders of record on June 10, 2011 and a $0.12 per share equity distribution to be paid to the holders of vested options on the Parent’s stock as of June 10, 2011, subject to the consummation of the note offering which occurred on June 17, 2011 (see Note 8, Long-term Debt), and payable on July 1, 2011.

Also on June 8, 2011, the Boards of Directors declared an equity distribution of $0.12 per option to holders of outstanding options on the Parent’s stock on June 10, 2011 that are scheduled to vest on December 31, 2011, 2012, 2013, 2014, and 2015.

Our consolidated balance sheets as of December 31, 2011 and March 31, 2012 reflect the decrease in shareholders’ equity for dividends paid to Parent shareholders and distributions to vested option holders on July 1, 2011 and distributions payable to vested option holders on December 31, 2011, as well as estimated amounts to be paid to holders of options expected to vest on December 31, 2012 though 2015 based on an estimated option forfeiture rate of 2% annually.  Our consolidated balance sheet also reflects the related current dividend payable and long-term dividend payable included in Payable to Parent.

8.Long-Term Debt

Long-term debt consists of the following:

	March 31,			December 31,
(in thousands)	2012			2011
PIK toggle notes	$	405,000		$	405,000
Floating rate notes	230,000			230,000
Unamortized bond premium	3,210			3,433
Senior secured credit facility	23,000			14,500
Capital lease obligations	18,379			18,164
	679,589			671,097
Less: Current portion of long-term debt	(5,686		)	(5,627		)
Total long-term debt	$	673,903		$	665,470

PIK Toggle Notes. Our 8.50% / 9.25% Second Lien Senior Secured PIK Toggle Notes due 2015 (the “PIK Toggle Notes”) consist of $230.0 million aggregate principal amount of PIK Toggle Notes issued on May 31, 2007 (the “Existing Notes”), and $175.0 million aggregate principal amount of PIK Toggle Notes issued on June 17, 2011 (the “Additional Notes”) for a total aggregate outstanding principal amount of $405.0 million.  All of the PIK Toggle Notes were issued under a Second Lien Senior Indenture dated as of May 31, 2007 (the “Second Lien Senior Indenture”).

The PIK Toggle Notes mature on June 1, 2015. Interest on the PIK Toggle Notes is payable semiannually in arrears on each June 1 and December 1. Beginning June 1, 2011, the Company was required to make all interest payments on the PIK Toggle Notes entirely as cash interest. Cash interest on the PIK Toggle Notes accrues at the rate of 8.50% per annum. The PIK Toggle Notes are redeemable, at the Company’s option, in whole or in part, at specified redemption prices (as defined in the Second Lien Senior Indenture) plus accrued interest to the date of redemption.

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We may redeem some or all of the PIK Toggle Notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, on the PIK Toggle Notes redeemed, to the applicable redemption date, if redeemed during the 12-month period beginning on June 1 of the years indicated below, subject to the rights of noteholders:

Year	Percentage
2011	104.250	%
2012	102.125	%
2013 and thereafter	100.000	%

In addition, the PIK Toggle Notes have a change of control provision, which gives each holder the right to require the Company to purchase all or a portion of such holders’ PIK Toggle Notes upon a change in control, as defined in the Second Lien Senior Indenture, at a purchase price equal to 101% of the principal amount plus accrued interest to the date of purchase. The PIK Toggle Notes, subject to certain definitions and exceptions, have covenants that restrict, among other things, the incurrence of additional debt, the payment of dividends and the issuance of preferred stock. The PIK Toggle Notes are uncollateralized.

Floating Rate Notes.  Our Floating Rate Notes (the “Floating Rate Notes”) were issued on May 31, 2007 in the aggregate principal amount of $230.0 million under the Second Lien Senior Indenture.  The Floating Rate Notes mature on June 1, 2015. Interest on the Floating Rate Notes is payable semiannually in arrears on each June 1 and December 1. Interest on the Floating Rate Notes is reset for each semi-annual interest period and is calculated at the current LIBOR rate plus 3.375%.  At March 31, 2012, our LIBOR-based rate was 4.120%, which includes the credit spread. The Floating Rate Notes are redeemable, at the Company’s option, in whole or in part, at specified redemption prices (as defined in the Second Lien Senior Indenture) plus accrued interest to the date of redemption. In addition, the Floating Rate Notes have a change of control provision, which gives each holder the right to require the Company to purchase all or a portion of such holders’ Floating Rate Notes upon a change in control, as defined in the Second Lien Senior Indenture, at a purchase price equal to 101% of the principal amount plus accrued interest to the date of purchase. The Floating Rate Notes, subject to certain definitions and exceptions, have covenants that restrict, among other things, the incurrence of additional debt, the payment of dividends and the issuance of preferred stock. The Floating Rate Notes are uncollateralized.

We may redeem some or all of the Floating Rate Notes at a redemption price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the applicable redemption date, if redeemed, subject to the rights of noteholders.

Interest Rate Swap. In June 2007, we entered into an interest rate swap agreement for $230.0 million, which has the effect of converting the interest rate applicable to our $230.0 million of Floating Rate Notes to a fixed interest rate.  The effective date for the interest rate swap agreement was December 2007 and the expiration date is May 2012.

The interest rate swap agreement qualifies for cash flow hedge accounting under ASC Topic 815, Derivatives and Hedging. Both at inception and on an on-going basis, we must perform an effectiveness test.  In accordance with ASC Topic 815, the fair value of the interest rate swap agreement at March 31, 2012 is included as a cash flow hedge on our balance sheet.  The change in fair value was recorded as a component of accumulated other comprehensive loss on our balance sheet, net of tax, since the

12

instrument was determined to be an effective hedge at March 31, 2012.  We expect to reclassify approximately $1.1 million into earnings, net of tax, currently recorded in accumulated other comprehensive loss, in the next two months.

As a result of our interest rate swap agreement, we expect the effective interest rate on our $230.0 million Floating Rate Notes to be 9.065% through May 2012.

Second Lien Senior Indenture. Our PIK Toggle Notes and Floating Rate Notes (collectively, the “Notes”) are guaranteed, jointly and severally, on a second priority senior secured basis, by Emergent Group and PRI Medical, and are also similarly guaranteed by certain of our future domestic subsidiaries. The Notes are our second priority senior secured obligations and rank (i) equal in right of payment with all of our existing and future unsecured and 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 other obligations that are secured by first priority liens on the collateral securing the Notes or that are secured by a lien on assets that are not part of the collateral securing the Notes, in each case, to the extent of the value of such collateral or assets; and (iv) structurally subordinated to any indebtedness and other liabilities (including trade payables) of any of our future subsidiaries that are not guarantors.

The Second Lien Senior Indenture governing the 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.

