Attached files
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EX-32.1 - EX-32.1 - ALMOST FAMILY INC | afam-20151002ex321520a35.htm |
EX-31.1 - EX-31.1 - ALMOST FAMILY INC | afam-20151002ex3115ea86c.htm |
EX-31.2 - EX-31.2 - ALMOST FAMILY INC | afam-20151002ex31280bd72.htm |
EX-32.2 - EX-32.2 - ALMOST FAMILY INC | afam-20151002ex32242a24a.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 October 2, 2015
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 001-09848
ALMOST FAMILY, INC.
(Exact name of Registrant as specified in its charter)
Delaware |
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06-1153720 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification |
9510 Ormsby Station Road, Suite 300, Louisville, Kentucky 40223
(Address of principal executive offices)
(502) 891-1000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):
Large accelerated filer ☐ |
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Accelerated filer ☒ |
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Non-accelerated filer ☐ |
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Smaller Reporting Company ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class of Common Stock $0.10 par value
Shares outstanding at November 4, 2015 9,823,132
ALMOST FAMILY, INC. AND SUBSIDIARIES
FORM 10-Q
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Consolidated Balance Sheets as of October 2, 2015 and December 31, 2014 |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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2
PART I — FINANCIAL INFORMATION
ALMOST FAMILY, INC. AND SUBSIDIARIES
(In thousands)
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October 2, 2015 |
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(UNAUDITED) |
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December 31, 2014 |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
6,368 |
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$ |
6,886 |
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Accounts receivable - net |
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85,269 |
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74,602 |
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Prepaid expenses and other current assets |
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16,260 |
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10,420 |
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Deferred tax assets |
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6,510 |
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12,230 |
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TOTAL CURRENT ASSETS |
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114,407 |
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104,138 |
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PROPERTY AND EQUIPMENT - NET |
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5,344 |
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5,575 |
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GOODWILL |
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241,568 |
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192,523 |
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OTHER INTANGIBLE ASSETS |
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61,664 |
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54,402 |
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OTHER ASSETS |
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2,857 |
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850 |
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TOTAL ASSETS |
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$ |
425,840 |
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$ |
357,488 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
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$ |
13,602 |
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$ |
9,257 |
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Accrued other liabilities |
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39,142 |
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42,326 |
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Current portion - notes payable and capital leases |
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— |
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51 |
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TOTAL CURRENT LIABILITIES |
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52,744 |
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51,634 |
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LONG-TERM LIABILITIES: |
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Revolving credit facility |
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92,297 |
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46,447 |
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Deferred tax liabilities |
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14,097 |
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23,510 |
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Other liabilities |
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3,721 |
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2,705 |
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TOTAL LONG-TERM LIABILITIES |
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110,115 |
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72,662 |
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TOTAL LIABILITIES |
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162,859 |
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124,296 |
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NONCONTROLLING INTEREST - REDEEMABLE - |
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HEALTHCARE INNOVATIONS |
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3,639 |
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3,639 |
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STOCKHOLDERS’ EQUITY: |
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Preferred stock, par value $0.05; authorized 2,000 shares; none issued or outstanding |
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— |
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— |
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Common stock, par value $0.10; authorized 25,000; 9,926 and 9,574 issued and outstanding |
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992 |
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957 |
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Treasury stock, at cost, 103 and 94 shares |
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(2,731) |
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(2,392) |
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Additional paid-in capital |
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119,023 |
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105,862 |
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Noncontrolling interest - nonredeemable |
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(737) |
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(420) |
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Retained earnings |
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142,795 |
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125,546 |
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TOTAL STOCKHOLDERS’ EQUITY |
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259,342 |
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229,553 |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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$ |
425,840 |
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$ |
357,488 |
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See accompanying Notes to Consolidated Financial Statements.
3
ALMOST FAMILY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share data)
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Three months ended |
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Nine months ended |
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October 2, 2015 |
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September 30, 2014 |
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October 2, 2015 |
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September 30, 2014 |
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Net service revenues |
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$ |
131,232 |
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$ |
125,541 |
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$ |
386,997 |
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$ |
371,072 |
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Cost of service revenues (excluding depreciation and amortization) |
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69,471 |
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66,521 |
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204,142 |
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197,604 |
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Gross margin |
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61,761 |
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59,020 |
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182,855 |
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173,468 |
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General and administrative expenses: |
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Salaries and benefits |
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36,748 |
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34,959 |
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108,973 |
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104,500 |
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Other |
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15,687 |
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15,036 |
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47,990 |
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46,260 |
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Deal, transition and other non-recurring costs |
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(1,309) |
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1,655 |
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(695) |
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6,012 |
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Total general and administrative expenses |
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51,126 |
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51,650 |
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156,268 |
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156,772 |
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Operating income |
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10,635 |
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7,370 |
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26,587 |
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16,696 |
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Interest expense, net |
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(494) |
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(401) |
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(1,247) |
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(1,078) |
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Income before income taxes |
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10,141 |
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6,969 |
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25,340 |
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15,618 |
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Income tax expense |
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(2,078) |
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(2,810) |
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(8,458) |
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(6,245) |
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Net income from continuing operations |
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8,063 |
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4,159 |
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16,882 |
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9,373 |
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Discontinued operations: |
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(Loss) gain from operations, net of tax of ($1), ($26), ($6) and ($116) |
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(2) |
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(39) |
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(9) |
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(173) |
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Net income |
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8,061 |
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4,120 |
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16,873 |
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9,200 |
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Net (income) loss attributable to noncontrolling interest |
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(262) |
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(338) |
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330 |
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(185) |
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Net income attributable to Almost Family, Inc. |
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$ |
7,799 |
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$ |
3,782 |
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$ |
17,203 |
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$ |
9,015 |
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Per share amounts-basic: |
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Average shares outstanding |
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9,604 |
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9,347 |
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9,432 |
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9,326 |
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Income from continued operations attributable to Almost Family, Inc. |
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$ |
0.81 |
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$ |
0.41 |
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$ |
1.82 |
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$ |
0.99 |
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Discontinued operations |
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— |
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— |
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— |
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(0.02) |
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Net income attributable to Almost Family, Inc. |
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$ |
0.81 |
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$ |
0.41 |
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$ |
1.82 |
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$ |
0.97 |
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Per share amounts-diluted: |
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Average shares outstanding |
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9,822 |
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9,443 |
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9,649 |
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9,444 |
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Income from continued operations attributable to Almost Family, Inc. |
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$ |
0.79 |
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$ |
0.40 |
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$ |
1.78 |
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$ |
0.97 |
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Discontinued operations |
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— |
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— |
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— |
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(0.02) |
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Net income attributable to Almost Family, Inc. |
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$ |
0.79 |
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$ |
0.40 |
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$ |
1.78 |
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$ |
0.95 |
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See accompanying Notes to Consolidated Financial Statements.
4
ALMOST FAMILY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
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Nine months ended |
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October 2, 2015 |
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September 30, 2014 |
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Cash flows from operating activities: |
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Net income |
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$ |
16,873 |
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$ |
9,200 |
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(Loss) gain on discontinued operations, net of tax |
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(9) |
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(173) |
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Net income from continuing operations |
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16,882 |
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9,373 |
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Adjustments to reconcile income to net cash provided by operating activities: |
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Depreciation and amortization |
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2,626 |
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3,165 |
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Provision for uncollectible accounts |
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9,298 |
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6,745 |
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Stock-based compensation |
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1,455 |
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1,337 |
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Deferred income taxes |
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3,108 |
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1,569 |
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33,369 |
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22,189 |
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Change in certain net assets and liabilities, net of the effects of acquisitions: |
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(Increase) decrease in: |
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Accounts receivable |
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(12,580) |
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(22,167) |
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Prepaid expenses and other current assets |
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(4,875) |
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378 |
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Other assets |
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(46) |
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(213) |
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Accounts payable and accrued expenses |
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(2,507) |
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(1,066) |
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Net cash provided by (used in) operating activities |
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13,361 |
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(879) |
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Cash flows from investing activities: |
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Capital expenditures |
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(1,753) |
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(871) |
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Cost basis investment |
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(1,000) |
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— |
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Acquisitions, net of cash acquired |
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(55,701) |
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(964) |
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Net cash used in investing activities |
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(58,454) |
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(1,835) |
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Cash flows from financing activities: |
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Credit facility borrowings |
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163,904 |
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25,542 |
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Credit facility repayments |
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(118,053) |
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(29,017) |
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Debt issuance fees |
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(1,161) |
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— |
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Proceeds from stock option exercises |
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141 |
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39 |
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Purchase of common stock in connection with share awards |
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(338) |
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(52) |
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Tax impact of share awards |
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227 |
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(39) |
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Payment of special dividend |
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(50) |
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(35) |
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Principal payments on notes payable and capital leases |
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(54) |
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(654) |
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Net cash provided by (used in) financing activities |
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44,616 |
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(4,216) |
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Cash flows from discontinued operations: |
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Operating activities |
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(41) |
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40 |
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Investing activities |
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— |
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2 |
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Net cash from discontinued operations |
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(41) |
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42 |
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Net change in cash and cash equivalents |
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(518) |
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(6,888) |
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Cash and cash equivalents at beginning of period |
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6,886 |
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12,246 |
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Cash and cash equivalents at end of period |
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$ |
6,368 |
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$ |
5,358 |
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See accompanying Notes to Consolidated Financial Statements.
