##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 COMMISSION FILE NUMBER: 333-117362
 IASIS HEALTHCARE LLC
  DELAWARE
    
    20-1150104(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)DOVER CENTRE117 SEABOARD LANE, BUILDING EFRANKLIN, TENNESSEE
    
    37067(Address of principal executive offices)
    
    (Zip Code)
 (615) 844-2747
 Not Applicable
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o
 o þ




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##### 



TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Condensed Consolidated Balance Sheets  March 31, 2011(Unaudited) and September 30, 2010
    
    
    1Condensed Consolidated Statements of Operations (Unaudited)  Quarters and Six Months Ended March 31, 2011 and 2010
    
    
    2Condensed Consolidated Statement of Equity (Unaudited)  Six Months Ended March 31, 2011
    
    
    3Condensed Consolidated Statements of Cash Flows (Unaudited)  Six Months Ended March 31, 2011 and 2010
    
    
    4Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    44Item 4. Controls and Procedures
    
    
    44PART II. OTHER INFORMATION
    
    
    45Item 1. Legal Proceedings
    
    
    45Item 1A. Risk Factors
    
    
    46Item 6. Exhibits
    
    
    46Exhibit 4.1Exhibit 4.2Exhibit 4.3Exhibit 10.1Exhibit 31.1Exhibit 31.2
   i




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##### Table of Contents



PART I.
FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In Thousands)
 March 31,
    
    
    September 30,2011
    
    
    2010(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    178,616
    
    
    $
    144,511Accounts receivable, less allowance for doubtful accounts of
$138,815 and $125,406 at March 31, 2011 and September 30,
2010, respectively
    
    
    251,147
    
    
    
    209,173Inventories
    
    
    59,050
    
    
    
    53,842Deferred income taxes
    
    
    29,289
    
    
    
    15,881Prepaid expenses and other current assets
    
    
    60,831
    
    
    
    65,340Total current assets
    
    
    578,933
    
    
    
    488,747Property and equipment, net
    
    
    1,002,090
    
    
    
    985,291Goodwill
    
    
    801,275
    
    
    
    718,243Other intangible assets, net
    
    
    34,067
    
    
    
    27,000Deposit for acquisition
    
    
    7,000
    
    
    
    97,891Other assets, net
    
    
    33,899
    
    
    
    36,022Total assets
    
    $
    2,457,264
    
    
    $
    2,353,194LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
    
    $
    89,583
    
    
    $
    78,931Salaries and benefits payable
    
    
    43,181
    
    
    
    38,110Accrued interest payable
    
    
    12,477
    
    
    
    12,536Medical claims payable
    
    
    106,950
    
    
    
    111,373Other accrued expenses and other current liabilities
    
    
    124,508
    
    
    
    106,614Current portion of long-term debt and capital lease obligations
    
    
    7,675
    
    
    
    6,691Total current liabilities
    
    
    384,374
    
    
    
    354,255Long-term debt and capital lease obligations
    
    
    1,047,852
    
    
    
    1,044,887Deferred income taxes
    
    
    109,623
    
    
    
    109,272Other long-term liabilities
    
    
    71,043
    
    
    
    60,162Non-controlling interests with redemption rights
    
    
    89,265
    
    
    
    72,112Equity:Members equity
    
    
    745,275
    
    
    
    702,135Non-controlling interests
    
    
    9,832
    
    
    
    10,371Total equity
    
    
    755,107
    
    
    
    712,506Total liabilities and equity
    
    $
    2,457,264
    
    
    $
    2,353,194
   1




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##### Table of Contents



IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



(UNAUDITED)
 (In Thousands)
 Quarter Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Net revenue:Acute care revenue
    
    $
    488,449
    
    
    $
    437,574
    
    
    $
    959,588
    
    
    $
    862,234Premium revenue
    
    
    189,960
    
    
    
    186,948
    
    
    
    392,152
    
    
    
    391,245Total net revenue
    
    
    678,409
    
    
    
    624,522
    
    
    
    1,351,740
    
    
    
    1,253,479Costs and expenses:Salaries and benefits (includes stock-based
compensation of $538, $2,128, $1,034 and $2,249,
respectively)
    
    
    196,036
    
    
    
    174,171
    
    
    
    385,949
    
    
    
    344,653Supplies
    
    
    77,924
    
    
    
    68,425
    
    
    
    154,360
    
    
    
    133,834Medical claims
    
    
    157,416
    
    
    
    160,094
    
    
    
    328,750
    
    
    
    338,661Other operating expenses
    
    
    103,350
    
    
    
    88,683
    
    
    
    200,476
    
    
    
    173,275Provision for bad debts
    
    
    54,801
    
    
    
    45,536
    
    
    
    114,415
    
    
    
    93,485Rentals and leases
    
    
    11,289
    
    
    
    10,145
    
    
    
    22,455
    
    
    
    20,420Interest expense, net
    
    
    16,510
    
    
    
    16,622
    
    
    
    33,387
    
    
    
    33,354Depreciation and amortization
    
    
    24,584
    
    
    
    24,025
    
    
    
    48,630
    
    
    
    47,902Management fees
    
    
    1,250
    
    
    
    1,250
    
    
    
    2,500
    
    
    
    2,500Total costs and expenses
    
    
    643,160
    
    
    
    588,951
    
    
    
    1,290,922
    
    
    
    1,188,084Earnings from continuing operations before gain (loss)
on disposal of assets and income taxes
    
    
    35,249
    
    
    
    35,571
    
    
    
    60,818
    
    
    
    65,395Gain (loss) on disposal of assets, net
    
    
    540
    
    
    
    (161
    )
    
    
    885
    
    
    
    (57
    )Earnings from continuing operations before income taxes
    
    
    35,789
    
    
    
    35,410
    
    
    
    61,703
    
    
    
    65,338Income tax expense
    
    
    13,500
    
    
    
    13,270
    
    
    
    22,689
    
    
    
    23,861Net earnings from continuing operations
    
    
    22,289
    
    
    
    22,140
    
    
    
    39,014
    
    
    
    41,477Earnings (loss) from discontinued operations, net of
income taxes
    
    
    (2,846
    )
    
    
    (25
    )
    
    
    (6,054
    )
    
    
    21Net earnings
    
    
    19,443
    
    
    
    22,115
    
    
    
    32,960
    
    
    
    41,498Net earnings attributable to non-controlling interests
    
    
    (2,417
    )
    
    
    (2,033
    )
    
    
    (4,188
    )
    
    
    (4,061
    )Net earnings attributable to IASIS Healthcare LLC
    
    $
    17,026
    
    
    $
    20,082
    
    
    $
    28,772
    
    
    $
    37,437
   2




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IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED STATEMENT OF EQUITY


(UNAUDITED)
 (In Thousands)
 Non-controllingInterests with
    

    
    
    
    
    
    Non-Redemption
    

    
    Members
    
    
    controllingRights
    

    
    Equity
    
    
    Interests
    
    
    Total EquityBalance at September 30, 2010
    
    $
    72,112
    

    
    $
    702,135
    
    
    $
    10,371
    
    
    $
    712,506Net earnings
    
    
    4,134
    

    
    
    28,772
    
    
    
    54
    
    
    
    28,826Distributions to non-controlling
interests
    
    
    (5,603
    )

    
    
    
    
    
    
    (86
    )
    
    
    (86
    )Repurchase of non-controlling
interests
    
    
    (118
    )

    
    
    
    
    
    
    (507
    )
    
    
    (507
    )Acquisition related adjustments to redemption value of non-controlling interests with redemption rights
    
    
    25,936
    

    
    
    
    
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    

    
    
    1,034
    
    
    
    
    
    
    
    1,034Other comprehensive income
    
    
    
    

    
    
    1,698
    
    
    
    
    
    
    
    1,698Contribution from parent company
related to tax benefit from
Holdings Senior PIK Loans
interest
    
    
    
    

    
    
    4,440
    
    
    
    
    
    
    
    4,440Adjustment to redemption value of
non-controlling interests with
redemption rights
    
    
    (7,196
    )

    
    
    7,196
    
    
    
    
    
    
    
    7,196Balance at March 31, 2011
    
    $
    89,265
    

    
    $
    745,275
    
    
    $
    9,832
    
    
    $
    755,107
   3




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IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



(UNAUDITED)
 (In Thousands)
 Six Months EndedMarch 31,2011
    
    
    2010Cash flows from operating activitiesNet earnings
    
    $
    32,960
    
    
    $
    41,498Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation and amortization
    
    
    48,630
    
    
    
    47,902Amortization of loan costs
    
    
    1,636
    
    
    
    1,564Stock-based compensation
    
    
    1,034
    
    
    
    2,249Deferred income taxes
    
    
    2,278
    
    
    
    19,589Income tax benefit from stock-based compensation
    
    
    
    
    
    
    (1,770
    )Income tax benefit from parent company interest
    
    
    4,440
    
    
    
    3,275Loss (gain) on disposal of assets, net
    
    
    (885
    )
    
    
    57Loss (earnings) from discontinued operations, net
    
    
    6,054
    
    
    
    (21
    )Changes in operating assets and liabilities, net of the effect of acquisitions and
dispositions:Accounts receivable, net
    
    
    (23,461
    )
    
    
    1,578Inventories, prepaid expenses and other current assets
    
    
    4,461
    
    
    
    (6,165
    )Accounts payable, other accrued expenses and other accrued liabilities
    
    
    20,562
    
    
    
    7,010Net cash provided by operating activities  continuing operations
    
    
    97,709
    
    
    
    116,766Net cash used in operating activities  discontinued operations
    
    
    (231
    )
    
    
    (199
    )Net cash provided by operating activities
    
    
    97,478
    
    
    
    116,567Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    (42,234
    )
    
    
    (30,187
    )Payments for acquisitions
    
    
    (12,804
    )
    
    
    Proceeds from sale of assets
    
    
    150
    
    
    
    36Change in other assets, net
    
    
    1,639
    
    
    
    1,013Net cash used in investing activities
    
    
    (53,249
    )
    
    
    (29,138
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (3,810
    )
    
    
    (5,138
    )Distribution to parent company in connection with the repurchase of equity, net
    
