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  • Aurora Health Care, Inc.and AffiliatesConsolidated Financial Statements as of and for the YearsEnded December 31, 2017 and 2016, and Independent Auditors' Report

  • 1

    AURORA HEALTH CARE, INC. AND AFFILIATES

    TABLE OF CONTENTS

    Page

    INDEPENDENT AUDITORS' REPORT

    CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDEDDECEMBER 31, 2017 AND 2016:

    Balance Sheets

    Statements of Operations and Changes in Unrestricted Net Assets

    Statements of Changes in Net Assets

    Statements of Cash Flows

    Notes to Consolidated Financial Statements

    2

    3 - 4

    5

    6

    7 - 8

    9 - 43

  • Deloitte & Touche LLP

    555 E. Wells St. Ste. 1400

    Milwaukee, WI 53202

    USA

    Tel: +1-414-271-3000

    www.deloitte.com

    INDEPENDENT AUDITORS REPORT

    To the Board of Directors of

    Aurora Health Care, Inc.:

    We have audited the accompanying consolidated financial statements of Aurora Health Care, Inc. and Affiliates

    (Aurora), which comprise the consolidated balance sheets as of December 31, 2017 and 2016, and the related

    consolidated statements of operations and changes in unrestricted net assets, changes in net assets, and cash flows for the

    years then ended, and the related notes to the consolidated financial statements.

    Managements Responsibility for the Consolidated Financial Statements

    Management is responsible for the preparation and fair presentation of these consolidated financial statements in

    accordance with accounting principles generally accepted in the United States of America; this includes the design,

    implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated

    financial statements that are free from material misstatement, whether due to fraud or error.

    Auditors Responsibility

    Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted

    our audits in accordance with auditing standards generally accepted in the United States of America. Those standards

    require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial

    statements are free from material misstatement.

    An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated

    financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of

    material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk

    assessments, the auditor considers internal control relevant to Auroras preparation and fair presentation of the

    consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for

    the purpose of expressing an opinion on the effectiveness of Auroras internal control. Accordingly, we express no such

    opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of

    significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated

    financial statements.

    We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

    Opinion

    In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial

    position of Aurora Health Care, Inc. and Affiliates as of December 31, 2017 and 2016, and the results of their operations,

    changes in their net assets, and their cash flows for the years then ended in accordance with accounting principles generally

    accepted in the United States of America.

    March 29, 2018

    http://www.deloitte.com/

  • 3

    AURORA HEALTH CARE, INC. AND AFFILIATES

    CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2017 AND 2016(In thousands)

    2017 2016ASSETS

    CURRENT ASSETS:Cash and cash equivalents $ 192,883 $ 107,664Investments 1,834,050 1,614,843Assets whose use is limited or restricted 5,059 5,484Patient accounts receivable net of allowance for doubtful accounts of $105,128 and $97,349 in 2017 and 2016, respectively 715,431 731,746Other receivables 84,939 102,791Inventory 69,583 70,031Prepaids and other current assets 57,030 48,026Estimated third-party payor settlements 13,910 9,989

    Total current assets 2,972,885 2,690,574

    ASSETS WHOSE USE IS LIMITED OR RESTRICTED:Board-designated and other 184,087 164,168Contractually-restricted 179,841 154,267Donor restricted 61,104 53,821Debt service reserve 19,089 25,792

    Total assets whose use is limited or restricted 444,121 398,048

    PROPERTY, PLANT, AND EQUIPMENT Net 2,106,327 2,066,286

    OTHER ASSETS:Intangible assets net 14,219 15,786Investments in unconsolidated entities 69,822 72,313Other 53,230 56,835

    Total other assets 137,271 144,934

    TOTAL $ 5,660,604 $ 5,299,842

    (Continued)

  • 4

    AURORA HEALTH CARE, INC. AND AFFILIATES

    CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2017 AND 2016(In thousands)

    2017 2016LIABILITIES AND NET ASSETS

    CURRENT LIABILITIES:Current installments of long-term debt $ 146,444 $ 161,936Accounts payable 242,734 222,528Accrued salaries and wages 246,774 259,225Other accrued expenses 192,252 213,684Estimated third-party payor settlements 28,358 34,041

