Company Quick10K Filing
Quick10K
Addus Homecare
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$87.33 13 $1,151
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-10-01 M&A, Regulation FD, Exhibits
8-K 2019-09-12 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-09-04 Enter Agreement, Exhibits
8-K 2019-08-25 Enter Agreement, Regulation FD, Exhibits
8-K 2019-08-05 Earnings, Regulation FD, Exhibits
8-K 2019-07-18 Officers, Exhibits
8-K 2019-06-12 Shareholder Vote
8-K 2019-05-06 Earnings, Regulation FD, Exhibits
8-K 2019-04-24 Accountant, Exhibits
8-K 2019-04-08 Regulation FD, Other Events, Exhibits
8-K 2019-03-04 Earnings, Regulation FD, Exhibits
8-K 2018-11-05 Earnings, Regulation FD, Exhibits
8-K 2018-10-29 Enter Agreement, Off-BS Arrangement, Officers
8-K 2018-08-15 Enter Agreement, Exhibits
8-K 2018-08-06 Earnings, Regulation FD, Exhibits
8-K 2018-06-13 Shareholder Vote
8-K 2018-05-07 Earnings, Regulation FD, Exhibits
8-K 2018-05-01 M&A, Regulation FD, Exhibits
8-K 2018-04-02 Other Events, Exhibits
8-K 2018-03-05 Earnings, Regulation FD, Exhibits
WBA Walgreens Boots Alliance 45,970
TDOC Teladoc 4,117
LHCG LHC Group 3,745
USPH US Physical Therapy 1,701
CIVI Civitas Solutions 603
BIOS Bioscrip 444
DPLO Diplomat Pharmacy 415
CCM Concord Medical Services Holdings 325
PETS PetMed Express 313
RAD Rite Aid 310
ADUS 2019-06-30
Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 adus-ex311_7.htm
EX-31.2 adus-ex312_8.htm
EX-32.1 adus-ex321_9.htm
EX-32.2 adus-ex322_6.htm

Addus Homecare Earnings 2019-06-30

ADUS 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 adus-10q_20190630.htm 10-Q adus-10q_20190630.htm

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission file number 001-34504

 

ADDUS HOMECARE CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

 

Delaware

 

20-5340172

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

6801 Gaylord Parkway, Suite 110

Frisco, TX

 

75034

(Address of principal executive offices)

 

(Zip code)

(469) 535-8200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

ADUS

The Nasdaq Global Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No .

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No .

As of July 31, 2019, Addus HomeCare Corporation had 13,218,613 shares of Common Stock outstanding.

 

 


Table of Contents

 

ADDUS HOMECARE CORPORATION

FORM 10-Q

INDEX

 

PART I. FINANCIAL INFORMATION

3

 

 

Item 1. Financial Statements (Unaudited)

3

 

 

Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

3

 

 

Condensed Consolidated Statements of Income For the Three and Six Months Ended June 30, 2019 and 2018

4

 

 

Condensed Consolidated Statements of Stockholders’ Equity For the Three and Six Months Ended June 30, 2019 and 2018

5

 

 

Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2019 and 2018

6

 

 

Notes to Condensed Consolidated Financial Statements

7

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

31

 

 

Item 4. Controls and Procedures

31

 

 

PART II. OTHER INFORMATION

32

 

 

Item 1. Legal Proceedings

32

 

 

Item 1A. Risk Factors

32

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

32

 

 

Item 3. Defaults Upon Senior Securities

32

 

 

Item 4. Mine Safety Disclosures

32

 

 

Item 5. Other Information

32

 

 

Item 6. Exhibits

33

 

2


Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

 

ADDUS HOMECARE CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2019 and December 31, 2018

(Amounts and Shares in Thousands, Except Per Share Data)

(Unaudited)

 

 

 

June 30,

2019

 

 

December 31,

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash

 

$

54,792

 

 

$

70,406

 

Accounts receivable, net of allowances

 

 

132,764

 

 

 

108,000

 

Prepaid expenses and other current assets

 

 

9,148

 

 

 

7,098

 

Total current assets

 

 

196,704

 

 

 

185,504

 

