UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2016

or

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

Commission File Number: 000-20086

UNIVERSAL HOSPITAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

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

6625 West 78th Street, Suite300

Minneapolis, Minnesota 55439-2604

(Address of principal executive offices, including zip code)

(952) 893-3200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1)has filed all reports required to be filed by Section13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.Yes☒  No☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes☒  No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act (Check one):

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).Yes☐  No☒

Number of shares of common stock outstanding as of August  8, 2016:  1,000

Universal Hospital Services, Inc.

Table of Contents

		Page
PART I -  FINANCIAL INFORMATION
ITEM 1.	Consolidated Financial Statements (unaudited)
	Consolidated Balance Sheets —June 30, 2016 and December 31, 2015	2
	Consolidated Statements of Operations—Three and sixmonths ended June 30, 2016 and 2015	3
	Consolidated Statements of Comprehensive Loss —Threeand sixmonths ended June 30, 2016 and 2015	4
	Consolidated Statements of Cash Flows — Three and sixmonths ended June 30, 2016 and 2015	5
	Notes to Consolidated Financial Statements	6
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	39
ITEM 4.	Controls and Procedures	39
PART II - OTHER INFORMATION
ITEM 1.	Legal Proceedings	40
ITEM 1A.	Risk Factors	40
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
ITEM 3.	Defaults Upon Senior Securities	40
ITEM 4.	Mine Safety Disclosures	40
ITEM 5.	Other Information	40
ITEM 6.	Exhibits	41
Signatures		41

1

PARTI - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements — Unaudited

Universal Hospital Services,Inc.

Consolidated Balance Sheets

(in thousands, except share and per share information)

(unaudited)

	June 30,		December 31,
	2016		2015
Assets
Current assets:
Accounts receivable, less allowance for doubtful accounts of  $1,500 at June 30, 2016 and December 31, 2015	$	76,423	$	71,252
Inventories		8,500		8,506
Other current assets		6,672		5,834
Total current assets		91,595		85,592
Property and equipment:
Medical equipment		595,635		590,091
Property and office equipment		88,872		85,341
Accumulated depreciation		(484,656)		(462,818)
Total property and equipment, net		199,851		212,614
Other long-term assets:
Goodwill		336,595		336,595
Other intangibles, net		156,601		162,354
Other		1,668		420
Total assets	$	786,310	$	797,575
Liabilities and Deficit
Current liabilities:
Current portion of long-term debt	$	5,185	$	4,867
Book overdrafts		9,469		6,444
Accounts payable		25,689		31,073
Accrued compensation		15,109		23,600
Accrued interest		18,650		18,742
Dividend payable		—		24
Other accrued expenses		15,988		14,564
Total current liabilities		90,090		99,314
Long-term debt, less current portion		684,173		682,591
Pension and other long-term liabilities		11,621		11,869
Deferred income taxes, net		53,079		52,959
Commitments and contingencies (Note 8)
Deficit
Common stock, $0.01 par value; 1,000 shares authorized, issued and outstanding at June 30, 2016 and December 31, 2015		—		—
Additional paid-in capital		243,413		241,833
Accumulated deficit		(288,450)		(283,066)
Accumulated other comprehensive loss		(7,795)		(8,165)
Total Universal Hospital Services, Inc. deficit		(52,832)		(49,398)
Noncontrolling interest		179		240
Total deficit		(52,653)		(49,158)
Total liabilities and deficit	$	786,310	$	797,575

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

2

Universal Hospital Services,Inc.

Consolidated Statements of Operations

(in thousands)

(unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Revenue
Medical equipment solutions	$	74,940	$	71,084	$	155,170	$	145,169
Clinical engineering solutions		25,464		24,784		51,042		49,179
Surgical services		17,214		16,421		33,532		31,427
Total revenues		117,618		112,289		239,744		225,775
Cost of Revenue
Cost of medical equipment solutions		33,213		31,053		71,494		62,331
Cost of clinical engineering solutions		20,644		20,041		40,668		39,271
Cost of surgical services		8,956		8,722		17,722		16,902
Medical equipment depreciation		16,077		15,501		31,247		33,635
Total costs of revenues		78,890		75,317		161,131		152,139
Gross margin		38,728		36,972		78,613		73,636
Selling, general and administrative		28,798		31,038		60,095		61,189
(Gain) on settlement		(2,750)		(5,718)		(2,750)		(5,718)
Operating income		12,680		11,652		21,268		18,165
Interest expense		13,061		13,249		26,130		26,559
Loss before income taxes and noncontrolling interest		(381)		(1,597)		(4,862)		(8,394)
Provision for income taxes		228		182		387		351
Consolidated net loss		(609)		(1,779)		(5,249)		(8,745)
Net income attributable to noncontrolling interest		75		95		135		220
Net loss attributable to Universal Hospital Services, Inc.	$	(684)	$	(1,874)	$	(5,384)	$	(8,965)

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

3

Universal Hospital Services,Inc.

Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Consolidated net loss	$	(609)	$	(1,779)	$	(5,249)	$	(8,745)
Other comprehensive income:
Gain on minimum pension liability, net of tax of $0		184		488		370		488
Total other comprehensive income		184		488		370		488
Comprehensive loss		(425)		(1,291)		(4,879)		(8,257)
Comprehensive income attributable to noncontrolling interest		75		95		135		220
Comprehensive loss attributable to Universal Hospital Services, Inc.	$	(500)	$	(1,386)	$	(5,014)	$	(8,477)

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

4

Universal Hospital Services, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended
	June 30,
	2016		2015
Cash flows from operating activities:
Consolidated net loss	$	(5,249)	$	(8,745)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		36,614		38,315
Asset impairment charges		—		1,703
Amortization of intangibles, deferred financing costs and bond premium		6,011		6,532
Provision for doubtful accounts		130		54
Provision for inventory obsolescence		86		225
Non-cash share-based compensation expense		1,514		1,140
Gain on sales and disposals of equipment		(1,863)		(2,522)
Deferred income taxes		120		108
Interest on note receivable		(3)		—
Changes in operating assets and liabilities:
Accounts receivable		(5,301)		(3,980)
Inventories		(80)		(393)
Other operating assets		(1,100)		669
Accounts payable		(1,338)		2,000
Other operating liabilities		(6,537)		5,119
Net cash provided by operating activities		23,004		40,225
Cash flows from investing activities:
Medical equipment purchases		(27,412)		(27,437)
Property and office equipment purchases		(2,083)		(2,433)
Proceeds from disposition of property and equipment		6,944		9,426
Issuance of note receivable from officer		(983)		—
Acquisition		—		(2,600)
Net cash used in investing activities		(23,534)		(23,044)
Cash flows from financing activities:
Proceeds under senior secured credit facility		75,700		63,900
Payments under senior secured credit facility		(74,500)		(75,900)
Payments of principal under capital lease obligations		(2,944)		(4,154)
Payments of deferred financing costs		(97)		—
Holdback payment related to acquisition		(500)		—
Distributions to noncontrolling interests		(196)		(240)
Contributions from new members to limited liability company		—		70
Dividend and equity distribution payments		(24)		(39)
Proceeds from exercise of parent company stock options		66		—
Change in book overdrafts		3,025		(818)
Net cash provided by (used in) financing activities		530		(17,181)
Net change in cash and cash equivalents		—		—
Cash and cash equivalents at the beginning of period		—		—
Cash and cash equivalents at the end of period	$	—	$	—
Supplemental cash flow information:
Interest paid	$	25,926	$	26,151
Income taxes paid		533		697
Non-cash activities:
Medical equipment purchases included in accounts payable (at end of period)	$	7,546	$	9,039
Capital lease additions		3,484		6,766

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

5

Universal Hospital Services,Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.Basis of Presentation

The interim consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared by Universal Hospital Services, Inc. (“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 2015 Annual Report on Form 10-K filed with the SEC.

The interim consolidated financial statements presented herein as of June 30, 2016, reflect, in the opinion of management, all adjustments necessary for a fair presentation of the financial position and the results of operations and cash flows for the periods presented.  These adjustments are all of a normal, recurring nature.  The results of operations for any interim period are not necessarily indicative of results for the full year.

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

A description of our significant accounting policies is included in our 2015 Annual Report on Form 10-K. There have been no material changes to these policies for the quarter ended June 30, 2016.

Principles of Consolidation

The consolidated financial statements include the accounts of UHS and its 100%-owned subsidiary, UHS Surgical Services, Inc. (“Surgical Services”). In addition, in accordance with guidance issued by the Financial Accounting Standards Board (“FASB”), we have accounted for our equity investments in entities in which we are the primary beneficiary under the full consolidation method. All significant intercompany transactions and balances have been eliminated through consolidation. As the primary beneficiary, we consolidate the limited liability companies (“LLCs”) referred to in Note 10, Limited Liability Companies, as we effectively receive the majority of the benefits from such entities and we provide equipment lease guarantees for such entities.

2.Recent Accounting Pronouncements

Standards Adopted

In November 2015, the FASB issued ASU No. 2015-17 Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”) to simplify the presentation of deferred income taxes. ASU 2015-17 requires an entity with a classified balance sheet to present all deferred tax assets and liabilities as noncurrent. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2016. Early adoption is permitted. We have elected to early adopt ASU 2015-17 as of December 31, 2015 and retrospectively applied ASU 2015-17 to all periods presented. 

In April 2015, the FASB issued ASU No. 2015-03 Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The ASU is

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effective for annual and interim periods in fiscal years beginning after December 15, 2015. We adopted ASU 2015-03 as of January 1, 2016 and retrospectively applied ASU 2015-03 to all periods presented. As a result, $10.3 million of deferred financing costs in other long-term assets were netted to long-term debt on the 2015 Consolidated Balance Sheets.

