Delaware | 001-38900 | 83-3349931 | ||||||||||||||||||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
1675 E Riverside Drive, Suite 150, | ||||||||
Eagle, ID 83616 | ||||||||
(Address of principal executive offices and Zip Code) |
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||||
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||||
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||||
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Common Stock, par value $0.001 per share | PNTG | Nasdaq Global Select Market |
Exhibit No. | Description | |||||||
Press Release of the Company dated August 11, 2020 |
Dated: August 11, 2020 | THE PENNANT GROUP, INC. | |||||||||||||
By: | /s/ JENNIFER L. FREEMAN | |||||||||||||
Jennifer L. Freeman | ||||||||||||||
Chief Financial Officer | ||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Revenue | $ | 92,740 | $ | 82,734 | $ | 184,589 | $ | 160,641 | |||||||||||||||
Expense | |||||||||||||||||||||||
Cost of services | 68,159 | 63,038 | 138,348 | 121,767 | |||||||||||||||||||
Rent—cost of services | 9,767 | 8,533 | 19,473 | 16,830 | |||||||||||||||||||
General and administrative expense | 7,538 | 6,889 | 14,199 | 15,133 | |||||||||||||||||||
Depreciation and amortization | 1,201 | 962 | 2,222 | 1,772 | |||||||||||||||||||
Total expenses | 86,665 | 79,422 | 174,242 | 155,502 | |||||||||||||||||||
Income from operations | 6,075 | 3,312 | 10,347 | 5,139 | |||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||
Interest expense, net | (301) | — | (704) | — | |||||||||||||||||||
Income before provision for income taxes | 5,774 | 3,312 | 9,643 | 5,139 | |||||||||||||||||||
Provision for income taxes | 1,437 | (375) | 2,326 | (32) | |||||||||||||||||||
Net income | 4,337 | 3,687 | 7,317 | 5,171 | |||||||||||||||||||
Less: net income attributable to noncontrolling interest | — | 200 | — | 350 | |||||||||||||||||||
Net income and other comprehensive income attributable to The Pennant Group, Inc. | $ | 4,337 | $ | 3,487 | $ | 7,317 | $ | 4,821 | |||||||||||||||
Earnings per share(1): | |||||||||||||||||||||||
Basic | $ | 0.16 | $ | 0.13 | $ | 0.26 | $ | 0.19 | |||||||||||||||
Dilutive | $ | 0.15 | $ | 0.13 | $ | 0.25 | $ | 0.19 | |||||||||||||||
Weighted average common shares outstanding: | |||||||||||||||||||||||
Basic | 27,952 | 27,834 | 27,922 | 27,834 | |||||||||||||||||||
Dilutive | 29,662 | 27,834 | 29,780 | 27,834 |
June 30, 2020 | December 31, 2019 | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash | $ | 12,129 | $ | 402 | |||||||
Accounts receivable—less allowance for doubtful accounts of $516 and $677, respectively | 33,858 | 32,183 | |||||||||
Prepaid expenses and other current assets | 6,443 | 6,098 | |||||||||
Total current assets | 52,430 | 38,683 | |||||||||
Property and equipment, net | 19,025 | 14,644 | |||||||||
Right-of-use assets | 311,821 | 316,328 | |||||||||
Escrow deposits | 1,639 | 1,400 | |||||||||
Restricted and other assets | 2,293 | 1,955 | |||||||||
Intangible assets, net | 38 | 45 | |||||||||
Goodwill | 45,372 | 41,233 | |||||||||
Other indefinite-lived intangibles | 36,628 | 33,462 | |||||||||
Total assets | $ | 469,246 | $ | 447,750 | |||||||
Liabilities and equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 7,224 | $ | 8,653 | |||||||
Accrued wages and related liabilities | 18,278 | 16,343 | |||||||||
Lease liabilities—current | 13,369 | 12,285 | |||||||||
Other accrued liabilities | 41,590 | 13,911 | |||||||||
Total current liabilities | 80,461 | 51,192 | |||||||||
Long-term lease liabilities—less current portion | 300,621 | 304,044 | |||||||||
Other long-term liabilities | 5,021 | 2,877 | |||||||||
Long-term debt, net | 642 | 18,526 | |||||||||
Total liabilities | 386,745 | 376,639 | |||||||||
Commitments and contingencies | |||||||||||
Equity: | |||||||||||
