|
ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
62-1559667
|
(State or other jurisdiction of
incorporation or organization)
|
|
(IRS Employer
Identification No.)
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
(Unaudited)
|
|
|
||||
CURRENT ASSETS:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
3,811
|
|
|
$
|
3,524
|
|
Receivables, less allowance for doubtful accounts of $14,235 at December 31, 2017
|
63,591
|
|
|
64,929
|
|
||
Other receivables
|
1,456
|
|
|
375
|
|
||
Prepaid expenses and other current assets
|
3,672
|
|
|
3,248
|
|
||
Income tax refundable
|
1,298
|
|
|
537
|
|
||
Current assets of discontinued operations
|
20
|
|
|
45
|
|
||
Total current assets
|
73,848
|
|
|
72,658
|
|
||
PROPERTY AND EQUIPMENT, at cost
|
135,485
|
|
|
147,549
|
|
||
Less accumulated depreciation and amortization
|
(81,184
|
)
|
|
(78,345
|
)
|
||
Property and equipment, net
|
54,301
|
|
|
69,204
|
|
||
OTHER ASSETS:
|
|
|
|
||||
Deferred income taxes, net
|
15,052
|
|
|
15,154
|
|
||
Deferred lease and other costs, net
|
114
|
|
|
137
|
|
||
Acquired leasehold interest, net
|
6,499
|
|
|
6,691
|
|
||
Assets held for sale
|
13,269
|
|
|
—
|
|
||
Other noncurrent assets
|
5,106
|
|
|
3,725
|
|
||
Total other assets
|
40,040
|
|
|
25,707
|
|
||
|
$
|
168,189
|
|
|
$
|
167,569
|
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
PATIENT REVENUES, net
|
$
|
141,082
|
|
|
$
|
142,550
|
|
EXPENSES:
|
|
|
|
||||
Operating
|
111,440
|
|
|
113,166
|
|
||
Lease and rent expense
|
13,725
|
|
|
13,763
|
|
||
Professional liability
|
3,182
|
|
|
2,724
|
|
||
General and administrative
|
9,295
|
|
|
8,221
|
|
||
Depreciation and amortization
|
2,847
|
|
|
2,620
|
|
||
Total expenses
|
140,489
|
|
|
140,494
|
|
||
OPERATING INCOME
|
593
|
|
|
2,056
|
|
||
OTHER INCOME (EXPENSE):
|
|
|
|
||||
Gain on sale of investment in unconsolidated affiliate
|
308
|
|
|
—
|
|
||
Other income
|
28
|
|
|
—
|
|
||
Interest expense, net
|
(1,661
|
)
|
|
(1,541
|
)
|
||
Total other expense
|
(1,325
|
)
|
|
(1,541
|
)
|
||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
(732
|
)
|
|
515
|
|
||
BENEFIT (PROVISION) FOR INCOME TAXES
|
425
|
|
|
(134
|
)
|
||
INCOME (LOSS) FROM CONTINUING OPERATIONS
|
(307
|
)
|
|
381
|
|
||
LOSS FROM DISCONTINUED OPERATIONS:
|
|
|
|
||||
Operating loss, net of tax expense of $0 and $18, respectively
|
(4
|
)
|
|
(28
|
)
|
||
NET INCOME (LOSS)
|
$
|
(311
|
)
|
|
$
|
353
|
|
NET INCOME (LOSS) PER COMMON SHARE:
|
|
|
|
||||
Per common share – basic
|
|
|
|
||||
Continuing operations
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
Discontinued operations
|
—
|
|
|
—
|
|
||
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
Per common share – diluted
|
|
|
|
||||
Continuing operations
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
Discontinued operations
|
—
|
|
|
—
|
|
||
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
COMMON STOCK DIVIDENDS DECLARED PER SHARE OF COMMON STOCK
|
$
|
0.055
|
|
|
$
|
0.055
|
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
|
|
|
|
||||
Basic
|
6,370
|
|
|
6,294
|
|
||
Diluted
|
6,370
|
|
|
6,472
|
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
NET INCOME (LOSS)
|
$
|
(311
|
)
|
|
$
|
353
|
|
OTHER COMPREHENSIVE INCOME:
|
|
|
|
||||
Change in fair value of cash flow hedge, net of tax
|
134
|
|
|
146
|
|
||
Less: reclassification adjustment for amounts recognized in net income
|
(38
|
)
|
|
(116
|
)
|
||
Total other comprehensive income
|
96
|
|
|
30
|
|
||
COMPREHENSIVE INCOME (LOSS)
|
$
|
(215
|
)
|
|
$
|
383
|
|
|
Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
PATIENT REVENUES, net
|
$
|
282,367
|
|
|
$
|
284,050
|
|
EXPENSES:
|
|
|
|
||||
Operating
|
223,718
|
|
|
223,833
|
|
||
Lease and rent expense
|
27,438
|
|
|
27,506
|
|
||
Professional liability
|
5,957
|
|
|
5,394
|
|
||
General and administrative
|
17,434
|
|
|
17,194
|
|
||
Depreciation and amortization
|
5,728
|
|
|
5,107
|
|
||
Total expenses
|
280,275
|
|
|
279,034
|
|
||
OPERATING INCOME
|
2,092
|
|
|
5,016
|
|
||
OTHER INCOME (EXPENSE):
|
|
|
|
||||
Gain on sale of investment in unconsolidated affiliate
|
308
|
|
|
733
|
|
||
Other income
|
79
|
|
|
—
|
|
||
Interest expense, net
|
(3,330
|
)
|
|
(3,024
|
)
|
||
Total other expense
|
(2,943
|
)
|
|
(2,291
|
)
|
