PRIME HEALTHCARE SERVICES, INC.  AND SUBSIDIARIES
 INDEPENDENT AUDITORS REPORT
 AND
 CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2009 AND 2008




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CONTENTS
 PAGEINDEPENDENT AUDITORS REPORT
    
    
    1CONSOLIDATED FINANCIAL STATEMENTSConsolidated balance sheets
    
    
    2-3Consolidated statements of income
    
    
    4Consolidated statements of stockholders equity
    
    
    5Consolidated statements of cash flows
    
    
    6-7Notes to consolidated financial statements
    
    
    8-31




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INDEPENDENT
AUDITORS REPORT




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PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 ASSETS
 DECEMBER 31,2009
    
    
    2008CURRENT ASSETSCash and cash equivalents
    
    $
    46,003,201
    
    
    $
    42,805,635Patient accounts receivable, net of allowance for doubtful accounts
of $76,665,000 in 2009 and $65,440,000 in 2008
    
    
    190,063,206
    
    
    
    176,834,552Related party receivables
    
    
    848,105
    
    
    
    1,012,731Notes receivable
    
    
    
    
    
    
    1,050,000Estimated third-party payor settlements
    
    
    6,933,628
    
    
    
    Supplies inventory
    
    
    5,149,389
    
    
    
    6,076,691Prepaid expenses and other current assets
    
    
    66,882,327
    
    
    
    36,560,544Deposits
    
    
    2,607,902
    
    
    
    3,418,066Total current assets
    
    
    318,487,758
    
    
    
    267,758,219PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization
    
    
    205,492,387
    
    
    
    205,387,793INVESTMENTS IN JOINT VENTURES
    
    
    150,000
    
    
    
    705,777GOODWILL
    
    
    13,707,803
    
    
    
    13,707,803OTHER ASSETS
    
    
    5,214,170
    
    
    
    3,921,293$
    543,052,118
    
    
    $
    491,480,885
 2




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LIABILITIES AND STOCKHOLDERS EQUITY
 DECEMBER 31,2009
    
    
    2008CURRENT LIABILITIESAccounts payable
    
    $
    30,024,524
    
    
    $
    34,942,071Accrued expenses
    
    
    67,914,649
    
    
    
    74,379,591Medical claims payable
    
    
    5,394,327
    
    
    
    4,337,241Related party payables
    
    
    50,000
    
    
    
    638,060Estimated third-party payor settlements
    
    
    
    
    
    
    248,405Current portion of capital leases
    
    
    7,193,226
    
    
    
    4,122,950Current portion of long-term debt
    
    
    40,388,724
    
    
    
    51,024,562Total current liabilities
    
    
    150,965,450
    
    
    
    169,692,880LONG-TERM LIABILITIESSale lease-back liability
    
    
    143,000,000
    
    
    
    158,000,000Capital leases, net of current portion
    
    
    14,322,308
    
    
    
    13,964,578Long-term debt, net of current portion
    
    
    72,207,803
    
    
    
    65,549,351Total long-term liabilities
    
    
    229,530,111
    
    
    
    237,513,929STOCKHOLDERS EQUITYCommon stock, $0.01 par value, 3,000 shares
authorized, 30 shares issued and outstanding
    
    
    1
    
    
    
    1Additional paid in capital
    
    
    2,999
    
    
    
    2,999Note receivable from related party
    
    
    
    
    
    
    (3,110,975
    )Retained earnings
    
    
    49,980,544
    
    
    
    10,840,152Non-controlling interest
    
    
    112,573,013
    
    
    
    76,541,899Total stockholders equity
    
    
    162,556,557
    
    
    
    84,274,076$
    543,052,118
    
    
    $
    491,480,885
 See accompanying notes.
 3




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##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 YEARS ENDED DECEMBER 31,2009
    
    
    2008REVENUENet patient service revenue
    
    $
    1,544,421,821
    
    
    $
    1,161,588,573Premium revenue
    
    
    22,635,296
    
    
    
    23,759,229Other revenue
    
    
    11,305,428
    
    
    
    10,971,3461,578,362,545
    
    
    
    1,196,319,148OPERATING EXPENSESCompensation and employee benefits
    
    
    538,823,926
    
    
    
    486,986,726Provision for doubtful accounts
    
    
    383,393,440
    
    
    
    254,060,627General and administrative
    
    
    66,189,480
    
    
    
    64,512,652Supplies
    
    
    132,462,044
    
    
    
    114,605,326Professional services
    
    
    124,666,861
    
    
    