Common stock, $0.001 par value; 100,000 shares authorized; 28,514 and 27,968, shares issued and outstanding at June 30, 2020, respectively, and 28,435 and 27,853 shares issued and outstanding at December 31, 2019, respectively. | 28 | 28 | |||||||||
Additional paid-in capital | 79,012 | 74,882 | |||||||||
Accumulated deficit | 3,518 | (3,799) | |||||||||
Net parent investment | (57) | ||||||||||
Total equity | 82,501 | 71,111 | |||||||||
Total liabilities and equity | $ | 469,246 | $ | 447,750 |
Six Months Ended June 30, | |||||||||||
2020 | 2019 | ||||||||||
Net cash provided by/(used in) operating activities | $ | 43,398 | $ | 4,003 | |||||||
Net cash used in investing activities | (13,803) | (18,567) | |||||||||
Net cash provided by financing activities | (17,868) | 14,566 | |||||||||
Net increase in cash | 11,727 | 2 | |||||||||
Cash at beginning of year | 402 | 41 | |||||||||
Cash at end of year | $ | 12,129 | $ | 43 |
Three Months Ended June 30, | |||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||
Revenue Dollars | Revenue Percentage | Revenue Dollars | Revenue Percentage | ||||||||||||||||||||
Home health and hospice services | |||||||||||||||||||||||
Home health | $ | 20,824 | 22.4 | % | $ | 20,680 | 25.0 | % | |||||||||||||||
Hospice | 32,623 | 35.2 | 25,220 | 30.5 | |||||||||||||||||||
Home care and other(a) | 4,537 | 4.9 | 4,308 | 5.2 | |||||||||||||||||||
Total home health and hospice services | 57,984 | 62.5 | 50,208 | 60.7 | |||||||||||||||||||
Senior living services | 34,756 | 37.5 | 32,526 | 39.3 | |||||||||||||||||||
Total revenue | $ | 92,740 | 100.0 | % | $ | 82,734 | 100.0 | % |
(a) | Home care and other revenue is included with home health revenue in other disclosures in this press release. |
Six Months Ended June 30, | |||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||
Revenue Dollars | Revenue Percentage | Revenue Dollars | Revenue Percentage | ||||||||||||||||||||
Home health and hospice services | |||||||||||||||||||||||
Home health | $ | 42,268 | 22.9 | % | $ | 40,224 | 25.0 | % | |||||||||||||||
Hospice | 63,063 | 34.2 | 47,678 | 29.7 | |||||||||||||||||||
Home care and other(a) | 9,415 | 5.1 | 8,423 | 5.3 | |||||||||||||||||||
Total home health and hospice services | 114,746 | 62.2 | 96,325 | 60.0 | |||||||||||||||||||
Senior living services | 69,843 | 37.8 | 64,316 | 40.0 | |||||||||||||||||||
Total revenue | $ | 184,589 | 100.0 | % | $ | 160,641 | 100.0 | % |
(a) | Home care and other revenue is included with home health revenue in other disclosures in this press release. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Home health services: | |||||||||||||||||||||||
Total home health admissions | 5,259 | 5,727 | 11,395 | 11,167 | |||||||||||||||||||
Total Medicare home health admissions | 2,459 | 2,675 | 5,268 | 5,278 | |||||||||||||||||||
Average Medicare revenue per 60-day completed episode(a) | $ | 3,412 | $ | 3,162 | $ | 3,232 | $ | 3,093 | |||||||||||||||
Hospice services: | |||||||||||||||||||||||
Total hospice admissions | 1,954 | 1,619 | 3,630 | 2,953 | |||||||||||||||||||
Average daily census | 1,979 | 1,673 | 1,925 | 1,544 | |||||||||||||||||||
Hospice Medicare revenue per day | $ | 164 | $ | 162 | $ | 163 | $ | 163 |
(a) | Recast prior period metrics based upon current methodology. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Occupancy | 78.5 | % | 80.3 | % | 79.3 | % | 80.1 | % | |||||||||||||||
Average monthly revenue per occupied unit | $ | 3,204 | $ | 3,098 | $ | 3,205 | $ | 3,109 |
Three Months Ended June 30, | ||||||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||||
Revenue Dollars | Revenue Percentage | Revenue Dollars | Revenue Percentage | |||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||
Medicare | $ | 40,358 | 43.5 | % | $ | 34,380 | 41.6 | % | ||||||||||||||||||
Medicaid | 14,755 | 15.9 | 11,033 | 13.3 | ||||||||||||||||||||||
Subtotal | 55,113 | 59.4 | 45,413 | 54.9 | ||||||||||||||||||||||
