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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: June 25, 1999
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PROVINCE HEALTHCARE COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 0-23639 62-1710772
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification
Number)
105 WESTWOOD PLACE
SUITE 400
BRENTWOOD, TENNESSEE 37027
(Address of principal executive offices) (Zip Code)
(615) 370-1377
(Registrant's telephone number, including area code)
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ITEM 5.
Province Healthcare Company (the "Company"), a Delaware corporation,
hereby amends its Report on Form 8-K, dated April 28, 1999, which reported under
Item 5, its acquisition of Glades General Hospital in Belle Glade, Florida on
April 12, 1999 (the "Acquisition"). The Company is filing this amendment for the
purpose of including the financial statements and pro forma financial
information with respect to the Acquisition.
FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The audited consolidated financial statements of Glades
General Hospital for the fiscal year ended September 30, 1998,
are filed herewith.
(b) Pro Forma Financial Information.
The pro forma financial statements of the Company and its
subsidiaries, giving effect to the Acquisition as if it had
occurred on March 31, 1999, as to the balance sheet, and on
January 1, 1998, as to the income statements, are filed
herewith.
(c) Exhibits:
2.1 Asset Purchase Agreement, dated as of March 24, 1999,
among Palm Beach County Health Care District,
PHC-Belle Glade, Inc. and Province Healthcare
Company, filed herewith.
23.1 Consent of KPMG LLP.
99.1 Copy of the press release, dated April 12, 1999,
relating to the execution of a definitive agreement to acquire
Glades General Hospital, is incorporated herein by reference
to the Company's Current Report on Form 8-K, filed April 28,
1999, Commission File No. 0-23639.
99.2 Copy of the press release, dated April 15, 1999,
relating to the completion of the Glades General Hospital
acquisition, incorporated herein by reference to the Company's
Current Report on Form 8-K, filed April 28, 1999, Commission
File No. 0-23639.
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SIGNATURES
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 hereunto duly authorized.
PROVINCE HEALTHCARE COMPANY
By: /s/ Brenda B. Rector
---------------------------------
Brenda B. Rector
Vice President and Controller
Date: June 25, 1999
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INDEX TO FINANCIAL STATEMENTS
PAGE
Glades General Hospital (a division of Palm Beach County Health Care District)
Independent Auditors' Report...................................................1
Balance Sheets at September 30, 1998 and 1997..................................2
Statements of Revenue, Expenses and Fund Balance for the
Years Ended September 30, 1998 and 1997...................................3
Statement of Cash Flows for the Years Ended September 30, 1998 and 1997........4
Notes to Financial Statements..................................................6
Condensed Balance Sheet at March 31, 1999 (Unaudited).........................18
Condensed Statements of Revenue, Expenses and Fund Balance for the
Six Months Ended March 31, 1999 and 1998 (Unaudited).....................19
Condensed Statements of Cash Flows for the Six Months Ended
March 31, 1999 and 1998 (Unaudited)......................................20
Notes to Condensed Financial Statements.......................................21
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
Pro Forma Condensed Consolidated Financial Statements.........................23
Pro Forma Condensed Consolidated Balance Sheet at March 31, 1999 (Unaudited)..24
Pro Forma Condensed Consolidated Statement of Income for the Year
Ended December 31, 1998 (Unaudited)......................................25
Pro Forma Condensed Consolidated Statement of Income for the Three Months
Ended March 31, 1999 (Unaudited).........................................26
Notes to Pro Forma Condensed Consolidated Financial Statements (Unaudited)....27
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INDEPENDENT AUDITORS' REPORT
The Governing Board
Palm Beach County Health Care District:
We have audited the accompanying balance sheets of Glades General Hospital (a
division of the Palm Beach County Health Care District) as of September 30, 1998
and 1997, and the related statements of revenue, expenses and fund balance and
cash flows for the years then ended. These financial statements are the
responsibility of the Hospital's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
and Government Auditing Standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Glades General Hospital (a
division of the Palm Beach County Health Care District) as of September 30, 1998
and 1997, and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
The year 2000 supplementary information in note 16 is not a required part of the
general purpose financial statements, but is supplementary information required
by the Governmental Accounting Standards Board, and we did not audit and do not
express an opinion on such information. Further, we were unable to apply to the
information certain procedures prescribed by professional standards because of
the nature of the subject matter underlying the disclosure requirements and
because sufficiently specific criteria regarding the matters to be disclosed
have not been established. In addition, we do not provide assurance that the
Hospital is or will become year 2000 compliant, that Hospital's year 2000
remediation efforts will be successful in whole or in part, or that parties with
which Hospital does business are or will become year 2000 compliant.
In accordance with Government Auditing Standards, we have also issued a report
dated November 20, 1998 on our consideration of Glades General Hospital's (a
division of the Palm Beach County Health Care District) internal control over
financial reporting and our tests of its compliance with certain provisions of
laws and regulations.
/s/ KPMG LLP
Jacksonville, Florida
November 20, 1998, except as to note 7,
which is as of December 17, 1998 and notes
15 and 16, which are as June 22, 1999.
