Company Quick10K Filing
Addus HomeCare
Price81.39 EPS1
Shares16 P/E64
MCap1,266 P/FCF157
Net Debt-179 EBIT27
TEV1,087 TEV/EBIT40
TTM 2019-09-30, in MM, except price, ratios
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-09
10-K 2018-12-31 Filed 2019-03-18
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-07
10-Q 2018-03-31 Filed 2018-05-09
10-K 2017-12-31 Filed 2018-03-14
10-Q 2017-09-30 Filed 2017-11-07
10-Q 2017-06-30 Filed 2017-08-08
10-Q 2017-03-31 Filed 2017-05-09
10-K 2016-12-31 Filed 2017-03-15
10-Q 2016-09-30 Filed 2016-11-09
10-Q 2016-06-30 Filed 2016-08-08
10-Q 2016-03-31 Filed 2016-05-09
10-K 2015-12-31 Filed 2016-03-11
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-08
10-K 2014-12-31 Filed 2015-03-16
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-11
10-Q 2014-03-31 Filed 2014-05-07
10-K 2013-12-31 Filed 2014-03-17
10-Q 2013-09-30 Filed 2013-11-08
10-Q 2013-06-30 Filed 2013-08-01
10-Q 2013-03-31 Filed 2013-05-09
10-K 2012-12-31 Filed 2013-03-28
10-Q 2012-09-30 Filed 2012-11-01
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-10
10-K 2011-12-31 Filed 2012-03-16
10-Q 2011-09-30 Filed 2011-11-04
10-Q 2011-06-30 Filed 2011-08-04
10-Q 2011-03-31 Filed 2011-05-05
10-K 2010-12-31 Filed 2011-03-28
10-Q 2010-09-30 Filed 2010-11-10
10-Q 2010-06-30 Filed 2010-08-10
10-Q 2010-03-31 Filed 2010-05-14
10-K 2009-12-31 Filed 2010-03-29
8-K 2020-05-13
8-K 2020-05-04
8-K 2020-03-20
8-K 2020-03-17
8-K 2020-02-27
8-K 2019-11-04
8-K 2019-10-01
8-K 2019-09-12
8-K 2019-09-04
8-K 2019-08-25
8-K 2019-08-05
8-K 2019-07-18
8-K 2019-06-12
8-K 2019-05-06
8-K 2019-04-24
8-K 2019-04-08
8-K 2019-03-04
8-K 2018-11-05
8-K 2018-10-29
8-K 2018-08-15
8-K 2018-08-06
8-K 2018-06-13
8-K 2018-05-07
8-K 2018-05-01
8-K 2018-04-02
8-K 2018-03-05
8-K 2018-02-27

ADUS 10Q Quarterly Report

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_8.htm
EX-31.2 adus-ex312_9.htm
EX-32.1 adus-ex321_6.htm
EX-32.2 adus-ex322_7.htm

Addus HomeCare Earnings 2019-09-30

Balance SheetIncome StatementCash Flow
0.70.60.40.30.10.02012201420172020
Assets, Equity
0.20.20.10.10.00.02012201420172020
Rev, G Profit, Net Income
0.20.10.10.0-0.0-0.12012201420172020
Ops, Inv, Fin

10-Q 1 adus-10q_20190930.htm 10-Q adus-10q_20190930.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 September 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 November 1, 2019, Addus HomeCare Corporation had 15,559,260 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 September 30, 2019 and December 31, 2018

3

 

 

Condensed Consolidated Statements of Income For the Three and Nine Months Ended September 30, 2019 and 2018

4

 

 

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

5

 

 

Condensed Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2019 and 2018

7

 

 

Notes to Condensed Consolidated Financial Statements

8

 

 

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

23

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

35

 

 

Item 4. Controls and Procedures

35

 

 

PART II. OTHER INFORMATION

36

 

 

Item 1. Legal Proceedings

36

 

 

Item 1A. Risk Factors

36

 

 

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

37

 

 

Item 3. Defaults Upon Senior Securities

37

 

 

Item 4. Mine Safety Disclosures

37

 

 

Item 5. Other Information

37

 

 

Item 6. Exhibits

38

 

2


Table of Contents

 

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

 

ADDUS HOMECARE CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2019 and December 31, 2018

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

(Unaudited)

 

 

 

September 30,

2019

 

 

December 31,

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash

 

$

239,609

 

 

$

70,406

 

