one blood, inc. - 2012 proforma · 27, 2012, all of the assets and liabilities of the merged...

OneBlood, Inc. Consolidated Financial Report December 31, 2012

Contents

Independent Auditor’s Report 1 – 2

Consolidated Financial Statements

Consolidated balance sheet 3

Consolidated statement of operations and changes in net assets 4

Consolidated statement of cash flows 5

Notes to consolidated financial statements 6 – 20

Independent Auditor’s Report on the Supplementary Information 21

Supplementary Information

Consolidating balance sheet 22

Consolidating statement of operations and changes in net assets 23

1

Independent Auditor’s Report To the Audit Committee OneBlood, Inc. Orlando, Florida Report on the Financial Statements We have audited the accompanying consolidated financial statements of OneBlood, Inc. and its subsidiary and controlled affiliate (collectively referred to as the “Organization”) which comprise the consolidated balance sheet as of December 31, 2012, and the related consolidated statements of operations and changes in net assets, and cash flows for the period from January 27, 2012 (date of inception) through December 31, 2012, 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 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. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit 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 of 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 auditor’s 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.

2

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of OneBlood, Inc. and its subsidiary and controlled affiliate as of December 31, 2012, and the results of its operations and its cash flows for the period from January 27, 2012 (date of inception) through December 31, 2012 in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As described in Note 1 to the consolidated financial statements, OneBlood, Inc. was formed on January 27, 2012 (date of inception) through the merger of four independent not-for-profit corporations.

Orlando, Florida April 25, 2013

3

OneBlood, Inc.

Consolidated Balance SheetDecember 31, 2012

Assets Current Assets:

Cash and cash equivalents 38,405,820 $ Certificates of deposit 1,177,957 Short-term investments 44,489,006 Receivables:

Trade receivables, net 32,899,045 Other 1,176,669

Supplies inventory 6,062,104 Blood and blood components inventory 5,114,189 Prepaid expenses and other current assets 3,853,405

Total current assets 133,178,195

Investments 34,566,814 Property and Equipment, net 114,254,789 Equity Interest in Creative Testing Solutions 11,386,825 Other Assets 1,165,469

294,552,092 $

Liabilities and Net AssetsCurrent Liabilities:

Current portion of long-term debt 182,734 $ Accounts payable 6,635,437 Accrued expenses 20,903,854 Due to related parties 3,662,550 Deferred revenue 596,547

Total current liabilities 31,981,122

Long-Term Liabilities,long-term debt, net of current portion 31,204,995

Total liabilities 63,186,117

Net Assets:Unrestricted 230,130,254 Temporarily restricted 1,204,221 Permanently restricted 31,500

231,365,975 294,552,092 $

See Notes to Consolidated Financial Statements.

4

OneBlood, Inc.

Consolidated Statement of Operations and Changes in Net Assetsfor the period from January 27, 2012 (Date of Inception) through December 31, 2012

Operating revenues:Red blood cells 163,132,213 $ Platelets 65,113,968 Plasma revenues 28,479,485 Compatibility testing 27,720,022 Other products and services 6,938,555

Total operating revenues 291,384,243

Operating expenses:Salaries and benefit costs 142,133,260 Medical supplies and testing services 97,268,723 Other operating expenses 46,335,987 Depreciation and amortization 13,032,229

Total operating expenses 298,770,199

Loss on disposal of property and equipment, net (124,171) Operating loss (7,510,127)

Nonoperating revenue and expense:Investment income, net 4,946,612 Equity earnings from investment 2,612,260 Lease and service revenue 2,667,545 Interest expense (312,633) Other, net 396,319

Total nonoperating revenue and expense 10,310,103

Increase in unrestricted net assets 2,799,976

Temporarily restricted revenues and expenses:Unrealized gain on investments 79,170 Realized gain on sale of investments 11,588 Interest and dividend income 29,401 Change in value of split interest agreements 20,526 Grant revenues 13,309 Net assets released from restrictions (39,595)

Increase in temporarily restricted net assets 114,399

Change in net assets 2,914,375

Net assets:January 27, 2012 (date of inception) 228,451,600 End of year 231,365,975 $


5

OneBlood, Inc.

