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EXHIBIT 99.1
ODESSA REGIONAL HOSPITAL, LP
FINANCIAL STATEMENTS
CONTENTS
Condensed Balance Sheets at December 31, 2003 (Unaudited) and September 30, 2003................. 2
Condensed Statements of Income for the Three Months ended December 31, 2003 and 2002
(Unaudited).................................................................................... 3
Condensed Statements of Cash Flows for the Three Months ended December 31, 2003 and 2002
(Unaudited).................................................................................... 4
Notes to Unaudited Condensed Financial Statements................................................ 5
ODESSA REGIONAL HOSPITAL, LP
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT UNIT AMOUNTS)
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
2003 2003
----------------------- -------------------------
ASSETS
Current assets:
Accounts receivable net of allowance for doubtful
accounts of $3,808 and $2,346, respectively............ $ 8,793 $ 7,365
Inventories.............................................. 1,288 1,299
Prepaid expenses and other current assets................ 161 249
------------ -------------
Total current assets................................... 10,242 8,913
Property and equipment, net................................. 24,069 23,991
Goodwill.................................................... 28,827 28,827
Due from affiliate.......................................... 6,897 14,107
Other assets, net........................................... 838 864
------------ -------------
Total assets........................................... $ 70,873 $ 76,702
============ =============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable......................................... $ 2,177 $ 2,501
Salaries and benefits payable............................ 1,402 1,489
Other accrued liabilities................................ 532 405
Current portion of capital lease obligations............. 184 182
Current portion of debt allocated from IASIS............. 893 960
------------ -------------
Total current liabilities.............................. 5,188 5,537
Long-term capital lease obligations......................... 618 665
Debt allocated from IASIS................................... 39,422 39,588
Partners' capital:
General partner - 1% ownership interest at December 31,
2003 and September 30, 2003............................. 571 624
Limited partners - $25,000 per unit; 733 units issued
and outstanding at December 31, 2003 and September 30,
2003.................................................... 25,074 30,288
------------ -------------
Total partners' capital................................ 25,645 30,912
------------ -------------
Total liabilities and partners' capital................ $ 70,873 $ 76,702
============ =============
See accompanying notes
2
ODESSA REGIONAL HOSPITAL, LP
CONDENSED STATEMENTS OF INCOME (Unaudited)
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
THREE MONTHS ENDED DECEMBER 31,
--------------------------------
2003 2002
--------- ---------
Net revenue .................................. $ 15,590 $ 16,220
Costs and expenses:
Salaries and benefits ..................... 5,311 5,315
Supplies .................................. 1,539 2,429
Other operating expenses .................. 2,071 2,547
Provision for bad debts ................... 1,292 1,425
Interest, net ............................. 947 1,255
Depreciation and amortization ............. 591 507
Management fees ........................... 304 315
--------- ---------
Total costs and expenses ................ 12,055 13,793
--------- ---------
Net income ................................... $ 3,535 $ 2,427
========= =========
Net income attributable to general partner.... $ 35 $ 24
========= =========
Net income attributable to limited partners... $ 3,500 $ 2,403
========= =========
Net income per limited partnership unit....... $4,822.65 $3,311.05
========= =========
See accompanying notes
3
ODESSA REGIONAL HOSPITAL, LP
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(IN THOUSANDS)
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
2003 2002
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .................................................. $ 3,535 $ 2,427
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ............................ 591 507
Changes in operating assets and liabilities, net of
effect of acquisition:
Accounts receivable .................................... (1,428) (1,972)
Inventories, prepaid expenses and other current assets.. 99 431
Accounts payable, salaries and benefits payable and
other accrued liabilities ............................ (284) 922
------- -------
Net cash provided by operating activities .......... 2,513 2,315
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment, net .................... (657) (377)
Change in other assets ...................................... 27 (126)
------- -------
Net cash used in investing activities .............. (630) (503)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of debt and capital leases .......................... (44) -
Change in due to/from affiliate, net ........................ (851) (1,522)
Distribution to partners .................................... (988) (290)
------- -------
Net cash used in financing activities .............. (1,883) (1,812)
------- -------
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
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
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 a wholly-owned subsidiary of IASIS. IASIS is a for-profit
hospital management company that owned and operated 14 acute care hospitals in
four states at December 31, 2003. IASIS also owns and operates a behavioral
health center in Phoenix, Arizona and has an ownership interest in three
ambulatory surgery centers. In addition, IASIS owns and operates a Medicaid
managed health plan in Phoenix. The 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 Partnership's Amended and Restated Limited Partnership Agreement provides
that earnings, losses and distributions will be shared pro rata among the
partners.
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, 2003 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 in the Partnership's Annual
Report on Form 10-K for the fiscal year ended September 30, 2003.
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 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 financial
statements and notes. Actual results could differ from those estimates.
2. DEBT ALLOCATED FROM IASIS
During 2002 and 2003, the Partnership was party to a promissory note (the "2001
Note") with IASIS in the amount of $33,761,000. The 2001 Note was a five-year
promissory note bearing interest at 13% interest per annum on a twenty-year
amortization schedule.
The Partnership, effective October 1, 2002, entered into a new promissory note
(the "2002 Note") with IASIS for $8,113,000. The proceeds from this note were
used to partially fund the Partnership's construction of a $12 million addition
to the hospital. The 2002 Note is a five-year promissory note bearing interest
at 9% per annum on a twenty-year amortization schedule.
Effective October 1, 2003, the Partnership, entered into an additional new
promissory note (the "2003 Note") with IASIS in the amount of $32,590,000. The
2003 Note replaces the 2001 Note and is a three-year promissory note bearing
interest at 9.3% interest per annum on a twenty-year amortization schedule.
Interest is due and payable on
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ODESSA REGIONAL HOSPITAL, L.P.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
the last day of the month beginning October 31, 2003 until September 30, 2006,
at which time the entire outstanding principal balance, together with all
accrued and unpaid interest, would be immediately due and payable in full.
3. CONTINGENCIES
NET REVENUE
The calculation of appropriate payments from the Medicare and Medicaid programs
as well as terms governing agreements with other third-party payors are complex
and subject to interpretation. Final determination of amounts earned under the
Medicare and Medicaid programs often occurs subsequent to the year in which
services are rendered because of audits by the programs, rights of appeal and
the application of numerous technical provisions. As a result, there is at least
a reasonable possibility that recorded estimates will change by a material
amount in the near term. In the opinion of management, adequate provision has
been made for adjustments that may result from such routine audits and appeals.
PROFESSIONAL, GENERAL AND WORKERS' COMPENSATION LIABILITY RISKS
IASIS, on behalf of the Partnership, maintains general and professional
liability insurance as well as workers' compensation insurance in excess of
self-insured retentions through a commercial insurance carrier in amounts that
IASIS believes to be sufficient for the Partnership, although, potentially, some
claims may exceed the scope of coverage in effect. The cost of general and
professional liability and workers' compensation coverage including the full
self-insured retention exposure is allocated by IASIS to the Partnership based
upon adjusted patient days. IASIS maintains reserves for general and
professional liability and workers' compensation. Accordingly, no reserve for
liability risks is recorded on the accompanying condensed balance sheets. 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 participates in a self-insured program for health insurance
administered by IASIS. IASIS allocates costs of the program based upon the
number of program participants employed by the Partnership.
OTHER
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
$652.0 million at December 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 generally forgiven pro rata 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.
4. INCOME TAXES
No provision for income taxes has been reflected in the accompanying condensed
financial statements because the tax effect of the Partnership's activities
accrues to the individual partners. The Partnership's tax return 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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