Managed Care | 7,243 | 7.8 | 7,199 | 8.7 | ||||||||||||||||||||||
Private and Other(a) | 30,384 | 32.8 | 30,122 | 36.4 | ||||||||||||||||||||||
Total revenue | $ | 92,740 | 100.0 | % | $ | 82,734 | 100.0 | % |
(a) | Private and other payors in our home health and hospice services segment includes revenue from all payors generated in home care operations. |
Six Months Ended June 30, | ||||||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||||
Revenue Dollars | Revenue Percentage | Revenue Dollars | Revenue Percentage | |||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||
Medicare | $ | 79,614 | 43.1 | % | $ | 65,399 | 40.7 | % | ||||||||||||||||||
Medicaid | 28,707 | 15.6 | 21,537 | 13.4 | ||||||||||||||||||||||
Subtotal | 108,321 | 58.7 | 86,936 | 54.1 | ||||||||||||||||||||||
Managed Care | 14,775 | 8.0 | 13,875 | 8.6 | ||||||||||||||||||||||
Private and Other(a) | 61,493 | 33.3 | 59,830 | 37.3 | ||||||||||||||||||||||
Total revenue | $ | 184,589 | 100.0 | % | $ | 160,641 | 100.0 | % |
(a) | Private and other payors in our home health and hospice services segment includes revenue from all payors generated in home care operations. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Net income (loss) attributable to The Pennant Group, Inc. | $ | 4,337 | $ | 3,487 | $ | 7,317 | $ | 4,821 | |||||||||||||||
Add: Net income attributable to noncontrolling interest | — | 200 | — | 350 | |||||||||||||||||||
Net income (loss) | 4,337 | 3,687 | 7,317 | 5,171 | |||||||||||||||||||
Non-GAAP adjustments | |||||||||||||||||||||||
Costs at start-up operations(a) | 511 | 84 | 756 | 326 | |||||||||||||||||||
Share-based compensation expense(b) | 1,959 | 508 | 3,915 | 1,127 | |||||||||||||||||||
Depreciation and amortization - patient base(c) | — | 18 | — | 29 | |||||||||||||||||||
Acquisition related costs(d) | — | 503 | — | 541 | |||||||||||||||||||
Spin-off related transaction costs(e) | — | 1,658 | — | 4,648 | |||||||||||||||||||
Transition services costs(f) | 552 | — | 810 | — | |||||||||||||||||||
Net COVID-19 related costs(g) | 883 | — | 1,160 | — | |||||||||||||||||||
Provision for income taxes on Non-GAAP adjustments(h) | (1,023) | (1,895) | (1,908) | (2,984) | |||||||||||||||||||
Non-GAAP net income | $ | 7,219 | $ | 4,563 | $ | 12,050 | $ | 8,858 | |||||||||||||||
Dilutive Earnings Per Share As Reported | |||||||||||||||||||||||
Net Income | $ | 0.15 | $ | 0.13 | $ | 0.25 | $ | 0.19 | |||||||||||||||
Average number of shares outstanding | 29,662 | 27,834 | 29,780 | 27,834 | |||||||||||||||||||
Adjusted Diluted Earnings Per Share | |||||||||||||||||||||||
Net Income | $ | 0.24 | $ | 0.16 | $ | 0.40 | $ | 0.32 | |||||||||||||||
Average number of shares outstanding | 29,662 | 27,834 | 29,780 | 27,834 |
(a) | Represents results related to start-up operations and acquisition costs that are not capitalizable. This amount excludes rent and depreciation and amortization expense related to such operations. | ||||||||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
Revenue | $ | (462) | $ | (75) | $ | (885) | $ | (252) | |||||||||||||||||||||||||||
Cost of services | 935 | 156 | 1,590 | 569 | |||||||||||||||||||||||||||||||
Rent | 36 | 3 | 49 | 9 | |||||||||||||||||||||||||||||||
Depreciation | $ | 2 | $ | — | $ | 2 | $ | — | |||||||||||||||||||||||||||
Total Non-GAAP adjustment | $ | 511 | $ | 84 | $ | 756 | $ | 326 | |||||||||||||||||||||||||||
(b) | Represents share-based compensation expense incurred for the periods presented. | ||||||||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
Cost of services | $ | 235 | $ | 100 | $ | 438 | $ | 224 | |||||||||||||||||||||||||||
General and administrative | 1,724 | 408 | 3,477 | 903 | |||||||||||||||||||||||||||||||
Total Non-GAAP adjustment | $ | 1,959 | $ | 508 | $ | 3,915 | $ | 1,127 | |||||||||||||||||||||||||||
(c) | Included in depreciation and amortization expenses related to patient base intangible assets at newly acquired senior living facilities. | ||||||||||||||||||||||||||||||||||