Senior Secured Credit Facility. On May 6, 2010 we entered into an Amended and Restated Credit Agreement with GE Business Financial Services, Inc., as agent for the lenders, and the lenders party thereto, which amended the Senior Secured Credit Facility dated as of May 31, 2007. The Senior Secured Credit Facility is a first lien senior secured asset based revolving credit facility (as amended, the “Senior Secured Credit Facility”). The Amended and Restated Credit Agreement increased the aggregate amount the Company may borrow under the Senior Secured Credit Facility from $135.0 million to $195.0 million and extended the maturity date to November 30, 2014. Additionally, we capitalized deferred financing costs related to the Amended and Restated Credit Agreement in the amount of $1.7 million. As of March 31, 2012, we had $163.4 million of availability under the Senior Secured Credit Facility based on a borrowing base of $190.7 million, after giving effect to $4.3 million used for letters of credit.  Our obligations under the Senior Secured Credit Facility are secured by a first priority security interest in substantially all of our assets, excluding a pledge of our and Parent’s capital

13

stock, any joint ventures and certain other exceptions. Our obligations under the Senior Secured Credit Facility are unconditionally guaranteed by Parent.

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 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 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 $15.0 million for a certain period, which consists of a minimum ratio of trailing four-quarter 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.

Borrowings under the Senior Secured Credit Facility accrue interest (including a credit spread varying with facility usage):

·at a per annum rate equal to 1.75% - 2.00% above the rate announced from time to time by the agent as the “prime rate” payable quarterly in arrears; and

·at a per annum rate equal to 2.75% - 3.00% above the adjusted LIBOR rate used by the agent, for the respective interest rate period determined at our option, payable in arrears upon cessation of the interest rate period elected.

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At March 31, 2012, we did not have any borrowings outstanding that were accruing interest at the prime rate. At March 31, 2012, we had $23.0 million of borrowings outstanding that were accruing interest at the LIBOR-based rate, which was 3.243%, which includes the credit spread noted above.

9.Commitments and Contingencies

On July 13, 2010, the U.S. Food and Drug Administration (“FDA”) issued a final order and transition plan to a medical equipment manufacturer to recall all infusion pumps of a certain model currently in use in the United States. The FDA order established the framework for the recall by providing for a cash refund, generally, $1,500 for single channel pumps and $3,000 for triple channel pumps, or a replacement pump to owners within a two-year period. At the time of the recall notice, we owned approximately 11,900 of the applicable infusion pumps.

For the three months ended March 31, 2012, we recognized recalled equipment net gains of approximately $2.5 million of which approximately $1.4 million were non-cash gains. Non-cash gains result from receiving a replacement pump for a recalled pump. The gains are a result of the fair market value of the replacement pump less the net book value of the recalled pump. At March 31, 2012, we owned approximately 4,575 of the applicable pumps. We are continuing the process of evaluating the course of action that best meets the infusion technology needs of our customers and our business. As such, we expect to continue to recognize gains and also expect to increase purchases of infusion pumps to replace recalled units as they are accepted by the equipment manufacturer. During the next two quarters of 2012, we expect to recognize recalled equipment net gains between $4.5 and $7.5 million.

The Company, from time to time, may become involved in litigation arising out of operations in the normal course of business. Asserted claims are subject to many uncertainties and the outcome of individual matters is not predictable with assurance.

On October 19, 2009, Freedom Medical, Inc. filed a lawsuit against the Company and others in U.S. District Court for the Eastern District of Texas. The federal complaint alleges violation of state and federal antitrust laws, tortious interference with business relationships, business disparagement and common law conspiracy in connection with the biomedical equipment rental market. Freedom Medical, Inc. is seeking unspecified damages and injunctive relief. While we believe these claims are without merit, and will vigorously defend against them, we are unable at this time to determine the ultimate outcome of this matter or determine the effect it may have on our business, financial condition or results of operations. We have been seeking coverage for the Freedom Medical, Inc. lawsuit from a number of our insurance carriers.  On December 30, 2011 two of the insurance carriers, Lexington Insurance Company and National Union Fire Insurance Company of Pittsburgh, Pa., served us with a Minnesota state court complaint seeking a declaration that they have no obligation to cover certain claims of Freedom Medical, Inc.’s lawsuit.  On January 11, 2012, we filed our own suit, venued in Texas state court, against all of the carriers currently implicated by Freedom Medical, Inc.’s allegations.  This action seeks, among other things, a declaration of coverage as to Freedom Medical, Inc.’s suit.  We are unable at this time to determine the ultimate outcome of this matter or determine the effect it may have on our business, financial condition or results of operations.

The Company, in the ordinary course of business, could be 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,

15

management believes that any such resolution would not have a material effect on the financial position, results of operations or cash flows of the Company.

As of March 31, 2012, we were not a party to any other pending legal proceedings the adverse outcome of which could reasonably be expected to have a material effect on our operating results, financial position or cash flows.

10.Related Party Transactions

Management Agreement

On May 31, 2007, we and Irving Place Capital entered into a professional services agreement pursuant to which Irving Place Capital provides general advisory and management services to us with respect to financial and operating matters.  Irving Place Capital is a principal owner of Parent, and the following members of our board of directors are associated with Irving Place Capital:  John Howard, Robert Juneja, Bret Bowerman and David Crane. We paid Irving Place Capital professional services fees of $0.3 and $0.2 million for the three-month periods ended March 31, 2012 and 2011, respectively.

Business Relationship

In the ordinary course of business, we entered into an operating lease for our Minneapolis, Minnesota district office with Ryan Companies US, Inc. (“Ryan”), which began on May 1, 2007.  One member of our board of directors is also a director of Ryan.  We made payments to Ryan totaling $88,000 and $87,000 during the three months ended March 31, 2012 and 2011, respectively.

The Company believes that the aforementioned arrangements and relationships were provided in the ordinary course of business at prices and on terms similar to those that would result from arm’s length negotiation between unrelated parties.

11.Limited Liability Companies

We participate with others in the formation of limited liability companies (“LLCs”) in which Surgical Services becomes a partner and shares the financial interest with the other investors. Surgical Services 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 March 31, 2012, the LLCs had approximately $0.9 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, Surgical Services will provide such financing companies with its corporate guarantee based on its respective ownership interest in each LLC. In certain instances, Surgical Services 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 March 31, 2012, we held interests in six 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 Surgical Services and the LLCs have been eliminated through consolidation.

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12.Segment Information

Our reporting segments consist of Medical Equipment Outsourcing, Technical and Professional Services, and Medical Equipment Sales and Remarketing. Certain operating information for our segments as well as a reconciliation of total Company gross margin to loss before income tax was as follows:

Medical Equipment Outsourcing

(in thousands)

	Three Months Ended March 31,
	2012		2011
Revenues	$	80,037	$	66,238
Cost of revenue	31,976		24,435
Medical equipment depreciation	16,906		17,166
Gross margin	$	31,155	$	24,637

Technical and Professional Services

(in thousands)

	Three Months Ended March 31,
	2012		2011
Revenues	$	20,129	$	10,870
Cost of revenue	15,768		7,884
Gross margin	$	4,361	$	2,986

Medical Equipment Sales and Remarketing

(in thousands)

	Three Months Ended March 31,
	2012		2011
Revenues	$	6,368	$	5,606
Cost of revenue	4,753		4,300
Gross margin	$	1,615	$	1,306

Total Gross Margin and Reconciliation to Loss Before Income Tax

(in thousands)

	Three Months Ended March 31,
	2012			2011
Total gross margin	$	37,131		$	28,929
Selling, general and administrative	27,659			22,381
Acquisition and integration expenses	104			774
Interest expense	15,500			11,706
Loss before income tax	$	(6,132	)	$	(5,932	)

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Total Assets by Reporting Segment

(in thousands)

	March 31,		December 31,
	2012		2011
Medical Equipment Outsourcing	$	468,067	$	464,593
Technical and Professional Services	84,310		84,483
Medical Equipment Sales and Remarketing	18,603		18,603
Corporate and Unallocated	391,317		372,328
Total Company Assets	$	962,297	$	940,007

13.Pension Plan

The components of net periodic pension costs are as follows:

	Three Months Ended March 31,
(in thousands)	2012			2011
Interest cost	$	274		$	273
Expected return on plan assets	(320		)	(309		)
Recognized net actuarial loss	177			84
Net periodic cost	$	131		$	48

Future benefit accruals for all participants were frozen as of December 31, 2002.  We made required contributions of $0.2 million during the three months ended March 31, 2012.