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GLADES GENERAL HOSPITAL
Balance Sheets
September 30, 1998 and 1997
1998 1997
----------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 2,320,292 $ 766,527
Patient accounts receivable, less allowance for doubtful
accounts of approximately $3,400,000 in 1998 and
$2,400,000 in 1997 4,578,917 2,254,234
Supplies 473,082 411,106
Prepaid expenses and other current assets 304,183 21,329
----------- ----------
Total current assets 7,676,474 3,453,196
----------- ----------
Property and equipment (note 4) 10,988,343 11,049,385
Less accumulated depreciation and amortization 7,758,018 8,212,908
----------- ----------
3,230,325 2,836,477
----------- ----------
$10,906,799 $6,289,673
=========== ==========
LIABILITIES AND FUND BALANCE
Current liabilities:
Accounts payable $ 654,403 $ 632,206
Current installments under loan payable to District (note 7) 1,856,428 120,000
Accrued salaries, professional fees and other current liabilities 1,592,414 1,092,758
Current installments of obligations under capital leases (note 6) 34,751 194,483
Estimated third-party payor settlements (note 3) 827,001 538,762
----------- ----------
Total current liabilities 4,964,997 2,578,209
Loan payable to District, excluding current installments (note 7) 514,406 2,234,745
Estimated self-insurance provision (note 13) 825,000 823,368
Obligations under capital leases, excluding current
installments (note 6) 19,301 54,641
----------- ----------
Total liabilities 6,323,704 5,690,963
Fund balance 4,583,095 598,710
----------- ----------
$10,906,799 $6,289,673
=========== ==========
See accompanying notes to financial statements.
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GLADES GENERAL HOSPITAL
Statements of Revenue, Expenses and Fund Balance
Years ended September 30, 1998 and 1997
1998 1997
------------ -----------
Net patient service revenue (note 3) $ 25,329,965 $16,265,655
Other revenue 112,977 169,840
------------ -----------
Total operating revenues 25,442,942 16,435,495
------------ -----------
Operating expenses:
Nursing services 6,944,365 2,941,959
Other professional services 6,433,052 7,014,682
General services 1,988,673 1,742,631
Fiscal and administrative services 2,776,081 2,544,343
Depreciation 681,977 806,858
Interest 127,002 161,410
Provision for bad debt 4,979,634 3,006,930
------------ -----------
Total operating expenses 23,930,784 18,218,813
------------ -----------
Income (loss) from operations 1,512,158 (1,783,318)
------------ -----------
Nonoperating gains (losses):
District funding (note 7) 1,461,681 2,204,896
Other (100,083) (17,330)
------------ -----------
Total nonoperating income 1,361,598 2,187,566
------------ -----------
Revenue and gains in excess of expenses
and losses 2,873,756 404,248
Fund balance, beginning of year 598,710 150,962
Fair value of donated equipment -- 43,500
Restricted capital subsidy from District (note 7) 1,110,629 --
------------ -----------
Fund balance, end of year $ 4,583,095 $ 598,710
============ ===========
See accompanying notes to financial statements.
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GLADES GENERAL HOSPITAL
Statements of Cash Flows
Years ended September 30, 1998 and 1997
1998 1997
----------- ----------
Net cash flow from operating activities and gains:
Income (loss) from operations $ 1,512,158 $(1,783,318)
Interest expense considered capital financing activity 127,002 161,410
Adjustments to reconcile income (loss) from operations
to cash flow provided by (used in) operating
activities and gains, net:
Depreciation 681,977 806,858
Provision for bad debt 4,979,634 3,006,930
Changes in:
Patient accounts receivable, net (7,304,317) (3,674,016)
Supplies (61,976) (1,625)
Prepaid expenses and other current assets (282,854) 7,904
Accounts payable 22,197 (308,449)
Accrued salaries, professional fees and other current
liabilities 499,656 31,298
Estimated third-party payor settlements 288,239 (43,905)
Estimated self-insurance provision 1,632 180,000
----------- ----------
Net cash provided by (used in) operating
activities and gains 463,348 (1,616,913)
----------- ----------
Cash flows from noncapital financing activities:
Decrease in deposits and other assets -- 226
Ad valorem taxes 1,461,681 2,204,896
Other -- 8,690
----------- ----------
Net cash provided by noncapital financing
activities $ 1,461,681 $2,213,812
----------- ----------
See accompanying notes to financial statements.
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GLADES GENERAL HOSPITAL
Statements of Cash Flows
Years ended September 30, 1998 and 1997
(Continued)
1998 1997
----------- --------
Cash flows from capital and related financing activities:
Principal payments under capital lease obligations $ (195,072) $(184,957)
Interest paid on loan and capital lease obligations (110,913) (161,410)
Capital expenditures, net (1,175,908) (206,521)
Capital subsidy from District 1,110,629 --
----------- --------
Net cash used in capital and related financing
activities (371,264) (552,888)
----------- --------
Net increase in cash and cash equivalents 1,553,765 44,011
Cash and cash equivalents, beginning of year 766,527 722,516
----------- --------
Cash and cash equivalents, end of year $ 2,320,292 $766,527
=========== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 111,000 $ 44,000
=========== ========
Capital lease additions -- $ 83,558
=========== ========
Fair value of equipment donated -- $ 43,500
=========== ========
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GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) ORGANIZATION
Glades General Hospital (the "Hospital") is a tax exempt
acute-care public hospital operated under the oversight of the
Palm Beach County Health Care District (the "District"). The
District was established as an independent taxing district by
special statute, Chapter 87-450 as amended by Chapters 88-460,
Laws of Florida, which was approved by the voters of Palm Beach
County on November 8, 1988. Pursuant to this action, the assets
and liabilities of the Hospital were effectively transferred to
the District.
(B) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and certificates of
deposit maturing within three months and are carried at cost,
which approximates market value.
(C) SUPPLIES
Supplies are stated at the lower of cost (first-in, first-out
method) or market.
