ý | ANNUAL 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.) |
1621 Galleria Boulevard, Brentwood, TN | 37027 |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Name of each Exchange on which registered |
Common Stock, $0.01 par value per share | The Nasdaq Capital Market |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ¨ |
Table of Contents | |||
Page | |||
Part I | |||
Item 1. | Business | ||
Item 1A. | Risk Factors | ||
Item 1B. | Unresolved Staff Comments | ||
Item 2. | Properties | ||
Item 3. | Legal Proceedings | ||
Item 4. | Mine Safety Disclosures | ||
Part II | |||
Item 5. | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 26 | |
Item 6. | Selected Consolidated Financial Data | ||
Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 29 | |
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | ||
Item 8. | Financial Statements and Supplementary Data | ||
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | ||
Item 9A. | Controls and Procedures | ||
Item 9B. | Other Information | ||
Part III | |||
Item 10. | Directors, Executive Officers and Corporate Governance | ||
Item 11. | Executive Compensation | ||
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | ||
Item 13. | Certain Relationships and Related Transactions, and Director Independence | ||
Item 14. | Principal Accountant Fees and Services | ||
Part IV | |||
Item 15. | Exhibits and Financial Statement Schedules | ||
Item 16. | Form 10-K Summary |
Number of Centers | Licensed Nursing Beds (1) | Available Nursing Beds (1) | ||||||
Operating Locations: | ||||||||
Alabama | 20 | 2,385 | 2,318 | |||||
Florida | 1 | 79 | 79 | |||||
Indiana | 1 | 158 | 158 | |||||
Kansas | 6 | 464 | 464 | |||||
Kentucky | 10 | 885 | 881 | |||||
Mississippi | 9 | 1,039 | 1,004 | |||||
Missouri | 3 | 339 | 339 | |||||
Ohio | 4 | 403 | 393 | |||||
Tennessee | 5 | 617 | 551 | |||||
Texas | 13 | 1,845 | 1,662 | |||||
72 | 8,214 | 7,849 | ||||||
Classification: | ||||||||
Owned | 15 | 1,365 | 1,250 | |||||
Leased | 57 | 6,849 | 6,599 | |||||
Total | 72 | 8,214 | 7,849 |
(1) | The number of Licensed Nursing Beds is based on the regulatory licenses for the nursing center. The Company reports its occupancy based on licensed nursing beds. The number of Available Nursing Beds represents Licensed Nursing Beds reduced by beds removed from service. Available Nursing Beds is subject to change based upon the needs of the centers, including configuration of patient rooms, common usage areas and offices, status of beds (private, semi-private, ward, etc.) and renovations. The number of Licensed and Available Nursing Beds does not include 429 Licensed Assisted Living/Residential Beds, all of which are also available. These beds are excluded from the bed counts as our operating statistics such as occupancy are calculated using Nursing Beds only. |
• | Tracking Activities of Daily Living (“ADLs”). ADLs are the functions that each person must perform on a daily basis including, but not limited to, getting dressed, bathing, and eating. ADL tracking allows us to capture the provision of care provided by our nursing, dietary and housekeeping staff in assisting with ADLs quickly, efficiently and electronically. |
• | Progress Notes. Progress notes are an important component of our medical records. Licensed nursing professionals provide documentation reflecting assessment of each patient's condition and intervention of skilled care provided. The EMR system provides means for a comprehensive chronological record resulting in improved capture, monitoring and review of documentation of condition and care provided. |
• | Medications. Our patients receive a number of daily medications. This module assists with electronic tracking and documenting of required medications and treatments. This provides a more accurate and efficient care system for our nurses and patients. |
• | Wound Module. This allows for an evidence-based risk assessment to drive patient specific interventions to prevent skin breakdown. When skin abnormalities are present, it provides for accurate depiction of anatomical location and description which drives individualized care treatments. |
• | Incident Module. Allows for capturing any event, such as a fall, and provides quality assurance steps for root cause and patient-specific care plans. |
Year Ended December 31, | |||||||||||||||||||||||||||
2018 | 2018 | 2017 | 2016 | ||||||||||||||||||||||||
As Reported | As Adjusted to Legacy GAAP | As Reported | As Reported | ||||||||||||||||||||||||
Medicaid | $ | 267,015 | 47.4 | % | $ | 303,412 | 52.5 | % | $ | 300,926 | 52.4 | % | $ | 215,381 | 50.6 | % | |||||||||||
Medicare | 110,794 | 19.7 | % | 143,104 | 24.8 | % | 149,020 | 25.9 | % | 117,143 | 27.5 | % | |||||||||||||||
Managed Care | 53,242 | 9.4 | % | 46,988 | 8.1 | % | 42,673 | 7.4 | % | 29,066 | 6.8 | % | |||||||||||||||
Private Pay and other | 132,411 | 23.5 | % | 84,153 | 14.6 | % | 82,175 | 14.3 | % | 64,473 | 15.1 | % | |||||||||||||||
Total | $ | 563,462 | 100.0 | % | $ | 577,657 | 100.0 | % | $ | 574,794 | 100.0 | % | $ | 426,063 | 100.0 | % |
Year Ended December 31, | |||||||||||||||||
2018 | 2017 | 2016 | |||||||||||||||
Medicaid | 4,634 | 69.2 | % | 4,681 | 69.1 | % | 3,448 | 68.1 | % | ||||||||
Medicare | 709 | 10.6 | % | 760 | 11.2 | % | 591 | 11.7 | % | ||||||||
Managed Care | 278 | 4.1 | % | 265 | 3.9 | % | 178 | 3.5 | % | ||||||||
Private Pay and other | 1,076 | 16.1 | % | 1,072 | 15.8 | % | 844 | 16.7 | % | ||||||||
Total | 6,697 | 100.0 | % | 6,778 | 100.0 | % | 5,061 | 100.0 | % |
• | difficulties integrating acquired operations, personnel and accounting and information systems, or in realizing projected efficiencies and cost savings; |
• | diversion of management's attention from other business concerns; |
• | potential loss of key team members or customers of acquired companies; |
• | entry into markets in which we may have limited or no experience; |
• | increased indebtedness and reduced ability to access additional capital when needed; |
• | assumption of unknown liabilities or regulatory issues of acquired companies, including failure to comply with healthcare regulations or to establish internal financial controls; and |
• | straining of our resources, including internal controls relating to information and accounting systems, regulatory compliance, logistics and others. |
State | Centers | Leased Beds | Owned Beds | Total Operational Beds (1) | ||||||||
Alabama | 20 | 2,079 | 306 | 2,385 | ||||||||
Florida | 1 | 79 | — | 79 | ||||||||
Indiana | 1 | 172 | — | 172 | ||||||||
Kansas | 6 | — | 483 | 483 | ||||||||
Kentucky | 10 | 917 | — | 917 | ||||||||
Mississippi | 9 | 1,039 | — | 1,039 | ||||||||
Missouri | 3 | 455 | — | 455 | ||||||||
Ohio | 4 | 651 | — | 651 | ||||||||
Tennessee | 5 | 497 | 120 | 617 | ||||||||
Texas | 13 | 1,370 | 475 | 1,845 | ||||||||
Total | 72 | 7,259 | 1,384 | 8,643 |
(1) | The number of Operational Beds includes 429 Licensed Assisted Living/Residential Beds. |
Year Ended December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
Statement of Operations Data | (in thousands, except per share amounts) | |||||||||||||||||||
REVENUES: | ||||||||||||||||||||
Patient revenues, net | $ | 563,462 | $ | 574,794 | $ | 426,063 | $ | 387,595 | $ | 344,192 | ||||||||||
EXPENSES: | ||||||||||||||||||||
Operating | 450,686 | 458,122 | 342,932 | 311,035 | 275,605 | |||||||||||||||
Lease and rent expense | 57,073 | 54,988 | 33,364 | 28,690 | 26,151 | |||||||||||||||
Professional liability | 11,796 | 10,764 | 8,456 | 8,122 | 7,216 | |||||||||||||||
Litigation contingency expense | 6,400 | — | — | — | — | |||||||||||||||
General and administrative | 32,791 | 33,311 | 30,271 | 24,793 | 22,133 | |||||||||||||||
Depreciation and amortization | 11,201 | 10,902 | 8,292 | 7,524 | 7,078 | |||||||||||||||
Gain on sale of assets | (4,825 | ) | — | — | — | — | ||||||||||||||
Lease termination costs (receipts) | — | (180 | ) | 2,008 | — | — | ||||||||||||||
565,122 | 567,907 | 425,323 | 380,164 | 338,183 | ||||||||||||||||
OPERATING INCOME (LOSS) | (1,660 | ) | 6,887 | 740 | 7,431 | 6,009 | ||||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||||||
Other income | 168 | — | — | — | — | |||||||||||||||
Equity in net income (losses) of investment in unconsolidated affiliate | — | — | 273 | 339 | (5 | ) | ||||||||||||||
Gain on bargain purchase | — | 925 | — | — | — | |||||||||||||||
Gain on sale of investment in unconsolidated affiliate | 308 | 733 | 1,366 | — | — | |||||||||||||||
Hurricane costs | — | (232 | ) | — | — | — | ||||||||||||||
Interest expense, net | (6,653 | ) | (6,369 | ) | (4,802 | ) | (4,102 | ) | (3,697 | ) | ||||||||||
Debt retirement costs | (267 | ) | — | (351 | ) | — | — | |||||||||||||
(6,444 | ) | (4,943 | ) | (3,514 | ) | (3,763 | ) | (3,702 | ) | |||||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | (8,104 | ) | 1,944 | (2,774 | ) | 3,668 | 2,307 | |||||||||||||
BENEFIT (PROVISION) FOR INCOME TAXES | 750 | (6,743 | ) | 1,030 | (916 | ) | (857 | ) | ||||||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS | (7,354 | ) | (4,799 | ) | (1,744 | ) | 2,752 | 1,450 | ||||||||||||
DISCONTINUED OPERATIONS, net of taxes | (42 | ) | (28 | ) | (67 | ) | (1,128 | ) | 3,258 | |||||||||||
NET INCOME (LOSS) | $ | (7,396 | ) | $ | (4,827 | ) | $ | (1,811 | ) | $ | 1,624 | $ | 4,708 | |||||||
INCOME (LOSS) PER COMMON SHARE: | ||||||||||||||||||||
Basic | ||||||||||||||||||||
Continuing operations | $ | (1.15 | ) | $ | (0.76 | ) | $ | (0.28 | ) | $ | 0.45 | $ | 0.21 | |||||||
Discontinued operations | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.18 | ) | 0.54 | |||||||||||
Net income (loss) per common share | $ | (1.16 | ) | $ | (0.77 | ) | $ | (0.29 | ) | $ | 0.27 | $ | 0.75 | |||||||
Diluted | ||||||||||||||||||||
Continuing operations | $ | (1.15 | ) | $ | (0.76 | ) | $ | (0.28 | ) | $ | 0.44 | $ | 0.20 | |||||||
Discontinued operations | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.18 | ) | 0.52 | |||||||||||
Net income (loss) per common share | $ | (1.16 | ) | $ | (0.77 | ) | $ | (0.29 | ) | $ | 0.26 | $ | 0.72 | |||||||
CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.17 | $ | 0.22 | $ | 0.22 | $ | 0.22 | $ | 0.22 | ||||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||||||
Basic | 6,372 | 6,279 | 6,199 | 6,100 | 6,011 | |||||||||||||||
Diluted | 6,372 | 6,279 | 6,199 | 6,315 | 6,197 |
December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
Balance Sheet Data | (in thousands) | |||||||||||||||||||
Working capital | $ | 10,192 | $ | 8,391 | $ | 13,521 | $ | 13,052 | $ | 8,797 | ||||||||||
Total assets | $ | 159,244 | $ | 167,569 | $ | 163,051 | $ | 137,084 | $ | 129,089 | ||||||||||
Long-term debt and capitalized lease obligations, less current portion and deferred financing costs, net | $ | 74,558 | $ | 89,552 | $ | 82,123 | $ | 60,867 | $ | 48,265 | ||||||||||
Total Equity (deficit) | $ | (1,198 | ) | $ | 6,462 | $ | 11,420 | $ | 13,267 | $ | 11,754 |
Year Ended December 31, | |||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
2018 | 2017 | 2016 | |||||||||||||||||||
Revenues: | |||||||||||||||||||||
Patient revenues, net | $ | 563,462 | 100.0 | % | $ | 574,794 | 100.0 | % | $ | 426,063 | 100.0 | % | |||||||||
Expenses: | |||||||||||||||||||||
Operating | 450,686 | 80.0 | % | 458,122 | 79.7 | % | 342,932 | 80.5 | % | ||||||||||||
Lease and rent expense | 57,073 | 10.1 | % | 54,988 | 9.6 | % | 33,364 | 7.8 | % | ||||||||||||
Professional liability | 11,796 | 2.1 | % | 10,764 | 1.9 | % | 8,456 | 2.0 | % | ||||||||||||
Litigation contingency expense | 6,400 | 1.1 | % | — | — | % | — | — | % | ||||||||||||
General & administrative | 32,791 | 5.8 | % | 33,311 | 5.8 | % | 30,271 | 7.1 | % | ||||||||||||
Depreciation and amortization | 11,201 | 2.0 | % | 10,902 | 1.9 | % | 8,292 | 1.9 | % | ||||||||||||
Gain on sale of assets | (4,825 | ) | (0.9 | )% | — | — | % | — | — | % | |||||||||||
Lease termination costs (receipts) | — | — | % | (180 | ) | — | % | 2,008 | 0.5 | % | |||||||||||
565,122 | 100.2 | % | 567,907 | 98.9 | % | 425,323 | 99.8 | % | |||||||||||||
Operating income (loss) | (1,660 | ) | (0.2 | )% | 6,887 | 1.1 | % | 740 | 0.2 | % | |||||||||||
Other income (expense): | |||||||||||||||||||||
Other income | 168 | — | % | — | — | % | — | — | % | ||||||||||||
Equity in net income of unconsolidated affiliate | — | — | % | — | — | % | 273 | 0.1 | % | ||||||||||||
Gain on bargain purchase | — | — | % | 925 | 0.2 | % | — | — | % | ||||||||||||
Gain on sale of investment in unconsolidated affiliate | 308 | 0.1 | % | 733 | 0.1 | % | 1,366 | 0.3 | % | ||||||||||||
Hurricane costs | — | — | % | (232 | ) | — | % | — | — | % | |||||||||||
Interest expense, net | (6,653 | ) | (1.2 | )% | (6,369 | ) | (1.1 | )% | (4,802 | ) | (1.1 | )% | |||||||||
Debt retirement costs | (267 | ) | — | % | — | — | % | (351 | ) | (0.1 | )% | ||||||||||
(6,444 | ) | (1.1 | )% | (4,943 | ) | (0.8 | )% | (3,514 | ) | (0.8 | )% | ||||||||||
Income (loss) from continuing operations before income taxes | (8,104 | ) | (1.3 | )% | 1,944 | 0.3 | % | (2,774 | ) | (0.6 | )% | ||||||||||
Benefit (provision) for income taxes | 750 | 0.1 | % | (6,743 | ) | (1.2 | )% | 1,030 | 0.2 | % | |||||||||||
Loss from continuing operations | $ | (7,354 | ) | (1.2 | )% | $ | (4,799 | ) | (0.9 | )% | $ | (1,744 | ) | (0.4 | )% |
December 31, | |||||||||
2018 | 2017 | 2016 | |||||||
Licensed Nursing Center Beds: | |||||||||
Owned | 1,365 | 1,607 | 1,504 | ||||||
Leased | 6,849 | 6,849 | 6,949 | ||||||
Total | 8,214 | 8,456 | 8,453 | ||||||
Facilities: | |||||||||
Owned | 15 | 18 | 17 | ||||||
Leased | 57 | 58 | 59 | ||||||
Total | 72 | 76 | 76 |
Contractual Obligations | Total | Less than 1 year | 1 to 3 Years | 3 to 5 Years | After 5 Years | |||||||||||||||
Long-term debt obligations (1) | $ | 84,866 | $ | 17,408 | $ | 67,327 | $ | 131 | $ | — | ||||||||||
Settlement obligations (2) | 1,504 | 1,504 | — | — | — | |||||||||||||||
Operating leases (3) | 624,927 | 58,291 | 119,966 | 124,873 | 321,797 | |||||||||||||||
Required capital expenditures under operating leases (4) | 26,566 | 2,610 | 5,221 | 5,221 | 13,514 | |||||||||||||||
Total | $ | 737,863 | $ | 79,813 | $ | 192,514 | $ | 130,225 | $ | 335,311 |
(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 $18.6 million between December 31, 2017 and December 31, 2018, which is related to the sale of three Kentucky centers. The proceeds were used to reduce our debt. See Note 2, "Business Developments and Other Significant Transactions" and Note 5, "Long-Term Debt, Interest Rate Swap and Capitalized Lease Obligations" to the consolidated financial statements included in this report for additional information. Included in the $17.4 million of long-term obligations for amounts due in less than one year is $5 million related to the Revolver and $5 million related to the Acquisition Line, which is due on February 26, 2021. These amounts are classified as current because it is management's intent to pay within the next 12 months. |
(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) | Represents minimum annual lease payments (exclusive of taxes, insurance, and maintenance costs) under our operating lease agreements, which does not include renewals. Our operating lease obligations increased $440.7 million between December 31, 2017 and December 31, 2018. The increase in operating lease obligations is due to the renewal of our Omega Master Lease. See Note 9, "Commitments and Contingencies," to the consolidated financial statements. |
(4) | Includes annual expenditure requirements under operating leases. Our required capital expenditures increased $14.7 million between December 31, 2017 and December 31, 2018. The increase is due to the renewal of our Omega Master Lease. See Note 9, "Commitments and Contingencies," to the consolidated financial statements. |
(in thousands) | Year Ended December 31, | ||||||||||||||
2018 | 2017 | Change | % | ||||||||||||
PATIENT REVENUES, net | $ | 563,462 | $ | 574,794 | $ | (11,332 | ) | (2.0 | )% | ||||||
EXPENSES: | |||||||||||||||
Operating | 450,686 | 458,122 | (7,436 | ) | (1.6 | )% | |||||||||
Lease and rent expense | 57,073 | 54,988 | 2,085 | 3.8 | % | ||||||||||
Professional liability | 11,796 | 10,764 | 1,032 | 9.6 | % | ||||||||||
Litigation contingency expense | 6,400 | — | 6,400 | 100.0 | % | ||||||||||
General and administrative | 32,791 | 33,311 | (520 | ) | (1.6 | )% | |||||||||
Depreciation and amortization | 11,201 | 10,902 | 299 | 2.7 | % | ||||||||||
Gain on sale of assets | (4,825 | ) | — | (4,825 | ) | 100.0 | % | ||||||||
Lease termination receipts | — | (180 | ) | 180 | 100.0 | % | |||||||||
Total expenses | 565,122 | 567,907 | (2,785 | ) | (0.5 | )% | |||||||||
OPERATING INCOME (LOSS) | (1,660 | ) | 6,887 | (8,547 | ) | (124.1 | )% | ||||||||
OTHER INCOME (EXPENSE): | |||||||||||||||
Other income | 168 | — | 168 | 100.0 | % | ||||||||||
Gain on bargain purchase | — | 925 | (925 | ) | (100.0 | )% | |||||||||
Gain on sale of investment in unconsolidated affiliate | 308 | 733 | (425 | ) | (58.0 | )% | |||||||||
Hurricane costs | — | (232 | ) | 232 | 100.0 | % | |||||||||
Interest expense, net | (6,653 | ) | (6,369 | ) | (284 | ) | (4.5 | )% | |||||||
Debt retirement costs | (267 | ) | — | (267 | ) | (100.0 | )% | ||||||||
(6,444 | ) | (4,943 | ) | (1,501 | ) | 30.4 | % | ||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | (8,104 | ) | 1,944 | (10,048 | ) | (516.9 | )% | ||||||||
BENEFIT (PROVISION) FOR INCOME TAXES | 750 | (6,743 | ) | 7,493 | 111.1 | % | |||||||||
LOSS FROM CONTINUING OPERATIONS | $ | (7,354 | ) | $ | (4,799 | ) | $ | (2,555 | ) | (53.2 | )% | ||||
NET LOSS PER COMMON SHARE: | |||||||||||||||
Continuing operations per common share - basic | $ | (1.15 | ) | $ | (0.76 | ) | $ | (0.39 | ) | (51.3 | )% | ||||
Continuing operations per common share - dilutive | $ | (1.15 | ) | $ | (0.76 | ) | $ | (0.39 | ) | (51.3 | )% | ||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | |||||||||||||||
Basic | 6,372 | 6,279 | |||||||||||||
Dilutive | 6,372 | 6,279 | |||||||||||||
(in thousands) | Year Ended December 31, | ||||||||||||||
2017 | 2016 | Change | % | ||||||||||||
PATIENT REVENUES, net | $ | 574,794 | $ | 426,063 | $ | 148,731 | 34.9 | % | |||||||
EXPENSES: | |||||||||||||||
Operating | 458,122 | 342,932 | 115,190 | 33.6 | % | ||||||||||
Lease and rent expense | 54,988 | 33,364 | 21,624 | 64.8 | % | ||||||||||
Professional liability | 10,764 | 8,456 | 2,308 | 27.3 | % | ||||||||||
General and administrative | 33,311 | 30,271 | 3,040 | 10.0 | % | ||||||||||
Depreciation and amortization | 10,902 | 8,292 | 2,610 | 31.5 | % | ||||||||||
Lease termination costs (receipts) | (180 | ) | 2,008 | (2,188 | ) | (100.0 | )% | ||||||||
Total expenses | 567,907 | 425,323 | 142,584 | 33.5 | % | ||||||||||
OPERATING INCOME | 6,887 | 740 | 6,147 | 830.7 | % | ||||||||||
OTHER INCOME (EXPENSE): | |||||||||||||||
Equity in net income of investment in unconsolidated affiliate | — | 273 | (273 | ) | (100.0 | )% | |||||||||
Gain on bargain purchase | 925 | — | 925 | 100.0 | % | ||||||||||
Gain on sale of investment in unconsolidated affiliate | 733 | 1,366 | (633 | ) | (46.3 | )% | |||||||||
Hurricane costs | (232 | ) | — | (232 | ) | (100.0 | )% | ||||||||
Interest expense, net | (6,369 | ) | (4,802 | ) | (1,567 | ) | (32.6 | )% | |||||||
Debt retirement costs | — | (351 | ) | 351 | 100.0 | % | |||||||||
(4,943 | ) | (3,514 | ) | (1,429 | ) | (40.7 | )% | ||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 1,944 | (2,774 | ) | 4,718 | 170.1 | % | |||||||||
BENEFIT (PROVISION) FOR INCOME TAXES | (6,743 | ) | 1,030 | (7,773 | ) | (754.7 | )% | ||||||||
LOSS FROM CONTINUING OPERATIONS | $ | (4,799 | ) | $ | (1,744 | ) | $ | (3,055 | ) | (175.2 | )% | ||||
NET LOSS PER COMMON SHARE: | |||||||||||||||
Continuing operations per common share - basic | $ | (0.76 | ) | $ | (0.28 | ) | $ | (0.48 | ) | (171.4 | )% | ||||
Continuing operations per common share - dilutive | $ | (0.76 | ) | $ | (0.28 | ) | $ | (0.48 | ) | (171.4 | )% | ||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | |||||||||||||||
Basic | 6,279 | 6,199 | |||||||||||||
Dilutive | 6,279 | 6,199 |
Year Ended December 31, | |||||||||||||||
2018 | 2017 | ||||||||||||||
As reported | As adjusted to Legacy GAAP | As reported | Change | ||||||||||||
Same-store revenue | $ | 537,762 | $ | 551,228 | $ | 546,489 | $ | 4,739 | |||||||
2017 acquisition revenue | 9,296 | 9,289 | 4,553 | 4,736 | |||||||||||
2017 disposition revenue | — | — | 5,348 | (5,348 | ) | ||||||||||
2018 disposition revenue | $ | 16,404 | $ | 17,140 | $ | 18,404 | (1,264 | ) | |||||||
Total revenue | $ | 563,462 | $ | 577,657 | $ | 574,794 | 2,863 |
Year Ended December 31, | |||||||||
2018 | 2017 | ||||||||
As adjusted to Legacy GAAP | As reported | ||||||||
Skilled nursing occupancy | 79.4 | % | 79.7 | % | |||||
As a percent of total census: | |||||||||
Medicaid census | 69.2 | % | 69.1 | % | |||||
Medicare census | 10.6 | % | 11.2 | % | |||||
Managed Care census | 4.1 | % | 3.9 | % | |||||
As a percent of total revenues: | |||||||||
Medicaid revenues | 52.5 | % | 52.4 | % | |||||
Medicare revenues | 24.8 | % | 25.9 | % | |||||
Managed Care revenues | 8.1 | % | 7.4 | % | |||||
Average rate per day: | |||||||||
Medicare | $ | 454.75 | $ | 454.22 | |||||
Medicaid | $ | 178.96 | $ | 175.58 | |||||
Managed Care | $ | 394.19 | $ | 381.46 |
Year Ended December 31, | |||||||||||||||
2018 | 2017 | ||||||||||||||
As reported | As adjusted to Legacy GAAP | As reported | Change | ||||||||||||
Same-store operating expenses | $ | 431,049 | 445,004 | $ | 436,926 | $ | 8,078 | ||||||||
2017 acquisition operating expenses | 6,822 | 6,814 | 3,640 | 3,174 | |||||||||||
2017 disposition operating expenses | — | — | 4,142 | (4,142 | ) | ||||||||||
2018 disposition operating expenses | $ | 12,815 | 13,550 | $ | 13,414 | 136 | |||||||||
Total operating expenses | $ | 450,686 | $ | 465,368 | $ | 458,122 | 7,246 |
Year Ended December 31, | |||||||||||
2017 | 2016 | Change | |||||||||
Same-store revenue | $ | 386,576 | $ | 388,890 | $ | (2,314 | ) | ||||
2016 acquisition revenue | 183,665 | 37,173 | 146,492 | ||||||||
2017 acquisition revenue | 4,553 | — | 4,553 | ||||||||
Total revenue | $ | 574,794 | $ | 426,063 | 148,731 |
Year Ended December 31, | |||||||||
2017 | 2016 | ||||||||
Skilled nursing occupancy | 79.7 | % | 78.1 | % | |||||
As a percent of total census: | |||||||||
Medicaid census | 69.1 | % | 68.1 | % | |||||
Medicare census | 11.2 | % | 11.7 | % | |||||
Managed Care census | 3.9 | % | 3.5 | % | |||||
As a percent of total revenues: | |||||||||
Medicaid revenues | 52.4 | % | 50.6 | % | |||||
Medicare revenues | 25.9 | % | 27.5 | % | |||||
Managed Care revenues | 7.4 | % | 6.8 | % | |||||
Average rate per day: | |||||||||
Medicare | $ | 454.22 | $ | 456.30 | |||||
Medicaid | $ | 175.58 | $ | 169.91 | |||||
Managed Care | $ | 381.46 | $ | 385.71 |
Year Ended December 31, | |||||||||||
2017 | 2016 | Change | |||||||||
Same-store operating expenses | $ | 310,571 | $ | 314,944 | $ | (4,373 | ) | ||||
2016 acquisition operating expenses | 143,911 | 27,988 | 115,923 | ||||||||
2017 acquisition operating expenses | 3,640 | — | 3,640 | ||||||||
Total operating expenses | $ | 458,122 | $ | 342,932 | 115,190 |
Requirement | Level at December 31, 2018 | ||
Minimum fixed charge coverage ratio | 1.01:1.00 | 1.02:1.00 | |
Minimum adjusted EBITDA | $13.0 million | $20.8 million | |
EBITDAR (mortgaged centers) | $10.0 million | $15.4 million | |
Current ratio (as defined in agreement) | 1.00:1.00 | 1.23:1.00 |
• | 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 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, |
• | our ability to regain compliance with the Nasdaq continued listing requirements, |
• | changes in the anticipated results of operations, |
• | the effect of changes in accounting policies as well as others. |
Form 10-K Pages | |
Financial Statements | |
Report of Independent Registered Public Accounting Firm | F-1 |
Consolidated Balance Sheets as of December 31, 2018 and 2017 | F-2 |
Consolidated Statements of Operations for the Years Ended December 31, 2018, 2017 and 2016 | F-3 |
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2018, 2017 and 2016 | F-4 |
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2018, 2017 and 2016 | F-5 |
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016 | F-6 |
Notes to Consolidated Financial Statements as of December 31, 2018, 2017 and 2016 | F-8 to F-35 |
Financial Statement Schedule | |
Schedule II - Valuation and Qualifying Accounts | S-1 to S-2 |
/s/ Chad A. McCurdy | /s/ Robert Z. Hensley |
Chad A. McCurdy | Robert Z. Hensley |
Chairman of the Board and Director | Director |
February 28, 2019 | February 28, 2019 |
/s/ James R. McKnight, Jr. | /s/ Leslie K. Morgan |
James R. McKnight, Jr. | Leslie K. Morgan |
President and Chief Executive Officer | Director |
Director | February 28, 2019 |
February 28, 2019 | |
/s/ Robert A. McCabe, Jr. | /s/ Richard M. Brame |
Robert A. McCabe, Jr. | Richard M. Brame |
Director | Director |
February 28, 2019 | February 28, 2019 |
/s/ Ben R. Leedle, Jr. | |
Ben R. Leedle, Jr. | |
Director | |
February 28, 2019 |
F-8 to F-35 | |
Schedule II - Valuation and Qualifying Accounts | S-1 to S-2 |
ASSETS | 2018 | 2017 | LIABILITIES AND SHAREHOLDERS' EQUITY | 2018 | 2017 | |||||||||||||
CURRENT ASSETS: | CURRENT LIABILITIES: | |||||||||||||||||
Cash | $ | 2,685 | $ | 3,524 | Current portion of long-term debt and capitalized lease obligations, less deferred financing costs, net | $ | 12,449 | $ | 13,065 | |||||||||
Receivables, less allowance for doubtful accounts of $0 and $14,235, respectively | 66,257 | 64,929 | Trade accounts payable | 15,659 | 14,080 | |||||||||||||
Self-insurance receivables | 4,475 | — | Current liabilities of discontinued operations | 86 | 461 | |||||||||||||
Other receivables | 1,191 | 375 | Accrued expenses: | |||||||||||||||
Prepaid expenses and other current assets | 4,728 | 3,248 | Payroll and employee benefits | 19,471 | 20,013 | |||||||||||||
Income tax refundable | 1,115 | 537 | Self-insurance reserves, current portion | 13,158 | 8,792 | |||||||||||||
Current assets of discontinued operations | 86 | 45 | Provider taxes | 2,394 | 3,090 | |||||||||||||
Total current assets | 80,537 | 72,658 | Other current liabilities | 7,128 | 4,766 | |||||||||||||
Total current liabilities | 70,345 | 64,267 | ||||||||||||||||
NONCURRENT LIABILITIES: | ||||||||||||||||||
PROPERTY AND EQUIPMENT, at cost | 138,460 | 147,549 | Long-term debt and capitalized lease obligations, less current portion and deferred financing costs, net | 60,984 | 74,603 | |||||||||||||
