##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 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 June 30, 2005
 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
(State or Other Jurisdiction of Incorporation
or Organization)
    
    20-1150104
(I.R.S. Employer
Identification No.)
 DOVER CENTRE117 SEABOARD LANE, BUILDING E
FRANKLIN, TENNESSEE
(Address of Principal Executive Offices)
    
    37067
(Zip Code)
 (615) 844-2747
 Not Applicable
 þ o
 o þ




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TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Condensed Consolidated Balance Sheets  June 30, 2005 (Unaudited) and September 30, 2004
    
    
    1Condensed Consolidated Statements of Operations (Unaudited)  Three Months Ended
June 30, 2005; June 23, 2004 through June 30, 2004 and April 1, 2004
through June 22, 2004 (Predecessor)
    
    
    2Condensed Consolidated Statement of Operations (Unaudited)  Nine Months Ended
June 30, 2005; June 23, 2004 through June 30, 2004 and October 1, 2003
through June 22, 2004 (Predecessor)
    
    
    3Condensed Consolidated Statements of Cash Flows (Unaudited)  Nine Months Ended
June 30, 2005; June 23, 2004 through June 30, 2004 and October 1, 2003
through June 22, 2004 (Predecessor)
    
    
    4Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    28Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    45Item 4. Controls and Procedures
    
    
    45PART II. OTHER INFORMATION
    
    
    45Item 1. Legal Proceedings
    
    
    45Item 4. Submission of Maters to a Vote of Security Holders
    
    
    45Item 6. Exhibits
    
    
    46EX-31.1  Section 302 Certification of the CEOEX-31.2  Section 302 Certification of the CFOEX-32.1  Section 906 Certifications of the CEO and CFO




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##### Table of Contents



PART I
 FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED BALANCE SHEETS  (In thousands)
 (Unaudited)
    
    September 30,June 30, 2005
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    67,956
    
    
    $
    98,805Accounts receivable, net of allowance for doubtful accounts of
$93,597 and $94,139, respectively
    
    
    182,055
    
    
    
    165,280Inventories
    
    
    28,835
    
    
    
    26,253Deferred income taxes
    
    
    32,475
    
    
    
    Prepaid expenses and other current assets
    
    
    27,290
    
    
    
    21,297Total current assets
    
    
    338,611
    
    
    
    311,635Property and equipment, net
    
    
    627,546
    
    
    
    532,459Goodwill
    
    
    752,257
    
    
    
    252,204Other intangible assets, net
    
    
    42,750
    
    
    
    Unallocated purchase price
    
    
    
    
    
    
    585,013Other assets, net
    
    
    37,265
    
    
    
    42,850Total assets
    
    $
    1,798,429
    
    
    $
    1,724,161LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
    
    $
    55,064
    
    
    $
    61,295Salaries and benefits payable
    
    
    29,138
    
    
    
    36,463Accrued interest payable
    
    
    7,760
    
    
    
    13,821Medical claims payable
    
    
    57,721
    
    
    
    55,421Other accrued expenses and other current liabilities
    
    
    27,853
    
    
    
    26,142Current portion of long-term debt and capital lease obligations
    
    
    7,653
    
    
    
    10,728Total current liabilities
    
    
    185,189
    
    
    
    203,870Long-term debt and capital lease obligations
    
    
    898,607
    
    
    
    902,026Deferred income taxes
    
    
    46,050
    
    
    
    Other long-term liabilities
    
    
    39,221
    
    
    
    31,596Minority interest
    
    
    16,784
    
    
    
    12,964Equity:Members equity
    
    
    612,578
    
    
    
    573,705Total liabilities and equity
    
    $
    1,798,429
    
    
    $
    1,724,161
  1




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##### Table of Contents



IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)  (In thousands)
 PredecessorThree Months
    
    June 23, 2004
    
    April 1, 2004Ended
    
    through
    
    throughJune 30, 2005
    
    June 30, 2004
    
    June 22, 2004Net revenue:Acute care revenue
    
    $
    299,891
    
    
    $
    24,879
    
    
    $
    259,283Premium revenue
    
    
    90,088
    
    
    
    6,847
    
    
    
    64,258Total net revenue
    
    
    389,979
    
    
    
    31,726
    
    
    
    323,541Costs and expenses:Salaries and benefits
    
    
    113,452
    
    
    
    9.638
    
    
    
    98,978Supplies
    
    
    46,208
    
    
    
    4,259
    
    
    
    43,085Medical claims
    
    
    77,409
    
    
    
    5,865
    
    
    
    52,687Rents and leases
    
    
    8,385
    
    
    
    722
    
    
    
    7,592Other operating expenses
    
    
    55,315
    
    
    
    4,597
    
    
    
    46,921Provision for bad debts
    
    
    33,792
    
    
    
    2,531
    
    
    
    30,198Interest expense, net
    
    
    15,664
    
    
    
    1,120
    
    
    
    11,903Depreciation and amortization
    
    
    20,590
    
    
    
    1,677
    
    
    
    16,511Management fees
    
    
    963
    
    
    
    
    
    
    
    Loss on early extinguishment
of debt
    
    
    
    
    
    
    
    
    
    
    51,852Merger expenses
    
    
    
    
    
    
    
    
    
    
    19,750Total costs and expenses
    
    
    371,778
    
    
    
    30,409
    
    
    
    379,477Earnings (loss) before gain (loss)
on sale of assets, minority
interests and income taxes
    
    
    18,201
    
    
    
    1,317
    
    
    
    (55,936
    )Gain (loss) on sale of assets, net
    
    
    2
    
    
    
    (8
    )
    
    
    (22
    )Minority interests
    
    
    (779
    )
    
    
    (122
    )
    
    
    (1,074
    )Earnings (loss) before income taxes
    
    
    17,424
    
    
    
    1,187
    
    
    
    (57,032
    )Income tax expense
    
    
    6,958
    
    
    
    29
    
    
    
    167Net earnings (loss)
    
    $
    10,466
    
    
    $
    1,158
    
    
    $
    (57,199
    )
  2




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IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)  (In thousands)
 PredecessorNine Months
    
    June 23, 2004
    
    October 1, 2003Ended
    
    through
    
    throughJune 30, 2005
    
    June 30, 2004
    
    June 22, 2004Net revenue:Acute care revenue
    
    $
    886,384
    
    
    $
    24,879
    
    
    $
    794,887Premium revenue
    
    
    263,827
    
    
    
    6,847
    
    
    
    202,273Total net revenue
    
    
    1,150,211
    
    
    
    31,726
    
    
    
    997,160Costs and expenses:Salaries and benefits
    
    
    332,685
    
    
    
    9,638
    
    
    
    308,881Supplies
    
    
    140,863
    
    
    
    4,259
    
    
    
    129,665Medical claims
    
    
    226,177
    
    
    
    5,865
    
    
    
    168,338Rents and leases
    
    
    24,236
    
    
    
    722
    
    
    
    23,158Other operating expenses
    
    
    162,556
    
    
    
    4,597
    
    
    
    145,648Provision for bad debts
    
    
    96,762
    
    
    
    2,531
    
    
    
    87,466Interest expense, net
    
    
    44,341
    
    
    
    1,120
    
    
    
    39,673Depreciation and amortization
    
    
    56,473
    
    
    
    1,677
    
    
    
    50,490Management fees
    
    
    2,884
    
    
    
    
    
    
    
    Loss on early extinguishment
of debt
    
    
    
    
    
    
    
    
    
    
    51,852Merger expenses
    
    
    
    
    
    
    
    
    
    
    19,750Write-off of debt issue costs
    
    
    
    
    
    
    
    
    
    
    8,850Total costs and expenses
    
    
    1,086,977
    
    
    
    30,409
    
    
    
    1,033,771Earnings (loss) before gain (loss)
on sale of assets, minority
interests and income taxes
    
    
    63,234
    
    
    
    1,317
    
    
    
    (36,611
    )Gain (loss) on sale of assets, net
    
    
    (80
    )
    
    
    (8
    )
    
    
    3,731Minority interests
    
    
    (3,052
    )
    
    
    (122
    )
    
    
    (3,098
    )Earnings (loss) before income taxes
    
    
    60,102
    
    
    
    1,187
    
    
    
    (35,978
    )Income tax expense
    
    
    23,879
    
    
    
    29
    
    
    
    1,152Net earnings (loss)
    
    $
    36,223
    
    
    $
    1,158
    
    
    $
    (37,130
    )
  3




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IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)  (In thousands)
 PredecessorNine Months
    
    June 23, 2004
    
    October 1, 2003Ended June 30,
    
    through
    
    through2005
    
    June 30, 2004
    
    June 22, 2004Cash flows from operating activities:Net earnings (loss)
    
    $
    36,223
    
    
    $
    1,158
    
    
    $
    (37,130
    )Adjustments to reconcile net earnings to net
cash provided by operating activities:Depreciation and amortization
    
    
    56,473
    
    
    
    1,677
    
    
    
    50,490Minority interests
    
    
    3,052
    
    
    
    122
    
    
    
    3,098Deferred income taxes
    
    
    22,742
    
    
    
    
    
    
    
    Loss (gain) on sale of assets
    
    
    80
    
    
    
    8
    
    
    
    (3,731
    )Write-off of debt issue costs
    
    
    
    
    
    
    
    
    
    
    8,850Loss on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    14,993Changes in operating assets and liabilities:Accounts receivable
    
    
    (16,776
    )
    
    
    2,284
    
    
    
    (8,542
    )Establishment of accounts receivable of recent
acquisition
    
    
    
    
    
    
    
    
    
    
    (11,325
    )Inventories, prepaid expenses and other
current assets
    
    
    (8,575
    )
    
    
    724
    
    
    
    (5,656
    )Accounts payable and other accrued liabilities
    
    
    (4,449
    )
    
    
    (5,756
    )
    
    
    6,991Net cash provided by operating activities
    
    
    88,770
    
    
    
    217
    
    
    
    18,038Cash flows from investing activities:Purchase of property and equipment
    
    
    (113,541
    )
    
    
    (2,947
    )
    
    
    (82,265
    )Cash paid for acquisition
    
    
    (617
    )
    
    
    
    
    
    
    (23,032
    )Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    14,928Change in other assets
    
    
    977
    
    
    
    56
    
    
    
    (1,650
    )Net cash used in investing activities
    
    
    (113,181
    )
    
    
    (2,891
    )
    
    
    (92,019
    )Cash flows from financing activities:Payment of debt and capital leases
    
    
    (8,993
    )
    
    
    (66
    )
    
    
    (651,371
    )Debt financing costs incurred
    
    
    (487
    )
    
    
    
    
    
    
    (31,469
    )Distribution of minority interests
    
    
    (3,129
    )
    
    
    
    
    
    
    (2,510
    )Proceeds received from hospital syndications
    
    
    3,897
    
    
    
    
    
    
    
    1,784Proceeds from debt borrowings
    
    
    2,274
    
    
    
    
    
    
    
    900,000Proceeds from issuance of common stock, net
    
    
    