(d) | Represents costs incurred to acquire an operation that are not capitalizable included in general and administrative expenses. | ||||||||||||||||||||||||||||||||||
(e) | Costs incurred related to the Spin-Off that are included in general and administrative expense. |
(f) | The portion of the costs incurred under the Transition Services Agreement identified as redundant or nonrecurring that are included in general and administrative expense or depreciation and amortization. Total fees under incurred under the Transition Services agreement, net of the Company’s payroll reimbursement, were $1,525 and $2,861 for the three and six months ended June 30, 2020, respectively. | ||||||||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
General and administrative | $ | 267 | $ | — | $ | 317 | $ | — | |||||||||||||||||||||||||||
Depreciation and amortization(1) | 285 | — | 493 | — | |||||||||||||||||||||||||||||||
Total Non-GAAP adjustment | $ | 552 | $ | — | $ | 810 | $ | — | |||||||||||||||||||||||||||
(1) | Consists of depreciation and amortization on IT hardware and software acquired to build infrastructure in anticipation of our transition from Ensign's IT infrastructure. | ||||||||||||||||||||||||||||||||||
(g) | Represents incremental costs incurred as part of the Company's response to COVID-19 including direct medical supplies, labor, and other expenses, net of $554 in increased revenue related to the 2% payment increase in Medicare reimbursements for sequestration relief with dates of service from May 1, 2020, through June 30, 2020. The amount reported for the six months ended June 30, 2020 includes net costs of $277 that were incurred in first quarter of 2020. | ||||||||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
Increased Medicare Reimbursements | $ | (554) | $ | — | $ | (554) | $ | — | |||||||||||||||||||||||||||
Cost of services | 1,409 | — | 1,682 | — | |||||||||||||||||||||||||||||||
General and administrative | 28 | — | 32 | — | |||||||||||||||||||||||||||||||
Total Non-GAAP adjustment | $ | 883 | $ | — | $ | 1,160 | $ | — | |||||||||||||||||||||||||||
(h) | Represents an adjustment to the provision for income tax to our year to date effective tax rate of 26.0% and 25.0% for the six months ended June 30, 2020, respectively. This rate excludes the tax benefit of shared-based payment awards. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Consolidated and combined net income (loss) | $ | 4,337 | $ | 3,687 | $ | 7,317 | $ | 5,171 | |||||||||||||||
Less: Net income attributable to noncontrolling interest | — | 200 | — | 350 | |||||||||||||||||||
Add: Provision for income taxes (benefit) | 1,437 | (375) | 2,326 | (32) | |||||||||||||||||||
Net interest expense | 301 | — | 704 | — | |||||||||||||||||||
Depreciation and amortization | 1,201 | 962 | 2,222 | 1,772 | |||||||||||||||||||
Consolidated and Combined EBITDA | 7,276 | 4,074 | 12,569 | 6,561 | |||||||||||||||||||
Adjustments to Consolidated and Combined EBITDA | |||||||||||||||||||||||
Add: Costs at start-up operations(a) | 473 | 81 | 705 | 317 | |||||||||||||||||||
Share-based compensation expense(b) | 1,959 | 508 | 3,915 | 1,127 | |||||||||||||||||||
Acquisition related costs(c) | — | 503 | — | 541 | |||||||||||||||||||
Spin-off related transaction costs(d) | — | 1,658 | — | 4,648 | |||||||||||||||||||
Transition services costs(e) | 267 | — | 317 | — | |||||||||||||||||||
Net COVID-19 related costs and supplies(f) | 883 | — | 1,160 | — | |||||||||||||||||||
Rent related to item (a) above | 36 | 3 | 49 | 9 | |||||||||||||||||||
Consolidated and Combined Adjusted EBITDA | 10,894 | 6,827 | 18,715 | 13,203 | |||||||||||||||||||
Rent—cost of services | 9,767 | 8,533 | 19,473 | 16,830 | |||||||||||||||||||
Rent related to item (a) above | (36) | (3) | (49) | (9) | |||||||||||||||||||