Less accumulated depreciation and amortization | (85,361 | ) | (78,345 | ) | Self-insurance reserves, noncurrent portion | 16,057 | 13,458 | |||||||||||
53,099 | 69,204 | Litigation contingency | 6,400 | — | ||||||||||||||
Other noncurrent liabilities | 6,656 | 8,779 | ||||||||||||||||
Total noncurrent liabilities | 90,097 | 96,840 | ||||||||||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||||||||||
SHAREHOLDERS’ EQUITY (DEFICIT): | ||||||||||||||||||
OTHER ASSETS: | Common stock, authorized 20,000 shares, $.01 par value, 6,751 and 6,687 shares issued, and 6,519 and 6,455 shares outstanding, respectively | 68 | 67 | |||||||||||||||
Deferred income taxes, net | 15,851 | 15,154 | Treasury stock at cost, 232 shares of common stock | (2,500 | ) | (2,500 | ) | |||||||||||
Deferred leasehold costs | 206 | 137 | Paid-in capital | 23,413 | 22,720 | |||||||||||||
Other noncurrent assets | 3,244 | 3,725 | Accumulated deficit | (23,016 | ) | (14,534 | ) | |||||||||||
Acquired leasehold interest, net | 6,307 | 6,691 | Accumulated other comprehensive income | 837 | 709 | |||||||||||||
Total other assets | 25,608 | 25,707 | Total shareholders’ equity (deficit) | (1,198 | ) | 6,462 | ||||||||||||
$ | 159,244 | $ | 167,569 | $ | 159,244 | $ | 167,569 |
Years Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
PATIENT REVENUES, net | $ | 563,462 | $ | 574,794 | $ | 426,063 | |||||
EXPENSES: | |||||||||||
Operating | 450,686 | 458,122 | 342,932 | ||||||||
Lease and rent expense | 57,073 | 54,988 | 33,364 | ||||||||
Professional liability | 11,796 | 10,764 | 8,456 | ||||||||
Litigation contingency expense | 6,400 | — | — | ||||||||
General and administrative | 32,791 | 33,311 | 30,271 | ||||||||
Depreciation and amortization | 11,201 | 10,902 | 8,292 | ||||||||
Gain on sale of assets | (4,825 | ) | — | — | |||||||
Lease termination costs (receipts) | — | (180 | ) | 2,008 | |||||||
Total expenses | 565,122 | 567,907 | 425,323 | ||||||||
OPERATING INCOME (LOSS) | (1,660 | ) | 6,887 | 740 | |||||||
OTHER INCOME (EXPENSE): | |||||||||||
Other income | 168 | — | — | ||||||||
Equity in net income of investment in unconsolidated affiliate | — | — | 273 | ||||||||
Gain on bargain purchase | — | 925 | — | ||||||||
Gain on sale of investment in unconsolidated affiliate | 308 | 733 | 1,366 | ||||||||
Hurricane costs | — | (232 | ) | — | |||||||
Interest expense, net | (6,653 | ) | (6,369 | ) | (4,802 | ) | |||||
Debt retirement costs | (267 | ) | — | (351 | ) | ||||||
(6,444 | ) | (4,943 | ) | (3,514 | ) | ||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | (8,104 | ) | 1,944 | (2,774 | ) | ||||||
BENEFIT (PROVISION) FOR INCOME TAXES | 750 | (6,743 | ) | 1,030 | |||||||
LOSS FROM CONTINUING OPERATIONS | (7,354 | ) | (4,799 | ) | (1,744 | ) | |||||
LOSS FROM DISCONTINUED OPERATIONS: | |||||||||||
Operating loss, net of income tax benefit of $5, $43 and $41, respectively | (42 | ) | (28 | ) | (67 | ) | |||||
LOSS FROM DISCONTINUED OPERATIONS | (42 | ) | (28 | ) | (67 | ) | |||||
NET LOSS | $ | (7,396 | ) | $ | (4,827 | ) | $ | (1,811 | ) | ||
NET LOSS PER COMMON SHARE: | |||||||||||
Per common share – basic | |||||||||||
Continuing operations | $ | (1.15 | ) | $ | (0.76 | ) | $ | (0.28 | ) | ||
Discontinued operations | (0.01 | ) | (0.01 | ) | (0.01 | ) | |||||
$ | (1.16 | ) | $ | (0.77 | ) | $ | (0.29 | ) | |||
Per common share – diluted | |||||||||||
Continuing operations | $ | (1.15 | ) | $ | (0.76 | ) | $ | (0.28 | ) | ||
Discontinued operations | (0.01 | ) | (0.01 | ) | (0.01 | ) | |||||
$ | (1.16 | ) | $ | (0.77 | ) | $ | (0.29 | ) | |||
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK | $ | 0.17 | $ | 0.22 | $ | 0.22 | |||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | |||||||||||
Basic | 6,372 | 6,279 | 6,199 | ||||||||
Diluted | 6,372 | 6,279 | 6,199 |
Years Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
NET LOSS | $ | (7,396 | ) | $ | (4,827 | ) | $ | (1,811 | ) | ||
OTHER COMPREHENSIVE INCOME (LOSS): | |||||||||||
Change in fair value of cash flow hedge, net of tax | 279 | 976 | 1,082 | ||||||||
Less: reclassification adjustment for amounts recognized in net loss | (151 | ) | (462 | ) | (500 | ) | |||||
Total other comprehensive income | 128 | 514 | 582 | ||||||||
COMPREHENSIVE LOSS | $ | (7,268 | ) | $ | (4,313 | ) | $ | (1,229 | ) |
Common Stock | Treasury Stock | Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Shareholders' Equity (Deficit) | ||||||||||||||||||||||||
Shares Issued | Amount | Shares | Amount | ||||||||||||||||||||||||||
BALANCE, DECEMBER 31, 2015 | 6,513 | $ | 65 | 232 | $ | (2,500 | ) | $ | 21,142 | $ | (5,053 | ) | $ | (387 | ) | $ | 13,267 | ||||||||||||
Net loss | — | — | — | — | — | (1,811 | ) | — | (1,811 | ) | |||||||||||||||||||
Common stock dividends declared | — | — | — | — | 46 | (1,412 | ) | — | (1,366 | ) | |||||||||||||||||||
Issuance/redemption of equity grants, net | 79 | 1 | — | — | (106 | ) | — | — | (105 | ) | |||||||||||||||||||
Interest rate cash flow hedge | — | — | — | — | — | — | 582 | 582 | |||||||||||||||||||||
Tax impact of equity grant exercises | — | — | — | — | 65 | — | — | 65 | |||||||||||||||||||||
Stock based compensation | — | — | — | — | 788 | — | — | 788 | |||||||||||||||||||||
BALANCE, DECEMBER 31, 2016 | 6,592 | 66 | 232 | (2,500 | ) | 21,935 | (8,276 | ) | 195 | 11,420 | |||||||||||||||||||
Net loss | — | — | — | — | — | (4,827 | ) | — | (4,827 | ) | |||||||||||||||||||
Common stock dividends declared | — | — | — | — | 47 | (1,431 | ) | — | (1,384 | ) | |||||||||||||||||||
Issuance/redemption of equity grants, net | 95 | 1 | — | — | (95 | ) | — | — | (94 | ) | |||||||||||||||||||
Interest rate cash flow hedge | — | — | — | — | — | — | 514 | 514 | |||||||||||||||||||||
Stock based compensation | — | — | — | — | 833 | — | — | 833 | |||||||||||||||||||||
BALANCE, DECEMBER 31, 2017 | 6,687 | 67 | 232 | (2,500 | ) | 22,720 | (14,534 | ) | 709 | 6,462 | |||||||||||||||||||
Net loss | — | — | — | — | — | (7,396 | ) | — | (7,396 | ) | |||||||||||||||||||
Common stock dividends declared | — | — | — | — | 31 | (1,086 | ) | — | (1,055 | ) | |||||||||||||||||||
Issuance/redemption of equity grants, net | 64 | 1 | — | — | (218 | ) | — | — | (217 | ) | |||||||||||||||||||
Interest rate cash flow hedge | — | — | — | — | — | — | 128 | 128 | |||||||||||||||||||||
Stock based compensation | — | — | — | — | 880 | — | — | 880 | |||||||||||||||||||||
BALANCE, DECEMBER 31, 2018 | 6,751 | $ | 68 | 232 | $ | (2,500 | ) | $ | 23,413 | $ | (23,016 | ) | $ | 837 | $ | (1,198 | ) |
Years Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
Net loss | $ | (7,396 | ) | $ | (4,827 | ) | $ | (1,811 | ) | ||
Loss from discontinued operations | (42 | ) | (28 | ) | (67 | ) | |||||
Loss from continuing operations | (7,354 | ) | (4,799 | ) | (1,744 | ) | |||||
Adjustments to reconcile loss from continuing operations to net cash provided by (used in) operating activities: | |||||||||||
Depreciation and amortization | 11,201 | 10,902 | 8,292 | ||||||||
Provision for doubtful accounts | — | 8,958 | 7,163 | ||||||||
Deferred income tax provision (benefit) | (615 | ) | 5,997 | (1,569 | ) | ||||||
Provision for self-insured professional liability, net of cash payments | 2,325 | 1,342 | 1,968 | ||||||||
Stock based and deferred compensation | 1,127 | 1,027 | 1,012 | ||||||||
Debt retirement costs | 267 | — | 351 | ||||||||
Provision for leases, net of cash payments | (106 | ) | (936 | ) | (1,773 | ) | |||||
Lease termination costs, net of cash payments | — | — | 1,863 | ||||||||
Equity in net income of investment in unconsolidated affiliate | — | — | (271 | ) | |||||||
Litigation contingency expense | 6,400 | — | — | ||||||||
Gain on sale of assets and unconsolidated affiliate | (5,133 | ) | (733 | ) | (1,366 | ) | |||||
Gain on bargain purchase | — | (925 | ) | — | |||||||
Deferred bonus | — | 761 | 350 | ||||||||
Other | 415 | 523 | 576 | ||||||||
Changes in other assets and liabilities affecting operating activities: | |||||||||||
Receivables | (2,289 | ) | (10,721 | ) | (25,551 | ) | |||||
Prepaid expenses and other assets | (5,857 | ) | 385 | (1,620 | ) | ||||||
Trade accounts payable and accrued expenses | 6,010 | 1,589 | 10,224 | ||||||||
Net cash provided by (used in) continuing operations | 6,391 | 13,370 | (2,095 | ) | |||||||
Net cash used in discontinued operations | (740 | ) | (1,310 | ) | (3,523 | ) | |||||
Net cash provided by (used in) operating activities | 5,651 | 12,060 | (5,618 | ) | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Purchase of property and equipment | (8,578 | ) | (9,730 | ) | (6,022 | ) | |||||
Nursing center acquisitions | — | — | (7,550 | ) | |||||||
Acquisition of property and equipment through business combination | — | (8,750 | ) | — | |||||||
Proceeds from sale of assets and unconsolidated affiliate | 19,008 | 1,100 | 2,068 | ||||||||
Change in restricted cash | — | — | 1,658 | ||||||||
Net cash provide by (used in) continuing operations | 10,430 | (17,380 | ) | (9,846 | ) | ||||||
Net cash used in discontinued operations | — | — | — | ||||||||
Net cash provided by (used in) investing activities | 10,430 | (17,380 | ) | (9,846 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Repayment of debt obligations | (36,683 | ) | (30,154 | ) | (73,374 | ) | |||||
Proceeds from issuance of debt | 21,689 | 37,067 | 92,789 | ||||||||
Financing costs | (146 | ) | (195 | ) | (2,162 | ) | |||||
Issuance and redemption of employee equity awards | (217 | ) | (94 | ) | (105 | ) | |||||
Payment of common stock dividends | (1,055 | ) | (1,384 | ) | (1,366 | ) | |||||
Payment for preferred stock restructuring | (508 | ) | (659 | ) | (640 | ) | |||||
Net cash provided by (used in) continuing operations | (16,920 | ) | 4,581 | 15,142 | |||||||
Net cash used in discontinued operations | — | — | — | ||||||||
Net cash provided by (used in) financing activities | (16,920 | ) | 4,581 | 15,142 |
Years Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
NET DECREASE IN CASH AND RESTRICTED CASH | $ | (839 | ) | $ | (739 | ) | $ | (322 | ) | ||
CASH AND RESTRICTED CASH, beginning of period | 3,524 | 4,263 | 4,585 | ||||||||
CASH AND RESTRICTED CASH, end of period | $ | 2,685 | $ | 3,524 | $ | 4,263 | |||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||||||
Cash payments of interest, net of amounts capitalized | $ | 6,074 | $ | 5,404 | $ | 3,965 | |||||
Cash payments of income taxes | $ | 498 | $ | 847 | $ | 549 | |||||
SUPPLEMENTAL INFORMATION ON NON-CASH INVESTING AND FINANCING TRANSACTIONS: | |||||||||||
Acquisition of equipment through capital lease | $ | 689 | $ | 507 | $ | 1,851 | |||||
The table below reconciles cash and restricted cash as reported in the consolidated balance sheets to the total of the same amounts shown in the consolidated statements of cash flows: | |||||||||||
Cash | $ | 2,685 | $ | 3,524 | $ | 2,605 | |||||
Restricted cash | — | — | $ | 1,658 | |||||||
Total cash and restricted cash shown in the consolidated statements of cash flows | $ | 2,685 | $ | 3,524 | $ | 4,263 |
Buildings and improvements | - | 5 to 40 years |
Leasehold improvements | - | 2 to 10 years |
Furniture, fixtures and equipment | - | 2 to 15 years |
December 31, | |||||||
2018 | 2017 | ||||||
Intangible assets | $ | 10,652 | $ | 10,652 | |||
Accumulated amortization | (4,345 | ) | (3,961 | ) | |||
Net intangible assets | $ | 6,307 | $ | 6,691 |
2019 | $ | 534 | ||
2020 | 534 | |||
2021 | 534 | |||
2022 | 534 | |||
2023 | 534 | |||
Thereafter | 3,637 | |||
$ | 6,307 |
December 31, 2018 | Fair Value Measurements - Assets (Liabilities) | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Interest rate swap | $ | 384 | $ | — | $ | 384 | $ | — | ||||||||
December 31, 2017 | Fair Value Measurements - Assets (Liabilities) | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Interest rate swap | $ | 211 | $ | — | $ | 211 | $ | — |
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 |
Twelve Months Ended December 31, 2018 | |||||
As Reported | Increase (Decrease) | Balances as if the previous accounting guidance was in effect | |||
Patient Revenues, net | $563,462 | 14,682 | (a) | $577,657 | |
(487) | (b) | ||||
14,195 | |||||
Operating Expenses | $450,686 | 14,682 | (a) | $465,368 | |
Total Expenses | $565,122 | 14,682 | (a) | $579,804 |
As of December 31, 2018 | |||||
As Reported | Increase (Decrease) | Balances as if the previous accounting guidance was in effect | |||
Accounts Receivable | $66,257 | (487) | (a) | $83,031 | |
17,261 | (b) | ||||
16,774 | |||||
Accumulated Deficit | $(23,016) | 487 | (a) | $(22,575) | |
(46) | (c) | ||||
441 |
Twelve Months Ended December 31, | |||||||||||||||||
2018 | 2018 | 2017(1) | |||||||||||||||
As reported | As Adjusted to Legacy GAAP | As reported | |||||||||||||||
Medicaid | $ | 267,015 | 47.4 | % | $ | 303,412 | 52.5 | % | $ | 300,926 | 52.4 | % | |||||
Medicare | 110,794 | 19.7 | % | 143,104 | 24.8 | % | 149,020 | 25.9 | % | ||||||||
Managed Care | 53,242 | 9.4 | % | 46,988 | 8.1 | % | 42,673 | 7.4 | % | ||||||||
Private Pay and other | 132,411 | 23.5 | % | 84,153 | 14.6 | % | 82,175 | 14.3 | % | ||||||||
Total | $ | 563,462 | 100.0 | % | $ | 577,657 | 100.0 | % | $ | 574,794 | 100.0 | % |
December 31, | |||||||||||
2018 | As Adjusted to Legacy GAAP | 2017 | |||||||||
Medicaid | $ | 8,126 | $ | 10,229 | $ | 9,356 | |||||
Medicare | $ | 15,706 | $ | 17,592 | $ | 20,007 | |||||
Managed Care | 27,532 | 30,105 | 29,453 | ||||||||
Private Pay and other | 14,893 | 25,592 | 20,348 | ||||||||
66,257 | 83,518 | 79,164 | |||||||||
Less: allowance for doubtful accounts | — | (17,261 | ) | (14,235 | ) | ||||||
Accounts receivable, net | 66,257 | 66,257 | 64,929 |
December 31, | |||||||
2018 | 2017 | ||||||
Land | $ | 5,283 | $ | 6,521 | |||
Buildings and leasehold improvements | 87,995 | 98,140 | |||||
Furniture, fixtures and equipment | 45,182 | 42,888 | |||||
138,460 | 147,549 | ||||||
Less: accumulated depreciation | (85,361 | ) | (78,345 | ) | |||
Net property and equipment | $ | 53,099 | $ | 69,204 |
December 31, | |||||||
2018 | 2017 | ||||||
Mortgage loan with a syndicate of banks; payable monthly, interest at 4.0% above LIBOR, a portion of which is fixed at 5.79% based on the interest rate swap described below. | $ | 51,730 | $ | 64,567 | |||
Acquisition loan with Canadian Imperial Bank of Commerce, interest at 4.75% above LIBOR. | 6,900 | 7,500 | |||||
Revolving credit facility borrowings payable to a bank; secured by receivables of the Company; interest at 4.0% above LIBOR. | 15,000 | 16,000 | |||||
Loan to finance equipment | — | 40 | |||||
73,630 | 88,107 | ||||||
Less current portion | (12,449 | ) | (13,065 | ) | |||
61,181 | 75,042 | ||||||
Less deferred financing costs, net | (1,125 | ) | (1,884 | ) | |||
Plus capitalized lease obligations | 928 | 1,445 | |||||
Long-term debt and capital lease obligation | $ | 60,984 | $ | 74,603 |
2018 | 2017 | ||||||
Write-off of deferred financing costs | $ | 267 | $ | — | |||
Deferred financing costs capitalized | $ | 146 | $ | 195 |
2019 | $ | 11,995 | |
2020 | 8,993 | ||
2021 | 52,642 | ||
Total | $ | 73,630 |
2019 | $ | 500 | |
2020 | 202 | ||
2021 | 189 | ||
2022 | 131 | ||
Total | 1,022 | ||
Amounts related to interest | (94 | ) | |
Principal payments on capitalized lease obligation | $ | 928 |
Year Ended December 31, | |||||
2018 | 2017 | 2016 | |||
Expected volatility (range) | 47%-49% | N/A(1) | N/A(1) | ||
Risk free interest rate (range) | 2.68%-2.75% | N/A(1) | N/A(1) | ||
Expected dividends | 2.70% | N/A(1) | N/A(1) | ||
Weighted average expected term (years) | 6 | N/A(1) | N/A(1) |
(1) | The Company did not issue any options or other equity grants that would require application of the Black-Scholes-Merton equity grant valuation model during the years ended December 31, 2017 and 2016. All equity grants during these periods were restricted common shares which are valued using an intrinsic valuation method based on market price. |
Year Ended December 31, | ||||||||||||
2018 | 2017(1) | 2016(1) | ||||||||||
Weighted average grant date fair value | $ | 3.05 | $ | — | $ | — | ||||||
Total intrinsic value of exercises | $ | 115 | $ | 2 | $ | 3 |
(1) | The Company did not issue any options or other equity grants that would require application of the Black-Scholes-Merton equity grant valuation model during the years ended December 31, 2017 and 2016. All equity grants during this period were restricted common shares which are valued using an intrinsic valuation method based on market price. |
Weighted | ||||||||||||||||||
Average | Intrinsic | Intrinsic | ||||||||||||||||
Range of | Exercise | Grants | Value-Grants | Grants | Value-Grants | |||||||||||||
Exercise Prices | Prices | Outstanding | Outstanding | Exercisable | Exercisable | |||||||||||||
$8.14 to $10.21 | $ | 9.32 | 60 | $ | — | 60 | $ | — | ||||||||||
$2.37 to $5.86 | $ | 5.32 | 62 | $ | — | 62 | $ | — | ||||||||||
122 | 122 |
Weighted | ||||||
SOSARs/ | Average | |||||
Options | Exercise Price | |||||
Outstanding, December 31, 2017 | 211 | $ | 6.64 | |||
Granted | 30 | 8.14 | ||||
Exercised | (100 | ) | 5.79 | |||
Expired or cancelled | (19 | ) | 9.17 | |||
Outstanding, December 31, 2018 | 122 | $ | 7.29 | |||
Exercisable, December 31, 2018 | 102 | $ | 7.13 |
Weighted | ||||||
Average | ||||||
Restricted | Grant Date | |||||
Shares | Fair Value | |||||
Outstanding, December 31, 2017 | 164 | $ | 9.95 | |||
Granted | 90 | 8.14 | ||||
Dividend Equivalents | 4 | 6.95 | ||||
Vested | (131 | ) | 9.71 | |||
Cancelled | (7 | ) | 9.62 | |||
Outstanding December 31, 2018 | 120 | $ | 8.77 |
Weighted | ||||||
Average | ||||||
Restricted | Grant Date | |||||
Share Units | Fair Value | |||||
Outstanding, December 31, 2017 | 44 | $ | 9.59 | |||
Granted | 17 | 8.14 | ||||
Dividend Equivalents | 1 | 6.89 | ||||
Vested | (19 | ) | 8.92 | |||
Cancelled | — | — | ||||
Outstanding December 31, 2018 | 43 | $ | 9.26 |
7. | NET LOSS PER COMMON SHARE |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Numerator: Loss: | ||||||||||||
Loss from continuing operations | $ | (7,354 | ) | $ | (4,799 | ) | $ | (1,744 | ) | |||
Loss from discontinued operations, net of income taxes | (42 | ) | (28 | ) | (67 | ) | ||||||
Net loss | $ | (7,396 | ) | $ | (4,827 | ) | $ | (1,811 | ) | |||
Denominator: Basic Weighted Average Common Shares Outstanding: | 6,372 | 6,279 | 6,199 | |||||||||
Basic net loss per common share | ||||||||||||
Loss from continuing operations | $ | (1.15 | ) | $ | (0.76 | ) | $ | (0.28 | ) | |||
Loss from discontinued operations | ||||||||||||
Operating loss, net of taxes | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||
Discontinued operations, net of taxes | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||
Basic net loss per common share | $ | (1.16 | ) | $ | (0.77 | ) | $ | (0.29 | ) |
2018 | 2017 | 2016 | ||||||||||
Numerator: Loss from continuing operations | $ | (7,354 | ) | $ | (4,799 | ) | $ | (1,744 | ) | |||
Loss from discontinued operations, net of income taxes | (42 | ) | (28 | ) | (67 | ) | ||||||
Net loss | $ | (7,396 | ) | $ | (4,827 | ) | $ | (1,811 | ) | |||
Basic weighted average common shares outstanding | 6,372 | 6,279 | 6,199 | |||||||||
Incremental shares from assumed exercise of options, SOSARS and Restricted Stock Units | — | — | — | |||||||||
Denominator: Diluted Weighted Average Common Shares Outstanding: | 6,372 | 6,279 | 6,199 | |||||||||
Diluted net loss per common share | ||||||||||||
Loss from continuing operations | $ | (1.15 | ) | $ | (0.76 | ) | $ | (0.28 | ) | |||
Loss from discontinued operations | ||||||||||||
Operating loss, net of taxes | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||
Discontinued operations, net of taxes | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||
Diluted net loss per common share | $ | (1.16 | ) | $ | (0.77 | ) | $ | (0.29 | ) |
2018 | 2017 | 2016 | |||
SOSARs/Options Excluded | 114,000 | 45,000 | 31,000 |
Year Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Current provision (benefit) : | ||||||||||||
Federal | $ | (49 | ) | $ | 274 | $ | 17 | |||||
State | (86 | ) | 472 | 522 | ||||||||
(135 | ) | 746 | 539 | |||||||||
Deferred provision (benefit): | ||||||||||||
Federal | 50 | 6,585 | (1,284 | ) | ||||||||
State | (665 | ) | (588 | ) | (285 | ) | ||||||
(615 | ) | 5,997 | (1,569 | ) | ||||||||
Provision (benefit) for income taxes of continuing operations | $ | (750 | ) | $ | 6,743 | $ | (1,030 | ) |
Year Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Provision (benefit) for federal income taxes at statutory rates | $ | (1,672 | ) | $ | 711 | $ | (889 | ) | ||||
Provision for state income taxes, net of federal benefit | (479 | ) | 421 | 120 | ||||||||
Valuation allowance changes affecting the provision for income taxes | (146 | ) | (372 | ) | (45 | ) | ||||||
Employment tax credits | (64 | ) | (217 | ) | (529 | ) | ||||||
Nondeductible expenses | 1,919 | 496 | 453 | |||||||||
Stock based compensation expense | 15 | (35 | ) | (62 | ) | |||||||
Effect of Tax Cuts and Jobs Creation Act | — | 5,476 | — | |||||||||
Other | (323 | ) | 263 | (78 | ) | |||||||
Provision (benefit) for income taxes of continuing operations | $ | (750 | ) | $ | 6,743 | $ | (1,030 | ) |
December 31, | ||||||||
2018 | 2017 | |||||||
Deferred tax assets (liabilities): | ||||||||
Net operating loss and other carryforwards | $ | 324 | $ | 495 | ||||
Credit carryforwards | 2,878 | 3,237 | ||||||
Allowance for doubtful accounts | 4,570 | 3,626 | ||||||
Prepaid expenses | (1,022 | ) | (731 | ) | ||||
Interest rate limitation | 148 | — | ||||||
Deferred lease costs | — | 32 | ||||||
Depreciation | 1,318 | 1,190 | ||||||
Tax goodwill and intangibles | (1,079 | ) | (972 | ) | ||||
Stock-based compensation | 197 | 476 | ||||||
Accrued liabilities | 896 | 773 | ||||||
Accrued rent | 1,914 | 1,892 | ||||||
Kentucky and Kansas acquisition costs | 3 | 4 | ||||||
Impairment of long-lived assets | 191 | 186 | ||||||
Interest rate swap | (152 | ) | (14 | ) | ||||
Hedge Ineffectiveness | (168 | ) | (106 | ) | ||||
Noncurrent self-insurance liabilities | 5,997 | 5,443 | ||||||
Other | 64 | — | ||||||
16,079 | 15,531 | |||||||
Less valuation allowance | (228 | ) | (377 | ) | ||||
$ | 15,851 | $ | 15,154 |
2018 | $ | 58,291 | |
2019 | 59,391 | ||
2020 | 60,575 | ||
2021 | 61,808 | ||
2022 | 63,065 | ||
Thereafter | 321,797 | ||
$ | 624,927 |
December 31 | |||||||
2018 | 2017 | ||||||
Leasehold improvement | $ | 921 | $ | 921 | |||
Accumulated Amortization | (921 | ) | (842 | ) | |||
Net | $ | — | $ | 79 |
Quarter | ||||||||||||||||
2018 | First | Second | Third | Fourth | ||||||||||||
Patient revenues, net | $ | 141,285 | $ | 141,082 | $ | 141,431 | $ | 139,664 | ||||||||
Professional liability expense (1) | 2,775 | 3,182 | 2,933 | 2,906 | ||||||||||||
Income (loss) from continuing operations | (81 | ) | (307 | ) | (7,389 | ) | 423 | |||||||||
Loss from discontinued operations | (22 | ) | (4 | ) | (8 | ) | (8 | ) | ||||||||
Net income (loss) | $ | (103 | ) | $ | (311 | ) | $ | (7,397 | ) | $ | 415 | |||||
Basic net income (loss) per common share: | ||||||||||||||||
Income (loss) from continuing operations | $ | (0.01 | ) | $ | (0.05 | ) | $ | (1.15 | ) | $ | 0.07 | |||||
Loss from discontinued operations | — | — | — | — | ||||||||||||
Net income (loss) per common share | $ | (0.01 | ) | $ | (0.05 | ) | $ | (1.15 | ) | $ | 0.07 |
Diluted net income (loss) per common share: | ||||||||||||||||
Income (loss) from continuing operations | $ | (0.01 | ) | $ | (0.05 | ) | $ | (1.15 | ) | $ | 0.07 | |||||
Loss from discontinued operations | — | — | — | — | ||||||||||||
Net income (loss) per common share | $ | (0.01 | ) | $ | (0.05 | ) | $ | (1.15 | ) | $ | 0.07 |
(1) | The Company's quarterly results are significantly affected by the amounts recorded for professional liability expense, as discussed further in Note 9, "Commitments and Contingencies". The amount of expense recorded for professional liability in each quarter of 2018 is set forth in the table above. |
Quarter | ||||||||||||||||
2017 | First | Second | Third | Fourth | ||||||||||||
Patient revenues, net | $ | 141,500 | $ | 142,550 | $ | 146,377 | $ | 144,367 | ||||||||
Professional liability expense (1) | 2,670 | 2,724 | 2,617 | 2,753 | ||||||||||||
Income (loss) from continuing operations | 1,348 | 381 | (581 | ) | (5,947 | ) | ||||||||||
Income (loss) from discontinued operations | (15 | ) | (28 | ) | 1 | 14 | ||||||||||
Net income (loss) | $ | 1,333 | $ | 353 | $ | (580 | ) | $ | (5,933 | ) | ||||||
Basic net income (loss) per common share: | ||||||||||||||||
Income (loss) from continuing operations | $ | 0.22 | $ | 0.06 | $ | (0.09 | ) | $ | (0.94 | ) | ||||||
Loss from discontinued operations | — | — | — | — | ||||||||||||
Net income (loss) per common share | $ | 0.22 | $ | 0.06 | $ | (0.09 | ) | $ | (0.94 | ) |
Diluted net income (loss) per common share: | ||||||||||||||||
Income (loss) from continuing operations | $ | 0.21 | $ | 0.06 | $ | (0.09 | ) | $ | (0.94 | ) | ||||||
Loss from discontinued operations | — | — | — | — | ||||||||||||
Net income (loss) per common share | $ | 0.21 | $ | 0.06 | $ | (0.09 | ) | $ | (0.94 | ) |
(1) | The Company's quarterly results are significantly affected by the amounts recorded for professional liability expense, as discussed further in Note 9, "Commitments and Contingencies". The amount of expense recorded for professional liability in each quarter of 2017 is set forth in the table above. |
Description | Balance at Beginning of Period | Impact of ASC 606 Adoption (1) | Additions Charged to Costs and Expenses | Deductions | Balance at End of Period | ||||
Year ended December 31, 2018: Allowance for doubtful accounts | $14,235 | $(14,235) | $— | $— | $— | ||||
Year ended December 31, 2017: Allowance for doubtful accounts | $10,326 | $— | $8,958 | $(5,049) | $14,235 | ||||
Year ended December 31, 2016: Allowance for doubtful accounts | $8,180 | $— | $7,163 | $(5,017) | $10,326 |
Column A | Column B | Column C | Column D | Column E | ||||||||
Additions | Deductions | |||||||||||
Description | Balance at Beginning of Period | Charged to Costs and Expenses | Charged to Other Accounts (2) | Other | Payments (1) | Balance at End of Period | ||||||
Year ended December 31, 2018: | ||||||||||||
Professional Liability Reserve | $20,057 | $8,865 | $— | $5,475 | $(7,196) | $27,201 | ||||||
Workers Compensation Reserve | $867 | $(18) | $— | $— | $(231) | $618 | ||||||
Health Insurance Reserve | $1,326 | $14,369 | $— | $— | $(14,299) | $1,396 | ||||||