In February 2015, the FASB issued ASU No. 2015-02 Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 changes the evaluation of whether limited partnerships (and similar legal entities) are variable interest entities (VIEs) and eliminates the presumption that a general partner should consolidate a limited partnership that is a voting interest entity. The new guidance also alters the analysis for determining when fees paid to a decision maker or service provider represent a variable interest in a VIE and how interests of related parties affect the primary beneficiary determination. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2015. The adoption of this standard does not have a material impact on our consolidated financial statements.

Standards Not Yet Adopted

In May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in the GAAP when it becomes effective. The new standard is effective beginning after December 15, 2016 and interim periods within those years. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.On July 9, 2015, the FASBapproved a one-year deferral of the effective date for ASU 2014-09, but would permit companies to adopt the standard as of the original effective date.

In August 2014, the FASB issued ASU No. 2014-15 Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern  (“ASU 2014-15”), which requires management to evaluate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern and whether or not it is probable that the entity will be unable to meet its obligations as they become due within one year after the date the financial statements are issued. The new standard is effective beginning after December 15, 2016 and interim periods within those years. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11 Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-03 changes the measurement principle for inventory from lower of cost or market to lower of cost and net realizable value for entities that do not measure inventory using the last in, first out or retail inventory method. The ASU also eliminates the requirement for these entities to consider replacement cost or net realizable value less an approximately normal profit margin when measuring inventory. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2016. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02 on Leases (Topic 842)(“ASU 2016-02”). ASU 2016-02 was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liability on the balance sheet and disclosing key information about leasing arrangements. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted. We are evaluating the effect that ASU 2016-02 will have on our consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-08 Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”). ASU 2016-08 amends the principal versus agent guidance in ASU 2014-09, Revenue from Contracts with Customers, and clarifies that the analysis must focus on whether the entity has control of the goods and services before they are transferred to the customer. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted but not before annual reporting periods beginning after December 15, 2016. We are evaluating the effect that ASU 2016-08 will have on our consolidated financial statements and related disclosures.

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In March 2016, the FASB issued ASU No. 2016-09 Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 was issued as part of the FASB’s simplification initiative and intends to improve the accounting for share-based payment transactions. The areas for simplification in this ASU involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2016. Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted. If an entity early adopts the ASU in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

In April 2016, the FASB issued ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”). ASU 2016-10 amends the guidance in ASU 2014-09 about identifying performance obligations and accounting for licenses of intellectual property. The ASU is effective on adoption of ASU 2014-09.

In May 2016, the FASB issued ASU No. 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”). ASU 2016-12 makes narrow-scope amendments to ASU 2014-09 and provides practical expedients to simplify the transition to the new standard and to clarify certain aspects of the standard. The ASU is effective on adoption of ASU 2014-09.

3.Fair Value Measurements

Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015 are summarized in the following table by type of inputs applicable to the fair value measurements:

	Fair Value at June 30, 2016								Fair Value at December 31, 2015
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Contingent Consideration	$	—	$	—	$	—	$	—	$	—	$	—	$	502	$	502

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

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

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

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

During 2012, we recorded a contingent consideration liability, in the form of an earn-out payment, related to our acquisitions. During 2015, we recorded a holdback liability related to our acquisition. The contingent consideration and holdback 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.  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

8

accordance with the terms of the agreements. During the three months ended June 30, 2016 and 2015, we paid $0 and $0.01 million, respectively, in earn-outs.  During the six months ended June 30, 2016 and 2015, we paid $0.5 and $0.02 million, respectively, in earn-outs and holdback. 

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

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

(in thousands)
Balance at December 31, 2015	$	502
Payments		(502)
Balance at June 30, 2016	$	—

Fair Value of Other Financial Instruments

The Company considers that the carrying amount of financial instruments, including accounts receivable, accounts payable, accrued liabilities and senior secured credit facility, approximates fair value due to their short maturities. The fair value of our outstanding Original Notes and Add-on Notes (each as defined in Note 7, Long-Term Debt) as of June 30, 2016 and December 31, 2015, based on the quoted market price for the same or similar issues of debt, which represents a Level 2 fair value measurement, is approximately:

	June 30, 2016				December 31, 2015
	Carrying		Fair		Carrying		Fair
(in thousands)	Value		Value		Value		Value
Original notes - 7.625% (1)	$	419,898	$	392,062	$	419,274	$	401,094
Add-on notes - 7.625% (2)		226,401		202,950		227,029		207,625

(1) The carrying value of the Original notes - 7.625% is net of unamortized deferred financing costs of $5.1 and $5.7 million as of June 30, 2016 and December 31, 2015, respectively.

(2) The carrying value of the Add-on notes - 7.625% % is net of unamortized deferred financing costs of $2.1 and $2.4 million as of June 30, 2016 and December 31, 2015, respectively, and includes unamortized bond premium of $8.5 and $9.4 million as of June 30, 2016 and December 31, 2015, respectively.

4.Goodwill and Other Intangible Assets

Our goodwill as of June 30, 2016 and December 31, 2015, by reporting segment, consists of the following:

	Medical		Clinical
	Equipment		Engineering		Surgical
(in thousands)	Solutions		Solutions		Services		Total
Balance at December 31, 2015	$	227,486	$	55,655	$	53,454	$	336,595
Acquisition		—		—		—		—
Balance at June 30, 2016	$	227,486	$	55,655	$	53,454	$	336,595

9

Our other intangible assets as of June 30, 2016 and December 31, 2015 consist of the following:

	June 30, 2016								December 31, 2015
			Accumulated								Accumulated
(in thousands)	Cost		Amortization		Impairment		Net		Cost		Amortization		Impairment		Net
Finite-life intangibles
Customer relationship	$	117,039	$	(93,887)	$	—	$	23,152	$	117,039	$	(89,663)	$	—	$	27,376
Supply agreement		26,000		(23,822)		—		2,178		26,000		(22,369)		—		3,631
Non-compete agreements		948		(777)		—		171		948		(701)		—		247
Total finite-life intangibles		143,987		(118,486)		—		25,501		143,987		(112,733)		—		31,254
Indefinite-life intangibles
Trade names		166,000		—		(34,900)		131,100		166,000		—		(34,900)		131,100
Total intangible assets	$	309,987	$	(118,486)	$	(34,900)	$	156,601	$	309,987	$	(112,733)	$	(34,900)	$	162,354

Total amortization expense related to intangible assets were $2.8 and $3.0 million for the three months ended June 30, 2016 and 2015, respectively, and $5.8 and $6.1 million for the six months ended June 30, 2016 and 2015, respectively.

The estimated future amortization expense for identifiable intangible assets during the remainder of 2016 and the next five years is as follows:

(in thousands)
Remainder of 2016	$	5,219
2017		7,679
2018		6,095
2019		3,529
2020		1,537
2021		877

5.Deficit

The following tables represent changes in deficit that are attributable to our shareholders and noncontrolling interests for the six month periods ended June 30, 2016 and 2015.

					Accumulated
	Additional				Other
	Paid-in		Accumulated		Comprehensive		Noncontrolling		Total
(in thousands)	Capital		Deficit		Loss		Interests		Deficit
Balance at December 31, 2015	$	241,833	$	(283,066)	$	(8,165)	$	240	$	(49,158)
Net (loss) income		—		(5,384)		—		135		(5,249)
Other comprehensive income		—		—		370		—		370
Share-based compensation		1,514		—		—		—		1,514
Stock option exercised		66		—		—		—		66
Cash distributions to noncontrolling interests		—		—		—		(196)		(196)
Balance at June 30, 2016	$	243,413	$	(288,450)	$	(7,795)	$	179	$	(52,653)

					Accumulated
	Additional				Other
	Paid-in		Accumulated		Comprehensive		Noncontrolling		Total
(in thousands)	Capital		Deficit		Loss		Interests		Deficit
Balance at December 31, 2014	$	214,514	$	(254,418)	$	(9,062)	$	219	$	(48,747)
Net (loss) income		—		(8,965)		—		220		(8,745)
Other comprehensive income		—		—		488		—		488
Cash distributions to noncontrolling interests		—		—		—		(240)		(240)
Contributions from new members to limited liability company		—		—		—		70		70
Balance at June 30, 2015	$	214,514	$	(263,383)	$	(8,574)	$	269	$	(57,174)

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6.Share-Based Compensation

During the six months ended June 30, 2016, activity under the 2007 Stock Option Plan (the “2007 Stock Option Plan”), of UHS Holdco, Inc., our parent company (“Parent”), was as follows:

						Weighted
						average
		Weighted		Aggregate		remaining
	Number of	average		intrinsic		contractual
(in thousands, except exercise price and years)	options	exercise price		value		term (years)
Outstanding at December 31, 2015	33,889	$	0.71	$	10,506	8.9
Granted	5,773		1.02
Exercised	(93)		0.71	$	29
Forfeited or expired	(3,140)		0.71
Outstanding at June 30, 2016	36,429	$	0.76	$	9,519	8.4
Exercisable at June 30, 2016	12,293	$	0.71	$	3,811	8.4
Remaining authorized options available for issue	7,163

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

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

We determine the fair value of stock options using the Black-Scholes option pricing model. The estimated fair value of options, including the effect of estimated forfeitures, is recognized as an expense on a straight-line basis over the options’ expected vesting periods. The following assumptions were used in determining the fair value of stock options granted during the six months ended June 30, 2016and 2015 under the Black-Scholes model.

	Six Months Ended
	June 30,
	2016			2015
Risk-free interest rate		1.50	%		1.70	%
Expected volatility		30.9	%		26.9	%
Dividend yield		N/A			N/A
Expected option life (years)		5.83			5.10
Black-Scholes Value of options	$	0.33		$	0.19

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

At June 30, 2016, unearned non-cash share-based compensation that we expect to recognize as expense over a weighted average period of 2.2 years totals approximately $6.0 million, net of our estimated forfeiture rate of 2.0%. The expense could be accelerated upon the sale of Parent or the Company.

