Quarterly Financial Disclosure

and Management Discussion

For the Twelve Months Ended August 31, 2016

Quarterly Disclosure Report/Discussion

Twelve months ended August 31, 2016
Page 2

Disclosure Report

TABLE OF CONTENT
I. Recent Historical Trends and Outlook for FY 2016

Page

Page

III. Review of Consolidated Results for 4th Qtr. FY 2016

(Twelve months ended August 31, 2016)

Page

IV. System Operating EBIDA for the Fourth Quarter

Page

Page

Page

Page

II. Seasonality of Fiscal Year 2016 Budgeted Operating Results

V. Utilization Statistics and Payor Mix

VI. Consolidated Balance Sheet as of August 31, 2016

VII. Consolidated Schedule of Cash Flows

VIII. Days Cash on Hand

IX. Interest Rate Derivatives

X. MBHS Debt Structure

1225 North State Street, Jackson, Mississippi 39202 (601) 968-5130 www.mbhs.org

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11

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Quarterly Disclosure Report/Discussion

Twelve months ended August 31, 2016
Page 3

Disclosure Report

I. Recent Historical Trends and Outlook for Fiscal Year 2016:

The Health Systems financial performance for the fiscal years 2011 through 2015 is
summarized in Table 1 below. For FY 2015, the Health System had a $32.1 million increase in
total revenue, increased non-capital expenses of $17.1 million and increased capital expenses of
$2.7 million. During FY 2015, MBHS acquired two critical access hospitals, Baptist Medical
Center-Yazoo (BMC-Yazoo) and Baptist Medical Center-Attala (BMC-Attala) and opened the
Baptist Heart Clinic. The addition of the two critical access hospitals resulted in $11.4 million in
additional total revenue and $14.2 million in operating expense for FY 2015. The remaining
increase in operating revenues can be attributed to inpatient and outpatient volume growth and
revenue cycle stabilization during FY 2015. Excluding the critical access hospitals, total noncapital and capital expenses increased by only $5.5 million due to labor control and contract
management.
Included for comparison is the FY 2016 budget. In FY 2016, the Health System budget
reflects a $61.9 million increase in total revenue principally resulting from increased outpatient
and inpatient volume and a full year of the two additional critical access hospitals. A major
component of the outpatient volume increase is the opening of the Baptist Premier clinic, on
October 1, 2015. Non-capital expenses are budgeted to increase $45.1 million or 10.3% due to a
full year of the critical access facilities, the addition of the Baptist Premier Clinic and increase in
volume. For FY 2016, budgeted operating EBIDA is $41.3 million, as compared to $24.5
million for FY 2015, while budgeted operating loss is $2.1 million as compared to an operating
loss of $17.0 million for FY 2015. Overall, the budgeted revenue in excess of expenses is $5.7
million, an $18.5 million improvement planned from FY 2015 to FY 2016.
Table 1
Mississippi Baptist Health Systems & Subsidiaries
Statements of Operations
(000's Omitted)

FY 2011
MBMC Admissions

FY 2012

20,264

Revenues:
Net patient service revenues
Other operating revenues
Total Revenue

Non-Capital Expenses:
Salaries and Benefits
Supplies and other
Total Non-Capital Expenses:
Operating EBIDA
Capital Expenses:
Depreciation/Amortization
Interest Expense
Total Capital Expenses
Operating Income (Loss)
Non-operating income(expense):
Revenues in excess of (less than) expenses
Net assets released from restriction and
used for purchase of property and equipment
Increase (decrease) in unrestricted net assets

356,435
11,657
368,092

20,454
$

401,148
15,741
416,889

FY 2014

20,555
$

398,241
19,184
417,425

20,720
$

411,209
18,010
429,219

Budget
FY 2016

FY 2015
21,504
$

443,876
17,444
461,320

22,035
$

505,964
17,239
523,203

216,048
125,670

246,967
132,871

267,019
138,693

279,282
140,458

283,046
153,779

326,596
154,992

341,718

379,838

405,712

419,740

436,825

481,588

26,374

37,051

11,713

9,479

24,495

41,615

22,793
10,193
32,986

22,977
9,503
32,480

25,230
9,167
34,397

29,023
9,764
38,787

31,428
10,021
41,449

33,199
10,469
43,668

(6,612)

