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Universal Health Services, Inc. Revises Upward the Gain on Sale of French Assets, No Effect on Income From Continuing Operations

KING OF PRUSSIA, Pa., Aug. 1 /PRNewswire-FirstCall/ -- Universal Health Services, Inc. (NYSE: UHS) announced today that its previously released Consolidated Statements of Income for the three and six months ended June 30, 2005 included an after-tax gain on the sale of our 81.5% ownership interest in Medi-Partenaires which was understated by $12.4 million or $.19 per diluted share. The actual after-tax gain on the sale amounts to $120.7 million or $1.89 per diluted share which is included in income from discontinued operations, net of income tax expense. This revision has no effect on the previously released balance sheet. It reflects the cumulative translation adjustment, previously included in stockholders' equity on the balance sheet, reclassified through the income statement upon the sale of the French assets.

As a result of this revision, reported net income increases to $158.8 million or $2.53 per diluted share for the three months ended June 30, 2005 and $220.3 million or $3.51 per diluted share for the six months ended June 30, 2005. This revision had no impact in either period on our income from continuing operations and income from continuing operations per diluted share or our adjusted net income and adjusted net income per diluted share (as calculated on the attached Schedules of Non-GAAP Supplemental Consolidated Statements of Income Information).

Income from continuing operations and income from continuing operations per diluted share remain unchanged as previously reported at $36.6 million or $.61 per diluted share during the three months ended June 30, 2005 and $91.3 million or $1.50 per diluted share during the six months ended June 30, 2005. Adjusted net income and adjusted net income per diluted share also remain unchanged as previously reported at $38.2 million or $.64 per diluted share during the three months ended June 30, 2005 and $95.8 million or $1.57 per diluted share during the six months ended June 30, 2005.

Universal Health Services, Inc. is one of the nation's largest hospital companies, operating acute care and behavioral health hospitals and ambulatory centers nationwide and in Puerto Rico. It acts as the advisor to Universal Health Realty Income Trust, a real estate investment trust (NYSE: UHT). For additional information on the Company, visit our website: http://www.uhsinc.com.

This press release contains forward-looking statements based on current management expectations. Numerous factors, including those related to healthcare industry trends and those detailed in our filings with the Securities and Exchange Commission (as set forth in "Forward-Looking Statements and Risk Factors" on pages 17 and 18 of our Form 10-Q for the quarterly period ended March 31, 2005), may cause results to differ materially from those anticipated in the forward-looking statements. Many of the factors that will determine our future results are beyond our capability to control or predict. These statements are subject to risks and uncertainties and therefore actual results may differ materially. Readers should not place undue reliance on such forward-looking statements which reflect management's view only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

We believe that operating income, operating margin, adjusted income from continuing operations, adjusted income from continuing operations per diluted share, adjusted net income, adjusted net income per diluted share, adjusted operating income and adjusted operating margin, which are non-GAAP financial measures ("GAAP" is Generally Accepted Accounting Principles in the United States of America), are helpful to our investors as measures of our operating performance. In addition, we believe that comparing and discussing our financial results based on these measures, as calculated, is helpful to our investors since it neutralizes the effect in each year of items that are nonrecurring or non-operational in nature such as property write-downs, gains on sales of assets and businesses or other amounts reflected in the current or prior year financial statements that relate to prior periods. To obtain a complete understanding of our financial performance these measures should be examined in connection with net income, determined in accordance with GAAP, as presented in the condensed consolidated financial statements and notes thereto in this Report or in our other filings with the Securities and Exchange Commission including our Report on Form 10-K for the year ended December 31, 2004. Since the items included or excluded from these measures are significant components in understanding and assessing financial performance under GAAP, these measures should not be considered to be alternatives to net income as a measure of our operating performance or profitability. Since these measures, as presented, are not determined in accordance with GAAP and are thus susceptible to varying calculations, they may not be comparable to other similarly titled measures of other companies. Investors are encouraged to use GAAP measures when evaluating our financial performance. Below are Schedules of Non-GAAP Supplemental Consolidated Income Statement Information which reconcile these measures to net income for the periods presented.


