UNIVERSAL HOSPITAL SERVICES INC (Form: 10-Q, Received: 11/07/2016 17:41:32)

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 September 30, 2016


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

Commission File Number: 000-20086

UNIVERSAL HOSPITAL SERVICES, INC.

(Exact name of registrant as specified in its charter)


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

6625 West 78th Street, Suite 300

Minneapolis, Minnesota 55439-2604

(Address of principal executive offices, including zip code)

(952) 893-3200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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


Large accelerated filer	☐	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 Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock outstanding as of November 7, 2016: 1,000

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Universal Hospital Services, Inc.

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		Page
PART I - FINANCIAL INFORMATION

ITEM 1.	Consolidated Financial Statements (unaudited)

	Consolidated Balance Sheets —September 30, 2016 and December 31, 2015	2

	Consolidated Statements of Operations—Three and nine months ended September 30, 2016 and 2015	3

	Consolidated Statements of Comprehensive Loss —Three and nine months ended September 30, 2016 and 2015	4

	Consolidated Statements of Cash Flows — Three and nine months ended September 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	40

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	42

Signatures		42

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PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements — Unaudited

Universal Hospital Services, Inc.

Consolidated Balance Sheet s

(in thousands, except share and per share information)

(unaudited)


	September 30,		December 31,
	2016		2015
Assets
Current assets:
Accounts receivable, less allowance for doubtful accounts of $1,400 at September 30, 2016 and $1,500 at December 31, 2015	$	82,013	$	71,252
Inventories		8,547		8,506
Other current assets		6,836		5,834
Total current assets		97,396		85,592
Property and equipment:
Medical equipment		596,533		590,091
Property and office equipment		91,644		85,341
Accumulated depreciation		(491,382)		(462,818)
Total property and equipment, net		196,795		212,614
Other long-term assets:
Goodwill		336,595		336,595
Other intangibles, net		153,992		162,354
Other		1,609		420
Total assets	$	786,387	$	797,575
Liabilities and Deficit
Current liabilities:
Current portion of long-term debt	$	5,562	$	4,867
Book overdrafts		3,559		6,444
Accounts payable		23,507		31,073
Accrued compensation		13,979		23,600
Accrued interest		6,405		18,742
Dividend payable		—		24
Other accrued expenses		16,660		14,564
Total current liabilities		69,672		99,314
Long-term debt, less current portion		707,309		682,591
Pension and other long-term liabilities		11,655		11,869
Deferred income taxes, net		53,140		52,959
Commitments and contingencies (Note 8)
Deficit
Common stock, $0.01 par value; 1,000 shares authorized, issued and outstanding at September 30, 2016 and December 31, 2015		—		—
Additional paid-in capital		244,183		241,833
Accumulated deficit		(292,165)		(283,066)
Accumulated other comprehensive loss		(7,610)		(8,165)
Total Universal Hospital Services, Inc. deficit		(55,592)		(49,398)
Noncontrolling interest		203		240
Total deficit		(55,389)		(49,158)
Total liabilities and deficit	$	786,387	$	797,575

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

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Universal Hospital Services, Inc.

Consolidated Statements of Operation s

(in thousands)

(unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Revenue
Medical equipment solutions	$	73,463	$	68,985	$	228,633	$	214,154
Clinical engineering solutions		26,926		25,401		77,968		74,581
Surgical services		17,559		16,727		51,091		48,154
Total revenues		117,948		111,113		357,692		336,889
Cost of Revenue
Cost of medical equipment solutions		33,146		30,134		104,640		92,466
Cost of clinical engineering solutions		21,278		20,063		61,946		59,333
Cost of surgical services		9,461		8,780		27,183		25,681
Medical equipment depreciation		15,545		16,590		46,792		50,225
Total costs of revenues		79,430		75,567		240,561		227,705
Gross margin		38,518		35,546		117,131		109,184
Selling, general and administrative		28,757		30,633		88,853		91,825
(Gain) on settlement		—		—		(2,750)		(5,718)
Operating income		9,761		4,913		31,028		23,077
Interest expense		13,081		13,250		39,210		39,810
Loss before income taxes and noncontrolling interest		(3,320)		(8,337)		(8,182)		(16,733)
Provision for income taxes		290		210		677		559
Consolidated net loss		(3,610)		(8,547)		(8,859)		(17,292)
Net income attributable to noncontrolling interest		105		121		240		341
Net loss attributable to Universal Hospital Services, Inc.	$	(3,715)	$	(8,668)	$	(9,099)	$	(17,633)

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

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Universal Hospital Services, Inc.

Consolidated Statements of Comprehensive Los s

(in thousands)

(unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Consolidated net loss	$	(3,610)	$	(8,547)	$	(8,859)	$	(17,292)
Other comprehensive income:
Gain on minimum pension liability, net of tax of $0		185		244		555		732
Total other comprehensive income		185		244		555		732
Comprehensive loss		(3,425)		(8,303)		(8,304)		(16,560)
Comprehensive income attributable to noncontrolling interest		105		121		240		341
Comprehensive loss attributable to Universal Hospital Services, Inc.	$	(3,530)	$	(8,424)	$	(8,544)	$	(16,901)

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

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Universal Hospital Services, Inc.

Consolidated Statements of Cash Flow s

(in thousands)

(unaudited)


	Nine Months Ended
	September 30,
	2016		2015
Cash flows from operating activities:
Consolidated net loss	$	(8,859)	$	(17,292)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		54,966		57,413
Asset impairment charges		—		2,339
Amortization of intangibles, deferred financing costs and bond premium		8,736		9,664
Provision for doubtful accounts		3		208
Provision for inventory obsolescence		255		299
Non-cash share-based compensation expense		2,272		1,902
Gain on sales and disposals of equipment		(2,990)		(3,547)
Deferred income taxes		181		697
Interest on note receivable		(7)		—
Changes in operating assets and liabilities:
Accounts receivable		(10,764)		(2,533)
Inventories		(296)		(405)
Other operating assets		(1,201)		542
Accounts payable		(763)		595
Other operating liabilities		(19,021)		(6,636)
Net cash provided by operating activities		22,512		43,246
Cash flows from investing activities:
Medical equipment purchases		(41,293)		(38,771)
Property and office equipment purchases		(3,655)		(3,148)
Proceeds from disposition of property and equipment		8,907		10,799
Issuance of note receivable from officer		(983)		—
Acquisition		—		(2,600)
Net cash used in investing activities		(37,024)		(33,720)
Cash flows from financing activities:
Proceeds under senior secured credit facility		131,700		104,952
Payments under senior secured credit facility		(108,800)		(108,900)
Payments of principal under capital lease obligations		(4,683)		(5,756)
Payments of deferred financing costs		(97)		—
Holdback payment related to acquisition		(500)		—
Distributions to noncontrolling interests		(277)		(360)
Contributions from new members to limited liability company		—		70
Dividend and equity distribution payments		(24)		(39)
Proceeds from exercise of parent company stock options		78		—
Change in book overdrafts		(2,885)		507
Net cash provided by (used in) financing activities		14,512		(9,526)
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	$	51,119	$	51,432
Income taxes paid		619		728
Non-cash activities:
Medical equipment purchases included in accounts payable (at end of period)	$	4,788	$	10,906
Capital lease additions		6,920		7,108

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

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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 September 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 September 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 FASB approved 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.

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

3. Fair Value Measurements

Financial assets and liabilities measured at fair value on a recurring basis as of September 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 September 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.

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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 accordance with the terms of the agreements. During the three months ended September 30, 2016 and 2015, we made no payment in earn-outs and holdback. During the nine months ended September 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 September 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 September 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:


	September 30, 2016				December 31, 2015
	Carrying		Fair		Carrying		Fair
(in thousands)	Value		Value		Value		Value
Original notes - 7.625% (1)	$	420,211	$	404,813	$	419,274	$	401,094
Add-on notes - 7.625% (2)		226,076		209,550		227,029		207,625

(1) The carrying value of the Original notes - 7.625% is net of unamortized deferred financing costs of $4.8 and $5.7 million as of September 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 $2.0 and $2.4 million as of September 30, 2016 and December 31, 2015, respectively, and includes unamortized bond premium of $8.1 and $9.4 million as of September 30, 2016 and December 31, 2015, respectively.

4. Goodwill and Other Intangible Assets

Our goodwill as of September 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 September 30, 2016	$	227,486	$	55,655	$	53,454	$	336,595

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


	September 30, 2016								December 31, 2015
			Accumulated								Accumulated
(in thousands)	Cost		Amortization		Impairment		Net		Cost		Amortization		Impairment		Net
Finite-life intangibles
Customer relationship	$	117,039	$	(95,742)	$	—	$	21,297	$	117,039	$	(89,663)	$	—	$	27,376
Supply agreement		26,000		(24,548)		—		1,452		26,000		(22,369)		—		3,631
Non-compete agreements		948		(805)		—		143		948		(701)		—		247
Total finite-life intangibles		143,987		(121,095)		—		22,892		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	$	(121,095)	$	(34,900)	$	153,992	$	309,987	$	(112,733)	$	(34,900)	$	162,354

Total amortization expense related to intangible assets were $2.6 and $3.0 million for the three months ended September 30, 2016 and 2015, respectively, and $8.4 and $9.1 million for the nine months ended September 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	$	2,609
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 nine month periods ended September 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		—		(9,099)		—		240		(8,859)
Other comprehensive income		—		—		555		—		555
Share-based compensation		2,272		—		—		—		2,272
Stock options exercised		78		—		—		—		78
Cash distributions to noncontrolling interests		—		—		—		(277)		(277)
Balance at September 30, 2016	$	244,183	$	(292,165)	$	(7,610)	$	203	$	(55,389)


					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		—		(17,633)		—		341		(17,292)
Other comprehensive income		—		—		732		—		732
Cash distributions to noncontrolling interests		—		—		—		(360)		(360)
Contributions from new members to limited liability company		—		—		—		70		70
Balance at September 30, 2015	$	214,514	$	(272,051)	$	(8,330)	$	270	$	(65,597)

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6. Share-Based Compensation

During the nine months ended September 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	5,823		1.02
Exercised	(111)		0.71	$	34
Forfeited or expired	(3,460)		0.71
Outstanding at September 30, 2016	36,141	$	0.76	$	9,414	8.1
Exercisable at September 30, 2016	12,074	$	0.71	$	3,743	8.1
Remaining authorized options available for issue	7,434

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 nine months ended September 30, 2016 and 2015 under the Black-Scholes model.


	Nine Months Ended
	September 30,
	2016			2015
Risk-free interest rate		1.50	%		1.70	%
Expected volatility		30.9	%		27.0	%
Dividend yield		N/A			N/A
Expected option life (years)		5.83			5.23
Black-Scholes Value of options	$	0.33		$	0.20

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 September 30, 2016, unearned non-cash share-based compensation that we expect to recognize as expense over a weighted average period of 1.9 years totals approximately $5.5 million, net of our estimated forfeiture rate of 2.0%. The expense could be accelerated upon the sale of Parent or the Company.