5
ALMOST FAMILY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise indicated, all dollars and share amounts are in thousands, except per share data)
1.Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements for the periods ended October 2, 2015 and September 30, 2014, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations. Accordingly, the reader of this Form 10-Q is referred to Almost Family, Inc.’s (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2014 for further information. In the opinion of management of the Company, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position at October 2, 2015, and the results of operations and cash flows for the periods ended October 2, 2015 and September 30, 2014. The results of operations for the period ended October 2, 2015 are not necessarily indicative of the operating results for the year.
Effective with the first quarter of 2015 the Company adopted a 52-53 week fiscal reporting calendar under which it will report its annual results going forward in four equal 13-week quarters. Every fifth year, one quarter will include 14 weeks and that year will include 53 weeks of operating results. Once fully adopted, this approach will help minimize the impact of calendar differences when comparing different historical periods.
As a result of the change in the fiscal reporting calendar, the quarter ended October 2, 2015 included one fewer day of results than they would have had if the change had not been made, while the year to date period January 1, 2015 through October 2, 2015 included 2 more days of results than they would have had if the change had not been made. Due to the fiscal reporting calendar change, the Independence Day holiday observed on July 3, 2015 was reported in the second quarter of 2015.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), during the second quarter of 2014. Topic 606 affects virtually all aspects of an entity’s revenue recognition, including determining the measurement of revenue and the timing of when it is recognized for the transfer of goods or services to customers. Topic 606 is effective for annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the effect of the adoption of Topic 606 on its financial position and results of operations.
In April, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. Subtopic 835-30 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. Subtopic 835-30 is effective for annual and interim periods beginning after December 15, 2015. The Company is currently evaluating the effect of the adoption of ASU No 2015-03 on its financial position and results of operations.
6
Discontinued Operations
In April 2014, the FASB issued accounting guidance amending the requirements for reporting discontinued operations Accounting Standards Codification (ASC 205 Presentation of Financial Statements and ASC 360 Property, Plant and Equipment). This guidance limits the requirement for discontinued operations treatment to the disposal of a component of an entity, or a group of components of an entity, that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. Additionally, this new guidance no longer precludes discontinued operations presentation based on continuing involvement or cash flows following the disposal. This guidance became effective prospectively for the Company on January 1, 2015, and will impact the Company’s determination and disclosure of discontinued operations treatment for subsequent qualifying divestitures, if any.
In the first quarter of 2014, the Company’s VN segment exited a market in the Northeast through the closure of a branch location. In conjunction with the SunCrest acquisition in 2013, the Company acquired operations which had been discontinued prior to acquisition. The operations and any related gain on sale for these operations were reclassified from continuing operations into discontinued operations for all periods presented. Unless otherwise noted, amounts in these Notes to Consolidated Financial Statements exclude amounts attributable to discontinued operations.
Cost-basis Investment
On January 29, 2015, the Company invested $1,000 in a development stage analytics software company, NavHealth, Inc. The cost basis investment is included in other assets in the Company’s balance sheet. The Company, through its ownership interest, is not in a position to significantly influence the activities of NavHealth, Inc.
2.Segment Data
The Company has two divisions, Home Health Care and Healthcare Innovations. The Home Health Care division is comprised of two reportable segments, Visiting Nurse Services (VN or Visiting Nurse) and Personal Care Services (PC or Personal Care). Healthcare Innovations is also a reportable segment. Reportable segments have been identified based upon how management has organized the business by services provided to customers and how the chief operating decision maker manages the business and allocates resources, consistent with the criteria in ASC 280, Segment Reporting.
Consistent with information given to the chief operating decision maker, the Company does not allocate certain expenses to the reportable segments. The Company evaluates the performance of its business segments based on operating income. Intercompany and intersegment transactions have been eliminated.
The VN segment provides skilled medical services in patients’ homes largely to enable recipients to reduce or avoid periods of hospitalization and/or nursing home care. Approximately 95% of the VN segment revenues are generated from the Medicare program while the balance is generated from Medicaid and private insurance programs. VN Medicare revenues include revenues from all Medicare sources including traditional Medicare and Medicare Advantage, whether paid on a per episode basis or a per visit basis.
The PC segment services are also provided in patients’ homes. These services (generally provided by paraprofessional staff such as home health aides) are generally of a custodial rather than skilled nature. PC revenues are generated on an hourly basis. Approximately 85% of the PC segment revenues are generated from Medicaid and other government programs while the balance is generated from insurance programs and private pay patients.
The Company’s Healthcare Innovations business segment was created to house and separately report on our developmental activities outside the traditional home health business platform. These activities are intended ultimately, whether directly or indirectly, to benefit the Company’s patients and payors through the enhanced provision of home health services. The activities all share a common goal of improving patient experiences and quality outcomes, while lowering costs. They include, but are not limited to, items such as: technology, information, population health management, risk-sharing, care-
7
coordination and transitions, clinical advancements, enhanced patient engagement and informed clinical decision and technology enabled in-home clinical assessments.
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Three months ended |
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Nine months ended |
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Consolidated |
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October 2, 2015 |
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September 30, 2014 |
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October 2, 2015 |
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September 30, 2014 |
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Home Health Operations |
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Net service revenues: |
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Visiting Nurse |
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$ |
98,344 |
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$ |
95,116 |
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$ |
295,627 |
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$ |
285,064 |
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Personal Care |
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30,837 |
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28,627 |
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|
89,086 |
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|
83,647 |
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|
|
|
129,181 |
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|
123,743 |
|
|
384,713 |
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|
368,711 |
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Operating income before corporate expenses: |
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Visiting Nurse |
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12,052 |
|
|
11,175 |
|
|
36,935 |
|
|
32,120 |
|
Personal Care |
|
|
3,067 |
|
|
3,136 |
|
|
9,570 |
|
|
9,316 |
|
|
|
|
15,119 |
|
|
14,311 |
|
|
46,505 |
|
|
41,436 |
|
Healthcare Innovations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
2,051 |
|
|
1,798 |
|
|
2,284 |
|
|
2,361 |
|
Operating income (loss) before noncontrolling interest |
|
|
485 |
|
|
1,077 |
|
|
(434) |
|
|
394 |
|
Corporate expenses |
|
|
6,278 |
|
|
6,363 |
|
|
20,179 |
|
|
19,122 |
|
Deal, transition and other |
|
|
(1,309) |
|
|
1,655 |
|
|
(695) |
|
|
6,012 |
|
Operating income |
|
|
10,635 |
|
|
7,370 |
|
|
26,587 |
|
|
16,696 |
|
Interest expense, net |
|
|
(494) |
|
|
(401) |
|
|
(1,247) |
|
|
(1,078) |
|
Income tax expense |
|
|
(2,078) |
|
|
(2,810) |
|
|
(8,458) |
|
|
(6,245) |
|
Net income from continuing operations |
|
$ |
8,063 |
|
$ |
4,159 |
|
$ |
16,882 |
|
$ |
9,373 |
|
3.Capitalized Software Development Costs
The Company capitalizes the cost of internally generated computer software developed for the Company’s own use. Software development costs of approximately $240 and $74 were capitalized in the three month periods ended October 2, 2015 and September 30, 2014, respectively. Software development costs of approximately $527 and $266 were capitalized in the nine month periods ended October 2, 2015 and September 30, 2014, respectively. Capitalized software development costs are amortized over the estimated useful life, generally three years, once the software is ready for its intended use.
4.Goodwill and Other Intangible Assets
The Company conducts annual reviews for impairment, or more frequently if circumstances indicate impairment may have occurred. Other intangible assets consist of certificates of need and licenses, trade names and non-compete agreements. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Licenses, provider numbers, certificates of need and trade names have indefinite lives and are reviewed at least annually for possible impairment, or whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. The Company completed its most recent annual impairment test of goodwill and other indefinite-lived intangible assets as of December 31, 2014 and determined that no impairment existed.
The following table summarizes the activity related to goodwill and other intangible assets for 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Intangible Assets |
|
||||||||||
|
|
|
|
Certificates |
|
|
|
|
|
|
|
|
||||
|
|
|
|
of Need and |
|
Trade |
|
Non-compete |
|
|
|
|
||||
|
|
Goodwill |
|
Licenses |
|
Names |
|
Agreements |
|
Total |
|
|||||
Balances at 12-31-14 |
|
$ |
192,523 |
|
$ |
39,611 |
|
$ |
14,771 |
|
$ |
20 |
|
$ |
54,402 |
|
Acquisitions |
|
|
49,045 |
|
|
5,782 |
|
|
1,500 |
|
|
— |
|
|
7,282 |
|
Amortization |
|
|
— |
|
|
— |
|
|
(8) |
|
|
(12) |
|
|
(20) |
|
Balances at 10-2-15 |
|
$ |
241,568 |
|
$ |
45,393 |
|
$ |
16,263 |
|
$ |
8 |
|
$ |
61,664 |
|
8
Acquisitions in the table relate to the WillCare and Ingenios acquisitions discussed further in Note 9, “Acquisitions”.