(D) PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, or if donated, at
fair value at the date of receipt. Depreciation is provided over
the estimated useful lives of the respective assets on the
straight-line basis. The estimated useful lives generally conform
to those recommended by the American Hospital Association, with
buildings and improvements ranging from 15 to 30 years and
equipment ranging from 3 to 20 years.
(E) STATEMENT OF REVENUE AND EXPENSES
For purposes of display, transactions deemed by management to be
ongoing, major, or central to the provision of health care
services are reported as operating revenues and expenses.
Peripheral or incidental transactions are reported as nonoperating
gains and losses.
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GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
(F) NET PATIENT SERVICE REVENUE
Net patient service revenue is reported at the estimated net
realizable amounts from patients, third-party payors, and others
for services rendered, including estimated retroactive adjustments
under reimbursement agreements with third-party payors.
Retroactive adjustments are accrued on an estimated basis in the
period the related services are rendered and adjusted in future
periods as final settlements are determined.
(G) INCOME TAXES
The Hospital is exempt from income taxes as a Government
organization pursuant to Internal Revenue Code Section 115.
Accordingly, no provision for income taxes has been recorded in
the accompanying financial statements.
(H) CHARITY CARE
The Hospital provides care to patients who meet certain criteria
under its charity care policy without charge or at amounts less
than its established rates. Because the Hospital does not pursue
collection of amounts determined to qualify as charity care, they
are not reported as revenue.
(I) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(J) RECLASSIFICATIONS
Certain amounts for 1997 have been reclassified to conform with
the presentation adopted for 1998.
(K) ACCOUNTING STANDARDS
Governmental Accounting Standards Board ("GASB") Statement No. 20,
"Accounting and Financial Reporting for Proprietary Funds and
Other Governmental Entities that use Proprietary-Fund Accounting
offers the option of following all Financial Accounting Standards
Board ("FASB") standards issued after November 30, 1989, unless
the latter conflict with or contradict GASB pronouncements, or not
following FASB standards issued after such date. The Hospital
elected the option not to follow FASB pronouncements issued after
November 30, 1989.
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GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
(2) CASH AND CASH EQUIVALENTS
Cash and cash equivalents as of September 30, 1998 consist of bank
deposits with a carrying amount of $2,320,292 and a market value of
$2,320,292.
Cash and cash equivalents are required to be categorized to give an
indication of the level of credit risk assumed by the entity at year-end.
The three categories of risk as defined by the Government Accounting
Standards Board Statement No. 3 are as follows:
(A) Insured or registered, or securities held by the entity or its agent
in the entity's name.
(B) Uninsured and unregistered, with securities held by the
counterparty's trust department or agent in the entity's name; and
(C) Uninsured and unregistered, with securities held by the
counterparty, or by its trust department or agent, but not in the
entity's name.
All of the Hospital's cash and cash equivalents are categorized in
Category I.
The Hospital's bank deposits at September 30, 1998 are as follows:
CARRYING BALANCE
AMOUNT PER BANK
-------------- -----------
Demand deposits $ 2,320,292 $ 2,570,028
============== ===========
The difference between the Hospital's demand deposits' carrying amount
and the bank balance is due to outstanding checks and deposits in transit.
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GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
In addition to insurance provided by the Federal Depository Insurance
Corporation, all demand deposits are held in banking institutions
approved by the State of Florida State Treasurer to hold public funds.
Under Florida Statutes Chapter 280, "Florida Security for Public Deposits
Act", the State Treasurer requires all qualified public depositories to
deposit with the State Treasurer, or another banking institution,
eligible collateral equal to from 30 percent to 125 percent of the
average daily balance for each month of all public deposits in excess of
any applicable deposit insurance held. The percentage of eligible
collateral (generally U.S. Government and agency securities, state or
local government debt, or corporate bonds) to public deposits is
dependent upon a depository's financial history and its compliance with
Chapter 280. In the event of a failure of a qualified public depository,
the remaining public depositories would be responsible for covering any
resulting losses.
(3) NET PATIENT SERVICE REVENUE
The Hospital has agreements with third-party payors that provide for
reimbursement at amounts different from its established rates. A summary
of the basis of reimbursement with major third-party payors follows:
MEDICARE - Inpatient acute care services rendered to Medicare program
beneficiaries are paid at prospectively determined rates per discharge.
These rates vary according to a patient classification system that is
based on clinical, diagnostic, and other factors. Certain outpatient
services are paid based on a cost reimbursement methodology. The Hospital
is reimbursed for cost reimbursable items at a tentative rate with final
settlement determined after submission of annual cost reports by the
Hospital and audits thereof by the Medicare fiscal intermediary. The
Hospital's classification of patients under the Medicare program and the
appropriateness of their admission are subject to an independent review
by a peer review organization under contract with the Hospital. The
Hospital's Medicare cost reports have been audited by the Medicare fiscal
intermediary through 1995. The Hospital has filed Medicare cost reports
through September 30, 1997, and an estimated provision for the fiscal
year ended September 30, 1998 has been included in the accompanying
financial statements.
MEDICAID - Inpatient and outpatient services rendered to Medicaid program
beneficiaries are reimbursed under a cost reimbursement methodology. The
Hospital is reimbursed at a tentative rate with final settlement
determined after submission of annual cost reports by the Hospital and
audits thereof by the Medicaid fiscal intermediary. The Hospital's
Medicaid cost reports have been audited by the Medicaid fiscal
intermediary through 1997.
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GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
HMOS AND PPOS - The Hospital is reimbursed by health maintenance and
preferred provider organizations based on the terms of the contracts with
them. Inpatient services are generally reimbursed at per diem rates, per
case rates, or at a percentage of the Hospital's established rates.