Consolidated Statement of Cash Flowsfor the period from January 27, 2012 (Date of Inception) through December 31, 2012

Cash Flows From Operating Activities:Change in net assets 2,914,375 $ Adjustments to reconcile change in net assets to net cash provided by

operating activities:Depreciation and amortization 13,032,229 Loss on disposal of equipment 124,171 Provision for doubtful accounts 106,941 Net realized/unrealized gain on investments (3,425,099) Equity earnings from investment in Creative Testing Solutions (2,612,260) Changes in assets and liabilities:

Trade receivables 2,765,001 Other receivables 58,062 Due from related parties 1,179,011 Supplies inventory (792,159) Blood and blood components inventory (867,215) Prepaid expenses and other current assets (1,168,169) Other assets (262,438) Accounts payable (7,329,662) Accrued expenses 756,862 Deferred revenue 30,777 Due to related parties 3,651,086

Net cash provided by operating activities 8,161,513

Cash Flows From Investing Activities:Purchases of property and equipment (18,116,726) Proceeds from sale of property and equipment 1,143,294 Purchases of investments (42,155,821) Proceeds from the sale and maturity of investments 30,458,337 Distribution from equity interest in Creative Testing Solutions 2,000,000 Purchase of certificates of deposit (3,235)

Net cash used in investing activities (26,674,151)

Cash Flows Used In Financing Activities,principal payments on long-term debt (1,724,802)

Net decrease in cash and cash equivalents (20,237,440)

Cash and cash equivalents:January 27, 2012 (date of inception) 58,643,260 Ending 38,405,820

Supplemental Disclosures of Cash flow Information,cash paid for interest 316,212 $


OneBlood, Inc. Notes to Consolidated Financial Statements

6

Note 1. Nature of Business and Significant Accounting Policies

Nature of business: OneBlood, Inc. (“OneBlood”) is a Florida not-for-profit corporation that provides for the recruitment, collection, processing and distribution of blood and blood products to meet the needs of the community. The Organization serves hospitals and health facilities throughout Florida, Georgia and Alabama. OneBlood was formed on January 27, 2012 when the following four Florida not-for-profit corporations merged together: Community Blood Centers of Florida, Inc. (“CBC”); Florida’s Blood Centers, Inc. (“FBC”); Florida Blood Services, Inc. (“FBS”); and Independent Blood and Tissue Services of Florida, Inc. (“IBTS”). OneBlood was formed to be able to more efficiently and effectively provide safe, available and affordable blood to its hospital partners and their patients. Upon the formation of OneBlood on January 27, 2012, all of the assets and liabilities of the merged entities were recorded at their carryover values. The assets and liabilities contributed to the newly formed entity as of January 27, 2012 were as follows:

Assets Liabilities Net AssetsCommunity Blood Centers of Florida, Inc. 66,883,304 $ 9,244,490 $ 57,638,814 $ Florida's Blood Centers, Inc. 48,434,893 10,264,189 38,170,704 Florida Blood Services, Inc. 121,435,024 29,057,679 92,377,345 Independent Blood and Tissue Services of Florida, Inc. 59,500,235 19,235,498 40,264,737

296,253,456 $ 67,801,856 $ 228,451,600 $

Community Blood Centers Laboratory Services, Inc. (“LSI”) was established as a Florida not-for-profit organization in August 2009 to operate a laboratory to support CBC. OneBlood is the sole member of LSI. At the date of formation of OneBlood, the assets and liabilities contributed by CBC included the assets and liabilities of LSI. OneBlood Foundation, Inc. (“OBF”), formerly Florida Blood Services Foundation, Inc., was established as a Florida not-for-profit organization in 1980 to support FBS. OBF is a controlled affiliate of OneBlood which maintains a majority voting interest in OBF. At the date of formation of OneBlood, the assets and liabilities contributed by FBS included the assets and liabilities of OBF. OneBlood, LSI and OBF are collectively referred to as the “Organization”. Principles of consolidation: The consolidated financial statements include the accounts of OneBlood and its subsidiary, Community Blood Centers Laboratory Services, Inc. (LSI) and OneBlood Foundation, Inc. (OBF), a controlled affiliate of OneBlood. All of the significant intercompany accounts and transactions have been eliminated in consolidation. A summary of the Organization’s significant accounting policies follows:

Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.


7

Note 1. Nature of Business and Significant Accounting Policies (Continued)