In April 2015, Parent granted the Company’s Chief Executive Officer 7.0 million restricted stock units which vest over four years. Total compensation expense related to this grant was $0.3 million and $0.3 million for the three months ended June 30, 2016 and 2015, respectively, and $0.6 million and $0.3 million for the six months ended June 30, 2016 and 2015, respectively.

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

7.Long-Term Debt

Long-term debt consists of the following:

	June 30,		December 31,
(in thousands)	2016		2015
Original notes - 7.625% (1)	$	419,898	$	419,274
Add-on notes - 7.625% (2)		226,401		227,029
Senior secured credit facility (3)		27,176		25,811
Capital lease obligations		15,883		15,344
		689,358		687,458
Less: Current portion of long-term debt		(5,185)		(4,867)
Total long-term debt	$	684,173	$	682,591

(1) The carrying value of the Original notes - 7.625% is net of unamortized deferred financing costs of $5.1 and $5.7 million as of June 30, 2016 and December 31, 2015, respectively.

(2) The carrying value of the Add-on notes - 7.625% is net of unamortized deferred financing costs of $2.1 and $2.4 million as of June 30, 2016 and December 31, 2015, respectively, and includes unamortized bond premium of $8.5 and $9.4 million as of June 30, 2016 and December 31, 2015, respectively.

(3) The carrying value of the Senior secured credit facility is net of unamortized deferred financing costs of $2.0 and $2.2 million as of June 30, 2016 and December 31, 2015, respectively.

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

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

Interest on the 2012 Notes is payable entirely in cash, semiannually, in arrears, on February 15 and August 15 of each year, beginning on February 15, 2013. We may redeem some or all of the 2012 Notes at the redemption prices set forth in the 2012 Indenture.  If we sell certain assets or undergo certain kinds of changes of control, we must offer to repurchase the 2012 Notes.

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

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

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(b) the unused line fee rate to 0.25%.  Our obligations under the Third Amended Credit Agreement are secured by a first priority security interest in substantially all of the assets of the Company, Parent and Surgical Services, excluding a pledge of the Company’s and its subsidiaries’ stock, any joint ventures and certain other exceptions. Our obligations under the Third Amended Credit Agreement are unconditionally guaranteed by the Parent and Surgical Services.

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

As of June 30, 2016, we had $131.8 million of availability under the senior secured credit facility based on a borrowing base of $165.5 million less borrowings of $29.2 million and after giving effect to $4.5 million used for letters of credit.

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

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

· incur indebtedness;

· create or permit liens;

· declare or pay dividends and certain other restricted payments;

· consolidate, merge or recapitalize;

· acquire or sell assets;

· make certain investments, loans or other advances;

· enter into transactions with affiliates;

· change our line of business; and

· enter into hedging transactions.

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

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

At June 30, 2016, we had $29.2 million of borrowings outstanding of which $19.0 million was accruing interest at a rate of 2.4471%,  $7.0 million was accruing interest at a rate of 2.4461% and $3.2 million was accruing interest at a rate of 4.5%.  

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

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

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

· incur additional indebtedness;

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

· issue redeemable stock or preferred stock;

· issue stock of subsidiaries;

· make certain investments;

· transfer or sell assets;

· create liens on our assets to secure debt;

· enter into transactions with affiliates; and

· merge or consolidate with another company.

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

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

8.Commitments and Contingencies

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

In May 2016,  the Company entered into an amendment toan agreement with a supplier. Between the original agreement and this amendment, certain end users  described in the original agreement have entered into a direct agreement with the supplier or have elected to participate in a group purchasing organization agreement with the supplier. As a result, the supplier agreed to make a payment of $2.75 million to the Company.The Company recorded a net gain of $2.75 million related to this settlement which is reflected as a Gain on settlement in the Consolidated Statements of Operations during the three and six month periods ended June 30, 2016.

On January 13, 2015, the Company filed suit in the Western District of Texas against Hill-Rom Holdings, Inc., Hill-Rom Company, Inc. and Hill-Rom Services, Inc. (the “Defendants”) alleging that the Defendants violated federal and state antitrust laws by willfully and unlawfully engaging in a pattern of exclusionary and predatory conduct in order to foreclose market competition and seeking actual damages, trebled damages and punitive damages.  On March 4, 2015, the Defendants filed a motion to transfer the case to another venue.  On March 23, 2015, the Defendants filed a motion to dismiss the case.  On July 2, 2015, the Court denied the Defendants’ motion to transfer.  On October 15, 2015, the Court denied the Defendants motion to dismiss. At this early stage in the litigation, the Company does not believe the expense of litigation will have a material impact on the Company's operating expenses or financial results.

9.Related Party Transactions

Management Agreement

On May 31, 2007, we and an affiliate of Irving Place Capital (together with its affiliates, “IPC”) entered into a professional services agreement pursuant to which IPC provides general advisory and management services to us with

14

respect to financial and operating matters.  IPC is a principal owner of Parent, and the following members of our board of directors are associated with IPC:  Robert Juneja and Bret Bowerman. The professional services agreement requires us to pay an annual fee for ongoing advisory and management services equal to the greater of $0.5 million or 0.75% of our Adjusted EBITDA (as defined in the professional services agreement) for the immediately preceding fiscal year, payable in quarterly installments. The professional services agreement provides that IPC will be reimbursed for its reasonable out-of-pocket expenses in connection with certain activities undertaken pursuant to the professional services agreement and will be indemnified for liabilities incurred in connection with its role under the professional services agreement, other than for liabilities resulting from its gross negligence or willful misconduct. The term of the professional services agreement commenced on May 31, 2007 and will remain in effect unless and until either party notifies the other of its desire to terminate, we are sold to a third-party purchaser or we consummate a qualified initial public offering, as defined in the professional services agreement. Total professional services fees incurred to IPC were $0.2 and $0.3 million for the three month periods ended June 30, 2016 and 2015, respectively,  and $0.4 and $0.5 million for the six month periods ended June 30, 2016 and 2015, respectively.

We entered into engagement letters with CTPartners, LLC (“CTPartners”) to conduct searches for certain executive positions.  One member of our board of directors was a former director of CTPartners. Total fees incurred to CTPartners was $0 and $0.2 million for the three month periods ended June 30, 2016 and 2015, respectivelyand $0 and $0.2 million during the six month periods ended June 30, 2016 and 2015, respectively.

In connection with the Restricted Stock Unit Award Agreement, dated as of April 13, 2015, between an offcer and the Company, we entered into a promissory note agreement with the officer dated April 13, 2016 for a total amount of $1.0 million which is included in other long-term assets in the Consolidated Balance Sheets. This note receivable bears annual interest at 1.45%. The principal and accrued interest of this note is due on the earliest of (i) the seventh anniversary of the date of this loan, (ii) any event with respect to borrower, which, in any such case of the loan were to remain outstanding on and after such date, would result in violation of Section 402 of the Sarbanes-Oxley Act of 2002, (iii) and certain events of default or (iv) a change in control. Interest income for this note was $0.003 and $0.003 million for the three and six month periods ended June 30, 2016.

10.Limited Liability Companies

We participate with others in the formation of 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 June 30, 2016, 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 June 30, 2016, we held interests in seven 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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11.Segment Information

Our reporting segments consist of Medical Equipment Solutions (“MES”), Clinical Engineering Solutions (“CES”) and Surgical Services (“SS”). Certain operating information for our segments as well as a reconciliation of total Company gross margin to loss before income taxes and noncontrolling interest was as follows:

Medical Equipment Solutions

(in thousands)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Revenues	$	74,940	$	71,084	$	155,170	$	145,169
Cost of revenue		33,213		31,053		71,494		62,331
Medical equipment depreciation		14,628		14,009		28,381		30,669
Gross margin	$	27,099	$	26,022	$	55,295	$	52,169

Clinical Engineering Solutions

(in thousands)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Revenues	$	25,464	$	24,784	$	51,042	$	49,179
Cost of revenue		20,644		20,041		40,668		39,271
Gross margin	$	4,820	$	4,743	$	10,374	$	9,908

Surgical Services

(in thousands)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Revenues	$	17,214	$	16,421	$	33,532	$	31,427
Cost of revenue		8,956		8,722		17,722		16,902
Medical equipment depreciation		1,449		1,492		2,866		2,966
Gross margin	$	6,809	$	6,207	$	12,944	$	11,559

Total Gross Margin and Reconciliation to Loss Before Income Taxes and Noncontrolling Interest

(in thousands)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Total gross margin	$	38,728	$	36,972	$	78,613	$	73,636
Selling, general and administrative		28,798		31,038		60,095		61,189
(Gain) on settlement		(2,750)		(5,718)		(2,750)		(5,718)
Interest expense		13,061		13,249		26,130		26,559
Loss before income taxes and noncontrolling interest	$	(381)	$	(1,597)	$	(4,862)	$	(8,394)

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Total Assets by Reporting Segment

(in thousands)

	June 30,		December 31,
	2016		2015
Medical Equipment Solutions	$	575,833	$	585,990
Clinical Engineering Solutions		111,150		110,588
Surgical Services		99,327		100,997
Total Company Assets	$	786,310	$	797,575

The following table provides additional detail on percentage of revenue for each group of similar products sold or services provided in the MES, CES and SS segments:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
MES
Equipment usage solutions	61.1	%	60.1	%	60.4	%	61.2	%
Equipment/disposable sales	2.6		3.2		4.3		3.1
	63.7		63.3		64.7		64.3
CES
Service solutions	21.6		22.1		21.3		21.8
SS
Equipment usage solutions	14.5		14.4		13.8		13.7
Equipment/disposable sales	0.2		0.2		0.2		0.2
	14.7		14.6		14.0		13.9
Total revenues	100.0	%	100.0	%	100.0	%	100.0	%

12.Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We evaluate the recoverability of our deferred tax assets by scheduling the expected reversals of deferred tax assets and liabilities in order to determine whether net operating loss carry forwards are recoverable prior to expiration and have established a valuation allowance in accordance with ASC Topic 740,  “Income Taxes”. The tax expense for the threeand sixmonths ended June 30, 2016 primarily relates to state minimum fees.The expected tax benefit from operating loss during the threeand sixmonths ended June 30, 2016 was offset by the recording of additional valuation allowance. In future reporting periods, we will continue to assess the likelihood that deferred tax assets will be realizable.