    110,188,666Rent and lease expense
    
    
    51,911,515
    
    
    
    42,160,222Depreciation and amortization
    
    
    25,533,556
    
    
    
    18,425,935Medical claims
    
    
    5,612,935
    
    
    
    4,604,5551,328,593,757
    
    
    
    1,095,544,709INCOME FROM OPERATIONS
    
    
    249,768,788
    
    
    
    100,774,439INTEREST EXPENSE, net
    
    
    (25,139,763
    )
    
    
    (19,417,215
    )LOSS FROM JOINT VENTURES
    
    
    
    
    
    
    (119,223
    )INCOME BEFORE PROVISION FOR INCOME
TAXES
    
    
    224,629,025
    
    
    
    81,238,001INCOME TAX PROVISION
    
    
    3,487,151
    
    
    
    1,286,887INCOME BEFORE ALLOCATION TO
NON-CONTROLLING INTEREST
    
    
    221,141,874
    
    
    
    79,951,114ALLOCATION OF INCOME TO
NON-CONTROLLING INTEREST
    
    
    (128,098,593
    )
    
    
    (57,138,689
    )CONTROLLING INTEREST IN NET INCOME
    
    $
    93,043,281
    
    
    $
    22,812,425
 See accompanying notes.
 4




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PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Common
    
    
    Additional
    
    
    Note Receivable
    
    
    Retained
    
    
    Non-controllingShares
    
    
    Stock
    
    
    Paid in Capital
    
    
    from Related Party
    
    
    Earnings
    
    
    Interest
    
    
    TotalBALANCE,
December 31, 2007
    
    
    30
    
    
    $
    1
    
    
    $
    2,999
    
    
    $
    (35,762,558
    )
    
    $
    49,089,475
    
    
    $
    41,379,196
    
    
    $
    54,709,113Distributions to stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61,061,748
    )
    
    
    
    
    
    
    (61,061,748
    )Notes receivable collected
from related party
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,762,558
    
    
    
    
    
    
    
    
    
    
    
    35,762,558Notes receivable from Prime A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,110,975
    )
    
    
    
    
    
    
    
    
    
    
    (3,110,975
    )Controlling interest in net
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,812,425
    
    
    
    
    
    
    
    22,812,425Distributions from
non-controlling interest
to its stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,975,986
    )
    
    
    (21,975,986
    )Non-controlling interest in
net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,138,689
    
    
    
    57,138,689BALANCE,
December 31, 2008
    
    
    30
    
    
    
    1
    
    
    
    2,999
    
    
    
    (3,110,975
    )
    
    
    10,840,152
    
    
    
    76,541,899
    
    
    
    84,274,076Distributions to stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (53,902,889
    )
    
    
    
    
    
    
    (53,902,889
    )Repayment of notes
receivable from Prime A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,110,975
    
    
    
    
    
    
    
    
    
    
    
    3,110,975Controlling interest in net
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93,043,281
    
    
    
    
    
    
    
    93,043,281Distributions from
non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (92,067,479
    )
    
    
    (92,067,479
    )Non-controlling interest in
net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128,098,593
    
    
    
    128,098,593BALANCE,
December 31, 2009
    
    
    30
    
    
    $
    1
    
    
    $
    2,999
    
    
    $
    
    
    
    $
    49,980,544
    
    
    $
    112,573,013
    
    
    $
    162,556,557
 See accompanying notes.
 5




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PRIME HEALTHCARE SERVICES, INC.  AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CASH FLOWS
 YEARS ENDED DECEMBER 31,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIESControlling interest in net income
    
    $
    93,043,281
    
    
    $
    22,812,425Adjustments to reconcile controlling interest in net income
to net cash provided by operating activities:Depreciation and amortization
    
    
    25,533,556
    
    
    
    18,294,556Loss (Gain) on sale of assets
    
    
    22,000
    
    
    
    (1,500
    )Loss from joint venture
    
    
    
    
    
    
    119,223Provision for doubtful accounts
    
    
    383,393,440
    
    
    
    254,060,627Non controlling interest in net income
    
    
    128,098,593
    
    
    
    57,138,689Changes in assets and liabilities net of acquisitions:Patient accounts receivable
    
    
    (408,779,166
    )
    
    
    (322,027,305
    )Supplies inventory
    
    
    587,579
    
    
    
    (1,124,944
    )Prepaid expenses and other assets
    
    
    (32,653,674
    )
    
    
    3,768,744Deposits
    
    
    810,164
    
    
    
