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Section 1: 8-K/A (8-K/A)

8-K/A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K/A

(Amendment No. 1)

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): February 1, 2019

Commission File Number: 0-24260

 

 

 

LOGO

AMEDISYS, INC.

(Exact Name of Registrant as specified in its Charter)

 

 

 

Delaware   11-3131700

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

3854 American Way, Suite A, Baton Rouge, LA 70816

(Address of principal executive offices, including zip code)

(225) 292-2031 or (800) 467-2662

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

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.  ☐

 

 

 


SECTION 2 — FINANCIAL INFORMATION

ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS

As reported in the Current Report on Form 8-K filed by Amedisys, Inc. (“we,” “us,” “our” or the “Company”) on February 4, 2019, the Company completed the acquisition of Compassionate Care Hospice Group, Inc. (“CCH”) on February 1, 2019.

This Current Report on Form 8-K/A is being filed as an amendment (“Amendment No. 1”) to the Current Report on Form 8-K filed by the Company on February 4, 2019. This Amendment No. 1 is being filed solely to provide the historical financial statements of CCH and unaudited pro forma information described in Item 9.01 below.

SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial statements of businesses acquired

The audited consolidated and combined financial statements of Compassionate Care Hospice Group, Inc. and Subsidiaries and Affiliates as of and for the years ended December 31, 2017 and 2016 and the unaudited interim condensed consolidated and combined financial statements as of September 30, 2018 and for the nine-month periods ended September 30, 2018 and 2017, are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and are included herein.

(b) Pro forma financial information

The unaudited pro forma consolidated and combined financial information as of and for the year ended December 31, 2018 is attached hereto as Exhibit 99.3.

(d) Exhibits

 

    

   23.1    Consent of BDO USA, LLP, Independent Auditors for CCH and Subsidiaries and Affiliates.
   99.1    Audited consolidated and combined financial statements of Compassionate Care Hospice Group, Inc. and Subsidiaries and Affiliates as of and for the years ended December 31, 2017 and 2016.
   99.2    Unaudited interim condensed consolidated and combined financial statements of Compassionate Care Hospice Group, Inc. and Subsidiaries and Affiliates as of September  30, 2018 and for the nine-month periods ended September 30, 2018 and 2017.
   99.3    Unaudited pro forma consolidated and combined financial information as of and for the year ended December 31, 2018.


Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

AMEDISYS, INC.

(Registrant)

 

By:  

/s/ Scott G. Ginn

  Scott G. Ginn
  Chief Financial Officer
  (Principal Financial Officer)

DATE: April 17, 2019

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Section 2: EX-23.1 (EX-23.1)

EX-23.1

Exhibit 23.1

Consent of Independent Auditor

Amedisys, Inc.

Baton Rouge, LA

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-138255 and 333-145582) and Form S-8 (Nos. 333-60525, 333-51704, 333-53786, 333-143967, 333-152359, 333-182347, 333-205267 and 333-225461) of Amedisys, Inc. of our report dated April 16, 2019, relating to the consolidated and combined financial statements and supplementary information, which appear in this Form 8-K/A.

/s/ BDO USA, LLP

New York, NY

April 16, 2019

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Section 3: EX-99.1 (EX-99.1)

EX-99.1

Exhibit 99.1

COMPASSIONATE CARE HOSPICE GROUP, INC.

AND SUBSIDIARIES AND AFFILIATES

Consolidated and Combined Financial Statements

and Supplementary Information

Years Ended December 31, 2017 and 2016


COMPASSIONATE CARE HOSPICE GROUP, INC.

AND SUBSIDIARIES AND AFFILIATES

Contents

 

Independent Auditor’s Report

     3-4  

Consolidated and Combined Financial Statements

  

Balance Sheets as of December 31, 2017 and 2016

     5  

Statements of Income for the Years Ended December 31, 2017 and 2016

     6  

Statements of Stockholders’ Equity for the Years Ended December 31, 2017 and 2016

     7  

Statements of Cash Flows for the Years Ended December 31, 2017 and 2016

     8  

Notes to Financial Statements

     9-18  

Supplementary Information

  

Combining Balance Sheet Schedule as of December 31, 2017

     19  

Combining Schedule of Income as of December 31, 2017

     20  

 

2


Independent Auditor’s Report

The Board of Directors

Compassionate Care Hospice Group, Inc.

and Subsidiaries and Affiliates

Parsippany, New Jersey

We have audited the accompanying consolidated and combined financial statements of Compassionate Care Hospice Group, Inc. and Subsidiaries and Affiliates (collectively referred to as the Company), which comprise the consolidated and combined balance sheets as of December 31, 2017 and 2016, and the related consolidated and combined statements of income, stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated and combined financial statements.

Management’s Responsibility for the Consolidated and Combined Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated and combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated and combined financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated and combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated and combined financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated and combined financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated and combined financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated and combined financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated and combined financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated and combined financial statements referred to above present fairly, in all material respects, the financial position of Compassionate Care Hospice Group, Inc. and Subsidiaries and Affiliates as of December 31, 2017 and 2016, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter Regarding Restatement

As discussed in Note 3, the accompanying consolidated and combined financial statements have been restated as of December 31, 2017 and 2016 and for each of the years then ended. Our opinion is not modified with respect to this matter.