4,571

(22,684)

(29,308)

(16,954)

(2,053)

21,546

9,133

30,653

19,237

4,113

7,703

14,934

13,704

7,969

(10,071)

(12,841)

5,650

420
$

Audited
FY 2013

15,354

89
$

13,793

18
$

7,987

615
$

(9,456) $

213
(12,628)

500
$

6,150

Note: The above budget information is presented in a format consistent with the audited financial statements and
may have minor differences between those used by management for internal purposes.
1225 North State Street, Jackson, Mississippi 39202 (601) 968-5130 www.mbhs.org

Quarterly Disclosure Report/Discussion

Twelve months ended August 31, 2016
Page 4

Disclosure Report

II. Seasonality of Fiscal Year 2016 Budgeted Operating Results:

As illustrated in Table 2 below, the quarterly operating budget for fiscal year 2016
demonstrates the seasonal nature of the hospitals business cycle.
Table 2
Mississippi Baptist Health Systems & Subsidiaries
Statements of Operations
(000's Omitted)

Qtr 1
Revenues:
Net patient service revenues
Other operating revenues
Net Assets released from restrictions
Total Revenue

Non-Capital Expenses:
Salaries and Benefits
Supplies and other
Total Non-Capital Expenses:
Operating EBIDA
Capital Expenses:
Depreciation/Amortization
Interest Expense
Total Capital Expenses
Operating Income (Loss)
Non-operating income(expense):
Revenues in excess of (less than) expenses
Net assets released from restriction and
used for purchase of property and equipment
Increase (decrease) in unrestricted net assets

FY 2016 Budget
Qtr 3

Qtr 2

Qtr 4

Total

122,015 $
4,223
150
126,388

128,207 $
4,132
150
132,489

128,768 $
4,142
150
133,060

126,974 $
4,142
150
131,266

505,964
16,639
600
523,203

80,651
38,376
119,027

81,710
38,755
120,465

82,208
39,001
121,209

82,027
38,859
120,886

326,596
154,992
481,588

7,361

12,024

11,851

10,380

41,615

8,299
2,618
10,917

8,300
2,617
10,917

8,300
2,617
10,917

8,300
2,617
10,917

33,199
10,469
43,668

(3,556)

1,107

934

(537)

(2,053)

1,970

1,966

1,900

1,867

7,703

(1,586)

3,073

2,834

1,330

5,650

125

125

125

125

500

(1,461) $

3,198 $

2,959 $

1,455 $

6,150

Note: The above budget information is presented in a format consistent with the audited financial statements and
may have minor differences between those used by management for internal purposes.

1225 North State Street, Jackson, Mississippi 39202 (601) 968-5130 www.mbhs.org

Quarterly Disclosure Report/Discussion

Twelve months ended August 31, 2016
Page 5

Disclosure Report

III. Review of Consolidated Results for the twelve months ended August 31, 2016:
The Health Systems financial performance for twelve months ending August 31,
2016 is summarized in Table 3 below. This table shows year-to-date operating loss of
$3.9 million and operating EBIDA of $38.2 million. Net operating revenue grew by
10.4% over prior year, and over the budgeted growth by $2.7 million. Actual inpatient
volume as compared to budgeted volume for the Medical Center was under budget by
167 admissions but ahead of prior year. Outpatient volume has been above budget
expectations and above prior year. Actual non-capital operating expenses are above
budgeted expectations and above prior year. Actual capital related expenses are below
budgeted amounts. This resulted in an operating loss of $3.9 million for the August 2016
year-to-date financial performance as compared to a budgeted loss of $2.1 million. The
non-operating gain is $5.2 million versus the budgeted gain of $7.7 million and the $4.5
million gain in the prior year. Included in this line item are year-to-date realized
investment gains totaling $19.3 million, unrealized investment losses of $14 million, and
a $9.8 million negative change in valuation of the fixed payer swap transaction entered
into in March 2007.
During the fourth quarter of fiscal year 2016, the Health System recognized a
number of favorable adjustments relating to actuarial estimates of professional/general
liability, medical claims reserves, and assets released from restrictions. These
adjustments offset other unfavorable adjustments relating to cost report reserves and
other routine evaluations performed as part of the normal fiscal year closing process.
Table 3
Statements of Operations
Sept-Nov

