SHANDS JACKSONVILLE HEALTHCARE, INC. UNAUDITED CONSOLIDATED BASIC STATEMENT OF NET ASSETS For the Periods Ended and June 30, (Dollars in Thousands) 2013 June 30, Assets Cash and Cash Equivalents $ 6,327 $ 30,638 Short Term Investments 66,851 77,219 Patient accounts receivable, net of estimated uncollectibles of $57,284 and $51,920, respectively 74,272 63,486 Due from city and state agencies 17,010 6,395 Inventories 9,063 9,016 Prepaid expenses and other current assets 9,890 4,519 Assets limited as to use, current portion 2,459 3,568 Total current assets 185,872 194,841 Assets limited as to use, less current portion 19,500 19,500 Capital assets, net 174,495 179,426 COther assets 28,371 23,474 Total Assets $ 408,237 $ 417,241 Liabilities and Net Assets Current liabilities Long-term debt, current portion $ 7,615 $ 11,585 Capital lease obligation, current portion 2,326 1,873 Accounts payable and accrued expenses 48,752 49,458 Accrued salaries and leave payable 22,551 23,269 Estimated third-party payor settlements 27,568 22,510 Total current liabilities 108,812 108,695 Long-term liabilities: Long-term debt, non-current portion 109,364 113,141 Capital lease obligation, non-current portion 6,809 7,064 Other liabilities 16,146 17,001 Total long-term liabilities: 132,318 137,206 Total liabilities 241,130 245,901 Net assets: Invested in capital assets, net of related debt 88,648 86,439 Restricted: Expendable 3,887 3,843 Unrestricted 74,573 81,058 Total net assets 167,107 171,340 Total Liabilities and Net Assets $ 408,237 $ 417,241
SHANDS JACKSONVILLE HEALTHCARE, INC. UNAUDITED CONSOLIDATED BASIC STATEMENT OF REVENUE, EXPENSES, AND CHANGES IN NET ASSETS For the Periods Ended and (Dollars in Thousands) 2013 Operating Revenues Net patient service revenue (net of provision for bad debts of $58,532 and $51,389, respectively $ 362,736 $ 358,305 Other revenue 30,123 24,476 Total unrestricted revenue and other support 392,859 382,781 Operating Expenses Salaries and benefits 183,302 188,947 Supplies and services 178,112 169,634 Depreciation and amortization 17,683 15,642 Total operating expenses 379,097 374,223 Operating income 13,761 8,558 Nonoperating revenues (expenses) Other nonoperating losses (2,306) (3,521) Net investment gain, incuding change in fair value 695 2,068 Gain on disposal of capital assets, net (3) 59 Total nonoperating revenues (expenses) $ (1,615) $ (1,394) Excess of revenues over expenses before transfers, capital contributions and other changes in net assets 12,147 7,164 Transfers and expenditures in support of the University of Florida and its medical programs (16,424) (18,960) Capital contributions, net 44 85 Other changes in net assets - - Decrease in net assets (4,233) (11,710) Net assets Beginning of year 171,340 193,388 End of year $ 167,107 $ 181,678
SHANDS JACKSONVILLE HEALTHCARE, INC. UNAUDITED CONSOLIDATED BASIC STATEMENT OF CASH FLOWS Cash flows from operating Activities: June 30, Cash received from patients and third-party payors $ 346,393 $ 486,739 Other receipts from operations 27,379 33,716 Salaries, wages and benefits paid to employees (183,339) (257,327) Payments to suppliers and vendors (184,931) (231,805) Net cash provided by operating activities 5,502 31,323 Cash flows from noncapital financing activities Interest paid (453) (1,851) Payments in support of the University of Florida and its medical programs (16,424) (27,437) Payments of long-term debt (352) (1,368) Net used in noncapital financing activities (17,228) (30,656) Cash flows from capital and related financing activities: Purchase of capital assets (9,152) (12,552) Proceeds from disposal of capital assets (45) 5,233 Payments of long-term debt and capital lease obligations (8,609) (8,258) Payments on other capital borrowings (4,500) (6,101) Interest paid (2,568) (1,808) Capital contributions 44 837 Net cash used in capital and related financing activities (24,830) (22,649) Cash flows from investing activities: Investment income received 1,241 1,951 Sale/(purchase) of short-term investments and assets limited as to use, net 11,003 (1,846) Net cash provided by investing activities 12,244 105 Net Decrease in Cash and Cash Equivalents (24,312) (21,877) Cash and cash equivalents For the Periods Ended and June 30, (Dollars in Thousands) Beginning of year 30,638 52,515 End of period $ 6,326 $ 30,638
Reconciliation of change in net assets to net cash provided by operating activities 2013 June 30, Operating Income $ 13,761 $ 6,818 Adjustments to operating income to net cash provided by operating activities: Depreciation and amortization 17,683 21,805 Provision for bad debts 58,532 68,372 Changes in: SHANDS JACKSONVILLE HEALTHCARE, INC. UNAUDITED CONSOLIDATED BASIC STATEMENT OF CASH FLOWS For the Periods Ended and June 30, (Dollars in Thousands) Patient accounts receivable (79,933) (64,984) Prepaid expenses, inventory and other current assets (5,593) 2,253 Other assets (5,093) (5,984) Accounts payable and accrued expenses (331) 5,197 Estimated third-party payor settlements 5,058 (479) Other liabilities 1,418 (1,675) Total adjustments (8,259) 24,505 Net cash provided by operating activities $ 5,502 $ 31,323
SHANDS JACKSONVILLE HEALTHCARE, INC. UNAUDITED FINANCIAL COVENANTS For the Periods Ended and June 30, (Dollars in Thousands) SJHC* SJMC** 2013 Covenant SJHC* SJMC** YTD '13 YTD '13 Requirement Compliance FYE '12 FYE '12 Working Capital $ 77,059 $ 71,364 $ 10,000 Yes $ 86,146 $ 76,825 Actual Long-Term Debt Service Coverage Ratio (1) 1.80 2.51 1.20 Yes 0.23 (0.08) Long-Term Debt Service Coverage Ratio (1) 1.86 2.69 1.10 Yes 0.23 (0.08) Debt Service Coverage Ratio (2) - 2.54 1.00 Yes - - Tangible Unrestricted Net Assets $ 164,865 $ 158,425 $ 60,000 Yes $ 169,098 $ 165,008 Ratio of Indebtedness to Capitalization 0.43 0.41 0.65 Yes 0.44 0.41 Days Cash on Hand (1) 57.70 52.85 50.00 Yes 80.09 75.13 Days Cash on Hand (2) - 52.11 NA NA - - * Shands Jacksonville Healthcare, Inc. ** Shands Jacksonville Medical Center Obligated Group (1) Calculated per the Reimbursement Agreement, with TD Bank, N.A., dated June 1, 2010 (2) Calculated per the First Amendment to Amended and Restated Reimbursement Agreement, with Wells Fargo Bank, N.A., dated October 19, (not required to be reported at )
Shands Jacksonville Healthcare, Inc. Summary of Financial and Operational Indicators Utilization Statistics YTD FY13 YTD FY12 Licensed beds 695 695 Beds in service (End of Period)* 557 615 Beds in service (YTD Weighted Avg)* 556 598 Admissions (excluding newborns and observation cases) 17,915 20,388 Patient days (excluding newborns and observation cases) 116,566 121,297 Average length of stay (days) 6.5 5.9 Percentage occupancy (beds in service) 76.4% 71.7% Emergency room and trauma center visits 67,246 67,150 Outpatient visits 272,496 260,891 Calendar Days 274 275 Payor Mix - Gross Revenues Medicare 32.3% 31.6% Medicaid 30.3% 29.7% Blue Cross 4.9% 4.1% Commercial 5.3% 4.9% Managed Care 9.8% 10.4% Self-pay and Medicaid Pending 16.7% 18.7% Other 0.7% 0.7% Total 100.0% 100.0% Other Medicare case mix index for reporting period 1.727 1.615 *March FY13 decrease compared to March FY12 is related to the closing of Pavilion CCs 5N & 6S on 4/30/12.