14.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. Our January 3, 2012 acquisition resulted in the recording of deferred tax liabilities on the opening balance sheet due to higher book than tax bases for fixed assets and amortizable intangible assets.  This discrete event had the one-time effect of reducing our valuation allowance by approximately $3.4 million on that date, though this amount was offset by approximately $2.5 million of additional valuation allowance resulting from year-to-date losses. In future reporting periods, we will continue to assess the likelihood that deferred tax assets will be realizable.

Reconciliations between the Company’s effective income tax rate and the U.S. statutory rate follow:

18

	Three Months Ended March 31,
	2012		2011
Statutory U.S. Federal income tax rate	(35.0	)%	(35.0	)%
State income taxes, net of U.S. Federal income tax	(3.3	)	(2.0	)
Permanent items	1.2		4.5
Valuation allowance	(14.7	)	35.9
Other	5.0		0.2
Effective income tax rate	(46.8	)%	3.6	%

At March 31, 2012, the Company had available unused federal net operating loss carryforwards of approximately $160.3 million.  The net operating loss carryforwards will expire at various dates from 2020 through 2030.

15.Consolidating Financial Statements

In accordance with the provisions of the Second Lien Senior Indenture, as a wholly owned subsidiary of UHS, Surgical Services has jointly and severally guaranteed all the Company’s Obligations (as defined in the Second Lien Senior Indenture) under the Second Lien Senior Indenture on a full and unconditional basis. Consolidating financial information of UHS and the guarantor is presented on the following pages.

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Universal Hospital Services, Inc.

Consolidating Balance Sheets

(in thousands)

(unaudited)

	At March 31, 2012
	Parent			Subsidiary
	Issuer			Guarantor			Consolidating
	UHS			Surigical Services			Adjustments			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—		$	202		$	—		$	202
Accounts receivable, less allowance for doubtful accounts	67,899			9,733			—			77,632
Due from (to) affiliates	21,809			(21,809		)	—			—
Inventories	5,482			2,529			—			8,011
Deferred income taxes	10,164			435			—			10,599
Other current assets	5,060			1,146			—			6,206
Total current assets	110,414			(7,764		)	—			102,650
Property and equipment, net:
Medical equipment, net	226,449			12,668			—			239,117
Property and office equipment, net	29,022			1,366			—			30,388
Total property and equipment, net	255,471			14,034			—			269,505
Other long-term assets:
Goodwill	283,141			51,932			—			335,073
Investment in subsidiary	58,123			—			(58,123		)	—
Other intangibles, net	220,550			22,478			—			243,028
Other, primarily deferred financing costs, net	11,967			74			—			12,041
Total assets	$	939,666		$	80,754		$	(58,123	)	$	962,297
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt	$	4,386		$	1,300		$	—		$	5,686
Interest rate swap	1,922			—			—			1,922
Book overdrafts	565			—			—			565
Accounts payable	30,709			2,171			—			32,880
Accrued compensation	13,688			2,640			—			16,328
Accrued interest	18,779			—			—			18,779
Dividend payable	780			—			—			780
Other accrued expenses	8,437			2,106			—			10,543
Total current liabilities	79,266			8,217			—			87,483
Long-term debt, less current portion	672,518			1,385			—			673,903
Pension and other long-term liabilities	11,828			1,664			—			13,492
Payable to Parent	19,472			—			—			19,472
Deferred income taxes	64,164			10,962			—			75,126
Commitments and contingencies
Total equity
Common stock	—			—			—			—
Additional paid-in capital	214,294			60,019			(60,019		)	214,294
Accumulated deficit	(109,873		)	(1,896		)	—			(111,769		)
Accumulated earnings in subsidiary	(1,896		)	—			1,896			—
Accumulated other comprehensive loss	(10,107		)	—			—			(10,107		)
Total Universal Hospital Services, Inc. equity	92,418			58,123			(58,123		)	92,418
Non controlling interest	—			403			—			403
Total equity	92,418			58,526			(58,123		)	92,821
Total liabilities and equity	$	939,666		$	80,754		$	(58,123	)	$	962,297

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Universal Hospital Services, Inc.

Consolidating Statements of Operations

(in thousands)

(unaudited)

	For the three months ended March 31, 2012
	Parent			Subsidiary
	Issuer			Guarantor			Consolidating
	UHS			Surigical Services			Adjustments			Consolidated
Revenue
Medical equipment outsourcing	$	68,196		$	11,841		$	—		$	80,037
Technical and professional services	20,129			—			—			20,129
Medical equipment sales and remarketing	6,368			—			—			6,368
Total revenues	94,693			11,841			—			106,534
Cost of Sales
Cost of medical equipment outsourcing	25,428			6,548			—			31,976
Cost of technical and professional services	15,768			—			—			15,768
Cost of medical equipment sales and remarketing	4,753			—			—			4,753
Medical equipment depreciation	15,763			1,143			—			16,906
Total costs of medical equipment outsourcing, technical and professional services and medical equipment sales and remarketing	61,712			7,691			—			69,403
Gross margin	32,981			4,150			—			37,131
Selling, general and administrative	24,044			3,615			—			27,659
Acquisition and integration expenses	104			—			—			104
Operating income	8,833			535			—			9,368
Equity in earnings of subsidiary	4			—			(4		)	—
Interest expense	15,151			348			—			15,499
Loss before income taxes and non controlling interest	(6,314		)	187			(4		)	(6,131		)
Provision (benefit) for income taxes	(3,054		)	183			—			(2,871		)
Consolidated net loss	(3,260		)	4			(4		)	(3,260		)
Net income attributable to non controlling interest	182			182			(182		)	182
Net loss attributable to Universal Hospital Services, Inc.	$	(3,442	)	$	(178	)	$	178		$	(3,442	)

Universal Hospital Services, Inc.

Consolidating Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

	For the three months ended March 31, 2012 Parent
	Parent			Subsidiary
	Issuer			Guarantor			Consolidating
	UHS			Surigical Services			Adjustments			Consolidated
Consolidated net loss	$	(3,260	)	$	4		$	(4	)	$	(3,260	)
Other comprehensive income:
Gain on cash flow hedge, net of tax	1,720			—			—			1,720
Total other comprehensive income	1,720			—			—			1,720
Comprehensive loss	(1,540		)	4			(4		)	(1,540		)
Comprehensive income attributable to non controlling interest	182			182			(182		)	182
Comprehensive loss attributable to Universal Hospital Services, Inc.	$	(1,722	)	$	(178	)	$	178		$	(1,722	)

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Universal Hospital Services, Inc.

