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Universal Hospital Services
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 2019-01-04 Enter Agreement, Off-BS Arrangement, Control, Officers, Other Events, Exhibits
8-K 2018-12-19 Other Events, Exhibits, Other Events
8-K 2018-12-03 Other Events, Exhibits
8-K 2018-11-06 Earnings, Regulation FD, Exhibits
8-K 2018-10-15 Other Events, Exhibits
8-K 2018-10-15 Earnings, Exhibits
8-K 2018-10-03 Other Events, Exhibits
8-K 2018-08-22 Other Events, Exhibits, Other Events
8-K 2018-08-15 Other Events, Exhibits
8-K 2018-08-13 Earnings, Regulation FD, Exhibits
8-K 2018-08-13 Other Events, Exhibits
8-K 2018-01-09 Regulation FD, Exhibits
8-K 2018-01-04 Other Events, Exhibits
WPZ Williams Partners 38,808
SONC Sonic 1,248
CURR Cure Pharmaceutical Holding 137
ENBP ENB Financial 111
RIHC Rorine International Holding 109
ELON Echelon 38
ADMT ADM Tronics Unlimited 11
ECMT Eco-Mat 0
IBMC IBM Credit 0
DLOC Digital Locations 0
UHSI 2018-09-30
Part I - Financial Information
Item 1. Consolidated Financial Statements — Unaudited
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 uhsi-20180930ex311c06bb2.htm
EX-31.2 uhsi-20180930ex31290aed8.htm
EX-32.1 uhsi-20180930ex321b68294.htm
EX-32.2 uhsi-20180930ex3227eb8dc.htm

Universal Hospital Services Earnings 2018-09-30

UHSI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 uhsi-20180930x10q.htm 10-Q uhsi_Current folio_10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

 

 

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2018

 

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: 000-20086

 

UNIVERSAL HOSPITAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

Delaware

 

41-0760940

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

6625 West 78th Street, Suite 300

Minneapolis, Minnesota 55439-2604

(Address of principal executive offices, including zip code)

 

(952) 893-3200

(Registrant’s telephone number, including area code)

 

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, 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 ☒

 

Number of shares of common stock outstanding as of November 6, 2018:  1,000

 

 

 


 

Universal Hospital Services, Inc. and Subsidiaries

Table of Contents

 

 

 

 

 

 

 

 

 

 

Page

PART I -  FINANCIAL INFORMATION 

 

 

 

 

 

 

 

ITEM 1. 

 

Consolidated Financial Statements (unaudited)

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets —September 30, 2018 and December 31, 2017

 

2

 

 

 

 

 

 

 

Consolidated Statements of Operations—Three and nine months ended September 30, 2018 and 2017

 

3

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Loss) —Three and nine months ended September 30, 2018 and 2017

 

4

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows —Nine months ended September 30, 2018 and 2017

 

5

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements

 

6

 

 

 

 

 

ITEM 2. 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

29

 

 

 

 

 

ITEM 3. 

 

Quantitative and Qualitative Disclosures About Market Risk

 

38

 

 

 

 

 

ITEM 4. 

 

Controls and Procedures

 

38

 

 

 

 

 

PART II - OTHER INFORMATION 

 

 

 

 

 

 

 

ITEM 1. 

 

Legal Proceedings

 

39

 

 

 

 

 

ITEM 1A. 

 

Risk Factors

 

39

 

 

 

 

 

ITEM 2. 

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

39

 

 

 

 

 

ITEM 3. 

 

Defaults Upon Senior Securities

 

39

 

 

 

 

 

ITEM 4. 

 

Mine Safety Disclosures

 

39

 

 

 

 

 

ITEM 5. 

 

Other Information

 

39

 

 

 

 

 

ITEM 6. 

 

Exhibits

 

39

 

 

 

 

 

Signatures 

 

 

 

40

 

1


 

PART I - FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements — Unaudited

Universal Hospital Services, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share and per share information)

(unaudited)

 

 

 

 

 

 

 

 

 

 

    

September 30,

    

December 31,

 

 

2018

 

2017

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Accounts receivable, less allowance for doubtful accounts of  $1,225 at September 30, 2018 and $1,234 at December 31, 2017

 

$

97,166

 

$

89,637

Inventories

 

 

11,257

 

 

9,760

Other current assets

 

 

6,928

 

 

6,836

Total current assets

 

 

115,351

 

 

106,233

Property and equipment:

 

 

 

 

 

 

Medical equipment

 

 

666,494

 

 

629,193

Property and office equipment

 

 

113,600

 

 

105,341

Accumulated depreciation

 

 

(572,400)

 

 

(536,520)

Total property and equipment, net

 

 

207,694

 

 

198,014

Other long-term assets:

 

 

 

 

 

 

Goodwill

 

