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material assets and liabilities” in addition to the assets and
liabilities on the balance sheets. In terms of the assets, he
indicated that economic intangible assets should be adjusted to
fair market value. He also included some liabilities that were
not recorded on the unaudited balance sheet, such as a balance
due to Medicare from the Jackson and Grenada facilities for the
fiscal year 1993. He further made allowance for pending events
which, he opined, suggested the possibility of future claims
against the companies, such as a reserve for future downward
reimbursement adjustments by Medicare.
Hahn observed that the passage of time had obscured the
then-current value of the companies because the analysis was
prepared 5 years after the actual transaction. Accordingly, Hahn
prepared both a “base case” and a “best case” scenario to develop
a range of fair market values. He concluded that the fair market
value of the Sta-Home tax-exempt entities’ total tangible and
intangible assets was between $10.5 million and $11.5 million.
He noted that the entities’ total recorded and contingent
liabilities were between $12 million and $12.5 million. His
result indicates that the combined liabilities of the Sta-Home
tax-exempt entities exceeded the value of their assets by $.5
million to $2 million.
The following tables set forth Hahn’s “base case” and “best
case” adjusted balance sheets. The first figure column lists the
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