Consolidating Statements of Cash Flows

(in thousands)

(unaudited)

	For the three months ended March 31, 2012
	Parent			Subsidiary
	Issuer			Guarantor			Consolidating
	UHS			Surigical Services			Adjustments		Consolidated
Cash flows from operating activities:
Consolidated net loss	$	(3,264	)	$	4		$	—	$	(3,260	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	18,346			1,228			—		19,574
Amortization of intangibles, deferred financing costs and bond premium	3,974			775			—		4,749
Provision for doubtful accounts	168			—			—		168
Provision for inventory obsolescence	55			—			—		55
Non-cash stock-based compensation expense	1,075			—			—		1,075
Non-cash gain on trade-in of recalled equipment	(1,356		)	—			—		(1,356		)
Gain on sales and disposals of equipment	(436		)	—			—		(436		)
Deferred income taxes	(1,900		)	(379		)	—		(2,279		)
Changes in operating assets and liabilities:
Accounts receivable	(3,169		)	(3,076		)	—		(6,245		)
Due from (to) affiliates	(17,679		)	17,679			—		—
Inventories	(857		)	(387		)	—		(1,244		)
Other operating assets	(1,049		)	(584		)	—		(1,633		)
Accounts payable	(1,081		)	(611		)	—		(1,692		)
Other operating liabilities	16,413			141			—		16,554
Net cash provided by operating activities	9,240			14,790			—		24,030
Cash flows from investing activities:
Medical equipment purchases	(11,795		)	(765		)	—		(12,560		)
Property and office equipment purchases	(1,502		)	(137		)	—		(1,639		)
Proceeds from disposition of property and equipment	958			—			—		958
Acquisitions, net of cash acquired	(436		)	(11,009		)	—		(11,445		)
Net cash used in investing activities	(12,775		)	(11,911		)	—		(24,686		)
Cash flows from financing activities:
Proceeds under senior secured credit facility	31,600			—			—		31,600
Payments under senior secured credit facility	(23,100		)	—			—		(23,100		)
Payments of principal under capital lease obligations	(1,303		)	(510		)	—		(1,813		)
Payoff of acquired debt	—			(3,163		)	—		(3,163		)
Cash paid to non controlling interests	—			(182		)	—		(182		)
Contributions from new members to limited liability companies	—			17			—		17
Proceeds from exercise of parent company stock options	150			—			—		150
Dividend and equity distribution payments	(763		)	—			—		(763		)
Change in book overdrafts	(3,049		)	—			—		(3,049		)
Net cash provided by (used in) financing activities	3,535			(3,838		)	—		(303		)
Net change in cash and cash equivalents	—			(959		)	—		(959		)
Cash and cash equivalents at the beginning of period	—			1,161			—		1,161
Cash and cash equivalents at the end of period	$	—		$	202		$	—	$	202

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. (“we”, “our”, “us”, the “Company”, or “UHS”) is a leading nationwide provider of medical equipment management and service solutions to the United States health care

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industry. Our customers include national, regional and local acute and long-term acute care hospitals, alternate site providers (such as long-term acute care hospitals, skilled nursing facilities, specialty hospitals, nursing homes, and home care providers) and medical equipment manufacturers.  We provide our customers solutions across the spectrum of the equipment life cycle as a result of our position as one of the industry’s largest purchasers and outsourcers of medical equipment. During the twelve months ended March 31, 2012, we owned or managed over 660,000 pieces of medical equipment consisting of 435,000 owned or managed pieces in our Medical Equipment Outsourcing segment and 225,000 pieces of customer owned equipment we managed in our Technical and Professional Services segment. Our diverse medical equipment outsourcing customer base includes more than 4,275 acute care hospitals and approximately 4,400 alternate site providers.  We also have relationships with more than 200 medical equipment manufacturers and many of the nation’s largest group purchasing organizations (“GPOs”) and many of the integrated delivery networks (“IDNs”).  All of our solutions leverage our nationwide network of 83 offices and our more than 70 years of experience managing and servicing all aspects of medical equipment. Our fees are paid directly by our customers rather than by direct reimbursement from third-party payors, such as private insurers, Medicare, or Medicaid.

We commenced operations in 1939, originally incorporated in Minnesota in 1954 and reincorporated in Delaware in 2001.  Historically, we have experienced significant and sustained growth. Our overall growth strategy is to continue to grow both organically, through strategic acquisitions, and potential international growth opportunities.

On April 1, 2011 we completed our acquisition of Emergent Group Inc. (“Emergent Group”) for a total purchase price of approximately $65.3 million as described in Note 3, Acquisitions.  The results of operations of this acquisition have been included in UHS’s consolidated results of operations since the date of acquisition and also included in the medical equipment outsourcing segment. Effective December 31, 2011, Emergent Group was merged into its principal operating subsidiary, PRI Medical Technologies, Inc. (“PRI Medical”) with PRI Medical the surviving entity. Also, on December 31, 2011, PRI Medical’s name was changed to UHS Surgical Services, Inc. (“Surgical Services”).

On May 31, 2011 we acquired certain assets of an equipment rental division of a medical equipment manufacturer for approximately $6.5 million. The financial results of this acquisition are included in our medical equipment outsourcing segment since the date of acquisition.

On October 3, 2011, we completed the acquisition, effective October 1, 2011, of all of the outstanding stock of a surgical laser equipment service provider for approximately $5.5 million in cash consideration. The $5.5 million purchase price included $0.5 million of debt which was paid off at closing. The financial results of this acquisition are included in our medical equipment outsourcing segment since the date of acquisition.

On January 3, 2012, we completed the acquisition of all of the outstanding stock of a Florida-based laser surgical laser equipment service provider for total consideration of approximately $16.1 million, including a holdback of approximately $1.6 million, expected to be paid in January 2013, and approximately $3.2 million of debt, which was paid off at closing.  The acquisition was funded through our $195.0 million Senior Secured Credit Facility.

On March 31, 2012 we completed the acquisition of certain assets of the southern California equipment rental division of a medical equipment manufacturer. Total purchase price of the transaction was approximately $0.8 million, including approximately $0.4 million in contingent consideration to be paid

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over four years based on future revenues. Assets acquired consist of medical equipment and customer relationship intangibles.

As one of the nation’s leading medical equipment management and service solutions companies, we focus on offering our customers comprehensive solutions that help reduce capital and operating expenses, increase equipment and staff productivity and support improved patient safety and outcomes.

We report our financial results in three segments. Our reporting segments consist of Medical Equipment Outsourcing, Technical and Professional Services, and Medical Equipment Sales and Remarketing. We evaluate the performance of our reporting segments based on gross margin and gross margin, before purchase accounting adjustments. The accounting policies of the individual reporting segments are the same as those of the entire company.

We present the non-generally accepted accounting principles (“GAAP”) financial measure gross margin, before purchase accounting adjustments, because we use this measure to monitor and evaluate the operational performance of our business and to assist analysts, investors and lenders in their comparisons of operational performance across companies, many of whose results will not include similar adjustments. A reconciliation of the non-GAAP financial measure to its equivalent GAAP measure is included in the respective tables.