Year ended December 31, 2017: | ||||||||||||
Professional Liability Reserve | $19,977 | $7,935 | $— | $— | $(7,855) | $20,057 | ||||||
Workers Compensation Reserve | $171 | $995 | $— | $— | $(299) | $867 | ||||||
Health Insurance Reserve | $1,019 | $13,769 | $— | $— | $(13,462) | $1,326 | ||||||
Year ended December 31, 2016: | ||||||||||||
Professional Liability Reserve | $21,618 | $6,423 | $— | $114 | $(8,178) | $19,977 | ||||||
Workers Compensation Reserve | $227 | $372 | $— | $— | $(428) | $171 | ||||||
Health Insurance Reserve | $686 | $8,896 | $— | $(137) | $(8,426) | $1,019 |
(1) | Payments for the Professional Liability Reserve include amounts paid for claims settled during the period as well as payments made under structured arrangements for claims settled in earlier periods. |
(2) | The Company has presented the results of certain divestiture and lease termination transactions as discontinued operations. The amounts charged to Other Accounts represent the amounts charged to discontinued operations. |
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). | |||
3.9 | Bylaw Second Amendment adopted April 14, 2016 (incorporated by reference to Exhibit 3.9 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2017. | ||
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). | ||
Master Agreement and Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.6 to the Company's Registration Statement No. 33-76150 on Form S-1). | |||
10.2 | Form of Director Indemnification Agreement (incorporated by reference to Exhibit 10.8 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). | ||
Consolidated Amended and Restated Master Lease dated November 8, 2000, effective October 1, 2000, between Sterling Acquisition Corp. (as Lessor) and Diversicare Leasing Corp. (as Lessee) (incorporated by reference to Exhibit 10.84 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000). | |||
Management Agreement effective October 1, 2000, between Diversicare Leasing Corp. and Diversicare Management Services Co. (incorporated by reference to Exhibit 10.85 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000). | |||
Amended and Restated Security Agreement dated as of November 8, 2000 between Diversicare Leasing Corp. and Sterling Acquisition Corp. (incorporated by reference to Exhibit 10.86 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000). | |||
Guaranty given as of November 8, 2000 by Registrant, Advocat Finance, Inc., and Diversicare Management Services Co., in favor of Sterling Acquisition Corp. (incorporated by reference to Exhibit 10.88 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000). | |||
First Amendment to Consolidated Amended and Restated Master Lease dated September 30, 2001 by and between Sterling Acquisition Corp. and Diversicare Leasing Corporation (incorporated by reference to Exhibit 10.126 to the Company's Annual Report on Form 10-K for the year ended December 31, 2001). |
Second Amendment to Consolidated Amended and Restated Master Lease dated as of June 15, 2005 by and between Sterling Acquisition Corp. and Diversicare Leasing Corporation (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005). | |||
Third Amendment to Consolidated Amended and Restated Master Lease executed as of October 20, 2006, to be effective as of October 1, 2006 by and between Sterling Acquisition Corp. and Diversicare Leasing Corporation (incorporated by reference to Exhibit 10.2 to the Company's current report on Form 8-K filed October 24, 2006). | |||
Fourth Amendment to Consolidated Amended and Restated Master Lease executed and delivered as of April 1, 2007 by and between Sterling Acquisition Corp., a Kentucky corporation, and Diversicare Leasing Corp., a Tennessee corporation (incorporated by reference to Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2007). | |||
Fifth Amendment to Consolidated Amended and Restated Master Lease dated as of August 10, 2007 by and between Sterling Acquisition Corp., a Kentucky corporation, and Diversicare Leasing Corp., a Tennessee corporation (incorporated by reference to Exhibit 10.7 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2007). | |||
Sixth Amendment to Consolidated Amended and Restated Master Lease dated as of March 14, 2008 by and between Sterling Acquisition Corp., a Kentucky corporation, and Diversicare Leasing Corp., a Tennessee corporation (incorporated by reference to Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2008). | |||
Seventh Amendment to Consolidated Amended and Restated Master Lease dated as of October 24, 2008 by and between Sterling Acquisition Corp., a Kentucky corporation, and Diversicare Leasing Corp., a Tennessee corporation (incorporated by reference to Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2008). | |||
Advocat Inc. 2005 Long-Term Incentive Plan (incorporated by reference to Appendix A to the Company's Definitive Proxy Statement on Schedule 14A filed on April 20, 2006). | |||
First Amendment to the Advocat Inc. 2005 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.63 to the Company's annual report on Form 10-K for the year ended December 31, 2008). | |||
Advocat Inc. 2010 Long-Term Incentive Plan (incorporated by reference to Appendix A to the Company's Definitive Proxy Statement on Schedule 14A filed on April 28, 2010). | |||
First Amendment to the Diversicare Healthcare Services, Inc. 2010 Long-Term Incentive Plan (incorporated by reference to Appendix A to the Company's Definitive Proxy Statement on Schedule 14A filed on April 26, 2017). | |||
Advocat Inc. 2008 Stock Purchase Plan for Key Personnel (incorporated by reference to Appendix A to the Company's Definitive Proxy Statement on Schedule 14A filed May 2, 2008). | |||
Ninth Amendment to Consolidated Amended and Restated Master Lease dated as of May 5, 2009 by and between Sterling Acquisition Corp., a Kentucky corporation, and Diversicare Leasing Corp., a Tennessee corporation (incorporated by reference to Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2009). | |||
Tenth Amendment to Consolidated Amended and Restated Master Lease dated as of September 8, 2009 by and between Sterling Acquisition Corp., a Kentucky corporation, and Diversicare Leasing Corp., a Tennessee corporation (incorporated by reference to Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2009). | |||
Eleventh Amendment to the Amended and Restated Master Lease between the Company and Sterling Acquisition Corp., an affiliate of Omega Healthcare Investors, Inc. (incorporated by reference to Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2011). | |||
Amended and Restated Employment Agreement effective as of April 1, 2012, by and between Advocat Inc., a Delaware corporation, and Kelly Gill (incorporated by reference to Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2012). | |||
Employment Agreement effective August 20, 2012, between James R. McKnight, Jr. and Advocat Inc. (incorporated by reference to Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2012). | |||
Employment Agreement effective January 1, 2013, between Leslie Campbell and Advocat Inc. (incorporated by reference to Exhibit 10.49 to the Company’s annual report on Form 10-K for the year ended December 31, 2012). | |||
Amendment No. 1 to Amended and Restated Employment Agreement effective as of March 1, 2013 by and between Advocat Inc., a Delaware corporation, and Kelly Gill (incorporated by reference to Exhibit 10.50 to the Company's annual report on Form 10-K for the year ended December 31, 2012). | |||
Thirteenth Amendment to Consolidated Amended and Restated Master Lease effective September 1, 2013 by and between Sterling Acquisition Corp. and Diversicare Leasing Corp. (incorporated by reference to Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2013). | |||
Fifteenth Amendment to Consolidated Amended and Restated Master Lease dated as of June 30, 2014 by and between the Company and Sterling Acquisition Corp. (incorporated by reference to exhibit 10.3 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2014). | |||
Second Amended and Restated Term Loan and Security Agreement dated February 26, 2016 (incorporated by reference to exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2016). | |||
Second Amended and Restated Guaranty (Revolver) dated as of February 26, 2016, by the Company to and for the benefit of The PrivateBank in its capacity as administrative agent. | |||
Second Amended and Restated Guaranty (Term) dated as of February 26, 2016, by the Company to and for the benefit of The PrivateBank in its capacity as administrative agent. | |||
Third Amended and Restated Revolving Loan and Security Agreement dated February 26, 2016 (incorporated by reference to exhibit 10.2 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2016). | |||
Amendment to Diversicare Healthcare Services, Inc. 2008 Employee Stock Purchase Plan for Key Personnel (incorporated by reference to exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2016). | |||
First Amendment to Third Amended and Restated Revolving Loan and Security Agreement dated August 3, 2016 (incorporated by reference to exhibit 10.12 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2016). | |||
First Amendment to Second Amended and Restated Term Loan and Security Agreement dated August 3, 2016 (incorporated by reference to exhibit 10.3 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2016). | |||
Second Amendment to Third Amended and Restated Revolving Loan and Security Agreement dated October 3, 2016 (incorporated by reference to exhibit 10.3 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2016). | |||
Third Amendment to the Third Amended and Restated Revolving Loan and Security Agreement dated December 29, 2016. | |||
Amended and Restated Golden Living Master Lease Agreement dated November 1, 2016. | |||
Fourth Amendment to the Third Amended and Restated Revolving Loan And Security Agreement dated June 30, 2017 (incorporated by reference to exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2017). | |||
Second Amendment to the Second Amended and Restated Term Loan and Security Agreement dated June 30, 2017 (incorporated by reference to exhibit 10.2 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2017). | |||
Fifth Amendment to Third Amended and Restated Revolving Loan and Security Agreement dated February 27, 2018. | |||
Third Amendment to Second Amended and Restated Term Loan and Security Agreement dated February 27, 2018. | |||
Kelly Gill Separation Agreement (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018). |
Employment Agreement effective September 10, 2018, between Kerry D. Massey and Diversicare Healthcare Services, Inc. (incorporated by reference to Exhibit 10.1 to the Company's current report on Form 8-K filed September 5, 2018). | |||
Amended Employment Agreement effective July 6, 2018, between James R. McKnight, Jr. and Diversicare Healthcare Services, Inc. (incorporated by reference to Exhibit 10.1 to the Company's current report on Form 8-K filed September 20, 2018). | |||
**10.45 | Master Lease Agreement Effective October 1, 2018 by and between the Company and Omega Healthcare Investors (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2018). | ||
Amended and Restated Guaranty in favor of Omega Healthcare Investors, Inc. dated October 1, 2018. | |||
Amended and Restated Security Agreement dated October 1, 2018 by and among the Company and a syndicate of financial institutions and banks. | |||
Asset Purchase Agreement dated October 30, 2018 by and between Diversicare of Fulton, LLC, Diversicare of Fulton Properties, LLC, Diversicare of Clinton, LLC, Diversicare of Clinton Properties, LLC, Diversicare of Glasgow, LLC and Fulton Nursing and Rehabilitation LLC, Holiday Fulton Propco LLC, Birchwood Nursing and Rehabilitation LLC, Padgett Clinton Propco LLC and Westwood Nursing and Rehabilitation LLC. | |||
Fourth Amendment to Second Amended and Restated Term Loan and Security Agreement dated December 1, 2018. | |||
Sixth Amendment to Third Amended and Restated Revolving Loan and Security Agreement dated December 1, 2018. | |||
Subsidiaries of the Registrant. | |||
Consent of BDO USA, LLP. | |||
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a). | |||
Certification of 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 | ||
* | Indicates management contract or compensatory plan or arrangement. | ||
** | Confidential treatment has been requested for portions of this exhibit |
Guarantor: DIVERSICARE HEALTHCARE SERVICES, INC. | |
By: | /s/Kelly J. Gill |
Name: Kelly J. Gill Title: President and Chief Executive Officer |
Guarantor: DIVERSICARE HEALTHCARE SERVICES, INC. | |
By: | /s/Kelly J. Gill |
Name: Kelly J. Gill Title: President and Chief Executive Officer |
(i) | all tax refund claims, license fees, patents, patent applications, trademarks, trademark applications, trade names, copyrights, copyright applications, rights to sue and recover for past infringement of patents, trademarks and copyrights, computer programs, computer software, engineering drawings, service marks, customer lists, goodwill, and all licenses, permits, agreements of any kind or nature pursuant to which (a) the Debtor operates or has authority to operate, (b) the Debtor possesses, uses or has authority to possess or use property (whether tangible or intangible) of others, or (c) others possess, use, or have authority to possess or use property (whether tangible or intangible) of the Debtor; and |
(ii) | all recorded data of any kind or nature, regardless of the medium of recording, including, without limitation, all software, writings, plans, specifications, and schematics; and |
(iii) | to the extent permitted by law, all rights under that certain program of medical assistance, funded jointly by the federal government and the states, for impoverished individuals who are aged, blind and/or disabled, and/or members of families with dependent children, which program is more fully described in Title XIX of the Social Security Act (42 U.S.C. §§ 1396 et seq.) and the regulations promulgated thereunder; and |
(iv) | to the extent permitted by law, all rights under that certain federal program providing health insurance for eligible elderly and other individuals, under which physicians, hospitals, skilled nursing homes, home health care, and other providers are reimbursed for certain covered services they provide to the beneficiaries of such program, which program is more fully described in Title XVIII of the Social Security Act (42 U.S.C. §§ 1395 et seq.) and the regulations promulgated thereunder; and |
(v) | any and all contracts, authorizations, agreements or consents made by or on behalf of any patient or resident of any of the Facilities, or any other person seeking or obtaining services or goods from Debtor, pursuant to which Debtor provides skilled nursing care, intermediate care, personal care and/or assisted living facilities, or any form of patient or residential care, as well as related services (“Primary Intended Use”) at any of the Facilities (as such contracts, authorizations, agreements or consents may be amended, supplemented, renewed, replaced, extended or modified from time to time); including consents to treatment and assignments of payment of benefits; and |
(vi) | to the extent permitted by law, the (a) operating licenses for each of the Facilities, any certificate of need, any other license, permit, approval or certificate which from time to time, may be issued or is required to be issued by the United States, any state or local government, or any agency or instrumentality of any of the foregoing with respect to the construction, installation or operation of any of the Facilities or any portion or component of any of the Facilities, the providing of any professional or other services by the Debtor, the purchase, sale, dispensing, storage, prescription or use of drugs, medications or the like by Debtor, or any other operations or businesses of Debtor at the Facilities; and (b) certifications and eligibility for participation by Debtor, in respect of its operation of any of the Facilities and any related businesses or operations at the Facilities, in programs or arrangements of or reimbursement from any third-party payors, including Medicare and Medicaid; and (c) all other licenses permits and certificates used or useful in connection with the ownership, operation, use or occupancy of any of the Facilities; and |
(vii) | to the extent permitted by law, all rights to third-party reimbursement contracts for the Facilities which are now or hereafter in effect with respect to residents or patients qualifying for coverage under the same, including Medicare and Medicaid, managed care plans and private insurance agreements, and any successor program or other similar reimbursement program and/or private insurance agreements, now or hereafter existing; and |
(viii) | all ledgers, printouts, papers, data, file materials and information pertaining to any of the above described property, relating to any account debtors in respect thereof, and/or to the operation of the Debtor’s business relating to the Facilities, and all rights of access to such books, records, ledgers, printouts, data, file materials and information, and all property in which such books, records, ledgers, printouts, data, file materials and information are stored wherever located, but excluding any computer readable memory and any computer hardware or software necessary to process such memory. |
(a) | To the extent permitted by law, Debtor has rights in or the power to transfer the Collateral, and is and will be the lawful owner or lessee of all of the Collateral, with the right, to the extent permitted by law, to subject the Collateral to the security interests of Secured Party hereunder; |
(b) | Except for the security interests in the Collateral herein granted to Secured Party and as may otherwise be permitted under the Master Lease, there are no other adverse claims, liens, restrictions on transfer or pledge, or security interests in the Collateral that are known to Debtor, and there are no financing statements covering any of the Collateral filed in any public office created by or known to Debtor prior to the date hereof. Debtor shall defend Secured Party against any claims and demands of any and all other persons to the Collateral inconsistent with this Security Agreement; |
(c) | All of the Collateral that constitutes tangible personal property is or will be (upon delivery) located at the Facilities or at the chief executive offices of Debtor; |
(d) | Except as permitted under the Master Lease or hereunder, Debtor shall not remove the Collateral from the Facilities or its chief executive offices without Secured Party’s prior written consent and shall not use or permit the Collateral to be used for any unlawful purpose whatsoever. Except as permitted under the Master Lease or hereunder, Debtor shall not remove any Collateral from the state in which the Facilities or its chief executive offices are located, without the prior written consent of Secured Party; |
(e) | Except as permitted under the Master Lease, Debtor shall not conduct business under any name at the Facilities other than that given above or set forth on attached Schedule 1 and Schedule 2, nor will Debtor ( other than DMS) change or reorganize the type of business entity under which it presently does business, except upon prior and express written approval of Secured Party, which approval shall not be unreasonably withheld, and, if such approval is granted, Debtor agrees that all documents, instruments and agreements reasonably requested by Secured Party and relating to such change shall be prepared, filed and recorded at Debtor’s expense before the change occurs; |
(f) | Debtor shall not remove any records concerning the Collateral located at the Facilities or its chief executive offices nor keep any of its records concerning the same at any other location unless written notice thereof is given to Secured Party at least ten (10) days prior to the removal of such records to any new addresses; and |
(g) | Debtor has the right and power and is duly authorized to enter into this Security Agreement. The execution of this Security Agreement does not and will not constitute a breach of any provision contained in any agreement or instrument to which Debtor is or may become a party or by which Debtor is or may be bound or affected. |
(h) | Debtor (other than DMS) shall not change its location (as that term is defined in Section 9.307 of the Commercial Code). DMS shall not change its location (as that term is defined in Section 9.307 of the Commercial Code) without providing Secured Party thirty (30) days prior written notice. Debtor shall not change its corporate name without providing Secured Party thirty (30) days prior written notice. |
(i) | Debtor’s (i) chief executive office is located in the state of Tennessee, (ii) location (as that term is defined in Section 9.307 of the Commercial Code) is the State of Tennessee (as to DLC and DMS) and the State of Delaware as to the other Debtors (the “Debtor State”), (iii) exact legal name is as set forth in the first paragraph of this Security Agreement, and (v) filing number with the Debtor State is set forth on Schedule 1 and Schedule 2 and is 000244626 for DMS. |
(j) | To the extent required under the Master Lease, the Debtor shall maintain the Collateral in good order and repair and with reasonable promptness make all necessary and appropriate repairs thereto of every kind and nature whether ordinary or extraordinary, foreseen or unforeseen, or arising by reason of a condition whether or not existing prior to the date of this Security Agreement. It is the intention of this provision that the level of maintenance of the Collateral shall be not less than that of a first class operator making use of the Collateral for its Primary Intended Use. |
(k) | All agreements and papers required to be filed, registered or recorded in order to create in favor of the Secured Party a perfected lien in the Collateral are true and correct, have been, or will be, filed, registered or recorded in the appropriate filing offices, and to the best of Debtor’s knowledge no further or subsequent filing, refiling, registration, reregistration, recorded or rerecording is necessary in any jurisdiction, except as provided under applicable law with respect to the filing of continuation statements. |
(l) | Except as otherwise permitted pursuant to the terms of this Security Agreement or the Master Lease, Debtor will not sell, lease assign, transfer, grant any other security interest in, pledge, license or otherwise dispose of or encumber any Collateral to any third party while this Security Agreement is in effect without the prior and express written consent of Secured Party. |
ENTITY | ORG. ID# | STATE |
Diversicare Leasing Corp. | 184309 | Tennessee |
Diversicare of Chateau, LLC | 5543771 | Delaware |
Diversicare of Riverside, LLC | 5543777 | Delaware |
Diversicare of St. Joseph, LLC | 5543776 | Delaware |
Diversicare of Providence, LLC | 5371371 | Delaware |
Diversicare of St. Theresa, LLC | 5371372 | Delaware |
Diversicare of Siena Woods, LLC | 5371369 | Delaware |
Diversicare of Bradford Place, LLC | 5371370 | Delaware |
Diversicare of Nicholasville, LLC | 5518692 | Delaware |
Diversicare of Seneca Place, LLC | 5364461 | Delaware |
Diversicare of Greenville, LLC | 5584479 | Delaware |
ENTITY | ORG. ID# | STATE |
Diversicare Texas I, LLC | 4388082 | Delaware |
Diversicare Ballinger, LLC | 4388083 | Delaware |
Diversicare Doctors, LLC | 4388084 | Delaware |
Diversicare Estates, LLC | 4388085 | Delaware |
Diversicare Humble, LLC | 4388087 | Delaware |
Diversicare Katy, LLC | 4388088 | Delaware |
Diversicare Normandy Terrace, LLC | 4388089 | Delaware |
Diversicare Treemont, LLC | 4388090 | Delaware |
Diversicare Paris, LLC | 4421472 | Delaware |
Facility | |
1. | Best Care, Inc. 2159 Dogwood Ridge Wheelersburg, OH 45694 |
2. | Boyd Nursing and Rehab Center 12800 Princeland Drive Ashland, KY 41102 |
3. | Canterbury Health Center 1720 Knowles Road Phoenix City, AL 36867 |
4. | Carter Nursing & Rehab Center 250 McDavid Boulevard, P.O. Box 904 Grayson, KY 41143 |
5. | Elliott Nursing & Rehab Center Howard Creek Road, P.O. Box 694, Route 32 East Sandy Hook, KY 41171 |
6. | Hardee Manor Care Center 401 Orange Place Wauchula, FL 33873 |
7. | Laurel Manor Health Center 902 Buchanan Road, P.O. Box 505 New Tazewell, TN 37825 |
8. | Lynwood Nursing Home 4164 Halls Mill Road Mobile, AL 36693 |
9. | Manor House of Dover 537 Spring Street, P.O. Box 399 Dover, TN 37058 |
10. | Mayfield Rehab and Special Care Center 200 Mayfield Drive Smyrna, TN 37167 |
11. | Northside Health Care 700 Hutchins Ave Gadsden, AL 35901 |
12. | South Shore Nursing & Rehab Center James Hannah Drive, P.O. box 489 South Shore, KY 41175 |
13. | West Liberty Nursing & Rehab Center 774 Liberty Road, P.O. Box 219, Route 5 Wells Hill West Liberty, KY 41472 |
14. | Westside Health Care Center 4320 Judith Lane Huntsville, AL 35805 |
15. | Wurtland Nursing & Rehab Center 100 Wurtland Avenue, P.O. Box 677 Wurtland, KY 41144 |
16. | Doctors Healthcare 9009 White Rock Trail Dallas, TX 75238 |
17. | Estates at Ft. Worth 201 Sycamore School Road Fort Worth, TX 76134 |
18. | Heritage Oaks Estates 2001 N. 6th Street Ballinger, TX 76821 |
19. | Humble 8450 Will Clayton Parkway Humble, TX 77338 |
20. | IHS of Dallas at Treemont 5550 Harvest Hill Road Dallas, TX 75230 |
21. | Katy 1525 Tull Drive Katy, TX 77499 |
22. | Normandy Terrace 841 Rice Road San Antonio, TX 78220 |
23. | Brentwood Terrace 2885 Stillhouse Road Paris, TX 75460 |
24. | Highlands Nursing and Rehabilitation Center 1705 Stevens Avenue Louisville, KY 40205 |
25. | Chateau Care Center 811 N. Ninth Street St. Joseph, MO 64501 |
26. | Riverside Care Center 1616 Weisenborn Road St. Joseph, MO 64507 |
27. | The Inn 3002 N. 18th Street St. Joseph, MO 64505 |
28. | Diversicare of Bradford Place (fka Mercy Schroder) 1302 Millville Avenue Hamilton, OH 45013 |
29. | Diversicare of Providence 4915 Charlestown Road New Albany, IN 47150 |
30. | Diversicare of Siena Woods 6125 North Main Street Dayton, OH 45415 |
31. | Diversicare of St. Theresa 7010 Rowan Hill Drive Cincinnati, OH 45227 |
32. | Royal Manor Health Care 100 Sparks Avenue Nicholasville, KY 40356 |
33. | Twinbrook Nursing and Rehabilitation Center 3526 Dutchman's Lane Louisville, KY 40205 |
34. | Belle Meade Home 521 Greene Dr. Greenville, KY 42345 |