Outpatient services are generally reimbursed at a percentage of the
Hospital's established rates.
The Hospital has also entered into reimbursement agreements with certain
commercial insurance carriers and other entities, including the District.
The basis for reimbursement under these agreements include prospectively
determined rates per discharge, discounts from established charges and
per diem rates.
(4) PROPERTY AND EQUIPMENT
Property and equipment at September 30, consist of the following:
1998 1997
----------- -----------
Land $ 184,331 $ 184,331
Land improvements 284,272 276,333
Buildings and improvements 4,228,344 4,177,685
Equipment 6,291,396 6,411,036
----------- -----------
10,988,343 11,049,385
Less accumulated depreciation and amortization 7,758,018 8,212,908
----------- -----------
$ 3,230,325 $ 2,836,477
=========== ===========
During 1997, the Hospital received donated equipment with a fair value
of $43,500.
(5) CHARITY CARE
The Hospital maintains records to identify and monitor the level of
charity care it provides. These records include the amount of charges
foregone for services and supplies furnished under its charity care
policy, the estimated cost of those services and supplies, and equivalent
service statistics. Charges foregone, based on established rates, were
approximately $3,034,000 and $1,753,000 in 1998 and 1997, respectively.
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GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
(6) LEASES
The Hospital has entered into various long-term capital lease agreements
for equipment with varying expirations through 2000. The Hospital's total
obligations under capital lease agreements at September 30, 1998 was
$54,052, of which $34,751 is payable during fiscal 1999.
The Hospital leased certain other equipment under operating leases.
Rental expense for the years ended September 30, 1998 and 1997 was
$258,130 and $69,442, respectively.
(7) DISTRICT
The Hospital receives funding from the District. The District allocates
funds to support the Hospital's operations, debt service requirements and
capital expenditures from ad valorem taxes levied by the District on
taxable property in Palm Beach County in its entirety. Funding of
$1,461,681 and $2,204,896 was received from the District for operations
in 1998 and 1997, respectively, and is included in other nonoperating
income in the statements of revenue, expenses and fund balance. In
addition, during 1998 the District provided funding of $1,110,629 to the
Hospital for capital improvements which has been reflected as a
restricted contribution to Fund balance in the accompanying financial
statements. The District has allocated $4,208,798 of funding for the
Hospital in 1999 of which $4,046,789 is restricted for capital additions.
Funding for fiscal year 2000 will be based on the discretion of the
Districts' Governing Board.
The District reimburses the Hospital for care provided to indigent
patients at per diem rates and at a percentage of the Hospital's
established rates for inpatient and outpatient services, respectively.
On September 20, 1994, the District approved a resolution authorizing a
conditional loan to the Hospital of up to $2,000,000 which bears interest
at the rate of 5 percent per annum. As of September 30, 1998, the
Hospital had received $2,000,000 and had accrued interest of $370,834
which is recorded as loan payable to District on the balance sheet.
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GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
On December 17, 1998, the Hospital's Governing Board approved a
resolution to repay the Hospital's loan with the District. The resolution
provides that the Hospital will pay $1,000,000 during December, 1998, and
will make monthly payments of $142,738 beginning January, 1999, which
will retire the debt and interest accruing thereon during December, 1999.
The accompanying financial statements have been adjusted to reflect
$1,856,428 as current installments under loan payable to the District
pursuant to the resolution.
(8) INDIGENT CARE ASSESSMENT
The Health Care Consumer Protection and Awareness Act of 1985 created a
fund to provide for the treatment of indigent patients. Hospitals in the
State of Florida are required to deposit into the fund an amount equal to
1-1/2 percent of net operating revenues for each fiscal year, with
payments due in quarterly installments. The Hospital's assessment
approximated $291,000 in 1998 and $184,000 in 1997.
(9) PENSION PLAN
The Hospital participates in the Florida Retirement System (the System),
a cost-sharing multiple employer, public employee retirement plan which
covers substantially all of the Hospital's full-time and part-time
employees who were eligible to participate in the plan prior to October
1, 1992. The System was created in 1970 by consolidating several employee
retirement systems. All eligible employees, as defined by the State, who
were hired after 1970 and those employed prior to 1970 who elect to be
enrolled are covered by the System. Benefits under the plan vest after 10
years of service. Employees who retire at or after age 62, with 10 years
of credited service, are entitled to an annual retirement benefit,
payable monthly for life. The System also provides for early retirement
at reduced benefits and death and disability benefits. These benefit
provisions and all other requirements are established by State statute.
The system is noncontributory and is administered by the State of
Florida. The Hospital is required to contribute amounts necessary to pay
benefits when due as defined by State statute. Such contribution
requirements were 16.45% and 16.77% of gross salaries during 1998 and
1997, respectively. Pension costs were approximately $299,696 on an
eligible payroll of $1,724,792 and a total payroll of $8,295,746 in 1998,
and $304,527 on an eligible payroll of $1,750,849 and a total payroll of
$6,576,051 in 1997.
A copy of the System's June 30, 1997 annual report can be obtained by
writing to the Division of Retirement, Cedars Executive Center, 2639-C
North Monroe Street, Tallahassee, FL 32399-1560 or by calling (850)
488-5706.
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GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
(10) EMPLOYEE BENEFIT PLAN
Effective October 1, 1992, the Hospital offered an employee benefit plan
created in accordance with Internal Revenue Code Section 457 to its
employees. The plan is available to all employees who are 21 years of age
or older who have completed 3 months of service and are not covered by
the System. The Hospital contributes a minimum of 6 percent of eligible
employees' gross wages, regardless of their contribution. The Hospital
matches 50% of employees' contributions up to 4% of each participant's
contributions, for a maximum possible contribution by the Hospital of 8%.