In April 2015, Parent granted the Company’s Chief Executive Officer 7.0 million restricted stock units which vest over four years. Total compensation expense related to this grant was $0.3 million and $0.3 million for the three months ended September 30, 2016 and 2015, respectively, and $0.9 million and $0.6 million for the nine months ended September 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:


	September 30,		December 31,
(in thousands)	2016		2015
Original notes - 7.625% (1)	$	420,211	$	419,274
Add-on notes - 7.625% (2)		226,076		227,029
Senior secured credit facility (3)		49,005		25,811
Capital lease obligations		17,579		15,344
		712,871		687,458
Less: Current portion of long-term debt		(5,562)		(4,867)
Total long-term debt	$	707,309	$	682,591

(1)

The carrying value of the Original notes - 7.625% is net of unamortized deferred financing costs of $4.8 and $5.7 million as of September 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 $2.0 and $2.4 million as of September 30, 2016 and December 31, 2015, respectively, and includes unamortized bond premium of $8.1 and $9.4 million as of September 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 $1.9 and $2.2 million as of September 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

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the agent or, at our option, 0.50% to 1.00% above the Base Rate as defined in the Third Amended Credit Agreement and (b) the unused line fee rate to 0.25%. Our obligations under the Third Amended Credit Agreement are secured by a first priority security interest in substantially all of the assets of the Company, Parent 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 September 30, 2016, we had $111.7 million of availability under the senior secured credit facility based on a borrowing base of $167.1 million less borrowings of $50.9 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 September 30, 2016, we had $50.9 million of borrowings outstanding of which $25.0 million was accruing interest at a rate of 2.5277%, $14.0 million was accruing interest at a rate of 2.5182% and $11.9 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

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indebtedness; (iii) effectively junior to our senior secured credit facility; and (iv) structurally subordinated to any indebtedness and other liabilities (including trade payables) of any of our future subsidiaries that are not guarantors.

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

incur additional indebtedness;

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

issue redeemable stock or preferred stock;

issue stock of subsidiaries;

make certain investments;

transfer or sell assets;

create liens on our assets to secure debt;

enter into transactions with affiliates; and

merge or consolidate with another company.

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

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

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 to an 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 nine month periods ended September 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. The litigation is currently early in the discovery phase.

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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 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 $0.2 million for the three month periods ended September 30, 2016 and 2015, respectively, and $0.6 and $0.7 million for the nine month periods ended September 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. No fees incurred to CTPartners for the three month periods ended September 30, 2016 and 2015. Total fees incurred to CT Partners was $0 and $0.2 million during the nine month periods ended September 30, 2016 and 2015, respectively.

In connection with the Restricted Stock Unit Award Agreement, dated as of April 13, 2015, between an officer and the Company, we entered into 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 $0.004 and $0.007 million for the three and nine month periods ended September 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 September 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 September 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				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Revenues	$	73,463	$	68,985	$	228,633	$	214,154
Cost of revenue		33,146		30,134		104,640		92,466
Medical equipment depreciation		14,008		15,043		42,389		45,712
Gross margin	$	26,309	$	23,808	$	81,604	$	75,976

Clinical Engineering Solutions

(in thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Revenues	$	26,926	$	25,401	$	77,968	$	74,581
Cost of revenue		21,278		20,063		61,946		59,333
Gross margin	$	5,648	$	5,338	$	16,022	$	15,248

Surgical Services

(in thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Revenues	$	17,559	$	16,727	$	51,091	$	48,154
Cost of revenue		9,461		8,780		27,183		25,681
Medical equipment depreciation		1,537		1,547		4,403		4,513
Gross margin	$	6,561	$	6,400	$	19,505	$	17,960

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

(in thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Total gross margin	$	38,518	$	35,546	$	117,131	$	109,184
Selling, general and administrative		28,757		30,633		88,853		91,825
(Gain) on settlement		—		—		(2,750)		(5,718)
Interest expense		13,081		13,250		39,210		39,810
Loss before income taxes and noncontrolling interest	$	(3,320)	$	(8,337)	$	(8,182)	$	(16,733)

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Total Assets by Reporting Segment

(in thousands)


	September 30,		December 31,
	2016		2015
Medical Equipment Solutions	$	574,166	$	585,990
Clinical Engineering Solutions		113,190		110,588
Surgical Services		99,031		100,997
Total Company Assets	$	786,387	$	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				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
MES
Equipment usage solutions	59.1	%	59.4	%	60.0	%	60.6	%
Equipment/disposable sales	3.2		2.7		3.9		3.0
	62.3		62.1		63.9		63.6
CES
Service solutions	22.8		22.9		21.8		22.1
SS
Equipment usage solutions	14.7		14.7		14.1		14.1
Equipment/disposable sales	0.2		0.3		0.2		0.2
	14.9		15.0		14.3		14.3
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 three and nine months ended September 30, 2016 primarily relates to state minimum fees. The expected tax benefit from operating loss during the three and nine months ended September 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 September 30, 2016, the Company had available unused federal net operating loss carryforwards of approximately $205.2 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.

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Universal Hospital Services, Inc.

Consolidating Balance Sheets

(in thousands, except share and per share information)

(unaudited)


	September 30, 2016
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Assets
Current assets:
Accounts receivable, less allowance for doubtful accounts	$	72,704	$	9,309	$	—	$	82,013
Due from affiliates		29,520		—		(29,520)		—
Inventories		5,630		2,917		—		8,547
Other current assets		6,604		232		—		6,836
Total current assets		114,458		12,458		(29,520)		97,396
Property and equipment:
Medical equipment		545,117		51,416		—		596,533
Property and office equipment		81,243		10,401		—		91,644
Accumulated depreciation		(451,051)		(40,331)		—		(491,382)
Total property and equipment, net		175,309		21,486		—		196,795
Other long-term assets:
Goodwill		283,141		53,454		—		336,595
Investment in subsidiary		56,100		—		(56,100)		—
Other intangibles, net		142,709		11,283		—		153,992
Other		1,259		350		—		1,609
Total assets	$	772,976	$	99,031	$	(85,620)	$	786,387
Liabilities and (Deficit) Equity
Current liabilities:
Current portion of long-term debt	$	4,165	$	1,397	$	—	$	5,562
Book overdrafts		3,583		(24)		—		3,559
Due to affiliates		—		29,520		(29,520)		—
Accounts payable		20,437		3,070		—		23,507
Accrued compensation		11,934		2,045		—		13,979
Accrued interest		6,405		—		—		6,405
Other accrued expenses		16,475		185		—		16,660
Total current liabilities		62,999		36,193		(29,520)		69,672
Long-term debt, less current portion		703,320		3,989		—		707,309
Pension and other long-term liabilities		11,649		6		—		11,655
Deferred income taxes, net		50,585		2,555		—		53,140
Commitments and contingencies
(Deficit) Equity
Common stock		—		—		—		—
Additional paid-in capital		244,198		60,004		(60,019)		244,183
Accumulated deficit		(288,246)		(3,919)		—		(292,165)
Accumulated loss in subsidiary		(3,919)		—		3,919		—
Accumulated other comprehensive loss		(7,610)		—		—		(7,610)
Total Universal Hospital Services, Inc. (deficit) equity		(55,577)		56,085		(56,100)		(55,592)
Noncontrolling interest		—		203		—		203
Total (deficit) equity		(55,577)		56,288		(56,100)		(55,389)
Total liabilities and (deficit) equity	$	772,976	$	99,031	$	(85,620)	$	786,387

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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 September 30, 2016
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Revenue
Medical equipment solutions	$	73,463	$	—	$	—	$	73,463
Clinical engineering solutions		26,926		—		—		26,926
Surgical services		—		17,559		—		17,559
Total revenues		100,389		17,559		—		117,948
Cost of Revenue
Cost of medical equipment solutions		33,146		—		—		33,146
Cost of clinical engineering solutions		21,278		—		—		21,278
Cost of surgical services		—		9,461		—		9,461
Medical equipment depreciation		14,008		1,537		—		15,545
Total costs of revenues		68,432		10,998		—		79,430
Gross margin		31,957		6,561		—		38,518
Selling, general and administrative		23,926		4,831		—		28,757
Operating income		8,031		1,730		—		9,761
Equity in earnings of subsidiary		(689)		—		689		—
Interest expense		12,539		542		—		13,081
(Loss) income before income taxes and noncontrolling interest		(3,819)		1,188		(689)		(3,320)
(Benefit) provision for income taxes		(209)		499		—		290
Consolidated net (loss) income		(3,610)		689		(689)		(3,610)
Net income attributable to noncontrolling interest		—		105		—		105
Net (loss) income attributable to Universal Hospital Services, Inc.	$	(3,610)	$	584	$	(689)	$	(3,715)

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Universal Hospital Services, Inc.

Consolidating Statements of Operations

(in thousands)

(unaudited)


	Three Months Ended September 30, 2015
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Revenue
Medical equipment solutions	$	68,985	$	—	$	—	$	68,985
Clinical engineering solutions		25,401		—		—		25,401
Surgical services		—		16,727		—		16,727
Total revenues		94,386		16,727		—		111,113
Cost of Revenue
Cost of medical equipment solutions		30,134		—		—		30,134
Cost of clinical engineering solutions		20,063		—		—		20,063
Cost of surgical services		—		8,780		—		8,780
Medical equipment depreciation		15,043		1,547		—		16,590
Total costs of revenues		65,240		10,327		—		75,567
Gross margin		29,146		6,400		—		35,546
Selling, general and administrative		25,956		4,677		—		30,633
Operating income		3,190		1,723		—		4,913
Equity in earnings of subsidiary		(442)		—		442		—
Interest expense		12,718		532		—		13,250
(Loss) income before income taxes and noncontrolling interest		(9,086)		1,191		(442)		(8,337)
(Benefit) provision for income taxes		(539)		749		—		210
Consolidated net (loss) income		(8,547)		442		(442)		(8,547)
Net income attributable to noncontrolling interest		—		121		—		121
Net (loss) income attributable to Universal Hospital Services, Inc.	$	(8,547)	$	321	$	(442)	$	(8,668)

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Universal Hospital Services, Inc.

Consolidating Statements of Operations

(in thousands)

(unaudited)


	Nine Months Ended September 30, 2016
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Revenue
Medical equipment solutions	$	228,633	$	—	$	—	$	228,633
Clinical engineering solutions		77,968		—		—		77,968
Surgical services		—		51,091		—		51,091
Total revenues		306,601		51,091		—		357,692
Cost of Revenue
Cost of medical equipment solutions		104,640		—		—		104,640
Cost of clinical engineering solutions		61,946		—		—		61,946
Cost of surgical services		—		27,183		—		27,183
Medical equipment depreciation		42,389		4,403		—		46,792
Total costs of revenues		208,975		31,586		—		240,561
Gross margin		97,626		19,505		—		117,131
Selling, general and administrative		74,385		14,468		—		88,853
(Gain) on settlement		(2,750)		—		—		(2,750)
Operating income		25,991		5,037		—		31,028
Equity in earnings of subsidiary		(1,957)		—		1,957		—
Interest expense		37,592		1,618		—		39,210
(Loss) income before income taxes and noncontrolling interest		(9,644)		3,419		(1,957)		(8,182)
(Benefit) provision for income taxes		(785)		1,462		—		677
Consolidated net (loss) income		(8,859)		1,957		(1,957)		(8,859)
Net income attributable to noncontrolling interest		—		240		—		240
Net (loss) income attributable to Universal Hospital Services, Inc.	$	(8,859)	$	1,717	$	(1,957)	$	(9,099)

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Universal Hospital Services, Inc.