||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
(851
|
)
|
|
2,725
|
|
||
BENEFIT (PROVISION) FOR INCOME TAXES
|
463
|
|
|
(996
|
)
|
||
INCOME (LOSS) FROM CONTINUING OPERATIONS
|
(388
|
)
|
|
1,729
|
|
||
LOSS FROM DISCONTINUED OPERATIONS:
|
|
|
|
||||
Operating loss, net of tax expense of $11 and $27, respectively
|
(26
|
)
|
|
(43
|
)
|
||
NET INCOME (LOSS)
|
$
|
(414
|
)
|
|
$
|
1,686
|
|
NET INCOME (LOSS) PER COMMON SHARE:
|
|
|
|
||||
Per common share – basic
|
|
|
|
||||
Continuing operations
|
$
|
(0.06
|
)
|
|
$
|
0.28
|
|
Discontinued operations
|
—
|
|
|
(0.01
|
)
|
||
|
$
|
(0.06
|
)
|
|
$
|
0.27
|
|
Per common share – diluted
|
|
|
|
||||
Continuing operations
|
$
|
(0.06
|
)
|
|
$
|
0.27
|
|
Discontinued operations
|
—
|
|
|
(0.01
|
)
|
||
|
$
|
(0.06
|
)
|
|
$
|
0.26
|
|
COMMON STOCK DIVIDENDS DECLARED PER SHARE OF COMMON STOCK
|
$
|
0.11
|
|
|
$
|
0.11
|
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
|
|
|
|
||||
Basic
|
6,342
|
|
|
6,263
|
|
||
Diluted
|
6,342
|
|
|
6,458
|
|
|
Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
NET INCOME (LOSS)
|
$
|
(414
|
)
|
|
$
|
1,686
|
|
OTHER COMPREHENSIVE INCOME:
|
|
|
|
||||
Change in fair value of cash flow hedge, net of tax
|
455
|
|
|
400
|
|
||
Less: reclassification adjustment for amounts recognized in net income
|
(151
|
)
|
|
(233
|
)
|
||
Total other comprehensive income
|
304
|
|
|
167
|
|
||
COMPREHENSIVE INCOME (LOSS)
|
$
|
(110
|
)
|
|
$
|
1,853
|
|
|
Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income (loss)
|
$
|
(414
|
)
|
|
$
|
1,686
|
|
Discontinued operations
|
(26
|
)
|
|
(43
|
)
|
||
Income (loss) from continuing operations
|
(388
|
)
|
|
1,729
|
|
||
Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
5,728
|
|
|
5,107
|
|
||
Provision for doubtful accounts
|
—
|
|
|
4,187
|
|
||
Deferred income tax provision (benefit)
|
(34
|
)
|
|
403
|
|
||
Provision for self-insured professional liability, net of cash payments
|
1,722
|
|
|
(309
|
)
|
||
Stock-based compensation
|
765
|
|
|
504
|
|
||
Gain on sale of unconsolidated affiliate
|
(308
|
)
|
|
(733
|
)
|
||
Provision for leases in excess of cash payments
|
(916
|
)
|
|
(304
|
)
|
||
Deferred bonus
|
—
|
|
|
600
|
|
||
Other
|
283
|
|
|
247
|
|
||
Changes in assets and liabilities affecting operating activities:
|
|
|
|
||||
Receivables, net
|
342
|
|
|
(7,313
|
)
|
||
Prepaid expenses and other assets
|
(2,651
|
)
|
|
620
|
|
||
Trade accounts payable and accrued expenses
|
2,072
|
|
|
(2,647
|
)
|
||
Net cash provided by continuing operations
|
6,615
|
|
|
2,091
|
|
||
Discontinued operations
|
(632
|
)
|
|
(329
|
)
|
||
Net cash provided by operating activities
|
5,983
|
|
|
1,762
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Purchases of property and equipment
|
(3,896
|
)
|
|
(5,121
|
)
|
||
Deposit in escrow
|
—
|
|
|
(8,673
|
)
|
||
Proceeds from sale of unconsolidated affiliate
|
308
|
|
|
1,100
|
|
||
Net cash used in continuing operations
|
(3,588
|
)
|
|
(12,694
|
)
|
||
Discontinued operations
|
—
|
|
|
—
|
|
||
Net cash used in investing activities
|
(3,588
|
)
|
|
(12,694
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Repayment of debt obligations
|
(9,057
|
)
|
|
(14,166
|
)
|
||
Proceeds from issuance of debt
|
8,203
|
|
|
26,074
|
|
||
Financing costs
|
(137
|
)
|
|
(226
|
)
|
||
Issuance and redemption of employee equity awards
|
(78
|
)
|
|
(94
|
)
|
||
Payment of common stock dividends
|
(702
|
)
|
|
(692
|
)
|
||
Payment for preferred stock restructuring
|
(337
|
)
|
|
(327
|
)
|
||
Net cash (used in) provided by financing activities
|
(2,108
|
)
|
|
10,569
|
|
||
Discontinued operations
|
—
|
|
|
—
|
|
||
Net cash (used in) provided by financing activities
|
$
|
(2,108
|
)
|
|
$
|
10,569
|
|
|
Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
$
|
287
|
|
|
$
|
(363
|
)
|
CASH AND CASH EQUIVALENTS, beginning of period
|
3,524
|
|
|
4,263
|
|
||
CASH AND CASH EQUIVALENTS, end of period
|
$
|
3,811
|
|
|
$
|
3,900
|
|
SUPPLEMENTAL INFORMATION:
|
|
|
|
||||
Cash payments of interest
|
$
|
2,920
|
|
|
$
|
2,563
|
|
Cash payments of income taxes
|
$
|
321
|
|
|
$
|
625
|
|
SUPPLEMENTAL INFORMATION ON NON-CASH INVESTING AND FINANCING TRANSACTIONS:
|
|
|
|
||||
Acquisition of equipment through capital lease
|
$
|
—
|
|
|
$
|
7
|
|
1.