    (2,209,810
    )Other assets
    
    
    (1,292,877
    )
    
    
    (3,526,073
    )Due to/ from related parties
    
    
    (423,434
    )
    
    
    (9,417,835
    )Accounts payable
    
    
    (4,917,547
    )
    
    
    7,045,368Accrued expenses
    
    
    (6,464,942
    )
    
    
    24,597,631Medical claims payable
    
    
    1,057,086
    
    
    
    (1,491,078
    )Income taxes
    
    
    
    
    
    
    (941,565
    )Estimated third-party payor settlements
    
    
    (7,280,299
    )
    
    
    1,164,162Accrued professional liability reserve
    
    
    
    
    
    
    (45,429
    )Net cash provided by operating activities
    
    
    170,733,760
    
    
    
    48,215,886CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property and equipment
    
    
    (24,268,158
    )
    
    
    (25,464,146
    )Investment in joint venture
    
    
    
    
    
    
    (825,000
    )Cash paid for acquisitions, net of cash acquired
    
    
    
    
    
    
    (54,225,425
    )Repayments (Advances) on notes receivable
    
    
    1,050,000
    
    
    
    (1,050,000
    )Net cash used in investing activities
    
    
    (23,218,158
    )
    
    
    (81,564,571
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from long-term debt borrowing
    
    
    
    
    
    
    4,043,477(Repayments of) proceeds from sale lease-back borrowings
    
    
    (15,000,000
    )
    
    
    60,000,000Borrowings on lines of credit
    
    
    592,399,879
    
    
    
    367,758,945Repayments on lines of credit
    
    
    (599,910,426
    )
    
    
    (334,192,195
    )Payments on long term debt
    
    
    (1,982,989
    )
    
    
    (2,820,930
    )Payments on capital lease obligations
    
    
    (5,901,697
    )
    
    
    (4,070,774
    )Repayments on related party notes receivable
    
    
    
    
    
    
    35,762,558(Repayments of) advances on related party notes receivable
    
    
    3,110,975
    
    
    
    (3,110,975
    )Distribution to non-controlling interest
    
    
    (92,067,479
    )
    
    
    (21,975,986
    )Distribution to stockholder
    
    
    (24,966,299
    )
    
    
    (61,061,748
    )Net cash (used in) provided by financing activities
    
    
    (144,318,036
    )
    
    
    40,332,372NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    3,197,566
    
    
    
    6,983,687CASH AND CASH EQUIVALENTS, beginning of year
    
    
    42,805,635
    
    
    
    35,821,948CASH AND CASH EQUIVALENTS, end of year
    
    $
    46,003,201
    
    
    $
    42,805,635
 6




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YEARS ENDED DECEMBER 31,2009
    
    
    2008SUPPLEMENTAL CASH FLOW INFORMATIONCash paid during the year for:Interest
    
    $
    43,350,446
    
    
    $
    20,233,889Income taxes
    
    $
    2,490,000
    
    
    $
    2,265,214SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIESCapital lease obligations incurred for the acquisition of property and
equipment
    
    $
    9,329,703
    
    
    $
    6,979,109Note payable obligation incurred for the acquisition of property and
equipment
    
    $
    5,516,150
    
    
    $
    Non-cash distribution of Encino Hospital Medical Center assets (Note 4)
    
    $
    29,113,320
    
    
    $
    
 See accompanying notes.
 7




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PRIME HEALTHCARE SERVICES, INC.  AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Nature of Business
   LicensedHospital
    
    Beds
    
    LocationDesert Valley Hospital (DVH)
    
    
    83
    
    
    VictorvilleChino Valley Medical Center (CVMC)
    
    
    126
    
    
    ChinoSherman Oaks Hospital (SOH)
    
    
    153
    
    
    Sherman OaksMontclair Hospital Medical Center (MHMC)
    
    
    102
    
    
    MontclairHuntington Beach Hospital (HBH)
    
    
    131
    
    
    Huntington BeachLa Palma Intercommunity Hospital (LPIH)
    
    
    141
    
    
    La PalmaWest Anaheim Medical Center (WAMC)
    
    
    219
    
    
    AnaheimParadise Valley Hospital (PVH)
    
    
    301
    
    
    National CityCentinela Hospital Medical Center (CHMC)
    
    
    370
    
    
    InglewoodGarden Grove Hospital Medical Center (GGHMC)
    
    
    167
    
    
    Garden GroveSan Dimas Community Hospital (SDCH)
    