Participants' interest in amounts contributed by the Hospital vest as
follows:
YEARS OF SERVICE VESTED %
---------------- --------
0-2 0%
3 20%
4 40%
5 60%
6 80%
7 100%
Amounts contributed by participants vest immediately. The Hospital's
contributions are invested in fixed accounts. Participants may choose to
invest their contributions in two programs which provide fixed accounts
and mutual fund-type accounts. Loans are permitted from a minimum of
$2,500 to a maximum of 50% of an employee's account balance or $50,000,
whichever is lower. The Hospital contributed approximately $356,531 on an
eligible payroll of $5,058,617 and a total payroll of $8,295,746 in 1998,
and $209,157 on an eligible payroll of $3,059,291 and a total payroll of
$6,576,051 in 1997.
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GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
(11) CONCENTRATIONS OF CREDIT RISK
The Hospital grants credit without collateral to its patients, most of
whom are local residents and are insured under third-party payor
agreements. The mix of receivables from patients and third-party payors
at September 30, 1998 and 1997, was as follows:
1998 1997
------------ ------------
Medicare 10% 12%
Medicaid 19% 11%
District 13% 3%
Other third-party payors 37% 64%
Self-pay 21% 10%
------------ ------------
100% 100%
============ ============
(12) MANAGEMENT AGREEMENT
On October 24, 1994, with the approval of the District, the Hospital
entered into a management agreement whereby the management company
provided certain consulting and volume purchasing functions to the
Hospital. During 1998 and 1997, the Hospital paid the management company
approximately $204,000 and $407,000, respectively, for such services.
Effective April 18, 1997, the Hospital terminated certain provisions of
the management agreement which related to the management company
providing key personnel services.
(13) COMMITMENTS AND CONTINGENCIES
Effective December 1985, the Hospital elected to be self-insured with
respect to medical malpractice and general liability claims under the
doctrine of Sovereign Immunity which limits the Hospital's liability to
$100,000/$200,000 per occurrence. The Hospital provides self-insurance
reserves based on available data and re-evaluates the adequacy of these
reserves annually based on claims experience.
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GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
Prior to October 1, 1994, the Hospital was a member of a workers'
compensation self-insurance risk management trust fund (the Fund) in
which members jointly and severally agree to pay the obligations of the
Fund. As a prior member of the Fund, the Hospital is subject to
assessments in the event that the total amount of premiums for a year in
which it was a member are not sufficient to satisfy claims. Assessments
amounting to $246,113 have been levied against the Hospital by the Fund
and have been reflected in the accompanying financial statements as of
September 30, 1997. No provision for the potential impact of any future
assessments by the Fund has been made by management in the accompanying
financial statements as any such impact is not readily determinable.
Effective October 1, 1994, the Hospital obtained workers compensation
coverage through a non-assessable insurance carrier.
(14) SCHEDULE OF VALUATION AND QUALIFIED ACCOUNTS
CHARGED
BALANCE AT TO COSTS BALANCE AT
BEGINNING AND END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS (2) OF PERIOD
----------- ---------- -------- -------------- ---------
For the year ended September 30, 1997
Allowance for doubtful accounts $2,100,000 $3,006,930 $2,706,930 $2,400,000
For the year ended September 30, 1998
Allowance for doubtful accounts $2,400,000 4,979,634 3,979,634 $3,400,000
(2) Uncollectable accounts written-off, net of recoveries
(15) REISSUANCE OF PREVIOUSLY - ISSUED REPORT ON GENERAL PURPOSE FINANCIAL
STATEMENTS
On March 29, 1999, the Governmental Accounting Standards Board issued
Technical Bulletin 99-1 (TB 99-1), Disclosures about Year 2000 Issues -
an amendment of Technical Bulletin 98-1. The amendment, among other
things, provides that required year 2000 disclosures may be presented
as required supplementary information. Retroactive application of TB
99-1 is permitted. The Hospital has elected to apply TB 99-1
retroactively for its 1998 general-purpose financial statements, and to
present the Year 2000 disclosures as required supplementary information
in note 16.
15
20
GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
(16) REQUIRED SUPPLEMENTARY INFORMATION YEAR 2000 - UNAUDITED
The Hospital is currently addressing year 2000 issues relating to its
computer systems and other electronic equipment. The year 2000 issue
refers to the fact that many computer programs use only the last two
digits to refer to a year. Therefore, both 1900 and 2000 would be
referred to as "00." Computer programs have to be adjusted to recognize
the difference between those two years or the programs will fail or
create errors. Also, some programs may not be able to recognize that 2000
is a leap year. Further, the year 2000 issue could affect electronic
equipment - such as environmental systems, elevators, and vehicles -
containing computer chips that have date recognition features.
During fiscal year 1998, the Hospital identified the computer systems
listed below that are mission-critical (that is, critical to conducting
operations) and that need to be year 2000 compliant.
The Hospital utilizes the following stages of work to address year 2000
issues:
- Awareness stage - Establishing a budget and project plan for
dealing with the year 2000 issue.
- Assessment stage - Identifying the systems and components for
which year 2000 compliance work is needed.
- Conversion/Replacement - Making changes to systems and equipment.
- Validation/Test stage - Validating and testing the changes that
were made during the remediation stage.
16
21
GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
The Hospital's year 2000 remediation work for its mission-critical
systems and electronic equipment are in the following stages of work: "C"
means complete, "P" means in process, and "A" means still needs to be
addressed.
