Report of Independent Auditors on Long-Term Debt Service Coverage Ratio and Days Cash on Hand of the Combined Group

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Gertrude Hensley
7 years ago
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1 Ernst & Young LLP Suite North Orange Avenue Orlando, FL Tel: Fax: ey.com Report of Independent Auditors on Long-Term Debt Service Coverage Ratio and Days Cash on Hand of the Combined Group The Board of Directors Baptist Health Care Corporation We have audited the accompanying schedules showing the long-term debt service coverage ratio for the year ended September 30, 2016 and the days cash on hand as of September 30, 2016, based on the financial statements referred to in the Report on Financial Statements as of September 30, 2016 paragraph below. Management s Responsibility for the Schedules Management is responsible for the preparation and fair presentation of the schedule showing the long-term debt service coverage ratio in conformity with Section 3.07(a) of the Master Trust Indenture between Regions Bank, as successor Master Trustee, and Baptist Hospital, Inc., and Lakeview Center, Inc. (the Combined Group) dated June 1, 1998, as amended on October 1, 2003, by the First Amendment to the Master Trust Indenture and December 1, 2009, by the Second Amendment to the Master Trust Indenture, and Appendix B of the Supplemental Indenture dated February 1, 2010, and the schedule of days cash on hand in conformity with Appendix B of the Supplemental Indenture between Regions Bank and the Combined Group dated February 1, Management also is responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the schedules showing the long-term debt service coverage ratio and days cash on hand that are free of material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on the schedules showing the long-term debt service coverage ratio and days cash on hand based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the schedules showing the long-term debt service coverage ratio and days cash on hand are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts in the schedules showing the long-term debt service coverage ratio and days cash on hand. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the schedules showing the long-term debt service coverage ratio and days cash on hand, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the schedules showing the long-term debt service coverage ratio and days cash on hand in order to design audit procedures

2 that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s 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 schedules showing the long-term debt service coverage ratio and days cash on hand. 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 schedules referred to above present fairly, in all material respects, the longterm debt service coverage ratio for the year ended September 30, 2016, in conformity with Section 3.07(a) of the Master Trust Indenture between Regions Bank, as successor Master Trustee, and the Combined Group dated June 1, 1998, as amended on October 1, 2003, by the First Amendment to the Master Trust Indenture and December 1, 2009, by the Second Amendment to the Master Trust Indenture, and Appendix B of the Supplemental Indenture dated February 1, 2010, and the days cash on hand as of September 30, 2016, in conformity with Appendix B of the Supplemental Indenture between Regions Bank and the Combined Group dated February 1, Contractual Basis of Accounting The method of calculating the long-term debt service coverage ratio is prescribed by Section 3.07(a) of the Master Trust Indenture between Regions Bank, as successor Master Trustee, and the Combined Group dated June 1, 1998, as amended on October 1, 2003, by the First Amendment to the Master Trust Indenture and December 1, 2009, by the Second Amendment to the Master Trust Indenture, and Appendix B of the Supplemental Indenture dated February 1, 2010, and the method of calculating the days cash on hand in conformity with Appendix B of the Supplemental Indenture between Regions Bank and the Combined Group dated February 1, Our opinion is not modified with respect to this matter. Report on Financial Statements as of September 30, 2016 We have audited, in accordance with auditing standards generally accepted in the United States, the consolidated financial statements of Baptist Health Care Corporation and Subsidiaries as of and for the year ended September 30, 2016 and have issued our report, with an unmodified opinion thereon, dated December 22,

3 Restrictions on Use This report is intended solely for the information and use of management and the board of directors of Baptist Health Care Corporation and Regions Bank and is not intended to be and should not be used by anyone other than these specified parties. December 22,

4 Long-Term Debt Service Coverage Ratio of the Combined Group Year ended September 30, 2016 (Dollars in thousands) Excess of revenues, other support, and gains over expenses and losses $ 51,273 Adjusted for: Depreciation and amortization 20,156 Interest 9,439 Net unrealized gain on trading securities (6,837) Change in value of interest rate swap agreements 276 Loss from weather related events 3,484 Income of the Combined Group available for debt service $ 77,791 (A) Maximum annual debt service $ 19,506 (B) Long-term debt service coverage ratio (A) / (B)

5 Days Cash on Hand of the Combined Group September 30, 2016 (Dollars in thousands) Cash and cash equivalents $ 173,611 Short-term investments 103,883 Board-designated assets 66,411 $ 343,905 (A) Total operating expenses $ 701,920 Less depreciation and amortization 20,156 $ 681,764 (B) Number of days 365 (C) Operating expenses per day (B) / (C) $ 1,868 (D) Days cash on hand (A) / (D)

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