Other Matter

Report on Supplementary Information

 

3


Our audit was conducted for the purpose of forming an opinion on the consolidated and combined financial statements as a whole. The accompanying combining balance sheet schedule and combining schedule of income for the year ended December 31, 2017 are presented for purposes of additional analysis and are not a required part of the basic consolidated and combined financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated and combined financial statements. The information has been subjected to the auditing procedures applied in the audits of the consolidated and combined financial statements, and subjected to certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic consolidated and combined financial statements, and to the basic consolidated and combined financial statements themselves, and other additional procedures, in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the consolidated and combined financial statements as a whole.

/s/ BDO USA, LLP

August 31, 2018, except for the revisions described in the reissuance of consolidated and combined financial statement in Note 3, as to which the date is April 16, 2019

 

4


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

CONSOLIDATED AND COMBINED BALANCE SHEETS

 

December 31,

   2017
(Restated)
    2016
(Restated)
 

Assets

    

Current

    

Cash and cash equivalents

   $ 24,015,044     $ 6,481,124  

Patient accounts receivable, less estimated allowance for uncollectible accounts of $33,990,617 and $23,732,049, respectively

     38,016,265       37,154,135  

Prepaid expenses and other current assets

     2,108,286       867,949  
  

 

 

   

 

 

 

Total Current Assets

     64,139,595       44,503,208  

Property and Equipment, Net

     219,959       84,300  
  

 

 

   

 

 

 

Total Assets

   $ 64,359,554     $ 44,587,508  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Liabilities

    

Accounts payable and accrued expenses

   $ 11,740,711     $ 12,786,325  

Accrued salaries, benefits and other payroll liabilities

     4,500,455       4,462,911  

Self-insured liability

     768,000       704,000  

Deferred tax liability

     404,252       183,333  

Income tax payable

     743,935       189,416  

Due to third-party payors

     11,940,323       13,966,463  
  

 

 

   

 

 

 

Total Liabilities

     30,097,676       32,292,448  
  

 

 

   

 

 

 

Commitments and Contingencies (Note 8)

    

Stockholders’ Equity

    

Common Stock:

    

Class A, no par value; 100 shares authorized; 100 shares issued and outstanding

     100       100  

Class B, no par value; 900 shares authorized; 900 shares issued and outstanding

     900       900  

Retained earnings

     37,352,669       15,965,713  

Noncontrolling Interest in Affiliates

     (3,091,791     (3,671,653
  

 

 

   

 

 

 

Total Stockholders’ Equity and Noncontrolling Interest

     34,261,878       12,295,060  
  

 

 

   

 

 

 

Total Liabilities, Stockholders’ Equity and Noncontrolling Interest

   $ 64,359,554     $ 44,587,508  
  

 

 

   

 

 

 

See accompanying notes to consolidated and combined financial statements.

 

5


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

CONSOLIDATED AND COMBINED STATEMENTS OF INCOME

 

Year ended December 31,

   2017
(Restated)
    2016
(Restated)
 

Operating Revenue

    

Net patient service revenue

   $ 204,181,571     $ 186,168,825  

Less: provision for uncollectibles, net

     (2,140,452     (1,996,901
  

 

 

   

 

 

 

Total Operating Revenue

     202,041,119       184,171,924  
  

 

 

   

 

 

 

Expenses

    

General and administrative

     27,681,152       25,679,903  

Salaries and wages

     114,342,577       109,573,127  

Supplies and other expenses

     30,650,997       29,824,881  

Rent expense

     3,347,605       3,264,804  
  

 

 

   

 

 

 

Total Expenses

     176,022,331       168,342,715  
  

 

 

   

 

 

 

Total Operating Income

     26,018,788       15,829,209  
  

 

 

   

 

 

 

Non-Operating Expenses

    

Depreciation and amortization

     (52,986     (18,147

Interest expense

     (152,781     (194,688
  

 

 

   

 

 

 

Total Non-Operating Expense

     (205,767     (212,835
  

 

 

   

 

 

 

Income Before Taxes

     25,813,021       15,616,374  

Income tax expense

     (775,438     (378,897
  

 

 

   

 

 

 

Net Income

     25,037,583       15,237,477  

Net Income Attributable to Noncontrolling Interests

     1,725,672       1,059,785  
  

 

 

   

 

 

 

Net Income Attributable to Compassionate Care Hospice Group, Inc.

   $ 23,311,911     $ 14,177,692  
  

 

 

   

 

 

 

See accompanying notes to consolidated and combined financial statements.

 

6


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS’ EQUITY

 

Years ended December 31, 2017 and 2016

   (Restated)  
     Class A
Common
Stock
     Class B
Common
Stock
     Retained
Earnings
    Noncontrolling
Interest in
Affiliates
    Total  

Balance, January 1, 2016

   $ 100      $ 900      $ 3,680,262     $ (4,522,268   $ (841,006

Net income

     —          —          14,177,692       1,059,785       15,237,477  

Capital distributions

     —          —          (1,892,241     (209,170     (2,101,411
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance, December 31, 2016

     100        900        15,965,713       (3,671,653     12,295,060  

Net income

     —          —          23,311,911       1,725,672       25,037,583  

Capital distributions

     —          —          (1,924,955     (1,145,810     (3,070,765
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance, December 31, 2017

   $ 100      $ 900      $ 37,352,669     $ (3,091,791   $ 34,261,878  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated and combined financial statements.

