Attached files
file | filename |
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8-K/A - 8-K/A - Surgical Care Affiliates, Inc. | d694349d8ka.htm |
EX-99.3 - EX-99.3 - Surgical Care Affiliates, Inc. | d694349dex993.htm |
EX-99.1 - EX-99.1 - Surgical Care Affiliates, Inc. | d694349dex991.htm |
EX-23.1 - EX-23.1 - Surgical Care Affiliates, Inc. | d694349dex231.htm |
Exhibit 99.2
EAST BRUNSWICK SURGERY CENTER, LLC
DBA UNIVERSITY SURGICENTER
Unaudited Financial Statements
Nine-Months Ended September 30, 2013 and 2012
INDEX
Financial Statements |
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Unaudited Balance Sheets as of September 30, 2013 and December 31, 2012 |
1 | |||
Unaudited Statements of Operations for the nine-months ended September 30, 2013 and 2012 |
2 | |||
Unaudited Statements of Changes in Members Equity for the nine-months ended September 30, 2013 and 2012 |
3 | |||
Unaudited Statements of Cash Flows for the nine-months ended September 30, 2013 and 2012 |
4 | |||
Notes to Financial Statements |
5 |
EAST BRUNSWICK SURGERY CENTER, LLC
DBA UNIVERSITY SURGICENTER
Balance Sheets
(Unaudited)
(U.S. dollars)
SEPTEMBER 30 2013 |
DECEMBER 31 2012 |
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Assets | ||||||||
Current assets |
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Cash and cash equivalents |
$ | 1,001,491 | $ | 1,209,454 | ||||
Accounts receivable, net of allowance for doubtful accounts (2013 - $2,751,216; 2012 - $1,390,253) |
2,412,952 | 1,893,769 | ||||||
Prepaid and other current assets |
97,282 | 141,587 | ||||||
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Total current assets |
3,511,725 | 3,244,810 | ||||||
Property and equipment, net of accumulated depreciation (2013 - $383,762; 2012 - $327,770) |
326,247 | 201,035 | ||||||
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Total assets |
$ | 3,837,972 | $ | 3,445,845 | ||||
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Liabilities and Members Equity | ||||||||
Current liabilities |
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Accounts payable |
$ | 44,605 | $ | 96,039 | ||||
Accrued payroll |
82,435 | 129,550 | ||||||
Other accrued expenses |
104,644 | 50,122 | ||||||
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Total current liabilities |
231,684 | 275,711 | ||||||
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Total liabilities |
231,684 | 275,711 | ||||||
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Commitments and contingent liabilities |
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Members equity |
3,606,288 | 3,170,134 | ||||||
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Total liabilities and members equity |
$ | 3,837,972 | $ | 3,445,845 | ||||
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The accompanying notes are an integral part of these financial statements.
1
EAST BRUNSWICK SURGERY CENTER, LLC
DBA UNIVERSITY SURGICENTER
Statements of Operations
(Unaudited)
(U.S. dollars)
NINE-MONTHS ENDED SEPTEMBER 30 2013 |
NINE-MONTHS ENDED SEPTEMBER 30 2012 |
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Net operating revenues: |
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Net patient revenues |
$ | 11,175,618 | $ | 9,495,630 | ||||
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Total net operating revenues |
11,175,618 | 9,495,630 | ||||||
Operating expenses: |
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Salaries and benefits |
1,976,221 | 2,060,792 | ||||||
Supplies |
1,210,337 | 1,097,522 | ||||||
Other operating expenses |
623,757 | 607,737 | ||||||
Management and collection fees paid to related parties (Note 6) |
467,411 | 483,754 | ||||||
Depreciation |
55,995 | 52,656 | ||||||
Occupancy costs |
382,246 | 360,423 | ||||||
Provision for doubtful accounts |
1,423,497 | 536,272 | ||||||
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Total operating expenses |
6,139,464 | 5,199,156 | ||||||
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Net income |
$ | 5,036,154 | $ | 4,296,474 | ||||
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The accompanying notes are an integral part of these financial statements.