|
BUSINESS
|
2.
|
CONSOLIDATION AND BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
|
3.
|
RECENT ACCOUNTING GUIDANCE
|
|
Three Months Ended June 30, 2018
|
||||
|
As Reported
|
|
Increase
(Decrease)
|
|
Balances as if the previous accounting guidance was in effect
|
Patient Revenues, net
|
$141,082
|
|
3,789
(362
)
3,427
|
(a)
(b)
|
$144,509
|
Operating Expenses
|
$111,440
|
|
3,789
|
(a)
|
$115,229
|
Total Expenses
|
$140,489
|
|
3,789
|
(a)
|
$144,278
|
|
Six Months Ended June 30, 2018
|
||||
|
As Reported
|
|
Increase
(Decrease)
|
|
Balances as if the previous accounting guidance was in effect
|
Patient Revenues, net
|
$282,367
|
|
7,252
(618
)
6,634
|
(a)
(b)
|
$289,001
|
Operating Expenses
|
$223,718
|
|
7,252
|
(a)
|
$230,970
|
Total Expenses
|
$280,275
|
|
7,252
|
(a)
|
$287,527
|
|
As of June 30, 2018
|
||||
|
As Reported
|
|
Increase
(Decrease)
|
|
Balances as if the previous accounting guidance was in effect
|
Accounts Receivable
|
$63,591
|
|
(618)
16,050
15,432
|
(a)
(b)
|
$79,023
|
Accumulated Deficit
|
$(15,673)
|
|
618
(198)
420
|
(a)
(c)
|
$(15,253)
|
|
Three Months Ended June 30,
|
||||||||||||||||
|
2018
|
|
2018
|
|
2017(1)
|
||||||||||||
|
As reported
|
|
As Adjusted to Legacy GAAP
|
|
As reported
|
||||||||||||
Medicaid
|
$
|
65,603
|
|
46.5
|
%
|
|
$
|
75,216
|
|
52.0
|
%
|
|
$
|
73,510
|
|
51.6
|
%
|
Medicare
|
27,863
|
|
19.7
|
%
|
|
36,079
|
|
25.0
|
%
|
|
38,900
|
|
27.3
|
%
|
|||
Managed Care
|
13,303
|
|
9.4
|
%
|
|
11,888
|
|
8.2
|
%
|
|
9,959
|
|
7.0
|
%
|
|||
Private Pay and other
|
34,313
|
|
24.4
|
%
|
|
21,326
|
|
14.8
|
%
|
|
20,181
|
|
14.1
|
%
|
|||
Total
|
$
|
141,082
|
|
100.0
|
%
|
|
$
|
144,509
|
|
100.0
|
%
|
|
$
|
142,550
|
|
100.0
|
%
|
|
Six Months Ended June 30,
|
||||||||||||||||
|
2018
|
|
2018
|
|
2017(1)
|
||||||||||||
|
As reported
|
|
As Adjusted to Legacy GAAP
|
|
As reported
|
||||||||||||
Medicaid
|
$
|
129,489
|
|
45.9
|
%
|
|
$
|
148,431
|
|
51.4
|
%
|
|
$
|
146,383
|
|
51.5
|
%
|
Medicare
|
57,614
|
|
20.4
|
%
|
|
74,217
|
|
25.7
|
%
|
|
76,911
|
|
27.1
|
%
|
|||
Managed Care
|
27,515
|
|
9.7
|
%
|
|
23,980
|
|
8.3
|
%
|
|
20,764
|
|
7.3
|
%
|
|||
Private Pay and other
|
67,749
|
|
24.0
|
%
|
|
42,373
|
|
14.6
|
%
|
|
39,992
|
|
14.1
|
%
|
|||
Total
|
$
|
282,367
|
|
100.0
|
%
|
|
$
|
289,001
|
|
100.0
|
%
|
|
$
|
284,050
|
|
100.0
|
%
|
5.
|
LONG-TERM DEBT AND INTEREST RATE SWAP
|
7.
