The Kansas Corporation Commission today issued an order rejecting the sale of Westar Energy to Great Plains Energy, citing a failure to meet its merger standards.
"The Joint Application is denied," The 51-page order says. "The Commission finds the proposed transaction
is not in the public interest and rejects Great Plains' application to acquire Westar.
Both Parties have 15 days from the date of electronic service of this Order to petition
for reconsideration."
The order also said, "Great Plains Energy does not dispute that they will incur a large amount of debt to acquire
Westar. Nor does it dispute it has no written plan to de-leverage. The Joint Application is
deficient. It does not include plans showing which generation plants will be retired early. There
are no examples of reduced spending through procurement savings and no evidence that
customers will see any savings. The Joint Application simply does not give the Commission any
assurances that it will be able to service the newly-incurred debt without raising rates or reducing
services. Therefore, the Commission has no choice but to find the proposed transaction is not in
the public interest. Accordingly, the Commission denies GPE's application to acquire Westar."
The order also says, "While the Joint Applicants argue "the repetition of the same arguments by multiple parties does not make them deserving of more weight, true, reasonable, or supportive of the public interest," the Commission cannot ignore the substantial, competent evidence in opposition to the proposed transaction. As the Joint Applicants admit, of the 28 parties to the Docket, only the Joint Applicants are in favor of the merger. All of the other parties are aligned in opposition to the merger. The Joint Applicants try to discredit the opposition by claiming "most of the intervenors in this case intervened to pursue private individual interests" rather than representing the public interest the Commission is charged to protect. But the Joint Applicants are also pursuing their own interests in advocating for the transaction. As Westar's CEO Mark Ruelle testified, "[i]dentifying risk is not the stopping point for an analysis; it's the starting point for an analysis." The threshold question facing the Commission is how much financial risk can be accepted before the proposed transaction does not serve the public interest. In its detailed review of an extensive record, the Commission found the proposed transaction to be too risky. GPE's market capitalization is only $4.8 billion, yet it proposes to pay Westar a $4.9 billion acquisition premium. The size of the acquisition premium calls into question GPE's ability to service the transaction-incurred debt."
Wednesday, April 19, 2017
SCL Health Reclassified $289 Million In Investments From St. Francis Health Center
By Michael Hooper
Tax returns show SCL Health reclassified $289 million in investments on the balance sheet of St. Francis Health Center in 2013. SCL Health reclassified the investments as "other assets” or “intercompany receivables” in subsequent tax returns for St. Francis.
Tax returns show SCL Health reclassified $289 million in investments on the balance sheet of St. Francis Health Center in 2013. SCL Health reclassified the investments as "other assets” or “intercompany receivables” in subsequent tax returns for St. Francis.
If you look at the 2013 St. Francis Health Center tax return Form 990, it says there was $289 million in investments at the beginning of the year, but by the end of the year, the investment total was $9.1 million, with the bulk of the assets -- $266 million -- transferred to “other assets.”
The 2015 Form 990, the latest available tax return for St. Francis Health Center, lists $248 million as “intercompany receivables.”
The 2015 Form 990, the latest available tax return for St. Francis Health Center, lists $248 million as “intercompany receivables.”
Attorney General Derek Schmidt said in a statement he would launch an inquiry aimed at ensuring charitable assets of St. Francis remained in Kansas.
The statement from Schmidt said, "The hospital’s parent company maintains over $2 billion dollars in assets, yet is seeking to “divest” St. Francis, possibly leading to its closure. The Kansas roots of St. Francis trace back to 1858 and the founding of Sisters of Charity of Leavenworth which remains organized as a non-profit corporation under the laws of the State of Kansas. The actions by Governor Brownback and Attorney General Schmidt seek to protect Kansas-based charitable assets from being improperly transferred from the state leading to the closure of St. Francis.
The statement from Schmidt said, "The hospital’s parent company maintains over $2 billion dollars in assets, yet is seeking to “divest” St. Francis, possibly leading to its closure. The Kansas roots of St. Francis trace back to 1858 and the founding of Sisters of Charity of Leavenworth which remains organized as a non-profit corporation under the laws of the State of Kansas. The actions by Governor Brownback and Attorney General Schmidt seek to protect Kansas-based charitable assets from being improperly transferred from the state leading to the closure of St. Francis.