 

7


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

 

Year ended December 31,

   2017
(Restated)
    2016
(Restated)
 

Cash Flows from Operating Activities

    

Net income

   $ 25,037,583     $ 15,237,477  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Provision for uncollectibles

     10,258,568       1,996,901  

Depreciation and amortization

     52,986       18,147  

Changes in operating assets and liabilities:

    

Increase in assets:

    

Patient accounts receivable

     (11,120,698     (15,458,474

Prepaid expenses and other current assets

     (1,240,337     (234,201

Increase (decrease) in liabilities:

    

Accounts payable and accrued expenses

     (1,045,614     (1,729,708

Self-insured liability

     64,000       704,000  

Accrued salaries, benefits and other payroll liabilities

     37,544       122,491  

Deferred tax liability

     220,919       216,025  

Income tax payable

     554,519       189,416  

Due to third-party payors

     (2,026,140     223,999  
  

 

 

   

 

 

 

Net cash provided by operating activities

     20,793,330       1,286,073  
  

 

 

   

 

 

 

Cash flows from Investing Activities

    

Purchase of property and equipment

     (188,645     (112,114

Purchase of interest in affiliate

     (1,062,500     —    
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,251,145     (112,114
  

 

 

   

 

 

 

Cash Flows from Financing Activities Capital Distributions

     (2,008,265     (2,101,411
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     17,533,920       (927,452

Cash and cash equivalents, beginning of year

     6,481,124       7,408,576  
  

 

 

   

 

 

 

Cash and cash equivalents, end of year

   $ 24,015,044     $ 6,481,124  
  

 

 

   

 

 

 

See accompanying notes to consolidated and combined financial statements.

 

8


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

1. Description of the Organization

Compassionate Care Hospice Group, Inc. (CCH Group) was incorporated in the State of Florida on September 21, 2015. The purpose of CCH Group is to be a holding company for its subsidiaries. CCH Group, along with its wholly owned subsidiaries and affiliates (collectively referred to as the Company), offer hospice and palliative care throughout the country. The Company is committed to providing the highest quality care to patients and their families.

CCH Group’s capital structure includes two classes of Common Stock: Class A Voting Common Stock and Class B Non-Voting Common Stock.

2. Principles of Consolidation and Combination

These consolidated and combined financial statements include the accounts of CCH Group, its consolidated wholly-owned subsidiaries and affiliates combined under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 810-10-55-1B, “Combined Financial Statements.” All significant intercompany accounts and transactions have been eliminated in the accompanying consolidated and combined financial statements.

The wholly-owned subsidiaries of CCH Group consolidated within these financial statements are as follows:

 

   

Compassionate Care Hospice of Delaware, LLC

 

   

Compassionate Care Hospice of the Delmar Peninsula, LLC

 

   

Compassionate Care Hospice of Central Georgia, LLC

 

   

Compassionate Care Hospice of Northern Georgia, LLC

 

   

Compassionate Care Hospice of Savannah, LLC

 

   

Compassionate Care Hospice of Illinois, LLC

 

   

Compassionate Care Hospice of Kansas City, LLC

 

   

Compassionate Care Hospice of Central Louisiana, LLC

 

   

Compassionate Care Hospice of Massachusetts, LLC

 

   

Compassionate Care Hospice of Michigan, LLC

 

   

Compassionate Care Hospice of Minnesota, LLC

 

   

Compassionate Care Hospice of Southern Mississippi, LLC

 

   

Pathways to Compassion, LLC

 

   

Compassionate Care Hospice of New Hampshire, LLC

 

   

Compassionate Care Hospice of Clifton, LLC

 

   

Compassionate Care Hospice of Marlton, LLC

 

   

Compassionate Care Hospice of Northern NJ, LLC

 

   

Compassionate Care Hospice of Ohio, LLC

 

   

Compassionate Care Hospice, Inc.

 

   

Compassionate Care Hospice of Gwynedd, Inc.

 

   

Compassionate Care Hospice of Northwestern Pennsylvania, LLC

 

9


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

   

Compassionate Care Hospice of South Carolina, LLC

 

   

Compassionate Care Hospice of The Midwest, LLC

 

   

Compassionate Care Hospice of Bryan Texas, LLC

 

   

Compassionate Care Hospice of Central Texas, LLC

 

   

Compassionate Care Hospice of Houston, LLC

 

   

Compassionate Care Hospice of North Texas, LLC

 

   

Compassionate Care Hospice of Southeastern Texas, LLC

 

   

Compassionate Care Hospice of The Chesapeake Bay, LLC

 

   

Compassionate Care Hospice of Wisconsin, LLC

The affiliates of CCH Group combined within these financial statements are as follows:

 

   

Pathways to Compassion of California, LLC

 

   

Compassionate Care Hospice of New York, LLC

 

   

Compassionate Care Hospice of Central Florida, Inc.

 

   

Compassionate Care Hospice of Miami Dade and the Florida Keys, Inc.