 

346,168

 

 

346,168

Other intangibles, net

 

 

146,136

 

 

151,921

Other

 

 

10,789

 

 

3,109

Total assets

 

$

826,138

 

$

805,445

Liabilities and Deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt

 

$

5,766

 

$

5,043

Book overdrafts

 

 

1,564

 

 

5,367

Accounts payable

 

 

33,478

 

 

36,689

Accrued compensation

 

 

26,255

 

 

21,498

Accrued interest

 

 

6,406

 

 

18,671

Other accrued expenses

 

 

19,971

 

 

17,763

Total current liabilities

 

 

93,440

 

 

105,031

Long-term debt, less current portion

 

 

691,651

 

 

698,065

Pension and other long-term liabilities

 

 

10,726

 

 

11,385

Deferred income taxes, net

 

 

35,581

 

 

35,342

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Deficit

 

 

 

 

 

 

Common stock, $0.01 par value; 1,000 shares authorized, issued and outstanding at September 30, 2018 and December 31, 2017

 

 

 —

 

 

 —

Additional paid-in capital

 

 

251,469

 

 

250,018

Accumulated deficit

 

 

(250,907)

 

 

(287,998)

Accumulated other comprehensive loss

 

 

(6,002)

 

 

(6,638)

Total Universal Hospital Services, Inc. and Subsidiaries deficit

 

 

(5,440)

 

 

(44,618)

Noncontrolling interest

 

 

180

 

 

240

Total deficit

 

 

(5,260)

 

 

(44,378)

Total liabilities and deficit

 

$

826,138

 

$

805,445

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

2


 

 

Universal Hospital Services, Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

    

2018

    

2017

    

2018

    

2017

Revenue

 

$

138,113

 

$

123,772

 

$

421,175

 

$

382,633

Cost of revenue

 

 

91,925

 

 

84,408

 

 

273,322

 

 

255,497

Gross margin

 

 

46,188

 

 

39,364

 

 

147,853

 

 

127,136

Selling, general and administrative

 

 

34,359

 

 

28,604

 

 

102,138

 

 

93,172

Gain on legal settlement

 

 

(2,817)

 

 

 —

 

 

(26,291)

 

 

 —

Operating income

 

 

14,646

 

 

10,760

 

 

72,006

 

 

33,964

Interest expense

 

 

13,140

 

 

13,474

 

 

40,128

 

 

40,366

Income (loss) before income taxes and noncontrolling interest

 

 

1,506

 

 

(2,714)

 

 

31,878

 

 

(6,402)

Provision for income taxes

 

 

134

 

 

393

 

 

767

 

 

888

Consolidated net income (loss)

 

 

1,372

 

 

(3,107)

 

 

31,111

 

 

(7,290)

Net income attributable to noncontrolling interest

 

 

75

 

 

125

 

 

241

 

 

295

Net income (loss) attributable to Universal Hospital Services, Inc. and Subsidiaries

 

$

1,297

 

$

(3,232)

 

$

30,870

 

$

(7,585)

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

3


 

Universal Hospital Services, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

    

2018

    

2017

    

2018

    

2017

Consolidated net income (loss)

 

$

1,372

 

$

(3,107)

 

$

31,111

 

$

(7,290)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Gain on minimum pension liability, net of tax of $0

 

 

212

 

 

185

 

 

636

 

 

556

Total other comprehensive income

 

 

212

 

 

185

 

 

636

 

 

556

Comprehensive income (loss)

 

 

1,584

 

 

(2,922)

 

 

31,747

 

 

(6,734)

Comprehensive income attributable to noncontrolling interest

 

 

75

 

 

125

 

 

241

 

 

295

Comprehensive income (loss) attributable to Universal Hospital Services, Inc. and Subsidiaries

 

$

1,509

 

$

(3,047)

 

$

31,506

 

$

(7,029)

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

4


 

Universal Hospital Services, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

September 30,

 

    

2018

    

2017

Cash flows from operating activities:

 

 

 

 

 

 

Consolidated net income (loss)

 

$

31,111

 

$

(7,290)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation

 

 

51,535

 

 

53,089

Gain on legal settlement

 

 

(23,391)

 

 

 —

Amortization of intangibles, contract costs, deferred financing costs and bond premium

 

 

7,369

 

 

7,692

Provision for doubtful accounts

 

 

1,654

 

 

207

Provision for inventory obsolescence

 

 

(123)

 

 

322

Non-cash share-based compensation expense

 

 

2,260

 

 

2,336

Gain on sales and disposals of equipment

 

 

(1,906)

 

 

(1,769)

Deferred income taxes

 

 

239

 

 

325

Interest on note receivable

 

 

(34)

 

 

(20)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(9,183)

 

 

(278)

Inventories

 

 

(1,374)

 