                         Universal Health Services, Inc.
                        Consolidated Statements of Income
                     (in thousands, except per share amounts)
                                   (unaudited)

                                      Three months           Six months
                                     ended June 30,        ended June 30,
                                     2005      2004       2005        2004

    Net revenues                   $990,888  $905,494  $1,997,533  $1,812,620

    Operating charges:
       Salaries, wages and
        benefits                    407,897   369,335     814,237     740,793
       Other operating expenses     234,707   213,274     465,872     421,229
       Supplies expense             126,124   113,521     252,660     229,105
       Provision for doubtful
        accounts                     95,478    74,244     177,886     157,801
       Depreciation and
        amortization                 37,988    35,033      77,684      68,342
       Lease and rental expense      15,288    15,255      30,755      30,148
                                    917,482   820,662   1,819,094   1,647,418

    Income before interest
     expense, minority interests
     and income taxes                73,406    84,832     178,439     165,202


    Interest expense, net             7,450     9,359      18,126      18,926
    Minority interests in earnings
     of consolidated entities         7,926     5,183      15,845       8,710

    Income before income taxes       58,030    70,290     144,468     137,566

    Provision for income taxes       21,398    25,908      53,146      50,671

    Income from continuing
     operations                      36,632    44,382      91,322      86,895

    Income from discontinued
     operations, net of income tax
     expense (a)                    122,211     3,907     128,930       7,578


    Net income                     $158,843   $48,289    $220,252     $94,473


    Basic earnings per share: (b)
         From continuing
          operations                  $0.65     $0.77       $1.60       $1.51
         From discontinued
          operations                   2.16      0.07        2.26        0.13
              Total basic earnings
               per share              $2.81     $0.84       $3.86       $1.64

    Diluted earnings per share: (b)
         From continuing
          operations                  $0.61     $0.72       $1.50       $1.40
         From discontinued
          operations                   1.92      0.06        2.01        0.12
              Total diluted
               earnings per share     $2.53     $0.78       $3.51       $1.52



                         Universal Health Services, Inc.
                  Footnotes to Consolidated Statements of Income

                                           Three months        Six months
                                          ended June 30,     ended June 30,
                                           2005     2004      2005     2004

    (a) Calculation of income from
     discontinued operations, net of
     income tax:

    Income from operations                 $2,602   $4,039    $4,433  $10,114
    Gains on divestitures                 177,125    2,338   186,220    2,338
    Income from discontinued operations,
     pre-tax                              179,727    6,377   190,653   12,452
    Income tax provision                  (57,516)  (2,470)  (61,723)  (4,874)
    Income from discontinued operations,
     net of income tax expense           $122,211   $3,907  $128,930   $7,578


    (b) Earnings per share calculation:

    Basic:
    Income from continuing operations     $36,632  $44,382   $91,322  $86,895
    Less: Dividends on unvested
     restricted stock, net of taxes           (28)     (28)      (55)     (56)
    Income from continuing operations -
     basic                                $36,604  $44,354   $91,267  $86,839
    Income from discontinued operations   122,211    3,907   128,930    7,578
    Net income - basic                   $158,815  $48,261  $220,197  $94,417

    Weighted average number of common
     shares - basic                        56,425   57,622    56,974   57,593

    Basic earnings per share:
         From continuing operations         $0.65    $0.77     $1.60    $1.51
         From discontinued operations        2.16     0.07      2.26     0.13
              Total basic earnings per
               share                        $2.81    $0.84     $3.86    $1.64

    Diluted:
    Income from continuing operations     $36,632  $44,382   $91,322  $86,895
    Less: Dividends on unvested
     restricted stock, net of taxes           (28)     (28)      (55)     (56)
    Add: Debenture interest, net of
     taxes                                  2,382    2,305     4,764    4,573
    Income from continuing operations -
     diluted                              $38,986  $46,659   $96,031  $91,412
    Income from discontinued operations   122,211    3,907   128,930    7,578
    Net income - diluted                 $161,197  $50,566  $224,961  $98,990

    Weighted average number of common
     shares                                56,425   57,622    56,974   57,593
    Add: Shares for conversion of
     convertible debentures                 6,577    6,577     6,577    6,577
             Other share equivalents          646      774       481      860
    Weighted average number of common
     shares and equiv. - diluted           63,648   64,973    64,032   65,030

    Diluted earnings per share:
         From continuing operations         $0.61    $0.72     $1.50    $1.40
         From discontinued operations        1.92     0.06      2.01     0.12
              Total diluted earnings per
               share                        $2.53    $0.78     $3.51    $1.52



                         Universal Health Services, Inc.
       Schedule of Non-GAAP Supplemental Consolidated Statements of Income
                                   Information
                For the Three Months Ended June 30, 2005 and 2004
                                  (in thousands)
                                   (unaudited)

                                         Three months ended Three months ended
                                            June 30, 2005     June 30, 2004