 

   

Compassionate Care Hospice of Lake and Sumter, Inc.

3. Summary of Significant Accounting Policies

Basis of Presentation

The consolidated and combined financial statements of the Company have been prepared on the accrual basis and conform to accounting principles generally accepted in the United States of America (U.S. GAAP). In the consolidated and combined balance sheet, assets and liabilities are presented in order of liquidity or conversion to cash and their maturity resulting in the use of cash, respectively.

Restatement

The consolidated and combined financial statements for the years ended December 31, 2017 and 2016 are being restated due to the following:

Corporate Integrity Agreement/Overpayment

In connection with a settlement agreement with the U.S. Department of Justice, on January 30, 2015, the Company entered into a corporate integrity agreement (CIA) with the Office of Inspector General—Health and Human Services (OIG). The CIA requires that the Company report substantial overpayments that the Company discovers it has received from federal health care programs, as well as probable violations of federal health care laws.

In accordance with the CIA, in 2017, the Company reported to the OIG overpayments in the amount of $2,422,636. $956,373 of the revenue associated with the overpayments was recognized during the year ended December 31, 2015 and $1,466,263 was recognized during the year ended December 31, 2016. The balance due was subsequently paid during the three-month period ended March 31, 2019. The consolidated and combined financial statements for the years ended December 31, 2017 and 2016 are being restated to reflect a reduction to net patient service revenue and an increase to amounts due to third party payors.

 

10


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

Medicare Hospice CAP

Medicare hospice is subject to an inpatient cap limit and an overall payment cap for each of their provider numbers. The Company monitors these caps and estimates amounts due back to Medicare if a cap has been exceeded. The initial calculations of the amounts due back to Medicare for caps were incomplete for the years ended December 31, 2017 and 2016. The consolidated and combined financial statements for the years ended December 31, 2017 and 2016 are being restated to reflect a reduction to net patient service revenue and an increase to amounts due to third party payors totaling $236,403 and $1,336,266, respectively.

In addition, the cap amounts previously reflected in the consolidated and combined financial statements for the years ended December 31, 2017 and 2016 were incorrectly recorded as an increase to general and administrative expenses rather than a reduction to net patient service revenue. As a result, the consolidated and combined financial statements for the years ended December 31, 2017 and 2016 are being restated to reduce net patient service revenue and to reduce general and administrative expenses by $1,612,238 and $736,207, respectively.

Hospice Room and Board

Hospice room and board expenses and the related reimbursements associated with these expenses should be recorded net within the statement of income. In the Company’s historical financial records, these amounts were reported gross within net patient service revenue and supplies and other expenses. The consolidated and combined statements of income for the years ended December 31, 2017 and 2016 are being restated to reflect a reduction to both net patient service revenue and supplies and other expenses totaling $33,289,795 and $31,478,527, respectively.

Paid Time Off (PTO) Accrual

There was an error in the PTO accrual for the year ended December 31, 2017. The consolidated and combined financial statements for the year ended December 31, 2017 are being restated to reflect a reduction in salaries and wages expenses and accrued salaries, benefits and other payroll liabilities totaling $884,537.

Loss on Repurchase of Interest in Affiliate

As of December 31, 2016, Pathways to Compassion of California, LLC (PCC) had a 50% ownership interest in Compassionate Care Hospice of Los Angeles, LLC (CCHLA). The remaining 50% interest was controlled by a non-affiliated company. During 2017, PCC completed the purchase of the remaining 50% ownership interest in CCHLA. The difference between the absorbed equity balance and the purchase price was recognized as a reduction to net patient service revenue. The consolidated and combined financial statements for the year ended December 31, 2017 are being restated to reflect an increase to net patient service revenue and an adjustment to equity totaling $1,062,500.

Impact of Restatement

The following table presents the impacted line items of the Company’s consolidated and combined balance sheets as previously reported, restatement adjustments and as restated as of December 31, 2017 and 2016:

 

December 31,    2017     2016  
     As Reported     Adjustments     As Restated     As Reported     Adjustments     As Restated  

Accrued salaries, benefits and other payroll liabilities

   $ 5,384,992     $ (884,537   $ 4,500,455     $ 4,462,911     $ —       $ 4,462,911  

Deferred tax liability

     403,448       804       404,252       311,824       (128,491     183,333  

Income tax payable

     892,486       (148,551     743,935       189,416       —         189,416  

Due to third-party payors

     7,945,018       3,995,305       11,940,323       10,207,561       3,758,902       13,966,463  

Retained earnings

     39,671,036       (2,318,367     37,352,669       19,413,051       (3,447,338     15,965,713  

Noncontrolling interest in affiliates

     (2,447,137     (644,654     (3,091,791     (3,488,580     (183,073     (3,671,653

 

11


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

The following table presents the impacted line items of the Company’s consolidated and combined statements of income as previously reported, restatement adjustments and as restated for the years ended December 31, 2017 and 2016:

 

                                                                                                                                               
Year ended December 31,    2017     2016  
     As Reported     Adjustments     As Restated     As Reported     Adjustments     As Restated  

Total Operating Revenue

   $ 236,117,055     $ (34,075,936   $ 202,041,119     $ 219,189,187     $ (35,017,263   $ 184,171,924  