Property and equipment, net of accumulated depreciation and amortization

 

 

11,428

 

 

 

10,658

 

Other assets

 

 

 

 

 

 

 

 

Goodwill

 

 

145,812

 

 

 

135,442

 

Intangibles, net of accumulated amortization

 

 

36,480

 

 

 

23,784

 

Operating lease right of use assets, net

 

 

18,260

 

 

 

 

Total other assets

 

 

200,552

 

 

 

159,226

 

Total assets

 

$

408,684

 

 

$

355,388

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

13,230

 

 

$

12,238

 

Accrued payroll

 

 

22,162

 

 

 

22,449

 

Accrued expenses

 

 

19,087

 

 

 

11,586

 

Accrued workers' compensation insurance

 

 

13,890

 

 

 

15,169

 

Current portion of long-term debt

 

 

955

 

 

 

62

 

Total current liabilities

 

 

69,324

 

 

 

61,504

 

Long-term liabilities

 

 

 

 

 

 

 

 

Long-term debt, less current portion, net of debt issuance costs

 

 

36,231

 

 

 

17,222

 

Long-term operating lease liabilities

 

 

12,929

 

 

 

 

Deferred tax liabilities, net

 

 

617

 

 

 

494

 

Other long-term liabilities

 

 

242

 

 

 

635

 

Total long-term liabilities

 

 

50,019

 

 

 

18,351

 

Total liabilities

 

$

119,343

 

 

$

79,855

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Common stock—$.001 par value; 40,000 authorized and 13,219 and 13,126 shares

   issued and outstanding as of June 30, 2019 and December 31, 2018, respectively

 

$

13

 

 

$

13

 

Additional paid-in capital

 

 

181,111

 

 

 

177,683

 

Retained earnings

 

 

108,217

 

 

 

97,837

 

Total stockholders’ equity

 

 

289,341

 

 

 

275,533

 

Total liabilities and stockholders’ equity

 

$

408,684

 

 

$

355,388

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

3


Table of Contents

ADDUS HOMECARE CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Three and Six Months Ended June 30, 2019 and 2018

(Amounts and Shares in Thousands, Except Per Share Data)

(Unaudited)

 

 

 

For the Three Months

Ended June 30,

 

 

For the Six Months

Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net service revenues

 

$

149,692

 

 

$

131,258

 

 

$

288,946

 

 

$

240,734

 

Cost of service revenues

 

 

109,222

 

 

 

95,515

 

 

 

210,902

 

 

 

177,058

 

Gross profit

 

 

40,470

 

 

 

35,743

 

 

 

78,044

 

 

 

63,676

 

General and administrative expenses

 

 

30,222

 

 

 

26,495

 

 

 

59,479

 

 

 

48,032

 

Depreciation and amortization

 

 

2,535

 

 

 

2,335

 

 

 

4,609

 

 

 

4,142

 

Total operating expenses

 

 

32,757

 

 

 

28,830

 

 

 

64,088

 

 

 

52,174

 

Operating income

 

 

7,713

 

 

 

6,913

 

 

 

13,956

 

 

 

11,502

 

Interest income

 

 

(95

)

 

 

(32

)

 

 

(310

)

 

 

(2,355

)

Interest expense

 

 

680

 

 

 

1,382

 

 

 

1,298

 

 

 

2,293

 

Total interest expense (income), net

 

 

585

 

 

 

1,350

 

 

 

988

 

 

 

(62

)

Income before income taxes

 

 

7,128

 

 

 

5,563

 

 

 

12,968

 

 

 

11,564

 

Income tax expense

 

 

1,610

 

 

 

1,245

 

 

 

2,588

 

 

 

2,360

 

Net income

 

$

5,518

 

 

$

4,318

 

 

$

10,380

 

 

$

9,204

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per share

 

$

0.42

 

 

$

0.37

 

 

$

0.80

 

 

$

0.80

 

Diluted income per share

 

$

0.41

 

 

$

0.36

 

 

$

0.77

 

 

$

0.78

 

Weighted average number of common shares and potential

   common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

13,044

 

 

 

11,533

 

 

 

13,019

 

 

 

11,517

 

Diluted

 

 