Revenue recognition: The Organization recognizes revenue from blood and blood products when shipments to the customers occur and the risk of loss is transferred (i.e. when there is persuasive evidence that delivery has occurred, the price is fixed or determinable, and collectability is reasonably assured. Revenues from processing fees are recognized in the period in which services are rendered. Cash and cash equivalents: For purposes of the statement of cash flows, all highly liquid investments with an original maturity of three months or less, and which are not designated as investments or certificates of deposit, are considered to be cash equivalents and are recorded at cost which approximates fair value. At various times, cash balances held at financial institutions are in excess of federally-insured limits. The Organization believes no significant concentration of credit risk exists with respect to these cash balances. Trade receivables: Trade receivables are recorded at net realizable value. Credit is extended based on an evaluation of the customer's financial condition, and generally, collateral is not required. The Organization maintains an allowance for potential credit losses based upon expected collectibility of all accounts receivable. The Organization records an allowance for returned blood products at the time of sale based upon historical trends. Management estimates its allowance for doubtful accounts and for returned blood products to be approximately $2,400,000 as of December 31, 2012. Credit losses and returns of blood products are provided for in the financial statements and have historically been within management's expectations. Investments and investments income: Investments are reported at fair value (see Note 2). Realized gains and losses are recorded at date of disposition based on the difference between the net proceeds and the cost of the investments sold, using the specific identification method. Unrealized gains and losses are reported for the changes in fair value between reporting periods. Interest and dividend income is recognized when earned. Investment income, reported in the accompanying consolidated statement of operations includes realized and unrealized gains and losses as well as interest and dividend income. Inventories: Inventories are stated at the lower of cost (first-in, first-out method) or market. The cost of blood and blood components inventory is determined using a current year average combined collection, processing and distribution cost per unit produced. The cost of supplies inventory is determined by the first-in, first-out method. Property and equipment: Property and equipment are reported on the basis of historical cost at the date of acquisition. Gifts of long-lived assets such as land, buildings, or equipment are reported as nonoperating revenue in the year donated, unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how those long-lived assets must be maintained, expirations of donor restrictions are reported when the donated or acquired long-lived assets are placed in service. Expenditures that materially increase values, change capacities, or extend useful lives are capitalized.


8


Depreciation is computed by the straight-line method over the following estimated useful lives:

EstimatedAssets Useful Life (Years)Building and improvements 30 – 40Furniture and equipment 5 – 10Leasehold improvements 3 – 25Computer equipment and software 3 – 6Automobiles and trucks 2 – 10

Leasehold improvements are amortized using the straight-line method over the lesser of the period of the lease term or the estimated useful life of the assets. Such amortization is included in depreciation and amortization expense in the accompanying statement of operations and changes in net assets. Deferred bond issue costs: Deferred bond issue costs are amortized over the term of the long-term debt using the straight-line method, which approximates the effective interest method. At December 31, 2012, approximately $326,000 of unamortized deferred bond issuance costs are included in other assets. Amortization of bond issue costs was approximately $13,800 for the period from January 27, 2012 (date of inception) through December 31, 2012. Classification of net assets: Contributions received are recorded as an increase in unrestricted, temporarily restricted or permanently restricted support, depending on the existence or nature of any donor restrictions. Accordingly, net assets of the Organization and changes therein are classified and reported as follows:

Unrestricted: Resources over which the Board of Directors (the "Board") of the Organization has discretionary control. Designated amounts represent those revenues which the Board has set aside for a particular purpose. Temporarily Restricted: Resources subject to donor imposed restrictions that will be satisfied by actions of the Organization or passage of time. Temporarily restricted net assets expended in the year of receipt are recognized as unrestricted contributions. Permanently Restricted: Resources subject to donor-imposed stipulations that they be maintained permanently by the Organization. Generally, the donors of these assets permit the Organization to use all or part of the income earned on related investments for general or specific purposes.

Contributed services: A substantial number of unpaid volunteers have made significant contributions of their time, principally in collection programs. The value of this contributed time is not reflected in these financial statements since it is not susceptible to objective measurement or valuation and the equivalent of an employer/employee relationship does not exist.


9


Impairment of long-lived assets: Long-lived assets, such as property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the use and eventual disposition of the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount of fair value less costs to sell, and would no longer be depreciated. Income taxes: The Organization is exempt from income taxes under section 501(c)(3) of the Internal Revenue Code and from state income taxes under a similar provision of the Florida statutes. Accordingly, no provision for federal and state income taxes has been recorded in the accompanying consolidated financial statements. The Organization follows accounting standards relating to accounting for uncertainty in income taxes. The Organization assessed whether there were any uncertain tax positions which may give rise to income tax liabilities and determined that there were no such matters requiring recognition in the accompanying financial statements. The Organization files income tax returns in the U.S. federal jurisdiction. Generally, the Organization, CBC, FBC, FBS, and IBTS are no longer subject to U.S. federal income tax examinations by tax authorities for years ended December 31, 2008 and prior. Advertising: The Organization expenses the costs of advertising as incurred. Advertising costs for the period from January 27, 2012 (date of inception) to December 31, 2012 were approximately $1,275,000. Shipping and handling: The Organization includes shipping and handling costs in costs of blood products and services. Total shipping and handling costs included in costs of blood products and services was approximately $2,800,000 for the period from January 27, 2012 (date of inception) through December 31, 2012. Subsequent events: Management has evaluated subsequent events through April 25, 2013, the date on which the financial statements were available to be and were issued.