Expenses—General and administrative

     29,293,390       (1,612,238     27,681,152       26,416,110       (736,207     25,679,903  

Expenses—Salaries and wages

     115,227,114       (884,537     114,342,577       109,573,127       —         109,573,127  

Expenses—Supplies and other expenses

     63,940,792       (33,289,795     30,650,997       61,303,408       (31,478,527     29,824,881  

Total Operating Income

     24,308,154       1,710,634       26,018,788       18,631,738       (2,802,529     15,829,209  

Income tax expense

     (794,694     19,256       (775,438     (474,696     95,799       (378,897

Net Income

     23,307,693       1,729,890       25,037,583       17,944,207       (2,706,730     15,237,477  

Net Income Attributable to Noncontrolling Interests

     1,124,753       600,919       1,725,672       1,242,858       (183,073     1,059,785  

Net Income Attributable to Compassionate Care Hospice Group, Inc.

     22,182,940       1,128,971       23,311,911       16,701,349       (2,523,657     14,177,692  

The following table presents the impacted line items of the Company’s consolidated and combined statements of stockholders’ equity as previously reported, restatement adjustments and as restated for the years ended December 31, 2017 and 2016:

 

                                                                                                                                               
Year ended December 31,    2017     2016  
     As Reported     Adjustments     As Restated     As Reported     Adjustments     As Restated  

Retained Earnings—Balance January 1

   $ 19,413,051     $ (3,447,338   $ 15,965,713     $ 4,603,943     $ (923,681   $ 3,680,262  

Retained Earnings—Net income (loss)

     22,182,940       1,128,971       23,311,911       16,701,349       (2,523,657     14,177,692  

Noncontrolling Interest in Affiliates—Net income (loss)

     1,124,753       600,919       1,725,672       1,242,858       (183,073     1,059,785  

Noncontrolling Interest in Affiliates—Capital distributions

     (83,310     (1,062,500     (1,145,810     (209,170     —         (209,170

The following table presents the impacted line items of the Company’s consolidated and combined statements of cash flows as previously reported, restatement adjustments and as restated for the years ended December 31, 2017 and 2016:

 

                                                                                                                                               
Year ended December 31,    2017     2016  
     As Reported     Adjustments     As Restated     As Reported     Adjustments     As Restated  

Net income

   $ 23,307,693     $ 1,729,890     $ 25,037,583     $ 17,944,207     $ (2,706,730   $ 15,237,477  

Loss on purchase of interest in affiliate

     1,062,500       (1,062,500     —         —         —         —    

Changes in operating assets and liabilities:

            

Accrued salaries, benefits and other

payroll liabilities

     922,081       (884,537     37,544       122,491       —         122,491  

Deferred tax liability

     91,624       129,295       220,919       311,824       (95,799     216,025  

Income tax payable

     703,070       (148,551     554,519       189,416       —         189,416  

Due to third-party payors

     (2,262,543     236,403       (2,026,140     (2,578,530     2,802,529       223,999  

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments with original maturity dates of three months or less from the date purchased to be cash equivalents.

 

12


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

Financial instruments that potentiality subject the Company to concentration of credit risk consist primarily of cash and cash equivalents in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits. At various times during the year, the Company may have cash deposits at financial institutions in excess of FDIC insurance limits. These financial institutions have strong credit ratings and management believes that credit risk related to these accounts is minimal.

Use of Estimates

The preparation of consolidated and combined financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. It also requires disclosure of the contingent assets and liabilities at the date of the consolidated and combined financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates used by management in the preparation of these consolidated and combined financial statements.

Patient Accounts Receivable, Net

Patient accounts receivable, net is recorded at the reimbursed or contracted amount due from Medicare, Medicaid, other third-party payors and patients and do not bear interest. The allowance for uncollectible accounts is management’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Management determines the allowance based on historical write-off experience and reviews the adequacy of the allowance for uncollectible accounts periodically. Past due balances are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Property and Equipment

Property and equipment are stated at cost. Expenditures for additions, renewals and betterments are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed on the straight-line method over the estimated useful lives of the assets. The estimated useful lives of various asset classes are as follows:

 

Furniture and fixtures    5-7 years
Equipment    3-7 years
Software    5 years

Leasehold improvements are amortized over the lesser of the term of the lease or the estimated useful lives of the improvements.

Impairment of Long-Lived Assets

Management assesses whether the value of the long-lived assets may be impaired whenever events or changes in the circumstances indicate that the carrying amount of an asset may not be recoverable. The value of long-lived assets may be impaired if management’s estimate of the aggregate, undiscounted future cash flows to be generated from the use or disposition of a long-lived asset are less than the carrying value of the asset. Based on management’s judgment, no such indicators of impairment have occurred.

Revenue Recognition

Net patient service revenue is recognized in the period services are performed and consists primarily of net patient service revenue that is reported at estimated net realizable amounts. Retroactive adjustments are considered in the recognition of revenue on an estimated basis in the period the related services are rendered, and such amounts are adjusted in future periods as adjustments become known or as years are no longer subject to such audits, reviews, and investigations.