This section of the Shands Jacksonville HealthCare, Inc. and Subsidiaries ( SJH or the Company ) fiscal year-to-date financial report presents the Company s analysis of its financial performance as of 2013. Please read this analysis in conjunction with the consolidated basic financial statements, which follow this section. Introduction Shands Jacksonville HealthCare, Inc. ( SJH ), formerly known as Jacksonville Health Group, Inc., is a Florida not- for-profit corporation with direct or indirect legal control over numerous subsidiaries. Shands Jacksonville Medical Center, Inc. ( SJMC ), formerly known as University Medical Center, Inc. ( UMC ), is a Florida not-for-profit corporation and the principal operating subsidiary of SJH. SJMC operates a teaching hospital located in Jacksonville, Florida, through a lease with the City of Jacksonville (the City ). On September 30, 1999, Methodist Medical Center, Inc., Methodist Health System, Inc. and The Methodist Hospital Foundation, Inc. (collectively, Methodist ), SJH, UMC and Shands Teaching Hospital and Clinics, Inc. ( Shands ) completed an affiliation agreement (the Affiliation ) which allowed for the combination of the hospital operations of UMC and Methodist under SJMC. SJH became the sole member of both SJMC and Methodist. The Affiliation was approved by the City and secured creditors of both UMC and Methodist. As a result of the Affiliation, the requisite corporate actions were taken on February 1, 2003 to designate Shands as the sole corporate member of SJH. Effective September 8, 2010, the Board of Directors of Shands approved a motion to reorganize its corporate structure. Under the reorganization, Shands will no longer be the sole corporate member of the Company, but will continue as an affiliated entity under common control of the University of Florida. Effective September 27, 2010, the Board of Directors of the Company approved the motion for Shands to no longer be the sole corporate member of the Company. The Company continues to receive management and operational services from Shands. As a part of the reorganization, the Company delivered a promissory note to Shands in the amount of approximately $42,276,000, payable over 20 years, in acknowledgement of historical investments in the Company. The accompanying consolidated basic financial statements include the accounts of SJH, SJMC, Methodist and other subsidiaries of SJH. The Company in these consolidated basic financial statements refers to the consolidated operations of these entities. Significant transactions between these entities have been eliminated. This section of the Company s financial statements presents analysis of the financial condition, the results of operations and cash flows for the periods indicated below. 1
Overview of the Consolidated Basic Financial Statements Along with management s discussion and analysis, the fiscal year-to-date financial report includes consolidated basic financial statements of the Company. Consolidated Basic Statement of Net Assets The consolidated basic statement of net assets presents the financial position of the Company as of and June 30, and includes all assets and liabilities of the Company. The Company s net assets, or the difference between total assets and total liabilities, are one indicator of the current financial condition of the Company. Changes in net assets are an indicator of whether the overall financial condition of the organization has improved or worsened over a period of time. Assets and liabilities are generally measured using current values, with the exception of capital assets, which are stated at historical cost less allowances for depreciation. A summary of the Company s condensed consolidated basic statement of net assets at and June 30, is presented below: (in thousands of dollars) 2013 June 30, Cash and short-term investments $ 73,177 $ 107,857 Other current assets 112,694 86,985 Capital assets, net 174,495 179,426 Other noncurrent assets 47,871 42,974 Total assets $ 408,237 $ 417,242 Current liabilities $ 108,812 $ 108,696 Noncurrent liabilities 132,318 137,206 Total liabilities 241,130 245,902 Net assets Invested in capital assets, net of related debt 88,648 86,439 Restricted: Expendable 3,887 3,843 Unrestricted 74,573 81,058 Total net assets 167,107 171,340 Total Liabilities and Net Assets $ 408,237 $ 417,242 Cash and cash equivalents and short-term investments decreased by approximately $34.7 million since June 30,. See Consolidated Basic Statement of Cash Flows section below for further information regarding cash activity. Other current assets increased by approximately $25.7 million since June 30,. Net patient accounts receivable increased approximately $10.8 million, prepaid expenses and other miscellaneous receivables increased approximately $5.4 million, due from city and state agencies increased approximately $10.6 million and the sinking fund deposit decreased by approximately $1.1 million. Capital assets, net, decreased approximately $4.9 million since June 30,. 2