10

Note 2. Investments and Fair Value Measurements

Investments at December 31, 2012 consist of:

Equity securities:Common stocks:

S&P 500 stocks 20,364,005 $ OTC market stocks 14,632,906 S&P Midcap 400 stocks 613,944

35,610,855

Mutual funds:International funds 1,884,863 Global funds 1,751,428 MidCap funds 1,679,943 SmallCap funds 1,558,963 Income funds 861,631 Large blend funds 835,668 Bond funds 452,518 Growth funds 321,775 Real estate funds 118,758 LargeCap funds 114,308 Commodity funds 56,671

9,636,526

Money market funds 2,008,999

Debt securities:U.S. government securities 16,508,794 Corporate debt securities 14,671,708 Municipal debt securities 412,334 Foreign debt securities 206,604

31,799,440 79,055,820 $

Unrestricted investment income was comprised of the following components for the period from January 27, 2012 (date of inception) through December 31, 2012: Net realized and unrealized gains from investments 3,425,099 $ Interest and dividend income 1,521,513

4,946,612 $


11

Note 2. Investments and Fair Value Measurements (Continued)

The Organization invests in various investment securities in accordance with its investment policy. These investment securities are exposed to various risks such as interest rate, market and credit risk. Due to the level of risk associated with certain investment securities and the uncertainty related to changes in their values, it is reasonable to expect that changes in the values of investment securities will occur in the near term and that such changes could materially affect the investment balance. The Organization follows accounting standards relating to fair value measurements which defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States of America, and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting standards relating to fair value measurements establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Investments recorded at fair value in the accompanying consolidated balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Level inputs, as defined by this guidance, are as follows: Level Input Input Definition

Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that theentity has the ability to access as of the measurement date.

Level 2 Significant other observable inputs other than level 1 prices such as quoted prices forsimilar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Fair value of actively traded debt and equity securities are based on quoted market prices. Fair value of inactively traded debt securities are based on quoted market prices of identical or similar securities or based on observable inputs like interest rates using either a market or income valuation approach and are generally classified as Level II.


12


The following table presents the fair value hierarchy for the balances of the financial and nonfinancial assets and liabilities of the Organization measured at fair value on a recurring and nonrecurring basis as of December 31, 2012:

Level 1 Level 2 Level 3 TotalEquity securities:

Common stocks:S&P 500 stocks 20,364,005 $ -$ -$ 20,364,005 $ OTC market stocks 14,632,906 - - 14,632,906 S&P Midcap 400 stocks 613,944 - - 613,944

35,610,855 - - 35,610,855

Mutual funds:International funds 1,884,863 - - 1,884,863 Global funds 1,751,428 - - 1,751,428 MidCap funds 1,679,943 - - 1,679,943 SmallCap funds 1,558,963 - - 1,558,963 Income funds 861,631 - - 861,631 Large Blend funds 835,668 - - 835,668 Bond funds 452,518 - - 452,518 Growth funds 321,775 - - 321,775 Real Estate funds 118,758 - - 118,758 LargeCap funds 114,308 - - 114,308 Commodity funds 56,671 - - 56,671

9,636,526 - - 9,636,526

Money market funds 2,008,999 - - 2,008,999

Debt securities:U.S. government securities - 16,508,794 - 16,508,794 Corporation debt securities - 14,671,708 - 14,671,708 Municipal debt securities - 412,334 - 412,334 Foreign debt securities - 206,604 - 206,604

- 31,799,440 - 31,799,440 47,256,380 $ 31,799,440 $ -$ 79,055,820 $


13


Investment in Creative Testing Solutions: The Organization owns a 25% joint venture interest in Creative Testing Solutions (“CTS”). The joint venture was formed on January 1, 2010 with Blood Systems, Inc. (“BSI”), who owns a 75% interest in the joint venture. CTS performs donor testing services for the Organization and conducts testing in existing laboratories of BSI (located in Tempe, Arizona and Bedford, Texas) and the Organization’s location in St. Petersburg, Florida. Employees performing work in these laboratories have remained employees of BSI and the Organization and were working as leased employees to CTS through December 31, 2012. Effective January 1, 2013, the employees are no longer leased employees rather they are employed by CTS. BSI and the Organization bill CTS monthly for the costs of the leased employees’ salaries and related benefits, along with costs of leased equipment, facility rent, overhead expenses, and other services/reimbursable expenses provided to CTS. CTS bills BSI and the Organization, along with all other customers, monthly for the cost of testing services provided. Profits and losses from the operations of CTS are split between BSI and the Organization on the 75%/25% basis, respectively. The equity interest in CTS is accounted for using the equity method whereby the Organization’s proportionate share of the net income or loss of CTS is recognized as income or loss in the Organization’s statement of operations and added or subtracted from the investment account. During the period from January 27, 2012 (date of inception) to December 31, 2012, the Organization’s share of CTS income was approximately $2,612,000 and is included in equity earnings from investment in the accompanying consolidated statement of operations and changes in net assets. Additional capital contributions paid to CTS or distributions received from CTS are added to or subtracted from the investment account. Fair value of financial instruments: The fair value of certain of the Organization's financial instruments that are not measured at fair value, including cash and cash equivalents, certificates of deposit, accounts receivable, and accounts payable approximate the carrying amount because of the short-term nature of these instruments. The fair value of the Organization's debt is based on quoted market prices, if available, or estimated using quoted market prices for similar securities. The estimated fair value of Organization's debt, as of December 31, 2012 approximated carrying value of the debt due to its proximity to current market rates for similar debt issues.


