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Accounting Policies
3 Months Ended
Mar. 31, 2013
Accounting Policies [Abstract]  
Accounting Policies
Accounting Policies
Cash and Cash Equivalents
The Company considers all investments with a maturity date three months or less from their date of acquisition to be cash equivalents, including money market funds invested in U.S. Treasury securities, short-term treasury bills and commercial paper. Cash and cash equivalents also included amounts on deposit with several major financial institutions in excess of the maximum amount insured by the Federal Deposit Insurance Corporation. Management believes that these major financial institutions are viable entities.
The Company had operating funds of approximately $6.0 million and $5.4 million at March 31, 2013 and December 31, 2012, respectively, which relate exclusively to a non-profit hospice operation managed in Florida.
Investments
At March 31, 2013 and December 31, 2012, the Company had assets of $31.1 million and $27.7 million, respectively, held in a Rabbi Trust for the benefit of participants in the Company’s non-qualified deferred compensation plan. The corresponding amounts payable to the plan participants are equivalent to the underlying value of the assets held in the Rabbi Trust. Assets held in a Rabbi Trust and amounts payable to plan participants are classified in other assets and other liabilities, respectively, in the Company’s consolidated balance sheets.
Debt Issuance Costs
The Company amortizes deferred debt issuance costs over the term of its credit agreement and senior notes. As of March 31, 2013 and December 31, 2012, the Company had unamortized debt issuance costs of $40.9 million and $44.2 million, respectively, recorded in other assets in the Company’s consolidated balance sheets.
During the first quarter of 2012, the Company incurred incremental debt issuance costs of approximately $5.3 million in connection with an amendment to the Company’s credit agreement. Approximately $4.1 million of these costs have been capitalized and are being amortized over the remaining life of the debt using an effective interest rate methodology. In addition, the Company wrote off prepaid debt issuance costs of approximately $0.5 million, which is reflected in interest expense in the Company’s consolidated statements of comprehensive income, associated with the reduction in the revolving credit facility.
Fixed Assets
Fixed assets, including costs of Company developed software, are stated at cost and depreciated over the estimated useful lives of the assets using the straight-line method. Leasehold improvements are amortized over the shorter of the life of the lease or the life of the improvement. Repairs and maintenance costs are expensed as incurred. As of March 31, 2013 and December 31, 2012, fixed assets, net were $37.1 million and $41.4 million, respectively.
At March 31, 2013, the Company performed an interim impairment test of its Hospice reporting unit. As part of that analysis, the Company reviewed the valuation of its owned real estate utilized in the Hospice business. The analysis indicated that two of the Company's hospice inpatient units had estimated fair values lower than their carrying values and, as such, the Company recorded a non-cash impairment charge of approximately $1.9 million. These charges are recorded in goodwill and other long-lived asset impairment in the Company's consolidated financial statements for the three months ended March 31, 2013. See Note 7 for additional information.
In addition, the Company conducted an evaluation of the various systems used to support its field operations. In connection with that review, the Company made a strategic decision to replace its business intelligence software platform and, as such, recorded a non-cash impairment charge related to developed software, of approximately $1.6 million, which is reflected in goodwill and other long-lived asset impairment in the Company's consolidated financial statements for the three months ended March 31, 2013.
Goodwill and Other Indefinite-Lived Intangible Assets
The Company is required to test goodwill and other indefinite-lived intangible assets for impairment on an annual basis and between annual tests if current events or circumstances require an interim impairment assessment. The Company allocates goodwill to its various reporting units upon the acquisition of the assets or stock of another third party business operation. The Company compares the fair value of each reporting unit to its carrying amount to determine if there is a potential impairment of goodwill and other indefinite-lived intangible assets. If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the fair value of the goodwill within the operating unit is less than the carrying value of its goodwill. To determine the fair value of the Company's reporting units, the Company uses a present value (discounted cash flow) technique corroborated by market multiples when available, a reconciliation to market capitalization or other valuation methodologies, and reasonableness tests, as appropriate.
If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized. Fair values of other indefinite-lived intangible assets are determined based on discounted cash flows or appraised values, as appropriate.
The Company completed its annual impairment test of goodwill and indefinite-lived intangible assets for the Company's operating units as of December 31, 2012, which indicated that there was no impairment. At March 31, 2013, the Company performed an interim impairment test of its Hospice reporting unit. Based on the results of the interim impairment test, the Company recorded a non-cash impairment charge relating to goodwill of approximately $220.8 million. See Note 7 for additional information.
Obligations Under Self Insurance Programs
As of March 31, 2013 and December 31, 2012, the Company’s obligations under its insurance programs were $54.5 million and $56.5 million, respectively. Workers’ compensation and professional and general liability expenses were $6.7 million for the first quarter of 2013 as compared to $4.7 million for the corresponding period of 2012. Employee health and welfare expenses were $20.6 million for the first quarter of 2013 as compared to $23.6 million for the corresponding period of 2012.
Nursing Home Costs
For patients receiving nursing home care under a state Medicaid program who elect hospice care under Medicare or Medicaid, the Company contracts with nursing homes for the nursing homes to provide patients’ room and board services. The state must pay the Company, in addition to the applicable Medicare or Medicaid hospice daily or hourly rate, an amount equal to at least 95 percent of the Medicaid daily nursing home rate for room and board furnished to the patient by the nursing home. Under the Company’s standard nursing home contracts, the Company pays the nursing home for these room and board services at the Medicaid daily nursing home rate. Nursing home costs are partially offset by nursing home net revenue, and the net amount is included in cost of services sold in the Company’s consolidated statements of comprehensive income.
Reclassifications
Certain reclassifications have been made to the Company's 2012 consolidated financial statements to conform to the current year presentation relating to a reclassification of certain costs of services sold and related income tax effects as presented within the Company's guarantor and non-guarantor financial information, as further described in Note 15.