|
STOCK-BASED COMPENSATION
|
|
|
|
Weighted
|
|||
|
Options/
|
|
Average
|
|||
|
SOSARs
|
|
Exercise Price
|
|||
Outstanding, December 31, 2017
|
211
|
|
|
$
|
6.64
|
|
Granted
|
30
|
|
|
8.14
|
|
|
Exercised
|
—
|
|
|
—
|
|
|
Expired or cancelled
|
(15
|
)
|
|
10.81
|
|
|
Outstanding, June 30, 2018
|
226
|
|
|
$
|
6.56
|
|
|
|
|
|
|||
Exercisable, June 30, 2018
|
206
|
|
|
$
|
6.41
|
|
|
|
|
Weighted
|
|||
|
|
|
Average
|
|||
|
Restricted
|
|
Grant Date
|
|||
|
Shares
|
|
Fair Value
|
|||
Outstanding, December 31, 2017
|
164
|
|
|
$
|
9.95
|
|
Granted
|
90
|
|
|
8.14
|
|
|
Dividend Equivalents
|
3
|
|
|
7.15
|
|
|
Vested
|
(79
|
)
|
|
10.27
|
|
|
Cancelled
|
(7
|
)
|
|
9.62
|
|
|
Outstanding, June 30, 2018
|
171
|
|
|
$
|
8.81
|
|
|
|
|
Weighted
|
|||
|
|
|
Average
|
|||
|
Restricted
|
|
Grant Date
|
|||
|
Share Units
|
|
Fair Value
|
|||
Outstanding, December 31, 2017
|
44
|
|
|
$
|
9.59
|
|
Granted
|
16
|
|
|
8.14
|
|
|
Dividend Equivalents
|
1
|
|
|
7.14
|
|
|
Vested
|
(17
|
)
|
|
8.91
|
|
|
Outstanding, June 30, 2018
|
44
|
|
|
$
|
9.28
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
||||||||
|
|
Average
|
|
|
|
Intrinsic
|
|
|
|
Intrinsic
|
||||||||
Range of
|
|
Exercise
|
|
Grants
|
|
Value-Grants
|
|
Grants
|
|
Value-Grants
|
||||||||
Exercise Prices
|
|
Prices
|
|
Outstanding
|
|
Outstanding
|
|
Exercisable
|
|
Exercisable
|
||||||||
$8.14 to $10.80
|
|
$
|
9.32
|
|
|
60
|
|
|
$
|
—
|
|
|
40
|
|
|
$
|
—
|
|
$2.37 to $6.21
|
|
$
|
5.56
|
|
|
166
|
|
|
$
|
206
|
|
|
166
|
|
|
$
|
206
|
|
|
|
|
|
226
|
|
|
|
|
206
|
|
|
|
8.
|
EARNINGS PER COMMON SHARE
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net income (loss)
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations
|
$
|
(307
|
)
|
|
$
|
381
|
|
|
$
|
(388
|
)
|
|
$
|
1,729
|
|
Loss from discontinued operations, net of income taxes
|
(4
|
)
|
|
(28
|
)
|
|
(26
|
)
|
|
(43
|
)
|
||||
Net income (loss)
|
$
|
(311
|
)
|
|
$
|
353
|
|
|
$
|
(414
|
)
|
|
$
|
1,686
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net income (loss) per common share:
|
|
|
|
|
|
|
|
||||||||
Per common share – basic
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.28
|
|
Loss from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
||||
Net income (loss) per common share – basic
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.27
|
|
Per common share – diluted
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.27
|
|
Loss from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
||||
Net income (loss) per common share – diluted
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.26
|
|
Weighted Average Common Shares Outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
6,370
|
|
|
6,294
|
|
|
6,342
|
|
|
6,263
|
|
||||
Diluted
|
6,370
|
|
|
6,472
|
|
|
6,342
|
|
|
6,458
|
|
9.
|
BUSINESS DEVELOPMENTS AND OTHER SIGNIFICANT TRANSACTIONS
|
|
|
Park Place
|
||
Purchase Price
|
|
$
|
8,750
|
|
Gain on bargain purchase
|
|
925
|
|
|
|
|
$
|
9,675
|
|
|
|
|
||
Allocation:
|
|
|
||
Building
|
|
$
|
8,435
|
|
Land
|
|
760
|
|
|
Land Improvements
|
|
145
|
|
|
Furniture, Fixtures and Equipment
|
|
335
|
|
|
|
|
$
|
9,675
|
|
10.
