I N T E R I M U N A U D I T E D C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S Saint Elizabeth Medical Center, Inc. For the Year Ended December 31, 2017
Unaudited Consolidated Financial Statements For the Year Ended December 31, 2017 Contents Year-end Unaudited Consolidated Financial Statements Unaudited Consolidated Balance Sheets...1 Unaudited Consolidated Statements of Operations and Changes in Net Assets...3 Unaudited Consolidated Statements of Cash Flows...4 Details of Unaudited Consolidating Balance Sheets...5 Details of Unaudited Consolidating Statements of Operations and Changes in Net Assets...6 Fourth Quarter Activity Unaudited Consolidating Statements of Operations and Changes in Net Assets...7 Recently Issued Accounting Pronouncements Disclosure...8
Consolidated Balance Sheets Unaudited December 31 December 31 2017 2016 Assets Current assets: Cash and cash equivalents $ 37,562 $ 30,686 Short-term investments 9,970 Patient accounts receivable, net of allowance for doubtful accounts (2017 $10,269 and 2016 $9,648) 133,346 124,960 Inventories and supplies 28,003 25,447 Prepaid expenses and other current assets 20,339 19,820 Total current assets 229,220 200,913 Cash and cash equivalents-restricted 37,820 56,046 Assets limited as to use 1,035,947 896,590 Property, plant and equipment, net 448,645 434,890 Goodwill 17,651 17,651 Intangible assets 9,045 10,846 Foundation pledge receivables 3,602 2,922 Other assets 22,766 14,774 Total assets $ 1,804,696 $ 1,634,632 1
Consolidated Balance Sheets Unaudited December 31 December 31 2017 2016 Liabilities and net assets Current liabilities: Accounts payable $ 79,236 $ 62,087 Accrued employee compensation 84,668 74,405 Accrued interest 929 904 Accrued third-party settlements 12,629 12,286 Deferred revenue 5,191 6,641 Other current liabilities 9,264 7,768 Current portion of long-term debt 6,490 5,035 Total current liabilities 198,407 169,126 Long-term debt 211,456 199,287 Liability for self-insurance 58,354 63,989 Accrued pension liability 26,474 167,588 Fair value of interest rate swap 3,451 4,194 Other long-term liabilities 7,007 8,424 Total liabilities 505,149 612,608 Net assets: Unrestricted 1,292,097 1,016,655 Temporarily restricted 7,450 5,866 Total net assets excluding noncontrolling interest 1,299,547 1,022,521 Noncontrolling interest (497) Total net assets 1,299,547 1,022,024 Total liabilities and net assets $ 1,804,696 $ 1,634,632 2
Consolidated Statements of Operations and Changes in Net Assets Unaudited Year Ended December 31 December 31 2017 2016 Patient service revenue, net of contractual provisions and discounts $ 1,277,373 $ 1,180,732 Provision for bad debts (48,730) (39,477) Net patient service revenue less provision for bad debts 1,228,643 1,141,255 Net assets released from restriction for operations 672 727 Other revenue 37,537 31,657 Total revenue 1,266,852 1,173,639 Expenses: Salaries and wages 577,674 543,270 Employee benefits (note 1) 138,270 132,248 Purchased services 81,396 72,581 Interest 5,633 5,835 Depreciation and amortization 69,338 67,644 Supplies 219,165 190,681 Other 90,280 92,459 Total expenses 1,181,756 1,104,718 Operating income 85,096 68,921 Unrestricted contributions 375 407 Other gains, net (note 1) 118,865 44,862 Excess of revenue over expenses 204,336 114,190 Excess of revenue (expense) over expense (revenue) attributable to noncontrolling interest 497 (135) Excess of revenue over expense attributable to St. Elizabeth Medical Center, Inc. 203,839 114,325 Unrestricted net assets: Pension change other than net periodic costs 71,078 6,201 Other (80) (79) Net assets released from restriction for capital 605 543 Increase in unrestricted net assets attributable to St. Elizabeth Medical Center, Inc. 275,442 120,990 Temporarily restricted net assets: Restricted contributions 2,861 1,859 Net assets released from restriction (1,277) (1,270) Increase in temporarily restricted net assets attributable to St. Elizabeth Medical Center, Inc. 1,584 589 Increase in net assets attributable to St. Elizabeth Medical Center, Inc. 277,026 121,579 Non-controlling interest: Excess of revenue (expense) over expense (revenue) attributable to noncontrolling interest 497 (135) Increase (decrease) in net assets attributable to noncontrolling interest 497 (135) Increase in net assets 277,523 121,444 Net assets at beginning of period 1,022,024 900,580 Net assets at end of period $ 1,299,547 $ 1,022,024 3