Consolidating Statements of Operations

(in thousands)

(unaudited)


	Nine Months Ended September 30, 2015
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Revenue
Medical equipment solutions	$	214,154	$	—	$	—	$	214,154
Clinical engineering solutions		74,581		—		—		74,581
Surgical services		—		48,154		—		48,154
Total revenues		288,735		48,154		—		336,889
Cost of Revenue
Cost of medical equipment solutions		92,466		—		—		92,466
Cost of clinical engineering solutions		59,333		—		—		59,333
Cost of surgical services		—		25,681		—		25,681
Medical equipment depreciation		45,712		4,513		—		50,225
Total costs of revenues		197,511		30,194		—		227,705
Gross margin		91,224		17,960		—		109,184
Selling, general and administrative		77,975		13,850		—		91,825
(Gain) on settlement		(5,718)		—		—		(5,718)
Operating income		18,967		4,110		—		23,077
Equity in earnings of subsidiary		(1,201)		—		1,201		—
Interest expense		38,244		1,566		—		39,810
(Loss) income before income taxes and noncontrolling interest		(18,076)		2,544		(1,201)		(16,733)
(Benefit) provision for income taxes		(784)		1,343		—		559
Consolidated net (loss) income		(17,292)		1,201		(1,201)		(17,292)
Net income attributable to noncontrolling interest		—		341		—		341
Net (loss) income attributable to Universal Hospital Services, Inc.	$	(17,292)	$	860	$	(1,201)	$	(17,633)

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Universal Hospital Services, Inc.

Consolidating Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)


	Three Months Ended September 30, 2016								Nine Months Ended September 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	$	(3,610)	$	689	$	(689)	$	(3,610)	$	(8,859)	$	1,957	$	(1,957)	$	(8,859)
Other comprehensive income:
Gain on minimum pension liability, net of tax		185		—		—		185		555		—		—		555
Total other comprehensive income		185		—		—		185		555		—		—		555
Comprehensive (loss) income		(3,425)		689		(689)		(3,425)		(8,304)		1,957		(1,957)		(8,304)
Comprehensive income attributable to noncontrolling interest		—		105		—		105		—		240		—		240
Comprehensive (loss) income attributable to Universal Hospital Services, Inc.	$	(3,425)	$	584	$	(689)	$	(3,530)	$	(8,304)	$	1,717	$	(1,957)	$	(8,544)


	Three Months Ended September 30, 2015								Nine Months Ended September 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	$	(8,547)	$	442	$	(442)	$	(8,547)	$	(17,292)	$	1,201	$	(1,201)	$	(17,292)
Other comprehensive income:
Gain on minimum pension liability, net of tax		244		—		—		244		732		—		—		732
Total other comprehensive income		244		—		—		244		732		—		—		732
Comprehensive (loss) income		(8,303)		442		(442)		(8,303)		(16,560)		1,201		(1,201)		(16,560)
Comprehensive income attributable to noncontrolling interest		—		121		—		121		—		341		—		341
Comprehensive (loss) income attributable to Universal Hospital Services, Inc.	$	(8,303)	$	321	$	(442)	$	(8,424)	$	(16,560)	$	860	$	(1,201)	$	(16,901)

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Universal Hospital Services, Inc.

Consolidating Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended September 30, 2016
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Cash flows from operating activities:
Consolidated net (loss) income	$	(8,859)	$	1,957	$	(1,957)	$	(8,859)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		49,447		5,519		—		54,966
Amortization of intangibles, deferred financing costs and bond premium		6,185		2,551		—		8,736
Equity in earnings of subsidiary		(1,957)		—		1,957		—
Provision for doubtful accounts		(14)		17		—		3
Provision for inventory obsolescence		167		88		—		255
Non-cash share-based compensation expense		2,272		—		—		2,272
Gain on sales and disposals of equipment		(3,136)		146		—		(2,990)
Deferred income taxes		1,148		(967)		—		181
Interest on note receivable		(7)		—		—		(7)
Changes in operating assets and liabilities:
Accounts receivable		(10,402)		(362)		—		(10,764)
Due from affiliates		(375)		—		375		—
Inventories		(1,264)		968		—		(296)
Other operating assets		(839)		(362)		—		(1,201)
Accounts payable		323		(1,086)		—		(763)
Other operating liabilities		(18,753)		(268)		—		(19,021)
Net cash provided by operating activities		13,936		8,201		375		22,512
Cash flows from investing activities:
Medical equipment purchases		(35,210)		(6,083)		—		(41,293)
Property and office equipment purchases		(3,619)		(36)		—		(3,655)
Proceeds from disposition of property and equipment		8,868		39		—		8,907
Issuance of note receivable from officer		(983)		—		—		(983)
Net cash used in investing activities		(30,944)		(6,080)		—		(37,024)
Cash flows from financing activities:
Proceeds under senior secured credit facility		131,700		—		—		131,700
Payments under senior secured credit facility		(108,800)		—		—		(108,800)
Payments of principal under capital lease obligations		(3,557)		(1,126)		—		(4,683)
Payments of deferred financing costs		(97)		—		—		(97)
Holdback payment related to acquisition		—		(500)		—		(500)
Distributions to noncontrolling interests		—		(277)		—		(277)
Dividend and equity distribution payments		(24)		—		—		(24)
Proceeds from exercise of parent company stock options		78		—		—		78
Due to affiliates		—		375		(375)		—
Change in book overdrafts		(2,292)		(593)		—		(2,885)
Net cash provided by (used in) financing activities		17,008		(2,121)		(375)		14,512
Net change in cash and cash equivalents		—		—		—		—
Cash and cash equivalents at the beginning of period		—		—		—		—
Cash and cash equivalents at the end of period	$	—	$	—	$	—	$	—

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Universal Hospital Services, Inc.

Consolidating Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended September 30, 2015
	Parent		Subsidiary
	Issuer		Guarantor		Consolidating
	UHS		Surgical Services		Adjustments		Consolidated
Cash flows from operating activities:
Consolidated net (loss) income	$	(17,292)	$	1,201	$	(1,201)	$	(17,292)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		51,931		5,482		—		57,413
Asset impairment charges		2,339		—		—		2,339
Amortization of intangibles, deferred financing costs and bond premium		7,146		2,518		—		9,664
Equity in earnings of subsidiary		(1,201)		—		1,201		—
Provision for doubtful accounts		145		63		—		208
Provision for inventory obsolescence		195		104		—		299
Non-cash share-based compensation expense		1,902		—		—		1,902
Gain on sales and disposals of equipment		(3,404)		(143)		—		(3,547)
Deferred income taxes		2,096		(1,399)		—		697
Changes in operating assets and liabilities:
Accounts receivable		(1,175)		(1,358)		—		(2,533)
Due from affiliates		267		—		(267)		—
Inventories		(269)		(136)		—		(405)
Other operating assets		471		71		—		542
Accounts payable		(238)		833		—		595
Other operating liabilities		(6,615)		(21)		—		(6,636)
Net cash provided by operating activities		36,298		7,215		(267)		43,246
Cash flows from investing activities:
Medical equipment purchases		(35,432)		(3,339)		—		(38,771)
Property and office equipment purchases		(3,132)		(16)		—		(3,148)
Proceeds from disposition of property and equipment		10,578		221		—		10,799
Acquisition		—		(2,600)		—		(2,600)
Net cash used in investing activities		(27,986)		(5,734)		—		(33,720)
Cash flows from financing activities:
Proceeds under senior secured credit facility		104,952		—		—		104,952
Payments under senior secured credit facility		(108,900)		—		—		(108,900)
Payments of principal under capital lease obligations		(4,946)		(810)		—		(5,756)
Distributions to noncontrolling interests		—		(360)		—		(360)
Contributions from new members to limited liability company		—		70		—		70
Dividend and equity distribution payments		(39)		—		—		(39)
Due to affiliates		—		(267)		267		—
Change in book overdrafts		621		(114)		—		507
Net cash used in financing activities		(8,312)		(1,481)		267		(9,526)
Net change in cash and cash equivalents		—		—		—		—
Cash and cash equivalents at the beginning of period		—		—		—		—
Cash and cash equivalents at the end of period	$	—	$	—	$	—	$	—

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14. Restructuring

We incurred no restructuring expense during the three months and nine months ended September 30, 2016 and 2015. As of December 31, 2015, we had $2.4 million of restructuring liability. For the nine months ended September 30, 2016, $2.2 million in restructuring charges was paid. No additional restructuring was recorded in the first three quarters of 2016 for new severance arrangements and the remaining liability of $0.2 million as of September 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 nine months ended September 30, 2015, $1.4 million in restructuring charges was paid. No additional restructuring was recorded in the first three quarters of 2015 for new severance arrangements and the remaining $0.2 million was a liability as of September 30, 2015.

15. Concentration

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

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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 September 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 $73.5 and $69.0 million, or approximately 62.3% and 62.1% of our revenues, for the three months ended September 30, 2016 and 2015, respectively and $228.6 and $214.2 million, or approximately 63.9% and 63.6% of our revenues, for the nine months ended September 30, 2016 and 2015, respectively. As of September 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.

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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 $26.9 and $25.4 million, or approximately 22.8% and 22.9% of our revenues, for the three months ended September 30, 2016 and 2015, respectively and $78.0 and $74.6 million, or approximately 21.8% and 22.1% of our revenues, for the nine months ended September 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 September 30, 2016. In addition, as of September 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 10 th 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 $17.6 and $16.7 million, or approximately 14.9% and 15.0% of our revenues, for the three months ended September 30, 2016 and 2015, respectively and $51.1 and $48.2 million, or approximately 14.3% and 14.3% of our revenues, for the nine months ended September 30, 2016 and 2015, respectively. As of September 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 September 30, 2016, SS provided solutions in 42 states.

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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 September 30, 2016 and

the results of operations for the three-month and nine-month periods ended September 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 nine-month periods ended September 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 September 30,				Increase		Nine Months Ended September 30,				Increase
	2016		2015		(Decrease)		2016		2015		(Decrease)
Revenue
Medical equipment solutions	62.3	%	62.1	%	6.5	%	63.9	%	63.6	%	6.8	%
Clinical engineering solutions	22.8		22.9		6.0		21.8		22.1		4.5
Surgical services	14.9		15.0		5.0		14.3		14.3		6.1
Total revenues	100.0	%	100.0	%	6.2		100.0	%	100.0	%	6.2
Cost of Revenue
Cost of medical equipment solutions	28.1		27.1		10.0		29.3		27.4		13.2
Cost of clinical engineering solutions	18.0		18.1		6.1		17.3		17.6		4.4
Cost of surgical services	8.0		7.9		7.8		7.6		7.6		5.8
Medical equipment depreciation	13.2		14.9		(6.3)		13.1		14.9		(6.8)
Total costs of revenues	67.3		68.0		5.1		67.3		67.5		5.6
Gross margin	32.7		32.0		8.4		32.7		32.5		7.3
Selling, general and administrative	24.4		27.6		(6.1)		24.8		27.3		(3.2)
(Gain) on settlement	—		—		—		(0.8)		(1.7)		*
Operating income	8.3		4.4		98.7		8.7		6.9		34.5
Interest expense	11.1		11.9		(1.3)		11.0		11.8		(1.5)
Loss before income taxes and noncontrolling interest	(2.8)		(7.5)		(60.2)		(2.3)		(4.9)		(51.1)
Provision for income taxes	0.2		0.2		*		0.2		0.2		*
Consolidated net loss	(3.0)	%	(7.7)	%	(57.8)		(2.5)	%	(5.1)	%	(48.8)

*Not meaningful

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

Total Revenue

Total revenue for the three months ended September 30, 2016 was $117.9 million, compared to $111.1 million for the three months ended September 30, 2015, an increase of $6.8 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 $3.4 million, growth in our CES segment of $1.5 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 by customer losses in the MES segment.

Cost of Revenue

Total cost of revenue for the three months ended September 30, 2016 was $79.4 million compared to $75.6 million for the three months ended September 30, 2015, an increase of $3.8 million or 5.1%. The increase was primarily in our MES segment due to increases in 360 solutions cost of $1.6 million and other rental costs of $1.3 million and the increase in CES 360 solutions cost of $1.2 million. The increase was partially offset with the decrease in medical equipment depreciation of $1.0 million.