    
    
    
    
    
    (124,962
    )Distributions to non-controlling interests
    
    
    (5,689
    )
    
    
    (5,277
    )Costs paid for the repurchase of non-controlling interests, net
    
    
    (625
    )
    
    
    (69
    )Net cash used in financing activities
    
    
    (10,124
    )
    
    
    (135,446
    )Change in cash and cash equivalents
    
    
    34,105
    
    
    
    (48,017
    )Cash and cash equivalents at beginning of period
    
    
    144,511
    
    
    
    206,528Cash and cash equivalents at end of period
    
    $
    178,616
    
    
    $
    158,511Supplemental disclosure of cash flow informationCash paid for interest
    
    $
    31,846
    
    
    $
    31,837Cash paid (received) for income taxes, net
    
    $
    (241
    )
    
    $
    6,188Supplemental disclosure of non-cash investing and financing activitiesCapital lease obligations resulting from acquisitions
    
    $
    1,896
    
    
    $
    
   4




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##### Table of Contents



IASIS HEALTHCARE LLC
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 1. ORGANIZATION AND BASIS OF PRESENTATION
   
    
    Salt Lake City, Utah;
 
    
    Phoenix, Arizona;
 
    
    Tampa-St. Petersburg, Florida;
 
    
    four cities in Texas, including San Antonio;
 
    
    Las Vegas, Nevada;
 
    
    West Monroe, Louisiana; and
 
    
    Woodland Park, Colorado.
    Principles of Consolidation
  Use of Estimates
   5




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Reclassifications
  General and Administrative
  Subsequent Events Consideration
  2. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
  March 31,
    
    
    September 30,2011
    
    
    2010Senior secured credit facilities
    
    $
    567,315
    
    
    $
    570,260Senior subordinated notes
    
    
    475,000
    
    
    
    475,000Capital leases and other obligations
    
    
    13,212
    
    
    
    6,3181,055,527
    
    
    
    1,051,578Less current maturities
    
    
    7,675
    
    
    
    6,691$
    1,047,852
    
    
    $
    1,044,887
 Senior Secured Credit Facilities
     6




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
   8 3 / 4 % Senior Subordinated Notes
 3 4 3 4 3 4 3 4 3 4 3 4
  Holdings Senior Paid-in-Kind Loans
   3. INTEREST RATE SWAPS
     7




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
   4. ACQUISITIONS
   5. GOODWILL
  Acute
    
    
    HealthCare
    
    
    Choice
    
    
    TotalBalance at September 30, 2010
    
    $
    712,486
    
    
    $
    5,757
    
    
    $
    718,243Brim acquisition
    
    
    77,762
    
    
    
    
    
    
    
    77,762Other acquisitions
    
    
    5,270
    
    
    
    
    
    
    
    5,270Balance at March 31, 2011
    
    $
    795,518
    
    
    $
    5,757
    
    
    $
    801,275
   8




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 6. COMPREHENSIVE INCOME
  Quarter Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Net earnings
    
    $
    19,443
    
    
    $
    22,115
    
    
    $
    32,960
    
    
    $
    41,498Change in fair value of interest rate swaps
    
    
    1,148
    
    
    
    (1,439
    )
    
    
    2,708
    
    
    
    (1,148
    )Change in income tax benefit (expense)
    
    
    (433
    )
    
    
    539
    
    
    
    (1,010
    )
    
    
    428Comprehensive income
    
    $
    20,158
    
    
    $
    21,215
    
    
    $
    34,658
    
    
    $
    40,778
  March 31,
    
    
    September 30,2011
    
    
    2010Fair value of interest rate swaps
    
    $
    (2,999
    )
    
    $
    (5,707
    )Income tax benefit
    
    
    1,118
    
    
    
    2,128Accumulated other comprehensive loss
    
    $
    (1,881
    )
    
    $
    (3,579
    )
 7. DISTRIBUTION TO PARENT
   8. COMMITMENTS AND CONTINGENCIES
 Net Revenue
  Professional, General and Workers Compensation Liability Risks
   9




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Health Choice
  Acquisitions
  Other
 qui tam qui tam qui tam qui tam qui tam
  10




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 qui tam qui tam qui tam
   9. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 Health Care Entities Measuring Charity Care for
Disclosure
  11




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Health
Care Entities Presentation of Insurance Claims and Related Insurance Recoveries
 Financial Services Insurance Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts
 IntangiblesGoodwill and Other When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or
Negative Carrying Amounts
 Business Combinations Disclosure of Supplementary Pro Forma Information for Business Combinations
  12




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 10. SEGMENT AND GEOGRAPHIC INFORMATION
  For the Quarter Ended March 31, 2011Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    488,449
    
    
    $
    
    
    
    $
    
    
    
    $
    488,449Premium revenue
    
    
    
    
    
    
    189,960
    
    
    
    
    
    
    
    189,960Revenue between segments
    
    
    2,807
    
    
    
    
    
    
    
    (2,807
    )
    
    
    Net revenue
    
    
    491,256
    
    
    
    189,960
    
    
    
    (2,807
    )
    
    
    678,409Salaries and benefits
(excludes stock-based
compensation)
    
    
    190,325
    
    
    
    5,173
    
    
    
    
    
    
    
    195,498Supplies
    
    
    77,872
    
    
    
    52
    
    
    
    
    
    
    
    77,924Medical claims
    
    
    
    
    
    
    160,223
    
    
    
    (2,807
    )
    
    
    157,416Other operating expenses
    
    
    96,425
    
    
    
    6,925
    
    
    
    
    
    
    
    103,350Provision for bad debts
    
    
    54,801
    
    
    
    
    
    
    
    
    
    
    
    54,801Rentals and leases
    
    
    10,891
    
    
    
    398
    
    
    
    
    
    
    
    11,289Adjusted EBITDA (1)
    
    
    60,942
    
    
    
    17,189
    
    
    
    
    
    
    
    78,131Interest expense, net
    
    
    16,510
    
    
    
    
    
    
    
    
    
    
    
    16,510Depreciation and amortization
    
    
    23,697
    
    
    
    887
    
    
    
    
    
    
    
    24,584Stock-based compensation
    
    
    538
    
    
    
    
    
    
    
    
    
    
    
    538Management fees
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    
    1,250Earnings from continuing
operations before gain on
disposal of assets and income
taxes
    
    
    18,947
    
    
    
    16,302
    
    
    
    
    
    
    
    35,249Gain on disposal of assets, net
    
    
    540
    
    
    
    
    
    
    
    
    
    
    
    540Earnings from continuing
operations before income
taxes
    
    $
    19,487
    
    
    $
    16,302
    
    
    $
    
    
    
    $
    35,789
 For the Quarter Ended March 31, 2010Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    437,574
    
    
    $
    
    
    
    $
    
    
    
    $
    437,574Premium revenue
    
    
    
    
    
    
    186,948
    
    
    
    
    
    
    
    186,948Revenue between segments
    
    
    3,336
    
    
    
    
    
    
    
    (3,336
    )
    
    
    Net revenue
    
    
    440,910
    
    
    
    186,948
    
    
    
    (3,336
    )
    
    
    624,522Salaries and benefits
(excludes stock-based
compensation)
    
    
    167,096
    
    
    
    4,947
    
    
    
    
    
    
    
    172,043Supplies
    
    
    68,375
    
    
    
    50
    
    
    
    
    
    
    
    68,425Medical claims
    
    
    
    
    
    
    163,430
    
    
    
    (3,336
    )
    
    
    160,094Other operating expenses
    
    
    82,604
    
    
    
    6,079
    
    
    
    
    
    
    
    88,683Provision for bad debts
    
    
    45,536
    
    
    
    
    
    
    
    
    
    
    
    45,536Rentals and leases
    
    
    9,780
    
    
    
    365
    
    
    
    
    
    
    
    10,145Adjusted EBITDA (1)
    
    
    67,519
    
    
    
    12,077
    
    
    
    
    
    
    
    79,596Interest expense, net
    
    
    16,622
    
    
    
    
    
    
    
    
    
    
    
    16,622Depreciation and amortization
    
    
    23,137
    
    
    
    888
    
    
    
    
    
    
    
    24,025Stock-based compensation
    
    
    2,128
    
    
    
    
    
    
    
    
    
    
    
    2,128Management fees
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    
    1,250Earnings from continuing
operations before loss on
disposal of assets and income
taxes
    
    
    24,382
    
    
    
    11,189
    
    
    
    
    
    
    
    35,571Loss on disposal of assets, net
    
    
    (161
    )
    
    
    
    
    
    
    
    
    
    
    (161
    )Earnings from continuing
operations before income
taxes
    
    $
    24,221
    
    
    $
    11,189
    
    
    $
    
    
    
    $
    35,410
  13




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 For the Six Months Ended March 31, 2011Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    959,588
    
    
    $
    
    
    
    $
    
    
    
    $
    959,588Premium revenue
    
    
    
    
    
    
    392,152
    
    
    
    
    
    
    
    392,152Revenue between segments
    
    
    5,467
    
    
    
    
    
    
    
    (5,467
    )
    
    
    Net revenue
    
    
    965,055
    
    
    
    392,152
    
    
    
    (5,467
    )
    
    
    1,351,740Salaries and benefits
(excludes stock-based
compensation)
    
    
    374,719
    
    
    
    10,196
    
    
    
    
    
    
    
    384,915Supplies
    
    
    154,264
    
    
    
    96
    
    
    
    
    
    
    
    154,360Medical claims
    
    
    
    
    
    
    334,217
    
    
    
    (5,467
    )
    
    
    328,750Other operating expenses
    
    
    187,255
    
    
    
    13,221
    
    
    
    
    
    
    
    200,476Provision for bad debts
    
    
    114,415
    
    
    
    
    
    
    
    
    
    
    
    114,415Rentals and leases
    
    
    21,613
    
    
    
    842
    
    
    
    
    
    
    
    22,455Adjusted EBITDA (1)
    
    
    112,789
    
    
    
    33,580
    
    
    
    
    
    
    
    146,369Interest expense, net
    
    
    33,387
    
    
    
    
    
    
    
    
    
    
    