Consolidated Statements of Cash Flows Unaudited Year Ended December 31 December 31 2017 2016 Operating activities and gains Increase in net assets $ 277,523 $ 121,444 Adjustments to reconcile increase in net assets to net cash provided by operating activities and gains (losses): Depreciation and amortization 69,338 67,644 Amortization of bond premium/discount and issuance costs (1,341) (901) Provision for bad debts 48,730 39,477 Interest and dividends received on long-term investments (20,127) (17,660) Net unrealized and realized gains on long-term investments (97,431) (39,524) Change in pension other than net periodic costs (71,078) (6,201) Change in fair value of interest rate swap (743) (559) Loss on defeasance of long-term debt 12,257 Changes in operating assets and liabilities: Patient accounts receivable (57,116) (49,827) Inventory, supplies, prepaid expenses and other current assets (3,074) 1,487 Other assets (8,671) 5,801 Accounts payable 17,148 7,025 Other liabilities (66,056) (25,294) Net cash provided by operating activities and gains 87,102 115,169 Investing activities Change in short-term investments, net (9,970) Change in assets limited to use, net (21,800) (20,797) Expenditures for property, plant, and equipment (81,647) (78,262) Cash restricted for property, plant, and equipment released 18,226 (6,240) Asset purchase acquisitions (17,560) Net cash used in investing activities (95,191) (122,859) Financing activities Proceeds from long-term debt 20,000 118,493 Payments on long-term debt (5,035) (102,146) Net cash provided by financing activities 14,965 16,347 Increase in cash and cash equivalents 6,876 8,657 Cash and cash equivalents at beginning of period 30,686 22,029 Cash and cash equivalents at end of period $ 37,562 $ 30,686 4
Details of Consolidating Balance Sheets December 31, 2017 Unaudited Combined Total Combined Physician December 31 December 31 Hospitals Groups 2017 2016 Assets Current assets: Cash and cash equivalents $ 39,340 $ (1,778) $ 37,562 $ 30,686 Short-term investments 9,970 9,970 Patient accts receivable, net of allowance for doubtful accts 121,240 12,106 133,346 124,960 Inventories and supplies 27,522 481 28,003 25,447 Prepaid expenses and other assets 16,519 3,820 20,339 19,820 Total current assets 214,591 14,629 229,220 200,913 Cash and cash equivalents-restricted 37,820 37,820 56,046 Assets limited as to use 1,035,947 1,035,947 896,590 Property, plant and equipment 441,637 7,008 448,645 434,890 Goodwill 4,489 13,162 17,651 17,651 Intangible assets 8,907 138 9,045 10,846 Foundation pledge receivables 3,602 3,602 2,922 Other assets 15,167 7,599 22,766 14,774 Total assets $ 1,762,160 $ 42,536 $ 1,804,696 $ 1,634,632 Liabilities and net assets Current liabilities: Accounts payable $ 73,728 $ 5,508 $ 79,236 $ 62,087 Accrued employee compensation 54,549 30,119 84,668 74,405 Accrued interest 929 929 904 Accrued third-party settlements 12,629 12,629 12,286 Deferred revenue 5,191 5,191 6,641 Other current liabilities 9,043 221 9,264 7,768 Current portion of long-term debt 6,490 6,490 5,035 Total current liabilities 162,559 35,848 198,407 169,126 Long-term debt 211,456 211,456 199,287 Liability for self-insurance 53,786 4,568 58,354 63,989 Accrued pension liability 26,474 26,474 167,588 Interest rate swap 3,451 3,451 4,194 Other long-term liabilities 7,007 7,007 8,424 Total liabilities 464,733 40,416 505,149 612,608 Net assets: Unrestricted 1,289,977 2,120 1,292,097 1,016,655 Temporarily restricted 7,450 7,450 5,866 Total net assets excluding noncontrolling interest 1,297,427 2,120 1,299,547 1,022,521 Noncontrolling interest (497) Total net assets 1,297,427 2,120 1,299,547 1,022,024 Total liabilities and net assets $ 1,762,160 $ 42,536 $ 1,804,696 $ 1,634,632 5
Details of Unaudited Consolidating Statement of Operations and Changes in Net Assets Combined Total Combined Physician December 31 Hospitals Groups Eliminations 2017 2016 Patient service revenue (net of contractual provisions and discounts) $ 1,087,682 $ 189,691 $ $ 1,277,373 $ 1,180,732 Provision for bad debts (41,997) (6,733) (48,730) (39,477) Net patient service revenue less provision for bad debts 1,045,685 182,958 1,228,643 1,141,255 Net assets released from restriction for operations 672 672 727 Other revenue 60,108 118,169 (140,740) 37,537 31,657 Total revenue 1,106,465 301,127 (140,740) 1,266,852 1,173,639 Expenses: Salaries and wages 401,045 176,629 577,674 543,270 Employee benefits 105,112 33,158 138,270 132,248 Purchased services 185,262 34,505 (138,371) 81,396 72,581 Interest 5,620 13 5,633 5,835 Depreciation and amortization 66,668 2,670 69,338 67,644 Supplies 203,316 16,091 (242) 219,165 190,681 Other 69,611 22,796 (2,127) 90,280 92,459 Total expenses 1,036,634 285,862 (140,740) 1,181,756 1,104,718 Operating