|
SUBSEQUENT EVENTS
|
|
Three Months Ended June 30,
|
||||||||||||||||
|
2018
|
|
2018
|
|
2017
|
||||||||||||
|
As reported
|
|
As Adjusted to Legacy GAAP
|
|
As reported
|
||||||||||||
Medicaid
|
$
|
65,603
|
|
46.5
|
%
|
|
$
|
75,216
|
|
52.0
|
%
|
|
$
|
73,510
|
|
51.6
|
%
|
Medicare
|
27,863
|
|
19.7
|
%
|
|
36,079
|
|
25.0
|
%
|
|
38,900
|
|
27.3
|
%
|
|||
Managed Care
|
13,303
|
|
9.4
|
%
|
|
11,888
|
|
8.2
|
%
|
|
9,959
|
|
7.0
|
%
|
|||
Private Pay and other
|
34,313
|
|
24.4
|
%
|
|
21,326
|
|
14.8
|
%
|
|
20,181
|
|
14.1
|
%
|
|||
Total
|
$
|
141,082
|
|
100.0
|
%
|
|
$
|
144,509
|
|
100.0
|
%
|
|
$
|
142,550
|
|
100.0
|
%
|
|
Six Months Ended June 30,
|
||||||||||||||||
|
2018
|
|
2018
|
|
2017
|
||||||||||||
|
As reported
|
|
As Adjusted to Legacy GAAP
|
|
As reported
|
||||||||||||
Medicaid
|
$
|
129,489
|
|
45.9
|
%
|
|
$
|
148,431
|
|
51.4
|
%
|
|
$
|
146,383
|
|
51.5
|
%
|
Medicare
|
57,614
|
|
20.4
|
%
|
|
74,217
|
|
25.7
|
%
|
|
76,911
|
|
27.1
|
%
|
|||
Managed Care
|
27,515
|
|
9.7
|
%
|
|
23,980
|
|
8.3
|
%
|
|
20,764
|
|
7.3
|
%
|
|||
Private Pay and other
|
67,749
|
|
24.0
|
%
|
|
42,373
|
|
14.6
|
%
|
|
39,992
|
|
14.1
|
%
|
|||
Total
|
$
|
282,367
|
|
100.0
|
%
|
|
$
|
289,001
|
|
100.0
|
%
|
|
$
|
284,050
|
|
100.0
|
%
|
Contractual Obligations
|
Total
|
|
Less than
1 year
|
|
1 to 3
Years
|
|
3 to 5
Years
|
|
After
5 Years
|
||||||||||
Long-term debt obligations
(1)
|
$
|
100,846
|
|
|
$
|
17,722
|
|
|
$
|
83,089
|
|
|
$
|
35
|
|
|
$
|
—
|
|
Settlement obligations
(2)
|
824
|
|
|
824
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Elimination of Preferred Stock Conversion feature
(3)
|
172
|
|
|
172
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Operating leases
(4)
|
1,046,148
|
|
|
58,751
|
|
|
120,826
|
|
|
124,263
|
|
|
742,308
|
|
|||||
Required capital expenditures under operating leases
(5)
|
10,667
|
|
|
1,172
|
|
|
2,344
|
|
|
2,344
|
|
|
4,807
|
|
|||||
Total
|
$
|
1,158,657
|
|
|
$
|
78,641
|
|
|
$
|
206,259
|
|
|
$
|
126,642
|
|
|
$
|
747,115
|
|
(1)
|
Long-term debt obligations include scheduled future payments of principal and interest of long-term debt and amounts outstanding on our capital lease obligations. Our long-term debt obligations decreased
$2.6 million
between December 31, 2017 and
June 30, 2018
. See Note 5, "Long-Term Debt and Interest Rate Swap," to the interim consolidated financial statements included in this report for additional information.
|
(2)
|
Settlement obligations relate to professional liability cases that are expected to be paid within the next twelve months. The professional liabilities are included in our current portion of self-insurance reserves.
|
(3)
|
Payments to Omega Health Investors ("Omega"), from which we lease
35
nursing centers, for the elimination of the preferred stock conversion feature in connection with restructuring the preferred stock and master lease agreements. Monthly payments of approximately $57,000 will be made through the end of the initial lease period that ends in September 2018.
|
(4)
|
Represents lease payments under our operating lease agreements. Assumes all renewal periods are enacted. Our operating lease obligations decreased
$19.5 million
between
December 31, 2017
and
June 30, 2018
.
|
(5)
|
Includes annual expenditure requirements under operating leases. Our required capital expenditures decreased
$1.2 million
between
December 31, 2017
and
June 30, 2018
.
|
(in thousands)
|
Three Months Ended June 30,
|
|||||||||||||
|
2018
|
|
2017
|
|
Change
|
|
%
|
|||||||
PATIENT REVENUES, net
|
$
|
141,082
|
|
|
$
|
142,550
|
|
|
$
|
(1,468
|
)
|
|
(1.0
|
)%
|
EXPENSES:
|
|
|
|
|
|
|
|
|||||||
Operating
|
111,440
|
|
|
113,166
|
|
|
(1,726
|
)
|
|
(1.5
|
)%
|
|||
Lease and rent expense
|
13,725
|
|
|
13,763
|
|
|
(38
|
)
|
|
(0.3
|
)%
|
|||
Professional liability
|
3,182
|
|
|
2,724
|
|
|
458
|
|
|
16.8
|
%
|
|||
General and administrative
|
9,295
|
|
|
8,221
|
|
|
1,074
|
|
|
13.1
|
%
|
|||
Depreciation and amortization
|
2,847
|
|
|
