CHRISTUS Health System December 31, 2018
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CONSOLIDATED FINANCIAL STATEMENTS CHRISTUS Health System December 31, 2018 CHRISTUS Health System Consolidated Financial Statements December 31, 2018 Contents Consolidated Financial Statements Consolidated Balance Sheets ...........................................................................................................1 Consolidated Statements of Operations and Changes in Net Assets ...............................................3 Consolidated Statements of Cash Flows ..........................................................................................5 Notes to Consolidated Financial Statements....................................................................................7 CHRISTUS Health Consolidated Balance Sheets December 31, June 30, 2018 2018 (unaudited) (in thousands) Assets Current assets: Cash and cash equivalents $ 659,219 $ 398,086 Short-term investments and equity in managed funds 705,674 691,407 Assets whose use is limited or restricted, required for current liabilities 66,291 64,869 Patient accounts receivable, net 548,310 525,316 Notes and other receivables 102,199 201,740 Inventories 118,223 112,448 Other current assets 163,416 84,389 Total current assets 2,363,332 2,078,255 Assets whose use is limited or restricted, less current portion 813,505 751,947 Property and equipment, net of accumulated depreciation 2,632,470 2,582,819 Other assets: Investments in unconsolidated organizations 245,254 200,059 Goodwill and intangible assets, net 166,253 163,275 Beneficial interest in supporting organizations and other restricted assets 101,872 103,398 Other assets, including notes receivable from related party 168,063 175,405 Total other assets 681,442 642,137 Total assets $ 6,490,749 $ 6,055,158 (Continued) 1 CHRISTUS Health Consolidated Balance Sheets December 31, June 30, 2018 2018 (unaudited) (in thousands) Liabilities and net assets Current liabilities: Accounts payable and accrued expenses $ 638,245 $ 641,628 Accrued employee compensation and benefits 222,152 279,603 Current portion of long-term debt 49,243 51,359 Total current liabilities 909,640 972,590 Long-term debt, less current portion 1,626,918 1,246,875 Accrued pension benefits, long-term portion 100,788 109,868 Derivative financial instruments 93,808 86,120 Other long-term obligations – including self-funded liabilities, less current portion 229,338 237,537 Total liabilities 2,960,492 2,652,990 Net assets: Unrestricted: Attributable to CHRISTUS Health 3,016,332 2,963,671 Attributable to non-controlling interest 311,289 238,122 Total unrestricted 3,327,621 3,201,793 Temporarily restricted 184,562 182,770 Permanently restricted 18,074 17,605 Total net assets 3,530,257 3,402,168 Total liabilities and net assets $ 6,490,749 $ 6,055,158 2 CHRISTUS Health Consolidated Statements of Operations and Changes in Net Assets For the Six Months Ended December 31, December 31, 2018 2017 (unaudited) (unaudited) (in thousands) Revenues: Patient service revenue (net of contractual allowance and discounts) $ 2,518,037 $ 2,711,329 Provision for bad debts - (302,565) Net patient service revenue, less provision for bad debts 2,518,037 2,408,764 Premium revenue 152,119 140,071 Other revenue including gain on contribution to joint ventures 147,394 159,433 Equity in income of unconsolidated organizations 7,344 6,228 Total revenues 2,824,894 2,714,496 Expenses: Employee compensation and benefits 1,262,980 1,215,600 Services and other 841,899 796,626 Supplies 469,550 460,808 Depreciation and amortization 112,636 113,600 Interest 31,246 25,992 Total expenses 2,718,311 2,612,626 Operating gain 106,583 101,870 Nonoperating investment (loss)/gain (28,567) 38,846 Other nonoperating loss (19,908) (2,747) Revenues in excess of expenses 58,108 137,969 Less revenues in excess of expenses attributable to non-controlling interest 11,144 18,458 Revenues in excess of expenses attributable to CHRISTUS Health $ 46,964 $ 119,511 (Continued) 3 CHRISTUS Health Consolidated Statements of Operations and Changes in Net Assets For the Six Months Ended December 31, December 31, 2018 2017 (unaudited) (unaudited) (in thousands) Changes in unrestricted net assets: Revenues in excess of expenses attributable to CHRISTUS Health $ 46,964 $ 119,511 Unrealized (loss)/gain on investments (6,163) 3,797 Change in pension liabilities 1,134 3,808 Change in non-controlling interest 73,167 8,214 Net assets released from restrictions for capital and other 10,726 655 Changes in unrestricted net assets 125,828 135,985 Temporarily restricted net assets: Net change in beneficial interest (1,132) (29) Contributions 7,489 15,048 Unrealized (loss)/gain on investments (1,687) 349 Net assets released from restrictions and other (2,878) 2,537 Changes