    
    
    
    
    
    
    
    529,000Cash paid to security holders
    
    
    
    
    
    
    
    
    
    
    (677,780
    )Payment of merger costs incurred by members of
IASIS Investment LLC
    
    
    
    
    
    
    
    
    
    
    (10,800
    )Net cash provided by (used in) financing activities
    
    
    (6,438
    )
    
    
    (66
    )
    
    
    56,854Decrease in cash and cash equivalents
    
    
    (30,849
    )
    
    
    (2,740
    )
    
    
    (17,127
    )Cash and cash equivalents at beginning of period
    
    
    98,805
    
    
    
    83,943
    
    
    
    101,070Cash and cash equivalents at end of period
    
    $
    67,956
    
    
    $
    81,203
    
    
    $
    83,943Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    54,671
    
    
    $
    377
    
    
    $
    62,069Cash paid for income taxes, net
    
    $
    2,420
    
    
    $
    
    
    
    $
    (105
    )Supplemental schedule of noncash investing
activities:Capital lease obligations incurred to acquire
equipment
    
    $
    
    
    
    $
    
    
    
    $
    1,542Property and equipment in accounts payable
    
    $
    6,027
    
    
    $
    13,619
    
    
    $
    13,165Stock consideration received
    
    $
    
    
    
    $
    
    
    
    $
    40,000
  4




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##### Table of Contents



IASIS HEALTHCARE LLC
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
 1. Organization and Basis of Presentation
     Business Combinations
  
    
    Salt Lake City, Utah;
    
    Phoenix, Arizona;
    
    Tampa-St. Petersburg, Florida;
    
    Las Vegas, Nevada; and
    
    three cities in Texas, including San Antonio.
   5




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IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
     2. Recently Issued Accounting Pronouncements
 Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock
Issued to Employees Statement of Cash Flows
 3. Long-Term Debt and Capital Lease Obligations
  6




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IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
 June 30,
    
    September 30,2005
    
    2004Senior secured credit facilities
    
    $
    420,750
    
    
    $
    423,938Senior subordinated notes
    
    
    475,000
    
    
    
    478,500Capital lease obligations and other
    
    
    10,510
    
    
    
    10,316906,260
    
    
    
    912,754Less current maturities
    
    
    7,653
    
    
    
    10,728$
    898,607
    
    
    $
    902,026
 Senior Secured Credit Facilities
        7




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IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
  13% Senior Subordinated Notes and 8 1/2% Senior Subordinated Notes
    8 3/4% Senior Subordinated Notes
    4. Acquisition of IASIS Healthcare Corporation
 Business Combinations
 8




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
 (in millions)Current assets, net
    
    $
    123Property and equipment
    
    
    547Non-current assets, net
    
    
    6Goodwill
    
    
    764Other intangible assets
    
    
    45Total assets acquired
    
    $
    1,485
   5. Stock Benefit Plans
   PredecessorThree Months
    
    June 23, 2004
    
    April 1, 2004Ended
    
    through
    
    throughJune 30, 2005
    
    June 30, 2004
    
    June 22, 2004Net earnings (loss) as reported
    
    $
    10,466
    
    
    $
    1,158
    
    
    $
    (57,199
    )Deduct: Total stock
based employee
compensation determined
under fair value based
method for all awards,
net of related tax
effects
    
    
    (364
    )
    
    
    (17
    )
    
    
    (343
    )Pro forma net earnings (loss)
    
    $
    10,102
    
    
    $
    1,141
    
    
    $
    (57,542
    )
 PredecessorNine Months
    
    June 23, 2004
    
    October 1, 2003Ended
    
    through
    
    throughJune 30, 2005
    
    June 30, 2004
    
    June 22, 2004Net earnings (loss) as reported
    
    $
    36,223
    
    
    $
    1,158
    
    
    $
    (37,130
    )Deduct: Total stock
based employee
compensation determined
under fair value based
method for all awards,
net of related tax
effects
    
    
    (847
    )
    
    
    (17
    )
    
    
    (1,097
    )Pro forma net earnings (loss)
    
    $
    35,376
    
    
    $
    1,141
    
    
    $
    (38,227
    )
  9




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
 6. Contingencies
 Net Revenue
  Professional, General and Workers Compensation Liability Risks
   Health Choice
  Capital Expenditure Commitments
   10




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
  Acquisitions
  Other
   7. Segment and Geographic Information
  11




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
 For the Three Months Ended June 30, 2005Acute Care
    
    Health Choice
    
    Eliminations
    
    ConsolidatedNet acute care revenue
    
    $
    299,891
    
    
    $
    
    
    
    $
    
    
    
    $
    299,891Premium revenue
    
    
    
    
    
    
    90,088
    
    
    
    
    
    
    
    90,088Revenue between segments
    
    
    2,100
    
    
    
    
    
    
    
    (2,100
    )
    
    
    Net revenue
    
    
    301,991
    
    
    
    90,088
    
    
    
    (2,100
    )
    
    
    389,979Salaries and benefits
    
    
    110,612
    
    
    
    2,840
    
    
    
    
    
    
    
    113,452Supplies
    
    
    46,160
    
    
    
    48
    
    
    
    
    
    
    
    46,208Medical claims
    
    
    
    
    
    
    79,509
    
    
    
    (2,100
    )
    
    
    77,409Rents and leases
    
    
    8,167
    
    
    
    218
    
    
    
    
    
    
    
    8,385Other operating expenses
    
    
    52,567
    
    
    
    2,748
    
    
    
    
    
    
    
    55,315Provision for bad debts
    
    
    33,792
    
    
    
    
    
    
    
    
    
    
    
    33,792Adjusted EBITDA(1)
    
    
    50,693
    
    
    
    4,725
    
    
    
    
    
    
    
    55,418Interest expense, net
    
    
    15,664
    
    
    
    
    
    
    
    
    
    
    
    15,664Depreciation and amortization
    
    
    19,792
    
    
    
    798
    
    
    
    
    
    
    
    20,590Management fees
    
    
    963
    
    
    
    
    
    
    
    
    
    
    
    963Earnings before gain on sale of
assets, minority interests and
income taxes
    
    $
    14,274
    
    
    $
    3,927
    
    
    $
    
    
    
    $
    18,201Gain on sale of assets, net
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2Minority interests
    
    
    (779
    )
    
    
    
    
    
    
    
    
    
    
    (779
    )Earnings before income taxes
    
    $
    13,497
    
    
    $
    3,927
    
    
    $
    
    
    
    $
    17,424Segment assets
    
    $
    1,708,573
    
    
    $
    89,856
    
    
    
    
    
    
    $
    1,798,429
 For the Period June 23, 2004 through June 30, 2004Acute Care
    
    Health Choice
    
    Eliminations
    
    ConsolidatedNet acute care revenue
    
    $
    24,879
    
    
    $
    
    
    
    $
    
    
    
    $
    24,879Premium revenue
    
    
    
    
    
    
    6,847
    
    
    
    
    
    
    
    6,847Revenue between segments
    
    
    124
    
    
    
    
    
    
    
    (124
    )
    
    
    Net revenue
    
    
    25,003
    
    
    
    6,847
    
    
    
    (124
    )
    
    
    31,726Salaries and benefits
    
    
    9,400
    
    
    
    238
    
    
    
    
    
    
    
    9,638Supplies
    
    
    4,253
    
    
    
    6
    
    
    
    
    
    
    
    4,259Medical claims
    
    
    
    
    
    
    5,989
    
    
    
    (124
    )
    
    
    5,865Rents and leases
    
    
    706
    
    
    
    16
    
    
    
    
    
    
    
    722Other operating expenses
    
    
    4,391
    
    
    
    206
    
    
    
    
    
    
    
    4,597Provision for bad debts
    
    
    2,531
    
    
    
    
    
    
    
    
    
    
    
    2,531Adjusted EBITDA(1)
    
    
    3,722
    
    
    
    392
    
    
    
    
    
    
    
    4,114Interest expense, net
    
    
    1,120
    
    
    
    
    
    
    
    
    
    
    
    1,120Depreciation and amortization
    
    
    1,673
    
    
    
    4
    
    
    
    
    
    
    
    1,677Earnings before loss on sale of
assets, minority interests and
income taxes
    
    $
    929
    
    
    $
    388
    
    
    $
    
    
    
    $
    1,317Loss on sale of assets, net
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    (8
    )Minority interests
    
    
    (122
    )
    
    
    
    
    
    
    
    
    
    
    (122
    )Earnings before income taxes
    
    $
    799
    
    
    $
    388
    
    
    $
    
    
    
    $
    1,187Segment assets
    
    $
    1,685,399
    
    
    $
    10,467
    
    
    
    
    
    
    $
    1,695,866
 12




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
 Predecessor
    
    For the Period April 1, 2004 through June 22, 2004Acute Care
    
    Health Choice
    
    Eliminations
    
    ConsolidatedNet acute care revenue
    
    $
    259,283
    
    
    $
    
    
    
    $
    
    
    
    $
    259,283Premium revenue
    
    
    
    
    
    
    64,258
    
    
    
    
    
    
    
    64,258Revenue between segments
    
    
    2,717
    
    
    
    
    
    
    
    (2,717
    )
    
    
    Net revenue
    
    
    262,000
    
    
    
    64,258
    
    
    
    (2,717
    )
    
    
    323,541Salaries and benefits
    
    
    96,706
    
    
    
    2,272
    
    
    
    
    
    
    
    98,978Supplies
    
    
    43,029
    
    
    
    56
    
    
    
    
    
    
    
    43,085Medical claims
    
    
    
    
    
    
    55,404
    
    
    
    (2,717
    )
    
    
    52,687Rents and leases
    
    
    7,430
    
    
    
    162
    
    
    
    
    
    
    
    7,592Other operating expenses
    
    
    44,765
    
    
    
    2,156
    
    
    
    
    
    
    
    46,921Provision for bad debts
    
    
    30,198
    
    
    
    
    
    
    
    
    
    
    
    30,198Adjusted EBITDA(1)
    
    
    39,872
    
    
    
    4,208
    
    
    
    
    
    
    
    44,080Interest expense, net
    
    
    11,903
    
    
    
    
    
    
    
    
    
    
    
    11,903Depreciation and amortization
    
    
    16,467
    
    
    
    44
    
    
    
    
    
    
    
    16,511Loss on early extinguishment of debt
    
    
    51,852
    
    
    
    
    
    
    
    
    
    
    
    51,852Merger expenses
    
    
    19,750
    
    
    
    
    
    
    
    
    
    
    
    19,750Earnings (loss) before loss on sale of
assets, minority interests and
income taxes
    
    $
    (60,100
    )
    
    $
    4,164
    
    
    $
    
    
    
    $
    (55,936
    )Loss on sale of assets, net
    
    
    (22
    )
    
    
    
    
    
    
    
    
    
    
    (22
    )Minority interests
    
    
    (1,074
    )
    
    
    
    
    
    
    
    
    
    
    (1,074
    )Earnings (loss) before income taxes
    
    $
    (61,196
    )
    