Dec-Feb
Mar-May
FY 2016
Qtr 2
Qtr 3

Qtr 1
Revenues:
Net patient service revenues
Other operating revenues
Net operating revenue

Non-capital expenses:
Salaries and benefits
Supplies and other
Total non-capital expenses
Operating EBIDA
Capital expenses:
Depreciation/amortization
Interest expense
Total capital expenses
Operating income (Loss)
Non-operating income(expense)
Revenues in excess of (less than) expenses
Other changes:
Net assets released from restrictions
Change in unrestricted net assets

125,301
3,654
128,955

Twelve months ended August 31, 2016

Current
Budget
Prior

Qtr 4

126,798
5,208
132,006

$ 125,631
3,180
128,811

80,555
40,455
121,010

83,873
41,560
125,433

84,620
40,515
125,135

82,542
33,597
116,139

331,590
156,127
487,717

326,596
154,992
481,588

298,002
154,250
452,252

7,945

6,573

3,676

20,015

38,209

41,615

24,072

8,331
2,497
10,828

7,954
2,471
10,425

7,777
2,450
10,227

8,246
2,423
10,669

32,308
9,841
42,149

33,199
10,469
43,668

31,428
10,021
41,449

(2,883)

(3,852)

(6,551)

9,346

(3,940)

(2,053)

(17,377)

(923)

(11,047)

6,401

10,808

5,239

7,703

4,537

(3,806)

(14,899)

(150)

20,154

1,299

5,650

(12,840)

10
(3,796)

(000's Omitted)

199
(14,700)

47
(103)

128,280
7,874
136,154

31
20,185

506,010
19,916
525,926

287
1,586

1225 North State Street, Jackson, Mississippi 39202 (601) 968-5130 www.mbhs.org

505,964
17,239
523,203

500
6,150

458,941
17,383
476,324

213
(12,627)

Quarterly Disclosure Report/Discussion

Twelve months ended August 31, 2016
Page 6

Disclosure Report

IV. System Operating EBIDA for the Fourth Quarter:

As can be seen in Table 4 below, the System generated an operating EBIDA of
$20.0 million for the fourth quarter. This performance is more than our budget of $10.4
million, and more than the prior year loss of $176 thousand. Admissions in the fourth
quarter were below budget expectations and above prior year totals. Total revenue in the
fourth quarter was over budgeted expectations by $4.9 million and $11.8 million more
than the same time period last fiscal year. Non-capital expenses were below budget and
below prior year.
Table 4

Mississippi Baptist Health Systems

4th Quarter ended August 31, 2016
(000's Omitted)

Current
MBMC Admissions
Revenues:
Net patient service revenues
Other operating revenues
Total revenue

Budget

5,539
$

Non-capital expenses:
Salaries and benefits
Supplies and other
Total non-capital expenses

128,280
7,874
136,154

Prior

5,566
$

126,974
4,292
131,266

5,505
$

120,748
3,673
124,421

82,542
33,597

82,027
38,859

78,076
46,503

116,139

120,886

124,579

Operating EBIDA - 4th Quarter

20,015

10,380

Operating EBIDA - Previous Qtrs

18,194

31,236

24,653

Operating EBIDA - FY 2016

38,209

41,616

24,495

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(158)

Quarterly Disclosure Report/Discussion

Twelve months ended August 31, 2016
Page 7

Disclosure Report

V. Utilization Statistics and Payor Mix:

As discussed in the operating EBIDA results summary, the Medical Centers
inpatient volumes (admissions) for fiscal 2016 are slightly below budgeted levels but
above prior year. For fiscal 2016, the Medical Centers patient day volume is 3.7%
below budget. Overall average length of stay was favorable to budget and has been a key
focus area for FY 2016. Key ancillary areas also showed growth over prior year.
Outpatient volumes are ahead of budget and above prior year. Overall hospital payor mix
stayed relatively consistent as of the third quarter of the fiscal year, but MBMC has seen
a shift to commercial payors from governmental payors and a minor increase in No
Insurance/Other.
Table 5
Mississippi Baptist Health Systems Utilization Stats & Payor Mix
Historic Trending Performance
FY 2012
FY 2013
FY 2014
FY 2015
Utilization Statistics
Admissions (MBMC Only)
Patient Days (MBMC Only)
Average Length of Stay (MBMC Only)
Average Daily Census (MBMC Only)
Adjusted Patient Days (MBMC Only)
Births (MBMC)
Emergency Dept. Visits (MBMC Total)
Surgical Cases (MBMC Total)
Outpatient Hospital Cases*