The following table summarizes the Company’s goodwill and other intangible assets by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Intangible Assets |
|
|||||||||||
|
|
|
|
Certificates |
|
|
|
|
|
|
|
|||||
|
|
|
|
of Need and |
|
Trade |
|
Non-compete |
|
|
|
|||||
|
|
Goodwill |
|
Licences |
|
Names |
|
Agreements |
|
Total |
|
|||||
Visiting Nurse |
|
$ |
167,016 |
|
$ |
44,493 |
|
$ |
12,133 |
|
$ |
4 |
|
$ |
56,630 |
|
Personal Care |
|
|
57,219 |
|
|
900 |
|
|
4,130 |
|
|
4 |
|
|
5,034 |
|
Healthcare Innovations |
|
|
17,333 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Balances at 10/2/2015 |
|
$ |
241,568 |
|
$ |
45,393 |
|
$ |
16,263 |
|
$ |
8 |
|
$ |
61,664 |
|
5.Revolving Credit Facility
The Company has a senior secured revolving credit facility with JP Morgan Chase Bank, NA, as Administrative Agent, Bank of America, as Syndication Agent, and certain other lenders (the “Facility”). The Facility consists of a $175,000 credit line with a maturity date of November 15, 2020 and an “accordion” feature providing for potential future expansion of the Facility to $250,000. Borrowings (other than letters of credit) under the credit facility generally will bear interest at a rate varying from the London Interbank Offered Rate (LIBOR) plus 1.75% to LIBOR rate plus 3.00%, depending on leverage. The Facility is secured by substantially all of the Company’s assets and the stock of its subsidiaries. Debt issuance costs of $1,200 incurred in connection with credit facility is recorded in prepaid assets and is being amortized through November 15, 2020.
Borrowings under the Facility are subject to various covenants including a multiple of 3.5 times earnings before interest, taxes, depreciation and amortization (“EBITDA”). “EBITDA” may include “Acquired EBITDA” from pro-forma acquisitions as defined. Borrowings under the New Facility may be used for general corporate purposes, including acquisitions. Application of the Facility’s borrowing formula as of October 2, 2015, permitted an additional $64,800 to be used. The Company had irrevocable letters of credit totaling $9,800 outstanding in connection with the Company’s self-insurance programs, which resulted in a total of $55,000 being available for use at October 2, 2015. As of October 2, 2015, the Company was in compliance with the various financial covenants. Under the most restrictive of its covenants, the Company was required to maintain minimum net worth of at least $176,100 at October 2, 2015. At such date, the Company’s net worth was approximately $259,300.
The effective interest rates on the Company’s borrowings were 2.62% and 2.90% for the three month periods ended October 2, 2015 and September 30, 2014, respectively.
6.Fair Value Measurements
The Company’s financial instruments consist of cash, accounts receivable, payables and debt instruments. The carrying values of cash, accounts receivable and payables are considered representative of their respective fair values due to the short-term nature of these instruments. The fair value of the Company’s debt instruments approximates their carrying values as substantially all of such debt instruments have rates which fluctuate with changes in market rates. The Company does not have any assets or liabilities carried at fair value that are measured on a recurring basis.
9
7.Earnings per Common Share
A reconciliation of the weighted average shares outstanding used in the calculation of basic and diluted earnings per common share is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
||||
|
|
October 2, 2015 |
|
September 30, 2014 |
|
October 2, 2015 |
|
September 30, 2014 |
|
Basic weighted average outstanding shares |
|
9,604 |
|
9,347 |
|
9,432 |
|
9,326 |
|
Add common equivalent shares representing shares issuable upon exercise of dilutive awards |
|
218 |
|
96 |
|
217 |
|
118 |
|
Diluted weighted average number of shares |
|
9,822 |
|
9,443 |
|
9,649 |
|
9,444 |
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares excluded from calculation |
|
— |
|
96 |
|
20 |
|
96 |
|
8.Commitments and Contingencies
Insurance Programs
The Company bears significant insurance risk under its large-deductible workers’ compensation insurance program and its self-insured employee health program. Under the workers’ compensation insurance program, the Company bears risk up to $400 per incident, after which stop-loss coverage is maintained. The Company purchases stop-loss insurance for the employee health plan that places a specific limit, generally $300, on its exposure for any individual covered life.
Malpractice and general patient liability claims for incidents which may give rise to litigation have been asserted against the Company by various claimants. The claims are in various stages of processing and some may ultimately be brought to trial. The Company is aware of incidents that have occurred through October 2, 2015 that may result in the assertion of additional claims. The Company currently carries professional and general liability insurance coverage (on a claims made basis) for this exposure with no deductible. The Company also carries D&O coverage (also on a claims made basis) for potential claims against the Company’s directors and officers, including securities actions, with deductibles ranging from $100 to $200 per claim.
The Company records estimated liabilities for its insurance programs based on information provided by the third-party plan administrators, historical claims experience, the life cycle of claims, expected costs of claims incurred but not paid, and expected costs to settle unpaid claims. The Company monitors its estimated insurance-related liabilities and recoveries, if any, on a monthly basis and records amounts due under insurance policies in other current assets, while recording the estimated carrier liability in other current liabilities. As facts change, it may become necessary to make adjustments that could be material to the Company’s results of operations and financial condition.
Legal Proceedings
The Company is currently, and from time to time, subject to claims and suits arising in the ordinary course of its business, including claims for damages for personal injuries. In the opinion of management, after discussions with legal counsel, the ultimate resolution of any of these ordinary course pending claims and legal proceedings will not have a material effect on the Company’s financial position or results of operations.
During the third quarter of 2015, certain acquisition indemnification and other legal matters were settled resulting in a $4,165 benefit which is included in Deal, transition and other costs in the Consolidated Statements of Income. Deal, transition and other costs includes a $1,799 provision for bad debts related to a Chapter 7 bankruptcy filing of a payor.
9.Acquisition
On August 29, 2015 the Company acquired 100% of the equity of Bracor, Inc. (dba WillCare). Based in Buffalo NY, WillCare reported $72,000 in revenue for the year ended December 31, 2014 with VN and PC branch locations in New York, Connecticut and Ohio. The purchase price for the New York and Connecticut operations was $50,843. The transaction was funded by borrowings under the Company’s bank credit facility. On March 1, 2015, the Company acquired
10
the stock of WillCare’s Ohio operations for $3,000. The following table summarizes the preliminary estimate of fair values of the assets acquired and liabilities assumed in the WillCare acquisition (estimates are not complete and subject to change):
|
|
|
Preliminary |
|
|
|
|
|
|
Purchase Price |
|
|
|
|
|
|
Allocation |
|
|
|
Accounts Receivable |
|
|
$ |
6,965 |
|
|
Property, plant & equipment |
|
|
|
209 |
|
|
Other assets |
|
|
|
912 |
|
|
Deferred tax assets |
|
|
|
3,635 |
|
|
Goodwill |
|
|
|
39,355 |
|
|
Other intangibles |
|
|
|
7,282 |
|
|
Assets acquired |
|
|
|
58,358 |
|
|
Liabilities assumed |
|
|
|
(4,515) |
|
|
Net assets acquired |
|
|
$ |
53,843 |
|
|
On July 22, 2015, the Company acquired 100% of the equity of Ingenios Health Co. (Ingenios) for $11,372 of the Company’s common stock plus $2,000 in cash. Ingenios is a leading provider of technology enabled in-home clinical assessments for Medicare Advantage, Managed Medicaid and Commercial Exchange lives in 7 states and Washington, D.C. The operating results of Ingenios will be reported in our Healthcare Innovations business segment, while the issuance of shares is expected to be dilutive to earnings per share.
Deal and transition costs incurred in conjunction with the WillCare and Ingenios acquisitions were $919 and $1,513, respectively, for the quarter and year to date periods ended October 2, 2015. Similar amounts for the prior year periods were $1,135 and $5,492, respectively, related to 2013 and 2014 acquisitions. Such amounts are included in Deal, transition and other costs in the Consolidated Statements of Income.
10.Income Taxes
The Company’s effective income tax rates from continuing operations for the three and nine month periods ended October 2, 2015 and September 30, 2014 were approximately 21.0% and 42.4%, respectively and 32.9% and 40.5%, respectively. The lower effective tax rate for the 2015 periods was primarily related to the tax treatment of the legal settlement discussed in Note 8, “Commitments and Contingencies”. Excluding the non-taxable settlement we expect our effective tax rate for 2015 to be approximately 40.5%.