Gross Margin

Total gross margin for the three months ended September 30, 2016 was $38.5 million, or 32.7% of total revenues, compared to $35.5 million, or 32.0% of total revenues, for the three months ended September 30, 2015, an increase of $3.0 million or 8.4%. The increase in gross margin as a percent of revenue for the quarter was primarily impacted by growth in our 360 solutions and lower depreciation expense.

Medical Equipment Solutions

(in thousands)


	Three Months Ended
	September 30,
	2016			2015			Change		% Change
Total revenue	$	73,463		$	68,985		$	4,478	6.5	%
Cost of revenue		33,146			30,134			3,012	10.0
Medical equipment depreciation		14,008			15,043			(1,035)	(6.9)
Gross margin	$	26,309		$	23,808		$	2,501	10.5
Gross margin %		35.8	%		34.5	%

Total revenue in the MES segment increased $4.5 million, or 6.5%, to $73.5 million in the third 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 $3.4 million and growth in our sales and remarketing revenue of $0.7 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 September 30, 2016, we had 238 such active programs, up from 230 as of December 31, 2015.

Total cost of revenue in the segment increased $3.0 million, or 10.0%, to $33.1 million in the third 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 $1.6 million largely due to the increase in employee related cost and an increase in rental costs of $1.3 million largerly due to the higher technician costs and repair parts expense.

Medical equipment depreciation decreased $1.0 million, or 6.9%, to $14.0 million in the third quarter 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.

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Gross margin percentage for the MES segment increased from 34.5% in the third quarter of 2015 to 35.8% in the same period of 2016. Gross margin rate was impacted by lower depreciation and growth in our 360 solutions.

Clinical Engineering Solutions

(in thousands)


	Three Months Ended
	September 30,
	2016			2015			Change		% Change
Total revenue	$	26,926		$	25,401		$	1,525	6.0	%
Cost of revenue		21,278			20,063			1,215	6.1
Gross margin	$	5,648		$	5,338		$	310	5.8
Gross margin %		21.0	%		21.0	%

Total revenue in the CES segment increased $1.5 million, or 6.0%, to $26.9 million in the third 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 September 30, 2016, we had 360 solutions implemented in 203 programs in our CES segment, up from 180 programs as of December 31, 2015.

Total cost of revenue in the segment increased $1.2 million, or 6.1%, to $21.3 million in the third 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 was consistent at 21.0% in the third quarter of 2016 and 2015.

Surgical Services

(in thousands)


	Three Months Ended
	September 30,
	2016			2015			Change		% Change
Total revenue	$	17,559		$	16,727		$	832	5.0	%
Cost of revenue		9,461			8,780			681	7.8
Medical equipment depreciation		1,537			1,547			(10)	(0.6)
Gross margin	$	6,561		$	6,400		$	161	2.5
Gross margin %		37.4	%		38.3	%

Total revenue in the SS segment increased $0.8 million, or 5.0%, to $17.6 million in the third quarter of 2016 as compared to the same period of 2015. The increase was primarily driven by organic growth in our surgical services business.

Total cost of revenue in the segment increased $0.7 million, or 7.8%, to $9.5 million in the third quarter of 2016 as compared to the same period of 2015. The increase was primarily attributable to an increase in employee related costs to support growth in our surgical services business.

Medical equipment depreciation decreased $0.01 million, or 0.6%, to $1.5 million in the third quarter of 2016 as compared to the same period of 2015.

Gross margin percentage for the SS segment decreased from 38.3% in the third quarter of 2015 to 37.4% in the same period of 2016. The decrease in gross margin percentage was primarily driven by higher employee related costs.

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Selling, General and Administrative and Interest Expense

(in thousands)


	Three Months Ended
	September 30,
	2016		2015		Change		% Change
Selling, general and administrative	$	28,757	$	30,633	$	(1,876)	(6.1)	%
Interest expense		13,081		13,250		(169)	(1.3)

Selling, General and Administrative

Selling, general and administrative expense decreased $1.9 million, or 6.1%, to $28.8 million for the third quarter of 2016 as compared to the same period of 2015. The decrease was primarily due to lower travel, payroll, depreciation and amortization expenses.

Selling, general and administrative expense as a percentage of total revenue was 24.4% and 27.6% for the quarters ended September 30, 2016 and 2015, respectively.

Interest Expense

Interest expense decreased $0.2 million to $13.1 million for the third quarter of 2016 as compared to the same period of 2015.

Income Taxes

Income taxes were an expense of $0.3 and $0.2 million for the three months ended September 30, 2016 and 2015, respectively. The tax expense for the three months ended September 30, 2016 and 2015 primarily related to state minimum fees. The expected tax benefit from operating loss during the three months ended September 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 $4.9 million to $3.6 million in the third quarter of 2016 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 third quarter of 2016.

Consolidated Results of Operations for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Total Revenue

Total revenue for the nine months ended September 30, 2016 was $357.7 million, compared to $336.9 million for the nine months ended September 30, 2015, an increase of $20.8 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 $9.8 million and sales and remarketing revenue of $4.1 million, growth in our CES segment of $3.4 million related to growth in providing existing and new customers with services on their equipment and growth in our SS segment of $2.9 million. These increases were partially offset by customer losses in our MES segment.

Cost of Revenue

Total cost of revenue for the nine months ended September 30, 2016 was $240.6 million compared to $227.7 million for the nine months ended September 30, 2015, an increase of $12.9 million or 5.6%. The increase was primarily in our MES segment due to the increases in 360 solutions cost of $5.3 million, other rental costs of $3.6 million and cost of equipment sales of $3.2 million, an increase in our CES 360 solutions cost of $2.6 million corresponding with the 360 solutions revenue growth and an increase in our SS cost of $1.5 million. The increases were partially offset by a decrease in medical equipment depreciation of $3.4 million.

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Gross Margin

Total gross margin for the nine months ended September 30, 2016 was $117.1 million, or 32.7% of total revenues, compared to $109.2 million, or 32.5% of total revenues, for the nine months ended September 30, 2015, an increase of $7.9 million or 7.3%. The increase in gross margin as a percent of revenue was primarily impacted by lower depreciation expense and growth in our 360 solutions.

Medical Equipment Solutions

(in thousands)


	Nine Months Ended
	September 30,
	2016			2015			Change		% Change
Total revenue	$	228,633		$	214,154		$	14,479	6.8	%
Cost of revenue		104,640			92,466			12,174	13.2
Medical equipment depreciation		42,389			45,712			(3,323)	(7.3)
Gross margin	$	81,604		$	75,976		$	5,628	7.4
Gross margin %		35.7	%		35.5	%

Total revenue in the MES segment increased $14.5 million, or 6.8%, to $228.6 million in the first nine 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 $9.8 million and growth in sales and remarketing of $4.1 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 September 30, 2016, we had 238 such active programs, up from 230 as of December 31, 2015.

Total cost of revenue in the segment increased $12.2 million, or 13.2%, to $104.6 million in the first nine 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 $5.3 million largely due to increases in employee related expense of $3.1 million and repair parts of $0.8 million, an increase in other supplemental rental costs of $3.6 million largely due to higher repair parts expense and an increase in cost of equipment sales of $3.3 million.

Medical equipment depreciation decreased $3.3 million, or 7.3%, to $42.4 million in the first nine 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 increased from 35.5% in the first nine months of 2015 to 35.7% in the same period of 2016. Gross margin rate was impacted by sales mix and lower depreciation.

Clinical Engineering Solutions

(in thousands)


	Nine Months Ended
	September 30,
	2016			2015			Change		% Change
Total revenue	$	77,968		$	74,581		$	3,387	4.5	%
Cost of revenue		61,946			59,333			2,613	4.4
Gross margin	$	16,022		$	15,248		$	774	5.1
Gross margin %		20.5	%		20.4	%

Total revenue in the CES segment increased $3.4 million, or 4.5%, to $78.0 million in the first nine 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 September 30, 2016, we had 360 solutions implemented in 203 programs in our CES segment, up from 180 programs as of December 31, 2015.

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Total cost of revenue in the segment increased $2.6 million, or 4.4%, to $61.9 million in the first nine 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 20.4% in the first nine months of 2015 to 20.5% 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 for manufacturer services.

Surgical Services

(in thousands)


	Nine Months Ended
	September 30,
	2016			2015			Change		% Change
Total revenue	$	51,091		$	48,154		$	2,937	6.1	%
Cost of revenue		27,183			25,681			1,502	5.8
Medical equipment depreciation		4,403			4,513			(110)	(2.4)
Gross margin	$	19,505		$	17,960		$	1,545	8.6
Gross margin %		38.2	%		37.3	%

Total revenue in the SS segment increased $2.9 million, or 6.1%, to $51.1 million in the first nine months of 2016 as compared to the same period of 2015. The increase was driven primarily 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 $1.5 million, or 5.8%, to $27.2 million in the first nine months of 2016 as compared to the same period of 2015. The increase was primarily attributable to the increases in employee related costs to support growth in our surgical services business and cost of disposables.

Medical equipment depreciation decreased $0.1 million, or 2.4%, to $4.4 million in the first nine months of 2016 as compared to the same period of 2015.

Gross margin percentage for the SS segment increased from 37.3% in the first nine months of 2015 to 38.2% 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.

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

(in thousands)


	Nine Months Ended
	September 30,
	2016		2015		Change		% Change
Selling, general and administrative	$	88,853	$	91,825	$	(2,972)	(3.2)	%
(Gain) on settlement		(2,750)		(5,718)		2,968	*
Interest expense		39,210		39,810		(600)	(1.5)

*Not meaningful

Selling, General and Administrative

Selling, general and administrative expense decreased $3.0 million, or 3.2%, to $88.9 million for the first nine 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 24.8% and 27.3% for the nine months ended September 30, 2016 and 2015, respectively.

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Gain on Settlement

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

Interest Expense

Interest expense decreased $0.6 million to $39.2 million for the first nine months of 2016 as compared to the same period of 2015.

Income Taxes

Income taxes were an expense of $0.7 and $0.6 million for the nine months ended September 30, 2016 and 2015, respectively. The tax expense for the nine months ended September 30, 2016 and 2015 primarily related to state minimum fees. The expected tax benefit from operating loss during the nine months ended September 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 $8.4 million to $8.9 million in the first nine months of 2016 as compared to the same period of 2015. Net loss was impacted by the growth in revenue as well as the decreases in medical equipment depreciation and selling, general and administrative expenses.

EBITDA

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) was $94.1 and $91.6 million for the nine months ended September 30, 2016 and 2015, respectively. EBITDA for the nine months ended September 30, 2016 was higher primarily due to lower medical equipment depreciation and selling, general and administration expenses.

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 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:

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	Nine Months Ended
	September 30,
(in thousands)	2016		2015
Net loss attributable to Universal Hospital Services, Inc.	$	(9,099)	$	(17,633)
Interest expense		39,210		39,810
Provision for income taxes		677		559
Depreciation and amortization of intangibles		63,328		68,850
EBITDA	$	94,116	$	91,586

Other Financial Data:
Net cash provided by operating activities	$	22,512	$	43,246
Net cash used in investing activities		(37,024)		(33,720)
Net cash provided by (used in) financing activities		14,512		(9,526)

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		4
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

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 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.

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Net cash provided by operating activities was $22.5 and $43.2 million for the nine months ended September 30, 2016 and 2015, respectively. The decrease in net cash provided by operating activities was primarily from higher incentive payments in 2016, the timing of accounts receivable colletions from specific customers and working capital increases primarily related to timing.