    $
    4,164
    
    
    $
    
    
    
    $
    (57,032
    )
 
 (1)
    
    Adjusted EBITDA represents net earnings (loss) before interest expense, income tax expense,
depreciation and amortization, loss on early extinguishment of debt, merger expenses,
management fees, gain (loss) on sale of assets, and minority interests. Management fees
represent monitoring and advisory fees paid to TPG, the Companys majority financial sponsor,
and certain other members of IASIS Investment. Merger expenses include legal and advisory
expenses and special bonus compensation of the Predecessor incurred in connection with the
acquisition of IASIS by TPG. 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 generally accepted accounting principles (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, may not be
comparable to similarly titled measures of other companies. 13




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
 For the Nine Months Ended June 30, 2005Acute Care
    
    Health Choice
    
    Eliminations
    
    ConsolidatedNet acute care revenue
    
    $
    886,384
    
    
    $
    
    
    
    $
    
    
    
    $
    886,384Premium revenue
    
    
    
    
    
    
    263,827
    
    
    
    
    
    
    
    263,827Revenue between segments
    
    
    6,597
    
    
    
    
    
    
    
    (6,597
    )
    
    
    Net revenue
    
    
    892,981
    
    
    
    263,827
    
    
    
    (6,597
    )
    
    
    1,150,211Salaries and benefits
    
    
    324,328
    
    
    
    8,357
    
    
    
    
    
    
    
    332,685Supplies
    
    
    140,718
    
    
    
    145
    
    
    
    
    
    
    
    140,863Medical claims
    
    
    
    
    
    
    232,774
    
    
    
    (6,597
    )
    
    
    226,177Rents and leases
    
    
    23,584
    
    
    
    652
    
    
    
    
    
    
    
    24,236Other operating expenses
    
    
    154,277
    
    
    
    8,279
    
    
    
    
    
    
    
    162,556Provision for bad debts
    
    
    96,762
    
    
    
    
    
    
    
    
    
    
    
    96,762Adjusted EBITDA(1)
    
    
    153,312
    
    
    
    13,620
    
    
    
    
    
    
    
    166,932Interest expense, net
    
    
    44,341
    
    
    
    
    
    
    
    
    
    
    
    44,341Depreciation and amortization
    
    
    54,074
    
    
    
    2,399
    
    
    
    
    
    
    
    56,473Management fees
    
    
    2,884
    
    
    
    
    
    
    
    
    
    
    
    2,884Earnings before loss on sale of
assets, minority interests and
income taxes
    
    $
    52,013
    
    
    $
    11,221
    
    
    $
    
    
    
    $
    63,234Loss on sale of assets, net
    
    
    (80
    )
    
    
    
    
    
    
    
    
    
    
    (80
    )Minority interests
    
    
    (3,052
    )
    
    
    
    
    
    
    
    
    
    
    (3,052
    )Earnings before income taxes
    
    $
    48,881
    
    
    $
    11,221
    
    
    $
    
    
    
    $
    60,102Segment assets
    
    $
    1,708,573
    
    
    $
    89,856
    
    
    
    
    
    
    $
    1,798,429Capital expenditures
    
    $
    112,930
    
    
    $
    611
    
    
    
    
    
    
    $
    113,541
 For Period June 23, 2004 through June 30, 2004Acute Care
    
    Health Choice
    
    Eliminations
    
    ConsolidatedNet acute care revenue
    
    $
    24,879
    
    
    $
    
    
    
    $
    
    
    
    $
    24,879Premium revenue
    
    
    
    
    
    
    6,847
    
    
    
    
    
    
    
    6,847Revenue between segments
    
    
    124
    
    
    
    
    
    
    
    (124
    )
    
    
    Net revenue
    
    
    25,003
    
    
    
    6,847
    
    
    
    (124
    )
    
    
    31,726Salaries and benefits
    
    
    9,400
    
    
    
    238
    
    
    
    
    
    
    
    9,638Supplies
    
    
    4,253
    
    
    
    6
    
    
    
    
    
    
    
    4,259Medical claims
    
    
    
    
    
    
    5,989
    
    
    
    (124
    )
    
    
    5,865Rents and leases
    
    
    706
    
    
    
    16
    
    
    
    
    
    
    
    722Other operating expenses
    
    
    4,391
    
    
    
    206
    
    
    
    
    
    
    
    4,597Provision for bad debts
    
    
    2,531
    
    
    
    
    
    
    
    
    
    
    
    2,531Adjusted EBITDA(1)
    
    
    3,722
    
    
    
    392
    
    
    
    
    
    
    
    4,114Interest expense, net
    
    
    1,120
    
    
    
    
    
    
    
    
    
    
    
    1,120Depreciation and amortization
    
    
    1,673
    
    
    
    4
    
    
    
    
    
    
    
    1,677Earnings before loss on sale of
assets, minority interests and
income taxes
    
    $
    929
    
    
    $
    388
    
    
    $
    
    
    
    
    1,317Loss on sale of assets, net
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    (8
    )Minority interests
    
    
    (122
    )
    
    
    
    
    
    
    
    
    
    
    (122
    )Earnings before income taxes
    
    $
    799
    
    
    $
    388
    
    
    $
    
    
    
    $
    1,187Segment assets
    
    $
    1,685,399
    
    
    $
    10,467
    
    
    
    
    
    
    $
    1,695,866Capital expenditures
    
    $
    2,943
    
    
    $
    4
    
    
    
    
    
    
    $
    2,947
 14




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
 Predecessor
    
    For the Period October 1, 2003 through June 22, 2004Acute Care
    
    Health Choice
    
    Eliminations
    
    ConsolidatedNet acute care revenue
    
    $
    794,887
    
    
    $
    
    
    
    $
    
    
    
    $
    794,887Premium revenue
    
    
    
    
    
    
    202,273
    
    
    
    
    
    
    
    202,273Revenue between segments
    
    
    8,031
    
    
    
    
    
    
    
    (8,031
    )
    
    
    Net revenue
    
    
    802,918
    
    
    
    202,273
    
    
    
    (8,031
    )
    
    
    997,160Salaries and benefits
    
    
    302,095
    
    
    
    6,786
    
    
    
    
    
    
    
    308,881Supplies
    
    
    129,518
    
    
    
    147
    
    
    
    
    
    
    
    129,665Medical claims
    
    
    
    
    
    
    176,369
    
    
    
    (8,031
    )
    
    
    168,338Rents and leases
    
    
    22,694
    
    
    
    464
    
    
    
    
    
    
    
    23,158Other operating expenses
    
    
    138,534
    
    
    
    7,114
    
    
    
    
    
    
    
    145,648Provision for bad debts
    
    
    87,466
    
    
    
    
    
    
    
    
    
    
    
    87,466Adjusted EBITDA(1)
    
    
    122,611
    
    
    
    11,393
    
    
    
    
    
    
    
    134,004Interest expense, net
    
    
    39,673
    
    
    
    
    
    
    
    
    
    
    
    39,673Depreciation and amortization
    
    
    50,360
    
    
    
    130
    
    
    
    
    
    
    
    50,490Loss on early extinguishment of debt
    
    
    51,852
    
    
    
    
    
    
    
    
    
    
    
    51,852Merger expenses
    
    
    19,750
    
    
    
    
    
    
    
    
    
    
    
    19,750Write-off of debt issue costs
    
    
    8,850
    
    
    
    
    
    
    
    
    
    
    
    8,850Earnings (loss) before gain on sale of
assets, minority interests and income
taxes
    
    $
    (47,874
    )
    
    $
    11,263
    
    
    $
    
    
    
    $
    (36,611
    )Gain on sale of assets, net
    
    
    3,731
    
    
    
    
    
    
    
    
    
    
    
    3,731Minority interests
    
    
    (3,098
    )
    
    
    
    
    
    
    
    
    
    
    (3,098
    )Earnings (loss) before income taxes
    
    $
    (47,241
    )
    
    $
    11,263
    
    
    $
    
    
    
    $
    (35,978
    )Capital expenditures
    
    $
    81,945
    
    
    $
    320
    
    
    
    
    
    
    $
    82,265
 
 (1)
    
    Adjusted EBITDA represents net earnings (loss) before interest expense, income tax expense,
depreciation and amortization, loss on early extinguishment of debt, merger expenses,
write-off of debt issue costs, management fees, gain (loss) on sale of assets, and minority
interests. Management fees represent monitoring and advisory fees paid to TPG, the Companys
majority financial sponsor, and certain other members of IASIS Investment. Merger expenses
include legal and advisory expenses and special bonus compensation of the Predecessor incurred
in connection with the acquisition of IASIS by TPG. 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 generally accepted accounting principles (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, may not be comparable to similarly titled measures of other companies. 15




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
 8. Supplemental Condensed Consolidating Financial Information
   16




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
  (in thousands)
 SubsidiarySubsidiary
    
    Non-
    
    
    
    
    
    CondensedParent Issuer
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    67,206
    
    
    $
    750
    
    
    $
    
    
    
    $
    67,956Accounts receivable, net
    
    
    
    
    
    
    127,970
    
    
    
    54,085
    
    
    
    
    
    
    
    182,055Inventories
    
    
    
    
    
    
    20,499
    
    
    
    8,336
    
    
    
    
    
    
    
    28,835Deferred income taxes
    
    
    32,475
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,475Prepaid expenses and other current assets
    
    
    
    
    
    
    12,993
    
    
    
    14,297
    
    
    
    
    
    
    
    27,290Total current assets
    
    
    32,475
    
    
    
    228,668
    
    
    
    77,468
    
    
    
    
    
    
    
    338,611Property and equipment, net
    
    
    
    
    
    
    391,634
    
    
    
    235,912
    
    
    
    
    
    
    
    627,546Intercompany
    
    
    
    
    
    
    (85,699
    )
    
    
    85,699
    
    
    
    
    
    
    
    Net investment in and advances to subsidiaries
    
    
    1,444,236
    
    
    
    
    
    
    
    
    
    
    
    (1,444,236
    )
    
    
    Goodwill
    
    
    20,249
    
    
    
    230,702
    
    
    
    501,306
    
    
    
    
    
    
    
    752,257Other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    42,750
    
    
    
    
    
    
    
    42,750Other assets, net
    
    
    24,400
    
    
    
    9,512
    
    
    
    3,353
    
    
    
    
    
    
    
    37,265Total assets
    
    $
    1,521,360
    
    
    $
    774,817
    
    
    $
    946,488
    
    
    $
    (1,444,236
    )
    
    $
    1,798,429Liabilities and EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    37,514
    
    
    $
    17,550
    
    
    $
    
    
    
    $
    55,064Salaries and benefits payable
    
    
    
    
    
    
    22,174
    
    
    
    6,964
    
    
    
    
    
    
    
    29,138Accrued interest payable
    
    
    7,760
    
    
    
    (1,012
    )
    
    
    1,012
    
    
    
    
    
    
    
    7,760Medical claims payable
    
    
    
    
    
    
    
    
    
    
    57,721
    
    
    