Accounting principles generally accepted in the United States prescribe a recognition threshold and measurement attribute for the accounting and financial statement disclosure of tax positions taken or expected to be taken in a tax return. The evaluation of a tax position is a two-step process. The first step requires the Company to determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. The second step requires the Company to recognize in the financial statements each tax position that meets the more likely than not criteria, measured at the amount of benefit that has a greater than 50% likelihood of being realized. The Company had $2,100 of unrecognized tax benefits at October 2, 2015, the total amount of which, if recognized, would affect the tax rate. The Company includes the full amount of unrecognized tax benefits in other liabilities in the Consolidated Balance Sheets. Additionally, the Company may from time to time be assessed interest and penalties by tax jurisdictions. Any such assessments historically have been immaterial to the Company’s financial results and are classified as other general and administrative expenses in the consolidated statements of income.
11.Subsequent Events
Management has evaluated all events and transactions that occurred after October 2, 2015. During this period, the Company had no material subsequent events requiring recognition in the consolidated financial statements.
11
On November 5, 2015, the Company acquired 100% of the equity of Black Stone Operations, LLC. (Black Stone) for $27,500 in cash, 188 shares of the Company’s common stock, and $5,000 in seller notes. Black Stone owns and operates nine locations in Ohio. The operating results will be reported in the Company’s PC and VN segments.
12
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company
Almost Family, Inc. and subsidiaries (collectively “Almost Family”) is a leading regional provider of home health nursing services. In this report, the terms “Company,” “we,” “us” or “our” mean Almost Family, Inc. and all subsidiaries included in our consolidated financial statements.
Cautionary Statements - Forward Outlook and Risks
Certain statements contained in this quarterly report on Form 10-Q, including, without limitation, statements containing the words “believes,” “anticipates,” “intends,” “expects,” “assumes,” “trends” and similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon the Company’s current plans, expectations and projections about future events. However, such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors include, among others, the following:
· |
general economic and business conditions; |
· |
demographic changes; |
· |
changes in, or failure to comply with, existing governmental regulations; |
· |
legislative proposals for healthcare reform; |
· |
changes in Medicare and Medicaid reimbursement levels; |
· |
changes in laws and regulations with respect to Accountable Care Organizations; |
· |
changes in the marketplace and regulatory environment for Health Risk Assessments; |
· |
effects of competition in the markets in which the Company operates; |
· |
liability and other claims asserted against the Company; |
· |
potential audits and investigations by government and regulatory agencies, including the impact of any negative publicity or litigation; |
· |
ability to attract and retain qualified personnel; |
· |
availability and terms of capital; |
· |
loss of significant contracts or reduction in revenues associated with major payor sources; |
· |
ability of customers to pay for services; |
· |
business disruption due to natural disasters or terrorist acts; |
· |
ability to effectively integrate, manage and keep secure our information systems; |
· |
ability to successfully integrate the operations of acquired businesses and achieve expected synergies and operating efficiencies from the acquisition, in each case within expected time-frames or at all; |
· |
significant deterioration in economic conditions and significant market volatility; |
· |
effect on liquidity of the Company's financing arrangements; and |
· |
changes in estimates and judgments associated with critical accounting policies and estimates. |
For a detailed discussion of these and other factors that could cause the Company’s actual results to differ materially from the results contemplated by the forward-looking statements, please refer to Item 1A. “Risk Factors” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s annual report on Form 10-K for year ended December 31, 2014 and this Form 10-Q. The reader should not place undue reliance on forward-looking statements, which speak only as of the date of this report. Except as required by law, the Company assumes no responsibility for updating forward-looking statements to reflect unforeseen or other events after the date of this report. The Company has provided a detailed discussion of risk factors in its Form 10-K and various filings with the Securities and Exchange Commission (SEC). The reader is encouraged to review these risk factors and filings.
13
Critical Accounting Policies
Refer to the “Critical Accounting Policies” section of Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Form 10-K for the year ended December 31, 2014 for a detailed discussion of our critical accounting policies. There have been no material changes to our critical accounting policies and estimates as described therein.
Fiscal Year End
Effective with the first quarter of 2015 the Company adopted a 52-53 week fiscal reporting calendar under which it will report its annual results going forward in four equal 13-week quarters. Every fifth year, one quarter will include 14 weeks and that year will include 53 weeks of operating results. Once fully adopted, this approach will help minimize the impact of calendar differences when comparing different historical periods.
As a result of the change in the fiscal reporting calendar, the quarter ended October 2, 2015 included one fewer day of results than they would have had if the change had not been made, while the year to date period January 1, 2015 through October 2, 2015 included 2 more days of results than they would have had if the change not been made. Due to the fiscal reporting calendar change, the Independence Day holiday observed on July 3, 2015 would have otherwise been reported in the current period.
Operating Segments
The Company has two divisions, Home Health Care and Healthcare Innovations. The Home Health Care division is comprised of two reportable segments, Visiting Nurse Services (VN or Visiting Nurse) and Personal Care Services (PC or Personal Care). Our Healthcare Innovations division is also a reporting segment. Reportable segments have been identified based upon how management has organized the business by services provided to customers and how the chief operating decision maker manages the business and allocates resources, consistent with the criteria in ASC 280, Segment Reporting.
Our VN segment provides skilled medical services in patients’ homes largely to enable recipients to reduce or avoid periods of hospitalization and/or nursing home care. VN Medicare revenues include revenues from all Medicare sources including traditional Medicare and Medicare Advantage, whether paid on a per episode basis or a per visit basis. Approximately 95% of the VN segment revenues are generated from the Medicare program while the balance is generated from Medicaid and private insurance programs.
Our PC segment services are also provided in patients’ homes. These services (generally provided by paraprofessional staff such as home health aides) are generally of a custodial rather than skilled nature. PC revenues are typically generated on an hourly basis. Approximately 85% of the PC segment revenues are generated from Medicaid and other government programs while the balance is generated from insurance programs and private pay patients.
Our Healthcare Innovations business segment was created to separately report on our developmental activities outside our traditional home health business platform. These activities are intended ultimately, whether directly or indirectly, to benefit our patients and our payers through the enhanced provision of home health services. Our activities all share a common goal of improving patient experiences and quality outcomes while lowering costs. They include, but are not limited to, items such as: technology, information, population health management, risk-sharing, care coordination and transitions, clinical advancements, enhanced patient engagement and informed clinical decision and technology enabled in-home clinical assessments.
Certain general and administrative expenses incurred at the corporate level have not been allocated to the segments.
Acquisitions and Investment
On August 29, 2015, we acquired 100% of the equity of Bracor, Inc. (dba WillCare). WillCare, based in Buffalo NY, reported $72 million in revenue for the year ended December 31, 2014 with VN and PC branch locations in New York, Connecticut and Ohio. The purchase price for the New York and Connecticut operations was approximately $50.8 million.
14
The transaction was funded by borrowings under our bank credit facility. On March 1, 2015, we acquired the stock of WillCare’s Ohio operations for $3.0 million.
On July 22, 2015, we acquired 100% of the equity of Ingenios Health Co. for approximately $11.4 million of the Company’s common stock plus $2 million in cash. Ingenios is a leading provider of technology enabled in-home clinical assessments for Medicare Advantage, Managed Medicaid and Commercial Exchange lives in 7 states and Washington, D.C. The operating results of Ingenios will be reported in our Healthcare Innovations business segment, while the issuance of shares is expected to be dilutive to earnings per share.
On January 29, 2015, we invested $1.0 million in a development stage analytics software company, NavHealth, Inc. The cost basis investment is included in other assets in our balance sheet. We are not in a position to significantly influence the activities of NavHealth, Inc.
Health Care Reform Legislation and Medicare Regulations
The reader is encouraged to review our detailed discussion of Health Care Reform Legislation and Medicare Regulations in the similarly titled section in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” along with the discussion under “Government Regulation” in Part I, Item 1, “Business” including but not limited to Item 1A. “Risk Factors” in the Company’s annual report on Form 10-K for year ended December 31, 2014.
On October 29, 2015, the Centers for Medicare and Medicaid Services (CMS) issued its CY2016 Home Health Prospective Payment System Rate Update. CMS is implementing a 0.13% increase in the National, Standardized 60-Day Episode Payment Amount consisting of a 2.9% “market basket” increase minus a 0.6% productivity adjustment, a 2.71% ($80.95 per episode) rebasing cut, a 0.97% case mix creep cut and an increase of 1.87% to maintain budget neutrality with respect to recalibration of the home health case mix model for CY2016. The impact of recalibration of the case-mix model on the Company results in CY2016 will depend upon the Company’s actual patient mix in that period. CMS is also implementing a “Value Based Purchasing” (VBP) demonstration in 9 states (including Florida, Tennessee and Massachusetts where the Company has significant operations) under which certain 2016 agency specific performance measures would be used to establish individual agency reimbursement rates for 2018. Investors are encouraged to read the rule in its entirety at http://federalregister.gov/a/2015-27931.
Seasonality
Our VN segment operations in Florida, where nearly 27% of that segment’s revenues are generated, normally experience higher admissions during the first quarter and lower admissions during the third quarter than in the other quarters due to seasonal population fluctuations.