CONVERSION/ VALIDATION/
AWARENESS ASSESSMENT REPLACEMENT TESTING
--------- ---------- ----------- -----------
Billing C P A A
Order management C C A A
Mainframe C C A A
Pharmacy C C P A
Pcs C C P P
Terminals C C C C
Interfaces C C C A
Biomedical C P P P
Engineering services C C P P
The Hospital has budgeted $832,000 during 1999 for the replacement of the
Hospital's main computer system which has been determined to be not Year
2000 compliant.
Because of the unprecedented nature of the year 2000 issue, its effects
and the success of related remediation efforts will not be fully
determinable until the year 2000 and thereafter. Management cannot assure
that the Hospital is nor will be year 2000 ready, that the Hospital's
remediation efforts will be successful in whole or in part, or that
parties with whom the Hospital does business will be year 2000 ready.
However, management has placed the highest priority on identifying and
resolving all year 2000 issues. Emphasis has been placed on ensuring that
mission critical systems are year 2000 compliant. As an additional
precaution, management has established contingency plans wherever
feasible to ensure continued operation of mission critical functions.
Project plans are closely monitored and all mission critical systems are
expected to be year 2000 compliant by the summer of 1999.
17
22
GLADES GENERAL HOSPITAL
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 1999
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents $ 2,136
Accounts receivable, less allowance for
doubtful accounts of $6,000 5,008
Inventories 486
Prepaid expenses and other 123
-------
Total current assets 7,753
Property, plant and equipment, net 3,568
-------
$11,321
=======
LIABILITIES AND FUND BALANCE
Current liabilities:
Accounts payable $ 598
Accrued salaries and benefits 858
Accrued expenses 1,394
Current maturities of long-term obligations 909
Third-party settlements 738
-------
Total current liabilities 4,497
Long-term obligations, less current maturities 447
Fund balance: 6,377
-------
$11,321
=======
See accompanying notes.
18
23
GLADES GENERAL HOSPITAL
CONDENSED CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES
AND FUND BALANCE (UNAUDITED)
SIX MONTHS
ENDED MARCH 31,
---------------------
1999 1998
------- --------
(IN THOUSANDS)
Revenue:
Net patient service revenue $15,703 $ 9,969
Other 623 427
------- --------
Net operating revenue 16,326 10,396
Expenses:
Salaries, wages and benefits 5,739 4,542
Purchased services 2,260 1,575
Supplies 1,718 1,157
Provision for doubtful accounts 3,483 2,190
Other operating expenses 807 570
Rentals and leases 145 114
Depreciation and amortization 342 424
Interest expense 46 65
------- --------
Total expenses 14,540 10,637
Income (loss) from operations 1,786 (241)
------- --------
Nonoperating gains:
District funding -- 731
------- --------
Total nonoperating income -- 731
------- --------
Revenue and gains in excess of expenses and losses 1,786 490
Fund balance, beginning of period 4,583 599
Restricted capital subsidy from District 8 396
------- --------
Fund balance, end of period $ 6,377 $ 1,485
======= ========
See accompanying notes.
19
24
GLADES GENERAL HOSPITAL
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS
ENDED MARCH 31,
---------------------
1999 1998
------- -------
(IN THOUSANDS)
Net cash flow from operating activities and gains:
Income (loss) from operations $ 1,786 $ (241)
Interest expense considered capital financing activity 46 65
Adjustments to reconcile net income (loss) from operations
to cash flow provided by (used in) operating activities
and gains, net:
Depreciation 342 424
Provision for bad debt 3,483 2,190
Changes in:
Patient accounts receivable, net (3,912) (2,564)
Supplies (13) 15
Prepaid expenses and other current assets 181 (103)
Accounts payable and accrued expenses 566 (522)
Accrued salaries and benefits (10) 558
Third-party settlements (89) --
------- -------
Net cash provided by (used in) operating
activities and gains 2,380 (178)
------- -------
Cash flows from noncapital financing activities:
Ad valorem taxes -- 731
------- -------
Net cash provided by noncapital
financing activities -- 731
------- -------
Cash flows from capital and related financing activities:
Payments under capital lease obligations (462) (183)
Payments on loan payable from District (1,431) --
Capital expenditures, net (680) (761)
Capital subsidy from District 8 396
------- -------
Net cash used in capital and related
financing activities (2,565) (548)
------- -------
Net increase (decrease) in cash and cash equivalents (185) 5
Cash and cash equivalents, beginning of year 2,321 767
------- -------
Cash and cash equivalents, end of period $ 2,136 $ 772
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest during the period for interest $ 8 $ 8
======= =======
See accompanying notes.
20
25
GLADES GENERAL HOSPITAL
Notes to Condensed Financial Statements
March 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Glades General Hospital (the "Hospital") is a tax exempt acute-care public
hospital operated under the oversight of the Palm Beach County Health Care
District (the "District"). The District was established as an independent taxing
district by special statute, Chapter 87-450 as amended by Chapters 88-460, Laws
of Florida, which was approved by the voters of Palm Beach County on November 8,
1998. Pursuant to this action, the assets and liabilities of the Hospital were
effectively transferred to the District.
As discussed in Note 2, effective April 12, 1999, Palm Beach County Health Care
District sold the assets and business of the Hospital to Province Healthcare
Company. The condensed financial statements of the Hospital are presented in a
format which conforms to the presentation of Province Healthcare Company's
consolidated financial statements.