    33,387Depreciation and amortization
    
    
    46,848
    
    
    
    1,782
    
    
    
    
    
    
    
    48,630Stock-based compensation
    
    
    1,034
    
    
    
    
    
    
    
    
    
    
    
    1,034Management fees
    
    
    2,500
    
    
    
    
    
    
    
    
    
    
    
    2,500Earnings from continuing
operations before gain on
disposal of assets and income
taxes
    
    
    29,020
    
    
    
    31,798
    
    
    
    
    
    
    
    60,818Gain on disposal of assets, net
    
    
    885
    
    
    
    
    
    
    
    
    
    
    
    885Earnings from continuing
operations before income
taxes
    
    $
    29,905
    
    
    $
    31,798
    
    
    $
    
    
    
    $
    61,703Segment assets
    
    $
    2,114,294
    
    
    $
    342,970
    
    
    
    
    
    
    $
    2,457,264Capital expenditures
    
    $
    42,187
    
    
    $
    47
    
    
    
    
    
    
    $
    42,234Goodwill
    
    $
    795,518
    
    
    $
    5,757
    
    
    
    
    
    
    $
    801,275
 For the Six Months Ended March 31, 2010Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    862,234
    
    
    $
    
    
    
    $
    
    
    
    $
    862,234Premium revenue
    
    
    
    
    
    
    391,245
    
    
    
    
    
    
    
    391,245Revenue between segments
    
    
    6,012
    
    
    
    
    
    
    
    (6,012
    )
    
    
    Net revenue
    
    
    868,246
    
    
    
    391,245
    
    
    
    (6,012
    )
    
    
    1,253,479Salaries and benefits
(excludes stock-based  compensation)
    
    
    332,865
    
    
    
    9,539
    
    
    
    
    
    
    
    342,404Supplies
    
    
    133,737
    
    
    
    97
    
    
    
    
    
    
    
    133,834Medical claims
    
    
    
    
    
    
    344,673
    
    
    
    (6,012
    )
    
    
    338,661Other operating expenses
    
    
    160,929
    
    
    
    12,346
    
    
    
    
    
    
    
    173,275Provision for bad debts
    
    
    93,485
    
    
    
    
    
    
    
    
    
    
    
    93,485Rentals and leases
    
    
    19,684
    
    
    
    736
    
    
    
    
    
    
    
    20,420Adjusted EBITDA (1)
    
    
    127,546
    
    
    
    23,854
    
    
    
    
    
    
    
    151,400Interest expense, net
    
    
    33,354
    
    
    
    
    
    
    
    
    
    
    
    33,354Depreciation and amortization
    
    
    46,125
    
    
    
    1,777
    
    
    
    
    
    
    
    47,902Stock-based compensation
    
    
    2,249
    
    
    
    
    
    
    
    
    
    
    
    2,249Management fees
    
    
    2,500
    
    
    
    
    
    
    
    
    
    
    
    2,500Earnings from continuing
operations before loss on
disposal of assets and income
taxes
    
    
    43,318
    
    
    
    22,077
    
    
    
    
    
    
    
    65,395Loss on disposal of assets, net
    
    
    (57
    )
    
    
    
    
    
    
    
    
    
    
    (57
    )Earnings from continuing
operations before income
taxes
    
    $
    43,261
    
    
    $
    22,077
    
    
    $
    
    
    
    $
    65,338Segment assets
    
    $
    1,991,583
    
    
    $
    286,775
    
    
    
    
    
    
    $
    2,278,358Capital expenditures
    
    $
    30,073
    
    
    $
    114
    
    
    
    
    
    
    $
    30,187Goodwill
    
    $
    712,163
    
    
    $
    5,757
    
    
    
    
    
    
    $
    717,920
  14




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (1)
    
    Adjusted EBITDA represents net earnings from continuing operations
before interest expense, income tax expense, depreciation and
amortization, stock-based compensation, gain (loss) on disposal of assets
and management fees. Management fees represent monitoring and advisory
fees paid to TPG, the Companys majority financial sponsor, and
certain other members of IASIS Investment LLC, majority shareholder of
IAS. Management routinely calculates and communicates adjusted EBITDA
and believes that it is useful to investors because it is commonly
used as an analytical indicator within the healthcare industry to
evaluate hospital performance, allocate resources and measure leverage
capacity and debt service ability. In addition, the Company uses
adjusted EBITDA as a measure of performance for its business segments
and for incentive compensation purposes. Adjusted EBITDA should not be
considered as a measure of financial performance under GAAP, and the
items excluded from adjusted EBITDA are significant components in
understanding and assessing financial performance. Adjusted EBITDA
should not be considered in isolation or as an alternative to net
earnings, cash flows generated by operating, investing, or financing
activities or other financial statement data presented in the
condensed consolidated financial statements as an indicator of
financial performance or liquidity. Adjusted EBITDA, as presented,
differs from what is defined under the Companys senior secured credit
facilities and may not be comparable to similarly titled measures of
other companies. 11. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
 3 4
    15




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    175,063
    
    
    $
    3,553
    
    
    $
    
    
    
    $
    178,616Accounts receivable, net
    
    
    
    
    
    
    101,203
    
    
    
    149,944
    
    
    
    
    
    
    
    251,147Inventories
    
    
    
    
    
    
    23,319
    
    
    
    35,731
    
    
    
    
    
    
    
    59,050Deferred income taxes
    
    
    29,289
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,289Prepaid expenses and other
current assets
    
    
    
    
    
    
    26,524
    
    
    
    34,307
    
    
    
    
    
    
    
    60,831Total current assets
    
    
    29,289
    
    
    
    326,109
    
    
    
    223,535
    
    
    
    
    
    
    
    578,933Property and equipment, net
    
    
    
    
    
    
    346,988
    
    
    
    655,102
    
    
    
    
    
    
    
    1,002,090Intercompany
    
    
    
    
    
    
    (299,762
    )
    
    
    299,762
    
    
    
    
    
    
    
    Net investment in and advances
to subsidiaries
    
    
    1,862,317
    
    
    
    
    
    
    
    
    
    
    
    (1,862,317
    )
    
    
    Goodwill
    
    
    7,701
    
    
    
    64,258
    
    
    
    729,316
    
    
    
    
    
    
    
    801,275Other intangible assets, net
    
    
    
    
    
    
    8,567
    
    
    
    25,500
    
    
    
    
    
    
    
    34,067Deposit for acquisition
    
    
    
    
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    
    7,000Other assets, net
    
    
    10,383
    
    
    
    15,346
    
    
    
    8,170
    
    
    
    
    
    
    
    33,899Total assets
    
    $
    1,909,690
    
    
    $
    468,506
    
    
    $
    1,941,385
    
    
    $
    (1,862,317
    )
    
    $
    2,457,264Liabilities and EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    31,814
    
    
    $
    57,769
    
    
    $
    
    
    
    $
    89,583Salaries and benefits payable
    
    
    
    
    
    
    22,237
    
    
    
    20,944
    
    
    
    
    
    
    
    43,181Accrued interest payable
    
    
    12,477
    
    
    
    (3,234
    )
    
    
    3,234
    
    
    
    
    
    
    
    12,477Medical claims payable
    
    
    
    
    
    
    
    
    
    
    106,950
    
    
    
    
    
    
    
    106,950Other accrued expenses and
other current liabilities
    
    
    
    
    
    
    50,173
    
    
    
    74,335
    
    
    
    
    
    
    
    124,508Current portion of long-term
debt and capital lease
obligations
    
    
    5,890
    
    
    
    1,785
    
    
    
    21,400
    
    
    
    (21,400
    )
    
    
    7,675Total current liabilities
    
    
    18,367
    
    
    
    102,775
    
    
    
    284,632
    
    
    
    (21,400
    )
    
    
    384,374Long-term debt and capital
lease obligations
    
    
    1,036,425
    
    
    
    11,427
    
    
    
    547,519
    
    
    
    (547,519
    )
    
    
    1,047,852Deferred income taxes
    
    
    109,623
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109,623Other long-term liabilities
    
    
    
    
    
    
    70,415
    
    
    
    628
    
    
    
    
    
    
    
    71,043Total liabilities
    
    
    1,164,415
    
    
    
    184,617
    
    
    
    832,779
    
    
    
    (568,919
    )
    
    
    1,612,892Non-controlling interests with
redemption rights
    
    
    
    
    
    
    89,265
    
    
    
    
    
    
    
    
    
    
    
    89,265Equity:Members equity
    
    
    745,275
    
    
    
    184,792
    
    
    
    1,108,606
    
    
    
    (1,293,398
    )
    
    
    745,275Non-controlling interests
    
    
    
    
    
    
    9,832
    
    
    
    
    
    
    
    
    
    
    
    9,832Total equity
    
    
    745,275
    
    
    
    194,624
    
    
    
    1,108,606
    
    
    
    (1,293,398
    )
    
    
    755,107Total liabilities and equity
    
    $
    1,909,690
    
    
    $
    468,506
    
    
    $
    1,941,385
    
    
    $
    (1,862,317
    )
    
    $
    2,457,264
  16




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    143,599
    
    
    $
    912
    
    
    $
    
    
    
    $
    144,511Accounts receivable, net
    
    
    
    
    
    
    81,649
    
    
    
    127,524
    
    
    
    
    
    
    
    209,173Inventories
    
    
    
    
    
    
    22,793
    
    
    
    31,049
    
    
    
    
    
    
    
    53,842Deferred income taxes
    
    
    15,881
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,881Prepaid expenses and other
current assets
    
    
    
    
    
    
    23,577
    
    
    
    41,763
    
    
    
    
    
    
    
    65,340Total current assets
    
    
    15,881
    
    
    
    271,618
    
    
    
    201,248
    
    
    
    
    
    
    
    488,747Property and equipment, net
    
    
    
    
    
    
    351,265
    
    
    
    634,026
    
    
    
    
    
    
    
    985,291Intercompany
    
    
    
    
    
    
    (297,257
    )
    
    
    297,257
    
    
    
    
    
    
    
    Net investment in and advances to
subsidiaries
    
    
    1,823,973
    
    
    
    
    
    
    
    
    
    
    
    (1,823,973
    )
    