    
    
    
    
    57,721Other accrued expenses and other current liabilities
    
    
    
    
    
    
    25,717
    
    
    
    2,136
    
    
    
    
    
    
    
    27,853Current portion of long-term debt and capital lease
obligations
    
    
    4,402
    
    
    
    2,108
    
    
    
    4,372
    
    
    
    (3,229
    )
    
    
    7,653Total current liabilities
    
    
    12,162
    
    
    
    86,501
    
    
    
    89,755
    
    
    
    (3,229
    )
    
    
    185,189Long-term debt and capital lease obligations
    
    
    891,500
    
    
    
    5,422
    
    
    
    207,558
    
    
    
    (205,873
    )
    
    
    898,607Deferred income taxes
    
    
    46,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,050Other long-term liabilities
    
    
    
    
    
    
    39,221
    
    
    
    
    
    
    
    
    
    
    
    39,221Minority interest
    
    
    
    
    
    
    16,784
    
    
    
    
    
    
    
    
    
    
    
    16,784Members equity
    
    
    571,648
    
    
    
    626,889
    
    
    
    649,175
    
    
    
    (1,235,134
    )
    
    
    612,578Total liabilities and equity
    
    $
    1,521,360
    
    
    $
    774,817
    
    
    $
    946,488
    
    
    $
    (1,444,236
    )
    
    $
    1,798,429
 17




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
  (in thousands)
 SubsidiarySubsidiary
    
    Non-
    
    
    
    
    
    CondensedParent Issuer
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    97,463
    
    
    $
    1,342
    
    
    $
    
    
    
    $
    98,805Accounts receivable, net
    
    
    
    
    
    
    120,936
    
    
    
    44,344
    
    
    
    
    
    
    
    165,280Inventories
    
    
    
    
    
    
    18,320
    
    
    
    7,933
    
    
    
    
    
    
    
    26,253Prepaid expenses and other current assets
    
    
    
    
    
    
    9,542
    
    
    
    11,755
    
    
    
    
    
    
    
    21,297Total current assets
    
    
    
    
    
    
    246,261
    
    
    
    65,374
    
    
    
    
    
    
    
    311,635Property and equipment, net
    
    
    
    
    
    
    340,599
    
    
    
    191,860
    
    
    
    
    
    
    
    532,459Intercompany
    
    
    
    
    
    
    (60,977
    )
    
    
    60,977
    
    
    
    
    
    
    
    Net investment in and advances to subsidiaries
    
    
    871,269
    
    
    
    
    
    
    
    
    
    
    
    (871,269
    )
    
    
    Goodwill
    
    
    
    
    
    
    208,150
    
    
    
    44,054
    
    
    
    
    
    
    
    252,204Unallocated purchase price
    
    
    585,013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    585,013Other assets, net
    
    
    28,977
    
    
    
    10,450
    
    
    
    3,423
    
    
    
    
    
    
    
    42,850Total assets
    
    $
    1,485,259
    
    
    $
    744,483
    
    
    $
    365,688
    
    
    $
    (871,269
    )
    
    $
    1,724,161Liabilities and EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    47,950
    
    
    $
    13,345
    
    
    $
    
    
    
    $
    61,295Salaries and benefits payable
    
    
    
    
    
    
    26,984
    
    
    
    9,479
    
    
    
    
    
    
    
    36,463Accrued interest payable
    
    
    13,821
    
    
    
    (853
    )
    
    
    853
    
    
    
    
    
    
    
    13,821Medical claims payable
    
    
    
    
    
    
    
    
    
    
    55,421
    
    
    
    
    
    
    
    55,421Other accrued expenses and other current liabilities
    
    
    
    
    
    
    24,117
    
    
    
    2,025
    
    
    
    
    
    
    
    26,142Current portion of long-term debt and capital lease
obligations
    
    
    7,750
    
    
    
    1,740
    
    
    
    3,759
    
    
    
    (2,521
    )
    
    
    10,728Total current liabilities
    
    
    21,571
    
    
    
    99,938
    
    
    
    84,882
    
    
    
    (2,521
    )
    
    
    203,870Long-term debt and capital lease obligations
    
    
    894,688
    
    
    
    4,817
    
    
    
    132,862
    
    
    
    (130,341
    )
    
    
    902,026Other long-term liabilities
    
    
    
    
    
    
    31,596
    
    
    
    
    
    
    
    
    
    
    
    31,596Minority interest
    
    
    
    
    
    
    12,964
    
    
    
    
    
    
    
    
    
    
    
    12,964Members equity
    
    
    569,000
    
    
    
    595,168
    
    
    
    147,944
    
    
    
    (738,407
    )
    
    
    573,705Total liabilities and equity
    
    $
    1,485,259
    
    
    $
    744,483
    
    
    $
    365,688
    
    
    $
    (871,269
    )
    
    $
    1,724,161
 18




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
  (in thousands)
 Subsidiary
    
    Subsidiary
    
    
    
    
    
    CondensedParent Issuer
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    211,949
    
    
    $
    90,042
    
    
    $
    (2,100
    )
    
    $
    299,891Premium revenue
    
    
    
    
    
    
    
    
    
    
    90,088
    
    
    
    
    
    
    
    90,088Total net revenue
    
    
    
    
    
    
    211,949
    
    
    
    180,130
    
    
    
    (2,100
    )
    
    
    389,979Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    81,679
    
    
    
    31,773
    
    
    
    
    
    
    
    113,452Supplies
    
    
    
    
    
    
    35,537
    
    
    
    10,671
    
    
    
    
    
    
    
    46,208Medical claims
    
    
    
    
    
    
    
    
    
    
    79,509
    
    
    
    (2,100
    )
    
    
    77,409Rents and leases
    
    
    
    
    
    
    5,964
    
    
    
    2,421
    
    
    
    
    
    
    
    8,385Other operating expenses
    
    
    
    
    
    
    39,713
    
    
    
    15,602
    
    
    
    
    
    
    
    55,315Provision for bad debts
    
    
    
    
    
    
    27,268
    
    
    
    6,524
    
    
    
    
    
    
    
    33,792Interest expense, net
    
    
    15,664
    
    
    
    
    
    
    
    5,131
    
    
    
    (5,131
    )
    
    
    15,664Depreciation and amortization
    
    
    1,668
    
    
    
    12,818
    
    
    
    6,104
    
    
    
    
    
    
    
    20,590Management fees
    
    
    963
    
    
    
    (1,885
    )
    
    
    1,885
    
    
    
    
    
    
    
    963Equity in earnings of affiliates
    
    
    (30,588
    )
    
    
    
    
    
    
    
    
    
    
    30,588
    
    
    
    Total costs and expenses
    
    
    (12,293
    )
    
    
    201,094
    
    
    
    159,620
    
    
    
    23,357
    
    
    
    371,778Earnings before gain (loss) on
sale of assets, minority
interests, and income taxes
    
    
    12,293
    
    
    
    10,855
    
    
    
    20,510
    
    
    
    (25,457
    )
    
    
    18,201Gain (loss) on sale of assets, net
    
    
    
    
    
    
    (1
    )
    
    
    3
    
    
    
    
    
    
    
    2Minority interests
    
    
    
    
    
    
    (779
    )
    
    
    
    
    
    
    
    
    
    
    (779
    )Earnings before income taxes
    
    
    12,293
    
    
    
    10,075
    
    
    
    20,513
    
    
    
    (25,457
    )
    
    
    17,424Income tax expense
    
    
    6,958
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,958Net earnings
    
    $
    5,335
    
    
    $
    10,075
    
    
    $
    20,513
    
    
    $
    (25,457
    )
    
    $
    10,466
 19




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
  (in thousands)
 Subsidiary
    
    Subsidiary
    
    
    
    
    
    CondensedParent Issuer
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    17,343
    
    
    $
    7,659
    
    
    $
    (123
    )
    
    $
    24,879Premium revenue
    
    
    
    
    
    
    
    
    
    
    6,847
    
    
    
    
    
    
    
    6,847Total net revenue
    
    
    
    
    
    
    17,343
    
    
    
    14,506
    
    
    
    (123
    )
    
    
    31,726Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    7,076
    
    
    
    2,562
    
    
    
    
    
    
    
    9,638Supplies
    
    
    
    
    
    
    3,232
    
    
    
    1,027
    
    
    
    
    
    
    
    4,259Medical claims
    
    
    
    
    
    
    
    
    
    
    5,988
    
    
    
    (123
    )
    
    
    5,865Rents and leases
    
    
    
    
    
    
    505
    
    
    
    217
    
    
    
    
    
    
    
    722Other operating expenses
    
    
    
    
    
    
    3,384
    
    
    
    1,213
    
    
    
    
    
    
    
    4,597Provision for bad debts
    
    
    
    
    
    
    1,954
    
    
    
    577
    
    
    
    
    
    
    
    2,531Interest expense, net
    
    
    1,120
    
    
    
    
    
    
    
    128
    
    
    
    (128
    )
    
    
    1,120Depreciation and amortization
    
    
    46
    
    
    
    1,315
    
    
    
    316
    
    
    
    
    
    
    
    1,677Management fees
    
    
    
    
    
    
    (157
    )
    
    
    157
    
    
    
    
    
    
    
    Equity in earnings of affiliates
    
    
    (2,225
    )
    
    
    
    
    
    
    
    
    
    
    2,225
    
    
    
    Total costs and expenses
    
    
    (1,059
    )
    
    
    17,309
    
    
    
    12,185
    
    
    
    1,974
    
    
    
    30,409Earnings before loss on
sale of assets, minority
interests, and income taxes
    
    
    1,059
    
    
    
    34
    
    
    
    2,321
    
    
    
    (2,097
    )
    
    
    1,317Loss on sale of assets, net
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    (8
    )Minority interests
    
    
    
    
    
    
    (122
    )
    
    
    
    
    
    
    
    
    
    
    (122
    )Earnings (loss) before income taxes
    
    
    1,059
    
    
    
    (96
    )
    
    
    2,321
    
    
    
    (2,097
    )
    
    
    1,187Income tax expense
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29Net earnings (loss)
    
    $
    1,030
    
    
    $
    (96
    )
    
    $
    2,321
    
    
    $
    (2,097
    )
    
    $
    1,158
 20




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
  (in thousands)
 Subsidiary
    
    Subsidiary
    
    
    
    
    
    CondensedPredecessor
    
    Parent Issuer
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    184,516
    
    
    $
    77,484
    
    
    $
    (2,717
    )
    
    $
    259,283Premium revenue
    
    
    
    
    
    
    
    
    
    
    64,258
    
    
    
    
    
    
    
    64,258Total net revenue
    
    
    
    
    
    
    184,516
    
    
    
    141,742
    
    
    
    (2,717
    )
    
    
    323,541Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    72,871
    
    
    
    26,107
    
    
    
    
    
    
    
    98,978Supplies
    
    
    
    
    
    
    33,344
    
    
    
    9,741
    
    
    
    
    
    
    
    43,085Medical claims
    
    
    
    
    
    
    