 

269

Other operating assets

 

 

202

 

 

147

Accounts payable

 

 

3,709

 

 

(2,259)

Other operating liabilities

 

 

(7,232)

 

 

(19,037)

Net cash provided by operating activities

 

 

54,836

 

 

33,734

Cash flows from investing activities:

 

 

 

 

 

 

Medical equipment purchases

 

 

(34,107)

 

 

(34,552)

Property and office equipment purchases

 

 

(5,575)

 

 

(4,722)

Proceeds from disposition of property and equipment

 

 

2,911

 

 

3,132

Issuance of note receivable from officer

 

 

(581)

 

 

(936)

Acquisition and refund of escrow

 

 

 —

 

 

(1,896)

Net cash used in investing activities

 

 

(37,352)

 

 

(38,974)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds under senior secured credit facility

 

 

160,448

 

 

130,223

Payments under senior secured credit facility

 

 

(167,648)

 

 

(112,942)

Payments of principal under capital lease obligations

 

 

(4,747)

 

 

(4,915)

Holdback payment related to acquisition

 

 

(624)

 

 

 —

Distributions to noncontrolling interests

 

 

(301)

 

 

(229)

Proceeds from exercise of parent company stock options

 

 

340

 

 

66

Contribution from Parent

 

 

 —

 

 

1,900

Shares forfeited for taxes

 

 

(1,149)

 

 

 —

Change in book overdrafts

 

 

(3,803)

 

 

(8,863)

Net cash (used in) provided by financing activities

 

 

(17,484)

 

 

5,240

Net change in cash and cash equivalents

 

 

 —

 

 

 —

Cash and cash equivalents at the beginning of period

 

 

 —

 

 

 —

Cash and cash equivalents at the end of period

 

$

 —

 

$

 —

Supplemental cash flow information:

 

 

 

 

 

 

Interest paid

 

$

51,630

 

$

51,751

Income taxes paid

 

 

842

 

 

656

Non-cash activities:

 

 

 

 

 

 

Medical equipment purchases included in accounts payable (at end of period)

 

$

6,471

 

$

6,978

Capital lease additions

 

 

6,066

 

 

4,921

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

5


 

Universal Hospital Services, Inc. and Subsidiaries

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.Basis of Presentation

 

The interim consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared by Universal Hospital Services, Inc. and Subsidiaries (“we”, “our”, “us”, the “Company”, or “UHS”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).  Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted, pursuant to such rules and regulations.  These consolidated financial statements should be read in conjunction with the financial statements and related notes included in the Company’s 2017 Annual Report on Form 10-K filed with the SEC.

 

The interim consolidated financial statements presented herein as of September 30, 2018, reflect, in the opinion of management, all adjustments necessary for a fair presentation of the financial position and the results of operations and cash flows for the periods presented.  These adjustments are all of a normal, recurring nature.  The results of operations for any interim period are not necessarily indicative of results for the full year.

 

We are required to make estimates and assumptions about future events in preparing consolidated financial statements in conformity with GAAP.  These estimates and assumptions affect the amounts of assets, liabilities, revenues and expenses at the date of the unaudited consolidated financial statements.  While we believe that our past estimates and assumptions have been materially accurate, our current estimates are subject to change if different assumptions as to the outcome of future events are made.  We evaluate our estimates and judgments on an ongoing basis and predicate those estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances.  We make adjustments to our assumptions and judgments when facts and circumstances dictate.  Since future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates used in preparing the accompanying unaudited consolidated financial statements.

 

A description of our significant accounting policies is included in our 2017 Annual Report on Form 10-K. There have been no material changes to these policies for the nine months ended September 30, 2018, except for the adoption of ASU 2014-09, see Note 3, Revenue Recognition.

 

Historically, the Company reported under three segments.  Medical Equipment Solutions included supplemental and peak needs usage solutions, customized equipment agreement solutions, 360 On-site managed solutions, specialty medical equipment sale, distribution and disposable sales.  Clinical Engineering Solutions included supplemental maintenance, repair and remediation solutions, on-site biomed services, health care technology solutions, federal governmental services and clinical engineering capital sales.  Surgical Services included on-demand and scheduled usage solutions, on-site solutions for hospital and multi-facility health systems and disposable only sales.