    
    Goodwill
    
    
    17,331
    
    
    
    65,504
    
    
    
    635,408
    
    
    
    
    
    
    
    718,243Other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    27,000
    
    
    
    
    
    
    
    27,000Deposit for acquisition
    
    
    
    
    
    
    97,891
    
    
    
    
    
    
    
    
    
    
    
    97,891Other assets, net
    
    
    12,018
    
    
    
    17,967
    
    
    
    6,037
    
    
    
    
    
    
    
    36,022Total assets
    
    $
    1,869,203
    
    
    $
    506,988
    
    
    $
    1,800,976
    
    
    $
    (1,823,973
    )
    
    $
    2,353,194Liabilities and EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    32,400
    
    
    $
    46,531
    
    
    $
    
    
    
    $
    78,931Salaries and benefits payable
    
    
    
    
    
    
    19,916
    
    
    
    18,194
    
    
    
    
    
    
    
    38,110Accrued interest payable
    
    
    12,536
    
    
    
    (3,237
    )
    
    
    3,237
    
    
    
    
    
    
    
    12,536Medical claims payable
    
    
    
    
    
    
    
    
    
    
    111,373
    
    
    
    
    
    
    
    111,373Other accrued expenses and
other current liabilities
    
    
    
    
    
    
    32,326
    
    
    
    74,288
    
    
    
    
    
    
    
    106,614Current portion of long-term
debt and capital lease
obligations
    
    
    5,890
    
    
    
    801
    
    
    
    20,570
    
    
    
    (20,570
    )
    
    
    6,691Total current liabilities
    
    
    18,426
    
    
    
    82,206
    
    
    
    274,193
    
    
    
    (20,570
    )
    
    
    354,255Long-term debt and capital lease
obligations
    
    
    1,039,370
    
    
    
    5,517
    
    
    
    547,170
    
    
    
    (547,170
    )
    
    
    1,044,887Deferred income taxes
    
    
    109,272
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109,272Other long-term liabilities
    
    
    
    
    
    
    59,527
    
    
    
    635
    
    
    
    
    
    
    
    60,162Total liabilities
    
    
    1,167,068
    
    
    
    147,250
    
    
    
    821,998
    
    
    
    (567,740
    )
    
    
    1,568,576Non-controlling interests with
redemption rights
    
    
    
    
    
    
    72,112
    
    
    
    
    
    
    
    
    
    
    
    72,112Equity:Members equity
    
    
    702,135
    
    
    
    277,255
    
    
    
    978,978
    
    
    
    (1,256,233
    )
    
    
    702,135Non-controlling interests
    
    
    
    
    
    
    10,371
    
    
    
    
    
    
    
    
    
    
    
    10,371Total equity
    
    
    702,135
    
    
    
    287,626
    
    
    
    978,978
    
    
    
    (1,256,233
    )
    
    
    712,506Total liabilities and equity
    
    $
    1,869,203
    
    
    $
    506,988
    
    
    $
    1,800,976
    
    
    $
    (1,823,973
    )
    
    $
    2,353,194
  17




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    188,517
    
    
    $
    302,739
    
    
    $
    (2,807
    )
    
    $
    488,449Premium revenue
    
    
    
    
    
    
    
    
    
    
    189,960
    
    
    
    
    
    
    
    189,960Total net revenue
    
    
    
    
    
    
    188,517
    
    
    
    492,699
    
    
    
    (2,807
    )
    
    
    678,409Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    95,505
    
    
    
    100,531
    
    
    
    
    
    
    
    196,036Supplies
    
    
    
    
    
    
    31,533
    
    
    
    46,391
    
    
    
    
    
    
    
    77,924Medical claims
    
    
    
    
    
    
    
    
    
    
    160,223
    
    
    
    (2,807
    )
    
    
    157,416Other operating expenses
    
    
    
    
    
    
    33,771
    
    
    
    69,579
    
    
    
    
    
    
    
    103,350Provision for bad debts
    
    
    
    
    
    
    22,149
    
    
    
    32,652
    
    
    
    
    
    
    
    54,801Rentals and leases
    
    
    
    
    
    
    4,735
    
    
    
    6,554
    
    
    
    
    
    
    
    11,289Interest expense, net
    
    
    16,510
    
    
    
    
    
    
    
    10,545
    
    
    
    (10,545
    )
    
    
    16,510Depreciation and
amortization
    
    
    
    
    
    
    9,951
    
    
    
    14,633
    
    
    
    
    
    
    
    24,584Management fees
    
    
    1,250
    
    
    
    (6,406
    )
    
    
    6,406
    
    
    
    
    
    
    
    1,250Equity in earnings of
affiliates
    
    
    (36,030
    )
    
    
    
    
    
    
    
    
    
    
    36,030
    
    
    
    Total costs and expenses
    
    
    (18,270
    )
    
    
    191,238
    
    
    
    447,514
    
    
    
    22,678
    
    
    
    643,160Earnings (loss) from
continuing operations before
gain on disposal of assets and
income taxes
    
    
    18,270
    
    
    
    (2,721
    )
    
    
    45,185
    
    
    
    (25,485
    )
    
    
    35,249Gain on disposal of assets, net
    
    
    
    
    
    
    128
    
    
    
    412
    
    
    
    
    
    
    
    540Earnings (loss) from
continuing operations before
income taxes
    
    
    18,270
    
    
    
    (2,593
    )
    
    
    45,597
    
    
    
    (25,485
    )
    
    
    35,789Income tax expense
    
    
    13,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,500Net earnings (loss) from
continuing operations
    
    
    4,770
    
    
    
    (2,593
    )
    
    
    45,597
    
    
    
    (25,485
    )
    
    
    22,289Earnings (loss) from
discontinued operations, net
of income taxes
    
    
    1,711
    
    
    
    (4,558
    )
    
    
    1
    
    
    
    
    
    
    
    (2,846
    )Net earnings (loss)
    
    
    6,481
    
    
    
    (7,151
    )
    
    
    45,598
    
    
    
    (25,485
    )
    
    
    19,443Net earnings attributable to
non-controlling interests
    
    
    
    
    
    
    (2,417
    )
    
    
    
    
    
    
    
    
    
    
    (2,417
    )Net earnings (loss)
attributable to IASIS
Healthcare LLC
    
    $
    6,481
    
    
    $
    (9,568
    )
    
    $
    45,598
    
    
    $
    (25,485
    )
    
    $
    17,026
  18




---



##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    174,795
    
    
    $
    266,115
    
    
    $
    (3,336
    )
    
    $
    437,574Premium revenue
    
    
    
    
    
    
    
    
    
    
    186,948
    
    
    
    
    
    
    
    186,948Total net revenue
    
    
    
    
    
    
    174,795
    
    
    
    453,063
    
    
    
    (3,336
    )
    
    
    624,522Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    88,167
    
    
    
    86,004
    
    
    
    
    
    
    
    174,171Supplies
    
    
    
    
    
    
    28,704
    
    
    
    39,721
    
    
    
    
    
    
    
    68,425Medical claims
    
    
    
    
    
    
    
    
    
    
    163,430
    
    
    
    (3,336
    )
    
    
    160,094Other operating expenses
    
    
    
    
    
    
    27,340
    
    
    
    61,343
    
    
    
    
    
    
    
    88,683Provision for bad debts
    
    
    
    
    
    
    21,440
    
    
    
    24,096
    
    
    
    
    
    
    
    45,536Rentals and leases
    
    
    
    
    
    
    4,056
    
    
    
    6,089
    
    
    
    
    
    
    
    10,145Interest expense, net
    
    
    16,622
    
    
    
    
    
    
    
    10,635
    
    
    
    (10,635
    )
    
    
    16,622Depreciation and
amortization
    
    
    
    
    
    
    9,948
    
    
    
    14,077
    
    
    
    
    
    
    
    24,025Management fees
    
    
    1,250
    
    
    
    (5,752
    )
    
    
    5,752
    
    
    
    
    
    
    
    1,250Equity in earnings of
affiliates
    
    
    (40,574
    )
    
    
    
    
    
    
    
    
    
    
    40,574
    
    
    
    Total costs and expenses
    
    
    (22,702
    )
    
    
    173,903
    
    
    
    411,147
    
    
    
    26,603
    
    
    
    588,951Earnings (loss) from
continuing operations before
loss on disposal of assets and
income taxes
    
    
    22,702
    
    
    
    892
    
    
    
    41,916
    
    
    
    (29,939
    )
    
    
    35,571Loss on disposal of assets, net
    
    
    
    
    
    
    (17
    )
    
    
    (144
    )
    
    
    
    
    
    
    (161
    )Earnings (loss) from
continuing operations before
income taxes
    
    
    22,702
    
    
    
    875
    
    
    
    41,772
    
    
    
    (29,939
    )
    
    
    35,410Income tax expense
    
    
    13,270
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,270Net earnings (loss) from
continuing operations
    
    
    9,432
    
    
    
    875
    
    
    
    41,772
    
    
    
    (29,939
    )
    
    
    22,140Earnings (loss) from
discontinued operations, net
of income taxes
    
    
    15
    
    
    
    (38
    )
    
    
    (2
    )
    
    
    
    
    
    
    (25
    )Net earnings (loss)
    
    
    9,447
    
    
    
    837
    
    
    
    41,770
    
    
    
    (29,939
    )
    
    
    22,115Net earnings attributable to
non-controlling interests
    
    
    
    
    
    
    (2,033
    )
    
    
    
    
    
    
    
    
    
    
    (2,033
    )Net earnings (loss)
attributable to IASIS
Healthcare LLC
    
    $
    9,447
    
    
    $
    (1,196
    )
    
    $
    41,770
    
    
    $
    (29,939
    )
    
    $
    20,082
  19




---



##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    372,803
    
    
    $
    592,252
    
    
    $
    (5,467
    )
    
    $
    959,588Premium revenue
    
    
    
    
    
    
    
    
    
    
    392,152
    
    
    
    
    
    
    
    392,152Total net revenue
    
    
    
    
    
    
    372,803
    
    
    
    984,404
    
    
    
    (5,467
    )
    
    
    1,351,740Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    188,848
    
    
    