Payor Mix (MBMC Gross Revenue)

Medicare
Medicaid
Blue Cross
HMO/PPO
Private Insurance
No Insurance / Other

20,454
108,698
5.3
297
206,901
1,244
61,202
14,599
132,506

54.0%
7.6%
16.3%
13.4%
1.2%
7.5%

20,555
109,462
5.3
300
215,069
1,135
59,852
15,209
133,473

54.7%
7.2%
16.1%
13.0%
1.2%
7.8%

20,720
107,447
5.2
294
216,639
1,396
60,951
15,635
127,156

54.5%
7.4%
15.7%
13.6%
1.6%
7.2%

21,504
112,153
5.2
307
208,398
1,666
65,487
15,577
129,445

54.7%
8.3%
14.8%
13.4%
1.9%
6.9%

Twelve months ended August 31

FY 2016
Budget
Prior
21,868
106,097
4.9
290
202,197
1,715
68,728
16,036
135,083

54.0%
8.1%
14.7%
14.0%
1.5%
7.7%

22,035
110,175
5.0
302
202,194
1,634
66,850
15,624
134,623

55.8%
8.3%
14.5%
12.9%
1.9%
6.7%

21,504
112,153
5.2
307
208,398
1,666
65,487
15,577
129,445

54.7%
8.3%
14.8%
13.4%
1.9%
6.9%

* Total outpatient cases changed from prior year reports due to the new system Paragon and how it calculates the outpatient hospital
cases. The difference in the reporting is that it no longer includes non patient labs in this number per the Decision Support department.
Because of this change, 2011 to 2014 numbers have been restated to be consistent with the new reporting.

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Quarterly Disclosure Report/Discussion

Twelve months ended August 31, 2016
Page 8

Disclosure Report

VI. Combined Balance Sheet as of August 31, 2016:

The combined Balance Sheets as of August 31, 2016, and prior years for Baptist
Health Systems and its subsidiaries are shown below in Table 6. Total assets of $694.7
million as of August 31, 2016, increased $2.8 million from August 31, 2015 year-end
balance. The increase in cash and cash equivalents is primarily the result of the sale of
property and transfer of cash from the Health Systems self insured trust at year end. The
Health System reported gains on sale of assets of $12.8 million, realized investments
gains of $18.7 million and unrealized losses of $13.9 million. The System continues to
use these funds for construction and renovation projects, purchases of new and
replacement equipment and working capital needs.
Table 6
Mississippi Baptist Health Systems
Combined Balance Sheets
(000's Omitted)
Audited 31-Aug

FY 12
Assets:
Cash and cash equivalents
Assets limited to use
Patient receivables, net
Notes and other receivables
Inventory and prepaid expenses
Property and equipment, net
Other Assets

FY 13

31-Aug

FY 14

FY 15

FY 16

3,264 $
283,598
51,671
5,212
11,581
263,805
19,897

2,925 $
271,699
56,148
5,145
13,202
301,832
19,993

3,572 $
261,595
57,099
7,764
13,043
309,599
24,799

6,928
234,838
56,554
8,570
12,061
338,178
34,748

30,858
240,881
54,231
9,032
12,975
309,828
36,861

Total Assets
Liabilities:
Current portion long term debt
Accounts Payable
Accrued payroll and withholdings
Accrued expenses
Long-Term debt
Other long-term liabilities