 

Effective January 1, 2018, the Company changed its segment reporting to report its financial information under one reporting segment. The change in reporting was made to conform to the way the Company currently manages and executes the strategy and operations of the business. Specifically, the chief operating decision maker (“CODM”) makes operating decisions and assesses performance using discrete financial information from one reportable segment, as our resources and infrastructure are shared, and as its go-to-market strategy has evolved with the introduction and validation of our Equipment Value Management (“EVM”) solution strategy. Current financial information is based upon the transformation of the business model and the development of the Company’s commercial framework, EVM – an end-to-end approach to medical equipment management that helps hospitals recover cost and time that today are wasted through inefficient medical equipment processes.  EVM integrates customers supply chain, patient care and clinical engineering teams, connecting these siloed groups to streamline processes to improve stakeholder productivity and satisfaction while optimizing equipment utilization and lowering the total cost of ownership.  EVM provides the customer with the equipment they need, when they need it, with assurance that the assets serviced to the highest quality standards in the industry. EVM combines the capabilities of all our service offerings.  Further, the Company maintains a similar compliment of services, type of customer for its services, method of distribution for its services and operates within a similar regulatory environment across the United States. Accordingly, we concluded that we operate as one reporting

6


 

segment and one reporting unit. The Company does not aggregate any components into its reporting unit.  Finally, the Company analyzed its goodwill for potential impairment before and after the change in reporting units and concluded that there was no impairment.

 

The presentation of one reporting segment resulted in three disaggregated revenue categories of Equipment Solutions which includes supplemental and peak needs usage solutions, surgical services on-demand and scheduled usage solutions, specialty medical equipment sale, distribution and disposable sales, clinical engineering capital sales and surgical disposable only sales.  Clinical Engineering Solutions includes supplemental maintenance, repair and remediation solutions, on-site biomed services, health care technology solutions and federal governmental services.  On-site Managed Services includes 360 On-site managed solutions and surgical services on-site solutions for hospital and multi-facility health systems.

 

The Company operates in one geographic region, the United States. As the Company now reports as one segment which equals the total Company’s results as reflected in the Consolidated Statement of Operations, prior periods presentation have been restated to conform with current period presentation.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Universal Hospital Services, Inc and its 100%-owned subsidiaries, UHS Surgical Services, Inc. (“Surgical Services” or “SS”) and Radiographic Equipment Services, Inc. (“RES”). In addition, in accordance with guidance issued by the Financial Accounting Standards Board (“FASB”), we have accounted for our equity investments in entities in which we are the primary beneficiary under the full consolidation method. All significant intercompany transactions and balances have been eliminated through consolidation. As the primary beneficiary, we consolidate the limited liability companies (“LLCs”) referred to in Note 11, Limited Liability Companies, as we effectively receive the majority of the benefits from such entities and we provide equipment lease guarantees for such entities.

 

2.Recent Accounting Pronouncements

 

Standards Adopted

 

In May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU replaced most existing revenue recognition guidance in GAAP when it became effective. The new standard is effective beginning after December 15, 2017 and interim periods within those years as stated in ASU 2015-14. The standard permits the use of either the full retrospective or cumulative effect (modified retrospective) transition method. We adopted this guidance on January 1, 2018 and selected the cumulative effect transition method.

 

We have performed a review of the requirements of the new guidance, codified by FASB in ASC Topic 606, and have applied the five-step model of the new standard to our contracts and have compared the results to our previous accounting practices under ASC Topic 605. Based on this analysis, the new standard did not have a material impact on the results of operations or cash flows of the Company. However, amendments to ASC Topic 340, Other Assets and Deferred Costs, require the capitalization of costs to obtain and fulfill customer contracts, which were previously expensed as incurred. The assets recognized for the costs to obtain and/or fulfill a contract will be amortized on a systematic basis that is consistent with the transfer of the services to which the asset relates. Accordingly, $6.2 million of prior year costs were capitalized as an asset upon adoption of this standard (effective January 1, 2018) and are being amortized over a period of five years.

 

In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The ASU became effective for annual and interim periods for fiscal years beginning after December 15, 2017.  The adoption of this standard did not have a material impact on our consolidated financial statements.

 

7


 

In January 2017, the FASB issued ASU No. 2017-01 Business Combination (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. The ASU became effective for annual and interim periods for fiscal years beginning after December 15, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements.

 

In March 2017, the FASB issued ASU No. 2017-07 Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-01”). ASU 2017-07 requires that a company present service cost separately from the other components of the net benefit cost.  This ASU became effective for annual and interim periods for fiscal years beginning after December 15, 2017. We adopted ASU 2017-07 on January 1, 2018 and retrospectively applied this ASU to all periods presented. As a result, $0.2 and $0.6 million of pension costs were reclassified from selling, general and administrative to interest expense for the three and nine months ended September 30, 2017.

 

In May 2017, the FASB issued ASU No. 2017-09 Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 clarifies what constitutes a modification of a share-based payment award. This ASU became effective for annual and interim periods for fiscal years beginning after December 15, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements.

 

Standards Not Yet Adopted

 

In February 2016, the FASB issued ASU No. 2016-02 on Leases (ASC Topic 842) (“ASU 2016-02”). ASU 2016-02 was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liability on the balance sheet and disclosing key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheets for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods.