    197,101
    
    
    
    
    
    
    
    385,949Supplies
    
    
    
    
    
    
    62,300
    
    
    
    92,060
    
    
    
    
    
    
    
    154,360Medical claims
    
    
    
    
    
    
    
    
    
    
    334,217
    
    
    
    (5,467
    )
    
    
    328,750Other operating expenses
    
    
    
    
    
    
    66,499
    
    
    
    133,977
    
    
    
    
    
    
    
    200,476Provision for bad debts
    
    
    
    
    
    
    47,642
    
    
    
    66,773
    
    
    
    
    
    
    
    114,415Rentals and leases
    
    
    
    
    
    
    9,325
    
    
    
    13,130
    
    
    
    
    
    
    
    22,455Interest expense, net
    
    
    33,387
    
    
    
    
    
    
    
    20,935
    
    
    
    (20,935
    )
    
    
    33,387Depreciation and
amortization
    
    
    
    
    
    
    19,947
    
    
    
    28,683
    
    
    
    
    
    
    
    48,630Management fees
    
    
    2,500
    
    
    
    (12,587
    )
    
    
    12,587
    
    
    
    
    
    
    
    2,500Equity in earnings of
affiliates
    
    
    (62,819
    )
    
    
    
    
    
    
    
    
    
    
    62,819
    
    
    
    Total costs and
expenses
    
    
    (26,932
    )
    
    
    381,974
    
    
    
    899,463
    
    
    
    36,417
    
    
    
    1,290,922Earnings (loss) from
continuing operations
before gain on disposal of
assets and income taxes
    
    
    26,932
    
    
    
    (9,171
    )
    
    
    84,941
    
    
    
    (41,884
    )
    
    
    60,818Gain on disposal of
assets, net
    
    
    
    
    
    
    492
    
    
    
    393
    
    
    
    
    
    
    
    885Earnings (loss) from
continuing operations
before income taxes
    
    
    26,932
    
    
    
    (8,679
    )
    
    
    85,334
    
    
    
    (41,884
    )
    
    
    61,703Income tax expense
    
    
    22,689
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,689Net earnings (loss) from
continuing operations
    
    
    4,243
    
    
    
    (8,679
    )
    
    
    85,334
    
    
    
    (41,884
    )
    
    
    39,014Earnings (loss) from
discontinued operations,
net of income taxes
    
    
    3,594
    
    
    
    (9,589
    )
    
    
    (59
    )
    
    
    
    
    
    
    (6,054
    )Net earnings (loss)
    
    
    7,837
    
    
    
    (18,268
    )
    
    
    85,275
    
    
    
    (41,884
    )
    
    
    32,960Net earnings attributable
to non-controlling
interests
    
    
    
    
    
    
    (4,188
    )
    
    
    
    
    
    
    
    
    
    
    (4,188
    )Net earnings (loss)
attributable to IASIS
Healthcare LLC
    
    $
    7,837
    
    
    $
    (22,456
    )
    
    $
    85,275
    
    
    $
    (41,884
    )
    
    $
    28,772
  20




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    346,096
    
    
    $
    522,150
    
    
    $
    (6,012
    )
    
    $
    862,234Premium revenue
    
    
    
    
    
    
    
    
    
    
    391,245
    
    
    
    
    
    
    
    391,245Total net revenue
    
    
    
    
    
    
    346,096
    
    
    
    913,395
    
    
    
    (6,012
    )
    
    
    1,253,479Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    174,776
    
    
    
    169,877
    
    
    
    
    
    
    
    344,653Supplies
    
    
    
    
    
    
    56,142
    
    
    
    77,692
    
    
    
    
    
    
    
    133,834Medical claims
    
    
    
    
    
    
    
    
    
    
    344,673
    
    
    
    (6,012
    )
    
    
    338,661Other operating expenses
    
    
    
    
    
    
    57,229
    
    
    
    116,046
    
    
    
    
    
    
    
    173,275Provision for bad debts
    
    
    
    
    
    
    43,763
    
    
    
    49,722
    
    
    
    
    
    
    
    93,485Rentals and leases
    
    
    
    
    
    
    8,482
    
    
    
    11,938
    
    
    
    
    
    
    
    20,420Interest expense, net
    
    
    33,354
    
    
    
    
    
    
    
    20,379
    
    
    
    (20,379
    )
    
    
    33,354Depreciation and
amortization
    
    
    
    
    
    
    19,858
    
    
    
    28,044
    
    
    
    
    
    
    
    47,902Management fees
    
    
    2,500
    
    
    
    (11,316
    )
    
    
    11,316
    
    
    
    
    
    
    
    2,500Equity in earnings of
affiliates
    
    
    (76,786
    )
    
    
    
    
    
    
    
    
    
    
    76,786
    
    
    
    Total costs and
expenses
    
    
    (40,932
    )
    
    
    348,934
    
    
    
    829,687
    
    
    
    50,395
    
    
    
    1,188,084Earnings (loss) from
continuing operations
before gain (loss) on
disposal of assets and
income taxes
    
    
    40,932
    
    
    
    (2,838
    )
    
    
    83,708
    
    
    
    (56,407
    )
    
    
    65,395Gain (loss) on disposal of
assets, net
    
    
    
    
    
    
    59
    
    
    
    (116
    )
    
    
    
    
    
    
    (57
    )Earnings (loss) from
continuing operations
before income taxes
    
    
    40,932
    
    
    
    (2,779
    )
    
    
    83,592
    
    
    
    (56,407
    )
    
    
    65,338Income tax expense
    
    
    23,861
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,861Net earnings (loss) from
continuing operations
    
    
    17,071
    
    
    
    (2,779
    )
    
    
    83,592
    
    
    
    (56,407
    )
    
    
    41,477Earnings (loss) from
discontinued operations,
net of income taxes
    
    
    (13
    )
    
    
    37
    
    
    
    (3
    )
    
    
    
    
    
    
    21Net earnings (loss)
    
    
    17,058
    
    
    
    (2,742
    )
    
    
    83,589
    
    
    
    (56,407
    )
    
    
    41,498Net earnings attributable
to non-controlling
interests
    
    
    
    
    
    
    (4,061
    )
    
    
    
    
    
    
    
    
    
    
    (4,061
    )Net earnings (loss)
attributable to IASIS
Healthcare LLC
    
    $
    17,058
    
    
    $
    (6,803
    )
    
    $
    83,589
    
    
    $
    (56,407
    )
    
    $
    37,437
  21




---



##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    7,837
    
    
    $
    (18,268
    )
    
    $
    85,275
    
    
    $
    (41,884
    )
    
    $
    32,960Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operating
activities:Depreciation and amortization
    
    
    
    
    
    
    19,947
    
    
    
    28,683
    
    
    
    
    
    
    
    48,630Amortization of loan costs
    
    
    1,636
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,636Stock-based compensation
    
    
    1,034
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,034Deferred income taxes
    
    
    2,278
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,278Income tax benefit from parent company
interest
    
    
    4,440
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,440Gain on disposal of assets, net
    
    
    
    
    
    
    (492
    )
    
    
    (393
    )
    
    
    
    
    
    
    (885
    )Loss (earnings) from discontinued
operations, net
    
    
    (3,594
    )
    
    
    9,589
    
    
    
    59
    
    
    
    
    
    
    
    6,054Equity in earnings of affiliates
    
    
    (62,819
    )
    
    
    
    
    
    
    
    
    
    
    62,819
    
    
    
    Changes in operating assets and
liabilities, net of the effect of acquisitions and
dispositions:Accounts receivable, net
    
    
    
    
    
    
    (14,608
    )
    
    
    (8,853
    )
    
    
    
    
    
    
    (23,461
    )Inventories, prepaid expenses and
other current assets
    
    
    
    
    
    
    (7,168
    )
    
    
    11,629
    
    
    
    
    
    
    
    4,461Accounts payable, other accrued
expenses and other accrued
liabilities
    
    
    (3,653
    )
    
    
    36,641
    
    
    
    (12,426
    )
    
    
    
    
    
    
    20,562Net cash provided by (used in) operating
activities  continuing operations
    
    
    (52,841
    )
    
    
    25,641
    
    
    
    103,974
    
    
    
    20,935
    
    
    
    97,709Net cash used in operating activities 
discontinued operations
    
    
    
    
    
    
    (231
    )
    
    
    
    
    
    
    
    
    
    
    (231
    )Net cash provided by (used in) operating
activities
    
    
    (52,841
    )
    
    
    25,410
    
    
    
    103,974
    
    
    
    20,935
    
    
    
    97,478Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    
    
    
    
    (18,200
    )
    
    
    (24,034
    )
    
    
    
    
    
    
    (42,234
    )Payments for acquisitions
    
    
    
    
    
    
    (11,432
    )
    
    
    (1,372
    )
    
    
    
    
    
    
    (12,804
    )Proceeds from sale of assets
    
    
    
    
    
    
    12
    
    
    
    138
    
    
    
    
    
    
    
    150Change in other assets, net
    
    
    
    
    
    
    (5,910
    )
    
    
    7,549
    
    
    
    
    
    
    
    1,639Net cash used in investing activities
    
    
    
    
    
    
    (35,530
    )
    
    
    (17,719
    )
    
    
    
    
    
    
    (53,249
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (2,945
    )
    
    
    
    
    
    
    (865
    )
    
    
    
    
    
    
    (3,810
    )Distributions to non-controlling interests
    
    
    
    
    
    
    (5,689
    )
    
    
    
    
    
    
    
    
    
    
    (5,689
    )Costs paid for repurchase of non-controlling
interests
    
    
    
    
    
    
    (625
    )
    
    
    
    
    
    
    
    
    
    
    (625
    )Change in intercompany balances with
affiliates, net
    
    
    55,786
    
    
    
    47,898
    
    
    
    (82,749
    )
    
    
    (20,935
    )
    
    
    Net cash provided by (used in) financing
activities
    
    
    52,841
    
    
    
    41,584
    
    
    
    (83,614
    )
    
    
    (20,935
    )
    
    
    (10,124
    )Change in cash and cash equivalents
    
    
    
    
    
    
    31,464
    
    
    