Medical Equipment Outsourcing Segment - Manage & Utilize

Our flagship business is our Medical Equipment Outsourcing segment, which accounted for $80.0 million, or approximately 75.1 % of our revenues, for the quarter ended March 31, 2012 and $66.2 million, or approximately 80.1% of our revenues, for the three months ended March 31, 2011. As of March 31, 2012, we owned or managed over 435,000 pieces in our Medical Equipment Outsourcing segment, primarily in the categories of respiratory therapy, newborn care, critical care, patient monitors, patient handling (which includes fall management, bariatrics, beds, stretchers and wheelchairs), pressure area management (such as therapy surfaces), wound therapy, laser and mobile surgical services (such as CO2, Nd:YAG, Pulse Dye, KTP/YAG, Diode, GreenLight XPS and HPS, Holmium YAG, Lithotripsy and Cryosurgery technology).  Historically, we have generally purchased and owned directly the equipment used in our Medical Equipment Outsourcing programs, though we have at times entered into revenue share agreements with certain equipment manufacturers, where the manufacturers retain ownership of the equipment, but UHS takes possession and manages the rental of the equipment to customers. Such arrangements are less capital intensive for us.

We have four primary outsourcing programs:

·Supplemental and Peak Needs Usage;

·Customized Outsourcing Agreements;

·Asset360TM Equipment Management Program, (“Asset360 Program”); and

·Laser and Mobile Surgical Services.

Our primary customer relationships are with local healthcare providers such as hospitals, surgery centers, long-term care providers, and nursing homes.  These organizations may belong to regional or national groups of facilities, and often participate in GPOs. We contract at the local, regional and national level, as requested by our customers. We expect much of our future growth in this segment to be driven by our customers outsourcing more of their medical equipment needs and taking full

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advantage of our diversified product offering, customized outsourcing agreements and Asset360 Programs.

On July 13, 2010, the U.S. Food and Drug Administration (“FDA”) issued a final order and transition plan to a medical equipment manufacturer to recall all infusion pumps of a certain model currently in use in the United States. The FDA order established the framework for the recall by providing for a cash refund, generally, $1,500 for single channel pumps and $3,000 for triple channel pumps, or a replacement pump to owners within a two-year period. At the time of the recall notice, we owned approximately 11,900 of the applicable infusion pumps.

For the three months ended March 31, 2012, we recognized recalled equipment net gains of approximately $2.5 million of which approximately $1.4 million were non-cash gains. Non-cash gains result from receiving a replacement pump for a recalled pump. The gains are a result of the fair market value of the replacement pump less the net book value of the recalled pump. At March 31, 2012, we owned approximately 4,575 of the applicable pumps. We are continuing the process of evaluating the course of action that best meets the infusion technology needs of our customers and our business. As such, we expect to continue to recognize gains and also expect to increase purchases of infusion pumps to replace recalled units as they are accepted by the equipment manufacturer. During the next two quarters of 2012, we expect to recognize recalled equipment net gains between $4.5 and $7.5 million.

Technical and Professional Services Segment - Plan & Acquire; Maintain & Repair

Our Technical and Professional Services segment accounted for $20.1 million, or approximately 18.9% of our revenues for the quarter ended March 31, 2012 and $10.9 million, or approximately 13.1% of our revenues for the three months ended March 31, 2011. We leverage our over 70 years of experience and our extensive equipment database in repairing and maintaining medical equipment.  We offer a broad range of inspection, preventative maintenance, repair, logistic and consulting services through our team of over 325 technicians and professionals located throughout the United States in our nationwide network of offices and managed over 225,000 units of customer owned equipment during the twelve months ended March 31, 2012. In addition, during the twelve months ended March 31, 2012, we serviced over 435,000 units that we own or directly manage. Our Technical and Professional Service offerings provide a complementary alternative for customers that wish to own their medical equipment, but lack the infrastructure, expertise or scale to perform routine maintenance, repair, record-keeping and lifecycle analysis and planning functions.

Medical Equipment Sales and Remarketing Segment - Redeploy & Remarket

Our Medical Equipment Sales and Remarketing segment accounted for $6.4 million, or approximately 6.0%, of our revenues for the quarter ended March 31, 2012 and $5.6 million, or approximately 6.8% of our revenues for the three months ended March 31, 2011. This segment includes three distinct business activities:

Medical Equipment Remarketing and Disposal.We are one of the nation’s largest buyers and sellers of pre-owned medical equipment.  We buy, source, remarket and dispose of pre-owned medical equipment for our customers and for our own behalf. We provide our customers with the ability to sell their unneeded medical equipment for immediate cash or credit. We provide fair market value assessments and buy-out proposals on equipment the customer intends to trade in for equipment upgrades so that the customer can evaluate the manufacturers’ or alternative offers.  Customers can also take advantage of

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our disposal services, where we dispose of equipment that has no remaining economic value in a safe and environmentally appropriate manner.

We remarket pre-owned medical equipment to hospitals, alternate site providers, veterinarians and equipment brokers.  This segment of our business focuses on providing solutions to customers that have capital budget dollars available to purchase equipment. We offer a wide range of equipment including equipment we use in our outsourcing programs and diagnostic, ultrasound and x-ray equipment.

Specialty Medical Equipment Sales and Distribution.We use our national infrastructure to provide sales and distribution services to manufacturers of specialty medical equipment on a limited basis.  Our distribution services include providing demonstration services and product maintenance services.  We act as a distributor for only a limited number of products that are particularly suited to our national distribution network or that fit with our ability to provide technical support.  We currently sell equipment in selected product lines including, but not limited to, respiratory percussion vests, continuous passive motion machines, patient monitors, patient handling equipment and infant security systems.

Sales of Disposables. We offer our customers single use disposable items.  Most of these items are used in connection with our outsourced equipment.  We offer these products as a convenience to customers and to complement our full medical equipment management and service solutions.

RESULTS OF OPERATIONS

The following discussion addresses:

·our financial condition as of March 31, 2012 and

·the results of operations for the three-month period ended March 31, 2012 and 2011.

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 2011 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 period ended March 31, 2012 and 2011.  The table below also indicates the percentage increase or decrease over the prior comparable period.

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	Three Months Ended March 31,
					Percent
	Percent of Total Revenues				Increase
	2012		2011		(Decrease)
Revenue
Medical equipment outsourcing	75.1	%	80.1	%	20.8	%
Technical and professional services	18.9		13.1		85.2
Medical equipment sales and remarketing	6.0		6.8		13.6
Total revenues	100.0	%	100.0	%	28.8
Cost of Sales
Cost of medical equipment outsourcing	30.0		29.5		30.9
Cost of technical and professional services	14.8		9.5		100.0
Cost of medical equipment sales and remarketing	4.5		5.2		10.5
Medical equipment depreciation	15.9		20.8		(1.5	)
Total costs of medical equipment outsourcing, technical and professional services and medical equipment sales and remarketing	65.2		65.0		29.0
Gross margin	34.8		35.0		28.4
Selling, general and administrative	26.0		27.1		23.6
Acquisition and intergration expenses	0.1		0.9			*
Operating income	8.7		7.0		62.2
Interest expense	14.5		14.2		32.4
Loss before income taxes and non controlling interest	(5.8	)	(7.2	)	3.4
Provision (benefit) for income taxes	(2.7	)	0.2		(1,441.6	)
Consolidated net loss	(3.1	)%	(7.4	)%	(46.9	)

*Not meaningful

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Results of Operations for the three months ended March 31, 2012 compared to the three months ended March 31, 2011