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of Glades General
Hospital have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended
March 31, 1999, are not indicative of the results that may be expected for the
year ended December 31, 1999. For further information, refer to the 1998
financial statements and footnotes thereto included herein.
DISTRICT
The Hospital receives funding from the District. The District allocates funds to
support the Hospital's operations, debt service requirements and capital
expenditures from ad valorem taxes levied by the District on taxable property in
Palm Beach County in its entirety. The District reimburses the Hospital for care
provided to indigent patients at per diem rates and at a percentage of the
Hospital's established rates for inpatient and outpatient services,
respectively.
INCOME TAXES
The Hospital is exempt from income taxes as a Government organization pursuant
to Internal Revenue Code Section 115. Accordingly, no provision for income taxes
has been recorded in the accompanying financial statements.
21
26
COMMITMENTS AND CONTINGENCIES
Effective December 1985, the Hospital elected to be self-insured with respect to
medical malpractice and general liability claims under the doctrine of Sovereign
Immunity, which limits the Hospital's liability to $100,000/$200,000 per
occurrence. The Hospital provides self-insurance reserves based on available
data and re-evaluates the adequacy of these reserves annually based on claims
experience.
NOTE 2 - SUBSEQUENT EVENT
As of April 12, 1999, Province Healthcare Company acquired the assets and
business of Glades General Hospital for approximately $15,150,000, excluding
working capital. Upon signing of the sales agreement, the public hospital
operated under the oversight of the Palm Beach County Health Care District
ceased to exist.
22
27
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On April 12, 1999, Province acquired Glades General Hospital
(a public hospital operated under the oversight of Palm Beach County Health
Care District) ("Glades").
The following unaudited pro forma condensed consolidated balance sheet
as of March 31, 1999 gives effect to the acquisition of Glades by Province as if
the transaction had been completed as of March 31, 1999.
The following unaudited pro forma condensed consolidated statements of
income for the year ended December 31, 1998, and the three months ended March
31, 1999, give effect to the acquisition of Glades by Province, as if such
transaction had been completed as of January 1, 1998.
The pro forma condensed consolidated financial information presented
herein does not purport to represent what the Company's results of operations or
financial position would have been had such transaction, in fact, occurred at
the beginning of the periods presented or to project the Company's results of
operations in any future period. The pro forma results of operations, which do
not take into account certain operational changes instituted by the Company upon
acquisition of its hospitals, are not necessarily indicative of the results that
may be expected from such hospitals. The unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements of Province, included in its Annual Report on
Form 10-K for the year ended December 31, 1998, the unaudited condensed
consolidated financial statements of Province, included in its Quarterly Report
on Form 10-Q for the period ended March 31, 1999, and the financial statements
of Glades, included elsewhere in this Current Report on Form 8-K/A. Certain
reclassifications have been made in the Glades historical financial statements,
included in the pro forma financial statements, to conform to the Province
presentation.
23
28
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(IN THOUSANDS)
HISTORICAL ACQUISITION PRO FORMA
------------------------ PRO FORMA ACQUISITION
PROVINCE GLADES ADJUSTMENTS CONSOLIDATED
-------- ------- ------------ --------------
ASSETS
Current assets:
Cash and cash equivalents $ 12,656 $ 2,136 $ 13,500 (a)
(2,136)(b)
(11,479)(c) $ 14,677
Accounts receivable, net 56,930 5,008 (3,176)(b) 58,762
Inventories 7,501 486 7,987
Prepaid expenses and other 8,417 123 8,540
-------- ------- -------- --------
Total current assets 85,504 7,753 (3,291) 89,966
Property, plant and equipment, net 111,830 3,568 2,364 (c) 117,762
Other assets:
Cost is excess of net assets acquired, net 140,846 -- -- 140,846
Other 16,001 -- 8,268 (c) 24,269
-------- ------- -------- --------
$354,181 $11,321 $ 7,341 $372,843
======== ======= ======== ========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,015 $ 598 $ (598)(b) $ 8,015
Accrued salaries and benefits 10,232 858 (43)(b) 11,047
Accrued expenses 5,473 1,394 (1,394)(b)
206 (c) 5,679
Current maturities of long-term obligations 1,545 909 (909)(b)
716 (c) 2,261
-------- ------- -------- --------
Total current liabilities 25,265 3,759 (2,022) 27,002
Long-term obligations, less current maturities 138,357 447 13,500 (a)
(447)(b)
3,395 (c) 155,252
Third-party settlements 5,353 738 (738)(b) 5,353
Other liabilities 10,795 -- 30 (c) 10,825
Minority interest 787 -- 787
Common stockholders' equity (deficit):
Net assets -- 6,377 (1,183)(b)
(5,194)(c) --
Common stock 157 -- 157
Additional paid-in-capital 163,294 -- 163,294
Retained earnings (deficit) 10,173 -- 10,173
-------- ------- -------- --------
Total common stockholders' equity (deficit) 173,624 6,377 (6,377) 173,624
-------- ------- -------- --------
$354,181 $11,321 $ 7,341 $372,843
======== ======= ======== ========
24
29
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
ACQUISITION
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
PROVINCE GLADES ADJUSTMENTS CONSOLIDATED
---------- ---------- ----------- ------------
Revenue:
Net patient service revenue $217,364 $24,342 $241,706
Management and professional services 11,885 -- 11,885