Facility | Address | OpCo Seller | PropCo Seller | OpCo Buyer | PropCo Buyer |
Diversicare of Fulton | 1004 Holiday Lane Fulton, KY 42041 | Diversicare of Fulton, LLC | Diversicare Fulton Properties, LLC | Fulton Nursing and Rehabilitation LLC | Holiday Fulton Propco LLC |
Diversicare of Clinton Place | 106 Padgett Drive Clinton, KY 42031 | Diversicare Clinton, LLC | Diversicare Clinton Properties, LLC | Birchwood Nursing and Rehabilitation LLC | Padgett Clinton Propco LLC |
Diversicare of Glasgow | 300 Westwood Street Glasgow, KY 42141 | Diversicare of Glasgow, LLC | Diversicare Glasgow Properties, LLC | Westwood Nursing and Rehabilitation LLC | Westwood Glasgow Propco LLC |
i) | the failure of Guarantor to pay the amounts required to be paid hereunder at the times specified herein; |
ii) | the failure of Guarantor to observe and perform any covenants, conditions or agreement on its part to be observed or performed under the Lease Documents, other than as referred to in Subsection (i) above, for a period of thirty (30) days after written notice of such failure has been given to Guarantor by Landlord, unless Landlord agrees in writing to an extension of such time prior to its expiration. |
BORROWER: | ||
DIVERSICARE AFTON OAKS, LLC | ||
DIVERSICARE BRIARCLIFF, LLC | ||
DIVERSICARE CHISOLM, LLC | ||
DIVERSICARE HARTFORD, LLC | ||
DIVERSICARE WINDSOR HOUSE, LLC | ||
DIVERSICARE HILLCREST, LLC | ||
DIVERSICARE LAMPASAS, LLC | ||
DIVERSICARE YORKTOWN, LLC | ||
By: | Diversicare Leasing Corp., its sole member | |
By: | /s/James R. McKnight, Jr. | |
Name: James R. McKnight, Jr. | ||
Its: President and Chief Executive Officer | ||
DIVERSICARE OF CHANUTE, LLC | ||
DIVERSICARE OF COUNCIL GROVE, LLC | ||
DIVERSICARE OF HAYSVILLE, LLC | ||
DIVERSICARE OF SEDGWICK, LLC | ||
DIVERSICARE OF HUTCHINSON, LLC | ||
DIVERSICARE OF LARNED, LLC | ||
By: | Diversicare Kansas, LLC, its sole member | |
By: | /s/James R. McKnight, Jr. | |
Name: James R. McKnight, Jr. | ||
Its: President and Chief Executive Officer |
DIVERSICARE PROPERTY CO., LLC | ||
By: | /s/James R. McKnight, Jr. | |
Name: James R. McKnight, Jr. | ||
Its: President and Chief Executive Officer |
DIVERSICARE AFTON OAKS PROPERTY, LLC | ||
DIVERSICARE BRIARCLIFF PROPERTY, LLC | ||
DIVERSICARE CHANUTE PROPERTY, LLC | ||
DIVERSICARE CHISOLM PROPERTY, LLC | ||
DIVERSICARE COUNCIL GROVE PROPERTY, LLC | ||
DIVERSICARE HAYSVILLE PROPERTY, LLC | ||
DIVERSICARE HARTFORD PROPERTY, LLC | ||
DIVERSICARE HILLCREST PROPERTY, LLC | ||
DIVERSICARE LAMPASAS PROPERTY, LLC | ||
DIVERSICARE LARNED PROPERTY, LLC | ||
DIVERSICARE SEDGWICK PROPERTY, LLC | ||
DIVERSICARE WINDSOR HOUSE PROPERTY, LLC | ||
DIVERSICARE YORKTOWN PROPERTY, LLC | ||
DIVERSICARE HUTCHINSON PROPERTY, LLC | ||
DIVERSICARE SELMA PROPERTY, LLC | ||
By: | Diversicare Property Co., LLC, its sole member | |
By: | /s/James R. McKnight, Jr. | |
Name: James R. McKnight, Jr. | ||
Its: President and Chief Executive Officer |
DIVERSICARE OF SELMA, LLC | ||
By: | Diversicare Holding Company, LLC, its sole member | |
By: | /s/James R. McKnight, Jr. | |
Name: James R. McKnight, Jr. | ||
Its: President and Chief Executive Officer |
RELEASED BORROWER: | |
DIVERSICARE GLASGOW PROPERTY, LLC | |
DIVERSICARE CLINTON PROPERTY, LLC | |
DIVERSICARE FULTON PROPERTY, LLC | |
By: Diversicare Property Co., LLC, its sole member | |
By: | /s/James R. McKnight, Jr. |
Name: James R. McKnight, Jr. | |
Its: President and Chief Executive Officer |
By: | DIVERSICARE HOLDING COMPANY, LLC, its sole member |
Its: | President and Chief Executive Officer |
DIVERSICARE CLINTON, LLC | |||
By: | DIVERSICARE LEASING CORP., its sole member | ||
By: | /s/James R. McKnight, Jr. | ||
Name: | James R. McKnight, Jr. | ||
Its: | President and Chief Executive Officer | ||
Acknowledged and Agreed: DIVERSICARE HEALTHCARE SERVICES, INC. By: /s/James R. McKnight, Jr. Name: James R. McKnight, Jr. Its: President and Chief Executive Officer |
LENDER: | |
OPUS BANK, a California commercial bank | |
By: | /s/Randy Boba |
Name: Randy Boba | |
Its: SVP, Healthcare Banking |
LENDER: | |
FRANKLIN SYNERGY BANK | |
By: | /s/Lisa Fletcher |
Name: Lisa Fletcher | |
Its: Senior Vice President | |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
BORROWER: ADVOCAT FINANCE, INC. DIVERSICARE MANAGEMENT SERVICES CO. DIVERSICARE LEASING CORP. STERLING HEALTH CARE MANAGEMENT, INC. DIVERSICARE TEXAS I, LLC DIVERSICARE HOLDING COMPANY, LLC DIVERSICARE KANSAS, LLC DIVERSICARE LEASING COMPANY II, LLC DIVERSICARE PROPERTY CO., LLC | ||
By: | /s/James R. McKnight, Jr. | |
Name: | James R. McKnight, Jr. | |
Its: | President and Chief Executive Officer |
SENIOR CARE CEDAR HILLS, LLC SENIOR CARE GOLFCREST, LLC SENIOR CARE GOLFVIEW, LLC SENIOR CARE SOUTHERN PINES, LLC | |||
BY: | SENIOR CARE FLORIDA LEASING, LLC, its sole member | ||
BY: | DIVERSICARE LEASING CORP., its sole member | ||
By: | /s/James R. McKnight, Jr. | ||
Name: | James R. McKnight, Jr. | ||
Its: | President and Chief Executive Officer |
SENIOR CARE FLORIDA LEASING, LLC DIVERSICARE AFTON OAKS, LLC DIVERSICARE BRIARCLIFF, LLC DIVERSICARE CHISOLM, LLC DIVERSICARE HARTFORD, LLC DIVERSICARE HILLCREST, LLC DIVERSICARE LAMPASAS, LLC DIVERSICARE PINEDALE, LLC DIVERSICARE WINDSOR HOUSE, LLC DIVERSICARE YORKTOWN, LLC DIVERSICARE ROSE TERRACE, LLC DIVERSICARE THERAPY SERVICES, LLC DIVERSICARE CLINTON, LLC DIVERSICARE HIGHLANDS, LLC | |||
BY: | DIVERSICARE LEASING CORP., its sole member | ||
By: | /s/James R. McKnight, Jr. | ||
Name: | James R. McKnight, Jr. | ||
Its: | President and Chief Executive Officer | ||
DIVERSICARE BALLINGER, LLC DIVERSICARE DOCTORS, LLC DIVERSICARE ESTATES, LLC DIVERSICARE HUMBLE, LLC DIVERSICARE KATY, LLC DIVERSICARE NORMANDY TERRACE, LLC DIVERSICARE TREEMONT, LLC DIVERSICARE PARIS, LLC | |||
BY: | DIVERSICARE TEXAS I, LLC, its sole member | ||
By: | /s/James R. McKnight, Jr. | ||
Name: | James R. McKnight, Jr. | ||
Its: | President and Chief Executive Officer |
DIVERSICARE OF CHANUTE, LLC DIVERSICARE OF COUNCIL GROVE, LLC DIVERSICARE OF HAYSVILLE, LLC DIVERSICARE OF SEDGWICK, LLC DIVERSICARE OF HUTCHINSON, LLC DIVERSICARE OF LARNED, LLC | |||
BY: | DIVERSICARE KANSAS, LLC its sole member | ||
By: | /s/James R. McKnight, Jr. | ||
Name: | James R. McKnight, Jr. | ||
Its: | President and Chief Executive Officer |
By: | DIVERSICARE LEASING COMPANY II, LLC, its sole member |
Name: | James R. McKnight, Jr. |
Its: | President and Chief Executive Officer |
By: | DIVERSICARE PROPERTY CO., LLC, its sole member |
Its: | President and Chief Executive Officer |
By: | DIVERSICARE HOLDING COMPANY, LLC, its sole member |
Its: | President and Chief Executive Officer |
Name: | James R. McKnight, Jr. |
Its: | President and Chief Executive Officer |
By: | DIVERSICARE LEASING COMPANY III, LLC, its sole member |
Its: | President and Chief Executive Officer |
Acknowledged and Agreed: DIVERSICARE HEALTHCARE SERVICES, INC. By: /s/James R. McKnight, Jr. Name: James R. McKnight, Jr. Its: President and Chief Executive Officer | ||
LENDER: BOKF, NA D/B/A BANK OF OKLAHOMA | ||
By: /s/Ky Chaffin_______________________ | ||
Name: | Ky Chaffin | |
Its: | Senior Vice President |
LENDER: CIT BANK, N.A. | ||
By: /s/Tom Gatsios____________________ | ||
Name: | Tom Gatsios | |
Its: | Vice President |
LENDER: OPUS BANK, a California commercial bank | ||
By: /s/Randy Boba | ||
Name: | Randy Boba | |
Its: | SVP, Healthcare Banking |
LENDER: FRANKLIN SYNERGY BANK | ||
By: /s/Lisa Fletcher | ||
Name: | Lisa Fletcher | |
Its: | Senior Vice President |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
Its: | President and Chief Executive Officer |
Lender | Contact Information | Pro Rata Shares |
CIBC Bank USA | 120 South LaSalle Street Chicago, IL 60603 Attn.: Adam D. Panos Managing Director Tel.: (312) 564-1278 Fax: (312) 683-0446 Dollar Allocation: $15,565,789.47 | 36.84210526% |
CIT Bank, N.A. | 11 West 42nd Street New York, NY 10036 Attn.: Edward Shuster Director Tel.: (212) 771-9303 Dollar Allocation: $8,894,736.84 | 21.05263158% |
Bankers Trust Company | 453 7th Street Des Moines, IA 50304-0897 Attn.: Jon M. Doll Vice President Tel.: (515) 245-2837 Fax: (515) 245-5216 Dollar Allocation: $6,671,052.63 | 15.78947368% |
BOKF, NA d/b/a Bank of Oklahoma | One Williams Center, Suite 8NE Tulsa, OK 74172 Attn.: Ky Chaffin Senior Vice President Tel.: (918) 588-6866 Fax: (918) 280-3368 Dollar Allocation: $2,223,684.21 | 5.26315789% |
Opus Bank | 19900 MacArthur Blvd. 12th Floor Irvine, CA 92612 Attn.: Randy Boba SVP, Healthcare Banking Tel.: (949) 251-8123 Fax: (949) 250-9988 Dollar Allocation: $4,447,368.42 | 10.52631579% |
Franklin Synergy Bank | 722 Columbia Ave. Franklin, TN 37064 Chicago, IL 60606 Attn.: Lisa Fletcher Senior Vice President Tel.: (615) 564-6374 Fax: (312) 564-7375 Dollar Allocation: $4,447,368.42 | 10.52631579% |
Advocat Finance, Inc. |
Diversicare Afton Oaks, LLC |
Diversicare Afton Oaks Property, LLC |
Diversicare Ballinger, LLC |
Diversicare Briarcliff, LLC |
Diversicare Briarcliff Property, LLC |
Diversicare Chanute Property, LLC |
Diversicare Chisolm, LLC |
Diversicare Chisolm Property, LLC |
Diversicare of Clinton, LLC |
Diversicare of Clinton Property, LLC |
Diversicare Council Grove Property, LLC |
Diversicare Doctors, LLC |
Diversicare Estates, LLC |
Diversicare Hartford, LLC |
Diversicare Hartford Property, LLC |
Diversicare Haysville Property, LLC |
Diversicare Highlands, LLC |
Diversicare Hillcrest, LLC |
Diversicare Hillcrest Property, LLC |
Diversicare Holding Company, LLC |
Diversicare Humble, LLC |
Diversicare Hutchinson Property, LLC |
Diversicare Kansas, LLC |
Diversicare Katy, LLC |
Diversicare Lampasas, LLC |
Diversicare Lampasas Property, LLC |
Diversicare Larned Property, LLC |
Diversicare Leasing Company II, LLC |
Diversicare Leasing Company III, LLC |
Diversicare Leasing Corp. |
Diversicare Management Services Co. |
Diversicare Normandy Terrace, LLC |
Diversicare of Avon, LLC |
Diversicare of Big Springs, LLC |
Diversicare of Bradford Place, LLC |
Diversicare of Chanute, LLC |
Diversicare of Chateau, LLC |
Diversicare of Council Grove, LLC |
Diversicare of Fulton, LLC |
Diversicare of Glasgow, LLC |
Diversicare of Greenville, LLC |
Diversicare of Haysville, LLC |
Diversicare of Hutchinson, LLC |
Diversicare of Larned, LLC |
Diversicare of Nicholasville, LLC |
Diversicare of Providence, LLC |
Diversicare of Riverside, LLC |
Diversicare of Sedgwick, LLC |
Diversicare of Selma, LLC |
Diversicare of Seneca Place, LLC |
Diversicare of Siena Woods, LLC |
Diversicare of St. Joseph, LLC |
Diversicare of St. Theresa, LLC |
Diversicare Paris, LLC |
Diversicare Pharmacy Holdings, LLC |
Diversicare Pinedale, LLC |
Diversicare Property Co., LLC |
Diversicare Rose Terrace, LLC |
Diversicare Sedgwick Property, LLC |
Diversicare Selma Property, LLC |
Diversicare Texas I, LLC |
Diversicare Therapy Services, LLC |
Diversicare Treemont, LLC |
Diversicare Windsor House, LLC |
Diversicare Windsor House Property, LLC |
Diversicare Yorktown, LLC |
Diversicare Yorktown Property, LLC |
Diversicare of Amory, LLC |
Diversicare of Arab, LLC |
Diversicare of Batesville, LLC |
Diversicare of Bessemer, LLC |
Diversicare of Boaz, LLC |
Diversicare of Brookhaven, LLC |
Diversicare of Eupora, LLC |
Diversicare of Foley, LLC |
Diversicare of Hueytown, LLC |
Diversicare of Lanett, LLC |
Diversicare of Montgomery, LLC |
Diversicare of Oneonta, LLC |
Diversicare of Oxford, LLC |
Diversicare of Pell City, LLC |
Diversicare of Ripley, LLC |
Diversicare of Riverchase, LLC |
Diversicare of Southaven, LLC |
Diversicare of Tupelo, LLC |
Diversicare of Tylertown, LLC |
Diversicare of Winfield, LLC |
Diversicare of Meridian, LLC |
Senior Care Cedar Hills, LLC |
Senior Care Florida Leasing, LLC |
Senior Care Golfcrest, LLC |
Senior Care Golfview, LLC |
Senior Care Southern Pines, LLC |
SHC Risk Carrier, Inc. |
Sterling Health Care Management, Inc. |
/s/ James R. McKnight, Jr. |
James R. McKnight, Jr. |
President and Chief Executive Officer |
/s/ Kerry D. Massey |
Kerry D. Massey |
Executive Vice President and Chief Financial Officer |
Document and Entity Information - USD ($) $ in Thousands |
12 Months Ended | ||
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Dec. 31, 2018 |
Feb. 15, 2019 |
Jun. 30, 2018 |
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Document and Entity Information [Abstract] | |||
Entity Registrant Name | Diversicare Healthcare Services, Inc. | ||
Entity Central Index Key | 0000919956 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Common Stock, Shares Outstanding | 6,518,568 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 28,398 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 0 | $ 14,235 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares issued | 6,751,000 | 6,687,000 |
Common stock, shares outstanding | 6,519,000 | 6,455,000 |
Treasury stock, shares | 232,000 | 232,000 |
Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands |
12 Months Ended | ||
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Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
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Income Statement [Abstract] | |||
Tax benefit on operating income | $ 5 | $ 43 | $ 41 |
Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands |
12 Months Ended | ||
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Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
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Statement of Comprehensive Income [Abstract] | |||
NET LOSS | $ (7,396) | $ (4,827) | $ (1,811) |
OTHER COMPREHENSIVE INCOME (LOSS): | |||
Change in fair value of cash flow hedge, net of tax | 279 | 976 | 1,082 |
Less: reclassification adjustment for amounts recognized in net loss | (151) | (462) | (500) |
Total other comprehensive income | 128 | 514 | 582 |
COMPREHENSIVE LOSS | $ (7,268) | $ (4,313) | $ (1,229) |
Business and Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business and Summary of Significant Accounting Policies | BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Diversicare Healthcare Services, Inc. ("Diversicare" or the "Company") provides a broad range of post-acute care services to patients and residents including skilled nursing, ancillary health care services and assisted living. In addition to the nursing and social services usually provided in long-term care centers, we offer a variety of rehabilitative, nutritional, respiratory, and other specialized ancillary services. As of December 31, 2018, our continuing operations consist of 72 nursing centers with 8,214 licensed skilled nursing beds. Our nursing centers range in size from 48 to 320 licensed nursing beds. The licensed nursing bed count does not include 429 licensed assisted living and other residential beds. Our continuing operations include centers in Alabama, Florida, Indiana, Kansas, Kentucky, Mississippi, Missouri, Ohio, Tennessee, and Texas. The number of centers and beds denoted in these consolidated financial statements are unaudited. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the financial position, operations and accounts of Diversicare and its subsidiaries, all wholly-owned. All significant intercompany accounts and transactions have been eliminated in consolidation. Any joint ventures are accounted for using the equity method, which is an investment in an entity over which the Company lacks control, but otherwise has the ability to exercise significant influence over operating and financial policies. The Company had one equity method investee through the fourth quarter of 2016. The Company’s share of the profits and losses from this investment are reported in equity in net income of investment in unconsolidated affiliate and the proceeds received from the sale are reported in gain on sale of investment in unconsolidated affiliate in the accompanying consolidated statement of operations. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition The fees charged by the Company to patients in its nursing centers are recorded on an accrual basis. These rates are contractually adjusted with respect to individuals receiving benefits under federal and state-funded programs and other third-party payors. Rates under federal and state-funded programs are determined prospectively for each center and may be based on the acuity of the care and services provided. These rates may be based on a center's actual costs subject to program ceilings and other limitations or on established rates based on acuity and services provided as determined by the federal and state-funded programs. Amounts earned under federal and state programs with respect to nursing home patients are subject to review by the third-party payors which may result in retroactive adjustments. In the opinion of management, adequate provision has been made for any adjustments that may result from such reviews. Retroactive adjustments, if any, are recorded when objectively determinable, generally within three years of the close of a reimbursement year depending upon the timing of appeals and third-party settlement reviews or audits. Allowance for Doubtful Accounts The Company's allowance for doubtful accounts is estimated utilizing current agings of accounts receivable, historical collections data and other factors. Management monitors these factors and determines the estimated provision for doubtful accounts. Historical bad debts have generally resulted from uncollectible private balances, some uncollectible coinsurance and deductibles and other factors. Receivables that are deemed to be uncollectible are written off. The allowance for doubtful accounts balance is assessed on a quarterly basis, with changes in estimated losses being recorded in the Consolidated Statements of Operations in the period identified. Refer to Note 3, "Revenue Recognition and Receivables" for more information. Lease Expense As of December 31, 2018, the Company operates 57 nursing centers under operating leases, including 34 owned by Omega, 20 owned by Golden Living and three owned by other parties. The Company's operating leases generally require the Company to pay stated rent, subject to increases based on changes in the Consumer Price Index, a minimum percentage increase, or increases in the net revenues of the leased properties. The Company's Omega and Golden Living leases require the Company to pay certain scheduled rent increases. Such scheduled rent increases are recorded as additional lease expense on a straight-line basis recognized over the term of the related leases and the difference between the amounts recorded for rent expense as compared to rent payments as an accrued liability. See Note 2, "Business Development and Other Significant Transactions" and Note 9, "Commitments and Contingencies" for a discussion regarding the Company's Master Leases with Omega and Golden Living and the addition of certain leased centers. Classification of Expenses The Company classifies all expenses (except lease, interest, depreciation and amortization expenses) that are associated with its corporate and regional management support functions as general and administrative expenses. All other expenses (except lease, professional liability, interest, depreciation and amortization expenses) incurred by the Company at the center level are classified as operating expenses. Operating expenses for the year ended December 31, 2017 are net of approximately $2.2 million received during 2017 related to a settlement of provider taxes appealed by the Company. Property and Equipment Property and equipment are recorded at cost or at fair value determined on the respective dates of acquisition for assets obtained in a business combination, with depreciation and amortization being provided over the shorter of the remaining lease term (where applicable) or the assets' estimated useful lives on the straight-line basis as follows:
Interest incurred during construction periods for qualifying expenditures is capitalized as part of the building cost. Maintenance and repairs are expensed as incurred, and major betterments and improvements are capitalized. The Company routinely evaluates the recoverability of the carrying value of its long-lived assets, including when significant adverse changes in the general economic conditions and significant deteriorations of the underlying undiscounted cash flows or fair values of the property indicate that the carrying amount of the property may not be recoverable. If circumstances suggest that the recorded amounts are not recoverable based upon estimated future undiscounted cash flows, the carrying values of such assets are reduced to fair value. Cash Cash and cash equivalents include cash on deposit with banks and all highly liquid investments with original maturities of three months or less when purchased. Our cash on deposit with banks was subject to the Federal Deposit Insurance Corporation ("FDIC") minimum insurance levels. Effective January 1, 2013, the coverage provided by the FDIC that had been unlimited under the Dodd-Frank Deposit Insurance Provision is limited to the legal maximum, which is generally $250,000 per ownership category. Deferred Financing and Other Costs The Company records deferred financing and lease costs for direct and incremental expenditures related to entering into or amending debt and lease agreements. These expenditures include lenders and attorneys fees. Financing costs are amortized using the effective interest method over the term of the related debt. The amortization is reflected as interest expense in the accompanying consolidated statements of operations. Deferred lease costs are amortized on a straight-line basis over the term of the related leases. See Note 5, "Long-term Debt, Interest Rate Swap and Capitalized Lease Obligations" for further discussion. Acquired Leasehold Interest The Company has recorded an acquired leasehold interest intangible asset related to an acquisition completed during 2007. The intangible asset is accounted for in accordance with the Financial Accounting Standards Board's ("FASB") guidance on goodwill and other intangible assets, and is amortized on a straight-line basis over the remaining life of the acquired lease. As discussed in Note 2, "Business Developments and Other Significant Transactions," the Company entered into a new Master Lease agreement with Omega on October 1, 2018. The new Master Lease includes the seven centers to which the intangible asset relates. As such, the intangible asset is now being amortized over an adjusted remaining life, consistent with the term of the new Master Lease, which goes through September 30, 2030. Amortization expense of approximately $384 related to this intangible asset was recorded during each of the years ended December 31, 2018, 2017 and 2016, respectively. The carrying value of the acquired leasehold interest intangible and the accumulated amortization are as follows:
The Company evaluates the recoverability of the carrying value of the acquired leasehold intangible in accordance with the FASB's guidance on accounting for the impairment or disposal of long-lived assets. Included in this evaluation is whether significant adverse changes in general economic conditions, and significant deteriorations of the underlying cash flows or fair values of the intangible asset, indicate that the carrying amount of the intangible asset may not be recoverable. The need to recognize an impairment charge is based on estimated future undiscounted cash flows from the asset compared to the carrying value of that asset. If recognition of an impairment charge is necessary, it is measured as the amount by which the carrying amount of the intangible asset exceeds the fair value of the intangible asset. The expected amortization expense for the acquired leasehold interest intangible asset is as follows:
Self-Insurance Self-insurance liabilities primarily represent the unfunded accrual for self-insured risks associated with general and professional liability claims, employee health insurance and workers' compensation. The Company's health insurance liability is based on known claims incurred and an estimate of incurred but unreported claims determined by an analysis of historical claims paid. The Company's workers' compensation liability relates primarily to periods of self insurance and consists of an estimate of the future costs to be incurred for the known claims. Final determination of the Company's actual liability for incurred general and professional liability claims is a process that takes years. The Company evaluates the adequacy of this liability on a quarterly basis. Semi-annually, the Company retains a third-party actuarial firm to assist in the evaluation of this unfunded accrual. Since May 2012, Merlinos & Associates, Inc. (“Merlinos”) has assisted management in the preparation of the appropriate accrual for incurred but not reported general and professional liability claims based on data furnished by the Company. Merlinos primarily utilizes historical data regarding the frequency and cost of the Company's past claims over a multi-year period, industry data and information regarding the number of occupied beds to develop its estimates of the Company's ultimate professional liability cost for current periods. On a quarterly basis, the Company obtains reports of asserted claims and lawsuits incurred. These reports, which are provided by the Company's insurers and a third party claims administrator, contain information relevant to the actual expense already incurred with each claim as well as the third-party administrator's estimate of the anticipated total cost of the claim. This information is reviewed by the Company quarterly and provided to the actuary semi-annually. Based on the Company's evaluation of the actual claim information obtained, the semi-annual estimates received from the third-party actuary, the amounts paid and committed for settlements of claims and on estimates regarding the number and cost of additional claims anticipated in the future, the reserve estimate for a particular period may be revised upward or downward on a quarterly basis. Any increase in the accrual has an unfavorable impact on results of operations in the period and any reduction in the accrual increases results of operations during the period. All losses are projected on an undiscounted basis. The self-insurance liabilities include estimates of liability for incurred but not reported claims, estimates of liability for reported but unresolved claims, actual liabilities related to settlements, including settlements to be paid over time, and estimates of related legal costs incurred and expected to be incurred. One of the key assumptions in the actuarial analysis is that historical losses provide an accurate forecast of future losses. Changes in legislation such as tort reform, changes in our financial condition, changes in our risk management practices and other factors may affect the severity and frequency of claims incurred in future periods as compared to historical claims. The facts and circumstances of each claim vary significantly, and the amount of ultimate liability for an individual claim may vary due to many factors, including whether the case can be settled by agreement, the quality of legal representation, the individual jurisdiction in which the claim is pending, and the views of the particular judge or jury deciding the case. Although the Company adjusts its unfunded accrual for professional and general liability claims on a quarterly basis and retains a third-party actuarial firm semi-annually to assist management in estimating the appropriate accrual, professional and general liability claims are inherently uncertain, and the liability associated with anticipated claims is very difficult to estimate. Professional liability cases have a long cycle from the date of an incident to the date a case is resolved, and final determination of the Company's actual liability for claims incurred in any given period is a process that takes years. As a result, the Company's actual liabilities may vary significantly from the unfunded accrual, and the amount of the accrual has and may continue to fluctuate by a material amount in any given period. Each change in the amount of this accrual will directly affect the Company's results of operations and financial position for the period in which the change in accrual is made. Income Taxes Effective January 1, 2018, the Tax Act reduced the corporate rate from 35% to 21%. The Company has adopted ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraph Pursuant to SEC Staff Accounting Bulletin No. 118, which allows the company to record provisional amounts during the period of enactment. Any change to the provisional amounts are recorded as an adjustment to the provision for income taxes in the period the amounts are determined. During the year ended December 31, 2017, the company recognized a provisional net deferred income tax expense of $5,476 to reflect the revaluation of the Company’s net deferred tax assets based on the U.S. federal tax rate of 21%. In accordance with SAB 118, the Tax Act related income tax effects that were initially reported as provisional estimates were refined as additional analysis was performed. The Company follows the FASB's guidance on Accounting for Income Taxes, which requires the asset and liability method of accounting for income taxes whereby deferred income taxes are recorded for the future tax consequences attributable to differences between the financial statement and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are provided against any estimated non-realizable deferred tax assets where necessary. Where the Company believes that a tax position is supportable for income tax purposes, the item is included in its income tax returns. Where treatment of a position is uncertain, liabilities are recorded based upon the Company’s evaluation of the “more likely than not” outcome considering the technical merits of the position. While the judgments and estimates made by the Company are based on management’s evaluation of the technical merits of a matter, historical experience and other assumptions that management believes are appropriate and reasonable under current circumstances, actual resolution of these matters may differ from recorded estimated amounts, resulting in charges or credits that could materially affect future financial statements. See Note 8, "Income Taxes" for additional information related to the provision for income taxes. Disclosure of Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. In calculating fair value, a company must maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the details of such fair value measurements. The carrying amounts of cash, receivables, trade accounts payable and accrued expenses approximate fair value because of the short-term nature of these accounts. The Company's self-insurance liabilities are reported on an undiscounted basis as the timing of estimated settlements cannot be determined. The Company follows the FASB's guidance on Fair Value Measurements and Disclosures which provides rules for using fair value to measure assets and liabilities as well as a fair value hierarchy that prioritizes the information used to develop the measurements. It applies whenever other guidance requires (or permits) assets or liabilities to be measured at fair value and gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). A summary of the fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels is described below: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. As further discussed in Note 5, "Long-term Debt, Interest Rate Swap and Capitalized Lease Obligations", in conjunction with the debt agreements entered into in February 2016, the Company entered into an interest rate swap agreement with a member of the bank syndicate as the counterparty. The applicable guidance requires companies to recognize all derivative instruments as either assets or liabilities at fair value in a company's balance sheets. As the Company's interest rate swap, a cash flow hedge, is not traded on a market exchange, the fair value is determined using a valuation model based on a discounted cash flow analysis. This analysis reflects the contractual terms of the interest rate swap agreement and uses observable market-based inputs, including estimated future LIBOR interest rates. The fair value of the Company's interest rate swap is the net difference in the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on the expectation of future interest rates and are observable inputs available to a market participant. The interest rate swap valuation is classified in Level 2 of the fair value hierarchy. The debt balances as presented in the consolidated balance sheets approximate the fair value of the respective instruments as the debt is at a variable rate, the estimates of which are considered Level 2 fair value calculations within the fair value hierarchy. The following table presents by level, within the fair value hierarchy, assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and 2017:
The change in fair value of the Company's cash flow hedge is detailed in the Company's Consolidated Statements of Comprehensive Loss. Net Loss per Common Share The Company follows the FASB's guidance on Earnings Per Share for the financial reporting of net loss per common share. Basic earnings per common share excludes dilution and restricted shares and is computed by dividing income available to common shareholders by the weighted-average number of common shares, excluding restricted shares, outstanding for the period. Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or otherwise resulted in the issuance of common stock that then shared in the earnings of the Company. See Note 7, "Net Loss per Common Share" for additional disclosures about the Company's Net Loss per Common Share. Stock Based Compensation The Company follows the FASB's guidance on Stock Compensation to account for share-based payments granted to team members and recorded non-cash stock based compensation expense of $1,127, $1,027 and $1,012 during the years ended December 31, 2018, 2017 and 2016, respectively. Such amounts are included as components of general and administrative expense or operating expense based upon the classification of cash compensation paid to the related employees. See Note 6, "Shareholders' Equity, Stock Plans and Preferred Stock" for additional disclosures about the Company's stock based compensation plans. Accumulated Other Comprehensive Income Accumulated other comprehensive income consists of other comprehensive income (loss). Comprehensive income (loss) is a more inclusive financial reporting method that includes disclosure of financial information that historically has not been recognized in the calculation of net income (loss). The Company has chosen to present the components of other comprehensive income (loss) in a separate statement of comprehensive income (loss). Currently, the Company's other comprehensive income (loss) consists of the change in fair value of the Company's interest rate swap transaction accounted for as a cash flow hedge. Recent Accounting Standards Adopted by the Company In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), which outlines a single comprehensive model for recognizing revenue and supersedes most existing revenue recognition guidance, including guidance specific to the healthcare industry. For public companies, Topic 606 is effective for annual and interim reporting periods beginning after December 15, 2017. The Company adopted the requirements of this standard effective January 1, 2018. The Company elected to apply the modified retrospective approach with the cumulative transition effect recognized in beginning retained earnings as of the date of adoption. The impact of the implementation to the consolidated financial statements for periods subsequent to the adoption is not material. See Note 3, "Revenue Recognition and Receivables" for a discussion regarding revenue recognition under the new standard. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU was issued as part of the FASB Simplification Initiative and involves several aspects of accounting for share-based payment transactions, including the income tax consequences and classification on the statement of cash flows. We adopted this standard as of January 1, 2017. The adoption did not have a material impact on our financial position, results of operations or cash flows. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). The ASU provides clarification regarding how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The ASU is effective for annual and interim periods beginning after December 15, 2017, which required the Company to adopt these provisions in the first quarter of fiscal 2018 using a retrospective approach. The adoption did not have a material impact on our financial position, results of operations or cash flows. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that the Statement of Cash Flows explain the changes during the period of cash and cash equivalents inclusive of amounts categorized as Restricted Cash. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for periods beginning after December 15, 2017, which required the Company to adopt these provisions in the first quarter of fiscal 2018. The adoption did not have a material impact on our financial position, results of operation or cash flows. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business, which provides guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The adoption is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted in certain circumstances. The Company will evaluate future acquisitions and dispositions under this guidance, which may result in future acquisitions being accounted for as asset acquisitions. In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. The amended standard specifies the modification accounting applicable to any entity which changes the terms or conditions of a share-based payment award. The new guidance is effective for all entities after December 15, 2017. The adoption did not have a material impact on our financial position, results of operations or cash flows. In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs pursuant to SEC Staff Accounting Bulletin No. 118 ("SAB No. 118"), which allowed SEC registrants to record provisional amounts in earnings for the year ended December 31, 2017 due to the complexities involved in accounting for the enactment of the Tax Cuts and Jobs Act. The Company recognized the estimated income tax effects of the Tax Cuts and Jobs Act in its 2017 Consolidated Financial Statements in accordance with SAB No. 118. Accounting Standards Recently Issued But Not Yet Adopted by the Company In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. In July 2018, the FASB issued ASU 2018-11, Leases - Targeted Improvements, which allows lessees and lessors to recognize and measure existing leases at the beginning of the period of adoption without modifying the comparative period financial statements (which therefore will remain under prior GAAP, Topic 840, Leases). The Company will adopt the requirements of this standard effective January 1, 2019. The Company elected to use the optional expedient to recognize existing leases in the period of adoption, January 1, 2019, rather than the earliest period presented. For periods presented under Topic 842, extensive quantitative and qualitative disclosures will be required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company has organized an implementation group of cross-functional departmental management to ensure the completeness of the lease information (specifically for new contracts entered into after the adoption date), analyze the appropriate classification of leases under the new standard, and develop new processes to execute, approve and classify new leases on an ongoing basis. The Company has also implemented software tools and processes to maintain lease information critical to applying the standard, including implemented changes to the systems, related processes and controls around leases. The Company elected to use the package of practical expedients upon transition, which includes retaining the lease classification for any leases that exist prior to adoption of the standard. The Company is currently in the process of evaluating the appropriate incremental borrowing rate under Topic 842. The implementation of this standard will have a material impact on the consolidated financial position, primarily from nursing center operating leases. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Loses on Financial Instruments. This update is intended to improve financial reporting by requiring timelier recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. This update requires that financial statement assets measured at an amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. This standard is effective for the fiscal year beginning after December 15, 2019 with early adoption permitted. The Company is in the initial stages of evaluating the impact from the adoption of this new standard on the consolidated financial statements and related notes. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which is intended to simplify and amend the application of hedge accounting to more clearly portray the economics of an entity’s risk management strategies in its financial statements. The new guidance will make more financial and nonfinancial hedging strategies eligible for hedge accounting and reduce complexity in fair value hedges of interest rate risk. The new guidance also changes how companies assess effectiveness and amends the presentation and disclosure requirements. The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally the entire change in the fair value of a hedging instrument will be required to be presented in the same income statement line as the hedged item. The new guidance also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. The new guidance is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted in any interim period or fiscal year before the effective date. The implementation is complete and the Company will adopt the new standard on January 1, 2019. The standard has an immaterial impact on our consolidated financial statements and related disclosures. In February 2018, the FASB issued ASU No. 2018-02, Income Statement- Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The new guidance allows entities the option to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income (OCI) to retained earnings. The new guidance allows the option to apply the guidance retrospectively or in the period of adoption. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the effect of this guidance will have on our consolidated financial statements and related disclosures. In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which modifies the accounting for share-based payment awards issued to nonemployees to largely align it with the accounting for share-based payment awards issued to employees. The standard is effective for fiscal years beginning after December 15, 2018. The Company is evaluating the effect of this guidance will have on our consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820. The standard is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is evaluating the effect of this guidance will have on our consolidated financial statements and related disclosures. In October 2018, FASB issued ASU No. 2018-16, Derivatives and Hedging (Topic 805): Inclusion of the Secured Overnight Financing Rate ("SOFR") Overnight Index Swap ("OIS") Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The ASU amends ASC 815 to add the OIS rate based on the SOFR as a fifth US benchmark interest rate. The Company is evaluating the effect of this guidance will have on our consolidated financial statements and related disclosures. |
Business Developments and Other Significant Transactions |
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Developments and Other Significant Transactions | BUSINESS DEVELOPMENTS AND OTHER SIGNIFICANT TRANSACTIONS 2017 Acquisition On June 8, 2017, the Company entered into an Asset Purchase Agreement (the "Purchase Agreement") with Park Place Nursing and Rehabilitation Center, LLC, Dunn Nursing Home, Inc., Wood Properties of Selma LLC, and Homewood of Selma, LLC to acquire a 103-bed skilled nursing center in Selma, Alabama, for an aggregate purchase price of $8,750. In connection with the funding of the acquisition, on June 30, 2017, the Company amended the terms of its Second Amended and Restated Term Loan Agreement to increase the facility by $7,500, which is described in Note 5, "Long-Term Debt, Interest Rate Swap and Capitalized Lease Obligations." The acquisition of the business closed on July 1, 2017. In accordance with ASC 805, this transaction was accounted for as a business combination, which resulted in the expensing of $140 of acquisition costs and a $925 recorded gain on bargain purchase for the Company for the year ended December 31, 2017. The operating results of the acquired center have been included in the Company's consolidated statement of operations since the acquisition date. Supplemental pro forma information regarding the acquisition is not material to the consolidated financial statements. The allocation of the purchase price to the net assets acquired is as follows:
2018 Assets Sold On October 30, 2018, the Company entered into an Asset Purchase Agreement (the "Agreement") with Fulton Nursing and Rehabilitation LLC, Holiday Fulton Propco LLC, Birchwood Nursing and Rehabilitation LLC, Padgett Clinton Propco LLC, Westwood Nursing and Rehabilitation LLC, and Westwood Glasgow Propco (the "Buyers") to sell the assets and transfer the operations of Diversicare of Fulton, LLC, Diversicare of Clinton, LLC and Diversicare of Glasgow, LLC (the "Kentucky Properties"). On December 1, 2018, the Company completed the sale of the Properties with the Buyers for a purchase price of $18,700. This transaction did not meet the accounting criteria to be reported as a discontinued operation. The carrying value of these centers' assets were $13,331, resulting in a gain of $4,825, with remaining proceeds for miscellaneous closing costs. The proceeds were used to relieve debt, which is required under the terms of the Company's Amended Mortgage Loan and Amended Revolver. Refer to Note 5, "Long-term Debt, Interest Rate Swap and Capitalized Lease Obligations" for more information on this transaction. 2017 Lease Termination On September 30, 2017, the Company entered into an Agreement with Trend Health and Rehab of Carthage, LLC ("Trend Health") to terminate the lease and the Company's right of possession of the center in Carthage, Mississippi. In consideration of the early termination of the lease, Trend Health provided the Company with a $250 cash termination payment which is included in lease termination receipts in the accompanying consolidated statements of operations for the year ended December 31, 2017, net of costs to terminate. For accounting purposes, this transaction was not reported as a discontinued operation as this disposal did not represent a strategic shift that has (or will have) a major effect on the Company's operations and financial results. 2016 Sale of Investment in Unconsolidated Affiliate On October 28, 2016, the Company and its partners entered into an asset purchase agreement to sell the pharmacy joint venture. The sale resulted in a $1,366 gain in the fourth quarter of 2016. Subsequently, we recognized additional gains of $308 and $733 for the years ended December 31, 2018 and 2017, respectively, related to the continuing liquidation of remaining net assets affiliated with the partnership. |
Revenue Recognition and Receivables |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition and Receivables | REVENUE RECOGNITION AND RECEIVABLES On January 1, 2018, the Company adopted Accounting Standards Codification ("ASC") 606 using the modified retrospective method for all contracts as of the date of adoption. The reported results for 2018 reflect the application of ASC 606 guidance while the reported results for 2017 were prepared under the guidance of ASC 605, Revenue Recognition (ASC 605), which is also referred to herein as "legacy GAAP". The adoption of ASC 606 represents a change in accounting principle that more closely aligns revenue recognition with the delivery of the Company's services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. ASC 606 requires companies to exercise more judgment and recognize revenue in accordance with the standard's core principle by applying the following five steps: Step 1: Identify the contract with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. Performance obligations are promises made in a contract to transfer a distinct good or service to the customer. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company has concluded that the contracts with patients and residents represent a bundle of distinct services that are substantially the same, with the same pattern of transfer to the customer. Accordingly, the promise to provide quality care is accounted for as a single performance obligation. The Company performed analyses using the application of the portfolio approach as a practical expedient to group patient contracts with similar characteristics, such that revenue for a given portfolio would not be materially different than if it were evaluated on a contract-by-contract basis. These analyses incorporated consideration of reimbursements at varying rates from Medicaid, Medicare, Managed Care, Private Pay, Assisted Living, Hospice, and Veterans for services provided in each corresponding state. It was determined that the contracts are not materially different for the following groups: Medicaid, Medicare, Managed Care and Private Pay and other (Assisted Living, Hospice and Veterans). In order to determine the transaction price, the Company estimates the amount of variable consideration at the beginning of the contract using the expected value method. The estimates consider (i) payor type, (ii) historical payment trends, (iii) the maturity of the portfolio, and (iv) geographic payment trends throughout a class of similar payors. The Company typically enters into agreements with third-party payors that provide for payments at amounts different from the established charges. These arrangement terms provide for subsequent settlement and cash flows that may occur well after the service is provided. The Company constrains (reduces) the estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract. Changes in the Company's expectation of the amount it will receive from the patient or third-party payors will be recorded in revenue unless there is a specific event that suggests the patient or third-party payor no longer has the ability and intent to pay the amount due and, therefore, the changes in its estimate of variable consideration better represent an impairment, or bad debt. These estimates are re-assessed each reporting period, and any amounts allocated to a satisfied performance obligation are recognized as revenue or a reduction of revenue in the period in which the transaction price changes. The Company satisfies its performance obligation by providing quality of care services to its patients and residents on a daily basis until termination of the contract. The performance obligation is recognized on a time elapsed basis, by day, for which the services are provided. For these contracts, the Company has the right to consideration from the customer in an amount that directly corresponds with the value to the customer of the Company's performance to date. Therefore, the Company recognizes revenue based on the amount billable to the customer in accordance with the practical expedient in ASC 606-10-55-18. Additionally, because the Company applied ASC 606 using certain practical expedients, the Company elected not to disclose the aggregate amount of the transaction price for unsatisfied, or partially unsatisfied, performance obligations for all contracts with an original expected length of one year or less. The Company incurs costs related to patient/resident contracts, such as legal and advertising expenses. The contract costs are expensed as incurred. They are not expected to be recovered and are not chargeable to the patient/resident regardless of whether the contract is executed. Financial Statement Impact of Adopting ASC 606 The Company adopted ASC 606 using the modified retrospective method. The cumulative effect of applying the new guidance to all contracts with customers as of January 1, 2018 was not material to the consolidated financial statements. As a result of applying the modified retrospective method to adopt ASC 606, the following adjustments were made to our operating results:
(a) Adjusts for the implicit price concession of bad debt expense. (b) Adjusts for the implementation of ASC 606.