    Total current liabilities 856,562 891,414

    LONG-TERM DEBT Less current installments 1,335,185 1,403,091

    OTHER LIABILITIES:Pension and other employee benefit liabilities 270,833 243,574Self-insured liabilities 58,770 61,592Deferred gain 31,161 36,662Other 64,887 61,822

    Total other liabilities 425,651 403,650

    Total liabilities 2,617,398 2,698,155

    NET ASSETS:Unrestricted:

    Controlling interest 2,862,327 2,439,653Noncontrolling interest in subsidiaries 115,051 100,119

    Total unrestricted net assets 2,977,378 2,539,772

    Temporarily restricted 46,859 43,171Permanently restricted 18,969 18,744

    Total net assets 3,043,206 2,601,687

    TOTAL $ 5,660,604 $ 5,299,842

    See accompanying notes to consolidated financial statements. (Concluded)

  • 5

    AURORA HEALTH CARE, INC. AND AFFILIATES

    CONSOLIDATED STATEMENTS OF OPERATIONS AND CHANGES IN UNRESTRICTED NET ASSETSFOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016(In thousands)

    2017 2016REVENUE:

    Patient service revenue (net of contractual allowances and discounts) $ 5,069,034 $ 4,837,262Less provision for bad debts 170,262 140,151

    Net patient service revenue less provision for bad debts 4,898,772 4,697,111Other revenue 435,332 427,702

    Total revenue 5,334,104 5,124,813EXPENSES:

    Salaries, wages and fringe benefits 2,972,910 2,805,198Professional fees 94,285 82,707Supplies 1,018,328 987,058Depreciation and amortization 221,591 207,842Interest 56,446 57,687Maintenance and service contracts 124,103 119,659Building and equipment rental 67,115 65,850Hospital tax assessment 96,794 97,201Utilities 48,174 48,751Purchased services 136,055 137,940Other expenses 159,251 141,582

    Total expenses 4,995,052 4,751,475

    OPERATING INCOME 339,052 373,338

    NONOPERATING INCOME:Investment income net 150,878 95,603Other nonoperating (loss) income net (16,033) 202

    Total nonoperating income net 134,845 95,805

    EXCESS OF REVENUE OVER EXPENSES 473,897 469,143Pension-related changes other than periodic pension cost (508) (49,680)Net assets released from restriction for purchase of property and equipment 1,595 3,292Distributions to noncontrolling interests (37,366) (37,277)Other - net (12) (378)

    INCREASE IN UNRESTRICTED NET ASSETS $ 437,606 $ 385,100

    See accompanying notes to consolidated financial statements.

  • 6

    AURORA HEALTH CARE, INC. AND AFFILIATES

    CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016(In thousands)

    ControllingInterest

    Unrestricted

    NoncontrollingInterest

    UnrestrictedTotal

    UnrestrictedTemporarilyRestricted

    PermanentlyRestricted Total

    NET ASSETS DECEMBER 31, 2015 $ 2,066,225 $ 88,447 $ 2,154,672 $ 43,779 $ 18,733 $ 2,217,184Excess of revenue over expenses 420,194 48,949 469,143 469,143Pension-related changes other than net periodic pension costs (49,680) (49,680) (49,680)Contributions 10,453 11 10,464Investment income 2,685 2,685Net assets released from restrictions for operations (10,431) (10,431)Net assets released from restrictions for purchase of property and equipment 3,292 3,292 (3,292) Distributions to noncontrolling interest (37,277) (37,277) (37,277)Other net (378) (378) (23) (401)

    Increase (decrease) in net assets 373,428 11,672 385,100 (608) 11 384,503

    NET ASSETS DECEMBER 31, 2016 2,439,653 100,119 2,539,772 43,171 18,744 2,601,687Excess of revenue over expenses 421,599 52,298 473,897 473,897Pension-related changes other than net periodic pension costs (508) (508) (508)Contributions 9,204 237 9,441Investment income 6,756 6,756Net assets released from restrictions for operations (8,014) (8,014)Net assets released from restrictions for purchase of property and equipment 1,595 1,595 (1,595) Distributions to noncontrolling interest (37,366) (37,366) (37,366)Other net (12) (12) (2,663) (12) (2,687)

    Increase in net assets 422,674 14,932 437,606 3,688 225 441,519

    NET ASSETS DECEMBER 31, 2017 $ 2,862,327 $ 115,051 $ 2,977,378 $ 46,859 $ 18,969 3,043,206

    See accompanying notes to consolidated fina

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