15
RESULTS OF OPERATIONS
THIRD QUARTER
Consolidated
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|
||||||||
|
|
October 2, 2015 |
|
September 30, 2014 |
|
Change |
|
|||||||||
Consolidated |
|
Amount |
|
% Rev |
|
Amount |
|
% Rev |
|
Amount |
|
% |
|
|||
Home Health Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net service revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Visiting Nurse |
|
$ |
98,344 |
|
76.1% |
|
$ |
95,116 |
|
76.9% |
|
$ |
3,228 |
|
3.4 |
% |
Personal Care |
|
|
30,837 |
|
23.9% |
|
|
28,627 |
|
23.1% |
|
|
2,210 |
|
7.7 |
% |
|
|
|
129,181 |
|
100.0% |
|
|
123,743 |
|
100.0% |
|
|
5,438 |
|
4.4 |
% |
Operating income before corporate expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Visiting Nurse |
|
|
12,052 |
|
12.3% |
|
|
11,175 |
|
11.7% |
|
|
877 |
|
7.8 |
% |
Personal Care |
|
|
3,067 |
|
9.9% |
|
|
3,136 |
|
11.0% |
|
|
(69) |
|
-2.2 |
% |
|
|
|
15,119 |
|
11.7% |
|
|
14,311 |
|
11.6% |
|
|
808 |
|
5.6 |
% |
Healthcare Innovations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
2,051 |
|
100.0% |
|
|
1,798 |
|
100.0% |
|
|
253 |
|
14.1 |
% |
Operating income before noncontrolling interest |
|
|
485 |
|
23.6% |
|
|
1,077 |
|
59.9% |
|
|
(592) |
|
-55.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses |
|
|
6,278 |
|
4.8% |
|
|
6,363 |
|
5.1% |
|
|
(85) |
|
-1.3 |
% |
Deal, transition and other costs |
|
|
(1,309) |
|
-1.0% |
|
|
1,655 |
|
1.3% |
|
|
(2,964) |
|
-179.1 |
% |
Operating income |
|
|
10,635 |
|
8.1% |
|
|
7,370 |
|
5.9% |
|
|
3,265 |
|
44.3 |
% |
Interest expense, net |
|
|
(494) |
|
-0.4% |
|
|
(401) |
|
-0.3% |
|
|
(93) |
|
23.2 |
% |
Income tax expense |
|
|
(2,078) |
|
-1.6% |
|
|
(2,810) |
|
-2.2% |
|
|
732 |
|
-26.0 |
% |
Net income from continuing operations |
|
$ |
8,063 |
|
6.1% |
|
$ |
4,159 |
|
3.3% |
|
$ |
3,904 |
|
93.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA-HHO (1) |
|
$ |
10,110 |
|
7.8% |
|
$ |
9,129 |
|
7.4% |
|
$ |
981 |
|
10.7 |
% |
Adjusted Earnings-HHO (1) |
|
$ |
5,052 |
|
3.9% |
|
$ |
4,412 |
|
3.6% |
|
$ |
641 |
|
14.5 |
% |
(1)See Page 23 for GAAP reconciliation of Adjusted EBITDA from home health operations and Adjusted earnings from home health operations.
Home Health revenue increased year over year by $5.4 million primarily as a result of our acquisition of WillCare ($6.9 million). Refer to VN and PC segment discussions for further operating performance details. Refer to “Fiscal Year End” related to our 52-53 week reporting calendar conversion.
Our Healthcare Innovations operating income declined primarily due to the expected losses of our third quarter Ingenios acquisition.
Corporate expenses declined as a percent of revenues to 4.8% in the 2015 period from 5.1% resulting primarily from higher management incentives in the 2014 period due to relative performance against plan on a year to date basis. Deal, transition and other costs for 2015 include a benefit of $4.2 million related to a legal settlement, which was partially offset by the $1.8 million provision for the Chapter 7 bankruptcy filing of a specific payor and $1.1 million of deal and transition costs primarily related to our 2015 acquisitions. Deal and transition costs of $1.7 million in 2014 primarily related to the completion of the transition of our 2013 acquisitions.
Our effective tax rate for the third quarter of 2015 was 21.0% compared to 42.4% for the third quarter of 2014. The lower effective tax rate for the 2015 period was primarily related to the tax treatment of the legal settlements discussed in Note 8 to the Consolidated Financial Statements, “Commitments and Contingencies”. Excluding the non-taxable settlement, we expect our effective tax rate for 2015 to be approximately 40.5%.
16
Visiting Nurse Segment
(In thousands, except for statistics)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|
||||||||
|
|
October 2, 2015 |
|
September 30, 2014 |
|
Change |
|
|||||||||
|
|
Amount |
|
% Rev |
|
Amount |
|
% Rev |
|
Amount |
|
% |
|
|||
Net service revenues |
|
$ |
98,344 |
|
100.0 |
% |
$ |
95,116 |
|
100.0 |
% |
$ |
3,228 |
|
3.4 |
% |
Cost of service revenues |
|
|
47,977 |
|
48.8 |
% |
|
46,984 |
|
49.4 |
% |
|
993 |
|
2.1 |
% |
Gross margin |
|
|
50,367 |
|
51.2 |
% |
|
48,132 |
|
50.6 |
% |
|
2,235 |
|
4.6 |
% |
General and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits |
|
|
28,312 |
|
28.8 |
% |
|
27,165 |
|
28.6 |
% |
|
1,147 |
|
4.2 |
% |
Other |
|
|
10,003 |
|
10.2 |
% |
|
9,792 |
|
10.3 |
% |
|
211 |
|
2.2 |
% |
Total general and administrative expenses |
|
|
38,315 |
|
39.0 |
% |
|
36,957 |
|
38.9 |
% |
|
1,358 |
|
3.7 |
% |
Operating income before corporate expenses |
|
$ |
12,052 |
|
12.3 |
% |
$ |
11,175 |
|
11.7 |
% |
$ |
877 |
|
7.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of locations |
|
|
164 |
|
|
|
|
159 |
|
|
|
|
5 |
|
3.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All payors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patients Months |
|
|
80,940 |
|
|
|
|
79,598 |
|
|
|
|
1,342 |
|
1.7 |
% |
Admissions |
|
|
24,759 |
|
|
|
|
24,371 |
|
|
|
|
388 |
|
1.6 |
% |
Billable Visits |
|
|
645,589 |
|
|
|
|
627,517 |
|
|
|
|
18,072 |
|
2.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Admissions (1) |
|
|
21,876 |
|
88.4 |
% |
|
21,531 |
|
88.3 |
% |
|
345 |
|
1.6 |
% |
Revenue (in thousands) |
|
$ |
92,033 |
|
93.6 |
% |
$ |
90,709 |
|
95.4 |
% |
$ |
1,324 |
|
1.5 |
% |
Revenue per admission |
|
$ |
4,207 |
|
|
|
$ |
4,213 |
|
|
|
$ |
(6) |
|
(0.1) |
% |
Billable visits (1) |
|
|
580,709 |
|
90.0 |
% |
|
564,626 |
|
90.0 |
% |
|
16,083 |
|
2.8 |
% |
Recertifications |
|
|
11,966 |
|
|
|
|
11,907 |
|
|
|
|
59 |
|
0.5 |
% |
Payor mix % of Admissions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Medicare Episodic |
|
|
84.6 |
% |
|
|
|
84.0 |
% |
|
|
|
0.6 |
% |
|
|
Replacement Plans Paid Episodically |
|
|
4.1 |
% |
|
|
|
3.8 |
% |
|
|
|
0.3 |
% |
|
|
Replacement Plans Paid Per Visit |
|
|
11.3 |
% |
|
|
|
12.2 |
% |
|
|
|
(0.9) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Medicare: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Admissions (1) |
|
|
2,883 |
|
11.6 |
% |
|
2,840 |
|
11.7 |
% |
|
43 |
|
1.5 |
% |
Revenue (in thousands) |
|
$ |
6,311 |
|
6.4 |
% |
$ |
4,407 |
|
4.6 |
% |
$ |
1,904 |
|
43.2 |
% |
Revenue per admission |
|
$ |
2,189 |
|
|
|
$ |
1,552 |
|
|
|
$ |
637 |
|
41.1 |
% |
Billable visits (1) |
|
|
64,880 |
|
10.0 |
% |
|
62,891 |
|
10.0 |
% |
|
1,989 |
|
3.2 |
% |
Recertifications |
|
|
774 |
|
|
|
|
432 |
|
|
|
|
342 |
|
79.2 |
% |
Payor mix % of Admissions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicaid & other governmental |
|
|
30.6 |
% |
|
|
|
24.1 |
% |
|
|
|
6.5 |
% |
|
|
Private payors |
|
|
69.4 |
% |
|
|
|
75.9 |
% |
|
|
|
(6.5) |
% |
|
|
(1)Percentages pertain to percentage of total admissions or total billable visits, as applicable.
VN segment net revenue increased primarily due to the WillCare acquisition which increased net service revenues by $3.5 million and operating income before corporate expenses by $0.6 million. The WillCare acquisition also increased the average number of locations.