(a) Adjusts for the implementation of ASC 606. (b) Adjusts for a direct reduction of accounts receivable that would have been reflected as allowance for doubtful accounts in the consolidated balance sheet prior to the adoption of ASC 606. (c) Reflects the tax impact of $46 for the ASC 606 adjustment of $487. Disaggregation of Revenue and Accounts Receivable The following table summarizes revenue from contracts with customers by payor source for the periods presented (dollar amounts in thousands):
(1) As noted above, prior period amounts have not been adjusted under the application of the modified retrospective method. Accounts receivable as of December 31, 2018 and 2017 is summarized in the following table:
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Property and Equipment |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | PROPERTY AND EQUIPMENT Property and equipment, at cost, consists of the following:
As discussed further in Note 5, "Long-term Debt, Interest Rate Swap and Capitalized Lease Obligations", the property and equipment of certain skilled nursing centers are pledged as collateral for mortgage debt obligations. In addition, the Company has assets recorded as capital leased assets purchased through capitalized lease obligations. The Company capitalizes leasehold improvements which will revert back to the lessor of the property at the expiration or termination of the lease, and depreciates these improvements over the shorter of the remaining lease term or the assets' estimated useful lives. |
Long-Term Debt, Interest Rate Swap and Capitalized Lease Obligations |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt, Interest Rate Swap and Capitalized Lease Obligations | LONG-TERM DEBT, INTEREST RATE SWAP AND CAPITALIZED LEASE OBLIGATIONS Long-term debt consists of the following:
Included in the current portion of long-term debt is $5 million related to the Revolver and $5 million related to the Acquisition Line, which are both due on February 26, 2021. It is classified as a current liability because it is management's intent to pay within the next 12 months. As of December 31, 2018, the Company's weighted average interest rate on long-term debt, including the impact of the interest rate swap, was approximately 6.31%. The Company has agreements with a syndicate of banks for a mortgage term loan ("Original Mortgage Loan") and the Company’s revolving credit agreement ("Original Revolver"). On February 26, 2016, the Company executed an Amended and Restated Credit Agreement (the "Credit Agreement") which modified the terms of the Original Mortgage Loan and the Original Revolver Agreements dated April 30, 2013. The Credit Agreement increases the Company's borrowing capacity to $100,000 allocated between a $72,500 Mortgage Loan ("Amended Mortgage Loan") and a $27,500 Revolver ("Amended Revolver"). The Amended Mortgage Loan consists of $60,000 term and $12,500 acquisition loan facilities. As of December 31, 2018, financing costs associated with the Amended Mortgage Loan and the Amended Revolver in the amount of $146 are netted against the related debt and are being amortized over the five-year term of the agreements, which are included in debt. Under the terms of the amended agreements, the syndicate of banks provided the Amended Mortgage Loan with an original balance of $72,500 with a five-year maturity through February 26, 2021, and a $27,500 Amended Revolver through February 26, 2021. The Amended Mortgage Loan has a term of five years, with principal and interest payable monthly based on a 25-year amortization. Interest on the term and acquisition loan facilities are based on LIBOR plus 4.0% and 4.75%, respectively. A portion of the Amended Mortgage Loan is effectively fixed at 5.79% pursuant to an interest rate swap with an initial notional amount of $30,000. The Amended Mortgage Loan balance was $58,630 as of December 31, 2018, consisting of $51,730 on the term loan facility with an interest rate of 6.5% and $6,900 on the acquisition loan facility with an interest rate of 7.25%. The Amended Mortgage Loan is secured by 15 owned nursing centers, related equipment and a lien on the accounts receivable of these centers. The Amended Mortgage Loan and the Amended Revolver are cross-collateralized and cross-defaulted. The Company’s Amended Revolver has an interest rate of LIBOR plus 4.0% and is secured by accounts receivable and is subject to limits on the maximum amount of loans that can be outstanding under the revolver based on borrowing base restrictions. Effective October 3, 2016, the Company entered into the Second Amendment ("Second Revolver Amendment") to amend the Amended Revolver. The Second Amendment increased the Amended Revolver capacity from the $27,500 in the Amended Revolver to $52,250; provided that the maximum revolving facility be reduced to $42,250 on August 1, 2017. Subsequently, on June 30, 2017, the Company executed a Fourth Amendment (the "Fourth Revolver Amendment") to amend the Amended Revolver, which modifies the capacity of the revolver to remain at $52,250. On December 29, 2016, the Company executed a Third Amendment ("Third Revolver Amendment") to amend the Amended Revolver. The Third Amendment modifies the terms of the Amended Mortgage Loan by increasing the Company’s letter of credit sublimit from $10,000 to $15,000. Effective June 30, 2017, the Company entered into a Second Amendment (the "Second Term Amendment") to amend the Amended Mortgage Loan. The Second Term Amendment amends the terms of the Amended Mortgage Loan by increasing the Company's term loan facility by $7,500. Effective February 27, 2018, the Company executed a Fifth Amendment to the Amended Revolver and a Third Amendment to the Amended Mortgage Loan. Under the terms of the Amendments, the minimum fixed charge coverage ratio shall not be less than 1.01 to 1.00 as of March 31, 2018 and for each quarter thereafter. Effective December 1, 2018, the Company entered into the Sixth Amendment ("Sixth Revolver Amendment") to amend the Amended Revolver. The Sixth Amendment decreased the Amended Revolver capacity from $52,250 to $42,250. The Company also applied $4,947 of net proceeds from the sale of the Kentucky centers to the outstanding borrowings under the Amended Revolver. Effective December 1, 2018, the Company executed a Fourth Amendment (the "Fourth Term Amendment") to amend the Amended Mortgage Loan. The Company applied $11,100 and $2,100 of net proceeds from the sale of the Kentucky centers to the Term Loan and Acquisition Loan, respectively. Additionally, we amended the Acquisition Loan availability to include a reserve of $2,100, and therefore, our borrowing capacity is $10,400. For further discussion of the sale of the Kentucky centers, refer to Note 2, "Business Development and Other Significant Transactions." As of December 31, 2018, the Company had $15,000 in borrowings outstanding under the Amended Revolver compared to $16,000 outstanding as of December 31, 2017. The interest rate related to the Amended Revolver was 6.50% as of December 31, 2018. The outstanding borrowings on the revolver were used primarily for temporary working capital requirements. Annual fees for letters of credit issued under the Amended Revolver are 3.0% of the amount outstanding. The Company has 4 letters of credit with a total value of $13,593 outstanding as of December 31, 2018. Considering the balance of eligible accounts receivable, the letter of credit, the amounts outstanding under the Amended Revolver and the maximum loan amount of $36,648, the balance available for borrowing under the Amended Revolver was $8,055 at December 31, 2018. The Company’s debt agreements contain various financial covenants, the most restrictive of which relates to debt service coverage ratios. The Company is in compliance with all such covenants at December 31, 2018. In connection with the Company's 2018 and 2017 financing agreements, the Company recorded the following amounts related to deferred loan costs, with such costs classified as a reduction of the debt balances discussed above:
The deferred financing costs included in the current and long-term debt balances were $1,125 at December 31, 2018 and $1,884 at December 31, 2017. Scheduled principal payments of long-term debt are as follows:
Interest Rate Swap Cash Flow Hedge As part of the debt agreements entered into in April 2013, the Company entered into an interest rate swap agreement with a member of the bank syndicate as the counterparty. The Company entered into the interest rate swap agreement to mitigate the variable interest rate risk on its outstanding mortgage borrowings. The Company designated its interest rate swap as a cash flow hedge and the effective portion of the hedge, net of taxes, is reflected as a component of other comprehensive income (loss). In conjunction with the aforementioned amendment to the Credit Agreement that occurred in February 2016, the Company retained the previously agreed upon interest rate swap modifying the terms of the swap to reflect the amended Credit Agreement. The Company redesignated the interest rate swap as a cash flow hedge. The interest rate swap agreement has the same effective date and maturity date as the Amended Mortgage Loan, and has an amortizing notional amount that was $27,695 as of December 31, 2018. The interest rate swap agreement requires the Company to make fixed rate payments to the bank calculated on the applicable notional amount at an annual fixed rate of 5.79% while the bank is obligated to make payments to the Company based on LIBOR on the same notional amounts. The applicable guidance requires companies to recognize all derivative instruments as either assets or liabilities at fair value in a company's balance sheets. The Company assesses the effectiveness of its interest rate swap on a quarterly basis and at December 31, 2018, the Company determined that the interest rate swap was effective. The interest rate swap valuation model indicated a net asset of $384 at December 31, 2018. The fair value of the interest rate swap is included in “other noncurrent liabilities” on the Company's consolidated balance sheets. The asset related to the change in the interest rate swap included in accumulated other comprehensive income at December 31, 2018 is $234, net of income tax benefit of $150. As the Company's interest rate swap is not traded on a market exchange, the fair value is determined using a valuation model based on a discounted cash flow analysis. This analysis reflects the contractual terms of the interest rate swap agreement and uses observable market-based inputs, including estimated future LIBOR interest rates. The fair value of the Company's interest rate swap is the net difference in the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on the expectation of future interest rates and are observable inputs available to a market participant. The interest rate swap valuation is classified in Level 2 of the fair value hierarchy, in accordance with the FASB's guidance on Fair Value Measurements and Disclosures. Capitalized Lease Obligations Upon acquisition of some centers, we assumed certain leases, primarily related to equipment, that constitute capital leases. As a result, we have recorded the underlying lease liabilities and capitalized lease obligations of $928 and $1,445 as of December 31, 2018 and 2017, respectively. These lease agreements provide three to five year terms. Scheduled payments of the capitalized lease obligations are as follows:
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity, Stock Plans and Preferred Stock | SHAREHOLDERS' EQUITY, STOCK PLANS AND PREFERRED STOCK Stock Based Compensation Plans The Company follows the FASB's guidance on Stock Compensation to account for stock-based payments granted to employees and non-employee directors. Overview of Plans In June 2008, the Company adopted the Advocat Inc. 2008 Stock Purchase Plan for Key Personnel (“Stock Purchase Plan”). The Stock Purchase Plan provides for the granting of rights to purchase shares of the Company's common stock to directors and officers and 150 shares of the Company's common stock has been reserved for issuance under the Stock Purchase Plan. The Stock Purchase Plan allows participants to elect to utilize a specified portion of base salary, annual cash bonus, or director compensation to purchase restricted shares or restricted share units (“RSU's”) at 85% of the quoted market price of a share of the Company's common stock on the date of purchase. The restriction period under the Stock Purchase Plan is generally two years from the date of purchase and during which the shares will have the rights to receive dividends, however, the restricted share certificates will not be delivered to the shareholder and the shares cannot be sold, assigned or disposed of during the restriction period and are subject to forfeiture. In June 2016, our shareholders approved an amendment to the Stock Purchase Plan to increase the number of shares of our common stock authorized under the Plan from 150 shares to 350 shares. No grants can be made under the Stock Purchase Plan after April 25, 2028. In April 2010, the Compensation Committee of the Board of Directors adopted the 2010 Long-Term Incentive Plan (“2010 Plan”), followed by approval by the Company's shareholders in June 2010. The 2010 Plan allows the Company to issue stock appreciation rights, stock options and other share and cash based awards. In June 2017, our shareholders approved an amendment to the Long-Term Incentive Plan to increase the number of shares of our common stock authorized under the Plan from 380 shares to 680 shares. No grants can be made under the 2010 Plan after May 31, 2027. Equity Grants and Valuations During 2018 and 2017, the Compensation Committee of the Board of Directors approved grants totaling approximately 90 and 88, respectively, shares of restricted common stock to certain employees and members of the Board of Directors. These restricted shares vest one-third on the first, second and third anniversaries of the grant date. Unvested shares may not be sold or transferred. During the vesting period, dividends accrue on the restricted shares, but are paid in additional shares of common stock upon vesting, subject to the vesting provisions of the underlying restricted shares. The restricted shares are entitled to the same voting rights as other common shares. Upon vesting, all restrictions are removed. Our policy is to account for forfeitures of share-based compensation awards as they occur. The Company recorded non-cash stock-based compensation expense from continuing operations for equity grants and RSU's issued under the Plans of $1,127, $1,027, and $1,012 during the years ended December 31, 2018, 2017, and 2016, respectively. Such amounts are included as components of general and administrative expense or operating expense based upon the classification of cash compensation paid to the related employees. As of December 31, 2018, there was $384 in unrecognized compensation costs related to stock-based compensation to be recognized over the applicable remaining vesting periods. The Company estimated the total recognized and unrecognized compensation for all options and SOSARs using the Black-Scholes-Merton equity grant valuation model. Restricted stock awards are valued using the market price on the grant date. The table below shows the weighted average assumptions the Company used to develop the fair value estimates under its option valuation model:
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In computing the fair value estimates using the Black-Scholes-Merton valuation model, the Company took into consideration the exercise price of the equity grants and the market price of the Company's stock on the date of grant. The Company used an expected volatility that equals the historical volatility over the most recent period equal to the expected life of the equity grants. The risk free interest rate is based on the U.S. treasury yield curve in effect at the time of grant. The Company used the expected dividend yield at the date of grant, reflecting the level of annual cash dividends currently being paid on its common stock. In computing the fair value of these equity grants, the Company estimated the equity grants' expected term based on the average of the vesting term and the original contractual terms of the grants. The table below describes the resulting weighted average grant date fair values calculated as well as the intrinsic value of options exercised under the Company's equity awards during each of the following years:
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The following table summarizes information regarding stock options and SOSAR grants outstanding as of December 31, 2018:
As of December 31, 2018, the outstanding equity grants have a weighted average remaining life of 2.26 years and those outstanding equity grants that are exercisable have a weighted average remaining life of 2.7 years. During the year ended December 31, 2018, approximately 100 stock option and SOSAR grants were exercised under these plans. All of the equity grants exercised were net settled. The net payments from equity grants exercised in 2018 was $(217). Summarized activity of the equity compensation plans is presented below:
Summarized activity of the Restricted Share Units for the Stock Purchase Plan is as follows:
Series A Preferred Stock The Company is authorized to issue up to 200 shares of Series A Preferred Stock. The Company's Board of Directors is authorized to establish the terms and rights of each series, including the voting powers, designations, preferences, and other special rights, qualifications, limitations, or restrictions thereof. |
Net Loss Per Common Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss Per Common Share | NET LOSS PER COMMON SHARE Information with respect to the calculation of basic and diluted net income (loss) per common share is presented below:
The dilutive effects of the Company's stock options, SOSARs, Restricted Shares and Restricted Share Units are included in the computation of diluted income per common share during the periods they are considered dilutive. The following table reflects the weighted average outstanding SOSARs and Options that were excluded from the computation of diluted earnings per share, as they would have been anti-dilutive:
The weighted average common shares for basic and diluted earnings for common shares was the same due to the losses in 2018, 2017 and 2016. |
Income Taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | INCOME TAXES Overview Effective January 1, 2018, the Tax Act reduced the corporate rate from 35% to 21%. The Company has adopted ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraph Pursuant to SEC Staff Accounting Bulletin No. 118, which allows the company to record provisional amounts during the period of enactment. Any change to the provisional amounts are recorded as an adjustment to the provision for income taxes in the period the amounts are determined. During the year ended December 31, 2017, the company recognized a provisional net deferred income tax expense of $5,476 to reflect the revaluation of the Company’s net deferred tax assets based on the U.S. federal tax rate of 21%. In accordance with SAB 118, the Tax Act related income tax effects that were initially reported as provisional estimates were refined as additional analysis was performed. The provision (benefit) for income taxes on continuing operations for the years ended December 31, 2018, 2017 and 2016 is summarized as follows:
A reconciliation of taxes computed at statutory income tax rates on income (loss) from continuing operations is as follows:
Deferred Taxes Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are reduced by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that we will realize only some portion of the deferred tax assets. The net deferred tax assets and liabilities, at the respective income tax rates, are as follows:
Deferred Tax Valuation Allowance The assessment of the amount of value assigned to our deferred tax assets under the applicable accounting standards is highly judgmental. We are required to consider all available positive and negative evidence in evaluating the likelihood that we will be able to realize the benefit of our deferred tax assets in the future. Such evidence includes scheduled reversals of deferred tax assets and liabilities, projected future taxable income, tax-planning strategies, and the results of recent operations. Since this evaluation requires consideration of historical and future events, there is significant judgment involved, and our conclusion could be materially different should certain of our expectations not transpire. When assessing all available evidence, we consider the weight of the evidence, both positive and negative, based on the objectivity of the underlying evidence and the extent to which it can be verified. For the three-year period ended December 31, 2018, the Company has a cumulative pre-tax loss from continuing operations of $8,934, which includes $8,104 of loss attributable to the year ended December 31, 2018. Additionally, the Company recognized governmental and regulatory changes have put downward revenue pressure on the long-term care industry as a piece of negative evidence in our analysis. As a result of this negative evidence, the Company performed a thorough assessment of the available positive and negative evidence in order to ascertain whether it is more-likely-than-not that in future periods the Company will generate sufficient pre-tax income to utilize all of our federal deferred tax assets and our net operating loss and other carryforwards and credits. State deferred tax assets are considered for valuation separately and on a state-by-state basis. The Company also identified several pieces of objective positive evidence which were considered and weighed in the analysis performed regarding the valuation of deferred tax assets, including, but not limited to the expected accretive strategic acquisitions completed by us during the three-year period, corporate and regional restructuring expected to reduce costs while maintaining revenue levels, the long-term expiration dates of a majority of the net operating losses and credits, our history of not having carryforwards or credits expire unutilized, and the completed divestiture of the centers in Mississippi in 2017 and Ohio in 2016. In performing the analysis, the Company contemplated utilization of the deferred tax assets under multiple scenarios. After consideration of these factors, the Company determined that it was more likely than not that future taxable income would be sufficient to realize substantially all of the recorded value of the Company's deferred tax assets for federal income tax purposes. Realization of the deferred tax assets is not assured and future events could result in a change in judgment. If future events result in a conclusion that realization is no longer more likely than not to occur, the Company would be required to establish a valuation allowance on the deferred tax assets at that time, which would result in a charge to income tax expense and a potentially material decrease in net income in the period in which the factors change our judgment. At December 31, 2018, the Company had $6,028 of net operating losses, which expire at various dates beginning in 2019 and continue through 2021. The use of a portion of these loss carryforwards is limited by change in ownership provisions of the Federal tax code to a maximum of approximately $1,162. The Company has reduced the deferred tax asset and the corresponding valuation allowances for net operating loss deductions permanently lost as a result of the change in ownership provisions. With respect to state deferred tax assets, the Company reduced the valuation allowance by approximately $147 in 2018, primarily related to the expectation that deferred tax assets for which valuation allowances had previously been applied would more-likely-than-not be utilized as a result of the increase in taxable income during the year ended December 31, 2018. In 2017 and 2016, the Company recorded a deferred tax provision to adjust approximately $357 and $47, respectively, of the valuation allowance on state deferred tax assets. The changes in valuation allowance were based on the Company's assessment of the realization of certain individual tax assets. The Company did not record a valuation allowance as of December 31, 2018. Under the Work Opportunity Tax Credit ("WOTC") program, the Company recorded $64, $210 and $550 in Work Opportunity Tax Credits during 2018, 2017 and 2016, respectively. The Company received a notice of an audit by the Internal Revenue Service related to the 2012 tax year, which was closed in 2017. As of December 31, 2018, the Company’s tax years for 2014 forward are subject to examination by tax authorities. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Lease Commitments The Company is committed under long-term operating leases with various expiration dates and varying renewal options. Minimum annual rentals (exclusive of taxes, insurance, and maintenance costs) under these leases beginning January 1, 2019, are as follows:
Under these lease agreements, the Company's lease payments are subject to periodic annual escalations as described below and in Note 1, "Business and Summary of Significant Accounting Policies". Total lease expense for continuing operations was $57,073, $54,988 and $33,364 for 2018, 2017 and 2016, respectively. The accrued liability related to straight line rent was $6,877 and $6,983 at December 31, 2018 and 2017, respectively, and is included in “Other noncurrent liabilities” on the accompanying consolidated balance sheets. Omega Master Lease On October 1, 2018, the Company entered into a New Master Lease Agreement (the "Omega Master Lease") with Omega Healthcare Investors (the "Lessor") to lease 34 centers currently owned by Omega and operated by Diversicare. The old Master Lease with Omega provided for its operation of 23 skilled nursing centers in Texas, Kentucky, Alabama, Tennessee, Florida, and Ohio. Additionally, Diversicare operates 11 centers owned by Omega, previously under separate leases in Missouri, Kentucky, Indiana, and Ohio. The Omega Master Lease entered into by Diversicare and Omega consolidated the leases for all 34 centers under one New Master Lease. The Omega Master Lease has an initial term of twelve years with the option of two ten year extensions at the Company's election. The Omega Master Lease has annual rent escalators of 2.15% beginning on October 1, 2019. Under generally accepted accounting principles, the Company is required to report these scheduled rent increases on a straight line basis over the term of the lease. These scheduled increases had no effect on cash rent payments at the start of the lease term and only result in additional cash outlay as the annual increases take effect each year. The Omega Master Lease requires the Company to fund annual capital expenditures related to the leased centers at an amount currently equal to four-hundred dollars per licensed bed. These amounts are subject to adjustment for increases in the Consumer Price Index. The Company is in compliance with the capital expenditure requirements. Total required capital expenditures during the remaining lease term are $18,611. These capital expenditures are being depreciated on a straight-line basis over the shorter of the asset life or the appropriate lease term. Upon expiration of the Omega Master Lease or in the event of a default under the Omega Master Lease, the Company is required to transfer all of the leasehold improvements, equipment, furniture and fixtures of the leased centers to Omega. The assets to be transferred to Omega are being amortized on a straight-line basis over the shorter of the remaining lease term, excluding the renewal options, or estimated useful life, and will be fully depreciated upon the expiration of the lease. All of the equipment, inventory and other related assets of the centers leased pursuant to the Omega Master Lease have been pledged as security under the Omega Master Lease. In addition, the Company has a letter of credit of $6,909 as a security deposit for the Company's leases with Omega, as described in Note 5, "Long-term Debt, Interest Rate Swap and Capitalized Lease Obligations". Renovation Funding In January 2013, we entered into an amendment to the former master lease with Omega under which Omega agreed to provide an additional $5,000 to fund renovations to two nursing centers located in Texas that are leased from Omega. The annual base rent related to these centers is increased to reflect the amount of capital improvements to the respective centers as the related expenditures are made. The increase is based on a rate of 10.25% per year of the amount financed under this amendment. The Company completed an expansion to one of its centers by making use of fifteen licensed beds it acquired in 2005. This expansion project was funded by Omega with the renovation funding previously described. Accordingly, the costs incurred to expand the center were recorded as a leasehold improvement asset with the amounts reimbursed by Omega for this project included as a long-term liability and were amortized to rent expense over the remaining term of the lease. The capitalized leasehold improvements and lessor reimbursed costs were amortized over the initial lease term that ended in September 2018. The leasehold improvement asset and accumulated amortization are as follows:
Golden Living Master Lease The Company leases 20 nursing centers from Golden Living. On October 1, 2016, the Company and Golden Living entered into a Master Lease ("Golden Living Lease") agreement to lease eight centers located in Mississippi. On November 1, 2016, the Company and Golden Living entered into an Amended and Restated Master Lease ("Amended Lease") to extend the term of its centers leased from Golden Living and lease an additional twelve centers located in Alabama. The Amended Lease is triple net and has an initial term of ten years with two separate five year options to extend the term. Base rent for the amended lease is $24,675 for the first year and escalates 2% annually thereafter. Under generally accepted accounting principles, the Company is required to report these scheduled rent increases on a straight line basis over the term of the lease including the 10 year term of the renewal period. These scheduled increases had no effect on cash rent payments at the start of the lease term and only result in additional cash outlay as the annual increases take effect each year. The Golden Living Lease requires the Company to fund annual capital expenditures related to the leased centers at an amount currently equal to five hundred and ten dollars per licensed bed. These amounts are subject to adjustment for increases in the Consumer Price Index. The Company is in compliance with the capital expenditure requirements. Total required capital expenditures during the remaining lease term and renewal options are $7,955. These capital expenditures are being depreciated on a straight-line basis over the shorter of the asset life or the appropriate lease term. Upon expiration of the Golden Living Lease or in the event of a default under the Golden Living Lease , the Company is required to transfer all of the leasehold improvements, equipment, furniture and fixtures of the leased centers to Golden Living. The assets to be transferred to Golden Living are being amortized on a straight-line basis over the shorter of the remaining lease term or estimated useful life, and will be fully depreciated upon the expiration of the lease. All of the equipment, inventory and other related assets of the center leased pursuant to the Golden Living Lease have been pledged as security under the Golden Living Lease. In addition, the Company has a letter of credit of $6,354 as a security deposit for the Company's leases with Golden Living, as described in Note 5, "Long-term Debt, Interest Rate Swap and Capitalized Lease Obligations". Insurance Matters Professional Liability and Other Liability Insurance The Company has professional liability insurance coverage for its nursing centers that, based on historical claims experience, is likely to be substantially less than the claims that are expected to be incurred. Effective July 1, 2013, the Company established a wholly-owned, offshore limited purpose insurance subsidiary, SHC Risk Carriers, Inc. (“SHC”), to replace some of the expiring commercial policies. SHC covers losses up to specified limits per occurrence. All of the Company's nursing centers in Florida and Tennessee are now covered under the captive insurance policies along with most of the nursing centers in Alabama, Kentucky, and Texas. The insurance coverage provided for these centers under the SHC policy includes coverage limits of at least $1,000 per medical incident with a sublimit per center of $3,000 and total annual aggregate policy limits of $5,000. All other centers within the Company’s portfolio are covered through various commercial insurance policies which provide similar coverage limits per medical incident, per location, and on an aggregate basis for covered centers. The deductibles for these policies are covered through the insurance subsidiary. The Company follows the FASB Accounting Standards Update, “Presentation of Insurance Claims and Related Insurance Recoveries,” that clarifies that a health care entity should not net insurance recoveries against a related professional liability claim and that the amount of the claim liability should be determined without consideration of insurance recoveries. Accordingly, the estimated insurance recovery receivables are included within "Other Current Assets" on the Consolidated Balance Sheet. As of December 31, 2018 and 2017, there are $5,478 and $1,579, respectively, estimated insurance recovery receivables. Reserve for Estimated Self-Insured Professional Liability Claims Because the Company’s actual liability for existing and anticipated professional liability and general liability claims will exceed the Company’s limited insurance coverage, the Company has recorded total liabilities for reported and incurred but not reported claims of $27,201 and $20,057 as of December 31, 2018 and 2017, respectively. This accrual includes estimates of liability for incurred but not reported claims, estimates of liability for reported but unresolved claims, actual liabilities related to settlements, including settlements to be paid over time, estimates of insurance settlements over the deductible, and estimates of legal costs related to these claims. All losses are projected on an undiscounted basis. Amounts are added to the accrual for estimates of anticipated liability for claims incurred during each period, and amounts are deducted from the accrual for settlements paid on existing claims during each period. The Company evaluates the adequacy of this liability on a quarterly basis. Semi-annually, the Company retains a third-party actuarial firm to assist in the evaluation of this reserve. Since May 2012, Merlinos & Associates, Inc. (“Merlinos”) has assisted management in the preparation of the appropriate accrual for incurred but not reported general and professional liability claims based on data furnished as of May 31 and November 30 of each year. Merlinos primarily utilizes historical data regarding the frequency and cost of the Company’s past claims over a multi-year period, industry data and information regarding the number of occupied beds to develop its estimates of the Company’s ultimate professional liability cost for current periods. On a quarterly basis, the Company obtains reports of asserted claims and lawsuits incurred. These reports, which are provided by the Company’s insurers and a third party claims administrator, contain information relevant to the actual expense already incurred with each claim as well as the third-party administrator’s estimate of the anticipated total cost of the claim. This information is reviewed by the Company quarterly and provided to the actuary semi-annually. Based on the Company’s evaluation of the actual claim information obtained, the semi-annual estimates received from the third-party actuary, the amounts paid and committed for settlements of claims and on estimates regarding the number and cost of additional claims anticipated in the future, the reserve estimate for a particular period may be revised upward or downward on a quarterly basis. Any increase in the accrual decreases results of operations in the period and any reduction in the accrual increases results of operations during the period. The Company’s cash expenditures for self-insured professional liability costs from continuing operations were $6,540, $6,593, and $4,456 for the years ended December 31, 2018, 2017 and 2016, respectively. Although the Company adjusts its accrual for professional and general liability claims on a quarterly basis and retains a third-party actuarial firm semi-annually to assist management in estimating the appropriate accrual, professional and general liability claims are inherently uncertain, and the liability associated with anticipated claims is very difficult to estimate. Professional liability cases have a long cycle from the date of an incident to the date a case is resolved, and final determination of the Company’s actual liability for claims incurred in any given period is a process that takes years. As a result, the Company’s actual liabilities may vary significantly from the accrual, and the amount of the accrual has and may continue to fluctuate by a material amount in any given period. Each change in the amount of this accrual will directly affect the Company’s reported earnings and financial position for the period in which the change in accrual is made. Other Insurance With respect to workers' compensation insurance, substantially all of our employees are covered under either a prefunded deductible policy or state-sponsored program. The Company has been and remains a non-subscriber to the Texas workers’ compensation system and is, therefore, completely self-insured for employee injuries with respect to its Texas operations. From June 30, 2003 until June 30, 2007, the Company’s workers’ compensation insurance programs provided coverage for claims incurred with premium adjustments depending on incurred losses. For the period from July 1, 2007 until June 30, 2008, the Company was completely insured for workers' compensation exposure. For the period from July 1, 2008 through December 31, 2017, the Company is covered by a prefunded deductible policy. Under this policy, the Company is self-insured for the first $500 per claim, subject to an aggregate maximum of $3,000. The Company funds a loss fund account with the insurer to pay for claims below the deductible. The Company accounts for premium expense under this policy based on its estimate of the level of claims subject to the policy deductibles expected to be incurred. The liability for workers’ compensation claims is $618 and $867 at December 31, 2018 and 2017, respectively. The Company has a non-current receivable for workers’ compensation policies covering previous years of $1,258 and $1,113 as of December 31, 2018 and 2017, respectively. The non-current receivable is a function of payments paid to the Company’s insurance carrier in excess of the estimated level of claims expected to be incurred. As of December 31, 2018, the Company is self-insured for health insurance benefits for certain employees and dependents for amounts up to $200 per individual annually. The Company provides reserves for the settlement of outstanding self-insured health claims at amounts believed to be adequate. The liability for reported claims and estimates for incurred but unreported claims is $1,396 and $1,326 at December 31, 2018 and 2017, respectively. The differences between actual settlements and reserves are included in expense in the period finalized. Employment Agreements The Company has employment agreements with certain members of management that provide for the payment to these members of amounts up to 2.0 times their annual salary in the event of a termination without cause, a constructive discharge (as defined in each employee agreement), or upon a change in control of the Company (as defined in each employee agreement). The maximum contingent liability under these agreements is $1,692 as of December 31, 2018. The terms of such agreements are from 1 to 3 years and automatically renew for 1 year if not terminated by the employee or the Company. No amounts have been accrued for these contingent liabilities for members of management the Company currently employs. Health Care Industry and Legal Proceedings The provision of health care services entails an inherent risk of liability. Participants in the health care industry are subject to lawsuits alleging malpractice, violations of false claims acts, product liability, or related legal theories, many of which involve large claims and significant defense costs. Like many other companies engaged in the long-term care profession in the United States, we have numerous pending liability claims, disputes and legal actions for professional liability and other related issues. It is expected that we will continue to be subject to such suits as a result of the nature of our business. Further, as with all health care providers, we are periodically subject to regulatory actions seeking fines and penalties for alleged violations of health care laws and are potentially subject to the increased scrutiny of regulators for issues related to compliance with health care fraud and abuse laws and with respect to the quality of care provided to residents of our center. Like other health care providers, in the ordinary course of our business, we are also subject to claims made by employees and other disputes and litigation arising from the conduct of our business. As of December 31, 2018, we are engaged in 78 professional liability lawsuits, which are reserved for as discussed above. Eighteen lawsuits are currently scheduled for trial or arbitration during the next twelve months, and it is expected that additional cases will be set for trial or hearing. The ultimate results of any of our professional liability claims and disputes cannot be predicted. We have limited, and sometimes no, professional liability insurance with regard to most of these claims. A significant judgment entered against us in one or more of these legal actions could have a material adverse impact on our financial position and cash flows. In July 2013, the Company learned that the United States Attorney for the Middle District of Tennessee ("DOJ") had commenced a civil investigation of potential violations of the False Claims Act ("FCA"). In October 2014, the Company learned that the investigation was started by the filing under seal of a false claims action against the two centers that were the subject of the original civil investigative demand ("CID"). In connection with this matter, between July 2013 and early February 2016, the Company has received three civil investigative demands (a form of subpoena) for documents. The Company has responded to those demands and also provided voluntarily additional information requested by the DOJ. The DOJ has also taken testimony from current and former employees of the Company. In May 2018, the Company learned that a second FCA complaint had been filed in late 2016 relating to the Company’s practices and policies for rehabilitation therapy at some of its facilities. The government’s investigation relates to the Company’s practices and policies for rehabilitation and other services at all of its facilities, for preadmission evaluation forms ("PAEs") required by TennCare and for Pre-Admission Screening and Resident Reviews ("PASRRs") required by the Medicare program. The Company is engaged in preliminary discussions with the DOJ regarding settlement of this investigation. The Company denies any wrong doing and is prepared to vigorously defend its actions. However, based upon preliminary settlement discussions, the Company believes that it is probable a loss will result from this contingency and has accrued $6,400 as a contingent liability in connection with this matter during the year ended December 31, 2018. The Company cannot predict whether a settlement can be achieved, the outcome of the litigation if there is no settlement or the length of time necessary to conclude this matter. Accordingly, the contingent liability has been classified as a noncurrent liability in the accompanying interim consolidated balance sheets. The Company’s ultimate ability to settle this investigation will depend on several factors, including whether the amount and terms of an acceptable settlement can be reached with the DOJ, the Company’s assessment of the risks of litigating this case and the effect of protracted litigation or settlement terms on the Company’s business plans. Because the outcome of this investigation and related settlement discussions remain uncertain, there is a reasonable possibility that the amount ultimately incurred in connection with the resolution of this matter could differ materially from the current accrual, as the Company cannot, at this time, estimate the possible range of loss that may result from either a settlement or litigation of this matter. The ultimate outcome of this litigation could have a materially adverse effect on the Company, including the imposition of treble damages, criminal charges, fines, penalties and/or a corporate integrity agreement. In June 2016, the Company received an authorized investigative demand (a form of subpoena) for documents in connection with a criminal investigation by the DOJ related to the practices of some of its employees with respect to PAEs and PASRRs, and the Company provided documents responsive to this subpoena and coordinated examinations of certain employees of the Company. The Company understands that this criminal investigation has been closed, subject to re-opening at the discretion of the government. In January 2009, a purported class action complaint was filed in the Circuit Court of Garland County, Arkansas against the Company and certain of its subsidiaries and Garland Nursing & Rehabilitation Center (the “Center”). The complaint alleges that the defendants breached their statutory and contractual obligations to the patients of the Center over the five-year period prior to the filing of the complaints. The lawsuit remains in its early stages and has not yet been certified by the court as a class action. The Company intends to defend the lawsuit vigorously. We cannot currently predict with certainty the ultimate impact of any of the above cases on our financial condition, cash flows or results of operations. Our reserve for professional liability expenses does not include any amounts for the pending DOJ investigation or the purported class action against the Arkansas centers. An unfavorable outcome in any of these lawsuits or any of our professional liability actions, any regulatory action, any investigation or lawsuit alleging violations of fraud and abuse laws or of elderly abuse laws or any state or Federal False Claims Act case could subject us to fines, penalties and damages, including exclusion from the Medicare or Medicaid programs, and could have a material adverse impact on our financial condition, cash flows or results of operations. |