Other noncurrent assets increased $4.9 million. The increase relates primarily to a deposit for land improvements for the Northside project of approximately $2.0 million, deposit for FCA, LLC s ITN application of over $1.8M and growth in the pension asset of approximately $0.7 million. Since June 30,, other current liabilities increased approximately $0.1 million and other noncurrent liabilities decreased approximately $4.9 million resulting in a net liability decrease of $4.8 million. As of, the Company has approximately $117.0 million in debt outstanding compared to approximately $124.7 million at June 30,. The long-term debt is comprised of a number of bond issues and a promissory note. During 2010, the Series 2008 Bonds were converted from variable to index rate bonds, which are now held in their entirety by Wells Fargo Bank, N.A, during the initial index rate period. The Series 2005 Bonds are variable rate bonds, which are backed by a bank letter of credit from TD Bank issued during 2010 for approximately $29,000,000, which expires in October 2015 (coterminous with the maturity of the bonds). No amounts were outstanding under this letter of credit at either 2013 or June 30,. The promissory note owed to Shands for $42.3 million, as mentioned above, was recorded by the Company during fiscal year 2011. On September 26,, the Board of Directors of Shands issued a resolution that from September 30, through the later of five consecutive quarters of the Company s compliance with all covenants of the Wells Fargo Bank, N.A. amended and restated Reimbursement Agreement dated December 7, 2010, or by June 30, 2014, the deferral period, all payments of principal and interest due under the Shands note would accrue but not be payable until five (5) business days after the deferral period end. As a result, approximately $0.9 million of interest accrual and $1.4 million of principal was reclassified from short-term to long-term liabilities. The note payable balance at 2013 is approximately $39.9 million. Effective October 19,, Shands entered into a Subordination Letter Agreement with Wells Fargo Bank, N.A. agreeing the promissory note is subordinate to senior secured parties. As of June 30,, the Company was in violation of its Debt Service Coverage Ratio covenants on its bond debt. The covenant violations also caused the Company to violate a cross-default provision in the 2011 note payable to Shands. The Company obtained waiver letters for these violations covering the events of default through July 1, 2013, with the exception of Series 2004 Bonds with Ambac Financial Group, Inc. ("Ambac"). Therefore, approximately $2,730,000 due to Ambac has been reclassified from long-term debt to current portion of long-term debt in the consolidated basic statements of net assets as of June 30,. In conjunction with the waiver letter from Wells Fargo Bank, N.A., the days cash on hand and debt service coverage ratio covenants were amended. The Company was in compliance with all covenants at. 3
Consolidated Basic Statement of Revenues, Expenses and Changes in Net Assets The following table presents the Company s condensed consolidated basic statement of revenues, expenses and changes in net assets for the six months ended and. The table presents the extent to which the Company s overall net assets decreased during fiscal year 2013 as a result of operations or other reasons. (in thousands of dollars) 2013 Net patient service revenue $ 362,736 $ 358,305 Other revenue 30,123 24,476 Total operating revenues 392,859 382,781 Operating expenses 379,097 374,223 Operating Income 13,761 8,558 Nonoperating expenses, net (1,615) (1,394) Excess of revenues over expenses 12,147 7,164 Other changes in net assets: Transfers to University of Florida and its medical programs (16,424) (18,960) Donor restricted funds received for equipment purchases 44 85 Decrease in net assets $ (4,233) $ (11,710) Patient Volumes Compared to the same time period of the prior fiscal year, inpatient volumes decreased while outpatient volumes increased during the first nine months of 2013. The following table reflects the associated volumes on a comparative basis to the prior year for fiscal year-to-date as of March 31: 2013 Net Change % Change Inpatient admissions 17,915 20,388 (2,473) (12.1%) Outpatient visits 272,496 260,891 11,605 4.4% Inpatient admissions, excluding observation cases, compared to the prior year have decreased by 2,473 or 12.1%. This decrease is primarily due to the termination of the Humana Medicare Advantage contract in October 2011 as well as a shift toward more observation cases, which are included as outpatient visits, rather than inpatient admissions. Total outpatient visits have increased by 4.4% due to the shift just mentioned and the opening of the Total Care Clinic. Operating Revenues fiscal year-to-date patient service revenue of approximately $362.7 million, net of allowances for contractual discounts, charity care and bad debt expense, represents an increase of approximately $4.4 million, or 1.2% in comparison to the same time period from the prior fiscal year. Other operating revenues of approximately $30.1 million, is an increase of approximately $5.6 million, or 23.1%, higher than the prior year. This increase is primarily related to an approximately $4.2 million settlement related to the provider service network (PSN) plan year 2009, increased enrollment in the PSN and increases in electronic medical records meaningful use grant revenue. 4