At June 30, 2016, the Company had available unused federal net operating loss carryforwards of approximately $207.1 million. The net operating loss carryforwards will expire at various dates from 2018 through 2036.

13.Consolidating Financial Statements

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

17

Universal Hospital Services, Inc.

Consolidating Balance Sheets

(in thousands, except share and per share  information)

(unaudited)

	June 30, 2016
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Assets
Current assets:
Accounts receivable, less allowance for doubtful accounts	$	67,326	$	9,097	$	—	$	76,423
Due from affiliates		30,525		—		(30,525)		—
Inventories		5,266		3,234		—		8,500
Other current assets		6,453		219		—		6,672
Total current assets		109,570		12,550		(30,525)		91,595
Property and equipment:
Medical equipment		544,124		51,511		—		595,635
Property and office equipment		79,155		9,717		—		88,872
Accumulated depreciation		(444,245)		(40,411)		—		(484,656)
Total property and equipment, net		179,034		20,817		—		199,851
Other long-term assets:
Goodwill		283,141		53,454		—		336,595
Investment in subsidiary		55,516		—		(55,516)		—
Other intangibles, net		144,474		12,127		—		156,601
Other		1,289		379		—		1,668
Total assets	$	773,024	$	99,327	$	(86,041)	$	786,310
Liabilities and (Deficit) Equity
Current liabilities:
Current portion of long-term debt	$	3,965	$	1,220	$	—	$	5,185
Book overdrafts		9,227		242		—		9,469
Due to affiliates		—		30,525		(30,525)		—
Accounts payable		22,584		3,105		—		25,689
Accrued compensation		13,097		2,012		—		15,109
Accrued interest		18,650		—		—		18,650
Other accrued expenses		15,789		199		—		15,988
Total current liabilities		83,312		37,303		(30,525)		90,090
Long-term debt, less current portion		680,682		3,491		—		684,173
Pension and other long-term liabilities		11,611		10		—		11,621
Deferred income taxes, net		50,236		2,843		—		53,079
Commitments and contingencies
(Deficit) Equity
Common stock		—		—		—		—
Additional paid-in capital		243,428		60,004		(60,019)		243,413
Accumulated deficit		(283,947)		(4,503)		—		(288,450)
Accumulated loss in subsidiary		(4,503)		—		4,503		—
Accumulated other comprehensive loss		(7,795)		—		—		(7,795)
Total Universal Hospital Services, Inc. (deficit) equity		(52,817)		55,501		(55,516)		(52,832)
Noncontrolling interest		—		179		—		179
Total (deficit) equity		(52,817)		55,680		(55,516)		(52,653)
Total liabilities and (deficit) equity	$	773,024	$	99,327	$	(86,041)	$	786,310

18

Universal Hospital Services, Inc.

Consolidating Balance Sheets

(in thousands, except share and per share  information)

(unaudited)

	December 31, 2015
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Assets
Current assets:
Accounts receivable, less allowance for doubtful accounts	$	62,288	$	8,964	$	—	$	71,252
Due from affiliates		29,145		—		(29,145)		—
Inventories		4,533		3,973		—		8,506
Other current assets		5,670		164		—		5,834
Total current assets		101,636		13,101		(29,145)		85,592
Property and equipment:
Medical equipment		541,200		48,891		—		590,091
Property and office equipment		76,436		8,905		—		85,341
Accumulated depreciation		(425,574)		(37,244)		—		(462,818)
Total property and equipment, net		192,062		20,552		—		212,614
Other long-term assets:
Goodwill		283,141		53,454		—		336,595
Investment in subsidiary		54,383		—		(54,383)		—
Other intangibles, net		148,520		13,834		—		162,354
Other		364		56		—		420
Total assets	$	780,106	$	100,997	$	(83,528)	$	797,575
Liabilities and (Deficit) Equity
Current liabilities:
Current portion of long-term debt	$	3,801	$	1,066	$	—	$	4,867
Book overdrafts		5,875		569		—		6,444
Due to affiliates		—		29,145		(29,145)		—
Accounts payable		25,260		5,813		—		31,073
Accrued compensation		21,266		2,334		—		23,600
Accrued interest		18,742		—		—		18,742
Dividend payable		24		—		—		24
Other accrued expenses		13,913		651		—		14,564
Total current liabilities		88,881		39,578		(29,145)		99,314
Long-term debt, less current portion		679,321		3,270		—		682,591
Pension and other long-term liabilities		11,850		19		—		11,869
Deferred income taxes, net		49,437		3,522		—		52,959
Commitments and contingencies
(Deficit) Equity
Common stock		—		—		—		—
Additional paid-in capital		241,848		60,004		(60,019)		241,833
Accumulated deficit		(277,430)		(5,636)		—		(283,066)
Accumulated loss in subsidiary		(5,636)		—		5,636		—
Accumulated other comprehensive loss		(8,165)		—		—		(8,165)
Total Universal Hospital Services, Inc. (deficit) equity		(49,383)		54,368		(54,383)		(49,398)
Noncontrolling interest		—		240		—		240
Total (deficit) equity		(49,383)		54,608		(54,383)		(49,158)
Total liabilities and (deficit) equity	$	780,106	$	100,997	$	(83,528)	$	797,575

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Universal Hospital Services, Inc.

Consolidating Statements of Operations

(in thousands)

(unaudited)

	Three Months Ended June 30, 2016
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Revenue
Medical equipment solutions	$	74,940	$	—	$	—	$	74,940
Clinical engineering solutions		25,464		—		—		25,464
Surgical services		—		17,214		—		17,214
Total revenues		100,404		17,214		—		117,618
Cost of Revenue
Cost of medical equipment solutions		33,213		—		—		33,213
Cost of clinical engineering solutions		20,644		—		—		20,644
Cost of surgical services		—		8,956		—		8,956
Medical equipment depreciation		14,628		1,449		—		16,077
Total costs of revenues		68,485		10,405		—		78,890
Gross margin		31,919		6,809		—		38,728
Selling, general and administrative		24,123		4,675		—		28,798
(Gain) on settlement		(2,750)		—		—		(2,750)
Operating income		10,546		2,134		—		12,680
Equity in earnings of subsidiary		(901)		—		901		—
Interest expense		12,528		533		—		13,061
(Loss) income before income taxes and noncontrolling interest		(1,081)		1,601		(901)		(381)
(Benefit) provision for income taxes		(472)		700		—		228
Consolidated net (loss) income		(609)		901		(901)		(609)
Net income attributable to noncontrolling interest		—		75		—		75
Net (loss) income attributable to Universal Hospital Services, Inc.	$	(609)	$	826	$	(901)	$	(684)

20

Universal Hospital Services, Inc.

Consolidating Statements of Operations

(in thousands)

(unaudited)

	Three Months Ended June 30, 2015
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Revenue
Medical equipment solutions	$	71,084	$	—	$	—	$	71,084
Clinical engineering solutions		24,784		—		—		24,784
Surgical services		—		16,421		—		16,421
Total revenues		95,868		16,421		—		112,289
Cost of Revenue
Cost of medical equipment solutions		31,053		—		—		31,053
Cost of clinical engineering solutions		20,041		—		—		20,041
Cost of surgical services		—		8,722		—		8,722
Medical equipment depreciation		14,009		1,492		—		15,501
Total costs of revenues		65,103		10,214		—		75,317
Gross margin		30,765		6,207		—		36,972
Selling, general and administrative		26,436		4,602		—		31,038
(Gain) on settlement		(5,718)		—		—		(5,718)
Operating income		10,047		1,605		—		11,652
Equity in earnings of subsidiary		(573)		—		573		—
Interest expense		12,734		515		—		13,249
(Loss) income before income taxes and noncontrolling interest		(2,114)		1,090		(573)		(1,597)
(Benefit) provision for income taxes		(335)		517		—		182
Consolidated net (loss) income		(1,779)		573		(573)		(1,779)
Net income attributable to noncontrolling interest		—		95		—		95
Net (loss) income attributable to Universal Hospital Services, Inc.	$	(1,779)	$	478	$	(573)	$	(1,874)

21

Universal Hospital Services, Inc.

Consolidating Statements of Operations

(in thousands)

(unaudited)

	Six Months Ended June 30, 2016
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Revenue
Medical equipment solutions	$	155,170	$	—	$	—	$	155,170
Clinical engineering solutions		51,042		—		—		51,042
Surgical services		—		33,532		—		33,532
Total revenues		206,212		33,532		—		239,744
Cost of Revenue
Cost of medical equipment solutions		71,494		—		—		71,494
Cost of clinical engineering solutions		40,668		—		—		40,668
Cost of surgical services		—		17,722		—		17,722
Medical equipment depreciation		28,381		2,866		—		31,247
Total costs of revenues		140,543		20,588		—		161,131
Gross margin		65,669		12,944		—		78,613
Selling, general and administrative		50,459		9,636		—		60,095
(Gain) on settlement		(2,750)		—		—		(2,750)
Operating income		17,960		3,308		—		21,268
Equity in earnings of subsidiary		(1,268)		—		1,268		—
Interest expense		25,053		1,077		—		26,130
(Loss) income before income taxes and noncontrolling interest		(5,825)		2,231		(1,268)		(4,862)
(Benefit) provision for income taxes		(576)		963		—		387
Consolidated net (loss) income		(5,249)		1,268		(1,268)		(5,249)
Net income attributable to noncontrolling interest		—		135		—		135
Net (loss) income attributable to Universal Hospital Services, Inc.	$	(5,249)	$	1,133	$	(1,268)	$	(5,384)

22

Universal Hospital Services, Inc.