14

Note 3. Property and Equipment

Property and equipment consists of the following as of December 31, 2012: Land 20,520,982 $ Buildings and improvements 95,789,760 Furniture and equipment 40,087,473 Automobiles and trucks 34,747,916 Computer equipment and software 23,811,490 Leasehold improvements 5,130,304

220,087,925 Less accumulated depreciation and amortization 105,833,136

114,254,789 $

Depreciation and amortization expense for period from January 27 (date of inception) through December 31, 2012 was approximately $13,018,000.

Note 4. Accrued Expenses

Accrued expenses consists of the following as of December 31, 2012: Vacation 8,036,754 $ Retirement 6,331,465 Payroll and related benefits 4,335,713 Health insurance 1,351,266 Other 848,656

20,903,854 $


15

Note 5. Long-Term Debt

Long-term debt as of December 31, 2012 consists of the following:

Orange County Industrial Development Authority, Florida Industrial Development Revenue Bonds, Series 2002 12,935,000 $

City of St. Petersburg, Florida Health Facilities Authority Variable/Fixed Revenue Bond, Series 2008 10,500,000

Palm Beach County, FloridaIndustrial Development Revenue Bonds, Series 2002 5,220,000

Note payable to a financial institution; payable in monthly installments of $25,860including interest at 4.75% and final balloon payment of principal of $2,070,369and accrued interest on July 21, 2016; secured by furniture, fixtures, and equipment and assignment of agreements affecting certain real estate on Nine Mile Road in Pensacola; certain financial ratios are required to be maintained. 2,732,729

31,387,729

Less current portion of long-term debt 182,734 31,204,995 $

On January 27, 2012 (date of inception), the Organization assumed liability for all long-term debt instruments entered into by the prior merging entities which are identified above. In April 2013, the Organization issued Health Care Facilities Revenue Bonds (OneBlood, Inc. Project) – Series 2013 (the “Bonds”) in the principal amount of $45,000,000 for the purpose of financing or refinancing the cost of the acquisition, construction, equipping, renovation or expansion of all or a portion of certain capital projects and equipment owned or to be owned and operated by OneBlood. The Bonds were issued through the City of St. Petersburg Health Facilities Authority, and a portion of the proceeds were used to refinance the Orange County Industrial Development Authority, City of St. Petersburg, and Palm Beach County bonds noted in the table above. The Bonds bear interest at a variable rate per annum equal to 67% of One-Month LIBOR plus an applicable margin equal to 0.72%. The Bonds which mature in April 2043 require annual principal payments beginning in April 2014 and quarterly interest payments commencing in July 2013. The Financing Agreement contains certain financial covenants including the maintenance of minimum unrestricted days cash on hand, an annual required debt service coverage ratio, and a maximum debt to capitalization ratio limit. The current maturities of long-term debt in the accompanying balance sheet reflect the aggregate current maturities on the Series 2013 Bonds and the notes payable to a financial institution.


16

Note 5. Long-Term Debt (Continued)

Long-term debt maturities, which include the Series 2013 bonds and the note payable, in each of the following five years and in the aggregate thereafter are as follows: Year ending December 31:

2013 182,734 $ 2014 1,124,721 2015 1,163,171 2016 3,145,103 2017 1,022,000 Thereafter 41,095,000

47,732,729 $

Note 6. Leases

The Organization leases land, equipment and office space in connection with its operations. These leases are accounted for as operating leases. Total lease expense incurred in connection with these lease agreements was approximately $4,557,000 for the period from January 27, 2012 (date of inception) through December 31, 2012. Future minimum lease payments under noncancelable operating leases are approximately as follows: Year ending December 31:

2013 2,757,000 $ 2014 1,811,000 2015 1,259,000 2016 773,000 2017 651,000 Thereafter 1,587,000