Charity Care

The Company provides care to patients who meet certain criteria under its charity care policy without charge or at amounts less than its established rates. Because the Company does not pursue collection of amounts determined to qualify as charity care, they are not reported as revenue.

 

13


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

Income Taxes

CCH Group is an S corporation and all wholly owned subsidiaries are disregarded for federal income tax purposes. As a result, the income of these entities passes through to the tax returns of the respective owners for federal income tax purposes. CCH Group and all wholly owned subsidiaries are taxed at the entity level by certain state jurisdictions and the related tax is included as a component of income tax expense in the consolidated and combined statements of income.

Related affiliates Compassionate Care Hospice of Central Florida, Inc., Compassionate Care Hospice of Miami Dade and the Florida Keys, Inc., and Compassionate Care Hospice of Lake and Sumter, Inc. combined within the financial statements account for income taxes in accordance with ASC 740, “Income Taxes,” which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated and combined financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the temporary differences between the financial statement and income tax bases using presently enacted tax rates in effect. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company adopted certain provisions of ASC 740, which clarifies the accounting for uncertainty in income taxes. This pronouncement prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company has not taken an unsubstantiated tax position that would require provision of a liability under ASC 740. The Company’s policy is to classify all interest and penalties related to uncertain tax positions as a component of income tax expense in the consolidated and combined statements of income.

Noncontrolling Interest

In accordance with U.S. GAAP, the Company reports noncontrolling interest, sometimes referred to as minority interest, as part of stockholders’ equity in the consolidated and combined balance sheet. Furthermore, the Company reports the changes in the stockholders’ equity of both the controlling and noncontrolling interests, for all periods presented, in the consolidated and combined statements of stockholders’ equity.

As of December 31, 2016, Pathways to Compassion of California, LLC (PCC) had a 50% ownership interest in Compassionate Care Hospice of Los Angeles, LLC (CCHLA). The remaining 50% interest was controlled by a non-affiliated company. During 2017, PCC completed the purchase of the remaining 50% ownership interest in CCHLA. As a result, PCC eliminated the increase in investment and the increase in members’ equity for combination purposes. The difference between the absorbed equity balance and purchase price was recognized as an adjustment to equity.

Concentration of Credit Risk

The Company operates in over 20 states nationwide. The Company grants credit without collateral to its patients, most of whom are local residents and are insured under various third-party payor agreements.

The mix of receivables from patients and third-party payors is as follows:

 

December 31,

   2017     2016  

Medicare

     54     59

Medicaid

     34       29  

Self and other third-party payors

     12       12  
  

 

 

   

 

 

 
     100     100

Accounting Pronouncements Issued but Not Yet Adopted

Revenue Recognition

In May 2014, the FASB issued Accounting Standards Update (ASU) 2014-09, “Revenue from Contracts with Customers (Topic 606),” which is a comprehensive new revenue recognition standard that will supersede existing revenue recognition guidance.

 

14


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB issued ASU 2015-14, which deferred the effective date for the Company until annual periods beginning after December 15, 2018. Earlier adoption is permitted subject to certain limitations. The amendments in this update are required to be applied retrospectively to each prior reporting period presented or with the cumulative effect being recognized at the date of initial application. Management is currently evaluating the impact of this ASU on its consolidated and combined financial statements.

Accounting for Leases

In February 2016, the FASB issued ASU 2016-02, “Accounting for Leases,” which applies a right-of-use (ROU) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the consolidated and combined statement of cash flows, differs depending on the lease classification. In addition, lessees and lessors are required to provide certain qualitative and quantitative disclosures to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The amendments are effective for fiscal years beginning after December 15, 2019. Management is currently evaluating the impact of this ASU on its consolidated and combined financial statements.

4. Net Patient Service Revenue and Third-Party Reimbursement

Hospice Medicare Revenue

Revenue is recorded on an accrual basis based upon the date of service at amounts equal to the estimated reimbursement rates. The estimated reimbursement rates are daily or hourly rates for each of the four levels of care delivered by the Company: routine care, general inpatient care, continuous home care and respite care. Beginning January 1, 2016, the Center for Medicare and Medicaid Services (CMS) has provided for two separate payment rates for routine care: payments for the first 60 days of care and care beyond 60 days. In addition to the two new routine rates, beginning January 1, 2016, Medicare is also reimbursing for a service intensity add-on (SIA). The SIA is based on visits made in the last seven days of life by a registered nurse or medical social worker for patients in a routine level of care.

The Company adjusts Medicare revenue for an inability to obtain appropriate billing documentation or acceptable authorizations and other reasons unrelated to credit risk. These amounts are estimated based on historical experience inclusive of the Company’s historical collection rate on Medicare claims, and are recorded during the period services are rendered as an estimated revenue adjustment and as a reduction to net patient accounts receivable.

Additionally, Medicare hospice is subject to an inpatient cap limit and an overall payment cap for each of their provider numbers. The Company monitors these caps and estimates amounts due back to Medicare if in fact a cap has been exceeded. These amounts are reported as a reduction to revenue and an increase to third-party payor liabilities. As of December 31, 2017 and 2016, the Company has recorded $2,706,275 and $1,876,613, respectively, related to the Medicare cap liability.