13,433

 

 

 

11,838

 

 

 

13,413

 

 

 

11,767

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

4


Table of Contents

 

ADDUS HOMECARE CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts and Shares in Thousands)

(Unaudited)

 

 

 

For the Three Months Ended June 30, 2019

 

 

 

Common Stock

 

 

Additional

Paid-in

Capital

 

 

Retained

Earnings

 

 

Total

Stockholders'

Equity

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at April 1, 2019

 

 

13,178

 

 

$

13

 

 

$

178,916

 

 

$

102,699

 

 

$

281,628

 

Issuance of shares of common stock under

   restricted stock award agreements

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,482

 

 

 

 

 

 

1,482

 

Shares issued for exercise of stock options

 

 

30

 

 

 

 

 

 

713

 

 

 

 

 

 

713

 

Net income

 

 

 

 

 

 

 

 

 

 

 

5,518

 

 

 

5,518

 

Balance at June 30, 2019

 

 

13,219

 

 

$

13

 

 

$

181,111

 

 

$

108,217

 

 

$

289,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30, 2019

 

 

 

Common Stock

 

 

Additional

Paid-in

Capital

 

 

Retained

Earnings

 

 

Total

Stockholders'

Equity

 

Balance at January 1, 2019

 

 

13,126

 

 

$

13

 

 

$

177,683

 

 

$

97,837

 

 

$

275,533

 

Issuance of shares of common stock under

   restricted stock award agreements

 

 

63

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,715

 

 

 

 

 

 

2,715

 

Shares issued for exercise of stock options

 

 

30

 

 

 

 

 

 

713

 

 

 

 

 

 

713

 

Net income

 

 

 

 

 

 

 

 

 

 

 

10,380

 

 

 

10,380

 

Balance at June 30, 2019

 

 

13,219

 

 

$

13

 

 

$

181,111

 

 

$

108,217

 

 

$

289,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2018

 

 

 

Common Stock

 

 

Additional

Paid-in

Capital

 

 

Retained

Earnings

 

 

Total

Stockholders'

Equity

 

Balance at April 1, 2018

 

 

11,691

 

 

$

12

 

 

$

96,846

 

 

$

85,220

 

 

$

182,078

 

Issuance of shares of common stock under

   restricted stock award agreements

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of shares of common stock under

   restricted stock award agreements

 

 

(14

)

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

997

 

 

 

 

 

 

997

 

Shares issued for exercise of stock options

 

 

11

 

 

 

 

 

 

244

 

 

 

 

 

 

244

 

Net income

 

 

 

 

 

 

 

 

 

 

 

4,318

 

 

 

4,318

 

Balance at June 30, 2018

 

 

11,697

 

 

$

12

 

 

$

98,087

 

 

$

89,538

 

 

$

187,637

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30, 2018

 

 

 

Common Stock

 

 

Additional

Paid-in

Capital

 

 

Retained

Earnings

 

 

Total

Stockholders'

Equity

 

Balance at January 1, 2018

 

 

11,632

 

 

$

12

 

 

$

95,963

 

 

$

80,334

 

 

$

176,309

 

Issuance of shares of common stock under

   restricted stock award agreements

 

 

69

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of shares of common stock under

   restricted stock award agreements

 

 

(16

)

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,856

 

 

 

 

 

 

1,856

 

Shares issued for exercise of stock options

 

 

12

 

 

 

 

 

 

268

 

 

 

 

 

 

268

 

Net income

 

 

 

 

 

 

 

 

 

 

 

9,204

 

 

 

9,204

 

Balance at June 30, 2018

 

 

11,697

 

 

$

12

 

 

$

98,087

 

 

$

89,538

 

 

$

187,637

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

5


Table of Contents

 

ADDUS HOMECARE CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2019 and 2018

(Amounts in Thousands)

(Unaudited)

 

 

 

For the Six Months

 

 

 

Ended June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

10,380

 

 

$

9,204

 

Adjustments to reconcile net income to net cash provided by operating

   activities, net of acquisitions:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

4,609

 

 

 

4,142

 

Deferred income taxes

 

 

123

 

 

 

245

 

Stock-based compensation

 