2,620
|
|
|
227
|
|
|
8.7
|
%
|
|||
Total expenses
|
140,489
|
|
|
140,494
|
|
|
(5
|
)
|
|
—
|
%
|
|||
OPERATING INCOME
|
593
|
|
|
2,056
|
|
|
(1,463
|
)
|
|
(71.2
|
)%
|
|||
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|||||||
Gain on sale of investment in unconsolidated affiliate
|
308
|
|
|
—
|
|
|
308
|
|
|
(100.0
|
)%
|
|||
Other income
|
28
|
|
|
—
|
|
|
28
|
|
|
100.0
|
%
|
|||
Interest expense, net
|
(1,661
|
)
|
|
(1,541
|
)
|
|
(120
|
)
|
|
(7.8
|
)%
|
|||
|
(1,325
|
)
|
|
(1,541
|
)
|
|
216
|
|
|
14.0
|
%
|
|||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
(732
|
)
|
|
515
|
|
|
(1,247
|
)
|
|
(242.1
|
)%
|
|||
BENEFIT (PROVISION) FOR INCOME TAXES
|
425
|
|
|
(134
|
)
|
|
559
|
|
|
417.2
|
%
|
|||
INCOME (LOSS) FROM CONTINUING OPERATIONS
|
$
|
(307
|
)
|
|
$
|
381
|
|
|
$
|
(688
|
)
|
|
(180.6
|
)%
|
(in thousands)
|
Six Months Ended June 30,
|
|||||||||||||
|
2018
|
|
2017
|
|
Change
|
|
%
|
|||||||
PATIENT REVENUES, net
|
$
|
282,367
|
|
|
$
|
284,050
|
|
|
$
|
(1,683
|
)
|
|
(0.6
|
)%
|
EXPENSES:
|
|
|
|
|
|
|
|
|||||||
Operating
|
223,718
|
|
|
223,833
|
|
|
(115
|
)
|
|
(0.1
|
)%
|
|||
Lease and rent expense
|
27,438
|
|
|
27,506
|
|
|
(68
|
)
|
|
(0.2
|
)%
|
|||
Professional liability
|
5,957
|
|
|
5,394
|
|
|
563
|
|
|
10.4
|
%
|
|||
General and administrative
|
17,434
|
|
|
17,194
|
|
|
240
|
|
|
1.4
|
%
|
|||
Depreciation and amortization
|
5,728
|
|
|
5,107
|
|
|
621
|
|
|
12.2
|
%
|
|||
Total expenses
|
280,275
|
|
|
279,034
|
|
|
1,241
|
|
|
0.4
|
%
|
|||
OPERATING INCOME
|
2,092
|
|
|
5,016
|
|
|
(2,924
|
)
|
|
(58.3
|
)%
|
|||
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|||||||
Gain on sale of investment in unconsolidated affiliate
|
308
|
|
|
733
|
|
|
(425
|
)
|
|
(100.0
|
)%
|
|||
Other income
|
79
|
|
|
—
|
|
|
79
|
|
|
100.0
|
%
|
|||
Interest expense, net
|
(3,330
|
)
|
|
(3,024
|
)
|
|
(306
|
)
|
|
(10.1
|
)%
|
|||
|
(2,943
|
)
|
|
(2,291
|
)
|
|
(652
|
)
|
|
(28.5
|
)%
|
|||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
(851
|
)
|
|
2,725
|
|
|
(3,576
|
)
|
|
(131.2
|
)%
|
|||
BENEFIT (PROVISION) FOR INCOME TAXES
|
463
|
|
|
(996
|
)
|
|
1,459
|
|
|
146.5
|
%
|
|||
INCOME (LOSS) FROM CONTINUING OPERATIONS
|
$
|
(388
|
)
|
|
$
|
1,729
|
|
|
$
|
(2,117
|
)
|
|
(122.4
|
)%
|
|
Three Months Ended June 30,
|
||||||||||||||
|
2018
|
2017
|
|
|
|||||||||||
|
As reported
|
|
As adjusted to Legacy GAAP
|
|
As reported
|
|
Change
|
||||||||
Same-store revenue
|
$
|
138,747
|
|
|
$
|
142,174
|
|
|
$
|
142,550
|
|
|
$
|
(376
|
)
|
2017 acquisition revenue
|
2,335
|
|
|
2,335
|
|
|
—
|
|
|
2,335
|
|
||||
Total revenue
|
$
|
141,082
|
|
|
$
|
144,509
|
|
|
$
|
142,550
|
|
|
$
|
1,959
|
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Skilled nursing occupancy
|
79.8
|
%
|
|
79.8
|
%
|
||
As a percent of total census:
|
|
|
|
||||
Medicare census
|
10.6
|
%
|
|
12.0
|
%
|
||
Medicaid census
|
68.9
|
%
|
|
68.6
|
%
|
||
Managed Care census
|
4.2
|
%
|
|
3.6
|
%
|
||
As a percent of total revenues:
|
|
|
|
||||
Medicare revenues
|
25.0
|
%
|
|
27.3
|
%
|
||
Medicaid revenues
|
52.0
|
%
|
|
51.6
|
%
|
||
Managed Care revenues
|
8.2
|
%
|
|
7.0
|
%
|
||
Average rate per day:
|
|
|
|
||||
Medicare
|
$
|
455.29
|
|
|
$
|
453.02
|
|
Medicaid
|
$
|
177.58
|
|
|
$
|
173.92
|
|
Managed Care
|
$
|
397.49
|
|
|
$
|
391.60
|
|
|
Three Months Ended June 30,
|
||||||||||||||
|
2018
|
2017
|
|
|
|||||||||||
|
As reported
|
|
As adjusted to Legacy GAAP
|
|
As reported
|
|
Change
|
||||||||
Same-store operating expense
|
$
|
109,758
|
|
|
$
|
113,547
|
|
|
$
|
113,166
|
|
|
$
|
381
|
|
2017 acquisition expense
|
1,682
|
|
|
1,682
|
|
|
—
|
|
|
1,682
|
|
||||
Total expense
|
$
|
111,440
|
|
|
$
|
115,229
|
|
|
$
|
113,166
|
|
|
$
|
2,063
|
|
|
Six Months Ended June 30,
|
||||||||||||||
|
2018
|
|
2017
|
|
|
||||||||||
|
As reported
|
|
As adjusted to Legacy GAAP
|
|
As reported
|
|
Change
|
||||||||
Same-store revenue
|
$
|
277,650
|
|
|
$
|
284,284
|
|
|
$
|
284,050
|
|
|
$
|
234
|
|
2017 acquisition revenue