    
    93
    
    
    San Dimas* Encino Hospital Medical Center (EHMC)
    
    
    151
    
    
    EncinoShasta Regional Medical Center (SRMC)
    
    
    246
    
    
    Redding
 
 *
    
    As of December 31, 2009, Encino Hospital Medical Center was distributed by the Company, on behalf
of the controlling stockholder, who contributed the operations of EHMC to Prime Healthcare Services
Foundation, Inc. (PHSF) (Note 4). Note 2  Organization and Summary of Significant Accounting Policies
 Basis of consolidation
 
  8




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Note 2  Organization and Summary of Significant Accounting Policies
 Basis of consolidation
  
  
  Net patient service revenue
 9




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PRIME HEALTHCARE SERVICES, INC.  AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 2  Organization and Summary of Significant Accounting Policies
 Premium revenue and medical claims expense
 Supplies inventory
 Property and equipment
 Asset retirement obligations
 Use of estimates
 10




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Note 2  Organization and Summary of Significant Accounting Policies
 Income
taxes
  Cash and cash equivalents
 Goodwill
  Fair value of financial instruments
 11




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PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 2  Organization and Summary of Significant Accounting Policies
 Recently Issued Accounting Standards:
 Fair value accounting
 FASB Codification
 Subsequent events
 Uncertain tax positions
 12




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Note 2  Organization and Summary of Significant Accounting Policies
 Consolidation of variable interest entities
 Reclassification
 Subsequent events
 Note 3  Net Patient Service Revenue
  Medicare
 13




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PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 3  Net Patient Service Revenue
  Medi-Cal
 Other
  Note 4  Acquisitions/Dispositions
  14




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Note 4  Acquisitions/Dispositions
  Cash and cash equivalents
    
    $
    3,205,015Patient accounts receivable, net of allowance
    
    
    12,157,072Supplies inventory
    
    
    339,723Prepaid expenses and other current assets
    
    
    2,331,891Property and equipment
    
    
    14,009,638Estimated third-party payor settlements
    
    
    274,996$
    32,318,335
    Allocation atJuly 1, 2008Prepaids and other current assets
    
    $
    325,897Supplies inventory
    
    
    403,432Land
    
    
    6,406,010Building and land improvements
    
    
    17,838,745Equipment
    
    
    4,517,923Accrued liabilities
    
    
    (439,780
    )Net cash consideration
    
    $
    29,052,227
  15




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PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 4  Acquisitions/Dispositions
  Allocation atJuly 1, 2008Prepaids and other current assets
    
    $
    70,142Supplies inventory
    
    
    375,743Land
    
    
    4,696,558Building and land improvements
    
    
    4,393,217Equipment
    
    
    4,471,668Accrued liabilities
    
    
    (730,552
    )Net cash consideration
    
    $
    13,276,776
   Allocation atJune 1, 2008Prepaids and other current assets
    
    $
    206,547Supplies inventory
    
    
    253,000Land
    
    
    3,769,354Building and land improvements
    
    
    6,069,069Equipment
    
    
    2,408,577Accrued liabilities
    
    
    (810,125
    )Net cash consideration
    
    $
    11,896,422
 16




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Note 5  New Operations
  Note 6  Concentration of Credit Risk
   17




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PRIME HEALTHCARE SERVICES, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 7  Property and Equipment
  2009
    
    
    2008Land
    
    $
    38,412,568
    
    
    $
    42,275,328Buildings
    
    
    61,101,680
    
    
    
    71,830,543Building improvements
    
    
    18,523,416
    
    
    
    11,075,807Equipment
    
    
    138,796,293
    
    
    
    117,992,936Automobiles and aircraft
    
    
    9,134,900
    
    
    
    3,524,198Construction in progress (estimated cost to complete
at December 31, 2009 is approximately $1,974,000)
    
    
    8,755,354
    
    
    
    3,776,686274,724,211
    
    
    
    250,475,498Accumulated depreciation and amortization
    
    
    (69,231,824
    )
    
    
    (45,087,705
    )$
    205,492,387
    
    
    $
    205,387,793
  18




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Note 8  Long-Term Debt
  2009
    
    
    2008Line of credit with City National Bank, secured by accounts
receivable of DVH, interest payable monthly at an annual rate
of prime (3.5% at December 31, 2009), due September 1,
2010.
    
    $
    4,000,000
    
    
    $
    7,000,000Term loans with GE Commercial Finance, secured by various
equipment of DVH, payable in monthly installments ranging
from approximately $7,000 to $60,000 including interest at
fixed interest rates ranging from 6.59% to 7.43% per annum,
maturing in 2010.
    