In addition to the Medicare cap liability, amounts related to government settlements are also recorded as a reduction to revenue and an increase to amounts due to third-party payors. As of December 31, 2017 and 2016, the Company has recorded $9,234,048 and $12,089,850, respectively, related to government settlements.

Hospice Non-Medicare Revenue

The Company records revenue on an accrual basis based upon the date of service at amounts equal to our established rates or estimated per day rates, as applicable. Contractual adjustments are recorded for the difference between the Company’s established rates and the amounts estimated to be realizable from patients, third parties and others for service provided and are deducted from the gross revenue to determine net patient service revenue and net patient accounts receivable.

 

15


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

5. Property and Equipment, Net

Property and equipment, net and accumulated depreciation are summarized as follows:

 

                                           

December 31,

   2017      2016  

Property and equipment

   $ 296,116      $ 282,831  

Less: accumulated depreciation and amortization

     (76,157      (198,531
  

 

 

    

 

 

 

Property and Equipment, Net

   $ 219,959      $ 84,300  
  

 

 

    

 

 

 

During 2017 and 2016, the Company wrote off $175,360 and $0, respectively, for fully depreciated assets.

Depreciation expense was $52,986 and $18,147 for the years ended December 31, 2017 and 2016.

6. Income Taxes

The Company’s income taxes expense for 2017 and 2016 consists of the following:

 

                                           

December 31,

   2017      2016  

Current Tax Expense

     

Federal

   $ —        $ —    

State

     554,518        189,416  
  

 

 

    

 

 

 

Current Tax Expense

     554,518        189,416  
  

 

 

    

 

 

 

Deferred Tax Expense

     

Federal

     —          (131,245

State

     220,920        320,726  
  

 

 

    

 

 

 

Deferred Tax Expense

     220,920        189,481  
  

 

 

    

 

 

 

Total Income Tax Expense

   $ 775,438      $ 378,897  
  

 

 

    

 

 

 

At December 31, 2017 and 2016, deferred taxes reflect the net tax effect of temporary differences between the financial reporting and tax basis of assets and liabilities and are primarily attributable to the following:

 

                                           

December 31,

   2017      2016  

Deferred Tax Assets

     

Accounts payable

   $ 996,562      $ 1,140,023  

Depreciation

     2,720        2,720  

Net operating losses

     1,739,459        1,399,341  
  

 

 

    

 

 

 

Total Deferred Tax Assets

     2,738,741        2,542,084  

Less: valuation allowance

     (596,728      (817,580
  

 

 

    

 

 

 

Net Deferred Tax Assets

   $ 2,142,013      $ 1,724,504  
  

 

 

    

 

 

 

Deferred Tax Liabilities

     

Accounts receivable

   $ (2,209,147    $ (1,880,099

Prepaid expenses

     (337,118      (27,738
  

 

 

    

 

 

 

Total Deferred Tax Liability

     (2,546,265      (1,907,837
  

 

 

    

 

 

 

Net Deferred Tax Liability

   $ (404,252    $ (183,333
  

 

 

    

 

 

 

The difference between the provision for income taxes and taxes computed using the statutory income tax rate results primarily from the effect of certain state taxes imposed on CCH Group and its wholly owned limited liability subsidiaries and certain federal and state taxes imposed on related affiliated corporations.

 

16


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

The related affiliated corporations have federal and state net operating losses of $6,863,123 which begin to expire in 2036. The Company has provided for a full valuation allowance against the net deferred tax assets of the affiliated corporations, as the Company has determined it is more likely than not that they will not be realized.

As of December 31, 2017 and 2016, the Company does not believe it has any uncertain tax positions that would require either recognition or disclosure in the accompanying consolidated and combined financial statements. The Company files in federal and certain state jurisdictions of which have varying statutes of limitations subject to exam by taxing authorities. The Company does not have any open federal or state exams as of December 31, 2017 and 2016.

7. Employee Benefit Plan

The Company sponsors a contributory 401(k) plan covering substantially all employees. For the years ended December 31, 2017 and 2016, other than Internal Revenue Service contribution limitations, there were no plan-imposed limits on employee elected deferrals. The Company does not match employee contributions to the plan but may make other types of qualified non-elective contributions.

8. Commitments and Contingencies

Self-Insured

The Company self-insures a portion of certain insurable risks consisting of employee medical and prescription claims. The Company records its estimated ultimate liability for reported claims plus an estimate for claims incurred but not reported. Accruals for self-insurance claims are included in accounts payable and accrued expenses and, as of December 31, 2017 and 2016, the estimated claims incurred but not reported were $768,000 and $704,000, respectively.

Litigation

The Company is involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management and the Company’s legal counsel, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.

Leases

The Company conducts its operations from facilities that are under noncancelable operating leases, which expire at varying intervals through the year 2022. The Company has also entered into certain operating leases for equipment, which are renewed annually.

The following is a schedule of future minimum rental payments under the above operating leases as of December 31, 2017:

 

Year ending December 31,

      

2018

   $     2,370,544  

2019

     2,004,058  

2020

     1,410,974  

2021

     463,109  

2022

     169,371  
  

 

 

 

Total

   $ 6,418,056  
  

 

 

 

 

17


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

9. Subsequent Events

The Company has performed subsequent events procedures through August 31, 2018 which is the date the consolidated and combined financial statements were available to be issued and there were no subsequent events requiring adjustment to the consolidated and combined financial statements or disclosures as stated herein, except the following:

In February 2018, CCH Group formed a new wholly-owned subsidiary that provides palliative care in the state of Georgia, and two new wholly-owned subsidiaries that provide hospice and palliative care in the states of Maine and California.

