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Acquisitions and Divestitures | 12 Months Ended
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Dec. 31, 2014
Acquisitions and Divestitures | 2) ACQUISITIONS AND DIVESTITURES 2015 Acquisition: In February, 2015, we acquired the Orchard Portman House Hospital (now called Cygnet Hospital-Taunton), a 46-bed behavioral health care facility located near Taunton, United Kingdom. Year ended December 31, 2014: 2014 Acquisitions of Assets and Businesses: During 2014 we spent $431 million to:
| • |  | acquire the stock of Cygnet Health Care Limited (“Cygnet”) which consists of 17 facilities located throughout the United Kingdom including 15 inpatient behavioral health hospitals and 2 nursing homes with a total of 723 beds (during the third quarter);
| • |  | acquire and fund the required capital reserves related to Prominence Health Plan, a commercial health insurer headquartered in Reno, Nevada (during the second quarter);
| • |  | acquire the Psychiatric Institute of Washington, a 124-bed behavioral health care facility and outpatient treatment center located in Washington, D.C. (during the second quarter);
| • |  | acquire the operations of Palo Verde Behavioral Health, a 48-bed behavioral health facility in Tucson, Arizona (during the first quarter);
| • |  | acquire the real property of The Bridgeway, a 103-bed behavioral health care facility located in North Little Rock, Arkansas, that was previously leased from Universal Health Realty Income Trust (during the fourth quarter);
| • |  | acquire the previously leased real property of Cygnet Hospital-Harrow, a 44-bed behavioral health care facility located in the United Kingdom, the operations of which were acquired as part of our acquisition of Cygnet (during the fourth quarter), and;
| • |  | acquire physician practices.
The aggregate net purchase price of the facilities was allocated to assets and liabilities based on their preliminary estimated fair values as follows:
|  | Amount (000s) |
Working capital, net |  | $ | (41,000 | )
Property & equipment |  |  | 174,000 |
Goodwill |  |  | 250,000 |
Other assets |  |  | 59,000 |
Income tax assets, net of deferred tax liabilities |  |  | 4,000 |
Debt |  |  | (16,000 | )
Other |  |  | 1,000 |
Cash paid in 2014 for acquisitions |  | $ | 431,000 |
Goodwill of the facilities acquired is computed, pursuant to the residual method, by deducting the fair value of the acquired assets and liabilities from the total purchase price. The factors that contribute to the recognition of goodwill, which may also influence the purchase price, include the following for each of the acquired facilities: (i) the historical cash flows and income levels; (ii) the reputations in their respective markets; (iii) the nature of the respective operations, and; (iv) the future cash flows and income growth projections. The vast majority of the goodwill resulting from these transactions is not deductible for federal income tax purposes (see Note 6. Income Taxes). Included in our consolidated net revenues for the year ended December 31, 2014 was an aggregate of approximately $175 million representing the net revenues generated at the Cygnet facilities, the commercial health insurer located in Reno, Nevada and the 124-bed behavioral health care facility and outpatient treatment center located in Washington, D.C., from their respective dates of acquisition through December 31, 2014. The aggregate effect of the earnings generated by these facilities since the dates of acquisition, less the cost on the borrowings utilized to finance the acquisition, was not material to our 2014 net income attributable to UHS and net income attributable to UHS per diluted share. Assuming the acquisitions occurred on January 1, 2014, our 2014 pro forma net revenues would have been approximately $8.28 billion and our pro forma net income attributable to UHS would have been approximately $558 million, or $5.55 per diluted share. Assuming the above-mentioned acquisitions occurred on January 1, 2013, our 2013 unaudited pro forma net revenues would have been approximately $7.62 billion and our unaudited pro forma net income attributable to UHS would have been approximately $522 million and $5.25 per diluted share. 2014 Divestiture of Assets and Businesses: During 2014 we received $15 million in connection with the divestiture of a non-operating investment (during the first quarter) and the real property of a closed behavioral health facility (during the second quarter). Year ended December 31, 2013: 2013 Acquisitions of Assets and Businesses: During 2013, we spent an aggregate of $13 million for the purchase of real property located in Pennsylvania, Nevada and Arizona. The aggregate net purchase price of these properties was allocated to property and equipment on our consolidated balance sheet. 2013 Divestiture of Assets and Businesses: During 2013, we received an aggregate of $37 million in connection with the divestiture of Peak Behavioral Health Services (sold during the second quarter of 2013) and certain other assets and real property including three previously closed behavioral health care facilities. As discussed below in Discontinued Operations, we agreed to sell Peak Behavioral Health Services as part of our agreement with the Federal Trade Commission in connection with our acquisition of Ascend Health Corporation (“Ascend”) in October of 2012. The aggregate pre-tax gain on these divestitures was approximately $3 million and in included in our 2013 consolidated results of operations. Year ended December 31, 2012: 2012 Acquisitions of Assets and Businesses: During 2012, we spent $528 million to acquire the following assets and businesses:
| • |  | spent $503 million to acquire nine behavioral health care facilities from Ascend in October, 2012, and;
| • |  | spent $25 million in connection with the acquisition of physician practices and various real property.