Excluding the effects of the WillCare acquisition, cost of service revenues were essentially unchanged on a per visit basis which, combined with the effective Medicare rate increase, led to a slightly higher gross margin.
17
Excluding effects of the WillCare acquisition, general and administrative expenses – Salaries and benefits increased 1.7% primarily due to higher health and dental insurance expense. General and administrative expenses – Other increased primarily due to higher provision for uncollectible accounts.
As a result, VN segment operating income before corporate expenses increased 7.8% to $12.1 million from $11.2 million in the prior year, while VN segment operating income as percentage of revenue increased to 12.3% from 11.7% in the prior year period.
Personal Care Segment
(In thousands, except for statistics)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|
||||||||
|
|
October 2, 2015 |
|
September 30, 2014 |
|
Change |
|
|||||||||
|
|
Amount |
|
% Rev |
|
Amount |
|
% Rev |
|
Amount |
|
% |
|
|||
Net service revenues |
|
$ |
30,837 |
|
100.0 |
% |
$ |
28,627 |
|
100.0 |
% |
$ |
2,210 |
|
7.7 |
% |
Cost of service revenues |
|
|
21,033 |
|
68.2 |
% |
|
19,474 |
|
68.0 |
% |
|
1,559 |
|
8.0 |
% |
Gross margin |
|
|
9,804 |
|
31.8 |
% |
|
9,153 |
|
32.0 |
% |
|
651 |
|
7.1 |
% |
General and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits |
|
|
4,310 |
|
14.0 |
% |
|
3,702 |
|
12.9 |
% |
|
608 |
|
16.4 |
% |
Other |
|
|
2,427 |
|
7.9 |
% |
|
2,315 |
|
8.1 |
% |
|
112 |
|
4.8 |
% |
Total general and administrative expenses |
|
|
6,737 |
|
21.8 |
% |
|
6,017 |
|
21.0 |
% |
|
720 |
|
12.0 |
% |
Operating income before corporate expenses |
|
$ |
3,067 |
|
9.9 |
% |
$ |
3,136 |
|
11.0 |
% |
$ |
(69) |
|
-2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of locations |
|
|
66 |
|
|
|
|
61 |
|
|
|
|
5 |
|
8.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Admissions |
|
|
1,725 |
|
|
|
|
1,667 |
|
|
|
|
58 |
|
3.5 |
% |
Patient months of care |
|
|
25,419 |
|
|
|
|
22,663 |
|
|
|
|
2,756 |
|
12.2 |
% |
Billable hours |
|
|
1,384,466 |
|
|
|
|
1,352,720 |
|
|
|
|
31,746 |
|
2.3 |
% |
Revenue per billable hour |
|
$ |
22.27 |
|
|
|
$ |
21.16 |
|
|
|
$ |
1.11 |
|
5.2 |
% |
PC segment net service revenues increased primarily due to the WillCare acquisition which increased net service revenues by $3.4 million and operating income before corporate expenses by $0.6 million.
Excluding effects of the WillCare acquisition, net service revenues decreased $1.2 million, or 4.1%, primarily due to changes in business mix. Cost of service revenues as a percentage of net service revenues increased slightly to 68.4% in 2015 from 68.0% in 2014, primarily due to changes in business mix.
Excluding the effects of the WillCare acquisition, total general and administrative expenses as a percent of net service revenues increased to 22.5% in 2015 from 21.0% in 2014, primarily due to the impact of changes in business mix on revenue.
PC segment operating income before corporate expenses was $3.1 million in both periods, while operating income before corporate expenses as a percentage of revenue decreased 1.1%.
18
YEAR TO DATE
Consolidated
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
|
|
|
|
||||||||
|
|
October 2, 2015 |
|
September 30, 2014 |
|
Change |
|
|||||||||
Consolidated |
|
Amount |
|
% Rev |
|
Amount |
|
% Rev |
|
Amount |
|
% |
|
|||
Home Health Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net service revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Visiting Nurse |
|
$ |
295,627 |
|
76.8% |
|
$ |
285,064 |
|
77.3% |
|
$ |
10,563 |
|
3.7 |
% |
Personal Care |
|
|
89,086 |
|
23.2% |
|
|
83,647 |
|
22.7% |
|
|
5,439 |
|
6.5 |
% |
|
|
|
384,713 |
|
100.0% |
|
|
368,711 |
|
100.0% |
|
|
16,002 |
|
4.3 |
% |
Operating income before corporate expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Visiting Nurse |
|
|
36,935 |
|
12.5% |
|
|
32,120 |
|
11.3% |
|
|
4,815 |
|
15.0 |
% |
Personal Care |
|
|
9,570 |
|
10.7% |
|
|
9,316 |
|
11.1% |
|
|
254 |
|
2.7 |
% |
|
|
|
46,505 |
|
12.1% |
|
|
41,436 |
|
11.2% |
|
|
5,069 |
|
12.2 |
% |
Healthcare Innovations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
2,284 |
|
100.0% |
|
|
2,361 |
|
100.0% |
|
|
(77) |
|
-3.3 |
% |
Operating (loss) income before noncontrolling interest |
|
|
(434) |
|
-19.0% |
|
|
394 |
|
16.7% |
|
|
(828) |
|
-210.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses |
|
|
20,179 |
|
5.2% |
|
|
19,122 |
|
5.2% |
|
|
1,057 |
|
5.5 |
% |
Deal, transition and other costs |
|
|
(695) |
|
-0.2% |
|
|
6,012 |
|
1.6% |
|
|
(6,707) |
|
-111.6 |
% |
Operating income |
|
|
26,587 |
|
6.9% |
|
|
16,696 |
|
4.5% |
|
|
9,891 |
|
59.2 |
% |
Interest expense, net |
|
|
(1,247) |
|
-0.3% |
|
|
(1,078) |
|
-0.3% |
|
|
(169) |
|
15.7 |
% |
Income tax expense |
|
|
(8,458) |
|
-2.2% |
|
|
(6,245) |
|
-1.7% |
|
|
(2,213) |
|
35.4 |
% |
Net income from continuing operations |
|
$ |
16,882 |
|
4.4% |
|
$ |
9,373 |
|
2.5% |
|
$ |
7,509 |
|
80.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA-HHO(1) |
|
$ |
30,551 |
|
7.9% |
|
$ |
26,634 |
|
7.2% |
|
$ |
3,917 |
|
14.7 |
% |
Adjusted Earnings-HHO(1) |
|
$ |
15,165 |
|
3.9% |
|
$ |
12,621 |
|
3.4% |
|
$ |
2,544 |
|
20.2 |
% |
(1)See Page 23 for GAAP reconciliation of Adjusted EBITDA from home health operations and Adjusted earnings from home health operations.
Approximately $8.2 million of our $16.0 million year over year increase in home health revenue was a result of our acquisition of WillCare. Refer to VN and PC segment discussions for further operating performance details. Refer to “Fiscal Year End” related to our 52-53 week reporting calendar conversion.
Our Healthcare Innovations operating loss was primarily due to the expected losses of our third quarter Ingenios acquisition.
Corporate expenses as a percentage of revenue were 5.2% in both periods. Deal, transition and other costs for 2015 include a benefit of $4.2 million related to a legal settlement, which was partially offset by the $1.8 million provision for the Chapter 7 bankruptcy filing of a specific payor and $1.7 million of deal and transition costs primarily related to our 2015 acquisitions. Deal and transition costs in 2014 primarily related to the completion of the transition of our 2013 acquisitions.
The effective tax rate for the nine months of 2015 was 32.9% compared to 40.5% for the nine months of 2014. The lower effective tax rate for the 2015 period was primarily related to the tax treatment of the legal settlement discussed in Note 8 to the the Consolidated Financial Statements, “Commitments and Contingencies”. Excluding the non-taxable settlement, we expect our effective tax rate for 2015 to be approximately 40.5%.