Accounts receivable, net of allowances

 

 

138,045

 

 

 

108,000

 

Prepaid expenses and other current assets

 

 

8,822

 

 

 

7,098

 

Total current assets

 

 

386,476

 

 

 

185,504

 

Property and equipment, net of accumulated depreciation and amortization

 

 

11,527

 

 

 

10,658

 

Other assets

 

 

 

 

 

 

 

 

Goodwill

 

 

162,016

 

 

 

135,442

 

Intangibles, net of accumulated amortization

 

 

41,119

 

 

 

23,784

 

Operating lease right of use assets, net

 

 

17,972

 

 

 

 

Total other assets

 

 

221,107

 

 

 

159,226

 

Total assets

 

$

619,110

 

 

$

355,388

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

14,741

 

 

$

12,238

 

Accrued payroll

 

 

27,043

 

 

 

22,449

 

Accrued expenses

 

 

19,133

 

 

 

11,586

 

Accrued workers’ compensation insurance

 

 

14,399

 

 

 

15,169

 

Current portion of long-term debt

 

 

970

 

 

 

62

 

Total current liabilities

 

 

76,286

 

 

 

61,504

 

Long-term liabilities

 

 

 

 

 

 

 

 

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

 

 

59,248

 

 

 

17,222

 

Long-term operating lease liabilities

 

 

12,559

 

 

 

 

Deferred tax liabilities, net

 

 

866

 

 

 

494

 

Other long-term liabilities

 

 

163

 

 

 

635

 

Total long-term liabilities

 

 

72,836

 

 

 

18,351

 

Total liabilities

 

$

149,122

 

 

$

79,855

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Common stock—$.001 par value; 40,000 authorized and 15,559 and 13,126 shares

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

 

$

15

 

 

$

13

 

Additional paid-in capital

 

 

356,889

 

 

 

177,683

 

Retained earnings

 

 

113,084

 

 

 

97,837

 

Total stockholders’ equity

 

 

469,988

 

 

 

275,533

 

Total liabilities and stockholders’ equity

 

$

619,110

 

 

$

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 Nine Months Ended September 30, 2019 and 2018

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

(Unaudited)

 

 

 

For the Three Months

Ended September 30,

 

 

For the Nine Months

Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net service revenues

 

$

169,803

 

 

$

137,716

 

 

$

458,749

 

 

$

378,449

 

Cost of service revenues

 

 

123,817

 

 

 

100,926

 

 

 

334,719

 

 

 

277,985

 

Gross profit

 

 

45,986

 

 

 

36,790

 

 

 

124,030

 

 

 

100,464

 

General and administrative expenses

 

 

35,950

 

 

 

28,267

 

 

 

95,429

 

 

 

76,298

 

Depreciation and amortization

 

 

2,756

 

 

 

2,535

 

 

 

7,365

 

 

 

6,676

 

Total operating expenses

 

 

38,706

 

 

 

30,802

 

 

 

102,794

 

 

 

82,974

 

Operating income from continuing operations

 

 

7,280

 

 

 

5,988

 

 

 

21,236

 

 

 

17,490

 

Interest income

 

 

(786

)

 

 

(113

)

 

 

(1,096

)

 

 

(2,468

)

Interest expense

 

 

866

 

 

 

1,543

 

 

 

2,164

 

 

 

3,836

 

Total interest expense, net

 

 

80

 

 

 

1,430

 

 

 

1,068

 

 

 

1,368

 

Income from continuing operations before income taxes

 

 

7,200

 

 

 

4,558

 

 

 

20,168

 

 

 

16,122

 

Income tax expense

 

 

1,759

 

 

 

927

 

 

 

4,347

 

 

 

3,287

 

Net income from continuing operations

 

 

5,441

 

 

 

3,631

 

 

 

15,821

 

 

 

12,835

 

Net loss from discontinued operations

 

 

(574

)

 

 

 

 

 

(574

)

 

 

 

Net income

 

$

4,867

 

 

$

3,631

 

 

$

15,247

 

 

$

12,835

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.40

 

 

$

0.29

 

 

$

1.19

 

 

$

1.08

 

Discontinued operations

 

 

(0.04

)

 

 

 

 

 

(0.04

)

 

 

 

Basic income per share

 

$

0.36

 

 

$

0.29

 

 

$

1.15

 

 

$

1.08

 

Diluted income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.38

 

 

$

0.28

 