Consolidating Statements of Operations

(in thousands)

(unaudited)

	Six Months Ended June 30, 2015
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Revenue
Medical equipment solutions	$	145,169	$	—	$	—	$	145,169
Clinical engineering solutions		49,179		—		—		49,179
Surgical services		—		31,427		—		31,427
Total revenues		194,348		31,427		—		225,775
Cost of Revenue
Cost of medical equipment solutions		62,331		—		—		62,331
Cost of clinical engineering solutions		39,271		—		—		39,271
Cost of surgical services		—		16,902		—		16,902
Medical equipment depreciation		30,669		2,966		—		33,635
Total costs of revenues		132,271		19,868		—		152,139
Gross margin		62,077		11,559		—		73,636
Selling, general and administrative		52,018		9,171		—		61,189
(Gain) on settlement		(5,718)		—		—		(5,718)
Operating income		15,777		2,388		—		18,165
Equity in earnings of subsidiary		(759)		—		759		—
Interest expense		25,525		1,034		—		26,559
(Loss) income before income taxes and noncontrolling interest		(8,989)		1,354		(759)		(8,394)
(Benefit) provision for income taxes		(244)		595		—		351
Consolidated net (loss) income		(8,745)		759		(759)		(8,745)
Net income attributable to noncontrolling interest		—		220		—		220
Net (loss) income attributable to Universal Hospital Services, Inc.	$	(8,745)	$	539	$	(759)	$	(8,965)

23

Universal Hospital Services, Inc.

Consolidating Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

	Three Months Ended June 30, 2016								Six Months Ended June 30, 2016
	Parent		Subsidiary						Parent		Subsidiary
	Issuer		Guarantor		Consolidating				Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated		UHS		Surgical Services		Adjustments		Consolidated
Consolidated net (loss) income	$	(609)	$	901	$	(901)	$	(609)	$	(5,249)	$	1,268	$	(1,268)	$	(5,249)
Other comprehensive income:
Gain on minimum pension liability, net of tax		184		—		—		184		370		—		—		370
Total other comprehensive income		184		—		—		184		370		—		—		370
Comprehensive (loss) income		(425)		901		(901)		(425)		(4,879)		1,268		(1,268)		(4,879)
Comprehensive income attributable to noncontrolling interest		—		75		—		75		—		135		—		135
Comprehensive (loss) income attributable to Universal Hospital Services, Inc.	$	(425)	$	826	$	(901)	$	(500)	$	(4,879)	$	1,133	$	(1,268)	$	(5,014)

	Three Months Ended June 30, 2015								Six Months Ended June 30, 2015
	Parent		Subsidiary						Parent		Subsidiary
	Issuer		Guarantor		Consolidating				Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated		UHS		Surgical Services		Adjustments		Consolidated
Consolidated net (loss) income	$	(1,779)	$	573	$	(573)	$	(1,779)	$	(8,745)	$	759	$	(759)	$	(8,745)
Other comprehensive income:
Gain on minimum pension liability, net of tax		488		—		—		488		488		—		—		488
Total other comprehensive income		488		—		—		488		488		—		—		488
Comprehensive (loss) income		(1,291)		573		(573)		(1,291)		(8,257)		759		(759)		(8,257)
Comprehensive income attributable to noncontrolling interest		—		95		—		95		—		220		—		220
Comprehensive (loss) income attributable to Universal Hospital Services, Inc.	$	(1,291)	$	478	$	(573)	$	(1,386)	$	(8,257)	$	539	$	(759)	$	(8,477)

24

Universal Hospital Services, Inc.

Consolidating Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended June 30, 2016
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Cash flows from operating activities:
Consolidated net (loss) income	$	(5,249)	$	1,268	$	(1,268)	$	(5,249)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		33,059		3,555		—		36,614
Amortization of intangibles, deferred financing costs and bond premium		4,304		1,707		—		6,011
Equity in earnings of subsidiary		(1,268)		—		1,268		—
Provision for doubtful accounts		72		58		—		130
Provision for inventory obsolescence		126		(40)		—		86
Non-cash share-based compensation expense		1,514		—		—		1,514
Gain on sales and disposals of equipment		(1,903)		40		—		(1,863)
Deferred income taxes		799		(679)		—		120
Interest on note receivable		(3)		—		—		(3)
Changes in operating assets and liabilities:
Accounts receivable		(5,110)		(191)		—		(5,301)
Due from affiliates		(1,380)		—		1,380		—
Inventories		(859)		779		—		(80)
Other operating assets		(722)		(378)		—		(1,100)
Accounts payable		(522)		(816)		—		(1,338)
Other operating liabilities		(6,254)		(283)		—		(6,537)
Net cash provided by operating activities		16,604		5,020		1,380		23,004
Cash flows from investing activities:
Medical equipment purchases		(22,647)		(4,765)		—		(27,412)
Property and office equipment purchases		(2,070)		(13)		—		(2,083)
Proceeds from disposition of property and equipment		6,940		4		—		6,944
Issuance of note receivable from officer		(983)		—		—		(983)
Net cash used in investing activities		(18,760)		(4,774)		—		(23,534)
Cash flows from financing activities:
Proceeds under senior secured credit facility		75,700		—		—		75,700
Payments under senior secured credit facility		(74,500)		—		—		(74,500)
Payments of principal under capital lease obligations		(2,341)		(603)		—		(2,944)
Payments of deferred financing costs		(97)		—		—		(97)
Holdback payment related to acquisition		—		(500)		—		(500)
Distributions to noncontrolling interests		—		(196)		—		(196)
Dividend and equity distribution payments		(24)		—		—		(24)
Proceeds from exercise of parent company stock options		66		—		—		66
Due to affiliates		—		1,380		(1,380)		—
Change in book overdrafts		3,352		(327)		—		3,025
Net cash provided by (used in) financing activities		2,156		(246)		(1,380)		530
Net change in cash and cash equivalents		—		—		—		—
Cash and cash equivalents at the beginning of period		—		—		—		—
Cash and cash equivalents at the end of period	$	—	$	—	$	—	$	—

25

Universal Hospital Services, Inc.

Consolidating Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended June 30, 2015
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Cash flows from operating activities:
Consolidated net (loss) income	$	(8,745)	$	759	$	(759)	$	(8,745)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		34,717		3,598		—		38,315
Asset impairment charges		1,703		—		—		1,703
Amortization of intangibles, deferred financing costs and bond premium		4,890		1,642		—		6,532
Equity in earnings of subsidiary		(759)		—		759		—
Provision for doubtful accounts		28		26		—		54
Provision for inventory obsolescence		210		15		—		225
Non-cash share-based compensation expense		1,140		—		—		1,140
Gain on sales and disposals of equipment		(2,436)		(86)		—		(2,522)
Deferred income taxes		1,098		(990)		—		108
Changes in operating assets and liabilities:
Accounts receivable		(3,213)		(767)		—		(3,980)
Due from affiliates		(1,196)		—		1,196		—
Inventories		(410)		17		—		(393)
Other operating assets		610		59		—		669
Accounts payable		1,148		852		—		2,000
Other operating liabilities		5,788		(669)		—		5,119
Net cash provided by operating activities		34,573		4,456		1,196		40,225
Cash flows from investing activities:
Medical equipment purchases		(25,308)		(2,129)		—		(27,437)
Property and office equipment purchases		(2,417)		(16)		—		(2,433)
Proceeds from disposition of property and equipment		9,290		136		—		9,426
Acquisition		—		(2,600)		—		(2,600)
Net cash used in investing activities		(18,435)		(4,609)		—		(23,044)
Cash flows from financing activities:
Proceeds under senior secured credit facility		63,900		—		—		63,900
Payments under senior secured credit facility		(75,900)		—		—		(75,900)
Payments of principal under capital lease obligations		(3,635)		(519)		—		(4,154)
Distributions to noncontrolling interests		—		(240)		—		(240)
Contributions from new members to limited liability company		—		70		—		70
Dividend and equity distribution payments		(39)		—		—		(39)
Due to affiliates		—		1,196		(1,196)		—
Change in book overdrafts		(464)		(354)		—		(818)
Net cash (used in) provided by financing activities		(16,138)		153		(1,196)		(17,181)
Net change in cash and cash equivalents		—		—		—		—
Cash and cash equivalents at the beginning of period		—		—		—		—
Cash and cash equivalents at the end of period	$	—	$	—	$	—	$	—

26

14.Restructuring

We incurred no restructuring expense during the three months and six months ended June 30, 2016 and 2015. As of December 31, 2015, we had $2.4 million of restructuring liability. For the six months ended June 30, 2016,  $1.9 million in restructuring charges was paid. No additional restructuring was recorded in the first twoquarters of 2016 for new severance arrangements and the remaining liability of $0.5 million as of June 30, 2016 is expected to be paid out by the end of the first quarter of 2017 and is included in the “other accrued expenses” in the Consolidated Balance Sheets. As of December 31, 2014, we had $1.6 million of restructuring liability. For the six months ended June 30, 2015,  $1.1 million in restructuring charges was paid.No additional restructuring was recorded in the first two quarters of 2015 for new severance arrangements and the remaining $0.4million was a liability as of June 30, 2015.