19
Visiting Nurse Segment
(In thousands, except for statistics)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
|
|
|
|
||||||||
|
|
October 2, 2015 |
|
September 30, 2014 |
|
Change |
|
|||||||||
|
|
Amount |
|
% Rev |
|
Amount |
|
% Rev |
|
Amount |
|
% |
|
|||
Net service revenues |
|
$ |
295,627 |
|
100.0 |
% |
$ |
285,064 |
|
100.0 |
% |
$ |
10,563 |
|
3.7 |
% |
Cost of service revenues |
|
|
142,560 |
|
48.2 |
% |
|
140,014 |
|
49.1 |
% |
|
2,546 |
|
1.8 |
% |
Gross margin |
|
|
153,067 |
|
51.8 |
% |
|
145,050 |
|
50.9 |
% |
|
8,017 |
|
5.5 |
% |
General and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits |
|
|
85,206 |
|
28.8 |
% |
|
82,473 |
|
28.9 |
% |
|
2,733 |
|
3.3 |
% |
Other |
|
|
30,926 |
|
10.5 |
% |
|
30,457 |
|
10.7 |
% |
|
469 |
|
1.5 |
% |
Total general and administrative expenses |
|
|
116,132 |
|
39.3 |
% |
|
112,930 |
|
39.6 |
% |
|
3,202 |
|
2.8 |
% |
Operating income before corporate expenses |
|
$ |
36,935 |
|
12.5 |
% |
$ |
32,120 |
|
11.3 |
% |
$ |
4,815 |
|
15.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of locations |
|
|
162 |
|
|
|
|
169 |
|
|
|
|
(7) |
|
-4.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All payors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patients Months |
|
|
242,989 |
|
|
|
|
239,198 |
|
|
|
|
3,791 |
|
1.6 |
% |
Admissions |
|
|
75,958 |
|
|
|
|
74,022 |
|
|
|
|
1,936 |
|
2.6 |
% |
Billable Visits |
|
|
1,926,660 |
|
|
|
|
1,875,922 |
|
|
|
|
50,738 |
|
2.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Admissions (1) |
|
|
67,965 |
|
89.5 |
% |
|
65,868 |
|
89.0 |
% |
|
2,097 |
|
3.2 |
% |
Revenue (in thousands) |
|
$ |
280,827 |
|
95.0 |
% |
$ |
273,441 |
|
95.9 |
% |
$ |
7,386 |
|
2.7 |
% |
Revenue per admission |
|
$ |
4,132 |
|
|
|
$ |
4,151 |
|
|
|
$ |
(19) |
|
-0.5 |
% |
Billable visits (1) |
|
|
1,742,505 |
|
90.4 |
% |
|
1,693,028 |
|
90.3 |
% |
|
49,477 |
|
2.9 |
% |
Recertifications |
|
|
35,277 |
|
|
|
|
35,962 |
|
|
|
|
(685) |
|
-1.9 |
% |
Payor mix % of Admissions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional Medicare Episodic |
|
|
84.4 |
% |
|
|
|
83.9 |
% |
|
|
|
0.5 |
% |
|
|
Replacement Plans Paid Episodically |
|
|
4.0 |
% |
|
|
|
3.4 |
% |
|
|
|
0.6 |
% |
|
|
Replacement Plans Paid Per Visit |
|
|
11.6 |
% |
|
|
|
12.7 |
% |
|
|
|
(1.1) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Medicare: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Admissions (1) |
|
|
7,993 |
|
10.5 |
% |
|
8,154 |
|
11.0 |
% |
|
(161) |
|
-2.0 |
% |
Revenue (in thousands) |
|
$ |
14,800 |
|
5.0 |
% |
$ |
11,623 |
|
4.1 |
% |
$ |
3,177 |
|
27.3 |
% |
Revenue per admission |
|
$ |
1,852 |
|
|
|
$ |
1,425 |
|
|
|
$ |
426 |
|
29.9 |
% |
Billable visits (1) |
|
|
184,155 |
|
9.6 |
% |
|
182,894 |
|
9.7 |
% |
|
1,261 |
|
0.7 |
% |
Recertifications |
|
|
1,681 |
|
|
|
|
1,366 |
|
|
|
|
315 |
|
23.1 |
% |
Payor mix % of Admissions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicaid & other governmental |
|
|
30.7 |
% |
|
|
|
22.5 |
% |
|
|
|
8.2 |
% |
|
|
Private payors |
|
|
69.3 |
% |
|
|
|
77.5 |
% |
|
|
|
(8.2) |
% |
|
|
(1)Percentages pertain to percentage of total admissions or total billable visits, as applicable.
VN segment net revenue includes results of the WillCare acquisition which increased net service revenues by $3.5 million and operating income before corporate expenses by $0.6 million.
Excluding the effects of the WillCare acquisition, VN segment net revenue increased by $7.1 million to $292.1 million from $285.1 million in the prior year period primarily due to higher volumes and an effective Medicare rate increase of about 1%. The average number of locations declined due to the 2014 combination of certain branches with overlapping service territory in Florida following the SunCrest acquisition.
20
Gross margin as a percent of revenue increased 0.9% primarily due to organic volume growth, the Medicare rate increase and a lower cost per visit. Total general and administrative expenses declined slightly as a percentage of revenue to 39.3% from 39.6% in the prior year period primarily due to organic volume growth and the Medicare rate increase.
As a result, VN segment operating income before corporate expenses improved to $36.9 million from $32.1 million in the prior year period, while VN segment operating income as percentage of revenue increased to 12.5% from 11.3% in the prior year period.
Personal Care Segment
(In thousands, except for statistics)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
|
|
|
|
||||||||
|
|
October 2, 2015 |
|
September 30, 2014 |
|
Change |
|
|||||||||
|
|
Amount |
|
% Rev |
|
Amount |
|
% Rev |
|
Amount |
|
% |
|
|||
Net service revenues |
|
$ |
89,086 |
|
100.0 |
% |
$ |
83,647 |
|
100.0 |
% |
$ |
5,439 |
|
6.5 |
% |
Cost of service revenues |
|
|
61,055 |
|
68.5 |
% |
|
57,367 |
|
68.6 |
% |
|
3,688 |
|
6.4 |
% |
Gross margin |
|
|
28,031 |
|
31.5 |
% |
|
26,280 |
|
31.4 |
% |
|
1,751 |
|
6.7 |
% |
General and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits |
|
|
12,181 |
|
13.7 |
% |
|
10,758 |
|
12.9 |
% |
|
1,423 |
|
13.2 |
% |
Other |
|
|
6,280 |
|
7.0 |
% |
|
6,206 |
|
7.4 |
% |
|
74 |
|
1.2 |
% |
Total general and administrative expenses |
|
|
18,461 |
|
20.7 |
% |
|
16,964 |
|
20.3 |
% |
|
1,497 |
|
8.8 |
% |
Operating income before corporate expenses |
|
$ |
9,570 |
|
10.7 |
% |
$ |
9,316 |
|
11.1 |
% |
$ |
254 |
|
2.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of locations |
|
|
64 |
|
|
|
|
61 |
|
|
|
|
3 |
|
4.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Admissions |
|
|
4,803 |
|
|
|
|
4,839 |
|
|
|
|
(36) |
|
-0.7 |
% |
Patient months of care |
|
|
71,907 |
|
|
|
|
67,022 |
|
|
|
|
4,885 |
|
7.3 |
% |
Billable hours |
|
|
3,989,328 |
|
|
|
|
3,988,514 |
|
|
|
|
814 |
|
0.0 |
% |
Revenue per billable hour |
|
$ |
22.33 |
|
|
|
$ |
20.97 |
|
|
|
$ |
1.36 |
|
6.5 |
% |
PC segment net revenue increased primarily due to the WillCare acquisition which increased net service revenues by $4.7 million and operating income before corporate expenses by $0.7 million.
Excluding the effects of the WillCare acquisition, net service revenues increased $0.7 million, or 0.9%, to $84.4 million in 2015 from $83.6 million in 2014 primarily due to mix changes. Cost of service revenues as a percentage of net service revenues decreased slightly to 68.5% in 2015 from 68.6% in 2014, primarily due to changes in business mix.
Total general and administrative expenses increased slightly as a percent of net service revenues to 20.7% from 20.3% in 2014, primarily due to impact of changes in business mix on revenue.
As a result, PC segment operating income before corporate expenses increased to $9.6 million from $9.3 million in 2014, while operating income before corporate expenses as percentage of revenue declined 0.4%.
Liquidity and Capital Resources
Revolving Credit Facility
We have a senior secured revolving credit facility with JP Morgan Chase Bank, NA, as Administrative Agent, Bank of America, as Syndication Agent, and certain other lenders (the “Facility”). The Facility consists of a $175 million credit line with a maturity date of November 15, 2020 and an “accordion” feature providing for potential future expansion of the Facility to $250 million. Borrowings (other than letters of credit) under the credit facility generally will bear interest at a rate varying from the London Interbank Offered Rate (LIBOR) plus 1.75% to LIBOR rate plus 3.00%, depending on leverage. The Facility is secured by substantially all of our assets and the stock of our subsidiaries. Debt issuance costs of $1.2 million incurred in connection with credit facility is recorded in prepaid assets and is being amortized through November 15, 2020.
21
Borrowings under the Facility are subject to various covenants including a multiple of 3.5 times earnings before interest, taxes, depreciation and amortization (“EBITDA”). “EBITDA” may include “Acquired EBITDA” from pro-forma acquisitions as defined. Borrowings under the New Facility may be used for general corporate purposes, including acquisitions. Application of the Facility’s borrowing formula as of October 2, 2015, permitted $64.8 million to be used. We had irrevocable letters of credit totaling $9.8 million outstanding in connection with our self-insurance programs, which resulted in a total of $55.0 million being available for use at October 2, 2015. As of October 2, 2015, we were in compliance with the various financial covenants. Under the most restrictive of its covenants, we were required to maintain minimum net worth of at least $176.1 million at October 2, 2015. At such date, our net worth was approximately $259.3 million.
We believe that this facility plus cash on hand will be sufficient to fund our operating needs and expansion plans for at least the next year. We will continue to evaluate additional capital, including possible debt and equity investments in the Company, to support a more rapid development of the business than would be possible with internal funds.