8,838,000 $


17

Note 7. Retirement Plans

The Organization maintains multiple retirement plans that carried forward from the entities that merged on January 27, 2012. A summary of each plan is as follows: Defined Contribution Retirement Plan – 401(K) The Organization maintains a defined contribution plan that was carried forward from FBC and IBTS. The plan is a salary savings plan established to encourage employees to develop a regular and systematic savings program through payroll deductions. The plan was effective as of January 1, 1985. Federal income taxes on amounts contributed by the employees are deferred in accordance with Section 401(k) of the Internal Revenue Code. Employees of the Organization are eligible to participate from the first day of employment, with no minimum age or service requirement. Contributions by the Organization are made at the discretion of the Organization's board of directors ("discretionary contributions"). In addition to the discretionary contributions, the Organization matches employee elective contributions ("matching contributions") dollar for dollar up to a maximum of 6.0 percent of eligible compensation for 2012. Total contribution expense recognized by the Organization under the plan was approximately $1,871,000 from January 27, 2012 (date of inception) to December 31, 2012. Discretionary contributions are made in February following the Plan year. Matching contributions are funded at the same time that employee contributions are made. An employee is fully vested immediately in all contributions made by the employee. The plan provides for vesting of Organization contributions at the rate of 100% after two years of service. Thus, the Organization's contributions are fully vested after two years of service. Normal withdrawals may begin at age 59 ½, with provisions for "hardship" withdrawals prior to that age. Employees are eligible to receive the then current value of their vested accounts upon termination. Defined Contribution Retirement Plan – 403(B) The Organization maintains a defined contribution 403(b) plan that was carried forward from CBC. Each employee determines their individual contribution to the plan and the Organization matches up to 3% of eligible salary and contributes an additional 5% of salary after one year of service. The Organization contributed approximately $2,005,000 to the plan during the period from January 27, 2012 (date of inception) to December 31, 2012. Key Employee Secured Benefit Plan The Organization maintains a Key Employee Secured Benefit Plan (KESBP) that was carried forward from CBC. The KESBP is funded solely by participant and sponsor contributions, deposited with an insurance carrier, who shall issue a Policy on the Plan Participant’s life. The Organization’s contributions are equal to 10% of the total compensation earned by the plan participant during the year. The participants are immediately vested in participant contributions and are 100% vested in sponsor contributions after 5 continuous years of full-time employment with the Organization. The Organization contributed approximately $220,000 to the KESBP during the period from January 27, 2012 (date of inception) to December 31, 2012.


18

Note 7. Retirement Plans (Continued)

Defined Contribution Retirement Plan – 401(A) The Organization maintains a defined contribution retirement plan that carried forward from FBS. The plan covers eligible employees who are 21 years of age and have attained 1,000 hours of service per year and are employed as of the plan’s year end. The Organization’s board of directors declared a discretionary contribution of 7% and 10% of eligible compensation for all employees and senior management in 2012. The Organization contributed approximately $2,835,000 to the plan during the period from January 27, 2012 (date of inception) to December 31, 2012. Nonqualified Retirement Plan – 457(F) The Organization also has a nonqualified retirement plan for certain members of management that carried forward from FBS. The Organization makes annual payments, which include fixed and discretionary amounts to fund this plan. The Organization contributed approximately $98,000 to the plan during the period from January 27, 2012 (date of inception) to December 31, 2012. Defined Contribution Pension Plan – 403(B) The Organization maintains a defined contribution pension retirement plan that carried forward from FBS. The plan covers employees from the first day of employment, with no minimum age or service requirements. During fiscal year 2013, the Organization will combine the 401(K) and 401(A) Defined Contribution Retirement Plans into one 401(A) Defined Contribution Retirement Plan. In addition, the Organization will combine both 403(B) Defined Contribution Retirement Plans into one 403(B) Defined Contribution Retirement Plan.

Note 8. Related Party Transactions

The Organization provides funding for scholarships for the benefit of public and private high school students pursuing higher education through a related not-for-profit organization. During the period from January 27, 2012 (date of inception) through December 31, 2012, OneBlood provided funding to the related organization of approximately $712,000. As of December 31, 2012, OneBlood has included approximately $1,038,000 in due to related parties in the accompanying consolidated balance sheet for funding to be provided during fiscal year 2013. In addition, the following is a summary of the transactions between CTS and the Organization as of December 31, 2012 and for the period from January 27, 2012 (date of inception) through December 31, 2012: Due to CTS 2,624,562 $ Distributions received from CTS 2,000,000 Testing services provided by CTS 36,673,818 Lease and services revenue from CTS 2,667,545 Salaries and related expenses reimbursed by CTS 7,713,004

In 2010, the Organization entered into leasing agreements with CTS, whereby the Organization leased the use of a portion of its building and certain testing equipment located in St. Petersburg, Florida to CTS.


