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EXHIBIT 99.1
ODESSA REGIONAL HOSPITAL, L.P.
Financial Statements
CONTENTS
Condensed Balance Sheets at March 31, 2003 (unaudited) and September 30, 2002.........................................2
Condensed Statements of Operations for the Three Months and Six Months Ended March 31, 2003 and 2002(unaudited).......3
Condensed Statements of Cash Flows for the Six Months Ended March 31, 2003 and 2002 (unaudited).......................4
Notes to Unaudited Condensed Financial Statements.....................................................................5
Odessa Regional Hospital, LP
Condensed Balance Sheets
(in thousands)
(UNAUDITED)
MARCH 31, SEPTEMBER 30,
2002 2002
---------- ------------
ASSETS
Current assets:
Accounts receivable, net of allowance for doubtful
accounts of $2,129 and $1,746, respectively $10,609 $ 8,749
Due (to) from affiliate 6,853 (3,426)
Inventories 1,734 1,690
Prepaid expenses and other current assets 311 905
------- --------
Total current assets 19,507 7,918
Property and equipment, net 23,785 23,456
Goodwill, net 28,827 28,827
Other assets, net 957 664
------- --------
Total assets $73,076 $ 60,865
======= ========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable $ 2,134 $ 1,934
Salaries and benefits payable 715 1,047
Accrued expenses and other accrued liabilities 360 199
Current portion of long term debt and capital lease obligations 809 470
------- --------
Total current liabilities 4,018 3,650
Long term portion of debt allocated from IASIS and capital leases 40,863 32,590
------- --------
Total liabilities 44,881 36,240
Partners' capital 28,195 24,625
------- --------
Total liabilities and Partners' capital $73,076 $ 60,865
======= ========
See accompanying notes.
2
Odessa Regional Hospital, LP
Condensed Statements of Operations (unaudited)
(in thousands)
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2003 2002 2003 2002
-------------- -------------- -------------- --------------
Net revenue $ 17,769 $ 12,078 $ 33,989 $ 23,013
Costs and expenses:
Salaries and benefits 5,523 3,957 10,839 7,731
Supplies 2,366 1,205 4,795 2,302
Other operating expenses 2,630 1,965 5,176 3,866
Provision for bad debts 1,355 1,030 2,780 1,976
Interest, net 1,262 1,083 2,517 2,170
Depreciation and amortization 525 349 1,032 695
Management fees 348 236 662 450
-------------- -------------- -------------- --------------
Total costs and expenses 14,009 9,825 27,801 19,190
-------------- -------------- -------------- --------------
Net earnings (loss) $ 3,760 $ 2,253 $ 6,188 $ 3,823
============== ============== ============== ==============
See accompanying notes.
3
Odessa Regional Hospital, LP
Condensed Statements of Cash Flows (unaudited)
(in thousands)
SIX MONTHS SIX MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2003 2002
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 6,188 $ 3,823
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,032 695
Changes in operating assets and liabilities:
Accounts receivable (1,860) (203)
Inventories, prepaid expenses and other current assets 550 (682)
Accounts payable, salaries and benefits payable and other accrued
liabilities 29 (884)
------- -------
Net cash provided by (used in) operating activities 5,939 2,749
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (520) (5,712)
Change in other assets (293) --
------- -------
Net cash used in investing activities (813) (5,712)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in due to/from affiliate, net (4,690) 3,108
Payment of capital leases (36) --
Distribution to physician partners (400) (145)
------- -------
Net cash provided by financing activities (5,126) 2,963
------- -------
Change in cash -- --
Cash at beginning of period -- --
------- -------
Cash at end of period $ -- $ --
======== =======
See accompanying notes.
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Odessa Regional Hospital, L.P.
Notes to Unaudited Condensed Financial Statements
(Continued)
1. ORGANIZATION
Odessa Regional Hospital, LP, a Delaware limited partnership (the
"Partnership") was formed on September 24, 1999 to own and operate Odessa
Regional Hospital (the "Hospital") in Odessa, Texas. The Partnership's general
partner is IASIS Healthcare Holdings, Inc. ("General Partner") and the limited
partners consist of IASIS Healthcare Corporation ("IASIS") and other third party
investors. The General Partner is an indirect wholly-owned subsidiary of IASIS.