“St. Francis has benefitted from its status as a Kansas charity for many years, and it is important to make certain that such charitable assets are properly managed and remain in Kansas,” said Governor Brownback. “The charitable assets should stay here for the benefit of Kansans, to serve their stated mission of improving the health of those who are poor and vulnerable. Northeast Kansas needs the medical services St. Francis provides.”
The office of the Attorney General has the authority to safeguard Kansas charities.
“Any decision by its out-of-state owners that would fail to maintain full operations of Saint Francis Hospital would be deeply troubling,” Schmidt said. “The absence of meaningful consultation with local leaders compounds the concern, particularly in light of the considerable benefits the people of Kansas have bestowed on this charitable operation over the years.”
Topeka Mayor Larry Wolgast emphasized the importance of St. Francis to the health and economy of Topeka and surrounding communities.
“I share Governor Brownback and the Attorney General’s deep concern that the charitable assets of St. Francis Hospital, a hospital that met the health care needs of our community for so long, will be improperly removed from the people it serves,” Wolgast said. “I welcome the action the Attorney General is taking. St. Francis has been a vital part of this city and northeast Kansas for 159 years and has benefitted by the non-profit status the citizens of Kansas granted."
I believe SCL Health does not really own St. Francis, SCL Health only controls it. St. Francis Health Center is a nonprofit corporation without stock holders. An argument can be made that the owner is the state of Kansas.
I believe SCL Health does not really own St. Francis, SCL Health only controls it. St. Francis Health Center is a nonprofit corporation without stock holders. An argument can be made that the owner is the state of Kansas.
SCL Health plans to sell/give away St. Francis Health Center by summer or risk closing the hospital. Stormont-Vail Health is looking at acquiring St. Francis, the newspaper reported.
SCL Health says, “St. Francis has struggled financially, losing $117 million over the last five years. Physician clinics lost $31 million in 2016 alone. All of this has come as the number of patients has dramatically decreased. Additionally without expanded Medicaid coverage and other challenges related to public programs, St. Francis experienced added pressure. Uncompensated and charity care more than doubled from 2012 to 2016.”
David Tangeman, an accountant, recently reviewed the 2015 Form 990 Tax Return.
“In reviewing the 2015 St Francis tax returns it shows a $12.5 million loss,” he said. “The buildings, land and equipment are carried on the books at $67.7 million after depreciation is deducted. Total assets are carried at $368.3 million in assets less $19.2 million in liabilities.”
“It is worth noting that $248 million of assets is listed as “Intercompany receivables. About $21 million is supposed to be bad debt or accounts receivable that is likely to be unrecovered. Still the Equity is $349 million so if you take that out you still have $328 million at the end of 2015," Tangeman said.
If you include all those assets, the picture does not look so dire.
“This hardly seems like a entity that would go out of business on the face of it, but losing $12.5 million a year isn't sustainable either over the long term.” Tangeman said.
Tangeman wonders if the $289 million in investments was the charitable assets that transferred to the parent company?
Tangeman said the $248 million in intercompany receivables should be paid back to the hospital, it belongs to St. Francis Health Center.
The hospital and its staff were able to generate a modest profit over time and invest proceeds wisely and grow them into a quarter billion dollars. For many years, the hospital had a very strong balance sheet, with around $200 million investments in 2006. By 2013, those investments had grown to $289 million.
Tangeman said the $248 million in intercompany receivables should be paid back to the hospital, it belongs to St. Francis Health Center.
The hospital and its staff were able to generate a modest profit over time and invest proceeds wisely and grow them into a quarter billion dollars. For many years, the hospital had a very strong balance sheet, with around $200 million investments in 2006. By 2013, those investments had grown to $289 million.
Brian Newsome, of SCL Health, said he would prepare a response to a list of questions that I gave him regarding the charitable assets of St. Francis Health Center. Several hours later this is what he had to say, "I connected with our finance folks this a.m., and I am now waiting for them to get out of a meeting this afternoon to confirm that what I’m pulling together for you is accurate. In the meantime, I wanted to let you know sooner rather than later that what you’ve reported thus far does not appear to be accurate. I’ll work on getting you correct info as soon as possible."