19

Note 8. Related Party Transactions (Continued)

The leased equipment consists of equipment used by CTS to perform the necessary laboratory testing procedures. The lease agreement will continue for a period of 12 months and will renew automatically for an additional 12 months, unless cancelled by CTS with written notice at least 60 days before the end of the term. The equipment to CTS has a cost basis of approximately $6,043,000 and a net book value of approximately $1,492,000 as of December 31, 2012. The facility lease commenced on January 1, 2010 and expires 10 years following the aforementioned commencement date. The Organization leases approximately 29,000 square feet of building space to CTS, with monthly payments of approximately $49,000. In addition, CTS is required to pay operating costs of approximately $425,000 per year for the first year of the leased term, subject to adjustment thereafter. The basic annual rent shall increase beginning January 1 of each year by an amount equal to the lesser of: (a) three percent (3%) or (b) the CPI Adjustment Rate. The portion of the facility leased has a cost basis of approximately $4,462,000 and a net book value of approximately $2,637,000 as of December 31, 2012. Future minimum rental payments receivable under noncancelable operating leases with initial or remaining lease terms in excess of one year are approximately as follows at December 31, 2012: Year ending December 31:

2013 1,062,000 $ 2014 1,081,000 2015 1,100,000 2016 1,121,000 2017 1,142,000 Thereafter 2,348,000

7,854,000 $

Note 9. Allocation of Functional Expenses

The cost of providing the Organization’s various programs and activities are summarized below on a functional basis. Accordingly, certain costs have been allocated among the programs benefited and supporting services.

SupportingServices

Program General and

Services Administration TotalSalaries and benefit costs 127,919,934 $ 14,213,326 $ 142,133,260 $ Medical supplies and testing services 97,268,723 - 97,268,723 Other operating expenses 34,983,670 11,352,317 46,335,987 Depreciation and amortization 11,729,006 1,303,223 13,032,229

271,901,333 $ 26,868,866 $ 298,770,199 $


20

Note 10. Commitments and Contingencies

Self-insurance: The Organization provides medical and other healthcare benefits to certain employees and covered dependents through a self-insured health care plan. Reinsurance, covering costs above $75,000 per individual per plan year is maintained through a commercial excess coverage policy. Estimated reserves for claims incurred but not yet reported totaled approximately $1,351,000 at December 31, 2012, and are included in accrued expenses in the accompanying consolidated balance sheet. Professional liability: The Organization is, from time to time, subject to claims and suits for damages, including damages for personal injuries to patients and others, which are covered as to risk and amount under various insurance policies, subject to deductibles. The Organization maintains occurrence-based professional liability insurance of $10,000,000 to cover the costs related to these claims. In the opinion of management, the ultimate resolution of pending claims will not have a material effect on the financial position, activities, or liquidity of the Organization. Workers’ Compensation: The Organization is, from time to time, subject to workers’ compensation claims from employees. The Organization maintains occurrence-based workers’ compensation insurance coverage to cover the costs related to these claims. In the opinion of management, the ultimate resolution of pending claims will not have a material effect on the financial position, activities, or liquidity of the Organization. Regulations: State and federal laws set forth anti-kickback and self-referral prohibitions and otherwise regulate financial relationships between blood banks and hospitals, physicians and other persons who refer business to them. While the Organization believes its present operations comply with applicable regulations, there can be no assurance that future legislation or rule making, or the interpretation of existing laws and regulations will not prohibit or adversely impact the delivery by the Organization of its services or products.

21

Independent Auditor’s Report on the Supplementary Information

To the Audit Committee OneBlood, Inc. Orlando, Florida We have audited the consolidated financial statements of OneBlood, Inc. and its subsidiary and controlled affiliate as of December 31, 2012 and for the period from January 27, 2012 (date of inception) through December 31, 2012, and have issued our report thereon, dated April 24, 2013, which contained an unmodified opinion on those consolidated financial statements. Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying supplementary information is presented for 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 audits 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 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 financial statements as a whole.

Orlando, Florida April 25, 2013

22

OneBlood, Inc.