 

2,715

 

 

 

1,856

 

Amortization of debt issuance costs under the credit facility

 

 

347

 

 

 

298

 

Provision for doubtful accounts

 

 

106

 

 

 

165

 

Loss of disposal of assets

 

 

(51

)

 

 

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(18,884

)

 

 

2,578

 

Prepaid expenses and other current assets

 

 

328

 

 

 

3,287

 

Accounts payable

 

 

641

 

 

 

2,458

 

Accrued expenses and other long-term liabilities

 

 

(4,392

)

 

 

(4,069

)

Net cash (used in) provided by operating activities

 

 

(4,078

)

 

 

20,164

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisitions of businesses, net of cash acquired

 

 

(29,808

)

 

 

(61,809

)

Purchases of property and equipment

 

 

(1,996

)

 

 

(1,662

)

Net cash used in investing activities

 

 

(31,804

)

 

 

(63,471

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Borrowings on term loan credit facility

 

 

19,600

 

 

 

60,420

 

Payments on term loan credit facility

 

 

 

 

 

(1,125

)

Payments for debt issuance costs under the credit facility

 

 

 

 

 

(52

)

Payments on financing lease obligations

 

 

(45

)

 

 

(741

)

Cash received from exercise of stock options

 

 

713

 

 

 

268

 

Net cash provided by financing activities

 

 

20,268

 

 

 

58,770

 

Net change in cash

 

 

(15,614

)

 

 

15,463

 

Cash, at beginning of period

 

 

70,406

 

 

 

53,754

 

Cash, at end of period

 

$

54,792

 

 

$

69,217

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

904

 

 

$

1,827

 

Cash paid for income taxes

 

 

3,474

 

 

 

2,993

 

Supplemental disclosures of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Contingent and deferred consideration accrued for acquisition

 

$

 

 

$

847

 

Leasehold improvements acquired through tenant allowances

 

 

682

 

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

6


Table of Contents

 

ADDUS HOMECARE CORPORATION

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of Operations, Consolidation, and Presentation of Financial Statements

Addus HomeCare Corporation (“Holdings”) and its subsidiaries (together with Holdings, the “Company”, “we”, “us” or “our”) operate as a multi-state provider of three distinct but related business segments providing in-home services. In its personal care services segment, the Company provides non-medical assistance with activities of daily living, primarily to persons who are at increased risk of hospitalization or institutionalization, such as the elderly, chronically ill or disabled. In its hospice segment, the Company provides physical, emotional and spiritual care for people who are terminally ill as well as related services for their families. In its home health segment, the Company provides services that are primarily medical in nature to individuals who may require assistance during an illness or after hospitalization and include skilled nursing and physical, occupational and speech therapy.

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements and related notes have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q. The accompanying balance sheet as of December 31, 2018 has been derived from the Company’s audited financial statements for the year ended December 31, 2018 previously filed with the SEC. Accordingly, these financial statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements and should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2018 included in our Annual Report on Form 10-K, which includes information and disclosures not included herein.

In the opinion of management, these financial statements reflect all adjustments of a normal, recurring nature necessary for the fair statement of our financial position, results of operations, and cash flows for the interim periods presented in conformity with GAAP. Our results for any interim period are not necessarily indicative of results for a full year or any other interim period and have not been audited by our independent auditors.

Principles of Consolidation

These Condensed Consolidated Financial Statements include the accounts of Addus HomeCare Corporation, and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

Estimates

The financial statements are prepared by management in conformity with GAAP and include estimated amounts and certain disclosures based on assumptions about future events. The Company’s critical accounting estimates include the following areas: implicit price concessions, reserve for workers’ compensation insurance claims, accounting for stock-based compensation, accounting for income taxes, business combinations and when required, the quantitative assessment of goodwill. Actual results could differ from these estimates.

Diluted Net Income Per Common Share

Basic earnings per share is calculated using our weighted-average outstanding common shares. Diluted net income per common share, calculated on the treasury stock method, is based on the weighted average number of shares outstanding during the period. The Company’s outstanding securities that may potentially dilute the common stock are stock options and restricted stock awards.