    
    1,080,604
    
    
    
    2,827,472Term loan with Siemens Financial Services, secured by certain
equipment of PHAT, payable in monthly installments of
approximately $75,000 including interest at a fixed rate of
6.77% per annum, maturing in 2017.
    
    
    5,385,038
    
    
    
    Term loan with City National Bank, secured by equipment of
CVMC, interest payable monthly at an annual rate of prime
(3.25% at December 31, 2009), principal payable in monthly
payments of $116,667, maturing on August 1, 2011.
    
    
    2,293,442
    
    
    
    3,287,663Bank note payable, secured by certain real estate of DVMG,
bearing interest at 5.75% per annum, payable in monthly
payments of $1,258, maturing in August 2024.
    
    
    142,541
    
    
    
    148,913Note payable with City National Bank, secured by equipment
of SOH, bearing interest at an annual rate of Prime (3.25% at
December 31, 2009), principal payable in monthly payment of
$63,837, maturing September 1, 2012.
    
    
    2,106,603
    
    
    
    2,872,642Note payable with Medical Properties Trust secured by certain
equipment and purchase options of SOH, bearing a fixed
interest rate of 11.64% per annum as of December 31, 2009.
Interest only payments due monthly, principal balance due at
maturity on December 30, 2020.
    
    
    5,000,000
    
    
    
    5,000,000
 19




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##### 



PRIME HEALTHCARE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 8  Long-Term Debt
 2009
    
    
    2008Note payable with Medical Properties Trust secured by certain
equipment of MHMC and bearing a fixed interest rate of
10.53% per annum. Interest only payments due monthly,
principal balance due at maturity on August 9, 2021.
    
    $
    5,000,000
    
    
    $
    5,000,000Note payable with Medical Properties Trust secured by certain
equipment and purchase options of HBH, LPIH, and WAMC,
bearing a fixed interest rate of 10.27% per annum as of
December 31, 2009. Interest only payments due monthly,
principal balance due at maturity on November 8, 2021.
    
    
    10,000,000
    
    
    
    10,000,000Line of credit with Medical Properties Trust secured by certain
equipment and purchase options of SRMC, interest payable
monthly at an annual rate of 9.25% as of December 31, 2009,
maturing on November 1, 2018.
    
    
    20,000,000
    
    
    
    15,000,000Note payable with Medical Properties Trust secured by certain
property and equipment and lease deposits of PVH, bearing a
fixed interest rate of 9.59% per annum as of December 31,
2009. Interest only payments due monthly, principal balance
due at matuity on May 6, 2022.
    
    
    25,000,000
    
    
    
    25,000,000Line of credit with Healthcare Finance Group (HFG),
secured by accounts receivable of HBH, LPIH and WAMC,
interest payable monthly at an annual rate of the greater of
2.75% or LIBOR + 3.50% (5.5% at December 31, 2009),
maturing in November 2012. Under the terms of the
agreements, the respective hospitals are required to maintain
financial and non-financial covenants. At December 31, 2009,
approximately $4,665,000, $3,663,000, $6,366,000, respectively,
and was available under this line.
    
    
    12,145,429
    
    
    
    8,249,884
 20




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##### 



Note 8  Long-Term Debt
 2009
    
    
    2008Line of credit with HFG, secured by accounts receivable and
inventory of SOH, interest payable monthly at an annual rate
of the greater for 2.75% or LIBOR + 3.00% (5.75% at
December 31, 2009), maturing in February 2013. SOH is
required to maintain certain financial and non-financial
covenants at year end. At December 31, 2009, approximately
$6,204,000 was available under this line.
    
    $
    5,087,016
    
    
    $
    4,015,691Line of credit with HFG, secured by accounts receivable and
inventory of CHMC, interest payable monthly at an annual
rate of the greater of 2.75% or LIBOR + 3.00% (5.75% at
December 31, 2009), maturing in December 2011. CHMC is
required to maintain certain financial and non-financial
covenants at year end. At December 31, 2009, approximately
$20,465,000 was available under this line.
    
    
    4,580,801
    
    
    
    15,231,033Line of credit with HFG, secured by accounts receivable and
inventory of CVMC, interest payable monthly at an annual rate
of the greater of 2.75% or LIBOR + 2.50% (5.25% at
December 31, 2009), maturing in September 2011. CVMC is
required to maintain certain financial and non-financial
covenants at year end. At December 31, 2009, approximately
$6,617,000 was available under this line.
    