Quarterly Financial Information (Unaudited) |
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information (Unaudited) | QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Selected quarterly financial information for each of the quarters in the years ended December 31, 2018 and 2017 is as follows:
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Schedule II - Valuation of Qualifying Accounts of Continuing Operations |
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SEC Schedule, 12-09, Valuation and Qualifying Accounts [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SCHEDULE II - VALUATION OF QUALIFYING ACCOUNTS OF CONTINUING OPERATIONS | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS OF CONTINUING OPERATIONS (in thousands)
(1) Subsequent to the adoption of ASC 606, the allowance for doubtful accounts related to bad debt expense has been incorporated as an implicit price concession factored into net revenue and accounts receivable. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (in thousands)
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Business and Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the financial position, operations and accounts of Diversicare and its subsidiaries, all wholly-owned. All significant intercompany accounts and transactions have been eliminated in consolidation. Any joint ventures are accounted for using the equity method, which is an investment in an entity over which the Company lacks control, but otherwise has the ability to exercise significant influence over operating and financial policies. The Company had one equity method investee through the fourth quarter of 2016. The Company’s share of the profits and losses from this investment are reported in equity in net income of investment in unconsolidated affiliate and the proceeds received from the sale are reported in gain on sale of investment in unconsolidated affiliate in the accompanying consolidated statement of operations. |
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Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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Revenue Recognition | Revenue Recognition The fees charged by the Company to patients in its nursing centers are recorded on an accrual basis. These rates are contractually adjusted with respect to individuals receiving benefits under federal and state-funded programs and other third-party payors. Rates under federal and state-funded programs are determined prospectively for each center and may be based on the acuity of the care and services provided. These rates may be based on a center's actual costs subject to program ceilings and other limitations or on established rates based on acuity and services provided as determined by the federal and state-funded programs. Amounts earned under federal and state programs with respect to nursing home patients are subject to review by the third-party payors which may result in retroactive adjustments. In the opinion of management, adequate provision has been made for any adjustments that may result from such reviews. Retroactive adjustments, if any, are recorded when objectively determinable, generally within three years of the close of a reimbursement year depending upon the timing of appeals and third-party settlement reviews or audits. |
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Allowance for Doubtful Accounts | Allowance for Doubtful Accounts The Company's allowance for doubtful accounts is estimated utilizing current agings of accounts receivable, historical collections data and other factors. Management monitors these factors and determines the estimated provision for doubtful accounts. Historical bad debts have generally resulted from uncollectible private balances, some uncollectible coinsurance and deductibles and other factors. Receivables that are deemed to be uncollectible are written off. The allowance for doubtful accounts balance is assessed on a quarterly basis, with changes in estimated losses being recorded in the Consolidated Statements of Operations in the period identified. |
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Lease Expense | Lease Expense As of December 31, 2018, the Company operates 57 nursing centers under operating leases, including 34 owned by Omega, 20 owned by Golden Living and three owned by other parties. The Company's operating leases generally require the Company to pay stated rent, subject to increases based on changes in the Consumer Price Index, a minimum percentage increase, or increases in the net revenues of the leased properties. The Company's Omega and Golden Living leases require the Company to pay certain scheduled rent increases. Such scheduled rent increases are recorded as additional lease expense on a straight-line basis recognized over the term of the related leases and the difference between the amounts recorded for rent expense as compared to rent payments as an accrued liability. See Note 2, "Business Development and Other Significant Transactions" and Note 9, "Commitments and Contingencies" for a discussion regarding the Company's Master Leases with Omega and Golden Living and the addition of certain leased centers. |
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Classification of Expenses | Classification of Expenses The Company classifies all expenses (except lease, interest, depreciation and amortization expenses) that are associated with its corporate and regional management support functions as general and administrative expenses. All other expenses (except lease, professional liability, interest, depreciation and amortization expenses) incurred by the Company at the center level are classified as operating expenses. |
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Property and Equipment | Property and Equipment Property and equipment are recorded at cost or at fair value determined on the respective dates of acquisition for assets obtained in a business combination, with depreciation and amortization being provided over the shorter of the remaining lease term (where applicable) or the assets' estimated useful lives on the straight-line basis as follows:
Interest incurred during construction periods for qualifying expenditures is capitalized as part of the building cost. Maintenance and repairs are expensed as incurred, and major betterments and improvements are capitalized. The Company routinely evaluates the recoverability of the carrying value of its long-lived assets, including when significant adverse changes in the general economic conditions and significant deteriorations of the underlying undiscounted cash flows or fair values of the property indicate that the carrying amount of the property may not be recoverable. If circumstances suggest that the recorded amounts are not recoverable based upon estimated future undiscounted cash flows, the carrying values of such assets are reduced to fair value. |
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Cash | Cash Cash and cash equivalents include cash on deposit with banks and all highly liquid investments with original maturities of three months or less when purchased. Our cash on deposit with banks was subject to the Federal Deposit Insurance Corporation ("FDIC") minimum insurance levels. Effective January 1, 2013, the coverage provided by the FDIC that had been unlimited under the Dodd-Frank Deposit Insurance Provision is limited to the legal maximum, which is generally $250,000 per ownership category. |
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Deferred Financing and Other Costs | Deferred Financing and Other Costs The Company records deferred financing and lease costs for direct and incremental expenditures related to entering into or amending debt and lease agreements. These expenditures include lenders and attorneys fees. Financing costs are amortized using the effective interest method over the term of the related debt. The amortization is reflected as interest expense in the accompanying consolidated statements of operations. Deferred lease costs are amortized on a straight-line basis over the term of the related leases. See Note 5, "Long-term Debt, Interest Rate Swap and Capitalized Lease Obligations" for further discussion. |
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Acquired Leasehold Interest | Acquired Leasehold Interest The Company has recorded an acquired leasehold interest intangible asset related to an acquisition completed during 2007. The intangible asset is accounted for in accordance with the Financial Accounting Standards Board's ("FASB") guidance on goodwill and other intangible assets, and is amortized on a straight-line basis over the remaining life of the acquired lease. As discussed in Note 2, "Business Developments and Other Significant Transactions," the Company entered into a new Master Lease agreement with Omega on October 1, 2018. The new Master Lease includes the seven centers to which the intangible asset relates. As such, the intangible asset is now being amortized over an adjusted remaining life, consistent with the term of the new Master Lease, which goes through September 30, 2030. Amortization expense of approximately $384 related to this intangible asset was recorded during each of the years ended December 31, 2018, 2017 and 2016, respectively. The carrying value of the acquired leasehold interest intangible and the accumulated amortization are as follows:
The Company evaluates the recoverability of the carrying value of the acquired leasehold intangible in accordance with the FASB's guidance on accounting for the impairment or disposal of long-lived assets. Included in this evaluation is whether significant adverse changes in general economic conditions, and significant deteriorations of the underlying cash flows or fair values of the intangible asset, indicate that the carrying amount of the intangible asset may not be recoverable. The need to recognize an impairment charge is based on estimated future undiscounted cash flows from the asset compared to the carrying value of that asset. If recognition of an impairment charge is necessary, it is measured as the amount by which the carrying amount of the intangible asset exceeds the fair value of the intangible asset. |
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Self Insurance | Self-Insurance Self-insurance liabilities primarily represent the unfunded accrual for self-insured risks associated with general and professional liability claims, employee health insurance and workers' compensation. The Company's health insurance liability is based on known claims incurred and an estimate of incurred but unreported claims determined by an analysis of historical claims paid. The Company's workers' compensation liability relates primarily to periods of self insurance and consists of an estimate of the future costs to be incurred for the known claims. Final determination of the Company's actual liability for incurred general and professional liability claims is a process that takes years. The Company evaluates the adequacy of this liability on a quarterly basis. Semi-annually, the Company retains a third-party actuarial firm to assist in the evaluation of this unfunded accrual. Since May 2012, Merlinos & Associates, Inc. (“Merlinos”) has assisted management in the preparation of the appropriate accrual for incurred but not reported general and professional liability claims based on data furnished by the Company. Merlinos primarily utilizes historical data regarding the frequency and cost of the Company's past claims over a multi-year period, industry data and information regarding the number of occupied beds to develop its estimates of the Company's ultimate professional liability cost for current periods. On a quarterly basis, the Company obtains reports of asserted claims and lawsuits incurred. These reports, which are provided by the Company's insurers and a third party claims administrator, contain information relevant to the actual expense already incurred with each claim as well as the third-party administrator's estimate of the anticipated total cost of the claim. This information is reviewed by the Company quarterly and provided to the actuary semi-annually. Based on the Company's evaluation of the actual claim information obtained, the semi-annual estimates received from the third-party actuary, the amounts paid and committed for settlements of claims and on estimates regarding the number and cost of additional claims anticipated in the future, the reserve estimate for a particular period may be revised upward or downward on a quarterly basis. Any increase in the accrual has an unfavorable impact on results of operations in the period and any reduction in the accrual increases results of operations during the period. All losses are projected on an undiscounted basis. The self-insurance liabilities include estimates of liability for incurred but not reported claims, estimates of liability for reported but unresolved claims, actual liabilities related to settlements, including settlements to be paid over time, and estimates of related legal costs incurred and expected to be incurred. One of the key assumptions in the actuarial analysis is that historical losses provide an accurate forecast of future losses. Changes in legislation such as tort reform, changes in our financial condition, changes in our risk management practices and other factors may affect the severity and frequency of claims incurred in future periods as compared to historical claims. The facts and circumstances of each claim vary significantly, and the amount of ultimate liability for an individual claim may vary due to many factors, including whether the case can be settled by agreement, the quality of legal representation, the individual jurisdiction in which the claim is pending, and the views of the particular judge or jury deciding the case. Although the Company adjusts its unfunded accrual for professional and general liability claims on a quarterly basis and retains a third-party actuarial firm semi-annually to assist management in estimating the appropriate accrual, professional and general liability claims are inherently uncertain, and the liability associated with anticipated claims is very difficult to estimate. Professional liability cases have a long cycle from the date of an incident to the date a case is resolved, and final determination of the Company's actual liability for claims incurred in any given period is a process that takes years. As a result, the Company's actual liabilities may vary significantly from the unfunded accrual, and the amount of the accrual has and may continue to fluctuate by a material amount in any given period. Each change in the amount of this accrual will directly affect the Company's results of operations and financial position for the period in which the change in accrual is made. |
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Income Taxes | Income Taxes Effective January 1, 2018, the Tax Act reduced the corporate rate from 35% to 21%. The Company has adopted ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraph Pursuant to SEC Staff Accounting Bulletin No. 118, which allows the company to record provisional amounts during the period of enactment. Any change to the provisional amounts are recorded as an adjustment to the provision for income taxes in the period the amounts are determined. During the year ended December 31, 2017, the company recognized a provisional net deferred income tax expense of $5,476 to reflect the revaluation of the Company’s net deferred tax assets based on the U.S. federal tax rate of 21%. In accordance with SAB 118, the Tax Act related income tax effects that were initially reported as provisional estimates were refined as additional analysis was performed. The Company follows the FASB's guidance on Accounting for Income Taxes, which requires the asset and liability method of accounting for income taxes whereby deferred income taxes are recorded for the future tax consequences attributable to differences between the financial statement and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are provided against any estimated non-realizable deferred tax assets where necessary. Where the Company believes that a tax position is supportable for income tax purposes, the item is included in its income tax returns. Where treatment of a position is uncertain, liabilities are recorded based upon the Company’s evaluation of the “more likely than not” outcome considering the technical merits of the position. While the judgments and estimates made by the Company are based on management’s evaluation of the technical merits of a matter, historical experience and other assumptions that management believes are appropriate and reasonable under current circumstances, actual resolution of these matters may differ from recorded estimated amounts, resulting in charges or credits that could materially affect future financial statements. See Note 8, "Income Taxes" for additional information related to the provision for income taxes. |
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Disclosure of Fair Value of Financial Instruments | Disclosure of Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. In calculating fair value, a company must maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the details of such fair value measurements. The carrying amounts of cash, receivables, trade accounts payable and accrued expenses approximate fair value because of the short-term nature of these accounts. The Company's self-insurance liabilities are reported on an undiscounted basis as the timing of estimated settlements cannot be determined. The Company follows the FASB's guidance on Fair Value Measurements and Disclosures which provides rules for using fair value to measure assets and liabilities as well as a fair value hierarchy that prioritizes the information used to develop the measurements. It applies whenever other guidance requires (or permits) assets or liabilities to be measured at fair value and gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). A summary of the fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels is described below: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. As further discussed in Note 5, "Long-term Debt, Interest Rate Swap and Capitalized Lease Obligations", in conjunction with the debt agreements entered into in February 2016, the Company entered into an interest rate swap agreement with a member of the bank syndicate as the counterparty. The applicable guidance requires companies to recognize all derivative instruments as either assets or liabilities at fair value in a company's balance sheets. As the Company's interest rate swap, a cash flow hedge, is not traded on a market exchange, the fair value is determined using a valuation model based on a discounted cash flow analysis. This analysis reflects the contractual terms of the interest rate swap agreement and uses observable market-based inputs, including estimated future LIBOR interest rates. The fair value of the Company's interest rate swap is the net difference in the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on the expectation of future interest rates and are observable inputs available to a market participant. The interest rate swap valuation is classified in Level 2 of the fair value hierarchy. The debt balances as presented in the consolidated balance sheets approximate the fair value of the respective instruments as the debt is at a variable rate, the estimates of which are considered Level 2 fair value calculations within the fair value hierarchy. |
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Net Income (Loss) per Common Share | Net Loss per Common Share The Company follows the FASB's guidance on Earnings Per Share for the financial reporting of net loss per common share. Basic earnings per common share excludes dilution and restricted shares and is computed by dividing income available to common shareholders by the weighted-average number of common shares, excluding restricted shares, outstanding for the period. Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or otherwise resulted in the issuance of common stock that then shared in the earnings of the Company. See Note 7, "Net Loss per Common Share" for additional disclosures about the Company's Net Loss per Common Share. |
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Stock Based Compensation | Stock Based Compensation The Company follows the FASB's guidance on Stock Compensation to account for share-based payments granted to team members and recorded non-cash stock based compensation expense of $1,127, $1,027 and $1,012 during the years ended December 31, 2018, 2017 and 2016, respectively. Such amounts are included as components of general and administrative expense or operating expense based upon the classification of cash compensation paid to the related employees. See Note 6, "Shareholders' Equity, Stock Plans and Preferred Stock" for additional disclosures about the Company's stock based compensation plans. |
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Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income Accumulated other comprehensive income consists of other comprehensive income (loss). Comprehensive income (loss) is a more inclusive financial reporting method that includes disclosure of financial information that historically has not been recognized in the calculation of net income (loss). The Company has chosen to present the components of other comprehensive income (loss) in a separate statement of comprehensive income (loss). Currently, the Company's other comprehensive income (loss) consists of the change in fair value of the Company's interest rate swap transaction accounted for as a cash flow hedge. |
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Recent Accounting Guidance | Recent Accounting Standards Adopted by the Company In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), which outlines a single comprehensive model for recognizing revenue and supersedes most existing revenue recognition guidance, including guidance specific to the healthcare industry. For public companies, Topic 606 is effective for annual and interim reporting periods beginning after December 15, 2017. The Company adopted the requirements of this standard effective January 1, 2018. The Company elected to apply the modified retrospective approach with the cumulative transition effect recognized in beginning retained earnings as of the date of adoption. The impact of the implementation to the consolidated financial statements for periods subsequent to the adoption is not material. See Note 3, "Revenue Recognition and Receivables" for a discussion regarding revenue recognition under the new standard. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU was issued as part of the FASB Simplification Initiative and involves several aspects of accounting for share-based payment transactions, including the income tax consequences and classification on the statement of cash flows. We adopted this standard as of January 1, 2017. The adoption did not have a material impact on our financial position, results of operations or cash flows. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). The ASU provides clarification regarding how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The ASU is effective for annual and interim periods beginning after December 15, 2017, which required the Company to adopt these provisions in the first quarter of fiscal 2018 using a retrospective approach. The adoption did not have a material impact on our financial position, results of operations or cash flows. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that the Statement of Cash Flows explain the changes during the period of cash and cash equivalents inclusive of amounts categorized as Restricted Cash. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for periods beginning after December 15, 2017, which required the Company to adopt these provisions in the first quarter of fiscal 2018. The adoption did not have a material impact on our financial position, results of operation or cash flows. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business, which provides guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The adoption is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted in certain circumstances. The Company will evaluate future acquisitions and dispositions under this guidance, which may result in future acquisitions being accounted for as asset acquisitions. In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. The amended standard specifies the modification accounting applicable to any entity which changes the terms or conditions of a share-based payment award. The new guidance is effective for all entities after December 15, 2017. The adoption did not have a material impact on our financial position, results of operations or cash flows. In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs pursuant to SEC Staff Accounting Bulletin No. 118 ("SAB No. 118"), which allowed SEC registrants to record provisional amounts in earnings for the year ended December 31, 2017 due to the complexities involved in accounting for the enactment of the Tax Cuts and Jobs Act. The Company recognized the estimated income tax effects of the Tax Cuts and Jobs Act in its 2017 Consolidated Financial Statements in accordance with SAB No. 118. Accounting Standards Recently Issued But Not Yet Adopted by the Company In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. In July 2018, the FASB issued ASU 2018-11, Leases - Targeted Improvements, which allows lessees and lessors to recognize and measure existing leases at the beginning of the period of adoption without modifying the comparative period financial statements (which therefore will remain under prior GAAP, Topic 840, Leases). The Company will adopt the requirements of this standard effective January 1, 2019. The Company elected to use the optional expedient to recognize existing leases in the period of adoption, January 1, 2019, rather than the earliest period presented. For periods presented under Topic 842, extensive quantitative and qualitative disclosures will be required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company has organized an implementation group of cross-functional departmental management to ensure the completeness of the lease information (specifically for new contracts entered into after the adoption date), analyze the appropriate classification of leases under the new standard, and develop new processes to execute, approve and classify new leases on an ongoing basis. The Company has also implemented software tools and processes to maintain lease information critical to applying the standard, including implemented changes to the systems, related processes and controls around leases. The Company elected to use the package of practical expedients upon transition, which includes retaining the lease classification for any leases that exist prior to adoption of the standard. The Company is currently in the process of evaluating the appropriate incremental borrowing rate under Topic 842. The implementation of this standard will have a material impact on the consolidated financial position, primarily from nursing center operating leases. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Loses on Financial Instruments. This update is intended to improve financial reporting by requiring timelier recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. This update requires that financial statement assets measured at an amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. This standard is effective for the fiscal year beginning after December 15, 2019 with early adoption permitted. The Company is in the initial stages of evaluating the impact from the adoption of this new standard on the consolidated financial statements and related notes. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which is intended to simplify and amend the application of hedge accounting to more clearly portray the economics of an entity’s risk management strategies in its financial statements. The new guidance will make more financial and nonfinancial hedging strategies eligible for hedge accounting and reduce complexity in fair value hedges of interest rate risk. The new guidance also changes how companies assess effectiveness and amends the presentation and disclosure requirements. The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally the entire change in the fair value of a hedging instrument will be required to be presented in the same income statement line as the hedged item. The new guidance also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. The new guidance is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted in any interim period or fiscal year before the effective date. The implementation is complete and the Company will adopt the new standard on January 1, 2019. The standard has an immaterial impact on our consolidated financial statements and related disclosures. In February 2018, the FASB issued ASU No. 2018-02, Income Statement- Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The new guidance allows entities the option to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income (OCI) to retained earnings. The new guidance allows the option to apply the guidance retrospectively or in the period of adoption. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the effect of this guidance will have on our consolidated financial statements and related disclosures. In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which modifies the accounting for share-based payment awards issued to nonemployees to largely align it with the accounting for share-based payment awards issued to employees. The standard is effective for fiscal years beginning after December 15, 2018. The Company is evaluating the effect of this guidance will have on our consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820. The standard is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is evaluating the effect of this guidance will have on our consolidated financial statements and related disclosures. In October 2018, FASB issued ASU No. 2018-16, Derivatives and Hedging (Topic 805): Inclusion of the Secured Overnight Financing Rate ("SOFR") Overnight Index Swap ("OIS") Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The ASU amends ASC 815 to add the OIS rate based on the SOFR as a fifth US benchmark interest rate. The Company is evaluating the effect of this guidance will have on our consolidated financial statements and related disclosures. |
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Revenue from Contract with Customer | On January 1, 2018, the Company adopted Accounting Standards Codification ("ASC") 606 using the modified retrospective method for all contracts as of the date of adoption. The reported results for 2018 reflect the application of ASC 606 guidance while the reported results for 2017 were prepared under the guidance of ASC 605, Revenue Recognition (ASC 605), which is also referred to herein as "legacy GAAP". The adoption of ASC 606 represents a change in accounting principle that more closely aligns revenue recognition with the delivery of the Company's services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. ASC 606 requires companies to exercise more judgment and recognize revenue in accordance with the standard's core principle by applying the following five steps: Step 1: Identify the contract with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. Performance obligations are promises made in a contract to transfer a distinct good or service to the customer. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company has concluded that the contracts with patients and residents represent a bundle of distinct services that are substantially the same, with the same pattern of transfer to the customer. Accordingly, the promise to provide quality care is accounted for as a single performance obligation. The Company performed analyses using the application of the portfolio approach as a practical expedient to group patient contracts with similar characteristics, such that revenue for a given portfolio would not be materially different than if it were evaluated on a contract-by-contract basis. These analyses incorporated consideration of reimbursements at varying rates from Medicaid, Medicare, Managed Care, Private Pay, Assisted Living, Hospice, and Veterans for services provided in each corresponding state. It was determined that the contracts are not materially different for the following groups: Medicaid, Medicare, Managed Care and Private Pay and other (Assisted Living, Hospice and Veterans). In order to determine the transaction price, the Company estimates the amount of variable consideration at the beginning of the contract using the expected value method. The estimates consider (i) payor type, (ii) historical payment trends, (iii) the maturity of the portfolio, and (iv) geographic payment trends throughout a class of similar payors. The Company typically enters into agreements with third-party payors that provide for payments at amounts different from the established charges. These arrangement terms provide for subsequent settlement and cash flows that may occur well after the service is provided. The Company constrains (reduces) the estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract. Changes in the Company's expectation of the amount it will receive from the patient or third-party payors will be recorded in revenue unless there is a specific event that suggests the patient or third-party payor no longer has the ability and intent to pay the amount due and, therefore, the changes in its estimate of variable consideration better represent an impairment, or bad debt. These estimates are re-assessed each reporting period, and any amounts allocated to a satisfied performance obligation are recognized as revenue or a reduction of revenue in the period in which the transaction price changes. The Company satisfies its performance obligation by providing quality of care services to its patients and residents on a daily basis until termination of the contract. The performance obligation is recognized on a time elapsed basis, by day, for which the services are provided. For these contracts, the Company has the right to consideration from the customer in an amount that directly corresponds with the value to the customer of the Company's performance to date. Therefore, the Company recognizes revenue based on the amount billable to the customer in accordance with the practical expedient in ASC 606-10-55-18. Additionally, because the Company applied ASC 606 using certain practical expedients, the Company elected not to disclose the aggregate amount of the transaction price for unsatisfied, or partially unsatisfied, performance obligations for all contracts with an original expected length of one year or less. The Company incurs costs related to patient/resident contracts, such as legal and advertising expenses. The contract costs are expensed as incurred. They are not expected to be recovered and are not chargeable to the patient/resident regardless of whether the contract is executed. |
Business and Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Estimated Useful Lives | Property and equipment are recorded at cost or at fair value determined on the respective dates of acquisition for assets obtained in a business combination, with depreciation and amortization being provided over the shorter of the remaining lease term (where applicable) or the assets' estimated useful lives on the straight-line basis as follows:
Property and equipment, at cost, consists of the following:
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Schedule of Acquired Finite-Lived Intangible Assets by Major Class | The carrying value of the acquired leasehold interest intangible and the accumulated amortization are as follows:
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | The expected amortization expense for the acquired leasehold interest intangible asset is as follows:
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Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The following table presents by level, within the fair value hierarchy, assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and 2017:
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Business Developments and Other Significant Transactions (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Allocated Purchase Price | The allocation of the purchase price to the net assets acquired is as follows:
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Revenue Recognition and Receivables (Tables) |
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Schedule of New Accounting Pronouncements and Changes in Accounting Principles | As a result of applying the modified retrospective method to adopt ASC 606, the following adjustments were made to our operating results:
(a) Adjusts for the implicit price concession of bad debt expense. (b) Adjusts for the implementation of ASC 606.