639,028 $

670,944 $

677,471 $

691,877

694,666

5,280 $
10,487
15,580
16,136
203,893
37,724

12,177 $
16,400
15,555
22,055
216,143
28,873

9,279 $
15,110
16,338
18,889
234,121
32,868

9,740
11,850
19,316
19,932
249,949
42,827

9,441
12,867
19,960
23,744
240,080
52,202

Total Liabilities

289,100 $

311,203 $

326,605 $

353,614

358,294

333,348 $
14,268
2,312

341,336 $
16,069
2,336

331,879 $
16,470
2,517

319,252
16,494
2,517

320,838
12,877
2,657

Total Net Assets

349,928 $

359,741 $

350,866 $

338,263

336,372

Total Liabilities and Net Assets

639,028 $

670,944 $

677,471 $

691,877

694,666

Net Assets:
Unrestricted
Temporarily restricted
Permanently restricted

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Quarterly Disclosure Report/Discussion

Twelve months ended August 31, 2016
Page 9

Disclosure Report

VII. Combined Schedule of Cash Flows:

A combined schedule of cash flows for Baptist Health Systems and its Subsidiaries
is found in Table 7 below. Cash and equivalents of $30.9 million plus Board designated
investments of $175.4 million total $206.3 million as of August 31, 2016.
Table 7
Mississippi Baptist Health Systems & Subsidiaries
Statement of Cash Flows
For Twelve Months Ended August 31, 2016
(000's Omitted)

Cash flows from operating activities:

Change in net assets
Add back: depreciation/amortization
Other non-cash adjustments
Other changes in working capital
Change in cash from operating activities

Cash flows from investing activities:

Capital expenditures
Change in assets limited as to use
Cash proceeds from sales of property and equipment
Investments in equity investees
Change in other assets
Change in cash from investing activities

(504)
38,311
11,469
3,546
52,822
(19,798)
(4,615)
22,052
(188)
(18,953)
(21,502)

Cash flows from financing activities:

Proceeds from long-term debt
Line of Credit, net
Repayment of long-term debt
Restricted contributions and investment income
Change in cash from financing activities

990
(8,765)
385
(7,390)

Net increase in cash and cash equivalents

23,930

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

6,928
$

30,858

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Quarterly Disclosure Report/Discussion

Twelve months ended August 31, 2016
Page 10

Disclosure Report

VIII. Days Cash on Hand:

As shown in Table 8, Baptists DCOH increased from prior fiscal year end. The
primary reasons for the increase is the sale of property during the year, the closure of the
MBHS self insurance trust fund, reduction in capital and renovation spending, and
fluctuations in the fair market value of the investment portfolio. Also impacting DCOH
is an increase of $22.6 million in the collateral posting requirements under the swap
agreement as discussed in Interest Rate Derivatives.

Table 8
Mississippi Baptist Health Systems & Subsidiaries
Days Cash on Hand
For Twelve Months Ended August 31, 2016
(000's Omitted)
FY 2015

FY 2016

Aug 31

Cash and cash equivalents

Unrestricted board-designated investments
Total unrestricted cash and investments
Average daily cash operating expenses
Days cash on hand

$
$

6,928
182,670
189,598

Nov 30

Feb 29

5,771
174,396
180,167

9,678
144,429
$ 154,107

1,267

1,357

150

133

May 31

Aug 31

11,121
154,325
165,446

30,858
175,413
$ 206,271

1,381

1,383

1,359

112

120

152

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Quarterly Disclosure Report/Discussion

Twelve months ended August 31, 2016
Page 11

Disclosure Report

IX. Interest Rate Derivatives:

On March 1, 2007 Mississippi Baptist Health Systems entered into a 67% of onemonth LIBOR fixed payor swap with USBAG. The swap had a notational amount of $80
million (Series 2007B bonds) and is fixed at 3.759% for a term of thirty years.
As a result of the 2010 Fitch downgrade to BBB+ by Fitch Ratings, earlier in
2013, UBS requested that Baptist post collateral on the value of the swap agreement, in
accordance with our swap agreement executed with the Series 2007 debt issuance. On
April 29, 2013, Baptist entered into a swap novation agreement with Deutsche Bank. The
agreement calls for Deutsche Bank to post $5M of collateral at the BBB rating level, by
Fitch ratings with a net interest cost of 6.25 bps on the $80M swap. As of August 31,
2016, the Health System has posted collateral of $27,033,239, an increase of $22.6
million from August 31, 2015.
As of August 31, 2016, the valuation of the swap was a $31.1 million liability, an
increase of $9.8 million from August 31, 2015. This is reported on the balance sheet in
other long-term liabilities.
X.