Newsome of SCL Health says St. Francis Health Center had a negative cash balance of $51.6 million as of March 31, 2017.
What happened to the $289 million in investments reported at the beginning of the year on the 2013 tax return? I asked. Later reported as $248 million in intercompany receivables on the 2015 tax return?
“There is not like a big cash reserve,” said Newsome, spokesman for SCL Health. “What you saw has been used to keep the hospital going. It didn’t leave the market.”
Newsome said a change on the balance sheet for the reporting of investments in the 2013 Form 990 was not a material change to the organization. Reporting on the tax return changed that year to be consistent with health care reporting standards, he said. Nothing material changed.
Newsome said any implication that money was taken from St. Francis and transferred to the parent company is not true. He said assets did not leave the Kansas market. Some of the hospital’s reserves were used to keep the hospital going, cover losses and expenditures on electronic medical records, pensions and debt.
“We’ve paid off debt associated with the hospital,” he said. That is not reflected in the 2015 tax return. He said St. Francis has lost $117 million over the last five years.
Tuesday, April 18, 2017
Gov. Brownback Says St. Francis Health Center Not Closing Today
“Yesterday, I had a meeting with Mike Slubowski, the CEO of SCL Health, about the status of St. Francis Hospital. He committed to me that they would not announce a closure of St. Francis on Tuesday, and that they would work with us to find a solution that keeps St. Francis open.
“I intend to hold Mr. Slubowski to his commitment and anticipate further negotiations in the coming days and weeks. As I have said previously, St. Francis is an important local and regional health care provider, and a significant Kansas charitable asset that has long served its stated mission of improving the health of those who are poor and vulnerable.”
Monday, April 17, 2017
Hundreds Rally For St. Francis Health Center
More than 500 people attended a candlelight vigil tonight, April 17, 2017, in support of St. Francis Health Center. Many employes of the hospital in Topeka held candles and sang Amazing Grace and walked around the hospital.
About 1,600 work for St. Francis. There are rumors circulating that SCL Health is considering closing the hospital.
Michael Hooper said St. Francis is not a failure but has successfully served the community for over 100 years. The hospital lost $12 million in 2015 but is still strong financially with over $248 million in reserves, according to the 2015 Form 990 Tax Return for St. Francis.
About 1,600 work for St. Francis. There are rumors circulating that SCL Health is considering closing the hospital.
Michael Hooper said St. Francis is not a failure but has successfully served the community for over 100 years. The hospital lost $12 million in 2015 but is still strong financially with over $248 million in reserves, according to the 2015 Form 990 Tax Return for St. Francis.
Sunday, April 16, 2017
St. Francis Had $248 Million In Reserves, Able To Overcome Losses
By Michael Hooper
Rumors are circulating St. Francis Health Center in Topeka, Kan., may announce on Tuesday plans to close the hospital, The Topeka Capital-Journal reported.
Rumors are circulating St. Francis Health Center in Topeka, Kan., may announce on Tuesday plans to close the hospital, The Topeka Capital-Journal reported.
SCL Health, of Broomfield, Colo., formerly known as the Sisters of Charity of Leavenworth, had previously announced plans to sell St. Francis Health Center.
The 2015 public tax return for St. Francis Health Center shows $278.5 million revenue and $291 million in expenses and an operating loss of $12.4 million. The organization received $14 million in investment income in 2015 compared to $20.7 million in the prior year.
Tax records show St. Francis Health Center is still strong financially -- able to withstand some losses. The organization has over $248 million in “inter-company” receivables, according to the 2015 Form 990 Tax Return Schedule D Part IX Other Assets.
Total assets of St. Francis were listed as $368 million at year end 2015, down 3.4% from $381.4 million in the prior year.
When Sister Loretto Marie Colwell was CEO of St. Francis, the organization was thriving. Much of the assets on the books today are the result of frugal savings efforts by Sister Colwell and staff during her 14 years there through 2006.
I wrote an article about St. Francis and Sister Colwell.
During Sister Colwell's leadership at St. Francis Health Center, the hospital healed the sick, gave to charity, invested in technology and improved the culture of the hospital -- all while improving its financial health.