|
4,717
|
|
|
4,717
|
|
|
—
|
|
|
4,717
|
|
||||
Total revenue
|
$
|
282,367
|
|
|
$
|
289,001
|
|
|
$
|
284,050
|
|
|
$
|
4,951
|
|
|
Six Months Ended June 30,
|
|
|
||||||||
|
2018
|
|
|
|
2017
|
|
|
||||
Skilled nursing occupancy
|
79.8
|
%
|
|
|
|
80.0
|
%
|
|
|
||
As a percent of total census:
|
|
|
|
|
|
|
|
||||
Medicare census
|
11.1
|
%
|
|
|
|
11.8
|
%
|
|
|
||
Medicaid census
|
68.4
|
%
|
|
|
|
68.6
|
%
|
|
|
||
Managed Care census
|
4.3
|
%
|
|
|
|
3.8
|
%
|
|
|
||
As a percent of total revenues:
|
|
|
|
|
|
|
|
||||
Medicare revenues
|
25.7
|
%
|
|
|
|
27.1
|
%
|
|
|
||
Medicaid revenues
|
51.4
|
%
|
|
|
|
51.5
|
%
|
|
|
||
Managed Care revenues
|
8.3
|
%
|
|
|
|
7.3
|
%
|
|
|
||
Average rate per day:
|
|
|
|
|
|
|
|
||||
Medicare
|
$
|
455.51
|
|
|
|
|
$
|
452.15
|
|
|
|
Medicaid
|
$
|
177.19
|
|
|
|
|
$
|
173.83
|
|
|
|
Managed Care
|
$
|
394.64
|
|
|
|
|
$
|
386.31
|
|
|
|
|
Six Months Ended June 30,
|
||||||||||||||
|
2018
|
2017
|
|
|
|||||||||||
|
As reported
|
|
As adjusted to Legacy GAAP
|
|
As reported
|
|
Change
|
||||||||
Same-store operating expense
|
$
|
220,432
|
|
|
$
|
227,684
|
|
|
$
|
223,833
|
|
|
$
|
3,851
|
|
2017 acquisition expense
|
3,286
|
|
|
3,286
|
|
|
—
|
|
|
3,286
|
|
||||
Total expense
|
$
|
223,718
|
|
|
$
|
230,970
|
|
|
$
|
223,833
|
|
|
$
|
7,137
|
|
|
Requirement
|
|
Level at
June 30, 2018
|
Minimum fixed charge coverage ratio
|
1.01:1.00
|
|
1.09:1.00
|
Minimum adjusted EBITDA
|
$13.0 million
|
|
$19.2 million
|
EBITDAR (mortgaged centers)
|
$10.0 million
|
|
$17.2 million
|
Current ratio (as defined in agreement)
|
1.00:1.00
|
|
1.24:1.00
|
•
|
our ability to successfully integrate the operations of our new nursing center in Alabama, as well as successfully operate all of our centers,
|
•
|
our ability to increase census at our centers and occupancy rates at our centers,
|
•
|
changes in governmental reimbursement,
|
•
|
government regulation,
|
•
|
the impact of the Affordable Care Act, efforts to repeal or significantly modify the Affordable Care Act, and other health care reform initiatives,
|
•
|
any increases in the cost of borrowing under our credit agreements,
|
•
|
our ability to comply with covenants contained in those credit agreements,
|
•
|
our ability to comply with the terms of our master lease agreements,
|
•
|
our ability to renew or extend our leases at or prior to the end of the existing lease terms,
|
•
|
the outcome of professional liability lawsuits and claims,
|
•
|
our ability to control ultimate professional liability costs,
|
•
|
the accuracy of our estimate of our anticipated professional liability expense,
|
•
|
the impact of future licensing surveys,
|
•
|
the outcome of proceedings alleging violations of state or Federal False Claims Acts,
|
•
|
laws and regulations governing quality of care or other laws and regulations applicable to our business including HIPAA and laws governing reimbursement from government payors,
|
•
|
the costs of investing in our business initiatives and development,
|
•
|
our ability to control costs,
|
•
|
our ability to attract and retain qualified healthcare professionals,
|
•
|
changes to our valuation of deferred tax assets,
|
•
|
changing economic and competitive conditions,
|
•
|
changes in anticipated revenue and cost growth,
|
•
|
changes in the anticipated results of operations,
|
•
|
the effect of changes in accounting policies as well as others.
|
|
|
|
|
Exhibit
Number
|
|
Description of Exhibits
|
|
3.1
|
|
|
Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement No. 33-76150 on Form S-1 filed in paper - hyperlink is not required pursuant to Rule 105 of Regulation S-T).
|
|
|
||
|
|
Certificate of Designation of Registrant (incorporated by reference to Exhibit 3.5 to the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2006).
|
|
|
|
||
3.3
|
|
|
Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement No. 33-76150 on Form S-1 filed in paper - hyperlink is not required pursuant to Rule 105 of Regulation S-T).