 

We expect to adopt the new standard on January 1, 2019 and use the effective date as our date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients in transition. We expect to elect the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We do not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us.

 

We expect that this standard will have a material impact on our consolidated balance sheets. We do not expect that this standard will have a material impact on our consolidated statements of operations and cash flows. While we are still evaluating the amount and continue to assess all of the effects of adoption, we currently believe the most significant effects relate to (1) the recognition of new ROU assets and lease liabilities on our balance sheet for our real estate operating leases; and (2) providing significant new disclosures about our leasing activities. We do not expect a significant change in our leasing activities between now and adoption. 

 

In February 2018, the FASB issued ASU No. 2018-02 Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax

8


 

effects resulting from the Tax Cuts and Jobs Act. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted. We expect to adopt this standard on January 1, 2019. The adoption of this standard is not expected to have a material impact on our consolidated financial statements due to our valuation allowance.

 

In March 2018, the FASB issued ASU No. 2018-05 Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU 2018-05”). ASU 2018-05 adds various SEC paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin No. 118. See Note 12, Income Taxes.

 

In June 2018, the FASB issued ASU No. 2018-07 Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 expands the scope of Topic 718 to include share based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted but no earlier than an entity’s adoption date of Topic 606. We expect to adopt this standard on January 1, 2019. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

 

In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements on fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted. We expect to adopt this standard on January 1, 2020. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

 

In August 2018, the FASB issued ASU No. 2018-14 Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”). ASU 2018-14 removes disclosures that no longer are considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted. We expect to adopt this standard on January 1, 2021. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

 

3.Revenue Recognition

 

The Company adopted ASU 2014-09, Revenue from Contracts with Customers, effective January 1, 2018, herein referred as ASC Topic 606. ASC Topic 606 is a comprehensive new revenue recognition model that requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. The Company adopted ASU 2014-09 using the cumulative effect (also known as the modified retrospective) method by recognizing the cumulative effect of initially applying the ASU as an adjustment to the opening balance of Accumulated Deficit at January 1, 2018. Therefore, the comparative information for the third quarter and nine months ended September 30, 2017 has not been adjusted and continues to be reported under the previous accounting standards (ASC Topic 605). The details of the changes to our accounting policies and the quantitative impact of the changes are set out below.

 

Customer arrangements typically have multiple performance obligations to provide equipment solutions, clinical engineering and/or on-site equipment managed services on a per use and/or over time basis.  Equipment Solutions primarily consists of supplemental, peak needs and surgical equipment usage solutions. Clinical Engineering consists of supplemental maintenance, repair and remediation solutions, health care technology solutions, and federal government services.  On-site Managed Services consists of 360 on-site managed solutions in both our historical A360 program (using UHS-owned equipment) and our newer M360 program (managing customer-owned equipment).  Consideration paid by the customer for each performance obligation is billed within the month the service is performed, and contractual prices are established within our customer arrangements that are representative of the stand-alone selling price. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that

9


 

are collected by the Company from a customer, are excluded from revenue. There are no differences between revenue being earned under Topic 606 and the previous standard (ASC Topic 605).

 

The Company reports only its portion of revenues earned under certain revenue share arrangements in accordance with ASC Topic 606-10-55-36 to 606-10-55-40 “Principal versus Agent Considerations,” because, among other factors, the equipment manufacturer retains title to the equipment, maintains general inventory and physical loss risk of equipment on rental and because we earn a fixed percentage of the billings to customers.

 

In the following table, revenue is disaggregated by service solution.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

(in thousands)

 

2018

 

2017

 

2018

 

2017

Equipment Solutions

 

$

60,279

 

$

54,152

 

$

185,713

 

$

172,845

Clinical Engineering

 

 

40,366

 

 

33,406

 

 

119,415

 

 

101,160

On-Site Managed Services

 

 

37,468

 

 

36,214

 

 

116,047

 

 

108,628

 

 

$

138,113

 

$

123,772

 

$

421,175

 

$

382,633

 

Concurrent with the adoption of Topic 606 on January 1, 2018, the Company also adopted amendments to ASC Topic 340, Other Assets and Deferred Costs, which requires the costs to obtain and fulfill customer contracts to be capitalized, which were previously expensed as incurred. The Company incurs costs related to obtaining new contracts. Management expects those costs attributable to new revenue production are recoverable and therefore the Company capitalized them as contract costs in accordance with ASC Topic 340 and is amortizing them over the anticipated period of the new revenue production.