Included in the Company’s calculation of diluted earnings per share for the three and six months ended June 30, 2019 were approximately 695,000 stock options outstanding, of which approximately 327,000 and 316,000 respectively, were dilutive. In addition, there were approximately 154,000 restricted stock awards outstanding, 62,000 and 78,000 of which were dilutive for the three and six months ended June 30, 2019, respectively.

Included in the Company’s calculation of diluted earnings per share for the three and six months ended June 30, 2018 were approximately 707,000 stock options outstanding, of which approximately 230,000 and 172,000 respectively, were dilutive. In addition, there were approximately 146,000 restricted stock awards outstanding, 75,000 and 77,000 of which were dilutive for the three and six months ended June 30, 2018, respectively.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize a lease liability and a right-of-use (“ROU”) asset for all leases, including operating leases, with a term greater than twelve months in their balance sheets. For income statement recognition purposes, leases will be classified as either a finance or an operating lease. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provided entities with an additional transition method. We elected to adopt the standard effective January 1, 2019 using the modified retrospective transition method. We elected the package of practical expedients available for expired or existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are, or contain, leases, (2) lease classification and (3) initial direct costs. The Company secured new software to account for the change in accounting for leases. In addition, the Company is designing and implementing new processes and controls. The most significant changes relate to the recognition of right-of-use assets and significant lease liabilities on our consolidated balance

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sheet as a result of our operating lease obligations, as well as the impact of new disclosure requirements. Adoption of the new standard did not have a significant impact to our results of operations or liquidity.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. Under the new standard, entities holding financial assets and net investment in leases that are not accounted for at fair value through net income are to be presented at the net amount expected to be collected. An allowance for credit losses will be a valuation account that will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. ASU 2016-13 is effective as of January 1, 2020. Early adoption is permitted. The Company is currently evaluating the impact of adopting this standard.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new guidance eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). ASU 2017-04 is effective for annual and any interim impairment tests for periods beginning after December 15, 2019. Adoption of the new standard is not expected to have an impact to our results of operations or liquidity.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 requires customers in a hosting arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification (“ASC”) 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. The Company is currently assessing the impact of adopting this standard.

3. Leases

We have historically entered into operating leases for local branches, our corporate headquarters and certain equipment. The Company’s current leases have expiration dates through 2029. Certain of our arrangements have free rent periods and/or escalating rent payment provisions. We recognize rent expense on a straight-line basis over the lease term. Certain of the Company’s leases include termination options and renewal options for periods ranging from one to five years. Because we are not reasonably certain to exercise these renewal options, the options generally are not considered in determining the lease term, and payments associated with the option years are excluded from lease payments.

When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement.

Amounts reported in the Condensed Consolidated Balance Sheets as of June 30, 2019 for our operating leases were as follows:

 

 

 

June 30, 2019

 

 

 

(Amounts in Thousands)

 

Operating lease right of use assets, net

 

$

18,260

 

 

 

 

 

 

Short-term operating lease liabilities (in Accrued expenses)

 

 

5,843

 

Long-term operating lease liabilities

 

 

12,929

 

Total operating lease liabilities

 

$

18,772

 

 

Leases Costs

Components of lease cost were reported in general and administrative expenses in the Condensed Consolidated Statements of Income as follows:

 

 

 

For the Three Months

Ended June 30, 2019

 

 

For the Six Months

Ended June 30, 2019

 

 

 

(Amounts in Thousands)

 

 

(Amounts in Thousands)

 

Operating lease costs

 

$

1,558

 

 

$

3,204

 

Short-term lease costs

 

 

96

 

 

 

160

 

Total lease cost

 

$

1,654

 

 

$

3,364

 

 

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Lease Term and Discount Rate

Weighted average remaining lease terms and discount rates for the six months ended June 30, 2019 were as follows:

 

 

 

2019

 

Operating leases:

 

 

 

 

Weighted average remaining lease term in years

 

 

3.75

 

Weighted average discount rate

 

 

5.71

%

 

Maturity of Lease Liabilities

A summary of our remaining operating lease payments as of June 30, 2019 were as follows:

 

 

 

Operating Leases

 

 

 