(a) Adjusts for the implementation of ASC 606. (b) Adjusts for a direct reduction of accounts receivable that would have been reflected as allowance for doubtful accounts in the consolidated balance sheet prior to the adoption of ASC 606. (c) Reflects the tax impact of $46 for the ASC 606 adjustment of $487. |
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Disaggregation of Revenue | The following table summarizes revenue from contracts with customers by payor source for the periods presented (dollar amounts in thousands):
(1) As noted above, prior period amounts have not been adjusted under the application of the modified retrospective method. |
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Schedule of Accounts, Notes, Loans and Financing Receivable | Accounts receivable as of December 31, 2018 and 2017 is summarized in the following table:
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Property and Equipment (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment, at cost | Property and equipment are recorded at cost or at fair value determined on the respective dates of acquisition for assets obtained in a business combination, with depreciation and amortization being provided over the shorter of the remaining lease term (where applicable) or the assets' estimated useful lives on the straight-line basis as follows:
Property and equipment, at cost, consists of the following:
|
Long-Term Debt, Interest Rate Swap and Capitalized Lease Obligations (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long Term Debt | Long-term debt consists of the following:
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Schedule of Deferred Financing Costs | In connection with the Company's 2018 and 2017 financing agreements, the Company recorded the following amounts related to deferred loan costs, with such costs classified as a reduction of the debt balances discussed above:
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Scheduled Principal Payments of Long-term Debt | Scheduled principal payments of long-term debt are as follows:
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Scheduled Payments of Capitalized Lease Obligations | Scheduled payments of the capitalized lease obligations are as follows:
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Shareholders' Equity, Stock Plans and Preferred Stock (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | The table below shows the weighted average assumptions the Company used to develop the fair value estimates under its option valuation model:
___________
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Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | The table below describes the resulting weighted average grant date fair values calculated as well as the intrinsic value of options exercised under the Company's equity awards during each of the following years:
___________
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Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range | The following table summarizes information regarding stock options and SOSAR grants outstanding as of December 31, 2018:
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Disclosure of Share-based Compensation Arrangements by Share-based Payment Award | Summarized activity of the equity compensation plans is presented below:
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Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity |
Summarized activity of the Restricted Share Units for the Stock Purchase Plan is as follows:
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Net Loss Per Common Share (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic and diluted net income (loss) per common share | Information with respect to the calculation of basic and diluted net income (loss) per common share is presented below:
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following table reflects the weighted average outstanding SOSARs and Options that were excluded from the computation of diluted earnings per share, as they would have been anti-dilutive:
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Income Taxes (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Income before Income Tax, Domestic and Foreign | The provision (benefit) for income taxes on continuing operations for the years ended December 31, 2018, 2017 and 2016 is summarized as follows:
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Schedule of Components of Income Tax Expense (Benefit) | A reconciliation of taxes computed at statutory income tax rates on income (loss) from continuing operations is as follows:
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Schedule of Deferred Tax Assets and Liabilities | The net deferred tax assets and liabilities, at the respective income tax rates, are as follows:
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Commitments and Contingencies (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contractual Obligation, Fiscal Year Maturity Schedule | Minimum annual rentals (exclusive of taxes, insurance, and maintenance costs) under these leases beginning January 1, 2019, are as follows:
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Schedule of Finite-Lived Intangible Assets | The leasehold improvement asset and accumulated amortization are as follows:
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Quarterly Financial Information (Unaudited) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Quarterly Financial Information | Selected quarterly financial information for each of the quarters in the years ended December 31, 2018 and 2017 is as follows:
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Business and Summary of Significant Accounting Policies - Schedule of Estimated Useful Lives (Details) |
12 Months Ended |
---|---|
Dec. 31, 2018 | |
Buildings and improvements | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 5 years |
Buildings and improvements | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 40 years |
Leasehold improvements | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 2 years |
Leasehold improvements | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 10 years |
Furniture, fixtures and equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 2 years |
Furniture, fixtures and equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 15 years |
Business and Summary of Significant Accounting Policies - Schedule of Acquired Leasehold Interest Intangible (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Net | $ 6,307 | |
Leases, acquired-in-place | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets | 10,652 | $ 10,652 |
Accumulated amortization | (4,345) | (3,961) |
Net | $ 6,307 | $ 6,691 |
Business and Summary of Significant Accounting Policies - Schedule of Expected Amortization Expense for Acquired Leasehold Interest Intangible Asset (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Accounting Policies [Abstract] | |
2019 | $ 534 |
2020 | 534 |
2021 | 534 |
2022 | 534 |
2023 | 534 |
Thereafter | 3,637 |
Net | $ 6,307 |
Business and Summary of Significant Accounting Policies - Schedule of Fair Value Measurements - Assets and Liabilities (Details) - Interest rate swap - Fair value, measurements, recurring - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets (liabilities) at fair value | $ 384 | $ 211 |
Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets (liabilities) at fair value | 0 | 0 |
Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets (liabilities) at fair value | 384 | 211 |
Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets (liabilities) at fair value | $ 0 | $ 0 |
Business Developments and Other Significant Transactions - Schedule of Allocated Purchase Price (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Jun. 08, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
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Business Acquisition [Line Items] | ||||
Gain on bargain purchase | $ 0 | $ 925 | $ 0 | |
Selma Nursing Centers | ||||
Business Acquisition [Line Items] | ||||
Purchase Price | $ 8,750 | |||
Gain on bargain purchase | $ 925 | |||
Assets acquired | 9,675 | |||
Building | 8,435 | |||
Land | 760 | |||
Land Improvements | 145 | |||
Furniture, Fixtures and Equipment | $ 335 |
Property and Equipment (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property and equipment, at cost | $ 138,460 | $ 147,549 |
Less: accumulated depreciation | (85,361) | (78,345) |
Net property and equipment | 53,099 | 69,204 |
Land | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, at cost | 5,283 | 6,521 |
Buildings and leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, at cost | 87,995 | 98,140 |
Furniture, fixtures and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, at cost | $ 45,182 | $ 42,888 |
Long-Term Debt, Interest Rate Swap and Capitalized Lease Obligations - Schedule of Deferred Loan Costs (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Debt Instrument [Line Items] | |||
Write-off of deferred financing costs | $ 267 | $ 0 | $ 351 |
Amended and restated credit agreement | |||
Debt Instrument [Line Items] | |||
Write-off of deferred financing costs | 267 | 0 | |
Deferred financing costs capitalized | $ 146 | $ 195 |
Long-Term Debt, Interest Rate Swap and Capitalized Lease Obligations - Schedule of Principal Payments of Long Term Debt Instruments (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Disclosure [Abstract] | ||
Deferred financing costs, net | $ 1,125 | $ 1,884 |
2019 | 11,995 | |
2020 | 8,993 | |
2021 | 52,642 | |
Total | $ 73,630 | $ 88,107 |
Long-Term Debt, Interest Rate Swap and Capitalized Lease Obligations - Interest Rate Swap Cash Flow Hedge (Details) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Derivative [Line Items] | ||
Accumulated other comprehensive income | $ 837,000 | $ 709,000 |
Interest rate swap | ||
Derivative [Line Items] | ||
Notional amount of interest rate swap | $ 27,695,000 | |
Long-term debt fixed based on the interest rate swap | 5.79% | |
Net asset of interest rate swap | $ 384,000 | |
Accumulated other comprehensive income | 234,000 | |
Income tax benefit, interest rate swap | $ 150,000 |
Long-Term Debt, Interest Rate Swap and Capitalized Lease Obligations - Capital Lease Obligations (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Capital Leased Assets [Line Items] | ||
Plus capitalized lease obligations | $ 928 | $ 1,445 |
Minimum | ||
Capital Leased Assets [Line Items] | ||
Lease agreement term | 3 years | |
Maximum | ||
Capital Leased Assets [Line Items] | ||
Lease agreement term | 5 years |
Long-Term Debt, Interest Rate Swap and Capitalized Lease Obligations - Scheduled Payments of Capital Lease Obligations (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2019 | $ 500 |
2020 | 202 |
2021 | 189 |
2022 | 131 |
Total | 1,022 |
Amounts related to interest | (94) |
Principal payments on capitalized lease obligation | $ 928 |
Shareholders' Equity, Stock Plans and Preferred Stock - Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected dividends | 2.70% | |
Weighted average expected term (years) | 6 years | |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected volatility (range) | 47.00% | |
Risk free interest rate (range) | 2.68% | |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected volatility (range) | 49.00% | |
Risk free interest rate (range) | 2.75% |
Shareholders' Equity, Stock Plans and Preferred Stock - Schedule of Weighted Average Grant Date Fair Value and Total Intrinsic Value of Exercises (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||
Weighted average grant date fair value (in dollars per share) | $ 3.05 | $ 0.00 | $ 0.00 |
Total intrinsic value of exercises | $ 115 | $ 2 | $ 3 |
Shareholders' Equity, Stock Plans and Preferred Stock - Preferred Stock (Details) |
Dec. 31, 2018
shares
|
---|---|
Series A Preferred Stock | |
Class of Stock [Line Items] | |
Preferred stock, shares authorized | 200,000 |
Net Loss Per Common Share - Calculation of Net Income (Loss) Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Numerator: Loss: | |||||||||||
Loss from continuing operations | $ 423 | $ (7,389) | $ (307) | $ (81) | $ (5,947) | $ (581) | $ 381 | $ 1,348 | $ (7,354) | $ (4,799) | $ (1,744) |
Loss from discontinued operations, net of income taxes | (42) | (28) | (67) | ||||||||
Net loss | $ (7,396) | $ (4,827) | $ (1,811) | ||||||||
Denominator: Basic Weighted Average Common Shares Outstanding (in shares) | 6,372 | 6,279 | 6,199 | ||||||||
Basic net loss per common share | |||||||||||
Income (loss) from continuing operations (in dollars per share) | $ 0.07 | $ (1.15) | $ (0.05) | $ (0.01) | $ (0.94) | $ (0.09) | $ 0.06 | $ 0.22 | $ (1.15) | $ (0.76) | $ (0.28) |
Loss from discontinued operations | |||||||||||
Operating loss, net of taxes (in dollars per share) | (0.01) | (0.01) | (0.01) | ||||||||
Discontinued operations (in dollars per share) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | (0.01) | (0.01) | (0.01) |
Net income (loss) (in dollars per share) | 0.07 | (1.15) | (0.05) | (0.01) | (0.94) | (0.09) | 0.06 | 0.22 | $ (1.16) | $ (0.77) | $ (0.29) |
Weighted Average Common Shares Outstanding: | |||||||||||
Denominator: Basic Weighted Average Common Shares Outstanding (in shares) | 6,372 | 6,279 | 6,199 | ||||||||
Incremental shares from assumed exercise of options, SOSARS and Restricted Stock Units (in shares) | 0 | 0 | 0 | ||||||||
Denominator: Diluted Weighted Average Common Shares Outstanding: (in shares) | 6,372 | 6,279 | 6,199 | ||||||||
Diluted net loss per common share | |||||||||||
Income (loss) from continuing operations (in dollars per share) | 0.07 | (1.15) | (0.05) | (0.01) | (0.94) | (0.09) | 0.06 | 0.21 | $ (1.15) | $ (0.76) | $ (0.28) |
Operating loss, net of taxes (in dollars per share) | (0.01) | (0.01) | (0.01) | ||||||||
Discontinued operations, net of taxes (in dollars per share) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | (0.01) | (0.01) | (0.01) |
Diluted net income (loss) per common share (in dollars per share) | $ 0.07 | $ (1.15) | $ (0.05) | $ (0.01) | $ (0.94) | $ (0.09) | $ 0.06 | $ 0.21 | $ (1.16) | $ (0.77) | $ (0.29) |
Net Loss Per Common Share - Schedule of Antidilutive Securities Excluded from the Computation of Earnings Per Share (Details) - shares shares in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Earnings Per Share [Abstract] | |||
SOSARs/Options Excluded | 114,000 | 45,000 | 31,000 |
Income Taxes - Narrative (Details) - USD ($) $ in Thousands |
12 Months Ended | 36 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2018 |
|
Income Tax Disclosure [Line Items] | ||||
Tax Cuts and Jobs Act, income tax expense | $ 0 | $ 5,476 | $ 0 | |
Cumulative pre-tax income (loss) from continuing operations | (8,104) | 1,944 | (2,774) | $ (8,934) |
Net operating losses | 6,028 | 6,028 | ||
Deferred tax benefit to reverse valuation allowance | (147) | (357) | (47) | |
Work Opportunity Tax Credit | ||||
Income Tax Disclosure [Line Items] | ||||
Employment tax credit | 64 | $ 210 | $ 550 | |
IRS | ||||
Income Tax Disclosure [Line Items] | ||||
Operating loss carryforwards limited by change in ownership provisions | $ 1,162 | $ 1,162 |
Income Taxes - Schedule of Components of Income Tax Expense (Benefit) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Current provision (benefit) : | |||
Federal | $ (49) | $ 274 | $ 17 |
State | (86) | 472 | 522 |
Total current | (135) | 746 | 539 |
Deferred provision (benefit): | |||
Federal | 50 | 6,585 | (1,284) |
State | (665) | (588) | (285) |
Total deferred | (615) | 5,997 | (1,569) |
Provision (benefit) for income taxes of continuing operations | $ (750) | $ 6,743 | $ (1,030) |
Income Taxes - Income Tax Reconciliation (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Tax Expense (Benefit), Continuing Operations, Income Tax Reconciliation [Abstract] | |||
Provision (benefit) for federal income taxes at statutory rates | $ (1,672) | $ 711 | $ (889) |
Provision for state income taxes, net of federal benefit | (479) | 421 | 120 |
Valuation allowance changes affecting the provision for income taxes | (146) | (372) | (45) |
Employment tax credits | (64) | (217) | (529) |
Nondeductible expenses | 1,919 | 496 | 453 |
Stock based compensation expense | 15 | (35) | (62) |
Effect of Tax Cuts and Jobs Creation Act | 0 | 5,476 | 0 |
Other | (323) | 263 | (78) |
Provision (benefit) for income taxes of continuing operations | $ (750) | $ 6,743 | $ (1,030) |
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Deferred tax assets (liabilities): | ||
Net operating loss and other carryforwards | $ 324 | $ 495 |
Credit carryforwards | 2,878 | 3,237 |
Allowance for doubtful accounts | 4,570 | 3,626 |
Prepaid expenses | (1,022) | (731) |
Interest rate limitation | 148 | 0 |
Deferred lease costs | 0 | 32 |
Depreciation | 1,318 | 1,190 |
Tax goodwill and intangibles | (1,079) | (972) |
Stock-based compensation | 197 | 476 |
Accrued liabilities | 896 | 773 |
Accrued rent | 1,914 | 1,892 |
Kentucky and Kansas acquisition costs | 3 | 4 |
Impairment of long-lived assets | 191 | 186 |
Interest rate swap | (152) | (14) |
Hedge Ineffectiveness | (168) | (106) |
Noncurrent self-insurance liabilities | 5,997 | 5,443 |
Other | 64 | 0 |
Subtotal | 16,079 | 15,531 |
Less valuation allowance | (228) | (377) |
Total noncurrent deferred tax assets | $ 15,851 | $ 15,154 |
Commitments and Contingencies - Schedule of Future Operating Lease Payments (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2019 | $ 58,291 |
2020 | 59,391 |
2021 | 60,575 |
2022 | 61,808 |
2023 | 63,065 |
Thereafter | 321,797 |
Total committed under long term operating leases | $ 624,927 |
Commitments and Contingencies - Schedule of Leasehold Improvement (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Net | $ 6,307 | |
Omega Healthcare Investors, Inc | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Leasehold improvement | 921 | $ 921 |
Accumulated amortization | (921) | (842) |
Net | $ 0 | $ 79 |
Quarterly Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|||||||||||||
Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||
Patient revenues, net | $ 139,664 | $ 141,431 | $ 141,082 | $ 141,285 | $ 144,367 | $ 146,377 | $ 142,550 | $ 141,500 | |||||||||||||||
Professional liability expense | 2,906 | [1] | 2,933 | [1] | 3,182 | [1] | 2,775 | [1] | 2,753 | [2] | 2,617 | [2] | 2,724 | [2] | 2,670 | [2] | $ 11,796 | $ 10,764 | $ 8,456 | ||||
Loss from continuing operations | 423 | (7,389) | (307) | (81) | (5,947) | (581) | 381 | 1,348 | (7,354) | (4,799) | (1,744) | ||||||||||||
Income (loss) from discontinued operations | (8) | (8) | (4) | (22) | 14 | 1 | (28) | (15) | (42) | (28) | (67) | ||||||||||||
NET LOSS | $ 415 | $ (7,397) | $ (311) | $ (103) | $ (5,933) | $ (580) | $ 353 | $ 1,333 | $ (7,396) | $ (4,827) | $ (1,811) | ||||||||||||
Basic net loss per common share | |||||||||||||||||||||||
Income (loss) from continuing operations (in dollars per share) | $ 0.07 | $ (1.15) | $ (0.05) | $ (0.01) | $ (0.94) | $ (0.09) | $ 0.06 | $ 0.22 | $ (1.15) | $ (0.76) | $ (0.28) | ||||||||||||
Loss from discontinued operations (in dollars per share) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | (0.01) | (0.01) | (0.01) | ||||||||||||
Net income (loss) (in dollars per share) | 0.07 | (1.15) | (0.05) | (0.01) | (0.94) | (0.09) | 0.06 | 0.22 | (1.16) | (0.77) | (0.29) | ||||||||||||
Diluted net loss per common share | |||||||||||||||||||||||
Income (loss) from continuing operations (in dollars per share) | 0.07 | (1.15) | (0.05) | (0.01) | (0.94) | (0.09) | 0.06 | 0.21 | (1.15) | (0.76) | (0.28) | ||||||||||||
Loss from discontinued operations (in dollars per share) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | (0.01) | (0.01) | (0.01) | ||||||||||||
Diluted net income (loss) per common share (in dollars per share) | $ 0.07 | $ (1.15) | $ (0.05) | $ (0.01) | $ (0.94) | $ (0.09) | $ 0.06 | $ 0.21 | $ (1.16) | $ (0.77) | $ (0.29) | ||||||||||||
|
Schedule II - Valuation of Qualifying Accounts of Continuing Operations (Schedule of Valuation and Qualifying Accounts) (Details) - USD ($) |
12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
||||||
Allowance for doubtful accounts | ||||||||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | ||||||||
Balance at Beginning of Period | $ 14,235,000 | $ 10,326,000 | $ 8,180,000 | |||||
Impact of ASC 606 Adoption | (14,235,000) | 0 | 0 | |||||
Charged to Costs and Expenses | 0 | 8,958,000 | 7,163,000 | |||||
Deductions | 0 | (5,049,000) | (5,017,000) | |||||
Balance at End of Period | 0 | 14,235,000 | 10,326,000 | |||||
Professional Liability Reserve | ||||||||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | ||||||||
Balance at Beginning of Period | 20,057 | 19,977 | 21,618 | |||||
Charged to Costs and Expenses | 8,865 | 7,935 | 6,423 | |||||
Charged to Other Accounts | [1] | 0 | 0 | 0 | ||||
Other | 5,475 | 0 | 114 | |||||
Payments | [2] | (7,196) | (7,855) | (8,178) | ||||
Balance at End of Period | 27,201 | 20,057 | 19,977 | |||||
Workers Compensation Reserve | ||||||||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | ||||||||
Balance at Beginning of Period | 867 | 171 | 227 | |||||
Charged to Costs and Expenses | (18) | 995 | 372 | |||||
Charged to Other Accounts | [1] | 0 | 0 | 0 | ||||
Other | 0 | 0 | 0 | |||||
Payments | [2] | (231) | (299) | (428) | ||||
Balance at End of Period | 618 | 867 | 171 | |||||
Health Insurance Reserve | ||||||||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | ||||||||
Balance at Beginning of Period | 1,326 | 1,019 | 686 | |||||
Charged to Costs and Expenses | 14,369 | 13,769 | 8,896 | |||||
Charged to Other Accounts | [1] | 0 | 0 | 0 | ||||
Other | 0 | 0 | (137) | |||||
Payments | [2] | (14,299) | (13,462) | (8,426) | ||||
Balance at End of Period | $ 1,396 | $ 1,326 | $ 1,019 | |||||
|
Label | Element | Value |
---|---|---|
Cash and Cash Equivalents, at Carrying Value | us-gaap_CashAndCashEquivalentsAtCarryingValue | $ 2,605,000 |
Cash and Cash Equivalents, at Carrying Value | us-gaap_CashAndCashEquivalentsAtCarryingValue | 3,524,000 |
Cash and Cash Equivalents, at Carrying Value | us-gaap_CashAndCashEquivalentsAtCarryingValue | $ 2,685,000 |
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