Operating Expenses Operating expenses of approximately $379 million through fiscal year-to-date, increased by 1.3% in comparison to fiscal year-to-date. Growth in membership in the PSN and expenditures related to the plan year 2009 settlement led to increased costs as did increases in depreciation, service/maintenance and consulting costs as the result of implementing the first phase of the EPIC system January and the second phase March 2013. Nonoperating expenses, net Nonoperating expenses, net, fiscal year-to-date, were approximately $1.6 million, which includes interest expense of approximately $2.6 million, investment income of approximately $1.2 million, an investment fair value decrease of approximately $0.5 million and a fair value increase for derivatives for approximately $0.2 million. Consolidated Basic Statement of Cash Flows The consolidated basic statement of cash flows provides additional information in regards to the Company s financial results by reporting the major sources and uses of cash. Total cash and cash equivalents dereased in the first nine months of fiscal year 2013 by approximately $24.3 million and short-term investments decreased $10.4 million. Amounts due from patient accounts receivable, net, are approximately $74.2 million at as compared to approximately $63.5 million at June 30,. Amounts due from City and State agencies are approximately $17.0 million at as compared to approximately $6.4 million at June 30,. Prepaid expenses and other current assets increased approximately $5.4 million and other assets increased approximately $4.9 million since June 30,. Estimated third-party payor settlements increased approximately $5.1 million in the past nine months. Cash paid on capital asset acquisitions during the first nine months of fiscal year 2013 totaled approximately $9.1 million, which excludes $1.4 million in new capital leases. Fiscal year 2013 payments of principal on long-term debt and capital lease obligations were approximately $9.0 million, interest payments were approximately $3.0 million and amounts paid on other borrowings were $4.5 million. The Company also made funding contributions of approximately $2.9 million into the frozen defined benefit employee pension plan during fiscal year 2013. Credit Ratings The Company s underlying credit rating of Baa1, from Moody s Investor Services, was reaffirmed December 2011. 5
Consolidated Basic Statement of Net Assets The consolidated basic statement of net assets presents the financial position of the Company as of and June 30, 2011 and includes all assets and liabilities of the Company. The Company s net assets, or the difference between total assets and total liabilities, are one indicator of the current financial condition of the Company. Changes in net assets are an indicator of whether the overall financial condition of the organization has improved or worsened over a period of time. Assets and liabilities are generally measured using current values, with the exception of capital assets, which are stated at historical cost less allowances for depreciation. A summary of the Company s condensed consolidated basic statement of net assets at and June 30, 2011 is presented below: (in thousands of dollars) June 30, 2011 Cash and short-term investments $ 103,654 $ 127,432 Other current assets 101,289 92,679 Capital assets, net 176,261 161,359 Other noncurrent assets 42,439 37,252 Total assets $ 423,644 $ 418,722 Current liabilities $ 103,727 $ 92,411 Noncurrent liabilities 138,239 132,922 Total liabilities 241,966 225,333 Net assets Invested in capital assets, net of related debt 88,273 69,388 Restricted: Nonexpendable - - Expendable 3,006 3,006 Unrestricted 90,399 120,995 Total net assets 181,678 193,389 Total Liabilities and Net Assets $ 423,644 $ 418,722 Cash and cash equivalents and short-term investments decreased by approximately $23.8 million since June 30, 2011. See Consolidated Basic Statement of Cash Flows section below for further information regarding cash activity. Other current assets increased by approximately $8.6 million since June 30, 2011. Net patient accounts receivable declined approximately $2.2 million, prepaid expenses and other miscellaneous receivables increased approximately $2.6 million, due from city and state agencies increased approximately $9.3 million and the sinking fund deposit decreased by approximately $1.1 million. Capital assets, net, increased approximately $14.9 million since June 30, 2011 related primarily to the new electronic medical records system. Other noncurrent assets increased $5.2 million. A deposit for land improvements for the Northside project contributed approximately $2.0 million to that increase. The remaining increase relates primarily to pension plan contributions, net of amortization. Since June 30, 2011, other current liabilities increased approximately $11.3 million and other noncurrent liabilities increased approximately $5.3 million. Both are primarily related to amounts due for the new electronic 6