    
    
    
    55,404
    
    
    
    (2,717
    )
    
    
    52,687Rents and leases
    
    
    
    
    
    
    5,398
    
    
    
    2,194
    
    
    
    
    
    
    
    7,592Other operating expenses
    
    
    
    
    
    
    34,530
    
    
    
    12,391
    
    
    
    
    
    
    
    46,921Provision for bad debts
    
    
    
    
    
    
    23,517
    
    
    
    6,681
    
    
    
    
    
    
    
    30,198Interest expense, net
    
    
    11,903
    
    
    
    
    
    
    
    2,461
    
    
    
    (2,461
    )
    
    
    11,903Depreciation and amortization
    
    
    507
    
    
    
    12,766
    
    
    
    3,238
    
    
    
    
    
    
    
    16,511Loss on early extinguishment of debt
    
    
    51,852
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,852Merger Expenses
    
    
    19,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,750Management fees
    
    
    
    
    
    
    (1,592
    )
    
    
    1,592
    
    
    
    
    
    
    
    Equity in earnings of affiliates
    
    
    (24,519
    )
    
    
    
    
    
    
    
    
    
    
    24,519
    
    
    
    Total costs and expenses
    
    
    59,493
    
    
    
    180,834
    
    
    
    119,809
    
    
    
    19,341
    
    
    
    379,477Earnings (loss) before loss on sale of
assets, minority interests, and income
taxes
    
    
    (59,493
    )
    
    
    3,682
    
    
    
    21,933
    
    
    
    (22,058
    )
    
    
    (55,936
    )Loss on sale of assets, net
    
    
    
    
    
    
    (22
    )
    
    
    
    
    
    
    
    
    
    
    (22
    )Minority interests
    
    
    
    
    
    
    (1,074
    )
    
    
    
    
    
    
    
    
    
    
    (1,074
    )Earnings (loss) before income taxes
    
    
    (59,493
    )
    
    
    2,586
    
    
    
    21,933
    
    
    
    (22,058
    )
    
    
    (57,032
    )Income tax expense
    
    
    167
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    167Net earnings/(loss)
    
    $
    (59,660
    )
    
    $
    2,586
    
    
    $
    21,933
    
    
    $
    (22,058
    )
    
    $
    (57,199
    )
 21




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
  (in thousands)
 Subsidiary
    
    Subsidiary
    
    
    
    
    
    CondensedParent Issuer
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    633,723
    
    
    $
    259,258
    
    
    $
    (6,597
    )
    
    $
    886,384Premium revenue
    
    
    
    
    
    
    
    
    
    
    263,827
    
    
    
    
    
    
    
    263,827Total net revenue
    
    
    
    
    
    
    633,723
    
    
    
    523,085
    
    
    
    (6,597
    )
    
    
    1,150,211Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    241,306
    
    
    
    91,379
    
    
    
    
    
    
    
    332,685Supplies
    
    
    
    
    
    
    109,402
    
    
    
    31,461
    
    
    
    
    
    
    
    140,863Medical claims
    
    
    
    
    
    
    
    
    
    
    232,774
    
    
    
    (6,597
    )
    
    
    226,177Rents and leases
    
    
    
    
    
    
    16,941
    
    
    
    7,295
    
    
    
    
    
    
    
    24,236Other operating expenses
    
    
    
    
    
    
    117,842
    
    
    
    44,714
    
    
    
    
    
    
    
    162,556Provision for bad debts
    
    
    
    
    
    
    77,981
    
    
    
    18,781
    
    
    
    
    
    
    
    96,762Interest expense, net
    
    
    44,341
    
    
    
    
    
    
    
    10,054
    
    
    
    (10,054
    )
    
    
    44,341Depreciation and amortization
    
    
    5,064
    
    
    
    35,812
    
    
    
    15,597
    
    
    
    
    
    
    
    56,473Management fees
    
    
    2,884
    
    
    
    (5,404
    )
    
    
    5,404
    
    
    
    
    
    
    
    2,884Equity in earnings of affiliates
    
    
    (102,337
    )
    
    
    
    
    
    
    
    
    
    
    102,337
    
    
    
    Total costs and expenses
    
    
    (50,048
    )
    
    
    593,880
    
    
    
    457,459
    
    
    
    85,686
    
    
    
    1,086,977Earnings before gain (loss) on
sale of assets, minority
interests, and income taxes
    
    
    50,048
    
    
    
    39,843
    
    
    
    65,626
    
    
    
    (92,283
    )
    
    
    63,234Gain (loss) on sale of assets, net
    
    
    
    
    
    
    (91
    )
    
    
    11
    
    
    
    
    
    
    
    (80
    )Minority interests
    
    
    
    
    
    
    (3,052
    )
    
    
    
    
    
    
    
    
    
    
    (3,052
    )Earnings before income taxes
    
    
    50,048
    
    
    
    36,700
    
    
    
    65,637
    
    
    
    (92,283
    )
    
    
    60,102Income tax expense
    
    
    23,879
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,879Net earnings/(loss)
    
    $
    26,169
    
    
    $
    36,700
    
    
    $
    65,637
    
    
    $
    (92,283
    )
    
    $
    36,223
 22




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
  (in thousands)
 Subsidiary
    
    Subsidiary
    
    
    
    
    
    CondensedParent Issuer
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    17,343
    
    
    $
    7,659
    
    
    $
    (123
    )
    
    $
    24,879Premium revenue
    
    
    
    
    
    
    
    
    
    
    6,847
    
    
    
    
    
    
    
    6,847Total net revenue
    
    
    
    
    
    
    17,343
    
    
    
    14,506
    
    
    
    (123
    )
    
    
    31,726Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    7,076
    
    
    
    2,562
    
    
    
    
    
    
    
    9,638Supplies
    
    
    
    
    
    
    3,232
    
    
    
    1,027
    
    
    
    
    
    
    
    4,259Medical claims
    
    
    
    
    
    
    
    
    
    
    5,988
    
    
    
    (123
    )
    
    
    5,865Rents and leases
    
    
    
    
    
    
    505
    
    
    
    217
    
    
    
    
    
    
    
    722Other operating expenses
    
    
    
    
    
    
    3,384
    
    
    
    1,213
    
    
    
    
    
    
    
    4,597Provision for bad debts
    
    
    
    
    
    
    1,954
    
    
    
    577
    
    
    
    
    
    
    
    2,531Interest expense, net
    
    
    1,120
    
    
    
    
    
    
    
    128
    
    
    
    (128
    )
    
    
    1,120Depreciation and amortization
    
    
    46
    
    
    
    1,315
    
    
    
    316
    
    
    
    
    
    
    
    1,677Management fees
    
    
    
    
    
    
    (157
    )
    
    
    157
    
    
    
    
    
    
    
    Equity in earnings of affiliates
    
    
    (2,225
    )
    
    
    
    
    
    
    
    
    
    
    2,225
    
    
    
    Total costs and expenses
    
    
    (1,059
    )
    
    
    17,309
    
    
    
    12,185
    
    
    
    1,974
    
    
    
    30,409Earnings (loss) before loss on
sale of assets, minority
interests, and income taxes
    
    
    1,059
    
    
    
    34
    
    
    
    2,321
    
    
    
    (2,097
    )
    
    
    1,317Loss on sale of assets, net
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    (8
    )Minority interests
    
    
    
    
    
    
    (122
    )
    
    
    
    
    
    
    
    
    
    
    (122
    )Earnings (loss) before income taxes
    
    
    1,059
    
    
    
    (96
    )
    
    
    2,321
    
    
    
    (2,097
    )
    
    
    1,187Income tax expense
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29Net earnings/(loss)
    
    $
    1,030
    
    
    $
    (96
    )
    
    $
    2,321
    
    
    $
    (2,097
    )
    
    $
    1,158
 23




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
  (in thousands)
 Subsidiary
    
    Subsidiary
    
    
    
    
    
    CondensedPredecessor
    
    Parent Issuer
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    563,697
    
    
    $
    239,221
    
    
    $
    (8,031
    )
    
    $
    794,887Premium revenue
    
    
    
    
    
    
    
    
    
    
    202,273
    
    
    
    
    
    
    
    202,273Total net revenue
    
    
    
    
    
    
    563,697
    
    
    
    441,494
    
    
    
    (8,031
    )
    
    
    997,160Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    223,954
    
    
    
    84,927
    
    
    
    
    
    
    
    308,881Supplies
    
    
    
    
    
    
    99,439
    
    
    
    30,226
    
    
    
    
    
    
    
    129,665Medical claims
    
    
    
    
    
    
    
    
    
    
    176,369
    
    
    
    (8,031
    )
    
    
    168,338Rents and leases
    
    
    
    
    
    
    16,180
    
    
    
    6,978
    
    
    
    
    
    
    
    23,158Other operating expenses
    
    
    
    
    
    
    105,238
    
    
    
    40,410
    
    
    
    
    
    
    
    145,648Provision for bad debts
    
    
    
    
    
    
    66,877
    
    
    
    20,589
    
    
    
    
    
    
    
    87,466Interest expense, net
    
    
    39,673
    
    
    
    
    
    
    
    7,753
    
    
    
    (7,753
    )
    
    
    39,673Depreciation and amortization
    
    
    2,293
    
    
    
    38,816
    
    
    
    9,381
    
    
    
    
    
    
    
    50,490Loss on early extinguishment of debt
    
    
    51,852
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,852Merger Expenses
    
    
    19,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,750Write-off of debt issue costs
    
    
    8,850
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,850Management fees
    
    
    
    
    
    
    (5,011
    )
    
    
    5,011
    
    
    
    
    
    
    
    Equity in earnings of affiliates
    
    
    (78,687
    )
    
    
    
    
    
    
    
    
    
    
    78,687
    
    
    
    Total costs and expenses
    
    
    43,731
    
    
    
    545,493
    
    
    
    381,644
    
    
    
    62,903
    
    
    
    1,033,771Earnings before gain on sale of
assets, minority interests, and income
taxes
    
    
    (43,731
    )
    
    
    18,204
    
    
    
    59,850
    
    
    
    (70,934
    )
    
    
    (36,611
    )Gain on sale of assets, net
    
    
    
    
    
    
    3,731
    
    
    
    
    
    
    
    
    
    
    
    3,731Minority interests
    
    
    
    
    
    
    (3,098
    )
    
    
    
    
    
    
    
    
    
    
    (3,098
    )Earnings before income taxes
    
    
    (43,731
    )
    
    
    18,837
    
    
    
    59,850
    
    
    
    (70,934
    )
    
    
    (35,978
    )Income tax expense
    
    
    1,152
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,152Net earning/(loss)
    
    $
    (44,883
    )
    
    $
    18,837
    
    
    $
    59,850
    
    
    $
    (70,934
    )
    
    $
    (37,130
    )
 24




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
  (in thousands)
 SubsidiarySubsidiary
    
    Non-
    
    
    
    
    
    CondensedParent Issuer
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedCash flows from operating activitiesNet earnings
    