Adjusted rent—cost of services | 9,731 | 8,530 | 19,424 | 16,821 | |||||||||||||||||||
Consolidated Adjusted EBITDAR | $ | 20,625 | $ | 38,139 |
(a) | Represents results related to start-up operations. This amount excludes rent and depreciation and amortization expense related to such operations. | |||||||
(b) | Share-based compensation expense incurred which is included in cost of services and general and administrative expense. | |||||||
(c) | Acquisition related costs that are not capitalizable. | |||||||
(d) | Costs incurred related to the Spin-Off are included in general and administrative expense. | |||||||
(e) | A portion of the costs incurred under the Transition Services Agreement (as defined in Note 3, Related Party Transactions and Net Parent Investment) identified as redundant or nonrecurring that are included in general and administrative expense. Fees incurred under the Transition Services agreement, net of the Company’s payroll reimbursement, were $1,525 and $2,861 for the three and six months ended June 30, 2020, respectively. | |||||||
(f) | Represents incremental costs incurred as part of the Company's response to COVID-19 including direct medical supplies, labor, and other expenses, net of $554 in increased revenue related to the 2% payment increase in Medicare reimbursements for sequestration relief with dates of service from May 1, 2020, through June 30, 2020. The amount reported for the six months ended June 30, 2020 includes net costs of $277 that were incurred in first quarter of 2020. |
Three Months Ended June 30, | |||||||||||||||||||||||
Home Health and Hospice Services | Senior Living Services | All Other | Total | ||||||||||||||||||||
Segment GAAP Financial Measures: | |||||||||||||||||||||||
Three Months Ended June 30, 2020 | |||||||||||||||||||||||
Revenue | $ | 57,984 | $ | 34,756 | $ | — | $ | 92,740 | |||||||||||||||
Segment Adjusted EBITDAR from Operations | $ | 11,245 | $ | 13,492 | $ | (4,112) | $ | 20,625 | |||||||||||||||
Three Months Ended June 30, 2019 | |||||||||||||||||||||||
Revenue | $ | 50,208 | $ | 32,526 | $ | — | $ | 82,734 | |||||||||||||||
Segment Adjusted EBITDAR from Operations | $ | 8,103 | $ | 12,012 | $ | (4,758) | $ | 15,357 |
Six Months Ended June 30, | |||||||||||||||||||||||
Home Health and Hospice Services | Senior Living Services | All Other | Total | ||||||||||||||||||||
Segment GAAP Financial Measures: | |||||||||||||||||||||||
Six Months Ended June 30, 2020 | |||||||||||||||||||||||
Revenue | $ | 114,746 | $ | 69,843 | $ | — | $ | 184,589 | |||||||||||||||
Segment Adjusted EBITDAR from Operations | $ | 21,151 | $ | 25,989 | $ | (9,001) | $ | 38,139 | |||||||||||||||
Six Months Ended June 30, 2019 | |||||||||||||||||||||||
Revenue | $ | 96,325 | $ | 64,316 | $ | — | $ | 160,641 | |||||||||||||||
Segment Adjusted EBITDAR from Operations | $ | 15,374 | $ | 24,129 | $ | (9,479) | $ | 30,024 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Segment Adjusted EBITDAR from Operations(a) | $ | 20,625 | $ | 15,357 | $ | 38,139 | $ | 30,024 | |||||||||||||||
Less: Depreciation and amortization | 1,201 | 962 | 2,222 | 1,772 | |||||||||||||||||||
Rent—cost of services | 9,767 | 8,533 | 19,473 | 16,830 | |||||||||||||||||||
Adjustments to Segment EBITDAR from Operations: | |||||||||||||||||||||||
Less: Costs at start-up operations (b) | 473 | 81 | 705 | 317 | |||||||||||||||||||
Share-based compensation expense (c) | 1,959 | 508 | 3,915 | 1,127 | |||||||||||||||||||
Acquisition related costs (d) | — | 503 | — | 541 | |||||||||||||||||||
Spin-off related transaction costs (e) | — | 1,658 | — | 4,648 | |||||||||||||||||||
Transition services costs(f) | 267 | — | 317 | — | |||||||||||||||||||
Net COVID-19 related costs (g) | 883 | — | 1,160 | — | |||||||||||||||||||
Add: Net income attributable to noncontrolling interest | — | 200 | — | 350 | |||||||||||||||||||