Reimbursable expenses 6,520 -- 6,520
Other 3,086 2,275 5,361
-------- ------- --------
Net operating revenue 238,855 26,617 265,472
Expenses:
Salaries, wages and benefits 94,970 10,129 105,099
Reimbursable expenses 6,520 -- 6,520
Purchased services 28,250 3,558 31,808
Supplies 24,252 2,705 26,957
Provision for doubtful accounts 17,839 4,980 22,819
Other operating expenses 19,149 1,304 20,453
Rentals and leases 5,777 258 6,035
Depreciation and amortization 13,409 682 $ 391 (a) 14,482
Interest expense 10,555 127 902 (b) 11,584
Minority interest 155 -- 155
Loss on sale of assets 45 -- 45
-------- ------- ------- --------
Total expenses 220,921 23,743 1,293 245,957
-------- ------- ------- --------
Income (loss) before income taxes 17,934 2,874 (1,293) 19,515
Income taxes (benefit) 7,927 -- 630 (c) 8,557
-------- ------- ------- --------
Net income (loss) 10,007 2,874 (1,923) 10,958
Preferred stock dividends and accretion (696) -- -- (696)
-------- ------- ------- --------
Net income (loss) to common shareholders $ 9,311 $ 2,874 $(1,923) $ 10,262
======== ======= ======= ========
Basic earnings (loss) per common share:
Net income $ 0.75 $ 0.82
Preferred stock dividends and accretion (0.05) (0.05)
-------- --------
Net income per common share $ 0.70 $ 0.77
======== ========
Diluted earnings (loss) per common share:
Net income $ 0.73 $ 0.80
Preferred stock dividends and accretion (0.05) (0.05)
-------- --------
Net income per common share $ 0.68 $ 0.75
======== ========
Weighted-average shares:
Basic 13,344 13,344
Diluted 13,672 13,672
25
30
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS)
HISTORICAL ACQUISITION
HISTORICAL GLADES PRO FORMA PRO FORMA
PROVINCE (Note d) ADJUSTMENTS CONSOLIDATED
---------- ---------- ----------- ------------
Revenue:
Net patient service revenue $67,256 $ 8,149 $ 75,405
Management and professional services 3,450 -- 3,450
Reimbursable expenses 1,777 -- 1,777
Other 764 313 1,077
------- ------- --------
Net operating revenue 73,247 8,462 81,709
Expenses:
Salaries, wages and benefits 29,508 2,916 32,424
Reimbursable expenses 1,777 -- 1,777
Purchased services 7,236 1,148 8,384
Supplies 8,217 912 9,129
Provision for doubtful accounts 4,676 1,807 6,483
Other operating expenses 6,145 426 6,571
Rentals and leases 1,683 72 1,755
Depreciation and amortization 4,177 178 $ 90 (a) 4,445
Interest expense 2,575 16 210 (b) 2,801
Minority interest 58 -- 58
Loss on sale of assets -- -- --
------- ------- ------ --------
Total expenses 66,052 7,475 300 73,827
------- ------- ------ --------
Income (loss) before income taxes 7,195 987 (300) 7,882
Income taxes (benefit) 3,130 -- 274 (c) 3,404
------- ------- ------ --------
Net income (loss) 4,065 987 (574) 4,478
Preferred stock dividends and accretion -- -- --
------- ------- ------ --------
Net income (loss) to common shareholders $ 4,065 $ 987 $(574) $ 4,478
======= ======= ====== ========
Basic earnings (loss) per common share:
Net income $ 0.26 $ 0.29
Preferred stock dividends and accretion -- --
------- --------
Net income per common share $ 0.26 $ 0.29
======= ========
Diluted earnings (loss) per common share:
Net income $ 0.25 $ 0.28
Preferred stock dividends and accretion -- --
------- --------
Net income per common share $ 0.25 $ 0.28
======= ========
Weighted-average shares:
Basic 15,709 15,709
Diluted 16,021 16,021
26
31
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) Reflects the borrowing by Province of $13.5 million to finance the
acquisition of Glades.
(b) Reflects the elimination of Glades assets not purchased and liabilities not
assumed by Province as follows:
Cash.................................................. $(2,136)
Accounts receivable................................... (3,176)
Accounts payable...................................... 598
Accrued salaries and benefits......................... 43
Accrued expenses...................................... 1,394
Current maturities of long-term obligations........... 909
Long-term obligations, less current maturities........ 447
Third-party settlements............................... 738
-------
Net assets............................................ $(1,183)
=======
(c) Reflects the purchase of Glades and the allocation of the purchase
price to adjust assets purchased and liabilities assumed to fair value
and to record intangibles as follows:
Unallocated purchase price............................ $ 8,268
Property, plant and equipment......................... 2,364
Accrued expenses...................................... (206)
Current maturities of long-term obligations........... (716)
Other liabilities..................................... (30)
Long-term obligations, less current maturities........ (3,395)
Net assets............................................ 5,194
------
Cash paid............................................. $11,479
=======
27
32
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
(a) Reflects the elimination of the historical depreciation expense of
Glades, and the inclusion of the Company's depreciation of property,
plant and equipment and amortization of unallocated purchase price,
goodwill and other intangible assets.
(b) Reflects the elimination of the historical interest expense related to
the debt of Glades not assumed in the acquisition, and the inclusion of
the Company's interest expense related to the debt used to finance the
acquisition.
(c) Reflects the inclusion of the income tax expense based on the combined
federal and state statutory rate of 40.0% applied to adjusted pre-tax
income.
(d) The unaudited pro forma condensed consolidated statement of income for
the year ended December 31, 1998 is presented using Province's fiscal
year-end. The presentation combines Province's income statement for the
year ended December 31, 1998, and Glades' income statement for the year
ended September 30, 1998, for the purposes of presenting the pro forma
information.
28