Net cash used in investing activities was $37.0 and $33.7 million for the nine months ended September 30, 2016 and 2015, respectively. The increase in net cash used in investing activities was primarily due to higher medical equipment purchases and lower proceeds from sale of medical equipment in 2016 compared to the same period of 2015.

Net cash provided by (used in) financing activities was $14.5 and $(9.5) million for the nine months ended September 30, 2016 and 2015, respectively. The increase in net cash provided by 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 September 30, 2016, we had $111.7 million of availability under the senior secured credit facility based on a borrowing base of $167.1 million less borrowings of $50.9 million and after giving effect to $4.5 million used for letters of credit. As of September 30, 2015, we had $129.7 million of availability under the senior secured credit facility based on a borrowing base of $168.7 million less borrowings of $35.1 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;

increases in expenses related to our pension plan;

our cash flow fluctuation;

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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 September 30, 2016, we had approximately $721.6 million of total debt outstanding of which $50.9 million was bearing interest at variable rates. Based on variable debt levels at September 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 $0.5 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 nine months of 2016 average price of unleaded gasoline, assuming gasoline usage levels for the nine months ended September 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 September 30, 2016, we have no other material exposure to market risk.

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Item 4. Controls and Procedures

(a)

Evaluation of disclosure controls and procedures

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

(a) Pursuant to this Item 5 of our Quarterly Report on Form 10-Q (the “Form 10-Q”), the Company is reporting information relating to the below-described amendments to existing compensatory plans, contracts and arrangements with certain of its named executive officers that would otherwise be required to be disclosed pursuant to Item 5.02(e) of a Current Report on Form 8-K.

On November 2, 2016, the Company made changes to the Employment Agreement with Thomas J. Leonard, our Chief Executive Officer, dated April 8, 2015 and amended on March 30, 2016 (as amended, the “Employment Agreement”), and its employment arrangements with James B. Pekarek, our Executive Vice President and Chief Financial Officer,

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which includes a Severance Arrangement dated April 11, 2013 (the “Severance Arrangement”), each of whom is one of our named executive officers.

The changes relative to Mr. Leonard, which are set forth in the Second Amendment to the Employment Agreement (the “Second Amendment”), include changes in the way Mr. Leonard’s bonus is calculated and when it is paid, as well as changes relative to payments related to Mr. Leonard’s health care insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), if Mr. Leonard’s employment is terminated by the Company without “Cause” or by Mr. Leonard for “Good Reason” (each as defined in the Employment Agreement). This disclosure is qualified in its entirety by reference to the Second Amendment, a copy of which is filed as Exhibit 10.2 to this Form 10-Q and is incorporated herein by this reference. The changes relative to Mr. Pekarek, which are set forth in an amended Severance Arrangement (the “Amended Severance Arrangement”), include changing the amount and timing of the payment of the bonus that would be payable to Mr. Pekarek if the Company terminates him without “Cause” (as defined in the Amended Severance Arrangement). This disclosure is qualified in its entirety by reference to the Amended Severance Arrangement, a copy of which is filed as Exhibit 10.3 to this Form 10-Q and is incorporated herein by this reference.

A description of Mr. Leonard’s Employment Agreement and Mr. Pekarek’s existing Severance Arrangement are contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, under the caption “Executive Compensation- Potential Payments Upon Termination Or Change in Control – Potential Payments Under Employment Agreements” and are incorporated herein by this reference.

On November 2, 2016, the Company also made changes to its existing Executive Severance Pay Plan dated June 1, 2007 and amended on December 31, 2008, February 2011, October 2011 and March 17, 2015 (as previously amended, the “Executive Severance Pay Plan”), which provides severance benefits for our senior executives, including our named executive officers (other than Mr. Leonard, who is entitled to the severance benefits provided in his Employment Agreement, as amended by the Second Amendment, and Mr. Pekarek, who is entitled to the severance benefits provided in his Amended Severance Arrangement), who currently are Kevin E. Ketzel, President, and Robert L. Creviston, Chief Human Resources Officer. The changes to the Executive Severance Pay Plan (as so amended, the “Amended Executive Severance Pay Plan”) include changes to the severance benefits to which such persons are entitled upon an “Involuntary Termination” (as defined in the Amended Executive Severance Pay Plan) from the Company relating to the amount and timing of the bonus, the payments required to be made by the Company to such executive relating to the continued cost of health care insurance coverage under COBRA, and the amounts that would be payable to the executive if the executive’s “Involuntary Termination” were to occur during the “Change of Control Period” (as defined in the Amended Executive Severance Pay Plan). This disclosure is qualified in its entirety by reference to the Amended Executive Severance Pay Plan, a copy of which is filed as Exhibit 10.1 to this Form 10-Q and is incorporated herein by this reference.

A description of the Executive Severance Pay Plan is contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, under the caption “Executive Compensation- Potential Payments Upon Termination Or Change in Control – Potential Payments Under Our Executive Severance Pay Plan” and is incorporated herein by this reference.

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Item 6. Exhibits


Number		Description

10.1		Universal Hospital Services, Inc. Executive Severance Pay Plan, dated November 2, 2016.
10.2		Amendment Two to the Employment Agreement, dated November 4, 2016, between Thomas Leonard and Universal Hospital Services, Inc.
10.3		Severance Arrangement, dated November 2, 2016, between James B. Pekarek and Universal Hospital Services, Inc.
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 September 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

SIGNATU RES

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: November 7, 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)

Universal Hospital Services, Inc.

Executive Severance Pay Plan

November 2, 2016

I. Purpose.

The Universal Hospital Services, Inc. Executive Severance Pay Plan (the “Plan”) was established by Universal Hospital Services, Inc. and its subsidiaries (collectively, the “Company”) as a “top hat” ERISA plan to provide severance benefits for a select group of management and highly compensated employees. Executives identified by the Company are eligible to participate. This Plan replaces the Executive Severance Pay Plan dated March 17, 2015.

II. Definitions.

A. “Cause” means:

(i.) Executive’s continued failure, whether willful, intentional, or grossly negligent, after written notice, to perform substantially Executive’s duties (the “Duties”) as determined by Executive’s immediate supervisor, or the Chief Executive Officer, or an Executive Vice President or Senior Vice President of the Company (other than as a result of a disability);

(ii.) dishonesty or fraud in the performance of Executive’s Duties or a material breach of Executive’s duty of loyalty to the Company or its subsidiaries;

(iii.) conviction or confession of an act or acts on Executive’s part constituting a felony under the laws of the United States or any state thereof or any misdemeanor which materially impairs such Executive’s ability to perform the Duties;

(iv.) any willful act or omission on Executive’s part which is materially injurious to the financial condition or business reputation of the Company or any of its subsidiaries; or

(v.) any breach by Executive of any non-competition, non-solicitation, non-disclosure or confidentiality agreement applicable to Executive.

B. “Change of Control” means (i) any event as a result of which Irving Place Capital (“IPC”) and its affiliates collectively cease to own and control all of the economic and voting rights associated with ownership of at least 50.1% of the outstanding capital stock of Company; or (ii) any sale or transfer of all or substantially all of the assets of the Company. Notwithstanding the foregoing, a Change of Control will not include the sale or transfer of all or substantially all of the assets of the

Company to a private equity firm who invests in companies (a “Private Equity Firm”), or a company owned or controlled by a Private Equity Firm.

C. “Change of Control Period” means the period starting 30 days before the Change of Control and continuing through 6 months after the Change of Control.

D. “Date of Termination” means the date specified as Executive’s last date of employment in the Company’s notice of termination to Executive or Executive’s Notice of resignation for Good Reason to the Company.

E. “Executive” collectively means any of the Company’s employees meeting the definition of Executive – President, Executive – SVP or Executive – VP as defined below.

F. “Executive - President” means any of the Company’s employees possessing the title of President.

G. “Executive - SVP” means any of the Company’s employees possessing a title of Executive Vice President, Senior Vice President or Chief Human Resources Officer who reports directly to the Chief Executive Officer of the Company.

H. “Executive - VP” means any of the Company’s employees possessing a title of Vice President or above, other than an Executive – President or Executive – SVP, or who are designated in writing as covered by the Plan by the Company’s Chief Executive Officer from time to time.

I. “Involuntary Termination” of an Executive occurs when the Executive has a Termination of Employment for reasons other than Cause that is “involuntary” within the meaning of Section 1.409A-1(n)(1) of the Treasury Regulations, or solely with respect to an Executive – President or Executive – SVP, such Executive – President or Executive – SVP has a Termination of Employment for Good Reason. With respect to an Executive – President or Executive – SVP, Termination of Employment which occurs due to the Executive – President’s or Executive – SVP’s death or Disability shall be considered an Involuntary Termination. With respect to an Executive – VP, Termination of Employment which occurs due to (i) the Executive – VP’s death or Disability or (ii) the Executive – VP’s termination for Good Reason shall not be considered an Involuntary Termination. For purposes hereof, “Disability” means the Executive’s inability to perform the essential functions of his or her position for a period of at least six months due to illness or accident after being provided with any reasonable accommodation or leave the Company may be obligated by law to provide.

J. “Good Reason” means that, other than for Cause, any of the events set forth in paragraphs (i)-(iii) below has occurred; within 30 days of such event, the Executive notifies the Company in writing of such event, and the Company fails

to cure the event within 60 days of receiving such notice; and the Executive Terminates Employment no later than 90 days after providing such notice.

(i.) The Company has demoted Executive, as evidenced by a material reduction or reassignment of Executive duties (per Executive job description), provided, however, that any change in Executive’s position constituting a lateral move or promotion will not be deemed to give rise to Good Reason unless Executive is required to relocate pursuant to Section J(iii) below;

(ii.) The Executive’s base salary has been materially reduced other than in connection with an across-the-board reduction (of approximately the same percentage) in executive compensation to employees imposed by the board of directors of the Company in response to negative financial results or other adverse circumstances affecting the Company; or

(iii.) The Company has required Executive to relocate in excess of 50 miles from the location where the Executive is currently employed.

K. “Salary” means all income earned as an employee of the Company and reportable in box 5 of Form W-2 (or the corresponding box of any subsequent form W-2), as adjusted in accordance with the following rules. Salary does not include any bonus or incentive plan payments, payments made to compensate employees for benefits lost under qualified benefit plans due to the application of compensation limits as determined by the Plan Administrator, payments classified by the Plan Administrator as reimbursed business expenses, or any benefits payable under this Plan. The Plan Administrator, in its absolute discretion, may include or exclude additional items in determining Salary for participants, and may reduce the amount of Salary considered for purposes of determining benefits under this Plan if necessary to retain this Plan’s eligibility for the severance pay plan exception to Section 409A of the Internal Revenue Code.

L. “Severance Period” means the period from the Date of Termination through the date which is 12 months from the Date of Termination.

M. “Termination of Employment” or “Terminate Employment” means the Executive’s Separation from Service within the meaning of Section 409A(a)(2)(A)(i) of the Code.

III. Eligibility . Participation in this Plan is limited to Executives. Executives who receive severance under this Plan will not be eligible to receive severance benefits under any other plan or agreement of the Company.

IV. Severance Benefits.

A. Executives who have an Involuntary Termination, and who sign the general release and other agreement described below in this Section IV within 45 days of such Involuntary Termination and who do not rescind the general release within the period required by law, are entitled to the severance benefits specified below in this Section IV.