(Amounts in Thousands)

 

Due in the 12-month period ended June 30,

 

 

 

 

2020

 

$

6,582

 

2021

 

 

5,548

 

2022

 

 

4,105

 

2023

 

 

2,270

 

2024

 

 

1,499

 

Thereafter

 

 

955

 

Total future minimum rental commitments

 

 

20,959

 

Less: Imputed interest

 

 

(2,187

)

Total lease liabilities

 

$

18,772

 

 

As required by ASC 842, the future minimum operating lease payments on non-cancelable leases as of December 31, 2018 under the accounting standards in effect as of that period were as follows:

 

 

Operating Leases

 

 

 

(Amounts in Thousands)

 

Due in the 12-month period ended December 31,

 

 

 

 

2019

 

$

6,374

 

2020

 

 

4,820

 

2021

 

 

3,460

 

2022

 

 

2,377

 

2023

 

 

2,130

 

Thereafter

 

 

1,382

 

Total future minimum rental commitments

 

$

20,543

 

 

Supplemental cash flow information

 

 

 

For the Six Months

Ended June 30, 2019

 

 

 

(Amounts in Thousands)

 

Supplemental Cash Flows Information

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

Operating cash flows from operating leases

 

$

3,465

 

 

 

 

 

 

Right-of-use assets obtained in exchange for lease obligations:

 

 

 

 

Operating leases

 

$

3,743

 

 

Financing Leases

Some of our financing leases include provisions to purchase the asset at the conclusion of the lease. The treatment of these leases remains consistent and the transition does not have an impact on the accounting for these leases. Financing leases were not material as of June 30, 2019 and December 31, 2018.

4. Acquisitions

VIP Health Care Services

On June 1, 2019, the Company completed the acquisition of all of the assets of VIP Health Care Services (“VIP”). The purchase price was approximately $29.9 million. The purchase of VIP was funded through a combination of the Company’s revolving credit facility and available cash. With the purchase of VIP, the Company expanded its personal care operations in the state of New York and into the New York City

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metropolitan area. The related acquisition costs of $0.2 million and integration costs of $0.1 million for the three and six months ended June 30, 2019. These costs were included in general and administrative expenses on the Condensed Consolidated Statements of Income, and were expensed as incurred. The results of VIP are included on the Condensed Consolidated Statements of Income from the date of the acquisition.

The Company’s acquisition of VIP has been accounted for in accordance with ASC Topic 805, Business Combinations, and the resulting goodwill and other intangible assets were accounted for under ASC Topic 350, Goodwill and Other Intangible Assets. The acquisition was recorded at its fair value as of June 1, 2019. Under business combination accounting, the VIP purchase price was allocated to VIP’s net tangible and identifiable intangible assets based on their estimated fair values. Based upon management’s valuation, which is preliminary and subject to completion of working capital adjustments, the total purchase price has been allocated as follows:

 

 

Total

(Amounts in

Thousands)

 

Goodwill

 

$

10,374

 

Identifiable intangible assets

 

 

15,370

 

Cash

 

 

110

 

Accounts receivable

 

 

5,986

 

Other assets

 

 

2,308

 

Property and equipment

 

 

27

 

Accounts payable

 

 

(385

)

Accrued expenses

 

 

(747

)

Accrued payroll

 

 

(1,571

)

Other liabilities

 

 

(1,554

)

Total purchase price allocation

 

$

29,918

 

 

Management’s assessment of qualitative factors affecting goodwill for VIP includes estimates of market share at the date of purchase, ability to grow in the market, synergy with existing Company operations, and the payor profile in the market.

Identifiable intangible assets acquired consist of state licenses and customer relationships, with estimated useful lives of six and eight years, respectively. The preliminary estimated fair value of identifiable intangible assets was determined, using Level 3 inputs as defined under ASC Topic 820, with the assistance of a valuation specialist. The goodwill and intangible assets acquired are deductible for tax purposes.

The VIP acquisition accounted for $4.4 million of net service revenues and $0.3 million of net income prior to corporate allocation for the three and six months ended June 30, 2019.