 

The Company capitalized the estimated costs to obtain a contract in the amount of $6.2 million at January 1, 2018 with a corresponding adjustment to accumulated deficit for the “Impact of Change in Accounting Policy”.  The Contract Asset included in other long-term assets in the Consolidated Balance Sheet at September 30, 2018 is $7.4 million.  Capitalized costs are amortized over the expected life of the related contracts which is estimated to be five years. Amortization is computed on a straight-line basis which coincides with the predominant expected life of the underlying contracts. Amortization costs are reflected in selling, general and administrative expenses. The amount of amortization was $0.5 and $1.4 million for the three and nine months ended September 30, 2018, respectively There was no impairment loss in relation to the costs capitalized during the three and nine months ended September 30, 2018.

 

4.Fair Value Measurements

 

Financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2018 and December 31, 2017 are summarized in the following table by type of inputs applicable to the fair value measurements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value at September 30, 2018

 

Fair Value at December 31, 2017

(in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

    

Level 1

    

Level 2

    

Level 3

    

Total

Contingent Consideration

 

$

 —

 

$

 —

 

$

200

 

$

200

 

$

 —

 

$

 —

 

$

133

 

$

133

 

A description of the inputs used in the valuation of assets and liabilities is summarized as follows:

 

Level 1 — Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets.

 

Level 2 — Inputs include directly or indirectly observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that are considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves that are observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

Level 3 — Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or

10


 

liabilities or related observable inputs that can be corroborated at the measurement date. Measurements of non-exchange traded derivative contract assets and liabilities are primarily based on valuation models, discounted cash flow models or other valuation techniques that are believed to be used by market participants. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in pricing assets or liabilities.

 

During 2017, we recorded a contingent consideration liability, in the form of an earn-out payment, related to our December 6, 2017 acquisition in the total amount of $0.1 million. Additionally, $0.07 million of an earn-out liability was recorded during the quarter ended June 30, 2018. The contingent consideration is based on achieving certain revenue results. The fair value of the liability was estimated using a discounted cash flow approach with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement.  The significant inputs in the Level 3 measurement not supported by market activity included our assessments of expected future cash flows during the earn-out period related to the assets acquired, appropriately discounted considering the uncertainties associated with the obligation, and calculated based on estimated revenues in accordance with the terms of the agreement. There were no earn-out payments for the three and nine months ended September 30, 2018. The earn-out is expected to be paid in the fourth quarter of 2018.

 

The assumptions used in preparing the discounted cash flow analyses included estimates of interest rates and the timing and amount of incremental cash flows.

 

A reconciliation of the beginning and ending balance for the Level 3 measurement are as follows:

 

 

 

 

 

(in thousands)

    

    

 

Balance at December 31, 2017

 

$

133

Addition

 

 

67

Balance at September 30, 2018

 

$

200

 

Fair Value of Other Financial Instruments

 

The Company considers that the carrying amount of financial instruments, including accounts receivable, accounts payable, accrued liabilities and senior secured credit facility, approximates fair value due to their short maturities. The fair value of our outstanding Original Notes and Add-on Notes (each as defined in Note 8, Long-Term Debt) as of September 30, 2018 and December 31, 2017, based on the quoted market price for the same or similar issues of debt, which represents a Level 2 fair value measurement, is approximately:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2018

 

December 31, 2017

 

    

Carrying

    

Fair

    

Carrying

    

Fair

(in thousands)

 

Value

 

Value

 

Value

 

Value

Original Notes - 7.625% (1)

 

$

422,709

 

$

425,531

 

$

421,772

 

$

426,063

Add-on Notes - 7.625% (2)

 

 

223,201

 

 

220,275

 

 

224,338

 

 

220,550


(1) The carrying value of the Original Notes - 7.625% is net of unamortized deferred financing costs of $2.3 and $3.2 million as of September 30, 2018 and December 31, 2017, respectively.

(2) The carrying value of the Add-on  Notes - 7.625% is net of unamortized deferred financing costs of $1.0 and $1.3 million as of September 30, 2018 and December 31, 2017, respectively, and includes unamortized bond premium of $4.2 and $5.7 million as of September 30, 2018 and December 31, 2017, respectively.

 

5.Goodwill and Other Intangible Assets

 

Our reporting unit, which is equal to our reporting segment, has a negative carrying amount at September 30, 2018 and December 31, 2017. There were no impairments recorded in the three months and nine months ended September 30, 2018 and 2017.