B. Upon qualifying for severance pay subject to Section V, Executives will be paid the following amounts in the following manner:

Executive – President

(i)

The Executive – President will continue to be paid his or her Salary through the Severance Period, in the manner and at the times paid during such Executive – President’s employment with the Company; provided, however, that the first such payment will be made as soon as practicable following the effectiveness of the release described in Section V. All such payments shall be subject to any required withholding and will be paid regardless of any other employment the Executive – President may accept.

(ii.) The Executive – President may elect at his or her expense to continue group health and dental benefits through the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) for a period of up to 18 months, to the extent he or she is eligible. The Executive – President will receive a lump payment of $11,350, which is equivalent to the amount of the portion of the Executive – President’s COBRA premiums as the Company paid during the Executive – President’s employment.

(iii.) The Company will pay the Executive – President a prorated bonus for the then-current fiscal year, calculated at the Executive – President’s individual bonus target and prorated based upon the number of days the Executive – President was actually employed during that year. If such bonus would cause the total amount of severance payments under this Plan to exceed the lesser of (a) twice the participant’s annual rate of pay during the year immediately preceding his or her termination; or (b) twice the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code (e.g. 2 X $260,000, or $530,000 for 2015), the Plan Administrator may, in its sole discretion, reduce such bonus to avoid the application of Section 409A. Such bonus will be payable in a single lump sum payment on the 61 st day following the Date of Termination.

(iv.) If the Executive – President’s Involuntary Termination occurs during the Change of Control Period, the Company will pay the Executive – President an additional amount equal to 100% of such Executive – President’s target bonus for the then-current fiscal year. Such amount will be paid in the manner and at the times paid during such Executive – President’s employment with the Company; provided, however, that the first such

payment will be made as soon as practicable following the effectiveness of the release described in Section V. All such payments shall be subject to any required withholding.

(v.) The Executive – President will receive outplacement assistance services as determined by the Company.

Executive – SVP

(vi)

The Executive – SVP will continue to be paid his or her Salary through the Severance Period, in the manner and at the times paid during such Executive – SVP’s employment with the Company; provided, however, that the first such payment will be made as soon as practicable following the effectiveness of the release described in Section V. All such payments shall be subject to any required withholding and will be paid regardless of any other employment the Executive – SVP may accept.

(vii.) The Executive – SVP may elect at his or her expense to continue group health and dental benefits through the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) for a period of up to 18 months, to the extent he or she is eligible. The Executive – SVP will receive a lump payment of $11,350, which is equivalent to the amount of the portion of the Executive – SVP’s COBRA premiums as the Company paid during the Executive – SVP’s employment.

(viii.) The Company will pay the Executive – SVP a prorated bonus for the then-current fiscal year, calculated at the Executive – SVP’s individual bonus target and prorated based upon the number of days the Executive – SVP was actually employed during that year. If such bonus would cause the total amount of severance payments under this Plan to exceed the lesser of (a) twice the participant’s annual rate of pay during the year immediately preceding his or her termination; or (b) twice the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code (e.g. 2 X $260,000, or $530,000 for 2015), the Plan Administrator may, in its sole discretion, reduce such bonus to avoid the application of Section 409A. Such bonus will be payable in a single lump sum payment on the 61 st day following the Date of Termination.

(ix.) The Executive – SVP will receive outplacement assistance services as determined by the Company.

Executive – VP

(x)

The Executive – VP will continue to be paid his or her Salary through the Severance Period, in the manner and at the times paid during such Executive – VP’s employment with the Company; provided, however, that

the first such payment will be made as soon as practicable following the effectiveness of the release described in Section V. All such payments shall be subject to any required withholding.

(xi.) If the Executive – VP is eligible for and elects COBRA continuation for medical and/or dental coverage under any Company-sponsored medical and/or dental plans, the Executive – VP shall receive payment of the same portion of the Executive – VP’s COBRA premiums as the Company paid during the Executive – VP’s employment for a period of up to twelve (12) months, provided the Executive – VP timely elects COBRA coverage and remains otherwise eligible to receive COBRA benefits.

(xii.) The Executive – VP will receive severance pay as set forth in paragraph (i) above for the first 6 months after the Date of Termination regardless of any other employment the Executive – VP may accept. If the Executive – VP finds other employment during the next 6 months after the Date of Termination, the amount of severance payments in accordance with B(x) above will be reduced by the value of the compensation the Executive – VP receives in his or her new employment from the date which is six months and one day after the Date of Termination through the date which is 12 months after the Date of Termination. The amounts payable in accordance with B(xi) will be similarly discontinued if medical and dental benefits are secured through the new employer. The Executive – VP shall be required to provide the Company with satisfactory evidence of the amount of compensation in his or her new employment.

(xiii.) If the Executive – VP’s Involuntary Termination occurs either (1) on or after October 1 st of the then-current fiscal year or (2) during the Change of Control Period, the Company will provide the Executive – VP a prorated portion of the bonus earned for the then-current fiscal year, based upon the number of days the Executive – VP was employed during that year. If such bonus would cause the total amount of severance payments under this Plan to exceed the lesser of (a) twice the participant’s annual rate of pay during the year immediately preceding his or her termination; or (b) twice the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code (e.g. 2 X $260,000, or $530,000 for 2015), the Plan Administrator may, in its sole discretion, reduce such bonus to avoid the application of Section 409A. Such bonus will be payable at the time annual bonuses are paid to the executives who remain employed by the Company. Such bonus shall not in any case be paid later than the end of the second calendar year following the calendar year in which the Involuntary Termination of such Executive – VP occurred.

(xiv.) The Executive – VP will receive outplacement assistance services as determined by the Company.

V. General Release and Other Agreements.

Executive will not be entitled to receive any of the severance pay described above until such time as Executive signs (A) an effective general release of all claims against the Company and its affiliates in the form and manner prescribed by the Company and (B) an agreement further providing (i) Executive’s agreement not to disclose or use confidential information of the Company, (ii) Executive’s agreement during the Severance Period not to compete with the Company in the medical equipment rental business, (iii) Executive’s agreement during the Severance Period not to solicit for employment or hire any person who was an employee of the Company at any time within the one year period before the Executive’s Date of Termination, and (iv) Executive’s agreement during the Severance Period not to induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company to cease doing business with the Company, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or any Subsidiary. A failure to execute such a general release and other agreements within 45 days of Executive’s Date of Termination or a subsequent rescission of such general release within the time allowed will result in the loss of any right to receive payments or benefits under this Plan.

VI. Termination of Severance Benefits.

In addition to any other remedies the Company may have for breach of any of the terms of the General Release and other Agreements, upon any such breach, the Company will immediately cease payment of the severance benefits provided for under the Plan and the Executive will be required to return any severance benefit that he or she has received under the Plan.

VII. Section 409A.

Although the Company does not guarantee to the Executive any particular tax treatment relating to the payments under the Plan, it is intended that such payments be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the Plan shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code.

(a) A termination of employment shall not be deemed to have occurred for purposes of any provision of the Plan providing for the payment of amounts subject to Section 409A of the Code upon or following a termination of employment unless such termination is also a “Separation from Service” within the meaning of Section 409A of the Code and, for purposes of any such provision of the Plan references to a “resignation,” “termination,” “termination of employment” or the like terms shall mean “Separation from Service” within the meaning of Section 409A of the Code.

(b) The right to each severance pay installment described in Section IV.B and paid under the Plan will at all times be treated as the “right to a series of separate payments” within the meaning of Treasury Regulation Section 1.409A-2(b)(2)(iii) and any subsequent authority.

(c) If any payment of money or provision of any benefit provided pursuant to the Plan constitutes “nonqualified deferred compensation” subject to Section 409A of the Code, and could potentially be made or provided in two different calendar years based on when the Executive signs and delivers the release, such payment or benefit will be made or provided to the Executive no earlier than the first business day of the second of such calendar years.

VIII. Amendment and Modification of Plan. This Plan may be modified, amended or terminated at any time by the CEO and the Board of Directors of the Company provided that during the Change of Control Period no such modification, amendment or termination of this Plan may (i) reduce the ability of any participant to receive severance benefits under this Plan, (ii) reduce the benefits that any participant is eligible to receive or (iii) otherwise adversely impact any participant hereunder.

IX. Plan Administration . The Company is the Plan Administrator, and may delegate to an employee the responsibility of day to day administration of the Plan. The Plan Administrator shall have authority, discretion, responsibility and control over the administration of the Plan. This grant of power shall be full, final, complete, conclusive, and exclusive. It shall be binding as to all parties, and will be above and beyond the initial ability to unilaterally determine the meaning of a term or deny benefits. The power shall include, but not be limited to, the following:

(1)

Construe and interpret the provisions and language of the Plan, including doubtful or disputed terms;

(2)

Determine all questions of eligibility for Plan participation;

(3)

Determine the approval or denial of all benefits, payments and claims under the Plan, including the appeal of all claim decisions;

(4)

Determine the amount of any benefits payable under the Plan, and authorize and direct the payment of such benefits;

(5)

Make and apply such rules, regulations, and policies, and prescribe the use of such forms as shall be necessary to carry out the provisions of the Plan, such rules, regulations and policies to apply uniformly to all employees in similar circumstances;

(6)

Provide Executives, government agencies and other appropriate parties with such returns, reports, schedules and individual statements as are required by law within the time prescribed by law;

(7)

Appoint or employ individuals to assist in the administration of the Plan and other agents deemed advisable; and

(8)

Do such other acts reasonably required to administer the Plan in accordance with its provisions or as may be provided for or required by law.

Any interpretation, determination, rule or regulation issued by the Plan Administrator shall be conclusive and binding on all persons. In any review of such an interpretation, determination, rule or regulation, the Plan Administrator’s decision shall be given deference and shall be set aside by a reviewing tribunal only in the event the Plan Administrator acted in an arbitrary and capricious manner. The Plan Administrator shall have the authority to accept service of process on behalf of the Program.

X. No Employment Rights. Neither this Plan nor the benefits hereunder shall be a term of the employment of any employee, and the Company shall not be obligated in any way to continue the Plan. The terms of this Plan shall not give any employee the right to be retained in the employment of the Company.

XI. Successors. This Plan shall be binding upon any successor of the Company, including, without limitation, any purchaser of all or substantially all of the assets of the Company.

XII. Claims Procedures.

CLAIM PROCEDURES

A. Initial Claim. A participant who believes he or she is entitled to a larger benefit than is provided, or a benefit that was denied, may file a written claim with the Plan Administrator. The written claim must provide an explanation of the claim’s nature; the facts supporting the claim; the amount of the claim; and the participant’s name and mailing address.

If a claim is denied in whole or in part, the participant will be notified in writing within 90 days of the receipt of the claim. If special circumstances require more time for this process, the participant will be notified within 90 days of the special circumstances requiring an extension, and the date (no more than 180 days after receipt of the claim) by which a decision will be made.

A written claim denial notice will include the specific reason(s) for the denial; references to the Plan provision(s) on which the denial is based; a description of any

additional material or information that is necessary to perfect the claim (and an explanation of why such information or material is necessary); and the procedures for appealing the decision, including a statement regarding your right to bring a civil court action under the Employee Retirement Security Act (ERISA) after exhaustion of the Plan’s claim procedures.

A participant or his or her authorized representative may review all documents related to any denial of benefits.

B. Appeal

A participant who disagrees with the Plan Administrator’s decision has 60 days from the receipt of the original denial to request an appeal. This request for an appeal should be in writing. The participant or his or her authorized representative will be given the opportunity to submit written comments, documents, records, and other information relating to his or her claim for benefits. The participant will also be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to your claim for benefits.