    2,641
    
    
    
    
    
    
    
    34,105Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    143,599
    
    
    
    912
    
    
    
    
    
    
    
    144,511Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    175,063
    
    
    $
    3,553
    
    
    $
    
    
    
    $
    178,616
  22




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    17,058
    
    
    $
    (2,742
    )
    
    $
    83,589
    
    
    $
    (56,407
    )
    
    $
    41,498Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operating
activities:Depreciation and amortization
    
    
    
    
    
    
    19,858
    
    
    
    28,044
    
    
    
    
    
    
    
    47,902Amortization of loan costs
    
    
    1,564
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,564Stock-based compensation
    
    
    2,249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,249Deferred income taxes
    
    
    19,589
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,589Income tax
benefit from stock-based
compensation
    
    
    (1,770
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,770
    )Income tax benefit from parent company
interest
    
    
    3,275
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,275Loss (gain) on disposal of assets, net
    
    
    
    
    
    
    (59
    )
    
    
    116
    
    
    
    
    
    
    
    57Loss (earnings) from discontinued
operations, net
    
    
    13
    
    
    
    (37
    )
    
    
    3
    
    
    
    
    
    
    
    (21
    )Equity in earnings of affiliates
    
    
    (76,786
    )
    
    
    
    
    
    
    
    
    
    
    76,786
    
    
    
    Changes in operating assets and
liabilities, net of the effect of
dispositions:Accounts receivable, net
    
    
    
    
    
    
    (1,735
    )
    
    
    3,313
    
    
    
    
    
    
    
    1,578Inventories, prepaid expenses and
other current assets
    
    
    
    
    
    
    (7,050
    )
    
    
    885
    
    
    
    
    
    
    
    (6,165
    )Accounts payable, other accrued
expenses and other accrued
liabilities
    
    
    1,762
    
    
    
    (4,873
    )
    
    
    10,121
    
    
    
    
    
    
    
    7,010Net cash provided by (used in) operating
activities  continuing operations
    
    
    (33,046
    )
    
    
    3,362
    
    
    
    126,071
    
    
    
    20,379
    
    
    
    116,766Net cash used in operating activities 
discontinued operations
    
    
    (13
    )
    
    
    (186
    )
    
    
    
    
    
    
    
    
    
    
    (199
    )Net cash provided by (used in) operating
activities
    
    
    (33,059
    )
    
    
    3,176
    
    
    
    126,071
    
    
    
    20,379
    
    
    
    116,567Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    
    
    
    
    (17,975
    )
    
    
    (12,212
    )
    
    
    
    
    
    
    (30,187
    )Proceeds from sale of assets
    
    
    
    
    
    
    8
    
    
    
    28
    
    
    
    
    
    
    
    36Change in other assets, net
    
    
    
    
    
    
    1,588
    
    
    
    (575
    )
    
    
    
    
    
    
    1,013Net cash used in investing activities
    
    
    
    
    
    
    (16,379
    )
    
    
    (12,759
    )
    
    
    
    
    
    
    (29,138
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (4,607
    )
    
    
    48
    
    
    
    (579
    )
    
    
    
    
    
    
    (5,138
    )Distribution to parent company in connection
with the repurchase of equity, net
    
    
    (124,962
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (124,962
    )Distributions to non-controlling interests
    
    
    
    
    
    
    (5,277
    )
    
    
    
    
    
    
    
    
    
    
    (5,277
    )Costs paid
for repurchase of non-controlling
interests
    
    
    
    
    
    
    (69
    )
    
    
    
    
    
    
    
    
    
    
    (69
    )Change in intercompany balances with
affiliates, net
    
    
    162,628
    
    
    
    (29,516
    )
    
    
    (112,733
    )
    
    
    (20,379
    )
    
    
    Net cash provided by (used in) financing
activities
    
    
    33,059
    
    
    
    (34,814
    )
    
    
    (113,312
    )
    
    
    (20,379
    )
    
    
    (135,446
    )Change in cash and cash equivalents
    
    
    
    
    
    
    (48,017
    )
    
    
    
    
    
    
    
    
    
    
    (48,017
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    206,331
    
    
    
    197
    
    
    
    
    
    
    
    206,528Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    158,314
    
    
    $
    197
    
    
    $
    
    
    
    $
    158,511
  23




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 12. SUBSEQUENT EVENTS
 Acquisition of St. Joseph Medical Center
  Refinancing Transaction
 Overview
 3 4
  $1.325 Billion Senior Secured Credit Facilities
    24




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
     8.375% Senior Notes due 2019
      25




---



##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Registration Rights Agreement
     26




---



##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  FORWARD LOOKING STATEMENTS
 qui tam
   27




---



##### Table of Contents



EXECUTIVE OVERVIEW
  
    
    Salt Lake City, Utah;
 
    
    Phoenix, Arizona;
 
    
    Tampa-St. Petersburg, Florida;
 
    
    four cities in Texas, including San Antonio;
 
    
    Las Vegas, Nevada;
 
    
    West Monroe, Louisiana; and
 
    
    Woodland Park, Colorado.
     Significant Industry Trends
  The Impact of Health Reform
   28




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##### Table of Contents



Payor Mix Shift
  State Medicaid Budgets
  Value-Based Reimbursement
      29




---



##### Table of Contents



Physician Alignment and Integration
    Uncompensated Care
     30




---



##### Table of Contents



March 31,
    
    
    September 30,2011
    
    
    2010Insured receivables
    
    
    63.8
    %
    
    
    61.8
    %Uninsured receivables
    
    
    36.2
    %
    
    
    38.2
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
   March 31,
    
    
    September 30,2011
    
    
    20100 to 90 days
    
    
    71.6
    %
    
    
    71.9
    %91 to 180 days
    
    
    15.9
    %
    
    
    17.8
    %Over 180 days
    
    
    12.5
    %
    
    
    10.3
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
 Revenue and Volume Trends
  Acute Care Revenue
    31




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##### Table of Contents



Quarter
    
    
    Six MonthsEnded March 31,
    
    
    Ended March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Medicare
    
    
    24.7
    %
    
    
    24.9
    %
    
    
    24.4
    %
    
    
    23.7
    %Managed Medicare
    
    
    8.0
    %
    
    
    8.8
    %
    
    
    8.2
    %
    
    
    8.2
    %Medicaid and managed Medicaid
    
    
    14.3
    %
    
    
    15.0
    %
    
    
    14.3
    %
    
    
    15.7
    %Managed care
    
    
    39.3
    %
    
    
    39.4
    %
    
    
    39.9
    %
    
    
    40.5
    %Self-pay
    
    
    13.7
    %
    
    
    11.9
    %
    
    
    13.2
    %
    
    
    11.9
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    32




---



##### Table of Contents



Premium Revenue
    CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   33




---



##### Table of Contents



SELECTED OPERATING DATA
  Quarter
    
    
    Six MonthsEnded March 31,
    
    
    Ended March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Acute Care:Number of acute care hospital facilities
at end of period
    
    
    17
    
    
    
    15
    
    
    
    17
    
    
    
    15Licensed beds at end of period (1)
    
    
    3,570
    
    
    
    2,884
    
    
    
    3,570
    
    
    
    2,884Average length of stay (days) (2)
    
    
    5.0
    
    
    
    4.9
    
    
    
    4.9
    
    
    
    4.8Occupancy rates (average beds in service)
    
    
    51.3
    %
    
    
    49.0
    %
    
    
    48.2
    %
    
    
    48.0
    %Admissions (3)
    
    
    28,311
    
    
    
    26,458
    
    
    
    54,513
    
    
    
    51,711Adjusted admissions (4)
    
    
    47,583
    
    
    
    42,932
    
    
    
    92,895
    
    
    
    84,999Patient days (5)
    
    
    141,670
    
    
    
    128,336
    
    
    
    269,477
    
    
    
    248,887Adjusted patient days (4)
    
    
    229,147
    
    
    
    201,615
    
    
    
    440,843
    
    
    
    394,838Net patient revenue per adjusted admission
    
    $
    10,183
    
    
    $
    10,130
    
    
    $
    10,252
    
    
    $
    10,079Same-Facility Acute Care (6):Number of acute care hospital facilities
at end of period
    
    
    15
    
    
    
    15
    
    
    
    15
    
    
    
    15Licensed beds at end of period (1)
    
    
    3,185
    
    
    
    2,884
    
    
    
    3,185
    
    
    
    2,884Average length of stay (days) (2)
    
    
    5.1
    
    
    
    4.9
    
    
    
    5.0
    
    
    
    4.8Occupancy rates (average beds in service)
    
    
    51.1
    %
    
    
    49.0
    %
    
    
    48.0
    %
    
    
    48.0
    %Admissions (3)
    
    
    26,211
    
    
    
    26,458
    
    
    
    50,348
    
    
    
    51,711Adjusted admissions (4)
    
    
    43,779
    
    
    
    42,932
    
    
    
    85,215
    
    
    
    84,999Patient days (5)
    
    
    132,412
    
    
    
    128,336
    
    
    
    251,696
    
    
    
    248,887Adjusted patient days (4)
    
    
    212,409
    
    
    
    201,615
    
    
    
    408,454
    
    
    
    394,838Net patient revenue per adjusted admission
    
    $
    10,307
    
    
    $
    10,130
    
    
    $
    10,399
    
    
    $
    10,079Health Choice:Medicaid covered lives
    
    
    190,915
    
    
    
    195,392
    
    
    
    190,915
    
    
    
    195,392Dual-eligible lives (7)
    
    
    4,331
    
    
    
    4,186
    
    
    
    4,331
    
    
    
    4,186Medical loss ratio (8)
    
    
    84.3
    %
    
    
    87.4
    %
    
    
    85.2
    %
    
    
    88.1
    %
 (1)
    
    Includes St. Lukes Behavioral Hospital.(2)
    
    Represents the average number of days that a patient stayed in our hospitals.(3)
    
    Represents the total number of patients admitted to our hospitals for stays in
excess of 23 hours. Management and investors use this number as a general measure
of inpatient volume.(4)
    