    $
    26,169
    
    
    $
    36,700
    
    
    $
    65,637
    
    
    $
    (92,283
    )
    
    $
    36,223Adjustments to reconcile net earnings to net cash provided
operating activities:Depreciation and amortization
    
    
    5,064
    
    
    
    35,812
    
    
    
    15,597
    
    
    
    
    
    
    
    56,473Minority interests
    
    
    
    
    
    
    3,052
    
    
    
    
    
    
    
    
    
    
    
    3,052Deferred income taxes
    
    
    22,742
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,742(Gain) loss on sale of assets
    
    
    
    
    
    
    91
    
    
    
    (11
    )
    
    
    
    
    
    
    80Equity in earnings of affiliates
    
    
    (102,337
    )
    
    
    
    
    
    
    
    
    
    
    102,337
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    
    
    
    
    (7,035
    )
    
    
    (9,741
    )
    
    
    
    
    
    
    (16,776
    )Inventories, prepaid expenses and other current assets
    
    
    
    
    
    
    (5,461
    )
    
    
    (3,114
    )
    
    
    
    
    
    
    (8,575
    )Accounts payable and other accrued liabilities
    
    
    (6,061
    )
    
    
    3,666
    
    
    
    (2,054
    )
    
    
    
    
    
    
    (4,449
    )Net cash provided by (used in) operating activities
    
    
    (54,423
    )
    
    
    66,825
    
    
    
    66,314
    
    
    
    10,054
    
    
    
    88,770Cash flows from investing activitiesPurchases of property and equipment
    
    
    
    
    
    
    (55,266
    )
    
    
    (58,275
    )
    
    
    
    
    
    
    (113,541
    )Cash paid for acquisition
    
    
    (617
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (617
    )Change in other assets
    
    
    
    
    
    
    940
    
    
    
    37
    
    
    
    
    
    
    
    977Net cash used in investing activities
    
    
    (617
    )
    
    
    (54,326
    )
    
    
    (58,238
    )
    
    
    
    
    
    
    (113,181
    )Cash flows from financing activitiesPayment of debt and capital leases
    
    
    (6,804
    )
    
    
    (1,265
    )
    
    
    (924
    )
    
    
    
    
    
    
    (8,993
    )Debt financing costs incurred
    
    
    (487
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (487
    )Distribution of minority interests
    
    
    
    
    
    
    
    
    
    
    (3,129
    )
    
    
    
    
    
    
    (3,129
    )Change in intercompany balances with affiliates, net
    
    
    60,057
    
    
    
    (45,388
    )
    
    
    (4,615
    )
    
    
    (10,054
    )
    
    
    Proceeds received from hospital syndication
    
    
    
    
    
    
    3,897
    
    
    
    
    
    
    
    
    
    
    
    3,897Proceeds from debt borrowings
    
    
    2,274
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,274Net cash provided by (used in) financing activities
    
    
    55,040
    
    
    
    (42,756
    )
    
    
    (8,668
    )
    
    
    (10,054
    )
    
    
    (6,438
    )Net decrease in cash and cash equivalents
    
    
    
    
    
    
    (30,257
    )
    
    
    (592
    )
    
    
    
    
    
    
    (30,849
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    97,463
    
    
    
    1,342
    
    
    
    
    
    
    
    98,805Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    67,206
    
    
    $
    750
    
    
    $
    
    
    
    $
    67,956
 25




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
  (in thousands)
 SubsidiarySubsidiary
    
    Non-
    
    
    
    
    
    CondensedPredecessor
    
    Parent Issuer
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    1,030
    
    
    $
    (96
    )
    
    $
    2,321
    
    
    $
    (2,097
    )
    
    $
    1,158Adjustments to reconcile net earnings (loss) to net cash
provided operating activities:Depreciation and amortization
    
    
    46
    
    
    
    1,315
    
    
    
    316
    
    
    
    
    
    
    
    1,677Minority interests
    
    
    
    
    
    
    122
    
    
    
    
    
    
    
    
    
    
    
    122Loss on sale of assets, net
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Equity in earnings of affiliates
    
    
    (2,225
    )
    
    
    
    
    
    
    
    
    
    
    2,225
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    
    
    
    
    2,386
    
    
    
    (102
    )
    
    
    
    
    
    
    2,284Inventories, prepaid expenses and other current assets
    
    
    
    
    
    
    676
    
    
    
    48
    
    
    
    
    
    
    
    724Accounts payable and other accrued liabilities
    
    
    
    
    
    
    (5,762
    )
    
    
    6
    
    
    
    
    
    
    
    (5,756
    )Net cash provided by (used in) operating activities
    
    
    (1,149
    )
    
    
    (1,351
    )
    
    
    2,589
    
    
    
    128
    
    
    
    217Cash flows from investing activitiesPurchases of property and equipment
    
    
    
    
    
    
    (2,078
    )
    
    
    (869
    )
    
    
    
    
    
    
    (2,947
    )Change in other assets
    
    
    
    
    
    
    (1
    )
    
    
    57
    
    
    
    
    
    
    
    56Net cash used in investing activities
    
    
    
    
    
    
    (2,079
    )
    
    
    (812
    )
    
    
    
    
    
    
    (2,891
    )Cash flows from financing activitiesPayment of debt and capital leases
    
    
    (66
    )
    
    
    29
    
    
    
    (29
    )
    
    
    
    
    
    
    (66
    )Change in intercompany balances with affiliates, net
    
    
    1,215
    
    
    
    (2,517
    )
    
    
    1,430
    
    
    
    (128
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    1,149
    
    
    
    (2,488
    )
    
    
    1,401
    
    
    
    (128
    )
    
    
    (66
    )Net increase (decrease) in cash and cash equivalents
    
    $
    
    
    
    $
    (5,918
    )
    
    $
    3,178
    
    
    $
    
    
    
    $
    (2,740
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    81,706
    
    
    
    2,237
    
    
    
    
    
    
    
    83,943Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    75,788
    
    
    $
    5,415
    
    
    $
    
    
    
    $
    81,203
 26




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
  (in thousands)
 SubsidiarySubsidiary
    
    Non-
    
    
    
    
    
    CondensedPredecessor
    
    Parent Issuer
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    (44,883
    )
    
    $
    18,837
    
    
    $
    59,850
    
    
    $
    (70,934
    )
    
    $
    (37,130
    )Adjustments to reconcile net earnings (loss) to net cash provided
operating activities:Depreciation and amortization
    
    
    2,293
    
    
    
    38,816
    
    
    
    9,381
    
    
    
    
    
    
    
    50,490Minority interests
    
    
    
    
    
    
    3,098
    
    
    
    
    
    
    
    
    
    
    
    3,098Gain on sale of property and equipment
    
    
    
    
    
    
    (3,731
    )
    
    
    
    
    
    
    
    
    
    
    (3,731
    )Loss on early extinguishment of debt
    
    
    14,993
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,993Write-off of debt issue costs
    
    
    8,850
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,850Equity in earnings of affiliates
    
    
    (78,687
    )
    
    
    
    
    
    
    
    
    
    
    78,687
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    
    
    
    
    (6,197
    )
    
    
    (2,345
    )
    
    
    
    
    
    
    (8,542
    )Establishment of accounts receivable of recent acquisitions
    
    
    
    
    
    
    (11,325
    )
    
    
    
    
    
    
    
    
    
    
    (11,325
    )Inventories, prepaid expenses and other current assets
    
    
    
    
    
    
    (4,096
    )
    
    
    (1,560
    )
    
    
    
    
    
    
    (5,656
    )Accounts payable and other accrued liabilities
    
    
    (19,695
    )
    
    
    9,590
    
    
    
    17,096
    
    
    
    
    
    
    
    6,991Net cash provided by (used in) operating activities
    
    
    (117,129
    )
    
    
    44,992
    
    
    
    82,422
    
    
    
    7,753
    
    
    
    18,038Cash flows from investing activitiesPurchases of property and equipment
    
    
    
    
    
    
    (46,095
    )
    
    
    (36,170
    )
    
    
    
    
    
    
    (82,265
    )Cash paid for acquisition
    
    
    
    
    
    
    (23,032
    )
    
    
    
    
    
    
    
    
    
    
    (23,032
    )Proceeds from sale of assets
    
    
    
    
    
    
    14,928
    
    
    
    
    
    
    
    
    
    
    
    14,928Change in other assets
    
    
    
    
    
    
    (1,969
    )
    
    
    319
    
    
    
    
    
    
    
    (1,650
    )Net cash used in investing activities
    
    
    
    
    
    
    (56,168
    )
    
    
    (35,851
    )
    
    
    
    
    
    
    (92,019
    )Cash flows from financing activitiesPayment of debt and capital leases
    
    
    (649,309
    )
    
    
    (1,019
    )
    
    
    (1,043
    )
    
    
    
    
    
    
    (651,371
    )Debt financing costs incurred
    
    
    (31,469
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,469
    )Distribution of minority interests
    
    
    
    
    
    
    
    
    
    
    (2,510
    )
    
    
    
    
    
    
    (2,510
    )Proceeds received from hospital syndication
    
    
    
    
    
    
    1,784
    
    
    
    
    
    
    
    
    
    
    
    1,784Proceeds from issuance of common stock, net
    
    
    529,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    529,000Proceeds from debt borrowings
    
    
    900,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    900,000Cash paid to security holders
    
    
    (677,780
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (677,780
    )Payment of merger costs incurred by members of IASIS Investment LLC
    
    
    (10,800
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,800
    )Change in intercompany balances with affiliates, net
    
    
    57,487
    
    
    
    (10,342
    )
    
    
    (39,392
    )
    
    
    (7,753
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    117,129
    
    
    
    (9,577
    )
    
    
    (42,945
    )
    
    
    (7,753
    )
    
    
    56,854Net increase (decrease) in cash and cash equivalents
    
    $
    
    
    
    $
    (20,753
    )
    
    $
    3,626
    
    
    $
    
    
    
    $
    (17,127
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    100,784
    
    
    
    286
    
    
    
    
    
    
    
    101,070Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    80,031
    
    
    $
    3,912
    
    
    $
    
    
    
    $
    83,943
 27




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward Looking Statements
   28




---



##### Table of Contents



Executive Overview
  
 
 
 
 
    The Merger
 Business Combinations
 Revenue and Volume Trends
  29




---



##### Table of Contents



Three Months
    
    Nine MonthsEnded June 30
    
    Ended June 302005
    
    2004
    
    2005
    
    2004Medicare
    
    
    25.8
    %
    
    
    25.7
    %
    
    
    26.8
    %
    
    
    26.7
    %Medicaid
    
    
    13.7
    
    
    
    13.3
    
    
    
    13.0
    
    
    
    13.2Managed care
    
    
    44.3
    
    
    
    42.6
    
    
    
    44.6
    
    
    
    43.8Self-pay and other
    
    
    16.2
    
    
    
    18.4
    
    
    
    15.6
    
    
    
    16.3Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
     
    
    a provision allocating $250.0 million per year for federal years
2005-2008 to pay for healthcare costs of undocumented aliens;
    
    provisions generally providing hospitals with more reimbursement for
outpatient drugs;
 30