The appeal will be reviewed and written notification of a decision provided within 60 days. If special circumstances require more time for this process, the participant will be notified in writing of the special circumstances requiring the extension and the date by which a decision will be made. All determinations of appeals made are final and binding. In the event of an adverse determination of an appeal, the participant is entitled to bring suit in federal court under section 502(a) of ERISA.

C. Deadline to Commence Legal Action

A participant who files his or her claim within the required time, completes the entire claim procedures, and is denied the claim on review, may sue over such claim (unless he or she has executed a release on such claim). Such a lawsuit must commence within six (6) months after the claims process is completed and may not, under any circumstances, be brought more than 30 months after the participant knew or should have known of facts behind the claim.

D. Venue

All litigation in any way related to the Plan (including but not limited to any and all claims brought under ERISA, such as claims for benefits and claims for breach of fiduciary duty) must be filed in the United States District Court for the District of Minnesota, in Minneapolis

AMENDMENT TWO TO THE

Employment agreement

This is Amendment Two to the Employment Agreement between Thomas Leonard (“Executive”) and Universal Hospital Services, Inc. (“UHS”) originally effective April 13, 2015 (“Agreement”). This Amendment Two is effective as of the last signature date below.

Capitalized terms used in this Amendment have the same meaning ascribed to them in the Agreement, unless otherwise indicated.

Purpose. The purpose of this Amendment is to update the payments made to Executive by virtue of termination of employment and amend the Executive’s non-competition obligations.

Payments by Virtue of Termination of Employment. Section 11 of the Agreement is hereby deleted and replaced with the following:

11.

Payments by Virtue of Termination of Employment .

Termination by the Company Without Cause or by Executive For Good Reason . If Executive’s employment is terminated at any time during the Term by the Company without Cause or by Executive for Good Reason, subject to Section 11(d) of this Agreement, Executive shall be entitled to:

(A) within ten (10) days following such termination, (i) payment of Executive’s accrued and unpaid Base Salary, (ii) payment for any accrued but unused vacation days, (iii) payment of any earned but unpaid Annual Bonus with respect to the year prior to the year of termination and (iv) reimbursement of expenses under Section 7 of this Agreement, in each case of (i) through (iv), accrued through the date of termination and (B) all other accrued amounts or accrued benefits due to Executive in accordance with the Company’s benefit plans, programs or policies (other than severance);

ii.

an amount equal to the sum of (A) twelve (12) months of Executive’s Base Salary as in effect immediately prior to Executive’s date of termination and (B) Executive’s Target Bonus Opportunity for the year of termination, which sum shall be payable during the twelve (12) month period commencing on the date of termination (the “ Severance Period ”) in substantially equal installments in accordance with the Company’s regular payroll practices as in effect from time to time, provided , that the first payment pursuant to this Section 11(a)(ii) shall be made on the next regularly scheduled payroll date following the sixtieth (60th) day after Executive’s termination and shall include payment of any amounts that would otherwise be due prior thereto; and


Form 070109	UHS Confidential Information	Page 1 of 4

iii.

an amount equal to the pro-rata portion of Executive’s Annual Bonus for the year of termination, calculated at Executive’s bonus target and prorated based on the number of days the Executive is employed during such year, payable in a lump-sum on the 61 st day following the date of termination (“ Pro-rata Bonus ”); and

iv.

Executive may elect at his expense to continue group health and dental benefits through the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) for a period of up to 18 months, to the extent he is eligible. Executive will receive a lump payment of $11,350, which is equivalent to the amount of the portion of Executive’s COBRA premiums as the Company paid during Executive’s employment.

Termination by the Company With Cause or by Executive Without Good Reason . If the Company terminates Executive’s employment for Cause during the Term or Executive terminates his employment without Good Reason during the Term, Executive shall be entitled to receive the payments and benefits described under Section 11(a)(i) of this Agreement.

Termination due to Executive’s Death or Disability . If Executive’s employment terminates during the Term due to death or Disability, Executive or Executive’s legal representatives, as applicable, shall be entitled to (i) an amount equal to the sum of twelve (12) months of Executive’s Base Salary as in effect immediately prior to Executive’s date of termination, (ii) the Pro-rata Bonus, (iii) the payments and benefits described under Section 11(a)(i) of this Agreement; and (iv) the payments and benefits described under Section 11(a)(iii) of this Agreement.

Conditions to Payment . All payments and benefits due to Executive under this Section 11 which are not otherwise required by applicable law shall be payable only if Executive executes and delivers to the Company a general release of claims in a form reasonably satisfactory to the Company and such release is no longer subject to revocation (to the extent applicable), in each case, within sixty (60) days following termination of employment. Failure to timely execute and return such release or revocation thereof shall be a waiver by Executive of Executive’s right to severance (which, for the avoidance of doubt, shall not include any amounts described in Section 11(a)(i) of this Agreement). In addition, severance shall be conditioned on Executive’s continued compliance with Section 16 of this Agreement as provided in Section 17 below.

No Other Severance . Executive hereby acknowledges and agrees that, other than the severance payments described in this Section 11 , upon the effective date of the termination of Executive’s employment, Executive shall not be entitled to any other severance payments or benefits of any kind under any Company benefit plan, severance policy generally available to the Company’s employees or otherwise and a ll other rights of Executive to compensation under this Agreement shall end as of such date.


Form 070109	UHS Confidential Information	Page 2 of 4

Non-Competition. Section 15(c) of the Agreement is hereby deleted and replaced with the following:

c. Non-Competition . Executive hereby acknowledges and agrees that during the Restricted period, Executive shall not, directly or indirectly, be employed or otherwise provide services for, including, but not limited to, as a consultant, independent contractor or in any other capacity, or own or invest in (other than ownership for investment purposes of less than two percent (2%) of a publicly traded company) any of the following competitors of the Company (and nay of such competitors’ affiliates or successors in interest in the United States of America:

Freedom Medical

Hill Rom

US Med-Equip

Aramark

Sodexo

Trimedx

Sizewise

Arjo Huntleigh/Getinge

Choice of Law/Venue. Section 18(i) of the Agreement is hereby deleted and replaced with the following:

i. Each party to this Agreement acknowledges, understands, and agrees that the employment is based in Minneapolis, Minnesota, and that the majority of work to be performed arises from that location and is to be performed from that location. As such, this Agreement, the construction of its terms, the interpretation of the parties’ rights, responsibilities, and duties, and enforcement of its terms shall be governed exclusively by and construed according to the laws of the State of Minnesota without regard to conflicts of law principles. Any action or proceeding initiated by either party to enforce this Agreement, avoid enforcement of this Agreement, of otherwise arising from or under the terms of the Agreement shall be brought exclusively in a state or federal court of competent jurisdiction located in the State of Minnesota. Each party to this Agreement hereby consents and submits to the jurisdiction of such courts, acknowledges the propriety of the venue there, and waives any defense of inconvenient forum to the maintenance of any action or proceeding in such venue .


Form 070109	UHS Confidential Information	Page 3 of 4

ACCEPTED AND AGREED TO:

th St, Suite 300
Minneapolis, Minnesota 55439

Thomas Leonard

/s/ Thomas J. Leonard

Thomas J. Leonard

Title: CEO Universal Hospital Services

Date: November 4, 2016

Universal Hospital Services, Inc.

6625 West 78 th St, Suite 300
Minneapolis, Minnesota 55439

/s/ James Pekarek

James Pekarek

Title: EVP & CFO

Date: November 4, 2016


Form 070109	UHS Confidential Information	Page 4 of 4

ENCLOSURE B – SEVERANCE ARRANGEMENT

Termination .

(a) Death . This Enclosure B will automatically terminate upon the Executive’s death. In the event of such termination, the Company will pay to the Executive’s legal representatives the sum of (i) 100% of the Executive’s annual base salary (as in effect on the Date of Termination (as defined below), (ii) $11,350, and (iii) any earned but unpaid bonus for a calendar year ending prior to the Date of Termination. Such amount shall be paid to Executive’s estate in a single lump sum payment on the 61 st day following the Date of Termination. Additionally, upon any termination hereunder, the Executive’s estate shall be entitled to receive any accrued but unpaid salary and unused PTO pay through the Date of Termination in accordance with the terms of the Company’s PTO plan or policy then in effect, and any accrued vested benefits through any benefit plan, program or arrangement of the Company at the times specified therein (collectively, the “ Accrued Obligations ”).

(b) Disability . If during the term of employment the Executive becomes physically or mentally disabled whether totally or partially, either permanently or so that the Executive has been unable substantially and competently to perform his duties hereunder for one hundred eighty (180) days during any twelve‑month period during the Term (a “ Disability ”), the Company may terminate the Executive’s employment hereunder by written notice to the Executive. In the event of such termination, the Company will pay to the Executive or his legal representative the sum of (i) 100% of the Executive’s annual base salary (as in effect on the Date of Termination), (ii) $11,350 and (iii) any earned but unpaid bonus for a calendar year ending prior to the Date of Termination. Such amounts under clauses (i), (ii) and (iii) above, subject to Section (l) hereof, shall be paid to the Executive or his legal representative in a single lump sum payment on the 61 st day following the Date of Termination. Additionally, the Executive or his legal representative shall be entitled to receive the Accrued Obligations at the time specified therefor in Section (a).

(c) Cause . The Executive’s employment hereunder may be terminated at any time by the Company for Cause (as defined herein) by written notice to the Executive. In the event of such termination, all of the Executive’s rights to any payments (other than the Accrued Obligations which shall be paid at the time specified therefor in Section (a)) will cease immediately. The Company will have “ Cause ” for termination of the Executive’s employment hereunder if any of the following has occurred:

(i) the commission by the Executive of a felony for which he is convicted; or

(ii) the material breach by the Executive of his agreements or obligations under this Employment Agreement, if such breach is described in a written notice to the Executive referring to this Section ‎1(c)(ii) , and such breach is not capable of being cured or has not been cured within thirty (30) days after receipt of such notice.

(d) Without Cause . The Executive’s employment hereunder may be terminated at any time by the Company without Cause by written notice to the Executive. In the event of such termination, the Company shall pay, subject to Section ‎1(j) , to the Executive the sum of (i) 175% of the Executive’s annual base salary (as in effect on the Date of Termination), (ii) $11,350 and (iii) any earned but unpaid bonus for a calendar year ending prior to the Date of Termination. Such amounts under clauses (i), (ii) and (iii) above shall be paid to the Executive or his legal representative in a single lump sum payment on the 61 st day following the Date of Termination. Additionally, the Company will pay to the Executive a pro rata bonus for the calendar year in which such termination occurs (calculated at the Executive’s bonus target and based on the number of days elapsed in such calendar year prior to the Date of Termination), in a single lump sum payment on the 61 st day following the Date of Termination (the “ Pro‑Rata Bonus ”). Additionally, the Executive shall be entitled to receive the Accrued Obligations at the time specified therefor in Section (a).

(e) Resignation Without Good Reason . The Executive may terminate the Executive’s employment hereunder upon sixty (60) days’ prior written notice to the Company, without Good Reason (as defined herein). In the event of such termination, all of the Executive’s rights to any payments (other than the Accrued Obligations which shall be paid at the time specified therefor in Section (a)) will cease upon the Date of Termination.