15.Concentration

One customer accounted for approximately 16%and 14%of total revenue for the six months ended June 30, 2016 and 2015, respectively.

27

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

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

BUSINESS OVERVIEW

Our Company

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

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

UHS delivers health care solutions through three segments: Medical Equipment Solutions (“MES”), Clinical Engineering Solutions (“CES”) and Surgical Services (“SS”). As of June 30, 2016, we owned or managed over 700,000 units of medical equipment consisting of approximately 400,000 owned or managed units in our MES segment, over 300,000 units of customer-owned equipment we managed in our CES segment and over 7,000 units of owned or managed mobile surgical equipment in our SS segment. Our diverse customer base includes more than 7,000 national, regional and local acute care hospitals and alternate site providers (such as long-term acute care hospitals, skilled nursing facilities, surgery centers, specialty hospitals, nursing homes and home care providers). We also have relationships with more than 200 medical device manufacturers, many of the nation’s largest group purchasing organizations (“GPOs”) and many health system integrated delivery networks (“IDNs”).  All of our solutions leverage our nationwide network of 83 district service centers, five CES Centers of Excellence and an additional five stand-alone SS service centers, together with our more than 75 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 report our financial results in three segments. Our reporting segments consist of MES, CES and SS. We evaluate the performance of our reportable segments based on gross margin. The accounting policies of the individual reportable segments are the same as those of the entire company.

Medical Equipment Solutions

Our MES segment accounted for $74.9 and $71.1 million, or approximately 63.7% and 63.3% of our revenues, for the three months ended June 30, 2016 and 2015, respectively and $155.2 and $145.2 million, or approximately 64.7% and 64.3% of our revenues, for the six months ended June 30, 2016 and 2015, respectively. As of June 30, 2016,  the MES segment owned or managed approximately 400,000 units of medical equipment ranging across many clinical categories, manufacturers and models.  These solutions are provided primarily to hospitals and other acute care providers for use through their facilities, including the emergency room, operating room, critical care, intensive care, rehabilitation and general patient care areas.

Our MES segment started more than 75 years ago as our leading medical equipment peak needs usage business and has transformed into providing comprehensive outsourced and on-site solutions that manage all aspects of medical equipment in a health care facility. We currently provide MES solutions to more than 7,000 acute care hospitals and alternate site providers in the United States, including some of the nation’s premier health care institutions. 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 advantage of our diversified product offering, clinical education and support, customized agreements and 360 On-site Managed Solutions.

28

We have four primary solutions in our MES segment:

· Supplemental and Peak Needs Usage Solutions;

· Customized Equipment Agreements Solutions;

· 360 On-site Managed Solutions; and

· Specialty Medical Equipment Sales, Distribution and Disposal Solutions.

Clinical Engineering Solutions

Our CES segment accounted for $25.5 and $24.8 million, or approximately 21.6% and 22.1% of our revenues, for the three months ended June 30, 2016 and 2015, respectively and $51.0 and $49.2 million, or approximately 21.3% and 21.8% of our revenues, for the six months ended June 30, 2016 and 2015, respectively. We offer a broad range of inspection, preventive maintenance, repair, logistic and consulting services through our team of over 390 technicians and professionals located throughout the United States in our nationwide network of service centers.  We managed over 300,000 units of customer owned equipment as of June 30, 2016.  In addition, as of June 30, 2016, we serviced approximately 400,000 units that we own or directly manage in our MES segment.

Our CES segment leverages our over 75 years of experience and our extensive equipment database in repairing and maintaining a broad range of health care technologies. Historically, we have been our own largest customer for CES services in order to repair and maintain approximately 400,000 units that we own or directly manage. However, we believe our CES segment has significant future growth potential by offering non-capital based comprehensive solutions as a stand-alone or complementary alternative for customers that own medical equipment but lack the infrastructure, expertise, or scale to perform routine maintenance, repair, record keeping, and lifecycle analysis and planning functions.  We also believe hospital and other facility-based clients will face increasing challenges in managing sophisticated medical equipment that requires connectivity and interoperability with information technology systems, compliance with the 10th revision of the International Statistical Classification of Diseases and Related Health Problems (ICD-10), regulatory requirements, integration with electronic medical records (EMR), maintenance and management of software databases and management of other medical equipment patient information and safety features.

We have three primary solutions in our CES segment:

· Supplemental Maintenance and Repair Solutions;

· 360 On-site Managed Solutions; and

· Manufacturer Solutions.

Surgical Services

Our SS segment accounted for $17.2 and $16.4 million, or approximately 14.7% and 14.6% of our revenues, for the three months ended June 30, 2016 and 2015,  respectively and $33.5 and $31.4 million, or approximately 14.0% and 13.9% of our revenues, for the six months ended June 30, 2016 and 2015, respectively.As of June 30, 2016, we owned or managed over 7,000 units of mobile surgical equipment in our SS segment, primarily used in the practice of general surgery, orthopedic surgery, otolaryngology, urology, obstetrics, gynecology, podiatry, dermatology and plastic/cosmetics.

SS provides high end, state-of-the-art surgical equipment and associated products along with trained and certified Surgical Equipment Technologists (“technologists”) to assist in the procedural operation of the equipment. We provide these services to over 1,000 acute care hospitals and surgery centers through our nationwide network of 83 district service centers and an additional five stand-alone SS service centers. Our technologists work in the operating room (“O.R.”) and support physicians and O.R. personnel. The services are offered on a per-procedure basis. Our technologists deliver, set up, and create a safe environment for hospital and clinical personnel operating the equipment and provide all necessary disposable materials needed. Our technologists work closely with our customers to confirm that all certifications and credentials meet requirements to provide on-site services. Our technologists also assist customers in the operation of facility-owned assets and supplement the training and staffing of their personnel.  As of June 30, 2016, SS provided solutions in 42 states.

29

We have two primary solutions in our SS segment:

· On-Demand and Scheduled Usage Solutions; and

· 360 On-site Managed Solutions.

RESULTS OF OPERATIONS

The following discussion addresses:

· our financial condition as of June 30, 2016 and

· the results of operations for the three-month and six-month periods ended June 30, 2016 and 2015.

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 2015 Annual Report on Form 10-K, filed with the Securities and Exchange Commission.

The following table provides information on the percentages of certain items of selected financial data compared to total revenues for the three-month and six-month periods ended June 30, 2016 and 2015.  The table below also indicates the percentage increase or decrease over the prior comparable period.

	Percent to Total Revenues				Percent		Percent to Total Revenues				Percent
	Three Months Ended June 30,				Increase		Six Months Ended June 30,				Increase
	2016		2015		(Decrease)		2016		2015		(Decrease)
Revenue
Medical equipment solutions	63.7	%	63.3	%	5.4	%	64.7	%	64.3	%	6.9	%
Clinical engineering solutions	21.6		22.1		2.7		21.3		21.8		3.8
Surgical services	14.7		14.6		4.8		14.0		13.9		6.7
Total revenues	100.0	%	100.0	%	4.7		100.0	%	100.0	%	6.2
Cost of Revenue
Cost of medical equipment solutions	28.2		27.7		7.0		29.8		27.6		14.7
Cost of clinical engineering solutions	17.6		17.8		3.0		17.0		17.4		3.6
Cost of surgical services	7.6		7.8		2.7		7.4		7.5		4.9
Medical equipment depreciation	13.7		13.8		3.7		13.0		14.9		(7.1)
Total costs of revenues	67.1		67.1		4.7		67.2		67.4		5.9
Gross margin	32.9		32.9		4.7		32.8		32.6		6.8
Selling, general and administrative	24.5		27.6		(7.2)		25.1		27.1		(1.8)
(Gain) on settlement	(2.3)		(5.1)		(51.9)		(1.1)		(2.5)		*
Operating income	10.7		10.4		8.8		8.8		8.0		17.1
Interest expense	11.1		11.8		(1.4)		10.9		11.8		(1.6)
Loss before income taxes and noncontrolling interest	(0.4)		(1.4)		(76.1)		(2.1)		(3.8)		(42.1)
Provision for income taxes	0.2		0.2		*		0.2		0.2		*
Consolidated net loss	(0.6)	%	(1.6)	%	(65.8)		(2.3)	%	(4.0)	%	(40.0)

*Not meaningful

Consolidated Results of Operations for the three months ended June 30, 2016 compared to the three months ended June 30, 2015

Total Revenue

Total revenue for the three months ended June 30, 2016 was $117.6 million, compared to $112.3 million for the three months ended June 30, 2015, an increase of $5.3 million or 4.7%.  The net increase was primarily due to additional

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revenue within our MES segment related to growth in our 360 Solutions of $3.2million, growth in our patient handling revenue of $0.8 million, growth in our CES segment of $0.7 million related to growth in providing existing and new customers with services on their equipment and growth in our SS segment of $0.8 million. These increases were partially offset due to customer lossesin the MES segment.

Cost of Revenue

Total cost of revenue for the three months ended June 30, 2016 was $78.9 million compared to $75.3 million for the three months ended June 30, 2015, an increase of $3.6 million or 4.7%. The increase was primarily in our MES segment due to increases in 360 solutions cost of $2.0 million and other rental costs of $1.0 million.

Gross Margin

Total gross margin for the three months ended June 30, 2016 was $38.7 million, or 32.9% of total revenues, compared to $37.0 million, or 32.9% of total revenues, for the three months ended June 30, 2015, an increase of $1.7 million or 4.7%.  Total gross margin as a percent of revenue was consistent in the second quarter of 2016 as compared to the same period of 2015.