 

 

 

 

 

11


 

Our other intangible assets as of September 30, 2018 and December 31, 2017 consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2018

 

December 31, 2017

 

    

    

    

Accumulated

    

 

    

    

    

    

    

Accumulated

    

 

    

    

(in thousands)

 

Cost

 

Amortization

 

Impairment

 

Net

 

Cost

 

Amortization

 

Impairment

 

Net

Finite-life intangibles

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationship

 

$

125,828

 

$

(111,417)

 

$

 —

 

$

14,411

 

$

125,828

 

$

(105,911)

 

$

 —

 

$

19,917

Non-compete agreements

 

 

2,101

 

 

(1,476)

 

 

 —

 

 

625

 

 

2,101

 

 

(1,197)

 

 

 —

 

 

904

Total finite-life intangibles

 

 

127,929

 

 

(112,893)

 

 

 —

 

 

15,036

 

 

127,929

 

 

(107,108)

 

 

 —

 

 

20,821

Indefinite-life intangibles

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names

 

 

166,000

 

 

 —

 

 

(34,900)

 

 

131,100

 

 

166,000

 

 

 —

 

 

(34,900)

 

 

131,100

Total intangible assets

 

$

293,929

 

$

(112,893)

 

$

(34,900)

 

$

146,136

 

$

293,929

 

$

(107,108)

 

$

(34,900)

 

$

151,921

 

Total amortization expense related to intangible assets was $1.8 and $2.1 million for the three months ended September 30, 2018 and 2017, respectively, and $5.8 and $7.4 million for the nine months ended September 30, 2018 and 2017, respectively.

 

The estimated future amortization expense for identifiable intangible assets during the remainder of 2018 and the next five years is as follows:

 

 

 

 

 

 

(in thousands)

    

    

 

Remainder of 2018

 

$

1,809

2019

 

 

5,005

2020

 

 

2,765

2021

 

 

2,106

2022

 

 

1,376

2023

 

 

503

 

 

 

 

 

 

6.Deficit

 

The following tables represent changes in deficit that are attributable to our shareholder and noncontrolling interests for the nine month periods ended September 30, 2018 and 2017.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

    

    

 

    

Accumulated

    

    

 

    

    

 

 

 

Additional

 

 

 

 

Other

 

 

 

 

 

 

 

Paid-in

 

Accumulated

 

Comprehensive

 

Noncontrolling

 

Total

(in thousands)

 

Capital

 

Deficit

 

Loss

 

Interests

 

Deficit

Balance at December 31, 2017

 

$

250,018

 

$

(287,998)

 

$

(6,638)

 

$

240

 

$

(44,378)

Impact of change in accounting policy

 

 

 —

 

 

6,221

 

 

 —

 

 

 —

 

 

6,221

Net income

 

 

 —

 

 

30,870

 

 

 —

 

 

241

 

 

31,111

Other comprehensive income

 

 

 —

 

 

 —

 

 

636

 

 

 —

 

 

636

Share-based compensation

 

 

2,260

 

 

 —

 

 

 —

 

 

 —

 

 

2,260

Stock options exercised

 

 

340

 

 

 —

 

 

 —

 

 

 —

 

 

340

Shares forfeited for taxes

 

 

(1,149)

 

 

 —

 

 

 —

 

 

 —

 

 

(1,149)

Cash distributions to noncontrolling interests

 

 

 —

 

 

 —

 

 

 —

 

 

(301)

 

 

(301)

Balance at September 30, 2018

 

$

251,469

 

$

(250,907)

 

$

(6,002)

 

$

180

 

$

(5,260)

 

 

 

12


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

    

    

 

    

Accumulated

    

    

 

    

    

 

 

 

Additional

 

 

 

 

Other

 

 

 

 

 

 

 

Paid-in

 

Accumulated

 

Comprehensive

 

Noncontrolling

 

Total

(in thousands)

 

Capital

 

Deficit

 

Loss

 

Interests

 

Deficit

Balance at December 31, 2016

 

$

244,986

 

$

(296,826)

 

$

(7,826)

 

$

181

 

$

(59,485)

Net (loss) income

 

 

 —

 

 

(7,585)

 

 

 —

 

 

295

 

 

(7,290)

Other comprehensive income

 

 

 —

 

 

 —

 

 

556

 

 

 —

 

 

556

Contribution from Parent

 

 

1,900

 

 

 —

 

 

 —

 

 

 —

 

 

1,900

Share-based compensation

 

 

2,336

 

 

 —

 

 

 —

 

 

 —

 

 

2,336

Stock options exercised

 

 

66

 

 

 —

 

 

 —

 

 

 —

 

 

66

Cash distributions to noncontrolling interests

 

 

 —

 

 

 —

 

 

 —

 

 

(229)

 

 

(229)

Balance at September 30, 2017

 

$

249,288

 

$

(304,411)

 

$

(7,270)

 

$

247

 

$

(62,146)

 

 

 

 

7.Share-Based Compensation

 

During the nine months ended September 30, 2018, activity under the 2007 Stock Option Plan (the “2007 Stock Option Plan”), of UHS Holdco, Inc., our parent company (“Parent”), was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

 

 

    

Weighted

 

 

 

 

 

 

 

 

 

 

average

 

 

 

 

Weighted

 

Aggregate

 

remaining

 

 

Number of

 

average

 

intrinsic

 

contractual

(in thousands, except exercise price and years)