Ambercare Corporation

On May 1, 2018, the Company completed the acquisition of all the issued and outstanding securities of Ambercare Corporation (“Ambercare”). The purchase price was approximately $39.6 million plus the amount of excess cash held by Ambercare at closing (approximately $12.0 million). The purchase of Ambercare was funded by a delayed draw term loan under the Company’s credit facility. With the purchase of Ambercare, the Company expanded its New Mexico personal care operations and acquired its hospice and home health segments in the state of New Mexico. The related acquisition costs were $0.5 million for each of the three and six months ended June 30, 2018. The related integration costs were $0.1 million for each of the three months ended June 30, 2019 and 2018, and $0.2 million and $0.1 million for the six months ended June 30, 2019 and 2018, respectively. These costs were included in general and administrative expenses on the Condensed Consolidated Statements of Income, and were expensed as incurred. The results of Ambercare are included on the Condensed Consolidated Statements of Income from the date of the acquisition.

The Company’s acquisition of Ambercare has been accounted for in accordance with ASC Topic 805, Business Combinations, and the resulting goodwill and other intangible assets were accounted for under ASC Topic 350, Goodwill and Other Intangible Assets. The acquisition was recorded at its fair value as of May 1, 2018. Under business combination accounting, the Ambercare purchase price was $51.6 million and was allocated to Ambercare’s net tangible and identifiable intangible assets based on their estimated fair values.


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Based upon management’s valuations, which are now final, the total purchase price has been allocated as follows:

 

 

 

Total

(Amounts in

Thousands)

 

Goodwill

 

$

28,831

 

Cash

 

 

12,028

 

Identifiable intangible assets

 

 

9,944

 

Accounts receivable

 

 

6,512

 

Other assets

 

 

442

 

Property and equipment

 

 

154

 

Accrued expenses

 

 

(4,073

)

Deferred tax liability

 

 

(2,138

)

Financing lease

 

 

(75

)

Accounts payable

 

 

(3

)

Total purchase price allocation

 

$

51,622

 

 

Management’s assessment of qualitative factors affecting goodwill for Ambercare includes estimates of market share at the date of purchase, ability to grow in the market, synergy with existing Company operations, and the payor profile in the market.

The Company acquired all of the outstanding stock of Ambercare. Identifiable intangible assets acquired consist of trade names and customer relationships, with estimated useful lives ranging from three to fifteen years, as well as indefinite lived state licenses. The estimated fair value of identifiable intangible assets was determined, using Level 3 inputs as defined under ASC Topic 820, with the assistance of a valuation specialist. The goodwill and intangible assets acquired are non-deductible for tax purposes.

The Ambercare acquisition accounted for $15.7 million and $30.6 million of net service revenues for the three and six months ended June 30, 2019, respectively, and $9.2 million of net service revenues for each of the three and six months ended June 30, 2018. Net income prior to corporate allocation for the three and six months ended June 30, 2019, was $3.7 million and $7.1 million, respectively, and $1.8 million of net income prior to corporate allocation for the three and six months ended June 30, 2018.

Arcadia Home Care & Staffing

On April 1, 2018, the Company acquired certain assets of Arcadia Home Care & Staffing (“Arcadia”), expanding its personal care services. The total consideration for the transaction was $18.9 million and was funded by a delayed draw term loan under the Company’s credit facility. The related acquisition costs were $0.5 million for the three and six months ended June 2018. These costs were included in general and administrative expenses on the Condensed Consolidated Statements of Income, and were expensed as incurred. The results of operations from this acquired entity are included in the Condensed Consolidated Statements of Income from the date of the acquisition.

The Company’s acquisition of Arcadia has been accounted for in accordance with ASC Topic 805 and the resulting goodwill and other intangible assets were accounted for under ASC Topic 350. The acquisition was recorded at its fair value as of April 1, 2018. Under business combination accounting, the Arcadia purchase price was $18.9 million and was allocated to Arcadia’s net tangible and identifiable intangible assets based on their estimated fair values. Based upon management’s valuations, which are now final, the total purchase price has been allocated as follows:

 

 

 

Total

(Amounts in

Thousands)

 

Goodwill

 

$

13,072

 

Accounts receivable

 

 

5,317

 

Identifiable intangible assets

 

 

2,264

 

Property and equipment

 

 

155

 

Other assets

 

 

92

 

Accrued expenses

 

 

(1,540

)

Accounts payable

 

 

(508

)

Total purchase price allocation

 

$

18,852

 

 

Management’s assessment of qualitative factors affecting goodwill for Arcadia includes estimates of market share at the date of purchase, ability to grow in the market, synergy with existing Company operations, and the payor profile in the market.