Cash Flows
Key elements to the Consolidated Statements of Cash Flows for the nine month periods ended October 2, 2015 and September 30, 2014 were:
Net Change in Cash and Cash Equivalents (in thousands) |
|
2015 |
|
2014 |
|
||
Provided by (used in): |
|
|
|
|
|
|
|
Operating activities |
|
$ |
13,361 |
|
$ |
(879) |
|
Investing activities |
|
|
(58,454) |
|
|
(1,835) |
|
Financing activities |
|
|
44,616 |
|
|
(4,216) |
|
Discontinued operations |
|
|
(41) |
|
|
42 |
|
Net decrease in cash and cash equivalents |
|
$ |
(518) |
|
$ |
(6,888) |
|
2015
Net cash provided by operating activities resulted primarily from current period net income of $16.9 million plus certain non-cash items, net of changes in accounts receivable, accounts payable and accrued expenses. Accounts receivable days sales outstanding, which were 56 at October 2, 2015 and 55 at December 31, 2014, increased due to collection delays, primarily in the PC segment, due to changes in patient enrollment and billing requirements enacted by the Medicaid managed care providers in Tennessee. Accounts receivable days sales outstanding declined by 3 days during the three months ended October 2, 2015.
Cash used in investing activities was primarily due to our August 29, 2015 acquisition of the stock of WillCare for $50.8 million, our March 1, 2015 acquisition of the stock of WillCare’s Ohio operations for $3.0 million, our July 23, 2015 acquisition of the stock of Ingenios for $2.0 million, capital expenditures of $1.7 million and a $1.0 million cost basis investment.
Cash provided by financing activities resulted from $45.9 million of new borrowings on the revolving credit facility and $1.2 million of debt issuance costs incurred with the new five year $175 million credit facility.
2014
Net cash used in operating activities resulted primarily from current period net income of $9.2 million plus certain non-cash items, net of an increase in accounts receivable, and decreases in accounts payable and accrued expenses. The cash used in investing activities was primarily due to an April 2014 acquisition and capital expenditures. Cash used in financing activities resulted from $3.5 million of payments on the revolving credit facility.
Impact of Inflation
Management does not believe that inflation has had a material effect on income during the past several years.
22
Non-GAAP Financial Measures
The information provided in some of the tables use certain non-GAAP financial measures as defined under SEC rules. In accordance with SEC rules, the Company has provided, in the supplemental information below, a reconciliation of those measures to the most directly comparable GAAP measures.
Adjusted Earnings from Home Health Operations
Adjusted earnings from home health operations (Adjusted Earnings-HHO) is not a measure of financial performance under accounting principles generally accepted in the United States of America (US GAAP). It should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities, or any other measure calculated in accordance with generally accepted accounting principles. We believe the use of non-GAAP measures on a consolidated and business segment basis assists investors in understanding the ongoing operating performance by presenting comparable financial results between periods. The non-GAAP information provided is used by us and may not be determined in a manner consistent with the methodologies used by other companies.
|
|
Three months ended |
|
Nine months ended |
|
||||||||
(in thousands) |
|
October 2, 2015 |
|
September 30, 2014 |
|
October 2, 2015 |
|
September 30, 2014 |
|
||||
Net income attributable to Almost Family, Inc. |
|
$ |
7,799 |
|
$ |
3,782 |
|
$ |
17,203 |
|
$ |
9,015 |
|
Addbacks: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deal, transition and other, net of tax |
|
|
(2,702) |
|
|
985 |
|
|
(2,336) |
|
|
3,577 |
|
Loss on discontinued operations, net of tax |
|
|
2 |
|
|
39 |
|
|
9 |
|
|
173 |
|
Adjusted earnings |
|
|
5,099 |
|
|
4,806 |
|
|
14,876 |
|
|
12,765 |
|
Healthcare Innovations operating (gain) loss after NCI, net of tax |
|
|
(47) |
|
|
(394) |
|
|
289 |
|
|
(144) |
|
Adjusted Earnings-HHO |
|
$ |
5,052 |
|
$ |
4,412 |
|
$ |
15,165 |
|
$ |
12,621 |
|
Adjusted EBITDA from Home Health Operations
Adjusted earnings before interest, income tax, depreciation, amortization, amortization of stock-based compensation, Healthcare Innovations operating loss and deal, transition and other from Home Health Operations (Adjusted EBITDA-HHO) is not a measure of financial performance under U.S. GAAP. It should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities, or any other measure calculated in accordance with generally accepted accounting principles. The items excluded from Adjusted EBITDA-HHO are significant components in understanding and evaluating financial performance and liquidity. Management routinely calculates and communicates Adjusted EBITDA-HHO and believes that it is useful to investors because it is commonly used as an analytical indicator within our industry to evaluate performance, measure leverage capacity and debt service ability, and to estimate current or prospective enterprise value. Adjusted EBITDA is used in certain covenants contained in our Credit Facility.
The following table sets forth a reconciliation of net income to Adjusted EBITDA-HHO as of October 2, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
||||||||
(in thousands) |
|
October 2, 2015 |
|
September 30, 2014 |
|
October 2, 2015 |
|
September 30, 2014 |
|
||||
Net income from continuing operations |
|
$ |
8,063 |
|
$ |
4,159 |
|
$ |
16,882 |
|
$ |
9,373 |
|
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
494 |
|
|
401 |
|
|
1,247 |
|
|
1,078 |
|
Income tax expense |
|
|
2,078 |
|
|
2,810 |
|
|
8,458 |
|
|
6,245 |
|
Depreciation and amortization |
|
|
846 |
|
|
1,012 |
|
|
2,626 |
|
|
3,165 |
|
Stock-based compensation |
|
|
450 |
|
|
465 |
|
|
1,455 |
|
|
1,337 |
|
Deal, transition and other costs |
|
|
(1,309) |
|
|
1,655 |
|
|
(695) |
|
|
6,012 |
|
Adjusted EBITDA |
|
|
10,622 |
|
|
10,502 |
|
|
29,973 |
|
|
27,210 |
|
Healthcare Innovations operating (gain) loss |
|
|
(512) |
|
|
(1,373) |
|
|
578 |
|
|
(576) |
|
Adjusted EBITDA-HHO |
|
$ |
10,110 |
|
$ |
9,129 |
|
$ |
30,551 |
|
$ |
26,634 |
|
23
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Derivative Instruments
The Company does not use derivative instruments.
Market Risk of Financial Instruments
Our primary market risk exposure with regard to financial instruments is to changes in interest rates on long-term obligations.
At October 2, 2015, a hypothetical 100 basis point increase in short-term interest rates would result in a reduction of approximately $0.9 million in our quarter pre-tax earnings.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures – As of October 2, 2015, the Company’s management, with participation of the Company’s Chief Executive Officer and Principal Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e). Based on that evaluation, the Chief Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of October 2, 2015.
Changes in Internal Control Over Financial Reporting - There were no changes in the Company’s internal control over financial reporting during the third quarter of 2015, that have materially affected, or are reasonably likely to materially affect, Almost Family, Inc.’s internal control over financial reporting.
24
From time to time, we are subject to various legal actions arising in the ordinary course of our business, including claims for damages for personal injuries. In our opinion, after discussion with legal counsel, the ultimate resolution of any of these pending ordinary course claims and legal proceedings will not have a material effect on our financial position or results of operations.
Information regarding risk factors appears in our Form 10-K for the year ending December 31, 2014, under the heading “Special Caution Regarding Forward – Looking Statements” and in the Form 10-K Part I, Item 1A. Risk Factors. There have been no material changes from the risk factors disclosed in our Form 10-K and subsequent Form 10-Q.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
None
2.1
Closing Letter Agreement dated August 28, 2015, as amendment to Share Purchase Agreement dated as of February 2, 2015 by and among Almost Family, Inc., National Health Industries, Inc., Bracor, Inc. and Bracor’s shareholders, Summer Street Capital II, L.P., Summer Street Capital NYS Fund II, L.P., David W. Brason, Todd W. Brason and David W. Brason Multi-Generational Irrevocable Trust (incorporated by reference to Exhibit 2.2 to the Company’s current Report on Form 8-K filed on September 2, 2015) (schedule has been omitted pursuant to Item 601(b)(2) of Regulation S-K. Almost Family hereby undertakes to furnish supplementally a copy of the omitted schedule upon request by the U.S. Securities and Exchange Commission).
31.1
Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certifications of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certifications of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
25
101
Financial statements from the quarterly report on Form 10-Q of Almost Family, Inc. for the quarter ended October 2, 2015, filed on November 10, 2015, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Cash Flows, and (iv) the Notes to Consolidated Financial Statements.
26
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
ALMOST FAMILY, INC. |
|
|
|
|
Date November 10, 2015 |
By: |
/s/ William B. Yarmuth William B. Yarmuth |
|
|
|
|
|
Chairman of the Board and Chief Executive Officer |
|
|
|
|
By: |
/s/ C. Steven Guenthner |
|
|
C. Steven Guenthner |
|
|
President and |
|
|
Principal Financial Officer |
27