MBHS Debt Structure:

2007A Bond Issue - $121 million fixed rate issue, part of a $201 million issued
sold through the Mississippi Hospital Equipment and Facilities Authority (MHEFA) in
March 2007. Five percent fixed rate interest is paid semiannually in February and
August with annual principal payments also paid in August. The principal balance as of
August 31, 2016 is $81,605,000.
2009 Bond Issue $80 million variable rate demand bonds issued through
Regions Bank in May 2009. This issue was used to close an $80 million line of credit
extended by Regions Bank. The $80 million line of credit was used to redeem $80
million in auction rate bonds issued in March 2007 (2007B) as part of the $201 million
issue mentioned above. In October 2011, this bond issue was amended to extend the
maturity date to May 19, 2016. The Series 2009 bond bore interest at a variable rate
based on 67% of LIBOR plus a spread as defined in the loan agreement. During fiscal
2012 $15,000 was paid on the Series 2009 bond obligation and during fiscal 2015 the
remaining $79,985,000 balance was refunded with the Series 2015 bonds discussed
below.
2015 Bond Issue-On April 1, 2015, MBHS retired the Series 2009 Bond Issue
through a combination of a financing agreement with Regions Bank and the issuance of
floating rate notes in a public offering. The floating rate notes known as the 2015A
bonds were issued at $50,725,000 with interest paid monthly based on the SIFMA rate +
1.3% spread, which was 1.86% at August 31, 2016. The amount financed with Regions
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Quarterly Disclosure Report/Discussion

Twelve months ended August 31, 2016
Page 12

Disclosure Report

Bank known as the 2015B bonds is $30,140,000 with interest paid monthly at the
variable rate of 1.78% as of August 31, 2016. The principal balance on the 2015A bonds
as of August 31, 2016, is $50,725,000. The principal balance on the 2015B bonds as of
August 31, 2016, is $30,140,000.
2006 Bond Issue $17 million GoZone bonds issued in 2006 to finance a medical
office building in Madison County approximately 10 miles north of the main hospital
campus. In October 2009 the System made a principal payment of $2.6 million with the
balance of $14.4 million converted from a variable instrument backed by a letter of credit
from a commercial bank to a variable debt instrument held by the commercial bank.
Interest on the debt is a variable rate based on LIBOR plus a spread as defined in the
supplemental trust indenture dated October 1, 2009. The debt initially had a maturity
date of October 31, 2012 but was extended till December 31, 2012 and was refinanced
with principle and interest payments due now referred to as the Regions 2012B bonds.
The principal balance as of August 31, 2016, is $12,000,406 at the fixed interest rate of
2.02%.
In February 2007, Standard & Poors and Fitch Ratings assigned the Series
2007A Bonds ($121 million) ratings of A (outlook stable). In February 2009, Fitch
lowered its rating to A- and revised its rating outlook to negative. In July 2010, Fitch
lowered its rating to BBB+ and revised its outlook to stable. In July 2011, Fitch affirmed
this rating. In April 2009, S&P lowered its rating to A- and revised its rating outlook to
negative. In June 2010, S&P affirmed its A- rating and maintained its negative rating
outlook. In January 2012, S&P again affirmed its A- rating and revised its negative
outlook to stable. In June 2014, S&P lowered its rating to BBB+ with a stable outlook.
In July 2014, Fitch lowered its rating to BBB with a stable outlook. In February and
March of 2015, both agencies affirmed these ratings in respect to the Series A Bond
Issue. In March 2016, S&P affirmed its rating of BBB+ with a stable outlook but Fitch
changed its rating to BBB with a negative outlook.
Effective September 12, 2011, MBHS entered into a joint venture with a
radiology practice group. The equipment transferred to the LLC by MBHS included
equipment financed with $3,592,565 of Series 2007A Bond proceeds and $10,500 of
Series 2007B Bond proceeds.
On September 10, 2012, the System executed a 3% fixed rate Series 2012 revenue
bond for $20,000,000 through the MS Business Finance Corporation. The proceeds of
the bond were used to finance the construction of a parking garage, skywalk and other
related construction on the Systems main campus.
In December 2014, Baptist Medical Center-Leake (BMC-Leake) completed a new
25-bed critical access hospital facility located adjacent to the old hospital in Carthage,
MS. In November 2013, BMC-Leake elected to finance the Project through the federal