|
|
|
||
|
|
Bylaw Amendment adopted November 5, 2007 (incorporated by reference to Exhibit 3.4 to the Company’s annual report on Form 10-K for the year ended December 31, 2007).
|
|
|
|
||
3.5
|
|
|
Amendment to Certificate of Incorporation dated March 23, 1995 (incorporated by reference to Exhibit A of Exhibit 1 to the Company’s Form 8-A filed March 30, 1995 filed in paper - hyperlink is not required pursuant to Rule 105 of Regulation S-T).
|
|
|
||
|
|
Certificate of Designation of Registrant (incorporated by reference to Exhibit 3.4 to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2001).
|
|
|
|
||
|
|
Certificate of Ownership and Merger of Diversicare Healthcare Services, Inc. with and into Advocat Inc. (incorporated by reference to Exhibit 3.1 to the Company's current report on Form 8-K filed March 14, 2013).
|
|
|
|
|
|
|
|
Amendment to Certificate of Incorporation dated June 9, 2016 (incorporated by reference to Exhibit 3.8 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2016).
|
|
|
|
|
|
|
|
Bylaw Second Amendment adopted April 14, 2016.
|
|
|
|
|
|
4.1
|
|
|
Form of Common Stock Certificate (incorporated by reference to Exhibit 4 to the Company's Registration Statement No. 33-76150 on Form S-1 filed in paper - hyperlink is not required pursuant to Rule 105 of Regulation S-T).
|
|
|
|
|
|
|
Kelly Gill Separation Agreement
|
|
|
|
|
|
|
|
Certification of Chief Executive and Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).
|
|
|
|
||
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b).
|
|
|
|
||
101.INS
|
|
|
XBRL Instance Document
|
|
|
||
101.SCH
|
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
||
101.CAL
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
||
101.LAB
|
|
|
XBRL Taxonomy Extension Labels Linkbase Document
|
|
|
||
101.PRE
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
Diversicare Healthcare Services, Inc.
|
||
|
|
|
|
August 2, 2018
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ James R. McKnight, Jr.
|
|
|
|
James R. McKnight, Jr.
|
|
|
|
President and Chief Executive Officer, Principal Financial Officer and
|
|
|
|
An Officer Duly Authorized to Sign on Behalf of the Registrant
|
|
|
|
A.
|
He has carefully read and fully understands the comprehensive terms and conditions of this Agreement and the releases set forth herein;
|
B.
|
He is executing this Agreement knowingly and voluntarily, without any duress, coercion or undue influence by the Company, its representatives, or any other person;
|
C.
|
He has been informed of his right to consult with legal counsel of his own choice before executing this Agreement;
|
D.
|
He has pending no claim, complaint, grievance or any document with any federal or state agency or any court seeking money damages or relief against the Company;
|
E.
|
The Benefits recited above constitute good and valuable consideration;
|
F.
|
He is fully satisfied with the terms and conditions of this Agreement including, without limitation, the consideration paid to him by the Company;
|
G.
|
He is not waiving rights or claims that may arise after the date this Agreement is executed;
|
H.
|
Except as specifically provided herein, he has been paid all compensation owed to him by the Company;
|
I.
|
He has had the right to consider the terms of this Agreement for a full 21 days and he hereby waives any and all rights to any further review period; and
|
J.
|
He has the right to revoke this Agreement within seven (7) calendar days after signing it (the “Revocation Period”) by providing during this seven (7) day period written notice of revocation to Board of Directors, Diversicare Healthcare Services, Inc., 1621 Galleria Blvd., Brentwood, TN 37027. If he revokes this Agreement during the seven-day period, the Agreement and all obligations hereunder become null and void in their entirety.
|
Dated:
July 10, 2018
|
DIVERSICARE HEALTHCARE SERVICES, INC.
|
1.
|
Options/SARs Exercise Price
|
a.
|
50,000 $5.60
|
b.
|
35,000 $6.21
|
c.
|
15,000 $5.45
|
2.
|
Restricted Stock Unvested, which will vest upon resignation
|
a.
|
25,000 granted 3/11/16 8,333
|
b.
|
25,000 granted 3/13/17 16,667
|
c.
|
25,000 granted 3/13/18 25,000
|
3.
|
Restricted stock Units – Will vest upon resignation
|
a.
|
10,719 purchased 3/13/17 paid $90,900 or $8.48/share
|
b.
|
2,977.46 purchased 3/13/18 paid $20,604 or $6.92/share
|
4.
|
Accrued dividends (as of 6/30/18)
|
a.
|
386.53 on 2018 restricted stock
|
b.
|
623.55 on 2017 restricted stock
|
c.
|
521.21 on 2016 restricted stock
|
d.
|
401.32 on 2017 RSUs
|
e.
|
46.04 on 2018 RSUs
|
|
/s/ James R. McKnight, Jr.
|
James R. McKnight, Jr.
|
President and Chief Executive Officer, Principal Financial Officer and
|
An Officer Duly Authorized to SIgn on Behalf of the Registrant
|
(a)
|
fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(b)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ James R. McKnight, Jr.
|
James R. McKnight, Jr.
|
President and Chief Executive Officer, Principal Financial Officer and
|
An Officer Duly Authorized to SIgn on Behalf of the Registrant
|