    Net revenues                           $990,888  100.0%  $905,494  100.0%

    Operating charges:
       Salaries, wages and benefits         407,897   41.2%   369,335   40.8%
       Other operating expenses             234,707   23.7%   213,274   23.6%
       Supplies expense                     126,124   12.7%   113,521   12.5%
       Provision for doubtful accounts       95,478    9.6%    74,244    8.2%
                                            864,206   87.2%   770,374   85.1%

    Operating income/margin                 126,682   12.8%   135,120   14.9%

       Lease and rental expense              15,288            15,255
       Minority interests in earnings of
        consolidated entities                 7,926             5,183

    Earnings before depreciation and
     amortization, interest expense, and
     income taxes ("EBITDA")                103,468           114,682

       Depreciation and amortization         37,988            35,033
       Interest expense, net                  7,450             9,359

    Income before income taxes               58,030            70,290

    Provision for income taxes               21,398            25,908

    Income from continuing operations        36,632            44,382

    Income from discontinued operations,
     net of income taxes                    122,211             3,907

    Net income                             $158,843           $48,289



                                         Three months ended Three months ended
                                            June 30, 2005     June 30, 2004
                                                      Per               Per
                                                    Diluted           Diluted
                                           Amount    Share    Amount   Share
    Calculation of Adjusted Net Income
    Net income                             $158,843   $2.53   $48,289   $0.78
    Less:  After-tax gain on sale of
     facilities                            (120,680)  (1.89)   (1,486)  (0.02)
    Adjusted net income                     $38,163   $0.64   $46,803   $0.76



                         Universal Health Services, Inc.
       Schedule of Non-GAAP Supplemental Consolidated Statements of Income
                                   Information
                 For the Six Months Ended June 30, 2005 and 2004
                                  (in thousands)
                                   (unaudited)

                                        Six months ended    Six months ended
                                         June 30, 2005       June 30, 2004


    Net revenues                       $1,997,533  100.0%  $1,812,620  100.0%

    Operating charges:
       Salaries, wages and benefits       814,237   40.8%     740,793   40.9%
       Other operating expenses           465,872   23.3%     421,229   23.2%
       Supplies expense                   252,660   12.6%     229,105   12.6%
       Provision for doubtful accounts    177,886    8.9%     157,801    8.7%
                                        1,710,655   85.6%   1,548,928   85.5%

    Operating income/margin               286,878   14.4%     263,692   14.5%

       Lease and rental expense            30,755              30,148
       Minority interests in earnings
        of consolidated entities           15,845               8,710

    Earnings before depreciation and
     amortization, interest expense,
     and income taxes ("EBITDA")          240,278             224,834

       Depreciation and amortization       77,684              68,342
       Interest expense, net               18,126              18,926

    Income before income taxes            144,468             137,566

    Provision for income taxes             53,146              50,671

    Income from continuing operations      91,322              86,895

    Income from discontinued
     operations, net of income taxes      128,930               7,578

    Net income                           $220,252             $94,473



                                         Six months ended Six months ended
                                           June 30, 2005    June 30, 2004
                                                     Per              Per
                                                   Diluted          Diluted
                                           Amount   Share   Amount   Share
    Calculation of Adjusted Income from
     Continuing Operations
    Income from continuing operations      $91,322  $1.50   $86,895  $1.40
    Less:  After-tax DSH revenue
     attributable to prior year                -      -      (1,748) (0.02)
    Adjusted income from continuing
     operations                            $91,322  $1.50   $85,147  $1.38

    Calculation of Adjusted Net Income
    Net income                            $220,252  $3.51   $94,473  $1.52
    Add:  After-tax asset impairment
     charge                                  1,974   0.03       -      -
    Less:  After-tax gain on sale of
     facilities                           (126,462) (1.97)   (1,486) (0.02)
    Less:  After-tax DSH revenue
     attributable to prior year                -      -      (1,748) (0.02)
    Adjusted net income                    $95,764  $1.57   $91,239  $1.48

                                           Amount  Margin   Amount  Margin
    Calculation of Adjusted Operating
     Income/Margin
    Operating income/margin               $286,878  14.4%  $263,692  14.5%
    Less:  After-tax DSH revenue
     attributable to prior year                -      -      (1,748)   -
    Adjusted operating income/margin      $286,878  14.4%  $261,944  14.5%

SOURCE: Universal Health Services, Inc.

CONTACT: Steve Filton, Chief Financial Officer, Universal Health Services, +1-610-768-3300

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