    
    2,243,899
    
    
    
    6,263,196Line of credit with HFG, secured by accounts receivable and
inventory of PVH, interest payable monthly at an annual rate
of the greater of 2.75% or LIBOR + 2.50% (5.25% at
December 31, 2009), maturing in December 2010. PVH is
required to maintain certain financial and non-financial
covenants at year end. At December 31, 2009, approximately
$6,671,000 was available under this line.
    
    
    8,531,154
    
    
    
    6,677,419112,596,527
    
    
    
    116,573,913Less current portion
    
    
    (40,388,724
    )
    
    
    (51,024,562
    )$
    72,207,803
    
    
    $
    65,549,351
 21




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PRIME HEALTHCARE SERVICES, INC.  AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 8  Long-Term Debt
  Years ending December 31,2009
    
    $
    40,388,7242010
    
    
    2,249,8532011
    
    
    1,208,1912012
    
    
    677,8282013
    
    
    725,072Thereafter
    
    
    67,346,859$
    112,596,527
  Note 9  Sales Lease-Back Liability
  22




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##### 



Note 9  Sales Lease-Back Liability
 .
 .
 23




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##### 



PRIME HEALTHCARE SERVICES, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 9  Sales Lease-Back Liability
 .
 .
 24




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##### 



Note 9  Sales Lease-Back Liability
  December 31,Hospital
    
    2009
    
    
    2008Paradise Valley Hospital (PVH)
    
    $
    23,000,000
    
    
    $
    23,000,000Centinela Hospital Medical Center (CHMC)
    
    
    75,000,000
    
    
    
    75,000,000Encino Hospital Medical Center (EHMC)
    
    
    
    
    
    
    15,000,000San Dimas Community Hospital (SDCH)
    
    
    13,000,000
    
    
    
    13,000,000San Dimas Medical Office Building (SDCH)
    
    
    7,000,000
    
    
    
    7,000,000Garden Grove Hospital Medical Center (GGHMC)
    
    
    16,250,000
    
    
    
    16,250,000Garden Grove Medical Office Building (GGHMC)
    
    
    8,750,000
    
    
    
    8,750,000$
    143,000,000
    
    
    $
    158,000,000
 Note 10 
    
    Professional Liability, Workers Compensation, Healthcare and Earthquake Insurance
   25




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PRIME
HEALTHCARE SERVICES, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 10  Professional Liability, and Workers Compensation, Healthcare and Earthquake Insurance
     Note 11  Leases
   26




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##### 



Note 11  Leases
         27




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##### 



PRIME
HEALTHCARE SERVICES, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 11  Leases
  OperatingCapital
    
    
    LeaseYears ending December 31,
    
    Leases
    
    
    Commitments2010
    
    $
    8,502,725
    
    
    $
    41,585,5062011
    
    
    8,422,261
    
    
    
    40,158,5032012
    
    
    6,119,865
    
    
    
    39,939,6662013
    
    
    719,456
    
    
    
    37,459,3212014
    
    
    
    
    
    
    37,715,468Thereafter
    
    
    
    
    
    
    223,405,794Total minimum lease payments
    
    
    23,764,307
    
    
    $
    420,264,258Less amounts representing interest
    
    
    (2,248,773
    )21,515,534Less current portion
    
    
    (7,193,226
    )$
    14,322,308
 28




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##### 



Note 12  Related Party Transactions
  2009
    
    
    2008Short term unsecured advances to employees, non
interest bearing, due on demand.
    
    $
    129,042
    
    
    $
    99,147Receivable from DVIL, related to expenses
incurred in excess of deductibles.
    
    
    719,063
    
    
    
    900,248Notes receivable from Prime A, unsecured, non
interest bearing, due on demand.
    
    
    
    
    
    
    3,110,975Various
    
    
    
    
    
    
    13,336Less: notes receivable from Prime A classified as
contra-equity.
    
    
    
    
    
    
    (3,110,975
    )$
    848,105
    
    
    $
    1,012,731Notes payable to related parties as of December 31:Notes payable to DVIL, unsecured, non interest bearing, payable on demand.
    
    $
    
    
    
    $
    628,393Various
    
    
    50,000
    
    
    
    9,667$
    50,000
    
    
    $
    638,060
  29




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##### 



PRIME HEALTHCARE SERVICES, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 12  Related Party Transactions
     Note 13  Retirement Savings Plan
  30




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##### 



Note 14  Contingencies
    Note 15  Legislation
  31