 

$

1.16

 

 

$

1.06

 

Discontinued operations

 

 

(0.04

)

 

 

 

 

 

(0.04

)

 

 

 

Diluted income per share

 

$

0.34

 

 

$

0.28

 

 

$

1.12

 

 

$

1.06

 

Weighted average number of common shares and potential

   common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

13,766

 

 

 

12,179

 

 

 

13,271

 

 

 

11,740

 

Diluted

 

 

14,203

 

 

 

12,569

 

 

 

13,687

 

 

 

12,037

 

 

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 September 30, 2019

 

 

 

Common Stock

 

 

Additional

Paid-in

Capital

 

 

Retained

Earnings

 

 

Total

Stockholders’

Equity

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at July 1, 2019

 

 

13,219

 

 

$

13

 

 

$

181,111

 

 

$

108,217

 

 

$

289,341

 

Issuance of shares of common stock under

   restricted stock award agreements

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of shares of common stock under

   restricted stock award agreements

 

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,470

 

 

 

 

 

 

1,470

 

Shares issued for exercise of stock options

 

 

43

 

 

 

 

 

 

1,365

 

 

 

 

 

 

1,365

 

Shares issued in Public Offering, net of offering costs

 

 

2,300

 

 

 

2

 

 

 

172,943

 

 

 

 

 

 

172,945

 

Net income

 

 

 

 

 

 

 

 

 

 

 

4,867

 

 

 

4,867

 

Balance at September 30, 2019

 

 

15,559

 

 

$

15

 

 

$

356,889

 

 

$

113,084

 

 

$

469,988

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30, 2018

 

 

 

Common Stock

 

 

Additional

Paid-in

Capital

 

 

Retained

Earnings

 

 

Total

Stockholders’

Equity

 

Balance at July 1, 2018

 

 

11,697

 

 

$

12

 

 

$

98,087

 

 

$

89,538

 

 

$

187,637

 

Issuance of shares of common stock under

   restricted stock award agreements

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,105

 

 

 

 

 

 

1,105

 

Shares issued for exercise of stock options

 

 

5

 

 

 

 

 

 

182

 

 

 

 

 

 

182

 

Shares issued in Public Offering, net of offering costs

 

 

1,390

 

 

 

1

 

 

 

76,617

 

 

 

 

 

 

76,618

 

Net income

 

 

 

 

 

 

 

 

 

 

 

3,631

 

 

 

3,631

 

Balance at September 30, 2018

 

 

13,097

 

 

$

13

 

 

$

175,991

 

 

$

93,169

 

 

$

269,173

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

5


Table of Contents

 

ADDUS HOMECARE CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts and Shares in Thousands)

(Unaudited)

 

 

 

For the Nine Months Ended September 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

 

 

64

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of shares of common stock under

   restricted stock award agreements

 

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,186

 

 

 

 

 

 

4,186

 

Shares issued for exercise of stock options

 

 

73

 

 

 

 

 

 

2,077

 

 

 

 

 

 

2,077

 

Shares issued in Public Offering, net of offering costs

 

 

2,300

 

 

 

2

 

 

 

172,943

 

 

 

 

 

 

172,945

 

Net income

 

 

 

 

 

 

 

 

 

 

 

15,247

 

 

 

15,247

 

Balance at September 30, 2019

 

 

15,559

 

 

$

15

 

 

$

356,889

 

 

$

113,084

 

 

$

469,988

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended September 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

 

 

74

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of shares of common stock under

   restricted stock award agreements

 

 

(16

)

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,961

 

 

 

 

 

 

2,961

 

Shares issued for exercise of stock options

 

 

17

 

 

 

 

 

 

450

 

 

 

 

 

 

450

 

Shares issued in Public Offering, net of offering costs

 

 

1,390

 

 

 

1

 

 

 

76,617

 

 

 

 

 

 

76,618

 

Net income

 

 

 

 

 

 

 

 

 

 

 

12,835

 

 

 

12,835

 

Balance at September 30, 2018

 

 

13,097

 

 

$

13

 

 

$

175,991

 

 

$

93,169

 

 

$

269,173

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

6


Table of Contents

 

 

ADDUS HOMECARE CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2019 and 2018

(Amounts in Thousands)

(Unaudited)

 

 

 

For the Nine Months

 

 

 

Ended September 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

15,247

 

 

$

12,835

 