 

options

 

exercise price

 

value

 

term (years)

Outstanding at December 31, 2017

 

37,673

 

$

0.79

 

$

40,875

 

6.8

Granted

 

715

 

 

1.87

 

 

 

 

 

Exercised

 

(475)

 

 

0.72

 

$

549

 

 

Forfeited or expired

 

(325)

 

 

0.78

 

 

 

 

 

Outstanding at September 30, 2018

 

37,588

 

$

0.81

 

$

39,971

 

6.1

Exercisable at September 30, 2018

 

23,116

 

$

0.75

 

$

25,909

 

6.1

Remaining authorized options available for issue

 

5,378

 

 

 

 

 

 

 

 

 

The exercise price of the stock option award is equal to the market value of Parent’s common stock on the grant date as determined reasonably and in good faith by Parent’s Board of Directors and compensation committee and based on an analysis of a variety of factors, including peer group multiples, merger and acquisition multiples, and discounted cash flow analyses.

 

The intrinsic value of a stock award is the amount by which the market value of the underlying stock exceeds the exercise price of the award.

 

We determine the fair value of stock options using the Black-Scholes option pricing model. The estimated fair value of options, including the effect of estimated forfeitures, is recognized as an expense on a straight-line basis over the options’ expected vesting periods. The following assumptions were used in determining the fair value of stock options granted during the nine months ended September 30, 2018 and 2017 under the Black-Scholes model.

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

September 30,

 

 

2018

 

 

2017

 

Risk-free interest rate

 

1.62

%

 

 

1.72

%

Expected volatility

 

29.0

%

 

 

29.0

%

Dividend yield

 

N/A

 

 

 

N/A

 

Expected option life (years)

 

4.60

 

 

 

4.97

 

Black-Scholes Value of options

$

0.50

 

 

$

0.34

 

 

Expected volatility is based on an independent valuation of the stock of companies within our peer group. Given the lack of a true comparable company, the peer group consists of selected public health care companies representing our suppliers, customers and competitors within certain product lines. The risk free-interest rate is based on the U.S. 

13


 

Treasury yield curve in effect at the grant date based on the expected option life. The expected option life is estimated based on foreseeable trends.

 

At September 30, 2018, unearned non-cash share-based compensation that we expect to recognize as expense over a weighted average period of 1.3 years totals approximately $3.1 million, net of our estimated forfeiture rate of 2.0%. The expense could be accelerated upon the sale of Parent or the Company.

 

In April 2015, Parent granted the Company’s Chief Executive Officer 7.0 million restricted stock units which vest over four years. Total compensation expense related to this grant was $0.3 million and $0.3 million for the three months ended September 30, 2018 and 2017, respectively, and $0.9 million and $0.9 million for the nine months ended September 30, 2018 and 2017, respectively.

 

Although Parent grants stock options and restricted stock units, the Company recognizes compensation cost, primarily included in Selling, General and Administrative expense, related to these options and units since the services are performed for its benefit.

 

On May 9, 2018, Parent adopted the 2018 Executive Management Stock Option Plan (the “2018 Plan”). Pursuant to the 2018 Plan, awards may be in the form of Non-Qualified Stock Options. The maximum number of shares for which options may be granted is 2,500,000 under the 2018 Plan. In the second quarter of 2018, 2,499,000 shares of common stock were issued to certain UHS executives, including Named Executive Officers other than the Chief Executive Officer pursuant to the 2018 Plan.

 

Options granted pursuant to the 2018 Plan have an exercise price of $0.71 per share and may only be exercised within 30 days after the signing of a binding agreement for the Company to undergo a Change in Control (as defined in the 2018 Plan) event.  No expense has been recorded for this plan in 2018.  Additionally, all awards of options granted pursuant to the 2018 Plan provide for a claw back of all proceeds received for such options in the event an award recipient voluntarily terminates his or her employment with the Company without Good Reason or has his or her employment terminated by the Company for Cause (as such terms are defined in the Company’s Executive Severance Pay Plan) within one year following a Change in Control of the Company.

 

On August 9, 2018, the board of directors of the Parent approved and adopted an amendment to the 2018 Plan to confirm that any options granted under the 2018 Plan will only be exercisable upon a Change of Control of Parent.

 

8.Long-Term Debt

 

Long-term debt consists of the following:

 

 

 

 

 

 

 

 

 

 

    

September 30,

    

December 31,

(in thousands)

 

2018

 

2017

Original Notes - 7.625% (1)

 

$

422,709

 

$

421,772

Add-on Notes - 7.625% (2)

 

 

223,201

 

 

224,338

Senior secured credit facility (3)

 

 

32,134

 

 

38,944

Capital lease obligations

 

 

19,373

 

 

18,054

 

 

 

697,417