medical records system. As of, the Company has approximately $125.1 million in debt outstanding compared to approximately $133.3 million at June 30, 2011. The long-term debt is comprised of a number of bond issues and a promissory note. The promissory note for $42.3 million, as mentioned above, was recorded by the Company during fiscal year 2011. During 2010, the Series 2008 Bonds were converted from variable to index rate bonds, which are now held in their entirety by Wells Fargo Bank, during the initial index rate period. The Series 2005 Bonds are variable rate bonds, which are backed by a bank letter of credit from TD Bank issued during 2010 for approximately $29,000,000, which expires in October 2015 (coterminous with the maturity of the bonds). No amounts were outstanding under this letter of credit at either or June 30, 2011. Consolidated Basic Statement of Revenues, Expenses and Changes in Net Assets The following table presents the Company s condensed consolidated basic statement of revenues, expenses and changes in net assets for the nine months ended and 2011. The table presents the extent to which the Company s overall net assets decreased during the first nine months of fiscal year as a result of operations or other reasons. (in thousands of dollars) 2011 Net patient service revenue $ 358,305 $ 380,690 Other revenue 24,476 18,171 Total operating revenues 382,781 398,861 Operating expenses 374,223 373,202 Operating Income 8,558 25,659 Nonoperating (expenses) / revenues, net (1,394) 4,620 Excess of revenues over expenses 7,164 30,278 Other changes in net assets: Transfers to University of Florida and its medical programs (18,960) (19,700) Donor restricted funds received for equipment purchases 85 330 Other changes in net assets - (42,276) Decrease in net assets $ (11,710) $ (31,368) Patient Volumes Compared to the same time period of the prior fiscal year, inpatient volumes decreased while outpatient volumes increased during the first nine months of. The following table reflects the associated volumes on a comparative basis to the prior year for fiscal year-to-date as of March 31: 2011 Net Change % Change Inpatient admissions 20,388 21,319 (931) (4.4%) Outpatient visits 260,891 252,599 8,292 3.3% Inpatient admissions compared to the prior year have decreased by 931 or 4.4%. This decrease is primarily due to the termination of the Humana Medicare Advantage contract. The decrease in admissions from prior year is seen largely in CHFM, Medicine, OB/GYN, and Orthopedics. Total outpatient visits have increased by 3.3%. The increase in the ancillary visits over prior year was partially offset by a reduction in hospital 7
based clinic visits. Operating Revenues fiscal year-to-date patient service revenue of approximately $358.3 million, net of allowances for contractual discounts, charity care and bad debt expense, represents a $22.4 million, or 5.9% decrease in comparison to the same time period from the prior fiscal year. Revenue increases associated with higher outpatient volumes and reimbursement rates were offset by decreases in state funding and IP volumes. Other operating revenues of approximately $24.5 million, is an increase of approximately $6.3 million, or 34.7%, higher than the prior year, primarily due to partial revenue recognition of a Medicaid Meaningful Use of electronic health records grant. Operating Expenses Operating expenses of approximately $374.2 million through fiscal year- to-date, increased by 0.3% in comparison to fiscal year-to-date 2011. Growth in membership in the provider service network led to increased costs as did increases in salaries, wages and benefits for additional staffing, which corresponds with the increase in outpatient patient volume and increased employee and retiree medical claims expense. These increases were offset by lower insurance costs related to sovereign immunity and lower medical supply spending. Nonoperating Revenues, Net Nonoperating expenses, fiscal year-to-date, were approximately $1.4 million. Interest expense of approximately $2.7 million is included in nonoperating expenses, net, in accordance with GASB Statement No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments. Investment income totaled approximately $1.5 million. The fair value increase for investments is $0.6 million. The fair value decrease for derivatives is approximately $0.8 million. Consolidated Basic Statement of Cash Flows The consolidated basic statement of cash flows provides additional information in regards to the Company s financial results by reporting the major sources and uses of cash. Total cash and cash equivalents decreased in the first nine months of fiscal year by approximately $25.7 million. Amounts due from patient accounts receivable, net, are approximately $63.8 million at as compared to approximately $65.9 million at June 30, 2011. Amounts due from City and State agencies are approximately $16.6 million at as compared to approximately $7.4 million at June 30, 2011. Capital asset acquisition during the first nine months of fiscal year totaled approximately $11.4 million. The approximately $3.8 million of proceeds from disposal of capital assets relate primarily to a sale-leaseback agreement. As previously mentioned, a $2 million deposit was made related to the Northside project. Payment of principal on long-term debt and capital lease obligations were approximately $7.6 million. The Company also made funding contributions of $5.7 million into the frozen defined benefit employee pension plan during the first nine months of fiscal year. Credit Ratings The Company s underlying credit rating of Baa1, from Moody s Investor Services, was reaffirmed December 2011. 8