2
EAST BRUNSWICK SURGERY CENTER, LLC
DBA UNIVERSITY SURGICENTER
Statements of Changes in Members Equity
(Unaudited)
(U.S. dollars)
Members Equity |
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Balance at December 31, 2011 |
$ | 3,437,670 | ||
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Net income |
4,296,474 | |||
Distributions to members |
(4,000,000 | ) | ||
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Balance at September 30, 2012 |
$ | 3,734,144 | ||
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Members Equity |
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Balance at December 31, 2012 |
$ | 3,170,134 | ||
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Net income |
5,036,154 | |||
Distributions to members |
(4,600,000 | ) | ||
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Balance at September 30, 2013 |
$ | 3,606,288 | ||
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The accompanying notes are an integral part of these financial statements.
3
EAST BRUNSWICK SURGERY CENTER, LLC
DBA UNIVERSITY SURGICENTER
Statements of Cash Flows
(Unaudited)
(U.S. dollars)
NINE-MONTHS ENDED SEPTEMBER 30 2013 |
NINE-MONTHS ENDED SEPTEMBER 30 2012 |
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Cash flows from operating activities |
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Net income |
$ | 5,036,154 | $ | 4,296,474 | ||||
Adjustments to reconcile net income to net cash provided by operating activities |
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Provision for doubtful accounts |
1,423,497 | 536,272 | ||||||
Depreciation |
55,995 | 52,656 | ||||||
(Increase) decrease in assets |
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Accounts receivable |
(1,942,680 | ) | (178,995 | ) | ||||
Other assets |
44,305 | 66,745 | ||||||
Increase (decrease) in liabilities |
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Accounts payable |
(51,434 | ) | (20,595 | ) | ||||
Accrued payroll |
(47,115 | ) | (43,491 | ) | ||||
Other liabilities |
54,522 | (73,716 | ) | |||||
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Net cash provided by operating activities |
4,573,244 | 4,635,350 | ||||||
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Cash flows from investing activities |
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Capital expenditures |
(181,207 | ) | (87,482 | ) | ||||
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Net cash used in investing activities |
(181,207 | ) | (87,482 | ) | ||||
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Cash flows from financing activities |
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Distributions to members |
(4,600,000 | ) | (4,000,000 | ) | ||||
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Net cash used in financing activities |
(4,600,000 | ) | (4,000,000 | ) | ||||
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Change in cash and cash equivalents |
(207,963 | ) | 547,868 | |||||
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Cash and cash equivalents at beginning of period |
1,209,454 | 625,982 | ||||||
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Cash and cash equivalents at end of period |
$ | 1,001,491 | $ | 1,173,850 | ||||
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The accompanying notes are an integral part of these financial statements.
4
EAST BRUNSWICK SURGERY CENTER, LLC
DBA UNIVERSITY SURGICENTER
Notes to Financial Statements
1. | DESCRIPTION OF THE BUSINESS |
Nature of Operations
East Brunswick Surgery Center, LLC (the Company) operates a multi-specialty ambulatory surgery center in East Brunswick, New Jersey. The Company contracts with managed care organizations, third-party payors, governmental agencies (Medicare & Medicaid), hospitals and their affiliates to perform various surgical procedures.
Basis of Presentation
The Company maintains its books and records on the accrual basis of accounting, and the accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates include, but are not limited to: (1) allowance for contractual revenue adjustments; (2) allowance for doubtful accounts; and (3) depreciable lives of assets. Future events and their effects cannot be predicted with certainty; accordingly, our accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of our financial statements will change as new events occur, as more experience is acquired, as additional information is obtained, and as our operating environment changes. We evaluate and update our assumptions and estimates on an ongoing basis and may employ outside experts to assist in our evaluation as considered necessary. Actual results could differ from those estimates.