---



##### Table of Contents




    
    a provision increasing our reimbursement by reducing the labor share
percentage from 71% to 62% for hospitals with wage indices less than 1.0; and
    
    a provision eliminating the requirement that hospitals must obtain
secondary payment information from all Medicare beneficiaries receiving reference
laboratory services.
   Other Trends
  Growth in Bad Debts Resulting From Increased Self-Pay Volume and Revenue
  31




---



##### Table of Contents



June 30,
    
    March 31,
    
    September 30,2005
    
    2005
    
    2004Insured receivables
    
    
    63.2
    %
    
    
    63.0
    %
    
    
    61.6
    %Uninsured receivables
    
    
    36.8
    %
    
    
    37.0
    %
    
    
    38.4
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
   June 30,
    
    March 31,
    
    September 30,2005
    
    2005
    
    20040 to 90 days
    
    
    63.9
    %
    
    
    63.0
    %
    
    
    63.4
    %90 to 180 days
    
    
    17.0
    %
    
    
    15.3
    %
    
    
    18.1
    %Over 180 days
    
    
    19.1
    %
    
    
    21.7
    %
    
    
    18.5
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 Additional Charity Care and Charges to the Uninsured
  Development of Sub-Acute Care Services
  Nursing Shortage
  32




---



##### Table of Contents



Decreased State Funding for Medicaid Programs
  Growth in Outpatient Services
  Increasing Insurance Costs
  Critical Accounting Policies
  33




---



##### Table of Contents



Selected Operating Data
  Three Months Ended
    
    Nine Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004Acute Care (1):Number of acute care hospitals at end of period (2)
    
    
    14
    
    
    
    15
    
    
    
    14
    
    
    
    15Beds in service at end of period
    
    
    2,225
    
    
    
    2,257
    
    
    
    2,225
    
    
    
    2,257Average length of stay (days) (3)
    
    
    4.45
    
    
    
    4.36
    
    
    
    4.43
    
    
    
    4.40Occupancy rates (average beds in service)
    
    
    48.4
    %
    
    
    49.1
    %
    
    
    49.0
    %
    
    
    50.7
    %Admissions (4)
    
    
    22,005
    
    
    
    23,124
    
    
    
    67,480
    
    
    
    67,997Adjusted admissions (4) (5)
    
    
    36,314
    
    
    
    37,151
    
    
    
    109,514
    
    
    
    108,995Patient days (6)
    
    
    98,023
    
    
    
    100,758
    
    
    
    299,032
    
    
    
    298,887Adjusted patient days (5)
    
    
    155,926
    
    
    
    156,363
    
    
    
    467,913
    
    
    
    462,176Net patient revenue per adjusted admission
    
    $
    8,135
    
    
    $
    7,553
    
    
    $
    7,985
    
    
    $
    7,426Acute Care (Same-Facility) (7)Number of acute care hospitals at end of period (2)
    
    
    14
    
    
    
    15
    
    
    
    13
    
    
    
    14Beds in service at end of period
    
    
    2,225
    
    
    
    2,257
    
    
    
    2,039
    
    
    
    2,081Average length of stay (days) (3)
    
    
    4.45
    
    
    
    4.36
    
    
    
    4.37
    
    
    
    4.38Occupancy rates (average beds in service)
    
    
    48.4
    %
    
    
    49.1
    %
    
    
    48.6
    %
    
    
    50.2
    %Admissions (4)
    
    
    22,005
    
    
    
    23,124
    
    
    
    62,206
    
    
    
    64,599Adjusted admissions (4) (5)
    
    
    36,314
    
    
    
    37,151
    
    
    
    102,720
    
    
    
    104,739Patient days (6)
    
    
    98,023
    
    
    
    100,758
    
    
    
    272,040
    
    
    
    282,920Adjusted patient days (5)
    
    
    155,926
    
    
    
    156,363
    
    
    
    433,142
    
    
    
    442,177Net patient revenue per adjusted admission
    
    $
    8,135
    
    
    $
    7,553
    
    
    $
    7,824
    
    
    $
    7,344Health Choice:Covered lives
    
    
    112,510
    
    
    
    93,720
    
    
    
    112,510
    
    
    
    93,720Medical loss ratio (8)
    
    
    88.3
    %
    
    
    86.3
    %
    
    
    88.2
    %
    
    
    87.2
    %
 
 (1)
    
    Includes North Vista Hospital (formerly known as Lake Mead Hospital Medical Center), which we
acquired effective February 1, 2004.(2)
    
    Excludes St. Lukes Behavioral Hospital. Additionally, on April 16, 2005, the Company opened
The Medical Center of Southeast Texas, its new hospital in Port Arthur, Texas. The operations
of Mid-Jefferson Hospital, in Nederland, Texas, and Park Place Medical Center, in Port Arthur,
Texas, moved to the new hospital. As a result, the Company currently operates 14 acute care
hospitals.(3)
    
    Represents the average number of days that a patient stayed in our hospitals.(4)
    
    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. The
Companys admissions for the three months ended June 30, 2004, were 23,124. The admissions
reported in the Companys earnings releases on August 6, 2004 and September 17, 2004, were
incorrect due to an inadvertent overstatement of 327 admissions for North Vista Hospital, which was acquired in the second
quarter of fiscal 2004. Similarly, the Companys admissions and patient days for the three
months ended September 30, 2004, were 22,309 and 96,282, respectively. The admissions and
patient days reported in the Companys earnings release on November 15, 2004, were incorrect
due to an inadvertent overstatement of 116 admissions and 1,208 patient days by North Vista
Hospital. The Company believes that the statistical corrections are not material to its
admissions, patient days and derived statistics and did not change previously reported
statistics on a same facility basis. The statistical corrections had no impact on the
Companys financial statements.(5)
    
    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.(6)
    
    Represents the number of days our beds were occupied by inpatients over the period.(7)
    
    Same facility data for the nine months ended June 30, 2005 and 2004, exclude the 186-bed
North Vista Hospital, which was acquired in the second quarter of fiscal 2004. Same facility
data for the three months ended June 30, 2005 and 2004, include the results of North Vista
Hospital.(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
  Three
    
    Three
    
    Nine
    
    NineMonths Ended
    
    Months Ended
    
    Months Ended
    
    Months EndedConsolidated (in thousands):
    
    June 30, 2005
    
    June 30, 2004
    
    June 30, 2005
    
    June 30, 2004($)
    
    (%)
    
    ($)
    
    (%)
    
    ($)
    
    (%)
    
    ($)
    
    (%)Net Revenue:Acute care revenue
    
    $
    299,891
    
    
    
    76.9
    %
    
    $
    284,162
    
    
    
    80.0
    %
    
    $
    886,384
    
    
    
    77.1
    %
    
    $
    819,766
    
    
    
    79.7
    %Premium revenue
    
    
    90,088
    
    
    
    23.1
    %
    
    
    71,105
    
    
    
    20.0
    %
    
    
    263,827
    
    
    
    22.9
    %
    
    
    209,120
    
    
    
    20.3
    %Total net revenue
    
    
    389,979
    
    
    
    100.0
    %
    
    
    355,267
    
    
    
    100.0
    %
    
    
    1,150,211
    
    
    
    100.0
    %
    
    
    1,028,886
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    113,452
    
    
    
    29.1
    %
    
    
    108,616
    
    
    
    30.6
    %
    
    
    332,685
    
    
    
    28.9
    %
    
    
    318,519
    
    
    
    31.0
    %Supplies
    
    
    46,208
    
    
    
    11.8
    %
    
    
    47,344
    
    
    
    13.3
    %
    
    
    140,863
    
    
    
    12.2
    %
    
    
    133,924
    
    
    
    13.0
    %Medical claims
    
    
    77,409
    
    
    
    19.8
    %
    
    
    58,552
    
    
    
    16.5
    %
    
    
    226,177
    
    
    
    19.7
    %
    
    
    174,203
    
    
    
    16.9
    %Rents and leases
    
    
    8,385
    
    
    
    2.2
    %
    
    
    8,314
    
    
    
    2.3
    %
    
    
    24,236
    
    
    
    2.1
    %
    
    
    23,880
    
    
    
    2.3
    %Other operating expenses
    
    
    55,315
    
    
    
    14.2
    %
    
    
    51,518
    
    
    
    14.5
    %
    
    
    162,556
    
    
    
    14.1
    %
    
    
    150,245
    
    
    
    14.6
    %Provision for bad debts
    
    
    33,792
    
    
    
    8.7
    %
    
    
    32,729
    
    
    
    9.2
    %
    
    
    96,762
    
    
    
    8.4
    %
    
    
    89,997
    
    
    
    8.7
    %Interest, net
    
    
    15,664
    
    
    
    4.0
    %
    
    
    13,023
    
    
    
    3.7
    %
    
    
    44,341
    
    
    
    3.9
    %
    
    
    40,793
    
    
    
    4.0
    %Depreciation and amortization
    
    
    20,590
    
    
    
    5.3
    %
    
    
    18,188
    
    
    
    5.1
    %
    
    
    56,473
    
    
    
    4.9
    %
    
    
    52,167
    
    
    
    5.1
    %Management fees
    
    
    963
    
    
    
    0.2
    %
    
    
    
    
    
    
    
    
    
    
    2,884
    
    
    
    0.3
    %
    
    
    
    
    
    
    Loss on early extinguishment
of debt
    
    
    
    
    
    
    
    
    
    
    51,852
    
    
    
    14.6
    %
    
    
    
    
    
    
    
    
    
    
    51,852
    
    
    
    5.0
    %Merger expenses
    
    
    
    
    
    
    
    
    
    
    19,750
    
    
    
    5.6
    %
    
    
    
    
    
    
    
    
    
    
    19,750
    
    
    
    1.9
    %Write-off of debt issue costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,850
    
    
    
    0.9
    %Total costs and expenses
    
    
    371,778
    
    
    
    95.3
    %
    
    
    409,886
    
    
    
    115.4
    %
    
    
    1,086,977
    
    
    
    94.5
    %
    
    
    1,064,180
    
    
    
    103.4
    %Earnings (loss) before gain (loss) on
sale of assets, minority interests and
income taxes
    
    
    18,201
    
    
    
    4.7
    %
    
    
    (54,619
    )
    
    
    (15.4
    )%
    
    
    63,234
    
    
    
    5.5
    %
    
    
    (35,294
    )
    
    
    (3.4
    )%Gain (loss) on sale of assets, net
    
    
    2
    
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    (80
    )
    
    
    
    
    
    
    3,723
    
    
    
    0.3
    %Minority interests
    
    
    (779
    )
    
    
    (0.2
    )%
    
    
    (1,196
    )
    
    
    (0.3
    )%
    
    
    (3,052
    )
    
    
    (0.3
    )%
    
    
    (3,220
    )
    
    
    (0.3
    )%Earnings (loss) before income taxes
    
    
    17,424
    
    
    