    Adjusted admissions and adjusted patient days are general measures of combined
inpatient and outpatient volume. We compute adjusted admissions/patient days by
multiplying admissions/patient days by gross patient revenue and then dividing
that number by gross inpatient revenue.(5)
    
    Represents the number of days our beds were occupied by inpatients over the period.(6)
    
    Excludes the impact of the Brim acquisition, which was effective October 1, 2010.(7)
    
    Represents members eligible for Medicare and Medicaid benefits under Health
Choices contract with CMS to provide coverage as a MAPD SNP.(8)
    
    Represents medical claims expense as a percentage of premium revenue, including
claims paid to our hospitals.  34




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##### Table of Contents



RESULTS OF OPERATIONS SUMMARY
 Consolidated
  Quarter Ended
    
    
    Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedMarch 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2011
    
    
    March 31, 2010($ in thousands)
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageNet revenue:Acute care revenue
    
    $
    488,449
    
    
    
    72.0
    %
    
    $
    437,574
    
    
    
    70.1
    %
    
    $
    959,588
    
    
    
    71.0
    %
    
    $
    862,234
    
    
    
    68.8
    %Premium revenue
    
    
    189,960
    
    
    
    28.0
    %
    
    
    186,948
    
    
    
    29.9
    %
    
    
    392,152
    
    
    
    29.0
    %
    
    
    391,245
    
    
    
    31.2
    %Total net revenue
    
    
    678,409
    
    
    
    100.0
    %
    
    
    624,522
    
    
    
    100.0
    %
    
    
    1,351,740
    
    
    
    100.0
    %
    
    
    1,253,479
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    196,036
    
    
    
    28.9
    %
    
    
    174,171
    
    
    
    27.9
    %
    
    
    385,949
    
    
    
    28.6
    %
    
    
    344,653
    
    
    
    27.5
    %Supplies
    
    
    77,924
    
    
    
    11.5
    %
    
    
    68,425
    
    
    
    11.0
    %
    
    
    154,360
    
    
    
    11.4
    %
    
    
    133,834
    
    
    
    10.7
    %Medical claims
    
    
    157,416
    
    
    
    23.2
    %
    
    
    160,094
    
    
    
    25.6
    %
    
    
    328,750
    
    
    
    24.3
    %
    
    
    338,661
    
    
    
    27.0
    %Other operating expenses
    
    
    103,350
    
    
    
    15.2
    %
    
    
    88,683
    
    
    
    14.2
    %
    
    
    200,476
    
    
    
    14.8
    %
    
    
    173,275
    
    
    
    13.8
    %Provision for bad debts
    
    
    54,801
    
    
    
    8.1
    %
    
    
    45,536
    
    
    
    7.3
    %
    
    
    114,415
    
    
    
    8.5
    %
    
    
    93,485
    
    
    
    7.5
    %Rentals and leases
    
    
    11,289
    
    
    
    1.7
    %
    
    
    10,145
    
    
    
    1.6
    %
    
    
    22,455
    
    
    
    1.7
    %
    
    
    20,420
    
    
    
    1.6
    %Interest expense, net
    
    
    16,510
    
    
    
    2.4
    %
    
    
    16,622
    
    
    
    2.7
    %
    
    
    33,387
    
    
    
    2.4
    %
    
    
    33,354
    
    
    
    2.7
    %Depreciation and amortization
    
    
    24,584
    
    
    
    3.6
    %
    
    
    24,025
    
    
    
    3.8
    %
    
    
    48,630
    
    
    
    3.6
    %
    
    
    47,902
    
    
    
    3.8
    %Management fees
    
    
    1,250
    
    
    
    0.2
    %
    
    
    1,250
    
    
    
    0.2
    %
    
    
    2,500
    
    
    
    0.2
    %
    
    
    2,500
    
    
    
    0.2
    %Total costs and expenses
    
    
    643,160
    
    
    
    94.8
    %
    
    
    588,951
    
    
    
    94.3
    %
    
    
    1,290,922
    
    
    
    95.5
    %
    
    
    1,188,084
    
    
    
    94.8
    %Earnings from continuing
operations before gain (loss)
on disposal of assets and
income taxes
    
    
    35,249
    
    
    
    5.2
    %
    
    
    35,571
    
    
    
    5.7
    %
    
    
    60,818
    
    
    
    4.5
    %
    
    
    65,395
    
    
    
    5.2
    %Gain (loss) on disposal of
assets, net
    
    
    540
    
    
    
    0.1
    %
    
    
    (161
    )
    
    
    (0.0
    %)
    
    
    885
    
    
    
    0.1
    %
    
    
    (57
    )
    
    
    (0.0
    %)Earnings from continuing
operations before income taxes
    
    
    35,789
    
    
    
    5.3
    %
    
    
    35,410
    
    
    
    5.7
    %
    
    
    61,703
    
    
    
    4.6
    %
    
    
    65,338
    
    
    
    5.2
    %Income tax expense
    
    
    13,500
    
    
    
    2.0
    %
    
    
    13,270
    
    
    
    2.2
    %
    
    
    22,689
    
    
    
    1.7
    %
    
    
    23,861
    
    
    
    1.9
    %Net earnings from continuing
operations
    
    
    22,289
    
    
    
    3.3
    %
    
    
    22,140
    
    
    
    3.5
    %
    
    
    39,014
    
    
    
    2.9
    %
    
    
    41,477
    
    
    
    3.3
    %Earnings (loss) from
discontinued operations, net
of income taxes
    
    
    (2,846
    )
    
    
    (0.4
    %)
    
    
    (25
    )
    
    
    (0.0
    %)
    
    
    (6,054
    )
    
    
    (0.5
    %)
    
    
    21
    
    
    
    0.0
    %Net earnings
    
    
    19,443
    
    
    
    2.9
    %
    
    
    22,115
    
    
    
    3.5
    %
    
    
    32,960
    
    
    
    2.4
    %
    
    
    41,498
    
    
    
    3.3
    %Net earnings attributable to
non-controlling interests
    
    
    (2,417
    )
    
    
    (0.4
    %)
    
    
    (2,033
    )
    
    
    (0.3
    %)
    
    
    (4,188
    )
    
    
    (0.3
    %)
    
    
    (4,061
    )
    
    
    (0.3
    %)Net earnings attributable to
IASIS Healthcare LLC
    
    $
    17,026
    
    
    
    2.5
    %
    
    $
    20,082
    
    
    
    3.2
    %
    
    $
    28,772
    
    
    
    2.1
    %
    
    $
    37,437
    
    
    
    3.0
    %
  35




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##### Table of Contents



Acute Care
  Quarter Ended
    
    
    Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedMarch 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2011
    
    
    March 31, 2010($ in thousands)
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageAcute care revenue:Acute care revenue
    
    $
    488,449
    
    
    
    99.4
    %
    
    $
    437,574
    
    
    
    99.3
    %
    
    $
    959,588
    
    
    
    99.4
    %
    
    $
    862,234
    
    
    
    99.3
    %Revenue between segments (1)
    
    
    2,807
    
    
    
    0.6
    %
    
    
    3,336
    
    
    
    0.7
    %
    
    
    5,467
    
    
    
    0.6
    %
    
    
    6,012
    
    
    
    0.7
    %Total acute care revenue
    
    
    491,256
    
    
    
    100.0
    %
    
    
    440,910
    
    
    
    100.0
    %
    
    
    965,055
    
    
    
    100.0
    %
    
    
    868,246
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    190,863
    
    
    
    38.9
    %
    
    
    169,224
    
    
    
    38.4
    %
    
    
    375,753
    
    
    
    38.9
    %
    
    
    335,114
    
    
    
    38.6
    %Supplies
    
    
    77,872
    
    
    
    15.9
    %
    
    
    68,375
    
    
    
    15.5
    %
    
    
    154,264
    
    
    
    16.0
    %
    
    
    133,737
    
    
    
    15.4
    %Other operating expenses
    
    
    96,425
    
    
    
    19.6
    %
    
    
    82,604
    
    
    
    18.7
    %
    
    
    187,255
    
    
    
    19.4
    %
    
    
    160,929
    
    
    
    18.5
    %Provision for bad debts
    
    
    54,801
    
    
    
    11.2
    %
    
    
    45,536
    
    
    
    10.3
    %
    
    
    114,415
    
    
    
    11.9
    %
    
    
    93,485
    
    
    
    10.8
    %Rentals and leases
    
    
    10,891
    
    
    
    2.2
    %
    
    
    9,780
    
    
    
    2.2
    %
    
    
    21,613
    
    
    
    2.2
    %
    
    
    19,684
    
    
    
    2.3
    %Interest expense, net
    
    
    16,510
    
    
    
    3.3
    %
    
    
    16,622
    
    
    
    3.8
    %
    
    
    33,387
    
    
    
    3.4
    %
    
    
    33,354
    
    
    
    3.8
    %Depreciation and amortization
    
    
    23,697
    
    
    
    4.8
    %
    
    
    23,137
    
    
    
    5.3
    %
    
    
    46,848
    
    
    
    4.9
    %
    
    
    46,125
    
    
    
    5.3
    %Management fees
    
    
    1,250
    
    
    
    0.2
    %
    
    
    1,250
    
    
    
    0.3
    %
    
    
    2,500
    
    
    
    0.3
    %
    
    
    2,500
    
    
    
    0.3
    %Total costs and expenses
    
    
    472,309
    
    
    
    96.1
    %
    
    
    416,528
    
    
    
    94.5
    %
    
    
    936,035
    
    
    
    97.0
    %
    
    
    824,928
    
    
    
    95.0
    %Earnings from continuing operations
before gain (loss) on disposal of
assets and income taxes
    
    
    18,947
    
    
    
    3.9
    %
    
    
    24,382
    
    
    
    5.5
    %
    
    
    29,020
    
    
    
    3.0
    %
    
    
    43,318
    
    
    
    5.0
    %Gain (loss) on disposal of assets, net
    
    
    540
    
    
    
    0.1
    %
    
    
    (161
    )
    
    
    (0.0
    %)
    
    
    885
    
    
    
    0.1
    %
    
    
    (57
    )
    
    
    (0.0
    %)Earnings from continuing operations
before income taxes
    
    $
    19,487
    
    
    