Medical Equipment Outsourcing Segment — Manage & Utilize

(in thousands)

	Three Months Ended
	March 31,
	2012			2011			Change			% Change
Total revenue	$	80,037		$	66,238		$	13,799		20.8	%
Cost of revenue	31,976			24,435			7,541			30.9
Medical equipment depreciation	16,906			17,166			(260		)	(1.5	)
Gross margin	$	31,155		$	24,637		$	6,518		26.5
Gross margin %	38.9		%	37.2		%
Gross margin	$	31,155		$	24,637		$	6,518		26.5
Purchase accounting adjustments, primarily non-cash charges related to step-up in carrying value of medical equipment	84			2,724			(2,640		)	(96.9	)
Gross margin, before purchase accounting adjustments	$	31,239		$	27,361		$	3,878		14.2
Gross margin %, before purchase accounting adjustments	39.0		%	41.3		%

Total revenue in the Medical Equipment Outsourcing segment increased $13.8 million, or 20.8%, to $80.0 million in the first quarter of 2012 as compared to the same period of 2011.  The increase was primarily due to revenues of $11.8 million related to our laser surgical services businesses which we acquired on April 1, 2011, revenue related to recalled equipment of $1.3 million, the net addition of six Asset360TM Equipment Management Programs (“Asset360 Programs”) and increased revenues driven by incremental business from new and existing technology, both owned and managed, partially offset by sluggish patient census and what we believe has been a sustained customer effort to control outsourcing expenses. Many of our Asset360 program customers utilize more than one of our equipment management program offerings in areas such as infusion, patient handling, and negative pressure wound therapy. As of March 31, 2012, we had 111 such active programs within 76 hospitals, up from 107 of such programs as of December 31, 2011.

Total cost of revenue in the segment increased $7.5 million, or 30.9%, to $32.0 million in the first quarter of 2012 as compared to the same period of 2011.  This increase, incremental to the costs of $6.5 million related to our new laser surgical services business, is attributable to higher employee-related expenses to support growth initiatives in patient handling and wound therapy.

Medical equipment depreciation decreased $0.3 million, or 1.5%, to $16.9 million in the first quarter of 2012 as compared to the same period of 2011. The decrease in medical equipment depreciation was due to the decrease in purchase accounting adjustments related to the step-up in carrying value of our medical equipment related to our 2007 recapitalization. Depreciation of those purchase accounting adjustments was completed in May of 2011. Medical equipment depreciation for the quarter ended March 31, 2012 and 2011 included $0.1 million and $2.7 million, respectively, of purchase accounting adjustments related to the step-up in carrying value of our medical equipment.

Gross margin percentage for the Medical Equipment Outsourcing segment increased from 37.2% in the first quarter of 2011 to 38.9% in the first quarter of 2012. This increase was primarily attributable to higher margin on recall gains. Gross margin percentage,

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before purchase accounting adjustments, decreased from 41.3 % in the first quarter of 2011 to 39.0% in the first quarter of 2012. The higher gross margin from recalled equipment and laser surgical services business more than offset the decrease in gross margin on our traditional outsourcing business.

Technical and Professional Services Segment — Plan & Acquire; Maintain & Repair

(in thousands)

	Three Months Ended
	March 31,
	2012			2011			Change		% Change
Total revenue	$	20,129		$	10,870		$	9,259	85.2	%
Cost of revenue	15,768			7,884			7,884		100.0
Gross margin	$	4,361		$	2,986		$	1,375	46.0
Gross margin %	21.7		%	27.5		%
Gross margin	$	4,361		$	2,986		$	1,375	46.0
Purchase accounting adjustments, primarily non-cash charges related to favorable lease commitments	3			1			2			*
Gross margin, before purchase accounting adjustments	$	4,364		$	2,987		$	1,377	46.1
Gross margin %, before purchase accounting adjustments	21.7		%	27.5		%

*Not meaningful

Total revenue in the Technical and Professional Services segment increased $9.3 million, or 85.2%, to $20.1 million in the first quarter of 2012 as compared to the same period of 2011. The increase was due to increased activity of $8.9 and $0.4 million in our provider and manufacturer services units, respectively. The increase in provider services revenues is related to a large BioMed360 Program, which began in September 2011.

Total cost of revenue in the segment increased $7.9 million, or 100.0%, to $15.8 million in the first quarter of 2012 as compared to the same period of 2011. The increase is attributable to expenses related to supporting the increased activity in our provider and manufacturer service units of $7.6 and $0.3 million, respectively.

Gross margin percentage for the Technical and Professional Services segment decreased from 27.5% for the first quarter of 2012 to 21.7% for the same period of 2011. Gross margin percentage will fluctuate based on the variability of third-party vendor expenses in our BioMed360 TM Equipment Management Programs (“BioMed360 Program”) and supplemental service programs. Additionally, gross margin includes revenues and expenses related to a large BioMed360 Program, which began in September 2011, whose gross margin percentage is expected to be lower than our historical service gross margins.

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Medical Equipment Sales and Remarketing Segment — Redeploy & Remarket

(in thousands)

	Three Months Ended
	March 31,
	2012			2011			Change			% Change
Total revenue	$	6,368		$	5,606		$	762		13.6	%
Cost of revenue	4,753			4,300			453			10.5
Gross margin	$	1,615		$	1,306		$	309		23.7
Gross margin %	25.4		%	23.3		%
Gross margin	$	1,615		$	1,306		$	309		23.7
Purchase accounting adjustments, primarily non-cash charges related to the step-up in carrying value of our medical equipment	1			22			(21		)	(95.5	)
Gross margin, before purchase accounting adjustments	$	1,616		$	1,328		$	288		21.7
Gross margin %, before purchase accounting adjustments	25.4		%	23.7		%

Total revenue in the Medical Equipment Sales and Remarketing segment increased $0.8 million, or 13.6%, to $6.4 million in the first quarter of 2012 as compared to the same period of 2011. The increase was driven by an increase in sales of disposables and used equipment of $0.7 and $0.7 million, respectively, offset by a decrease in new equipment sales of $0.6 million.

Total cost of revenue in the segment increased $0.5 million, or 10.5%, to $4.8 million in the first quarter of 2012 as compared to the same period of 2011. The increase was the result of increases in the cost of disposable and used sales of $0.7 and $0.1, respectively, offset by a decrease in the cost of new equipment sales of $0.3 million.

Gross margin percentage for the Medical Equipment Sales and Remarketing segment increased from 23.3% in the first quarter of 2011 to 25.4% for the same period of 2012. Gross margin percentage, before purchase accounting adjustments, increased from 23.7% in the first quarter of 2011 to 25.4% for the same period of 2012.  We expect margins and activity in this segment to fluctuate based on the transactional nature of the business.