Medical Equipment Solutions

(in thousands)

	Three Months Ended
	June 30,
	2016			2015			Change		% Change
Total revenue	$	74,940		$	71,084		$	3,856	5.4	%
Cost of revenue		33,213			31,053			2,160	7.0
Medical equipment depreciation		14,628			14,009			619	4.4
Gross margin	$	27,099		$	26,022		$	1,077	4.1
Gross margin %		36.2	%		36.6	%

Total revenue in the MES segment increased $3.9 million, or 5.4%, to $74.9 million in the second quarter of 2016 as compared to the same period of 2015.  The increase was primarily due to the growth in our 360 solutions from both new programs and expansion of existing programs of $3.2million and growth in our patient handling revenue of $0.8 million. The increases were partially offset by the loss of certain customers. Many of our 360 solution 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 June 30, 2016,  we had 234 such active programs, up from 230 as of December 31, 2015.

Total cost of revenue in the segment increased $2.2 million, or 7.0%, to $33.2 million in the second quarter of 2016 as compared to the same period of 2015.  This increase was due to the increases in costs to support growth in our 360 solutions of $2.0 million largely due to theincrease in employee related cost and an increase in rental costs of $1.0 million largerly due to the higher repair parts expense.  

Medical equipment depreciation increased $0.6 million, or 4.4%, to $14.6 million in the second quarter of 2016 as compared to the same period of 2015. The increase in medical equipment depreciation was primarily due to additional medical equipment purchased in the second quarter of 2016.  

Gross margin percentage for the MES segment decreased from 36.6% in the second quarter of 2015 to 36.2% in the same period of 2016. Gross margin rate was impacted by the higher depreciation and growth in our 360 solutions.

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Clinical Engineering Solutions

(in thousands)

	Three Months Ended
	June 30,
	2016			2015			Change		% Change
Total revenue	$	25,464		$	24,784		$	680	2.7	%
Cost of revenue		20,644			20,041			603	3.0
Gross margin	$	4,820		$	4,743		$	77	1.6
Gross margin %		18.9	%		19.1	%

Total revenue in the CES segment increased $0.7 million, or 2.7%, to $25.5 million in the second quarter of 2016 as compared to the same period of 2015. The increase was primarily due to growth in our managed 360 solutions.  As of June 30, 2016, we had 360 solutions implemented in 192 programs in our CES segment, up from 180 programs as of December 31, 2015.

Total cost of revenue in the segment increased $0.6 million, or 3.0%, to $20.6 million in the second quarter of 2016 as compared to the same period of 2015. The increase was primarily attributable to increases in repair parts and vendor expenses to support the revenue growth and mix shifts in type of service provided to customers.

Gross margin percentage for the CES segment decreased from 19.1% in the second quarter of 2015 to 18.9% in the same period of 2016. Gross margin percentage will fluctuate based on the variability of third-party vendor expenses in our 360 solutions and supplemental service programs, as well as fluctuation of services being performed in house for manufacturer services.

Surgical Services

(in thousands)

	Three Months Ended
	June 30,
	2016			2015			Change		% Change
Total revenue	$	17,214		$	16,421		$	793	4.8	%
Cost of revenue		8,956			8,722			234	2.7
Medical equipment depreciation		1,449			1,492			(43)	(2.9)
Gross margin	$	6,809		$	6,207		$	602	9.7
Gross margin %		39.6	%		37.8	%

Total revenue in the SS segment increased $0.8 million, or 4.8%, to $17.2 million in the second quarter of 2016 as compared to the same period of 2015. The increase was primarily driven by organic growth in our surgical services business and to a lesser extent from an acquisition completed in the second quarter of 2015.

Total cost of revenue in the segment increased $0.2 million, or 2.7%, to $9.0 million in the second quarter of 2016 as compared to the same period of 2015. The increase was primarily attributable to an increase in cost of disposables and employee related costs to support growth in our surgical services business.

Medical equipment depreciation decreased $0.04 million, or 2.9%, to $1.4 million in the second quarter of 2016 as compared to the same period of 2015.  

Gross margin percentage for the SS segment increased from 37.8% in the second quarter of 2015 to 39.6% in the same period of 2016. The increase in gross margin percentage was primarily driven by both positive operating leverage from volume growth and some shift to higher margin modalities.

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Selling, General and Administrativeand Interest Expense

(in thousands)

	Three Months Ended
	June 30,
	2016		2015		Change		% Change
Selling, general and administrative	$	28,798	$	31,038	$	(2,240)	(7.2)	%
(Gain) on settlement		(2,750)		(5,718)		2,968	*
Interest expense		13,061		13,249		(188)	(1.4)

Selling, General and Administrative

Selling, general and administrative expense decreased $2.2 million, or 7.2%, to $28.8 million for the second quarter of 2016 as compared to the same period of 2015. The decrease was primarily due to lower consulting costs.

Selling, general and administrative expense as a percentage of total revenue was 24.5% and 27.6% for the quarters ended June 30, 2016 and 2015, respectively.

Gain on Settlement

Gain on settlement of $2.8 and $5.7 million for the three months ended June 30, 2016 and 2015, respectively was related to settlements with a supplier and former supplier.

Interest Expense

Interest expense decreased $0.2 million to $13.1 million for the second quarter of 2016as compared to the same period of2015.

Income Taxes

Income taxes were an expense of $0.2 and$0.2 million for the three months ended June 30, 2016 and 2015, respectively. The tax expense for the three months ended June 30, 2016and 2015primarily related to state minimum fees. The expected tax benefit from operating loss during the three months ended June 30, 2016 was offset by the recording of additional valuation allowance. 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 $1.2 million to $0.6 million in the second quarter of2016 as compared to the same period of 2015.  Net loss was impacted by the growth in revenue as well as the decrease in selling, general and administrative expenses during the second quarter of 2016.

Consolidated Results of Operations for the six months ended June 30, 2016 compared to the six months ended June 30, 2015

Total Revenue

Total revenue for the six months ended June 30, 2016 was $239.7 million, compared to $225.8 million for the six months ended June 30, 2015, an increase of $13.9 million or 6.2%.  The net increase was primarily due to additional revenue within our MES segment related to growth in our 360 solutions of $6.4million and sales and remarketing revenueof $3.4 million, growth in our CES segment of $1.9 million related to growth in providing existing and new customers with services on their equipmentand growth in our SS segment of $2.1 million. These increases were partially offset due to customer losses in our MES segment.

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Cost of Revenue

Total cost of revenue for the six months ended June 30, 2016 was $161.1 million compared to $152.1 million for the six months ended June 30, 2015, an increase of $9.0 million or 5.9%. The increase was primarily in our MES segment due to theincreases in 360 solutions cost of $3.7 million,cost of equipment sales of $3.1 million and other rental costs of $2.3 million,an increase in our CES 360 solutions cost of $1.4 million corresponding with the 360 solutions revenue growth. The increases were partially offset by thea decrease in medical equipment depreciation of $2.4 million.

Gross Margin

Total gross margin for the six months ended June 30, 2016 was $78.6 million, or 32.8% of total revenues, compared to $73.6 million, or 32.6% of total revenues, for the six months ended June 30, 2015, an increase of $5.0 million or 6.8%.  The increase in gross margin as a percent of revenue was primarily impacted by lower depreciation expense and a partial shift to higher margin modalities in the SS portions of the business.

Medical Equipment Solutions

(in thousands)

	Six Months Ended
	June 30,
	2016			2015			Change		% Change
Total revenue	$	155,170		$	145,169		$	10,001	6.9	%
Cost of revenue		71,494			62,331			9,163	14.7
Medical equipment depreciation		28,381			30,669			(2,288)	(7.5)
Gross margin	$	55,295		$	52,169		$	3,126	6.0
Gross margin %		35.6	%		35.9	%

Total revenue in the MES segment increased $10.0 million, or 6.9%, to $155.2 million in the first six months of 2016 as compared to the same period of 2015.  The increase was primarily due to the growth in our 360 solutions from both new programs and expansion of existing programs of $6.4 millionand growth in sales and remarketing of $3.4 million.  Many of our 360 Solution 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 June 30, 2016, we had 234 such active programs, up from 230 as of December 31, 2015.

Total cost of revenue in the segment increased $9.2 million, or 14.7%, to $71.5 million in the first six months of 2016 as compared to the same period of 2015.  This increase was due to  an increase in costs to support growth in our 360 solutions of $3.7 million largely due to increases in employee related expense of $2.0million and repair parts of $0.7 million,  an increase in cost of equipment sales of $3.1 million and an increasein other supplemental rental costs of $2.3 million largely due to higher repair parts expense.  

Medical equipment depreciation decreased $2.3 million, or 7.5%, to $28.4 million in the first six months of 2016 as compared to the same period of 2015. The decrease in medical equipment depreciation was primarily due to reduced depreciation resulting from disposals of certain medical equipment.

Gross margin percentage for the MES segment decreased from 35.9% in the first six months of 2015 to 35.6% in the same period of 2016. Gross margin rate was impacted bysales mix and higher repair parts expense, partly offset by lower depreciation.

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Clinical Engineering Solutions

(in thousands)

	Six Months Ended
	June 30,
	2016			2015			Change		% Change
Total revenue	$	51,042		$	49,179		$	1,863	3.8	%
Cost of revenue		40,668			39,271			1,397	3.6
Gross margin	$	10,374		$	9,908		$	466	4.7
Gross margin %		20.3	%		20.1	%

Total revenue in the CES segment increased $1.9 million, or 3.8%, to $51.0 million in the first six months of 2016 as compared to the same period of 2015. The increase was primarily due to growth in our managed 360 solutions.  As of June 30, 2016, we had 360 solutions implemented in 192 programs in our CES segment, up from 180 programs as of December 31, 2015.

Total cost of revenue in the segment increased $1.4 million, or 3.6%, to $40.7 million in the first six months of 2016 as compared to the same period of 2015. The increase is primarily attributable to increases in vendor expenses and employee related costs to support the revenue growth and mix shifts in type of service provided to customers.