Revenue Recognition
Revenues consist primarily of net patient service revenues that are recorded based upon established billing rates less allowances for contractual adjustments. Revenues are recorded during the period the healthcare services are provided, based upon the estimated amounts due from patients and third-party payors, including federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies and employers. Estimates of contractual allowances under third-party payor arrangements are based upon the payment terms specified in the related contractual agreements and payment history. Third-party payor contractual payment terms are generally based upon predetermined rates per procedure or discounted fee-for-service rates.
Cash and Cash Equivalents
Cash and cash equivalents include all demand deposits reduced by the amount of outstanding checks and drafts where the right of offset exists for these bank accounts. The Company has deposits with certain financial institutions which exceed federally insured limits. The Company has not experienced any losses on such deposits.
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Accounts Receivable and Allowance for Doubtful Accounts
We report accounts receivable at estimated net realizable amounts from services rendered from federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies, workers compensation, employers and patients. The concentration of net patient service accounts receivable by payor class, as a percentage of total net patient service accounts receivable, as of the end of each of the reporting periods, is as follows:
AS OF SEPTEMBER 30 2013 |
AS OF DECEMBER 31 2012 |
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Managed care and other discount plans |
81 | % | 58 | % | ||||
Workers compensation |
11 | 32 | ||||||
Medicare |
5 | 4 | ||||||
Medicaid |
1 | 1 | ||||||
Patients and other third-party payors |
2 | 5 | ||||||
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Total |
100 | % | 100 | % | ||||
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We recognize that revenues and accounts receivable from government agencies are significant to our operations; however, we do not believe there are significant credit risks associated with these government agencies.
We also recognize that revenue and accounts receivable from managed care and other discount plans are significant to our operations. Because the category of managed care and other discount plans is composed of numerous individual payors, our management does not believe there are any significant concentrations of revenues from any individual payor that would subject us to significant credit risks in the collection of our accounts receivable.
The Company records an allowance for doubtful accounts in each period based on several factors, including accounts receivable collection history, the balance and aging composition of accounts receivable at the end of the period as reported through the Companys computerized billing systems, the mix of business, and the financial condition of payors. The allowance for doubtful accounts was $2,751,216 as of September 30, 2013 and $1,390,253 as of December 31, 2012.
Although the Company believes that the estimation of the net realizable value of accounts receivable is reasonable, the Company has a collections department which continually monitors accounts receivable and assesses its methods for calculating the appropriate allowance for doubtful accounts. The Company adjusts allowances and its calculation methods as needed. The Company writes off accounts receivable as bad debts after all reasonable collection efforts have been exhausted. If actual collections differ from estimates, the Company may have to adjust its allowance for doubtful accounts, which could materially impact the Companys financial condition and results of operations in future periods.
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Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation. Depreciation is provided over the estimated useful lives of the assets as follows:
Years | ||
Furniture and fixtures | 5 - 7 | |
Equipment | 3 - 7 | |
Leasehold improvements | Term of lease or estimated useful life, whichever is shorter |
Maintenance and repairs of property and equipment are expensed as incurred. We capitalize replacements and improvements that increase the estimated useful life of an asset.
For operating leases, we recognize escalated rents, including any rent holidays, on a straight-line basis over the term of the lease.
Income Taxes
The Company is a limited liability company and is taxed as a partnership. Substantially all of the profits, losses, credits and deductions are passed through to the members. Therefore, the accompanying financial statements do not contain a provision or credit for federal or state income taxes.
Fair Value of Financial Instruments
The valuation techniques required for Fair Value Measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs create the following fair value hierarchy:
Level 1 Quoted prices for identical instruments in active markets. Assets utilizing Level 1 inputs are invested in equities and mutual funds.
Level 2 Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Significant inputs to the valuation model are unobservable.
The financial instruments level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The carrying amounts of financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities approximates fair value due to the short maturity of these instruments.