Selling, General and Administrative

Selling, General and Administrative and Interest Expense

(in thousands)

	Three Months Ended
	March 31,
	2012		2011		Change			% Change
Selling, general and administrative	$	27,659	$	22,381	$	5,278		23.6	%
Acquisition and integration expenses	104		774		(670		)	(86.6	)
Interest expense	15,499		11,706		3,793			32.4

*Not meaningful

Selling, general and administrative expense increased $5.3 million, or 23.6%, to $27.7 million for the first quarter of 2012 as compared to the same period of 2011.  The increase was primarily due to an

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increase of $3.6 million related to our newly acquired laser surgical business, as well as increases in employee-related and other expenses of $2.2 and $0.6 million, respectively, offset by decreases in vehicle and strategic and board-related expenses of $0.6 and $0.5 million, respectively. Employee-related expenses increased as a result of certain clinical resources focusing on growth platforms, when they had previously been focused on equipment management. Acquisition and integration expenses were $0.1 million for the three months ended March 31, 2012. These charges were related primarily to our acquisition of a Florida based surgical laser equipment service provider on January 3, 2012. Selling, general and administrative expense as a percentage of total revenue was 26.0% and 27.1% for each of the quarters ended March 31, 2012 and 2011, respectively.

Interest Expense

Interest expense increased $3.8 million to $15.5 million for the first quarter of 2012 as compared to the same period of 2011. This increase is primarily due to the interest expense related to the issuance of $175.0 million aggregate principal amount of our 8.50% / 9.25% Second Lien Senior Secured PIK Toggle Notes due 2015 (“PIK Toggle Notes”) in the second quarter of 2011.  See Note 8 Long-Term Debt.

Income Taxes

Income taxes were a benefit of $2.9 million and an expense $0.2 million for the three months ended March 31, 2012 and 2011, respectively. Our January 3, 2012 acquisition resulted in the recording of deferred tax liabilities on the opening balance sheet due to higher book than tax basis for fixed assets and amortizable intangible assets. This discrete event had the one-time effect of reducing our valuation allowance by approximately $3.4 million on that date, though this amount was offset by approximately $2.5 million of additional valuation allowance resulting from year-to-date losses. In future reporting periods, we will continue to assess the likelihood that deferred tax assets will be realizable.

Consolidated Net Loss

Consolidated net loss decreased $2.9 million to $3.3 million in the first quarter of 2012 as compared to the same period of 2011.  Net loss was impacted primarily by higher operating income and income tax benefit partially offset by higher selling, general and administrative and interest expense.

EBITDA

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) was $32.8 and $28.5 million for the three months ended March 31, 2012 and 2011, respectively.  EBITDA for the three months ended March 31, 2012, was impacted by the inclusion of our acquired surgical laser business, increased employee-related expenses, including costs related to our continued build of clinical resources to support growth initiatives in patient handling and wound therapy.

In addition to using 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. Management also understands that some industry analysts and investors consider EBITDA as a supplementary non-GAAP financial measure useful in analyzing a company’s ability to service debt.  EBITDA, however, is not a measure of financial performance under GAAP and should not be

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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 EBITDA is not a measure determined in accordance with GAAP and is thus susceptible to varying interpretations and calculations, EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. EBITDA does not represent an amount of funds that is available for management’s discretionary use. A reconciliation of EBITDA to net cash provided by operating activities is included below:

	Three Months Ended
	March 31,
(in thousands)	2012			2011
Net cash provided by operating activities	$	24,030		$	25,182
Changes in operating assets and liabilities	(5,740		)	(4,784		)
Other non-cash expenses (income)	1,899			(3,846		)
Provision (benefit) for income taxes	(2,871		)	214
Interest expense	15,499			11,706
EBITDA	$	32,817		$	28,472

	Three Months Ended
	March 31,
(in thousands)	2012			2011
EBITDA	$	32,817		$	28,472
Other Financial Data:
Net cash provided by operating activities	$	24,030		$	25,182
Net cash used in investing activities	(24,686		)	(26,483		)
Net cash provided by (used in) financing activities	(303		)	1,301
Other Operating Data (as of end of period):
Medical equipment (approximate number of owned outsourcing units)	247,000			236,000
District offices	83			84
Number of outsourcing hospital customers	4,275			4,325
Number of total outsourcing customers	8,675			8,600

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

PIK Toggle Notes. Our 8.50% / 9.25% Second Lien Senior Secured PIK Toggle Notes due 2015 (the “PIK Toggle Notes”) consist of $230.0 million aggregate principal amount of PIK Toggle Notes issued on May 31, 2007 (the “Existing Notes”), and $175.0 million aggregate principal amount of PIK Toggle Notes issued on June 17, 2011 (the “Additional Notes”) for a total aggregate outstanding principal

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amount of $405.0 million.  All of the PIK Toggle Notes were issued under a Second Lien Senior Indenture dated as of May 31, 2007 (the “Second Lien Senior Indenture”).

Our principal sources of liquidity are expected to be cash and cash equivalents, cash flows from operating activities, and borrowings under our Senior Secured Credit Facility, which provides for loans in an amount of up to $195.0 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 Medical Equipment Outsourcing programs and service our debt.  Our outsourcing programs require us to invest a significant amount of cash in medical equipment purchases.  To the extent that such expenditures cannot be funded from cash and cash equivalents, 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. We anticipate additional capital investment of approximately $55.0 million during the remaining nine months of 2012.

If we are unable to service our debt obligations through our cash and cash equivalents, generating sufficient cash flow from operations, and additional borrowings under our first lien senior secured asset-based revolving credit facility, 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, 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 $23.9 and $25.2 million for the three months ended March 31, 2012 and 2011, respectively. Net cash provided by operating activities during the three months ended March 31, 2012 was impacted by the increase in working capital compared to the same period of 2011.

Net cash used in investing activities was $24.6 and $26.5 million for the three months ended March 31, 2012 and 2011, respectively.  The change in net cash used in investing activities was primarily the result of our January 3, 2012, acquisition of a surgical laser equipment service provider offset by lower medical equipment purchases during the same period.

Net cash provided by (used in) financing activities was ($0.3) and $1.3 million for the three months ended March 31, 2012 and 2011, respectively.  During the three months ended March 31, 2012, the change in net cash used in financing activities was primarily impacted by our payment of debt acquired through our January 3,2012 acquisition of a surgical laser equipment service provider.

Our cash balances were $0.2 million as of March 31, 2012 compared to zero as of March 31, 2011.

Based on the level of operating performance expected in 2012, we believe our cash and cash equivalents, 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 March

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31, 2012, we had $163.4 million of availability under the Senior Secured Credit Facility based on a borrowing base of $190.7 million, after giving effect to $4.3 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 Second Lien Senior Indenture governing our PIK Toggle Notes and Floating Rate Notes, as described in Note 8, Long-Term Debt.  As of March 31, 2012, the Company was in compliance with all covenants under the Senior Secured Credit Facility and the second lien senior indenture.

RECENT ACCOUNTING PRONOUNCEMENT

Standard Adopted

In September 2011, the FASB issued an amendment to the authoritative guidance on goodwill impairment testing. The objective of this amendment is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendment permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350, Intangibles — Goodwill and Other. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. The adoption of this amendment did not have a material effect on our consolidated financial statements.