in temporarily restricted net assets 1,792 17,905 Permanently restricted net assets: Net change in beneficial interest 1 226 Other 468 53 Changes in permanently restricted net assets 469 279 Changes in net assets 128,089 154,169 Net assets – beginning of period 3,402,168 3,176,459 Net assets – end of period $ 3,530,257 $ 3,330,628 4 CHRISTUS Health Consolidated Statements of Cash Flows For the Six Months Ended December 31 December 31 2018 2017 (unaudited) (unaudited) (in thousands) Operating activities Changes in net assets $ 128,089 $ 154,169 Adjustments to reconcile changes in net assets to net cash provided by operating activities: Net gain on contributions to joint ventures - (36,340) Change in beneficial interest 1,131 (197) Change in pension liabilities recognized in net assets (1,134) (3,808) Contributions of temporarily restricted net assets (7,489) (15,741) Non-controlling interests acquired in business combination - (14,550) Distributions to and acquisitions of non-controlling interest (4,307) - Net assets acquired from sale of non-controlling interests (62,770) - Equity in income of unconsolidated organizations (7,344) (6,228) Unrealized investment loss 47,625 8,333 Depreciation and amortization 112,636 113,600 Amortization of deferred financing costs 540 566 Provision for uncollectible accounts - 302,565 Change in derivative fair value 7,235 (8,798) Loss on extinguishment of debt 18,166 - Loss on disposal of property and equipment 114 1,009 Foreign currency translation adjustment (1,406) - Changes in operating assets and liabilities, net of acquisitions: Increase in net patient accounts receivable (22,994) (344,035) Increase in investments and assets whose use is limited or restricted (124,872) (53,305) Decrease (increase) in notes and other receivables 99,541 (1,140) Increase in other current assets and inventories (84,802) (10,410) (Decrease) increase in accounts payable, accrued expenses, and accrued employee compensation and benefits (60,013) 18,023 Decrease in other long term liabilities (16,513) (7,156) Net cash provided by operating activities $ 21,433 $ 96,557 (Continued) 5 CHRISTUS Health Consolidated Statements of Cash Flows For the Six Months Ended December 31 December 31 2018 2017 (unaudited) (unaudited) (in thousands) Investing activities: Purchases of property and equipment $ (157,792) $ (209,233) Proceeds from sale or disposal of property and equipment 65 - Proceeds from sale of majority interest in operating entities - 22,346 Distributions from investments in unconsolidated organizations 6,284 2,246 Purchases of investments in unconsolidated organizations (33,659) (24,428) Notes issued to related parties (1,757) - Decrease in other assets 21,983 22,277 Acquisitions of health care entities, net of cash acquired - (45,642) Net cash used in investing activities (164,876) (232,434) Financing activities: Contributions of temporarily restricted net assets 7,489 15,741 Distributions to and acquisitions of non-controlling interest 4,307 - Proceeds from sale of non-controlling interests 35,000 - Proceeds from debt issuance, net of premiums and discounts 885,621 158,676 Payments on long-term debt (527,841) (42,361) Net cash provided by financing activities 404,576 132,056 Net increase (decrease) in cash and cash equivalents 261,133 (3,821) Cash and cash equivalents—beginning of year 398,086 528,259 Cash and cash equivalents—end of year $ 659,219 $ 524,438 Noncash investing and financing transactions: Capital Lease and debt obligations incurred for property and equipment $ 1,441 $ 224 Notes issued in exchange for non-controlling interests in consolidated organizations $ 27,770 $ - Supplemental cash flow information: Cash paid during the period for interest (net of amount capitalized) $ 31,953 $ 17,622 6 Notes to Consolidated Financial Statements (unaudited) For the Six Months Ended December 31, 2018 1. Mission, Vision, and Organization of CHRISTUS Health CHRISTUS Health was incorporated as a Texas nonprofit corporation on December 15, 1998. CHRISTUS is sponsored by the Congregation of the Sisters of Charity of the Incarnate Word of Houston, Texas, the Congregation of the Sisters of Charity of the Incarnate Word of San Antonio, Texas, and the Congregation of the Sisters of the Holy Family of Nazareth. CHRISTUS Health, together with each affiliated entity for which CHRISTUS Health holds, directly or indirectly, at least a majority membership, ownership or other controlling interest are collectively referred to in these consolidated financial statements as “CHRISTUS” or “the System”. The mission of CHRISTUS is to extend the healing ministry of Jesus Christ. The Gospel values underlying the mission statement challenge CHRISTUS to make choices that respond to the economically disadvantaged and the underserved with health care needs. The growth and