    4.5
    %
    
    
    (55,845
    )
    
    
    (15.7
    )%
    
    
    60,102
    
    
    
    5.2
    %
    
    
    (34,791
    )
    
    
    (3.4
    )%Income tax expense
    
    
    6,958
    
    
    
    1.8
    %
    
    
    196
    
    
    
    0.1
    %
    
    
    23,879
    
    
    
    2.1
    %
    
    
    1,181
    
    
    
    0.1
    %Net earnings (loss)
    
    $
    10,466
    
    
    
    2.7
    %
    
    $
    (56,041
    )
    
    
    (15.8
    )%
    
    $
    36,223
    
    
    
    3.1
    %
    
    $
    (35,972
    )
    
    
    (3.5
    )%
 35




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##### Table of Contents



Three
    
    Three
    
    Nine
    
    NineMonths Ended
    
    Months Ended
    
    Months Ended
    
    Months EndedAcute Care (in thousands):
    
    June 30, 2005
    
    June 30, 2004
    
    June 30, 2005
    
    June 30, 2004($)
    
    (%)
    
    ($)
    
    (%)
    
    ($)
    
    (%)
    
    ($)
    
    (%)Net Revenue:Acute care revenue
    
    $
    299,891
    
    
    
    99.3
    %
    
    $
    284,162
    
    
    
    99.0
    %
    
    $
    886,384
    
    
    
    99.3
    %
    
    $
    819,766
    
    
    
    99.0
    %Revenue between segments
    
    
    2,100
    
    
    
    0.7
    %
    
    
    2,841
    
    
    
    1.0
    %
    
    
    6,597
    
    
    
    0.7
    %
    
    
    8,155
    
    
    
    1.0
    %Total net revenue (1)
    
    
    301,991
    
    
    
    100.0
    %
    
    
    287,003
    
    
    
    100.0
    %
    
    
    892,981
    
    
    
    100.0
    %
    
    
    827,921
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    110,612
    
    
    
    36.6
    %
    
    
    106,106
    
    
    
    37.0
    %
    
    
    324,328
    
    
    
    36.3
    %
    
    
    311,495
    
    
    
    37.6
    %Supplies
    
    
    46,160
    
    
    
    15.3
    %
    
    
    47,282
    
    
    
    16.5
    %
    
    
    140,718
    
    
    
    15.8
    %
    
    
    133,771
    
    
    
    16.2
    %Rents and leases
    
    
    8,167
    
    
    
    2.7
    %
    
    
    8,136
    
    
    
    2.8
    %
    
    
    23,584
    
    
    
    2.6
    %
    
    
    23,400
    
    
    
    2.8
    %Other operating expenses
    
    
    52,567
    
    
    
    17.4
    %
    
    
    49,156
    
    
    
    17.1
    %
    
    
    154,277
    
    
    
    17.3
    %
    
    
    142,925
    
    
    
    17.2
    %Provision for bad debts
    
    
    33,792
    
    
    
    11.2
    %
    
    
    32,729
    
    
    
    11.4
    %
    
    
    96,762
    
    
    
    10.8
    %
    
    
    89,997
    
    
    
    10.9
    %Interest, net
    
    
    15,664
    
    
    
    5.2
    %
    
    
    13,023
    
    
    
    4.5
    %
    
    
    44,341
    
    
    
    5.0
    %
    
    
    40,793
    
    
    
    4.9
    %Depreciation and
amortization
    
    
    19,792
    
    
    
    6.6
    %
    
    
    18,140
    
    
    
    6.3
    %
    
    
    54,074
    
    
    
    6.1
    %
    
    
    52,033
    
    
    
    6.3
    %Management fees
    
    
    963
    
    
    
    0.3
    %
    
    
    
    
    
    
    
    
    
    
    2,884
    
    
    
    0.3
    %
    
    
    
    
    
    
    Loss on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    51,852
    
    
    
    18.1
    %
    
    
    
    
    
    
    
    
    
    
    51,852
    
    
    
    6.3
    %Merger expenses
    
    
    
    
    
    
    
    
    
    
    19,750
    
    
    
    6.9
    %
    
    
    
    
    
    
    
    
    
    
    19,750
    
    
    
    2.4
    %Write-off of debt issue costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,850
    
    
    
    1.1
    %Total costs and
expenses
    
    
    287,717
    
    
    
    95.3
    %
    
    
    346,174
    
    
    
    120.6
    %
    
    
    840,968
    
    
    
    94.2
    %
    
    
    874,866
    
    
    
    105.7
    %Earnings (loss) before gain (loss) on sale of
assets and minority interests
    
    
    14,274
    
    
    
    4.7
    %
    
    
    (59,171
    )
    
    
    (20.6
    )%
    
    
    52,013
    
    
    
    5.8
    %
    
    
    (46,945
    )
    
    
    (5.7
    )%Gain (loss) on sale of assets, net
    
    
    2
    
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    (80
    )
    
    
    
    
    
    
    3,723
    
    
    
    0.5
    %Minority interests
    
    
    (779
    )
    
    
    (0.2
    )%
    
    
    (1,196
    )
    
    
    (0.4
    )%
    
    
    (3,052
    )
    
    
    (0.3
    )%
    
    
    (3,220
    )
    
    
    (0.4
    )%Earnings (loss) before income taxes
    
    $
    13,497
    
    
    
    4.5
    %
    
    $
    (60,397
    )
    
    
    (21.0
    )%
    
    $
    48,881
    
    
    
    5.5
    %
    
    $
    (46,442
    )
    
    
    (5.6
    )%
 
 (1)
    
    Revenue between segments is eliminated in our consolidated results. 36




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##### Table of Contents



Three
    
    Three
    
    Nine
    
    NineHealth Choice (in
    
    Months Ended
    
    Months Ended
    
    Months Ended
    
    Months Endedthousands):
    
    June 30, 2005
    
    June 30, 2004
    
    June 30, 2005
    
    June 30, 2004($)
    
    (%)
    
    ($)
    
    (%)
    
    ($)
    
    (%)
    
    ($)
    
    (%)Premium revenue
    
    $
    90,088
    
    
    
    100.0
    %
    
    $
    71,105
    
    
    
    100.0
    %
    
    $
    263,827
    
    
    
    100.0
    %
    
    $
    209,120
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    2,840
    
    
    
    3.1
    %
    
    
    2,510
    
    
    
    3.5
    %
    
    
    8,357
    
    
    
    3.2
    %
    
    
    7,024
    
    
    
    3.3
    %Supplies
    
    
    48
    
    
    
    0.1
    %
    
    
    62
    
    
    
    0.1
    %
    
    
    145
    
    
    
    0.1
    %
    
    
    153
    
    
    
    0.1
    %Medical claims (1)
    
    
    79,509
    
    
    
    88.2
    %
    
    
    61,393
    
    
    
    86.3
    %
    
    
    232,774
    
    
    
    88.2
    %
    
    
    182,358
    
    
    
    87.2
    %Rents and leases
    
    
    218
    
    
    
    0.2
    %
    
    
    178
    
    
    
    0.3
    %
    
    
    652
    
    
    
    0.2
    %
    
    
    480
    
    
    
    0.2
    %Other operating expenses
    
    
    2,748
    
    
    
    3.1
    %
    
    
    2,362
    
    
    
    3.3
    %
    
    
    8,279
    
    
    
    3.1
    %
    
    
    7,320
    
    
    
    3.5
    %Interest, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciation and
amortization
    
    
    798
    
    
    
    0.9
    %
    
    
    48
    
    
    
    0.1
    %
    
    
    2,399
    
    
    
    0.9
    %
    
    
    134
    
    
    
    0.1
    %Total costs and expenses
    
    
    86,161
    
    
    
    95.6
    %
    
    
    66,553
    
    
    
    93.6
    %
    
    
    252,606
    
    
    
    95.7
    %
    
    
    197,469
    
    
    
    94.4
    %Earnings before income taxes
    
    $
    3,927
    
    
    
    4.4
    %
    
    $
    4,552
    
    
    
    6.4
    %
    
    $
    11,221
    
    
    
    4.3
    %
    
    $
    11,651
    
    
    
    5.6
    %
 
 (1)
    
    Medical claims paid to our hospitals of $2.1 million and $2.8 million for the three
months ended June 30, 2005 and 2004 and $6.6 million and $8.2 million for the nine months
ended June 30, 2005 and 2004, respectively, is eliminated in our consolidated results. 37




---



##### Table of Contents



Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004
 Net revenue
   Salaries and benefits
 Supplies
 Medical claims
 Provision for bad debts
 38




---



##### Table of Contents



Interest, net
 Depreciation and amortization
 Income tax expense
 Net earnings (loss)
 39




---



##### Table of Contents



Nine Months Ended June 30, 2005 Compared to Nine Months Ended June 30, 2004
 Net revenue
   Salaries and benefits
 Supplies
 Medical claims
 Provision for bad debts
 40




---



##### Table of Contents



Interest, net
 Depreciation and amortization
 Income tax expense
 Net earnings (loss)
 Liquidity and Capital Resources
 Operating Activities
  Investing Activities
  41




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##### Table of Contents



Financing Activities
     a senior secured Tranche B term loan of $425.0 million, which we refer to as the
Term Facility; and; a senior secured revolving credit facility of up to $250.0 million, which we refer
to as the Revolving Facility, and which is available for working capital and other
general corporate purposes.
     42




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##### Table of Contents



June 30,2005Actual Total Leverage Ratio
    
    
    3.99Maximum Total Leverage Ratio
    
    
    6.00Actual Interest Coverage Ratio
    
    
    3.57Minimum Interest Coverage Ratio
    
    
    2.15
      43




---



##### Table of Contents



Off-Balance Sheet Arrangements
   Seasonality
  Recent Accounting Pronouncements
 Share-Based Payment Accounting for Stock-Based
Compensation Accounting for Stock Issued to Employees Statement of Cash Flows
 44




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##### Table of Contents



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
  
 PART II
OTHER INFORMATION
 
 Item 1. Legal Proceedings
 qui tam
 
 Item 4. Submission of Matters to a Vote of Security Holders.
  45




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##### Table of Contents



Item 6. Exhibits
  10.1
    
    Letter Agreement, effective May 6, 2005, amending Lease
by and between Sierra Equities, Inc. and Mesa General
Hospital, L.P. (1)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 200231.2
    
    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 200232.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
 
 (1)
    
    Incorporated by reference to the Companys Current Report on Form 8-K, dated
May 12, 2005. 46




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##### Table of Contents



SIGNATURES
  IASIS HEALTHCARE LLCDate: August 12, 2005
    
    By:
    
    /s/ W. Carl WhitmerW. Carl Whitmer, Chief Financial Officer(Principal Financial and Accounting Officer)
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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description10.1
    
    Letter Agreement, effective May 6, 2005, amending Lease by and
between Sierra Equities, Inc. and Mesa General Hospital, L.P.
(1)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
200231.2
    
    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
200232.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Incorporated by reference to the Companys Current Report on Form 8-K, dated
May 12, 2005. 48