Adjustments to reconcile net income to net cash provided by operating

   activities, net of acquisitions:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

7,365

 

 

 

6,676

 

Deferred income taxes

 

 

372

 

 

 

397

 

Stock-based compensation

 

 

4,186

 

 

 

2,961

 

Amortization of debt issuance costs under the credit facility

 

 

533

 

 

 

450

 

Provision for doubtful accounts

 

 

168

 

 

 

214

 

Loss of disposal of assets

 

 

(90

)

 

 

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(22,291

)

 

 

(5,418

)

Prepaid expenses and other current assets

 

 

2,822

 

 

 

2,007

 

Accounts payable

 

 

1,856

 

 

 

1,844

 

Accrued expenses and other long-term liabilities

 

 

(2,084

)

 

 

2,713

 

Net cash provided by operating activities

 

 

8,084

 

 

 

24,679

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisitions of businesses, net of cash acquired

 

 

(53,224

)

 

 

(62,347

)

Purchases of property and equipment

 

 

(3,077

)

 

 

(3,384

)

Net cash used in investing activities

 

 

(56,301

)

 

 

(65,731

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of offering costs

 

 

172,945

 

 

 

76,618

 

Borrowings on revolver — credit facility

 

 

23,458

 

 

 

 

Borrowings on term loan credit facility

 

 

19,600

 

 

 

60,420

 

Payments on term loan credit facility

 

 

(245

)

 

 

(1,688

)

Payments for debt issuance costs under the credit facility

 

 

(361

)

 

 

(73

)

Payments on financing lease obligations

 

 

(54

)

 

 

(952

)

Cash received from exercise of stock options

 

 

2,077

 

 

 

450

 

Net cash provided by financing activities

 

 

217,420

 

 

 

134,775

 

Net change in cash

 

 

169,203

 

 

 

93,723

 

Cash, at beginning of period

 

 

70,406

 

 

 

53,754

 

Cash, at end of period

 

$

239,609

 

 

$

147,477

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,594

 

 

$

3,202

 

Cash paid for income taxes

 

 

5,808

 

 

 

4,234

 

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

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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 nine months ended September 30, 2019 were approximately 650,000 stock options outstanding, of which approximately 359,000 and 335,000 respectively, were dilutive. In addition, there were approximately 147,000 restricted stock awards outstanding, 78,000 and 81,000 of which were dilutive for the three and nine months ended September 30, 2019, respectively.

Included in the Company’s calculation of diluted earnings per share for the three and nine months ended September 30, 2018 were approximately 708,000 stock options outstanding, of which approximately 307,000 and 213,000 respectively, were dilutive. In addition, there were approximately 148,000 restricted stock awards outstanding, 83,000 and 83,000 of which were dilutive for the three and nine months ended September 30, 2018, respectively.

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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 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. Public Offering

On September 9, 2019, the Company completed a public offering of an aggregate 2,300,000 shares of common stock, par value $0.001 per share, including 300,000 shares of common stock sold pursuant to the exercise in full by the underwriters of their option to purchase additional shares at a public offering price of $79.50 per share (the “Public Offering”). The Company received net proceeds of approximately $172.9 million, after deducting underwriting discounts and estimated offering expenses of approximately $9.9 million. The Company used approximately $130.0 million from the net proceeds of the Public Offering to fund the purchase price for the Company’s acquisition of Hospice Partners of America, LLC (“Hospice Partners”), on October 1, 2019 and may use any remaining net proceeds of the Public Offering for general corporate purposes, including future acquisitions or investments, and the repayment of indebtedness outstanding under the Company’s amended and restated credit facility. The Public Offering resulted in an increase to additional paid in capital of approximately $172.9 million on the Company’s Condensed Consolidated Balance Sheet at September 30, 2019.

4. 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.

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

 

 

 

September 30, 2019

 

 

 

(Amounts in Thousands)

 

Operating lease right of use assets, net

 

$

17,972

 

 

 

 

 

 

Short-term operating lease liabilities (in accrued expenses)

 

 

5,928

 

Long-term operating lease liabilities

 

 

12,559

 

Total operating lease liabilities

 

$

18,487

 

 

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 September 30, 2019

 

 

For the Nine Months

Ended September 30, 2019

 

 

 

(Amounts in Thousands)

 

 

(Amounts in Thousands)

 

Operating lease costs

 

$

1,897

 

 

$

5,101

 

Short-term lease costs