Consolidating Balance SheetDecember 31, 2012

CommunityOneBlood Blood Center

Foundation, Laboratory ConsolidatedOneBlood, Inc. Inc. Services, Inc. Eliminations Total

Assets Current Assets:

Cash and cash equivalents 37,938,167 $ 467,653 $ -$ -$ 38,405,820 $ Certificates of deposit 1,177,957 - - - 1,177,957 Short-term investments 43,990,550 498,456 - - 44,489,006 Receivables:

Trade receivable, net 32,899,045 - - - 32,899,045 Other 1,176,669 - - - 1,176,669 Due from related parties 2,109,226 - - (2,109,226) -

Supplies inventory 6,062,104 - - - 6,062,104 Blood and blood components inventory 5,114,189 - - - 5,114,189 Prepaid expenses and other current assets 3,853,405 - - - 3,853,405

Total current assets 134,321,312 966,109 - (2,109,226) 133,178,195

Investments 35,638,977 869,869 - (1,942,032) 34,566,814 Property and Equipment, net 114,254,789 - - - 114,254,789 Equity Interest in Creative Testing Solutions 11,386,825 - - - 11,386,825 Other Assets 854,629 310,840 - - 1,165,469

296,456,532 $ 2,146,818 $ -$ (4,051,258) $ 294,552,092 $

Liabilities and Net AssetsCurrent Liabilities:

Current portion of long-term debt 182,734 $ -$ -$ -$ 182,734 $ Accounts payable 6,430,651 204,786 - - 6,635,437 Accrued expenses 20,903,854 - - - 20,903,854 Due to related parties 3,662,550 - 2,109,226 (2,109,226) 3,662,550 Deferred revenue 596,547 - - - 596,547

Total current liabilities 31,776,336 204,786 2,109,226 (2,109,226) 31,981,122

Long-Term Liabilities,long-term debt, net of current portion 31,204,995 - - - 31,204,995

Total liabilities 62,981,331 204,786 2,109,226 (2,109,226) 63,186,117

Net Assets:Unrestricted 232,239,480 706,311 (2,109,226) (706,311) 230,130,254 Temporarily restricted 1,204,221 1,204,221 - (1,204,221) 1,204,221 Permanently restricted 31,500 31,500 - (31,500) 31,500

233,475,201 1,942,032 (2,109,226) (1,942,032) 231,365,975 296,456,532 $ 2,146,818 $ -$ (4,051,258) $ 294,552,092 $

See independent auditor's report on the supplementary information.

23

OneBlood, Inc.

Consolidating Statement of Operations and Changes in Net Assetsfor the period from January 27, 2012 (Date of Inception) through December 31, 2012

CommunityOneBlood Blood Center

Foundation, Laboratory ConsolidatedOneBlood, Inc. Inc. Services, Inc. Eliminations Total

Operating revenues:Red blood cells 163,132,213 $ -$ -$ -$ 163,132,213 $ Platelets 65,113,968 - - - 65,113,968 Plasma revenues 28,479,485 - - - 28,479,485 Compatibility testing 27,720,022 - 5,608,999 (5,608,999) 27,720,022 Other products and services 6,544,776 458,881 - (65,102) 6,938,555

Total operating revenues 290,990,464 458,881 5,608,999 (5,674,101) 291,384,243

Operating expenses:Salaries and benefit costs 141,678,283 454,977 - - 142,133,260 Medical supplies and testing services 95,647,598 - 7,230,124 (5,608,999) 97,268,723 Other operating expenses 46,248,547 432,632 - (345,192) 46,335,987 Depreciation and amortization 13,032,229 - - - 13,032,229

Total operating expenses 296,606,657 887,609 7,230,124 (5,954,191) 298,770,199

Loss on disposition of property and equipment, net (124,171) - - - (124,171) Operating loss (5,740,364) (428,728) (1,621,125) 280,090 (7,510,127)

Nonoperating revenue and expense:Investment income, net 4,632,283 125,025 - 189,304 4,946,612 Equity earnings from investment 2,612,260 - - - 2,612,260 Lease and service revenue 2,667,545 - - - 2,667,545 Interest expense (312,633) - - - (312,633) Other, net 676,409 - - (280,090) 396,319

Total nonoperating revenue and expense 10,275,864 125,025 - (90,786) 10,310,103

Increase (decrease) in unrestricted net assets 4,535,500 (303,703) (1,621,125) 189,304 2,799,976

Temporarily restricted revenues and expenses:Unrealized gain on investments - 79,170 - - 79,170 Realized gain on sale of investments - 11,588 - - 11,588 Interest and dividend income - 29,401 - - 29,401 Change in value of split interest agreements - 20,526 - - 20,526 Grant revenues - 13,309 - - 13,309 Net assets released from restrictions - (39,595) - - (39,595)

Increase in temporarily restricted net assets - 114,399 - - 114,399

Change in net assets 4,535,500 (189,304) (1,621,125) 189,304 2,914,375

Net assets:January 27, 2012 (date of inception) 228,939,701 2,131,336 (488,101) (2,131,336) 228,451,600 End of year 233,475,201 $ 1,942,032 $ (2,109,226) $ (1,942,032) $ 231,365,975 $

See independent auditor's report on the supplementary information.

one blood, inc. - 2012 proforma · 27, 2012, all of the assets and liabilities of the merged...

Documents