Consolidated and Combined income (loss) from Operations | $ | 6,075 | $ | 3,312 | $ | 10,347 | $ | 5,139 |
(a) | Segment Adjusted EBITDAR from Operations is net income attributable to the Company's reportable segments excluding the interest expense, provision for income taxes, depreciation and amortization expense, rent, and, in order to view the operations performance on a comparable basis from period to period, certain adjustments including: (1) costs at start-up operations, (2) share-based compensation, (3) acquisition related costs, (4) transaction costs, (5) redundant and nonrecurring costs associated with the transition services agreement, (6) operating results of closed operations, (7) net income attributable to noncontrolling interest, and (8) net COVID-19 related costs. General and administrative expenses are not allocated to the reportable segments, and are included as “All Other”, accordingly the segment earnings measure reported is before allocation of corporate general and administrative expenses. The Company’s Chief Operating Decision Maker (“CODM”) uses Segment Adjusted EBITDAR from Operations as the primary measure of profit and loss for the Company's reportable segments and to compare the performance of its operations with those of its competitors. The Company's segment measures may be different from the calculation methods used by other companies and, therefore, comparability may be limited. | |||||||
(b) | Represents results related to start-up operations and acquisition costs that are not capitalizable. This amount excludes rent and depreciation and amortization expense related to such operations. | |||||||
(c) | Share-based compensation expense incurred which is included in cost of services and general and administrative expense. | |||||||
(d) | Acquisition related costs that are not capitalizable. | |||||||
(e) | Costs incurred related to the Spin-Off are included in general and administrative expense. | |||||||
(f) | A portion of the costs incurred under the Transition Services Agreement (as defined in Note 3, Related Party Transactions and Net Parent Investment) identified as redundant or nonrecurring that are included in general and administrative expense. Fees incurred under the Transition Services agreement, net of the Company’s payroll reimbursement, were $1,525 and $2,861 for the three and six months ended June 30, 2020, respectively. | |||||||
(g) | Represents incremental costs incurred as part of the Company's response to COVID-19 including direct medical supplies, labor, and other expenses, net of $554 in increased revenue related to the 2% payment increase in Medicare reimbursements for sequestration relief with dates of service from May 1, 2020, through June 30, 2020. The amount reported for the six months ended June 30, 2020 includes net costs of $277 that were incurred in first quarter of 2020. |
Three Months Ended June 30, | |||||||||||||||||||||||
Home Health and Hospice | Senior Living | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Segment Adjusted EBITDAR from Operations | $ | 11,245 | $ | 8,103 | $ | 13,492 | $ | 12,012 | |||||||||||||||
Less: Rent—cost of services | 874 | 779 | 8,893 | 7,754 | |||||||||||||||||||
Rent related to costs at start-up operations | (16) | (3) | (20) | — | |||||||||||||||||||
Segment Adjusted EBITDA | $ | 10,387 | $ | 7,327 | $ | 4,619 | $ | 4,258 |
Six Months Ended June 30, | |||||||||||||||||||||||
Home Health and Hospice | Senior Living | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Segment Adjusted EBITDAR from Operations | $ | 21,151 | $ | 15,374 | $ | 25,989 | $ | 24,129 | |||||||||||||||
Less: Rent—cost of services | 1,724 | 1,414 | 17,749 | 15,416 | |||||||||||||||||||
Rent related to costs at start-up operations | (29) | (9) | (20) | — | |||||||||||||||||||
Segment Adjusted EBITDA | $ | 19,456 | $ | 13,969 | $ | 8,260 | $ | 8,713 |
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