(f) Resignation For Good Reason . The Executive may terminate the Executive’s employment hereunder at any time upon thirty (30) days’ written notice to the Company, for Good Reason. In the event of such termination, the Company shall pay, subject to Section ‎1(j) , to the Executive the sum of (i) 175% of the Executive’s annual base salary (as in effect on the Date of Termination), (ii) $11,350 and (iii) any earned but unpaid bonus for a calendar year ending prior to the date of such termination. Such amounts under clauses (i), (ii) and (iii) above shall, subject to Section (l) hereof, be paid to the Executive or his legal representative in a single lump sum payment on the 61 st day following the Date of Termination. The Executive shall be entitled to receive the Accrued Obligations and the Pro Rata Bonus, if any, at time specified therefor in Sections (a) and (d), respectively.

The Executive will have “ Good Reason ” for termination of the Executive’s employment hereunder if, other than for Cause, any of the following has occurred:

(i) the Executive’s base salary or the percentage of base salary to which the Executive may be entitled as the result of the Company reaching the annual EBITDA targets has been reduced, other than in connection with an across‑the‑board reduction (of approximately the same percentage but no more than five (5%) of the then base salary) in executive compensation to executive employees imposed by the Board in response to materially negative financial results or other materially adverse circumstances affecting the Company;

(ii) the Board (or any compensation committee thereof) establishes an unachievable and commercially unreasonable annual EBITDA target that the Company must achieve in order for the Executive to receive a bonus and the Executive provides written notice of his objection to the Board (or such compensation committee) within ten (10) business days after such target has been

established and communicated in writing to the Executive stating that the Executive believes such target to be unachievable and commercially unreasonable;

(iii) the Company has required the Executive to relocate outside the greater Minneapolis, Minnesota area or has relocated the corporate headquarters of the Company outside the greater Minneapolis, Minnesota area or has removed or relocated outside the greater Minneapolis area, a material number of employees or senior management of the Company in each case, without the Executive’s written consent;

(iv) any diminution in title, or any material diminution in responsibilities, duties or authorities, without the Executive’s written consent; or

(v) the Company has breached this Employment Agreement in any material respect if such breach is described in a written notice to the Company referring to this Section ‎1(c)(ii), and such breach is not capable of being cured or has not been cured within thirty (30) days after receipt of such notice.

(g) Change of Control . If the Executive is terminated without Cause or resigns for Good Reason at any time within six (6) months prior to, or twenty‑ four (24) months following, a Change of Control, then, notwithstanding Sections ‎1(d) and ‎1(f) and in lieu of amounts provided under Sections ‎1(d) and ‎1(f) , the Company shall pay the Executive the sum of (i) 262.5% of the Executive’s annual base salary (as in effect on the Date of Termination), (ii) $11,350, and (iii) any earned but unpaid bonus for a calendar year ending prior to the Date of Termination. Such amounts under clauses (i), (ii) and (iii) above shall, subject to Section (l) hereof, be paid to the Executive or his legal representative in a single lump sum payment on the 61 st day following the Date of Termination except that in the event the Executive’s employment terminates within six (6) months prior to a Change in Control due to termination by the Company without Cause or due to termination by the Executive for Good Reason, then on the Date of Termination, the Executive shall be entitled to receive payment in accordance with the terms of Section (d), and within thirty (30) days following a Change in Control, the Executive shall receive a single lump sum payment in an amount equal to the difference between the amount paid in accordance with Section (d) and the amount to be paid in accordance with this Section (g). Additionally, the Executive shall be entitled to receive the Accrued Obligations and the Pro-Rata Bonus, if any, at the time specified therefor in Sections (a) and (d), respectively.

For purposes of this Section ‎1(g), “ Change of Control ” shall mean (i) when any “ person ” (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934), other than the Company, Irving Place Capital, L.P., or its affiliates, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary, or any corporation owned, directly or indirectly, by the stockholders of the Company, in substantially the same proportions as their ownership of stock of the Company, acquires, in a single transaction or a series of transactions (whether by a merger, consolidation, reorganization or otherwise), ( A ) “beneficial ownership” (as defined in Rule 13d‑3 under the Securities Exchange Act of 1934) of securities representing more than 50% of the combined voting power of the Company (or, prior to a public offering, more than 50% of the Company’s outstanding shares of Common Stock), or ( B ) substantially all or all of the assets of the Company and its Subsidiaries on a consolidated basis or

(ii) a merger, consolidation, reorganization or similar transaction of the Company with a “person” (as defined above) if, following such transaction, the holders of a majority of the Company’s outstanding voting securities in the aggregate immediately prior to such transaction do not own at least a majority of the outstanding voting securities in the aggregate of the surviving corporation immediately after such transaction. For purposes of this Section ‎1(g), “ Subsidiary ” shall mean any corporation in an unbroken chain of corporations beginning with the Company if, at the time of a Change of Control, each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. In the event of any merger, consolidation, reorganization or similar transaction with, into or involving another corporation or other entity, such entity shall be a “person” for purposes of this Section ‎1(g).

(h) Date and Effect of Termination . The date of termination of the Executive’s employment hereunder pursuant to this Section will be, (i) in the case of Section ‎1(a), the date of the Executive’s death, (ii) in the case of Sections ‎1(b), ‎(c) or ‎(d), the date specified as the Executive’s last day of employment in the Company’s notice to the Executive of such termination, (iii) in the case of Section ‎1(e) or ‎1(f), the date specified in the Executive’s notice to the Company of such termination, or (iv) in the case of Section ‎1(g), the date specified in the Executive’s notice to the Company for resignation for Good Reason or the Company’s notice to the Executive for termination without Cause (in each case, the “ Date of Termination ”). Upon any termination of the Executive’s employment hereunder pursuant to this Section, the Executive will not be entitled to, and hereby irrevocably waives, any further payments or benefits of any nature pursuant to this Enclosure B, or as a result of such termination, except as specifically provided for in this Enclosure B, the Stockholders Agreement between Holdco and certain of the equityholders of Holdco (the “ Stockholders Agreement ”) or in any stock option plans adopted by Holdco. Notwithstanding the foregoing, upon any termination of the Executive’s employment hereunder, the Executive shall continue to be entitled to (i) the rights to indemnification pursuant to the Company’s charter or by laws or any written agreement between the Executive and the Company and (ii) rights with respect to any directors and officers insurance policy of the Company.

(i) Terminations Not a Breach. The termination of the Executive’s employment pursuant to this Section shall not constitute a breach of this Enclosure B by the party responsible for the termination, and the rights and responsibilities of the parties under this Enclosure B as a result of such termination shall be as described in this Section.

(j) Release . The Executive agrees that the Executive shall be entitled to the payments and services provided for in this Section (other than the Accrued Obligations), if any, if and only if the Executive has executed and delivered the Release attached as Annex A within forty-five (45) days of the Date of Termination and fifteen (15) days have elapsed since such execution without any revocation thereof by the Executive.

(k) Withholding . All amounts payable to the Executive as compensation hereunder shall be subject to all customary withholding, payroll and other taxes. The Company shall be entitled to deduct or withhold from any amounts payable to the Executive any federal, state, local or foreign withholding taxes, excise tax, or employment taxes imposed with respect to the Executive’s compensation or other payments or the Executive’s ownership interest in the Company (including,

without limitation, wages, bonuses, dividends, the receipt or exercise of equity options and/or the receipt or vesting of restricted equity).

(l) Section 409A. Although the Company does not guarantee the Executive any particular tax treatment relating to payments under this Enclosure B, it is intended that such payments be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986 as amended (the “Code”) and Enclosure B shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code.

(i) A termination of employment shall not be deemed to have occurred for purposes of any provision of Enclosure B for providing the payment of amounts subject to Section 409A of the Code upon or following a termination of employment unless such termination is also a “Separation from Service” within the meaning of Section 409A of the Code and, for purposes of any such provision of Enclosure B references to a “resignation,” “termination,” “termination of employment” or the like terms shall mean “Separation from Service” within the meaning of Section 409A of the Code.

(ii) Each installment paid under Enclosure B shall be treated as a separate payment.

(iii) If any payment of money or provision of any benefit provided pursuant to this Enclosure B constitutes “nonqualified deferred compensation” subject to Section 409A of the Code, and could potentially be made or provided in two different calendar years based on when the Executive signs and delivers the release, such payment or benefit will be made or provided to the Executive no earlier than the first business day of the second of such calendar years.

ANNEX A

RELEASE

I, James B. Pekarek, in consideration of and subject to the performance by Universal Hospital Services, Inc., a Delaware corporation (together with its subsidiaries, the “ Company ”), of its material obligations under the Offer Letter dated April 11, 2013 (the “ Agreement ”), do hereby release and forever discharge as of the date hereof the Company and all present and former directors, officers, agents, representatives, executives, successors and assigns of the Company and its direct or indirect owners (collectively, the “ Released Parties ”) to the extent provided below.

1. Except as provided in paragraph 2 below, I knowingly and voluntarily release and forever discharge the Released Parties from any and all claims, controversies, actions, causes of action, cross-claims, counter-claims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date hereof) and whether known or unknown, suspected, or claimed against any of the Released Parties which I, or any of my heirs, executors, administrators or assigns, may have, which arise out of or are connected with my employment with, or my separation from, the Company (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Civil Rights Act of 1866, as amended; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters), (all of the foregoing collectively referred to herein as the “ Claims ”).

2. I agree that this Release does not waive or release any rights or claims that I may have under: the Age Discrimination in Employment Act of 1967 which arise after the date I execute this Release; claims for benefits under any employee benefit plan maintained by the Company; rights and entitlements under the Company’s equity plans and related award agreements; claims for indemnification and coverage under any directors and officers insurance policy; or claims or claims for unemployment or worker’s compensation as provided by law.

I acknowledge and intend that this Release shall be effective as a bar and shall serve as a complete defense to each and every one of the Claims and that it shall be given full force and effect according to each and all of its express terms and provisions, including those

relating to unknown and unsuspected Claims (notwithstanding any state statute that expressly limits the effectiveness of a release of unknown, unsuspected and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied.

4. I represent that I have not made any assignment or transfer of any Claim. I agree that neither this Release, nor the furnishing of the consideration for this Release, shall be deemed or construed at any time to be an admission by the Company or any Released Party of any improper or unlawful conduct. I agree that this Release is confidential and agree not to disclose any information regarding the terms of this Release, except to my immediate family and any tax, legal or other counsel I have consulted regarding the meaning or effect hereof or as required by law, and I will instruct each of the foregoing not to disclose the same to anyone.

5. Each provision of this Release shall be interpreted in such manner as to be effective and valid under applicable law and any provision of this Release held to be invalid, illegal or unenforceable in any respect shall be severable. This Release cannot be amended except in a writing duly executed by the Company and me.

I UNDERSTAND THAT I HAVE FIFTEEN (15) DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED.

DATE:	UNIVERSAL HOSPITAL SERVICES, INC.

	By:
			Name:
			Title:



		James B. Pekarek

Exhibit 31.1

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

I, Thomas J. Leonard, certify that:

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

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

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

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

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

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

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

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

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

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

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


Date: November 7, 2016	/s/ Thomas J. Leonard
	Thomas J. Leonard
	Chief Executive Officer
	(Principal Executive Officer)

Exhibit 31.2

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

I, James B. Pekarek, certify that:

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

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


Date: November 7, 2016	/s/ James B. Pekarek
	James B. Pekarek
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Universal Hospital Services, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2016, as filed with the Securities and Exchange Commission (the “Report”), I, Thomas J. Leonard, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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


Date: November 7, 2016	/s/ Thomas J. Leonard
	Thomas J. Leonard
	Chief Executive Officer

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Universal Hospital Services, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2016, as filed with the Securities and Exchange Commission (the “Report”), I, James B. Pekarek, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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


Date: November 7, 2016	/s/ James B. Pekarek
	James B. Pekarek
	Executive Vice President and
	Chief Financial Officer