The aggregate net purchase price of the facilities was allocated to assets and liabilities based on their estimated fair values as follows:
|  | Amount (000s) |
Working capital, net |  | $ | 21,000 |
Property & equipment |  |  | 60,000 |
Goodwill |  |  | 446,000 |
Other assets |  |  | 9,000 |
Income tax assets, net of deferred tax liabilities |  |  | (1,000 | )
Other liabilities |  |  | (7,000 | )
Cash paid in 2012 for acquisitions |  | $ | 528,000 |
Goodwill of the facilities acquired is computed, pursuant to the residual method, by deducting the fair value of the acquired assets and liabilities from the total purchase price. The factors that contribute to the recognition of goodwill, which may also influence the purchase price, include the following for each of the acquired facilities: (i) the historical cash flows and income levels; (ii) the reputations in their respective markets; (iii) the nature of the respective operations, and; (iv) the future cash flows and income growth projections. During the period of October 10, 2012 through December 31, 2012, the facilities acquired from Ascend generated $42 million of net revenues which are included in our consolidated net revenues for the year ended December 31, 2012. The aggregate effect of the earnings generated by these facilities since the date of acquisition, less the cost on the borrowings utilized to finance the acquisition, and less the above-mentioned transaction costs, was not material to our 2012 net income attributable to UHS and net income attributable to UHS per diluted share. Assuming the acquisition of Ascend occurred on January 1, 2012, our 2012 unaudited pro forma net revenues would have been approximately $7.11 billion and our unaudited pro forma net income attributable to UHS and unaudited pro forma net income attributable to UHS per diluted share would have been $464 million and $4.74 per diluted share, respectively. 2012 Divestiture of Assets and Businesses: During 2012, we received $149 million from the divestiture of assets and businesses, including the following:
| • |  | received $93 million for the sale of Auburn Regional Medical Center (“Auburn”), a 159-bed acute care hospital located in Auburn, Washington (sold in October of 2012);
| • |  | received $50 million for the sale of the Hospital San Juan Capestrano, a 108-bed acute care hospital located in Rio Piedras, Puerto Rico (sold in January of 2012 pursuant to our below-mentioned agreement with the FTC in connection with our acquisition of PSI in November, 2010), and;
| • |  | received an aggregate of $6 million for the sale of the real property of two non-operating behavioral health facilities and our majority ownership interest in an outpatient surgery center located in Puerto Rico.
Included in our 2012 consolidated results of operations was a $26 million pre-tax gain on the divestiture of Auburn. The divestiture of San Juan Capestrano (in January, 2012) did not have a material impact on our consolidated results of operations. Discontinued Operations There were no material divestitures during 2014. In connection with the receipt of antitrust clearance from the Federal Trade Commission (“FTC”) in connection with our acquisition of Ascend Health Corporation in October of 2012, we agreed to certain conditions, including the divestiture of Peak Behavioral Health Services (“Peak”), a 104-bed behavioral health care facility located in Santa Teresa, New Mexico. The divestiture of Peak was completed during the second quarter of 2013 for total cash proceeds of approximately $24 million resulting in a pre-tax gain of approximately $3 million which is included in our 2013 consolidated financial statements. In October of 2012, we completed the divestiture of Auburn Regional Medical Center (“Auburn”), a 159-bed acute care hospital located in Auburn, Washington, for total cash proceeds of approximately $93 million. This divestiture resulted in a pre-tax gain of $26 million which was included in our 2012 consolidated financial statements. In connection with the receipt of antitrust clearance from the FTC in connection with our acquisition of PSI in November, 2010, we agreed to divest three former PSI facilities (which were divested during 2011) as well as one of our legacy behavioral health facilities in Puerto Rico, which we divested in 2012. The following table shows the results of operations for Auburn and Peak, on a combined basis, which were reflected as discontinued operations during our period of ownership for each of the years presented herein (amounts in thousands). Since the aggregate income from discontinued operations before income tax expense for these facilities is not material to our consolidated financial statements, it is included as a reduction to other operating expenses.
|  | 2013 |  |  | 2012 |
Net revenues |  | $ | 7,813 |  |  | $ | 95,226 |
Income (loss) from discontinued operations, before income taxes |  |  | 932 |  |  |  | (3,472 | )
Gain on divestiture |  |  | 3,080 |  |  |  | 26,419 |
Income from discontinued operations, before income tax expense |  |  | 4,012 |  |  |  | 22,947 |
Income tax expense |  |  | (1,506 | ) |  |  | (8,688 | )
Income from discontinued operations, net of income taxes |  | $ | 2,506 |  |  | $ | 14,259 |

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References No definition available. + Details
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