Dr. Nason Lui, former president of the medical staff at St. Francis, said, "She didn't turn anybody down, and she was still able to keep the hospital financially stable, profitable and viable."
In the early 2000s, the hospital was doing great. St. Francis generated a total of $182 million in revenue from June 1, 2003, to May 31, 2004, and had $153 million in expenses -- with $29 million leftover for a margin of 16 percent. Its cash and investments grew 8.6 percent to $213.3 million by May 31, 2004, compared with $196.4 million on June 1, 2003.
Post Colwell
It seems St. Francis lost its way when SCL Health hired a new CEO and bought 132 acres of the former Menninger campus, with plans to build a new hospital there. But SCL Health shut down those plans, replaced the CEO and sold 13 acres to the the Sunflower Foundation.
Current leadership at St. Francis is
Tax returns in the past few years have shown some losses. St. Francis suffered a $12.4 million loss in 2015, a $6.1 million loss in 2014 and a $1.46 million loss in 2013.
Gov. Sam Brownback's recent veto of the expansion of Medicaid did not help the situation any. Hospitals suffer losses when treating people without insurance. Many of these patients cannot afford health insurance and cannot afford hospital stays, which costs thousands of dollars per day.
Who owns the $248 million in reserves?
Post Colwell
It seems St. Francis lost its way when SCL Health hired a new CEO and bought 132 acres of the former Menninger campus, with plans to build a new hospital there. But SCL Health shut down those plans, replaced the CEO and sold 13 acres to the the Sunflower Foundation.
Current leadership at St. Francis is
| David Setchel – President |
| Essence Montgomery - Vice President, Finance |
| Erik Olson - Vice President, Medical Group |
| Jenna Speckart - Vice President, Mission Integration |
| Lisa Alexander, RN - Chief Nursing Officer |
| Jacquelyn Hyland, MD - Chief Medical Officer |
| Nikki Sloup - Director, Marketing and Communications |
Gov. Sam Brownback's recent veto of the expansion of Medicaid did not help the situation any. Hospitals suffer losses when treating people without insurance. Many of these patients cannot afford health insurance and cannot afford hospital stays, which costs thousands of dollars per day.
If SCL Health closes the hospital, I believe the hospital's assets, including the $248 million in reserves, belong to Topeka, Kansas. Those monies were made here and invested under shrewd leadership and grew to a large amount of money. The Kansas Attorney General may be able to file a lawsuit to retain those assets in Kansas. SCL Health may want to take those investments and use them for other purposes, but I believe they belong with the hospital. The hospital and its staff were able to generate a modest profit over time and invest proceeds wisely and grow them into a quarter billion dollars.
SCL Health used to be located in Lenexa. Several years ago, SCL Health hired a new CEO, Michael Slubowski, who moved the headquarters from Lenexa to Denver and started expanding and spending money on Denver area locations including over $600 million on the main Denver hospital rebuilding it.
SCL Health sold two of its Kansas-based hospitals — Providence Medical Center in Kansas City and Saint John Hospital in Leavenworth — to for-profit operator Prime Healthcare Services.
Michael Slubowski recently announced plans to resign as president and chief executive of SCL Health to become president and chief operating officer of Trinity Health in Novi, Mich., a health system he worked for from 1997 to 2010.
SCL Health used to be located in Lenexa. Several years ago, SCL Health hired a new CEO, Michael Slubowski, who moved the headquarters from Lenexa to Denver and started expanding and spending money on Denver area locations including over $600 million on the main Denver hospital rebuilding it.
SCL Health sold two of its Kansas-based hospitals — Providence Medical Center in Kansas City and Saint John Hospital in Leavenworth — to for-profit operator Prime Healthcare Services.
Michael Slubowski recently announced plans to resign as president and chief executive of SCL Health to become president and chief operating officer of Trinity Health in Novi, Mich., a health system he worked for from 1997 to 2010.
Slubowski joined SCL Health in January 2011 and oversaw the relocation of its system services operations from Lenexa, Kan., to Denver and later to Broomfield, Colo.