Gross margin percentage for the CES segment increased from 20.1% in the first six months of 2015 to 20.3% in the same period of 2016.  Gross margin percentage will fluctuate based on the variability of third-party vendor expenses in our 360 solutions and supplemental service programs, as well as fluctuation of services being performed in house for manufacturer services.

Surgical Services

(in thousands)

	Six Months Ended
	June 30,
	2016			2015			Change		% Change
Total revenue	$	33,532		$	31,427		$	2,105	6.7	%
Cost of revenue		17,722			16,902			820	4.9
Medical equipment depreciation		2,866			2,966			(100)	(3.4)
Gross margin	$	12,944		$	11,559		$	1,385	12.0
Gross margin %		38.6	%		36.8	%

Total revenue in the SS segment increased $2.1 million, or 6.7%, to $33.5 million in the first six months of 2016 as compared to the same period of 2015. The increase was driven primarily by organic growth in our surgical services businessand to a lesser extent from an acquisition completed in the second quarter of 2015.

Total cost of revenue in the segment increased $0.8 million, or 4.9%, to $17.7 million in the first six months of 2016 as compared to the same period of 2015. The increase was primarily attributable to increases in cost of disposables and employee related costs to support growth in our surgical services business.

Medical equipment depreciation decreased $0.1 million, or 3.4%, to $2.9 million in the first six months of 2016 as compared to the same period of 2015.

Gross margin percentage for the SS segment increased from 36.8% in the first six months of 2015 to 38.6% in the same period of 2016. The increase in gross margin percentage was primarily driven by both positive operating leverage from volume growth and some shift to higher margin modalities.

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Selling, General and Administrative, Gain on Settlement, Restructuring, Acquisition and Integration Expenses, Intangible Asset Impairment Charge and Interest Expense

(in thousands)

	Six Months Ended
	June 30,
	2016		2015		Change		% Change
Selling, general and administrative	$	60,095	$	61,189	$	(1,094)	(1.8)	%
(Gain) on settlement		(2,750)		(5,718)		2,968	*
Interest expense		26,130		26,559		(429)	(1.6)

*Not meaningful

Selling, General and Administrative

Selling, general and administrative expense decreased $1.1 million, or 1.8%, to $60.1 million for the first six months of 2016 as compared to the same period of 2015. The decrease was primarily due to lower consulting costs.

Selling, general and administrative expense as a percentage of total revenue was 25.1% and 27.1% for the six months ended June 30, 2016 and 2015, respectively.

Gain on Settlement

Gain on settlement of $2.8 and $5.7 million for the first six months of 2016and 2015, respectively was related to settlements with asupplier and former supplier.

Interest Expense

Interest expense decreased $0.4 million to $26.1 million for the first six months of 2016 as compared to the same period of 2015.

Income Taxes

Income taxes were an expense of $0.4 and $0.4 million for the six months ended June 30, 2016 and 2015, respectively. The tax expense for the six months ended June 30, 2016and 2015primarily related to state minimum fees. The expected tax benefit from operating loss during the six months ended June 30, 2016 was offset by the recording of additional valuation allowance. 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 $3.5 million to $5.2 million in the first six months of 2016 as compared to the same period of 2015.  Net loss was impacted by the decreases inmedical equipment depreciation and selling, general and administrative expenses.

EBITDA

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) was $63.5 and $64.1 million for the six months ended June 30, 2016 and 2015, respectively.  EBITDA for the six months ended June 30, 2016 was lower primarily due to lower gain on settlement.

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. EBITDA, however, is not a measure of financial performance under accounting principles generally accepted in the United States of America (“GAAP”) and should not be considered as an alternative to, or more meaningful than, net income as a measure of operating performance or to cash flows from

36

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 net loss attributable to UHS to EBITDA is included below:

	Six Months Ended
	June 30,
(in thousands)	2016		2015
Net loss attributable to Universal Hospital Services, Inc.	$	(5,384)	$	(8,965)
Interest expense		26,130		26,559
Provision for income taxes		387		351
Depreciation and amortization of intangibles		42,367		46,166
EBITDA	$	63,500	$	64,111
Other Financial Data:
Net cash provided by operating activities	$	23,004	$	40,225
Net cash used in investing activities		(23,534)		(23,044)
Net cash provided by (used in) financing activities		530		(17,181)
Other Operating Data (as of end of period):
Medical equipment (approximate number of owned outsourcing units)		246,000		254,000
District service centers		83		83
SS stand-alone service centers		5		5
Centers of Excellence		5		5

SEASONALITY

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

LIQUIDITY AND CAPITAL RESOURCES

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

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

Our principal sources of liquidity are expected to be cash flows from operating activities and borrowings under our senior secured credit facility, which provides for loans in an amount of up to $235.0 million, subject to our borrowing base. See Note 7, Long-Term Debt, for details related to our senior secured credit facility. It is anticipated that our principal uses of liquidity will be to fund capital expenditures related to purchases of medical equipment, provide working capital, meet debt service requirements and finance our strategic plans.

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

If we are unable to generate sufficient cash flow from operations in order to service our debt, we will be forced to take actions, such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing our debt, or seeking

37

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 $23.0 and $40.2 million for the six months ended June 30, 2016 and 2015, respectively. The decrease in net cash provided by operating activities was primarily from the payment of incentives in 2016 and working capital decreases primarily related to timing.

Net cash used in investing activities was $23.5 and $23.0 million for the six months ended June 30, 2016 and 2015, respectively.

Net cash provided by (used in) financing activities was $0.5 and $(17.2) million for the six months ended June 30, 2016 and 2015, respectively.  The decrease in net cash used in financing activities was primarily due to higher net borrowings in 2016 compared to the same period of 2015.

Based on the level of operating performance expected in 2016, we believe our cash from operations and additional borrowings under our senior secured credit facility will meet our liquidity needs for the foreseeable future, exclusive of any borrowings that we may make to finance potential acquisitions.  However, if during that period or thereafter we are not successful in generating sufficient cash flows from operations or in raising additional capital when required in sufficient amounts and on terms acceptable to us, our business could be adversely affected.  As of June 30, 2016, we had $131.8 million of availability under the senior secured credit facility based on a borrowing base of $165.5 million less borrowings of $29.2 million and after giving effect to $4.5 million used for letters of credit.  As of June 30, 2015, we had $140.7 million of availability under the senior secured credit facility based on a borrowing base of $171.6 million less borrowings of $27.0 million and after giving effect to $3.9 million used for letters of credit.

Our levels of borrowing are further restricted by the financial covenants set forth in our senior secured credit facility agreement and the 2012 Indenture governing our 2012 Notes, as described in Note 7, Long-Term Debt.

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

RECENT ACCOUNTING PRONOUNCEMENT

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

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements.

SAFE HARBOR STATEMENT

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: We believe statements in this Quarterly Report on Form 10-Q looking forward in time involve risks and uncertainties.  The following factors, among others, could adversely affect our business, operations and financial condition, causing our actual results to differ materially from those expressed in any forward-looking statements:

· our competitors’ activities;

· our customers’ patient census or service needs;

· global economic conditions’ effect on our customers;

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

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

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

· our relationships with key suppliers;

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

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

· our dependence on key personnel;

· our ability to identify and manage acquisitions;

38

· increases in expenses related to our pension plan;

· our cash flow fluctuation;

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

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

· increased costs we cannot pass through;

· the failure of any management information system;

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

· the uncertainty surrounding health care reform initiatives;

· the federal Privacy law risks;

· the federal Anti-Kickback law risks;

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

· potential other new healthcare laws or regulations;

· our customers operate in a highly regulated environment;

· our fleet’s risk of recalls or obsolescence;

· our substantial debt service obligations;

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

· our history of net losses and substantial interest expense.

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

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

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

Interest Rates

We use both fixed and variable rate debt as sources of financing.  At June 30, 2016, we had approximately $698.7 million of total debt outstanding of which $29.2 million was bearing interest at variable rates. Based on variable debt levels at June 30, 2016, a 1.0 percentage point change in interest rates on variable rate debt would have resulted in annual interest expense fluctuating by approximately $0.3 million.

Fuel Costs

We are also exposed to market risks related to changes in the price of gasoline used to fuel our fleet of delivery and sales vehicles.  A hypothetical 10% increase in the first six months of 2016 average price of unleaded gasoline, assuming gasoline usage levels for the six months ended June 30, 2016, would lead to an annual increase in fuel costs of approximately $0.3 million.

Pension

Our pension plan assets, which were approximately $19.5 million at December 31, 2015, 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, 2015 would lead to a decrease in the funded status of the plan of approximately $2.0 million.

Other Market Risk

As of June 30, 2016, we have no other material exposure to market risk.

Item 4.  Controls and Procedures

(a) Evaluation of disclosure controls and procedures

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Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2016.

(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.

PART II - OTHER INFORMATION

Item 1.Legal Proceedings

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, management believes that any such resolution would not have a material adverse effect on the financial position, results of operations or cash flows of the Company and the chance of a negative outcome on outstanding litigation is considered remote. See the additional information in Item 1 of Part I, Note 8, Commitments and Contingencies.

Item 1A.  Risk Factors

Our business is subject to various risks and uncertainties.  Any of the risks discussed elsewhere in this Quarterly Report on Form 10-Q or our other filings with the Securities and Exchange Commission, including the risk factors set forth in our 2015 Annual Report on Form 10-K, could materially adversely affect our business, financial condition or results of operations.

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

None.

Item 3.Defaults upon Senior Securities

None.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5.Other Information

None.

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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	Financial Statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2016, formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Loss, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements.

* Furnished, not filed

SIGNATURES

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

Date:  August 8, 2016

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

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