1225 North State Street, Jackson, Mississippi 39202 (601) 968-5130 www.mbhs.org

Quarterly Disclosure Report/Discussion

Twelve months ended August 31, 2016
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New Markets Tax Credit (NMTC) program and its Mississippi counterpart, with
certain loans to be made to BMC-Leake in the aggregate principal amount of $25.4
million (Qualified Low Income Community Investments QLICI Loans). The QLICI
Loans include a senior loan of $17.2 million with a 7-year term and a junior loan in the
amount of $8.2 million with a 30 year term. The QLICI loans will be evidenced by
promissory notes. The senior loan will be refinanced after 7 years, while the junior loan
is expected to be acquired by Mississippi Baptist Medical Center after pursuant to a
put/purchase option agreement with a leverage fund. In order to obtain the QLICI loans,
BMC-Leake will be required to pay various fees and transaction cost both at closing and
during the 7-year NMTC compliance period.
In fiscal year 2015, Baptist entered into three capital lease agreements with Bank
of America Leasing & Capital, LLC. The first lease is for a MBMC Telemetry system
with total rental payments of $1,747,979, the second lease is for a Leake Telemetry
system with total payments of $228,422, and the third is a LINAC linear accelerator with
total payments of $4,205,289. As a result of the Yazoo City acquisition a select number
of capital leases were assumed but are immaterial in dollar value.
At February 29, 2016, MBHS has lower than the required days cash on hand
under certain financing agreements with Regions Bank and their affiliates as executed in
2012. MBHS has received all necessary waivers and has made modifications to those
certain agreements to be more consistent with the Master Trust Indenture requirements.
XI.

Other:
On October 1, 2009, MBHS executed an agreement with Kings Daughters
Hospital of Yazoo City to acquire a 51% reversionary interest in the net assets of the
Hospital and perform management services. This 51% reversionary interest has been
accounted for under the equity method. On February 1, 2015, MBHS exercised the
option to purchase the remaining 49% interest in the Hospital. MBHS will operate the
Yazoo City Facility under the name Baptist Medical Center-Yazoo, a wholly-owned
subsidiary.
On June 1, 2015, MBHS, through a limited liability company, Baptist Medical
Center-Attala, closed on a transaction to lease and purchase certain assets from Montfort
Jones Memorial Hospital (MJMH) in Kosciusko, MS and the Board of Supervisors of
Attala County, MS. MJMH has both an outstanding principal balance of $6,325,000 on a
Mississippi Development Bank Special Obligation Bonds issued in 2011 and
$13,192,000 in New Market Tax Credit Financing issued in 2012. The terms of the lease
agreements are such that the annual rent will be equal to the annual debt service under the

1225 North State Street, Jackson, Mississippi 39202 (601) 968-5130 www.mbhs.org

Quarterly Disclosure Report/Discussion

Twelve months ended August 31, 2016
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outstanding obligations. At the end of the lease terms, MBHS will have to the right to
purchase the assets at a nominal amount. MBHS intends to operate the facility as Baptist
Medical Center-Attala (BMC-Attala). Under the terms of the lease agreements, BMCAttala has been granted all rights under the New Market Tax Credit Structure. MBHS
has reviewed the accounting treatment of the transaction and related disclosure and as a
result of the acquisition the hospital recorded an Inherent Contribution of approximately
$14.0 million in the FY 2015 financials as a Nonoperating Gain.
On October 1, 2015, MBHS acquired the minor assets of a major local medical
group, Premier Medical Group, and entered into employment agreements with the
physicians. MBHS operates this clinic as part of its Medical Foundation under the name
of Baptist Premier. MBHS employed over 20 physicians as part of this acquisition.

1225 North State Street, Jackson, Mississippi 39202 (601) 968-5130 www.mbhs.org