IASIS is a for-profit hospital management company that owns and operates 14
general, acute care hospitals in four states. IASIS also owns a Medicaid managed
health plan in Arizona. Odessa Regional Hospital is a 121-bed acute care
hospital that provides inpatient, outpatient and emergency care services to
residents in the Odessa-Midland region of Texas.
The unaudited condensed financial statements include the accounts of
the Partnership and have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial reporting and in
accordance with Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and notes required by accounting principles generally
accepted in the United States for complete financial statements. The balance
sheet at September 30, 2002 has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. For further information, refer to the
financial statements and footnotes thereto included as Exhibit 99.1 to IASIS'
Annual Report on Form 10-K for the fiscal year ended September 30, 2002.
In the opinion of management, the accompanying unaudited condensed
financial statements contain all material adjustments (consisting of normal
recurring items) necessary for a fair presentation of results for the interim
periods presented. The results of operations for any interim period are not
necessarily indicative of results for the full year.
The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the accompanying unaudited condensed financial statements and notes. Actual
results could differ from those estimates.
2. DEBT ALLOCATED FROM IASIS
In conjunction with the acquisition of the Hospital, the Partnership entered
into a promissory note (the "Note") with IASIS in the amount of $31,387,041.
Under the provisions of the Note, interest of 13% per annum is due and payable
on October 1 of
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Odessa Regional Hospital, L.P.
Notes to Unaudited Condensed Financial Statements
(Continued)
each year until October 1, 2004, at which time the entire outstanding principal
balance, together with all accrued and unpaid interest, would be immediately due
and payable in full. The Note may be prepaid in whole or in part without premium
or penalty and may reborrow up to the stated principal amount.
During 2001, the Partnership entered into a new promissory note (the
"New Note") with IASIS in the amount of $33,761,000. The New Note replaces the
Note and is a five-year note at 13% interest per annum on a twenty-year
amortization schedule.
In October 2002, the partnership entered into an additional promissory
note with IASIS in the amount of $8,113,346. The note is a five-year note at 9%
interest per annum on a twenty-year amortization schedule.
3. GOODWILL
Goodwill represents cost in excess of the fair value of acquired
tangible net assets of the Hospital and is evaluated for impairment according to
Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other
Intangible Assets. The Partnership adopted SFAS No. 142 effective October 1,
2001 which resulted in no goodwill impairment.
4. COMMITMENTS AND CONTINGENCIES
Final determination of amounts earned under the Medicare and Medicaid programs
often occurs in subsequent years because of audits by the programs, rights of
appeal and the application of numerous technical provisions. In the opinion of
management, adequate provision has been made for adjustments that may result
from such routine audits and appeals.
The Partnership is subject to claims and legal actions arising in the ordinary
course of business. The Partnership is currently not a party to any such
proceedings that, in the Partnership's opinion, would have a material adverse
effect on the Partnership's business, financial condition or results of
operations.
The Partnership's assets and equity interests are pledged as a full and
unconditional guarantee of certain debt of IASIS, which totaled approximately
$579 million at March 31, 2003.
In order to recruit and retain physicians to the communities it serves, the
Partnership has committed to provide certain financial assistance in the form of
recruiting agreements with various physicians. Amounts advanced under the
recruiting agreements are
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Odessa Regional Hospital, L.P.
Notes to Unaudited Condensed Financial Statements
(Continued)
generally forgiven prorata over a period of 24 months after one year of
completed service and contingent upon the physician continuing to practice in
the respective community. The amounts advanced and not repaid, in management's
opinion, will not have a material adverse effect on the Partnership's financial
condition or results of operations.
5. INCOME TAXES
No provision for income taxes has been reflected in the accompanying financial
statements because the tax effect of the Partnership's activities accrues to the
individual partners. The Partnership's tax returns and the amounts of
distributable Partnership income or loss are subject to examination by the
federal and state taxing authorities. In the event of an examination of the
Partnership's tax return, the tax liability of the partners could be changed if
any adjustment to the Partnership taxable income or loss is ultimately sustained
by the taxing authorities.
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