income 69,831 15,265 85,096 68,921 Unrestricted contributions 375 375 407 Other gains (losses), net 119,579 (714) 118,865 44,862 Excess of revenue over expenses 189,785 14,551 204,336 114,190 Excess of revenue (expense) over expense (revenue) attributable to noncontrolling interest Excess of revenue over expenses attributable to St. Elizabeth Medical Center, Inc. 497 497 (135) 189,785 14,054 203,839 114,325 Unrestricted net assets: Transfer between entities 21,177 (21,177) Pension change other than net periodic costs 71,078 71,078 6,201 Other (80) (80) (79) Net assets released from restriction for capital 605 605 543 Increase (Decrease) in unrestricted net assets attributable to St. Elizabeth Medical Center, Inc. 282,565 (7,123) 275,442 120,990 Temporarily restricted net assets: Restricted contributions 2,861 2,861 1,859 Net assets released from restriction (1,277) (1,277) (1,270) Increase in temporarily restricted net assets attributable to St. Elizabeth Medical Center, Inc. 1,584 1,584 589 Increase (decrease) in net assets attributable to St. Elizabeth Medical Center, Inc. Noncontrolling interest: Excess of revenue (expense) over expense (revenue) attributable to noncontrolling interest Increase (decrease) in net assets attributable to noncontrolling interest 284,149 (7,123) 277,026 121,579 497 497 (135) 497 497 (135) Increase (decrease) in net assets 284,149 (6,626) 277,523 121,444 Net assets at beginning of year 1,013,278 8,746 1,022,024 900,580 Net assets at end of year $ 1,297,427 $ 2,120 $ $ 1,299,547 $ 1,022,024 6
Consolidated Statements of Operations and Changes in Net Assets Unaudited Three Months Activity 4th Quarter 4th Quarter Change 2017 2016 Higher/(Lower) Patient service revenue, net of contractual provisions and discounts $ 328,565 $ 312,536 $ 16,029 Provision for bad debts (12,610) (10,298) (2,312) Net patient service revenue less provision for bad debts 315,955 302,238 13,717 Net assets released from restriction for operations 210 258 (48) Other revenue 11,530 8,090 3,440 Total revenue 327,695 310,586 17,109 Expenses: Salaries and wages 146,271 139,143 7,128 Employee benefits 29,440 32,686 (3,246) Purchased services 25,476 19,336 6,140 Interest 1,448 1,278 170 Depreciation and amortization 18,479 17,440 1,039 Supplies 55,748 52,871 2,877 Other 20,671 25,269 (4,598) Total expenses 297,533 288,023 9,510 Operating income 30,162 22,563 7,599 Unrestricted contributions 213 165 48 Other gains, net 36,981 20,799 16,182 Excess of revenue over expenses 67,356 43,527 23,829 Excess of rev. (exp.) over exp. (rev.) attributable to noncontrolling interest 581 (29) 610 Excess of revenue over expenses attributable to St. Elizabeth Medical Center, Inc. 66,775 43,556 23,219 Unrestricted net assets: Pension change other than net periodic costs 71,078 6,201 64,877 Other (19) (27) 8 Net assets released from restriction for capital 231 384 (153) Increase in unrestricted net assets attributable to St. Elizabeth Medical Center, Inc. 138,065 50,114 87,951 Temporarily restricted net assets: Restricted Contributions 1,658 716 942 Net assets released from restriction (441) (642) 201 Increase in temporarily restricted net assets attributable to St. Elizabeth Medical Center, Inc. 1,217 74 1,143 Increase in net assets attributable to St. Elizabeth Medical Center, Inc. 139,282 50,188 89,094 Non-controlling interest: Excess of revenue over expense attributable to noncontrolling interest 84 106 (22) Increase (decrease) in net assets attributable to noncontrolling interest 581 (29) 610 Increase in net assets 139,863 50,159 89,704 Change in Net assets for the period $ 139,863 $ 50,159 $ 89,704 7
Notes to Unaudited Consolidated Financial Statements 1. Summary of Significant Accounting Policies Recently Issued Accounting Pronouncements In March 2017, the Financial Accounting Standards Board released Accounting Standards Update (ASU) 2017-07, Compensation Retirement Benefits (Topic 715). The amendments improve the presentation of net periodic pension cost and net periodic postretirement benefit cost and require that the employer report the service cost component in the same line item or items as other compensation costs. The other components of net benefit cost are required to be presented in the consolidated statement of operations and changes in net assets separately from the service cost component and included in the other gains (losses) line item of non-operating income. St. Elizabeth has elected to early adopt this new standard beginning with first quarter 2017. The amendments in this ASU have been applied retrospectively using the practical expedient. 8