Identifiable intangible assets acquired consist of trade name, customer relationships and state licenses, with estimated useful lives ranging from seven to fifteen years. The estimated fair value of identifiable intangible assets was determined, using Level 3 inputs as defined under ASC Topic 820, with the assistance of a valuation specialist. The goodwill and intangible assets acquired are deductible for tax purposes.

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The Arcadia acquisition accounted for $10.9 million and $21.3 million of net service revenues for the three and six months June 30, 2019, respectively, and $10.8 of net service revenues for each of the three and six months June 30, 2018. Net income prior to corporate allocation for the three and six months ended June 30, 2019, was $1.4 million and $2.7 million, respectively, and $1.6 million of net income prior to corporate allocation for each of the three and six months ended June 30, 2018.

LifeStyle Options, Inc.

Effective January 1, 2018, the Company acquired certain assets of LifeStyle Options, Inc. (“LifeStyle”) in order to expand private pay services in Illinois. The total consideration for the transaction was $4.1 million, comprised of $3.3 million in cash and $0.8 million, representing the estimated fair value of contingent consideration, subject to the achievement of certain performance targets set forth in an earn-out agreement. As of December 31, 2018, the performance targets were not met and the contingent consideration was remeasured to zero. The results of operations from this acquired entity are included in the Condensed Consolidated Statements of Income from the date of the acquisition.

The Company’s acquisition of LifeStyle has been accounted for in accordance with ASC Topic 805 and the resulting goodwill and other intangible assets were accounted for under ASC Topic 350. The acquisition was recorded at its fair value as of January 1, 2018. Under business combination accounting, the LifeStyle purchase price was $4.1 million and was allocated to LifeStyle’s net tangible and identifiable intangible assets based on their estimated fair values. Based upon management’s valuations, which are now final, the total purchase price is final and has been allocated as follows:

 

 

 

Total

(Amounts in

Thousands)

 

Goodwill

 

$

2,751

 

Identifiable intangible assets

 

 

1,152

 

Accounts receivable

 

 

573

 

Other assets

 

 

32

 

Property and equipment

 

 

18

 

Accrued expenses

 

 

(291

)

Accounts payable

 

 

(105

)

Total purchase price allocation

 

$

4,130

 

 

Management’s assessment of qualitative factors affecting goodwill for LifeStyle includes estimates of market share at the date of purchase, ability to grow in the market, synergy with existing Company operations, and the payor profile in the market.

Identifiable intangible assets acquired consist of trade name and customer relationships, with estimated useful lives ranging from ten to fifteen years. The estimated fair value of identifiable intangible assets was determined, using Level 3 inputs as defined under ASC Topic 820, with the assistance of a valuation specialist. The goodwill and intangible assets acquired are deductible for tax purposes.

The LifeStyle acquisition accounted for $1.3 million and $2.5 million of net service revenues for the three and six months June 30, 2019, respectively, and $1.5 million and $3.0 million of net service revenues for the three and six months June 30, 2018, respectively. Net income prior to corporate allocation for the three and six months ended June 30, 2019, was $0.1 million and $0.1 million, respectively, and $0.1 million and $0.3 million of net income prior to corporate allocation for the three and six months ended June 30, 2018, respectively.

The following table contains unaudited pro forma condensed consolidated income statement information of the Company had the acquisitions of VIP, Ambercare and Arcadia closed on January 1, 2018.

 

 

 

For the Three Months Ended

June 30,

 

 

For the Six Months Ended

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(Amounts in Thousands)

 

 

(Amounts in Thousands)

 

Net service revenues

 

$

159,177

 

 

$

148,610

 

 

$

313,511

 

 

$

300,318

 

Operating income