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 substantial indebtedness could adversely affect our financial health;

·risks associated with our substantial leverage;

·risk associated with our ability to fund our significant cash needs;

·risks associated with the current economic environment, including the credit markets;

·revenue generation related to decreases in patient census or services;

·the effect of the global economic downturn on our customers and suppliers;

·risks associated with supplier concentration;

·health care providers willingness to alter their procurement of medical equipment;

·risks associated with competition;

·risk associated with bundling of products and services by competitors;

·risks associated with our lack of long-term commitments from some customers;

·consolidation in the health care industry;

·our ability to successfully identify and manage our acquisitions;

·uncertainties regarding the impact of U.S. healthcare reform on our business;

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

·our inability to attract or retain skilled employees and the loss of any of our key personnel;

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

·risks associated with cash flow fluctuations;

·risks associated with credit risks posed by our home care provider and nursing home customers;

·risk associated with our pension plan;

·our customers being subject to extensive government regulation and our exposure to potential costs and fines associated with such regulations;

·the effect of expenditures related to equipment recalls or obsolescence;

·liabilities for legal claims associated with medical equipment that we outsource and service;

·risks associated with the failure of our management information systems;

·risks related to increased costs that cannot be passed on to our customers;

·inherent limitations in our internal control systems over financial reporting;

·conflicts of interest between our principal equity holder and our other security holders; and

·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 March 31, 2012, we had approximately $679.6 million of total debt outstanding of which $23.0 million was bearing interest at variable rates. Based on variable debt levels at March 31, 2012 and 2011, a 1.0 percentage point change in interest rates on variable rate debt would have resulted in annual interest expense fluctuating by approximately $0.2 and $0.5 million, respectively.

In June 2007, we entered into an interest rate swap agreement for $230.0 million, which has the effect of converting the interest rate applicable to our $230.0 million of Floating Rate Notes to a fixed interest rate.  The effective date for the interest rate swap agreement was December 2007; the expiration date is May 2012.

The interest rate swap agreement qualifies for cash flow hedge accounting under Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging. Both at inception and on an on-going basis, we must perform an effectiveness test.  In accordance with ASC Topic 815, the fair value of the interest rate swap agreement at March 31, 2012 is included as a cash flow hedge on our balance sheet.  The change in fair value was recorded as a component of accumulated other comprehensive loss, net of tax, on our balance sheet since the instrument was determined to be an effective hedge at March 31, 2012.  We have not recorded any amounts due to ineffectiveness for any periods presented. We expect to reclassify approximately $1.1 million into earnings, net of tax, currently recorded in accumulated other comprehensive loss, in the next two months. As a result of our interest rate swap agreement, we expect the effective interest rate on our $230.0 million Floating Rate Notes to be 9.065% through May 2012.

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 quarter of 2012 average price of

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unleaded gasoline, assuming gasoline usage levels for the quarter ended March 31, 2012, would lead to an annual increase in fuel costs of approximately $0.5 million.

Pension

Our pension plan assets, which were approximately $14.0 million at December 31, 2011 are subject to volatility that can be caused by fluctuations in general economic conditions. Continued market volatility and disruption could cause further 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, 2011 would lead to a decrease in the funded status of the plan of approximately $1.4 million.

Other Market Risk

As of March 31, 2012, we have no other material exposure to market risk.

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) and Rule 15d 15(e) promulgated under the Securities Exchange Act of 1934 as amended (the “Exchange Act”)) 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, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

(b)           Changes in internal control over financial reporting

There were no changes that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

In making its assessment of changes in internal control over financial reporting as of March 31, 2012, management has excluded those companies acquired in purchase business combinations during the twelve months ended March 31, 2012. The Company is currently assessing the control environments of these acquisitions.

The results reported in this quarterly report include those of Emergent Group Inc. acquired in April 2011.

PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

The Company, from time to time, may become involved in litigation arising out of operations in the normal course of business.  Asserted claims are subject to many uncertainties and the outcome of individual matters is not predictable.

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On October 19, 2009, Freedom Medical, Inc. filed a lawsuit against the Company and others in U.S. District Court for the Eastern District of Texas. The federal complaint alleges violation of state and federal antitrust laws, tortious interference with business relationships, business disparagement and common law conspiracy in connection with the biomedical equipment rental market. Freedom Medical, Inc. is seeking unspecified damages and injunctive relief. While we believe these claims are without merit, and will vigorously defend against them, we are unable at this time to determine the ultimate outcome of this matter or determine the effect it may have on our business, financial condition or results of operations. We have been seeking coverage for the Freedom Medical, Inc. lawsuit from a number of our insurance carriers.  On December 30, 2011 two of the insurance carriers, Lexington Insurance Company and National Union Fire Insurance Company of Pittsburgh, Pa., served us with a Minnesota state court complaint seeking a declaration that they have no obligation to cover certain claims of Freedom Medical, Inc.’s lawsuit.  On January 11, 2012, we filed our own suit, venued in Texas state court, against all of the carriers currently implicated by Freedom Medical, Inc.’s allegations.  This action seeks, among other things, a declaration of coverage as to Freedom Medical, Inc.’s suit.  We are unable at this time to determine the ultimate outcome of this matter or determine the effect it may have on our business, financial condition or results of operations.

In addition to the foregoing, the Company, from time to time, may become involved in litigation arising out of operations in the normal course of business, including the matters discussed in Item 3 of Part I of the 2011 Annual Report on Form 10-K. As of March 31, 2012, we were not a party to any other pending legal proceedings the adverse outcome of which could reasonably be expected to have a material adverse effect on our operating results, financial position or cash flows. See the additional information in Item 1 of Part I, Note 9, Commitments and Contingencies.

Asserted claims are subject to many uncertainties and the outcome of individual matters is not predictable with assurance.

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 2011 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

Not applicable.

Item 4.    Mine Safety Disclosures

Not applicable.

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Item 5.    Other Information

In June 2011, the Financial Accounting Standards Board issued guidance on the presentation of comprehensive income in financial statements requiring entities to present total comprehensive income either in a single, continuous statement of comprehensive income or in two separate, but consecutive, statements. We adopted this standard as of December 31, 2011, when we presented our consolidated net income and consolidated other comprehensive income in two separate statements in our annual financial statements. Since that time, additional guidance has been released clarifying that the requirement of including total comprehensive income is also applicable to guarantor consolidating financial statements. The table below reflects the retrospective application of this guidance for the year ended December 31, 2011 as related to guarantor consolidating financial statements. The retrospective application did not have a material impact on our financial condition or results of operations.

Universal Hospital Services, Inc.

Consolidating Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

	For the twelve months ended December 31, 2011
				Subsidiary
	Parent			Guarantor
	Issuer			Surgical			Consolidating
	UHS			Services			Adjustments			Consolidated
Consolidated net loss	$	(20,600	)	$	(1,267	)	$	1,267		$	(20,600	)
Other comprehensive income (loss):										$	—
Loss on minimum pension liability, net of tax	(4,136		)	—			—			(4,136		)
Gain on cash flow hedge, net of tax	7,088			—			—			7,088
Total other comprehensive income	2,952			—			—			2,952
Comprehensive loss	(17,648		)	(1,267		)	1,267			(17,648		)
Comprehensive income attributable to non controlling interest	451			451			(451		)	451
Comprehensive loss attributable to Universal Hospital Services, Inc.	$	(18,099	)	$	(1,718	)	$	1,718		$	(18,099	)

Item 6.    Exhibits

Number	Description
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.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document

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101.LAB*	XBRL Extension Labels Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed Herewith

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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: May 14, 2012

Universal Hospital Services, Inc.
By	/s/ Gary D. Blackford
Gary D. Blackford,
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer and Duly Authorized Officer)
By	/s/ Rex T. Clevenger
Rex T. Clevenger,
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

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