    4.0
    %
    
    $
    24,221
    
    
    
    5.5
    %
    
    $
    29,905
    
    
    
    3.1
    %
    
    $
    43,261
    
    
    
    5.0
    %
 (1)
    
    Revenue between segments is eliminated in our consolidated results. Quarters Ended March 31, 2011 and 2010
 Acute care revenue 
  Salaries and benefits 
 Supplies 
 Other operating expenses 
  36




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##### Table of Contents



Provision for bad debts 
 Six Months Ended March 31, 2011 and 2010
 Acute care revenue 
  Salaries and benefits 
 Supplies 
 Other operating expenses 
 Provision for bad debts 
  37




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##### Table of Contents



Health Choice
  Quarter Ended
    
    
    Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedMarch 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2011
    
    
    March 31, 2010($ in thousands)
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentagePremium revenue:Premium revenue
    
    $
    189,960
    
    
    
    100.0
    %
    
    $
    186,948
    
    
    
    100.0
    %
    
    $
    392,152
    
    
    
    100.0
    %
    
    $
    391,245
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    5,173
    
    
    
    2.7
    %
    
    
    4,947
    
    
    
    2.6
    %
    
    
    10,196
    
    
    
    2.6
    %
    
    
    9,539
    
    
    
    2.4
    %Supplies
    
    
    52
    
    
    
    0.0
    %
    
    
    50
    
    
    
    0.0
    %
    
    
    96
    
    
    
    0.0
    %
    
    
    97
    
    
    
    0.0
    %Medical claims (1)
    
    
    160,223
    
    
    
    84.3
    %
    
    
    163,430
    
    
    
    87.4
    %
    
    
    334,217
    
    
    
    85.2
    %
    
    
    344,673
    
    
    
    88.1
    %Other operating expenses
    
    
    6,925
    
    
    
    3.7
    %
    
    
    6,079
    
    
    
    3.3
    %
    
    
    13,221
    
    
    
    3.4
    %
    
    
    12,346
    
    
    
    3.2
    %Rentals and leases
    
    
    398
    
    
    
    0.2
    %
    
    
    365
    
    
    
    0.2
    %
    
    
    842
    
    
    
    0.2
    %
    
    
    736
    
    
    
    0.2
    %Depreciation and amortization
    
    
    887
    
    
    
    0.5
    %
    
    
    888
    
    
    
    0.5
    %
    
    
    1,782
    
    
    
    0.5
    %
    
    
    1,777
    
    
    
    0.5
    %Total costs and expenses
    
    
    173,658
    
    
    
    91.4
    %
    
    
    175,759
    
    
    
    94.0
    %
    
    
    360,354
    
    
    
    91.9
    %
    
    
    369,168
    
    
    
    94.4
    %Earnings before income taxes
    
    $
    16,302
    
    
    
    8.6
    %
    
    $
    11,189
    
    
    
    6.0
    %
    
    $
    31,798
    
    
    
    8.1
    %
    
    $
    22,077
    
    
    
    5.6
    %
 (1)
    
    Medical claims paid to our hospitals of $2.8 million and $3.3 million
for the quarters ended March 31, 2011 and 2010, respectively, and $5.5
million and $6.0 million for the six months ended March 31, 2011 and
2010, respectively, are eliminated in our consolidated results. Quarters Ended March 31, 2011 and 2010
 Premium revenue 
 Medical claims 
 Six Months Ended March 31, 2011 and 2010
 Premium revenue 
 Medical claims 
  38




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Overview of Cash Flow Activities for the Six Months Ended March 31, 2011 and 2010
  Six MonthsEnded March 31,2011
    
    
    2010Cash flows from operating activities
    
    $
    97,478
    
    
    $
    116,567Cash flows from investing activities
    
    $
    (53,249
    )
    
    $
    (29,138
    )Cash flows from financing activities
    
    $
    (10,124
    )
    
    $
    (135,446
    )
 Operating Activities
   Investing Activities
   Financing Activities
   Capital Resources
  
    
    $854.0 million senior secured credit facilities; and
 
    
    $475.0 million in 83/4% senior subordinated notes due 2014.
  39




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##### Table of Contents



Overview of Refinancing Transaction
 3 4
  $1.325 Billion Senior Secured Credit Facilities
     40




---



##### Table of Contents



8.375% Senior Notes due 2019
      Credit Ratings
  Moodys
    
    Standard & PoorsCorporate credit
    
    B2
    
    BSenior secured term loan facility
    
    Ba3
    
    BSenior secured revolving credit facility
    
    Ba3
    
    BB-8.375% senior notes due 2019
    
    Caa1
    
    CCC+Outlook
    
    Stable
    
    Stable
  41




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##### Table of Contents



Other
   Capital Expenditures
  
    
    $35.0 million to $40.0 million for growth and new business projects;
 
    
    $30.0 million to $35.0 million in replacement or maintenance related projects at our
hospitals;
 
    
    $20.0 million to $25.0 million related to our newly acquired facilities; and
 
    
    $20.0 million in hardware and software costs related to information systems projects,
including healthcare IT stimulus initiatives.
 Liquidity
   Cash and cash equivalents
    
    $
    178.6Available capacity under our new senior secured revolving credit facility
    
    
    214.8Net available liquidity at March 31, 2011, adjusted for the impact of
our new senior secured revolving credit facility
    
    $
    393.4
   42




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##### Table of Contents



SEASONALITY
  RECENT ACCOUNTING PRONOUNCEMENTS
 Health Care Entities Measuring
Charity Care for Disclosure
 Health Care Entities Presentation of Insurance Claims and Related Insurance Recoveries
 Financial Services Insurance Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts
  43




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##### Table of Contents



IntangiblesGoodwill and Other When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or
Negative Carrying Amounts
 Business Combinations Disclosure of Supplementary Pro Forma Information for Business Combinations
 
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
      
 Item 4.
    
    Controls and Procedures
 Evaluations of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
   44




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
 qui tam qui tam qui tam qui tam qui tam qui tam qui
tam qui tam
   45




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##### Table of Contents



Item 1A.
    
    Risk Factors
  PART II. OTHER INFORMATION
 
 Item 6.
    
    Exhibits
  4.1
    
    
    Indenture, dated as of May 3, 2011, among IASIS Healthcare LLC, IASIS Capital Corporation,
the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A, as trustee,
relating to the 8.375% Senior Notes due 2019 (incorporated by reference to the Companys
Current Report on Form 8-K dated May 6, 2011).4.2
    
    
    Registration Rights Agreement dated as of May 3, 2011 by and among IASIS Healthcare LLC,
IASIS Capital Corporation, the Guarantors named therein and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Barclays Capital Inc., Citigroup Global Markets Inc., Goldman, Sachs &
Co., J.P. Morgan Securities LLC, Deutsche Bank Securities Inc. and SunTrust Robinson Humphrey,
Inc. (incorporated by reference to the Companys Current Report on Form 8-K dated May 6,
2011).4.3
    
    
    Supplemental Indenture, dated as of May 2, 2011 among IASIS Healthcare LLC, IASIS Capital
Corporation, the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A.
(formerly The Bank of New York Trust Company, N.A.), as trustee, relating to the 83/4% Senior Subordinated Notes due 2014 (incorporated by reference to the Companys
Current Report on Form 8-K dated May 6, 2011).10.1
    
    
    Restatement Agreement, dated as of May 3, 2011, among IASIS Healthcare LLC, IASIS Healthcare
Corporation, the lenders party thereto and Bank of America, N.A., as administrative agent and
attached thereto as Exhibit A, the Amended and Restated Credit Agreement, dated as of May 3,
2011, among IASIS Healthcare LLC, IASIS Healthcare Corporation, Bank of America, N.A., as
administrative agent, swing line lender and L/C issuer and each lender from time to time party
thereto (incorporated by reference to the Companys Current Report on Form 8-K dated May 6,
2011).31.1
    
    
    Certification of Principal Executive Officer Pursuant to Rule
15d-14(a) under the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Principal Financial Officer pursuant to Rule
15d-14(a) under the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  46




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##### Table of Contents



SIGNATURES
  IASIS HEALTHCARE LLCDate: May 16, 2011
    
    By:
    
    /s/ John M. Doyle

John M. DoyleChief Financial Officer
  47




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    
    Description4.1
    
    
    Indenture, dated as of May 3, 2011, among IASIS Healthcare LLC, IASIS Capital Corporation,
the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A, as trustee,
relating to the 8.375% Senior Notes due 2019 (incorporated by reference to the Companys
Current Report on Form 8-K dated May 6, 2011).4.2
    
    
    Registration Rights Agreement dated as of May 3, 2011 by and among IASIS Healthcare LLC,
IASIS Capital Corporation, the Guarantors named therein and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Barclays Capital Inc., Citigroup Global Markets Inc., Goldman, Sachs &
Co., J.P. Morgan Securities LLC, Deutsche Bank Securities Inc. and SunTrust Robinson Humphrey,
Inc. (incorporated by reference to the Companys Current Report on Form 8-K dated May 6,
2011).4.3
    
    
    Supplemental Indenture, dated as of May 2, 2011 among IASIS Healthcare LLC, IASIS Capital
Corporation, the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A.
(formerly The Bank of New York Trust Company, N.A.), as trustee, relating to the 83/4% Senior Subordinated Notes due 2014 (incorporated by reference to the Companys
Current Report on Form 8-K dated May 6, 2011).10.1
    
    
    Restatement Agreement, dated as of May 3, 2011, among IASIS Healthcare LLC, IASIS Healthcare
Corporation, the lenders party thereto and Bank of America, N.A., as administrative agent and
attached thereto as Exhibit A, the Amended and Restated Credit Agreement, dated as of May 3,
2011, among IASIS Healthcare LLC, IASIS Healthcare Corporation, Bank of America, N.A., as
administrative agent, swing line lender and L/C issuer and each lender from time to time party
thereto (incorporated by reference to the Companys Current Report on Form 8-K dated May 6,
2011).31.1
    
    
    Certification of Principal Executive Officer Pursuant to Rule
15d-14(a) under the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    
    Certification of Principal Financial Officer pursuant to Rule
15d-14(a) under the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
  48