A modest proposal
There should be a way to make St. Francis break-even. With $278 million in revenue, and $291 million in expenses, the leadership should be able to cut expenses somehow by $20 million and break even or make a slight profit. Don’t shut down a good hospital. If you close all the doors now, then it will be very hard to re-start, to re-open.
There should be a way to make St. Francis break-even. With $278 million in revenue, and $291 million in expenses, the leadership should be able to cut expenses somehow by $20 million and break even or make a slight profit. Don’t shut down a good hospital. If you close all the doors now, then it will be very hard to re-start, to re-open.
Let’s find a way to save St. Francis. Close down unprofitable ventures. Find core profit centers in your operation and build from there a sustainable health care concern. There is certainly enough capital within the hospital’s reserves to keep this organization going, especially if the hospital cuts $20 million in operating expenses.
SCL Health should consider giving St. Francis to the City of Topeka, along with the hospital's $248 million in reserves. This way the organization would have sufficient reserves to keep the organization going. Let St. Francis Health Center continue to heal the sick and bring people back to good health. The medical staff save people every day. Find a way to keep this mission alive.
SCL Health should consider giving St. Francis to the City of Topeka, along with the hospital's $248 million in reserves. This way the organization would have sufficient reserves to keep the organization going. Let St. Francis Health Center continue to heal the sick and bring people back to good health. The medical staff save people every day. Find a way to keep this mission alive.
Friday, April 7, 2017
Why Payless ShoeSource Is Bankrupt: A Leveraged Buyout Disaster
Payless ShoeSource and two related Hong Kong-based logistics businesses recently filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court for the Eastern District of Missouri.
Payless says it is using Chapter 11 bankruptcy court to reorganize the business, to strengthen its balance sheet and position the company for long-term success. Payless plans to close 400-500 stores. The company has about $838 million in debt, plus $250 million outstanding accounts payable, The Topeka Capital-Journal reported.
We all know traditional brick and mortar retailers are struggling, but also contributing to the company's financial demise is Payless owners Golden Gate Capital and Blum Capital Partners. They have bled the company of its cash and loaded up the balance sheet with debt. Since the company’s leveraged buyout in 2012, Payless' owners have taken out nearly $350 million in debt-funded dividends, according to Moody’s reports. Shortly before declaring bankruptcy, Moody’s downgraded Payless’ debt to Caa2 junk status, with a negative outlook.
“Also constraining the rating is the company's history of highly-aggressive financial policies that includes nearly $350 million of debt-funded dividends since the company's 2012 leveraged buy-out,” Moody’s wrote on Feb. 2, 2017.
In 2012, an investor group, including Golden Gate Capital, Blum Capital Partners and Wolverine Worldwide, acquired Collective Brands in a $1.32 billion buyout, with Golden Gate Capital and Blum Capital Partners taking control of Payless, and the remaining footwear brands going to Wolverine.
Golden Gate Capital and Blum Capital took out $350 million in cash from Payless and loaded the company with debt at a time when retail was struggling from huge online competition.
Leveraged buyouts can be disastrous for companies because they can’t afford to pay all the bills plus additional interest expense on debt, when sales are declining.
A huge problem facing retailers today is customers who go into the stores, try on shoes, then walk out and buy the shoes online from a competitor. This happened to Best Buy until it offered price matching.
Brick & mortar retailers must find creative ways to compete, price matching is probably one solution. It may come to a point where retailers will have to charge a fee if someone is trying on clothes or shoes without buying any merchandise from the store.
Union Pacific Will Beat EPS Estimates in Q1
Union Pacific Will Beat EPS Estimates In Q1
Summary
Growth
in the shipment of coal, metals and grain will help Union Pacific post
earnings of $1.30 per share, beating consensus estimate of $1.24 per
share.
Union Pacific’s total freight shipments increased 2% to 2.1 million carloads/intermodal units through Week 13.
Grain volumes are up 20% at Union Pacific through YTD through Week 13.
Union Pacific’s total freight shipments increased 2% to 2.1 million carloads/intermodal units through Week 13.
Grain volumes are up 20% at Union Pacific through YTD through Week 13.
Growth in the shipment of coal, metals and grain will help Union Pacific (NYSE:UNP) post earnings of $1.30 per share in first quarter 2017 -- a 12% increase over Q1 EPS 2016.
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