OVERLAKE HOSPITAL ASSOCIATION

OVERLAKE HOSPITAL ASSOCIATION

Consolidated Financial Statements

and Consolidating Information

June 30, 2018 and 2017

(With Independent Auditors¡¯ Report Thereon)

KPMG LLP

Suite 2900

1918 Eighth Avenue

Seattle, WA 98101

Independent Auditors¡¯ Report

The Board of Directors

Overlake Hospital Association:

We have audited the accompanying consolidated financial statements of Overlake Hospital Association and

subsidiaries, which comprise the consolidated balance sheets as of June 30, 2018 and 2017, and the related

consolidated statements of operations and changes in net assets, and cash flows for the years then ended, and

the related notes to the consolidated financial statements.

Management¡¯s Responsibility for the Financial Statements

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

in accordance with U.S. generally accepted accounting principles; 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 the entity¡¯s

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 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 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 Overlake Hospital Association and subsidiaries as of June 30, 2018 and 2017, and the

results of their operations and their cash flows for the years then ended, in accordance with U.S. generally

accepted accounting principles.

KPMG LLP is a Delaware limited liability partnership and the U.S. member

firm of the KPMG network of independent member firms affiliated with

KPMG International Cooperative (¡°KPMG International¡±), a Swiss entity.

Other Matters

Our audit was performed for the purpose of forming an opinion on the consolidated financial statements as a

whole. The consolidating information in Schedules 1 and 2 is presented for the purposes of additional analysis

and is not a required part of the consolidated financial statements. Such information is the responsibility of

management and was derived from and relates directly to the underlying accounting and other records used to

prepare the consolidated financial statements. The information has been subjected to the auditing procedures

applied in the audit of the consolidated financial statements and certain additional procedures, including

comparing and reconciling such information directly to the underlying accounting and other records used to

prepare the consolidated financial statements or to the consolidated financial statements themselves, and other

additional procedures in accordance with auditing standards generally accepted in the United States of

America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated

financial statements as a whole.

October 15, 2018

2

OVERLAKE HOSPITAL ASSOCIATION

Consolidated Balance Sheets

June 30, 2018 and 2017

(In thousands)

Assets

2018

Current assets:

Cash and cash equivalents

Receivables, net of allowance for uncollectible accounts of $9,465

in 2018 and $9,009 in 2017

Current portion of pledges receivable

Current portion of assets whose use is limited

Supplies inventory

Prepaid expenses

Other current assets

$

Total current assets

Assets whose use is limited:

Restricted by donors

Management designated

Funds held under bond indenture and collateral agreements

Less current portion

Total assets whose use is limited, net of current portion

Investments

Long-term portion of pledges receivable, net

Other long-term receivables, net

Land, buildings, and equipment, net

Other assets:

Investments in joint ventures

Prepaid pension

Other assets

Total other assets

Total assets

$

3

2017

29,730

18,404

60,787

2,158

6,946

9,744

10,722

5,519

54,983

706

8,488

9,029

8,154

5,798

125,606

105,562

10,657

4,041

118,939

(6,946)

16,023

3,536

8,488

(8,488)

126,691

19,559

466,515

4,743

3,043

253,178

408,061

3,252

3,398

240,068

2,740

¡ª

1,917

3,091

1,946

2,175

4,657

7,212

984,433

787,112

(Continued)

OVERLAKE HOSPITAL ASSOCIATION

Consolidated Balance Sheets

June 30, 2018 and 2017

(In thousands)

Liabilities and Net Assets

2018

Current liabilities:

Current portion of long-term debt

Accounts payable

Accrued liabilities

Deferred revenues

Accrued interest payable

Payable to third-party agencies

$

Total current liabilities

Long-term debt, net of current portion

Pension liability

Other long-term liabilities

Total liabilities

Net assets:

Unrestricted net assets

Temporarily restricted net assets

Permanently restricted net assets

Total net assets

Total liabilities and net assets

$

See accompanying notes to consolidated financial statements.

4

2017

5,245

21,576

56,168

¡ª

5,699

7,229

8,640

16,928

49,192

14,029

3,729

5,600

95,917

98,118

307,653

5,438

11,454

155,816

¡ª

10,842

420,462

264,776

546,792

11,334

5,845

502,732

13,874

5,730

563,971

522,336

984,433

787,112

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