Newly Issued Authoritative Guidance
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04 (ASU No. 2011-4), Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs to provide a uniform framework for fair value measurements and related
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disclosures between U.S. GAAP and International Financial Reporting Standards (IFRS). Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entitys use of a nonfinancial asset that is different from the assets highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU No. 2011-04 requires prospective application for interim and annual periods beginning on or after December 15, 2011. The Company has determined that ASU No. 2011-04 did not have an impact on its financial statements.
We do not believe any other recently issued, but not yet effective, revisions to authoritative guidance will have a material effect on our consolidated financial position, results of operations or cash flows.
3. | PROPERTY AND EQUIPMENT |
Property and equipment consists of the following:
AS OF SEPTEMBER 30 2013 |
AS OF DECEMBER 31 2012 |
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Medical equipment |
$ | 568,147 | $ | 444,921 | ||||
Leasehold improvements |
135,051 | 78,051 | ||||||
Computer equipment |
4,940 | 3,962 | ||||||
Furniture and fixtures |
1,871 | 1,871 | ||||||
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710,009 | 528,805 | |||||||
Less: Accumulated depreciation |
(383,762 | ) | (327,770 | ) | ||||
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Property and equipment, net |
$ | 326,247 | $ | 201,035 | ||||
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Depreciation expense for the nine-months ended September 30, 2013 and 2012 was $55,995 and $52,656, respectively, and is included in the statements of operations as a component of operating expenses.
Operating Leases
The Company leases its facility under an operating lease with equal monthly payments of $14,000 plus condominium fees and real estate taxes through April 30, 2014. The Company is entitled to an annual rent credit of $31,500 over a ten year period for leasehold improvements. The Company has the option to renew the lease at the fair market rental value of the premises for five additional terms of three years each.
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The following is a schedule by years of approximate future minimum payments required under the operating lease that have initial or remaining non-cancelable lease terms in excess of one year as of September 30, 2013:
Year ending December 31, |
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2013 |
$ | 53,000 | ||
2014 |
70,000 | |||
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Total minimum lease payments required |
$ | 123,000 | ||
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Facility rent expense was approximately $220,000 and $209,000 for the nine months-ended September 30, 2013 and 2012.
4. | EMPLOYEE BENEFIT PLAN |
The Company maintains a 401(k) for qualified employees. The terms of the plan define qualified employees as those 21 years of age or older with at least 12 months and 1,000 hours of employment with the Company. Employer contributions are discretionary. The 401(k) plan expense was $0 and $19,156 for the nine-months ended September 30, 2013 and 2012. The plan was terminated as of December 31, 2012.
5. | SIGNIFICANT RISKS AND UNCERTAINTIES |
Concentration of Cash Balances
The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash.
Major Suppliers
The Company had two major suppliers for the nine-months ended September 30, 2013 and 2012 that accounted for 24% and 31% of total purchases, each of which exceeded 10% of total purchases for each period. Management believes that other suppliers could provide similar goods on comparable terms.
Major Third-Party Payors
The Company had two major third-party payors that accounted for 63% and 36% of total revenues for the nine-months ended September 30, 2013 and 2012, respectively.
6. | RELATED PARTY TRANSACTIONS |
Management Fees
The Company pays a monthly management fee to Brunswick ASC Investment, LLC, the owner of a majority of the outstanding membership interests of the Company, for consulting and administrative services based on five percent of the collections in any month. The total management fee was $461,411 and $477,754 for the nine-months ended September 30, 2013 and 2012, respectively.
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Collection Fees
The Company paid collection fees to a collection agency that is owned by a member of the parent company. Total collection fees paid were $6,000 for both the nine-month periods ended September 30, 2013 and 2012.
7. | SUBSEQUENT EVENTS |
Effective December 31, 2013, ASC Holdings of New Jersey, LLC purchased 51% of the outstanding ownership interests in the Company.
The Company has evaluated subsequent events through March 19, 2014, which is the date the financial statements were available to be issued.
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