On October 25, 2017, the Company received a letter of intent for the purchase of 100% of the equity interest in Compassionate Care Hospice Group, Inc. and its subsidiaries and affiliates.

 

18


Supplementary Information


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

COMBINING BALANCE SHEET SCHEDULE

 

December 31, 2017

 
    CCH and
Subsidiaries
    Pathways to
Compassion of
California, LLC
    Compassionate
Care Hospice of
Central Florida,

Inc.
    Compassionate
Care Hospice of
Miami Dade and
the

Florida Keys, Inc.
    Compassionate
Care Hospice of
Lake Sumter, Inc.
    Compassionate
Care Hospice of
New York, LLC
    Elimination
Entries
    Total  

Assets

               

Current

               

Cash and cash equivalents

  $ 23,497,581     $ 517,448     $ —       $ —       $ 15     $ —       $ —       $ 24,015,044  

Patient accounts receivable, less estimated allowance for uncollectible accounts

    30,680,794       1,129,532       882,651       2,204,482       1,491,214       1,627,592       —         38,016,265  

Investment in Pathways to Compassion of California, LLC

    (12,571     —         —         —         —         —         12,571       —    

Investment in Central Florida/Florida and Lake Sumter

    (196,949     —         —         —         —         —         196,949       —    

Intercompany receivables

    41,176,644       —         —         —         —         2,519,411       (43,696,055     —    

Prepaid expenses and other current assets

    855,238       7,750       11,658       1,186,955       16,158       30,527       —         2,108,286  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Current Assets

    96,000,737       1,654,730       894,309       3,391,437       1,507,387       4,177,530       (43,486,535     64,139,595  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Property and Equipment, Net

    219,471       488       —         —         —         —         —         219,959  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Assets

    96,220,208       1,655,218       894,309       3,391,437       1,507,387       4,177,530       (43,486,535     64,359,554  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

               

Liabilities

               

Accounts payable and accrued expenses

    9,770,985       164,187       317,866       261,428       216,621       1,009,624       —         11,740,711  

Accrued salaries, benefits and other payroll liabilities

    3,727,238       58,863       168,750       154,118       165,634       225,852       —         4,500,455  

Self-insured liability

    768,000       —         —         —         —         —         —         768,000  

Deferred tax liability

    404,252       —         —         —         —         —         —         404,252  

Income tax payable

    743,935       —         —         —         —         —         —         743,935  

Due to third-party payors

    8,482,614       1,027,709       —         —         —         2,430,000       —         11,940,323  

Intercompany payables

    34,913,854       2,303,994       1,041,684       2,979,943       2,456,580       —         (43,696,055     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities

    58,810,878       3,554,753       1,528,300       3,395,489       2,838,835       3,665,476       (43,696,055     30,097,676  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commitments and Contingencies (Note 8)

               

Stockholders’ Equity

               

Common Stock:

               

Class A Common Stock, no par value; 100 shares authorized; 100 shares issued and outstanding

    100       —         —         —         —         —         —         100  

Class B Common Stock, no par value; 900 shares authorized; 900 shares issued and outstanding

    900       —         —         —         —         —         —         900  

Retained earnings (accumulated deficit)

    37,408,330       (1,899,535     (633,991     (4,052     (1,331,448     512,054       209,520       34,260,878  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Stockholders’ Equity

    37,409,330       (1,899,535     (633,991     (4,052     (1,331,448     512,054       209,520       34,261,878  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

  $ 96,220,208     $ 1,655,218     $ 894,309     $ 3,391,437     $ 1,507,387     $ 4,177,530     $ (43,486,535   $ 64,359,554  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

19


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

COMBINING SCHEDULE OF INCOME

 

December 31, 2017

 
    CCH and
Subsidiaries
    Pathways to
Compassion of
California,
LLC
    Compassionate
Care Hospice
of Central
Florida, Inc.
    Compassionate
Care Hospice

of Miami Dade
and the

Florida Keys,
Inc.
    Compassionate
Care Hospice

of Lake
Sumter, Inc.
    Compassionate
Care Hospice

of New York,
LLC
    Elimination
Entries
    Total  

Operating Revenue

               

Net patient service revenue

  $ 173,154,859     $ 3,223,737     $ 4,828,758     $ 6,798,167     $ 5,493,230     $ 10,682,820     $ —       $ 204,181,571  

Less: Provision for uncollectibles, net

    (1,605,221     (172,306     (60,249     (94,365     (17,878     (190,433     —         (2,140,452
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Revenue

    171,549,638       3,051,431       4,768,509       6,703,802       5,475,352       10,492,387       —         202,041,119  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

               

General and administrative

    21,509,527       823,728       547,759       1,218,480       1,753,825       1,827,833       —         27,681,152  

Salaries and wages

    97,047,017       1,489,940       3,792,046       3,613,476       3,125,675       5,274,423       —         114,342,577  

Supplies and other expenses

    25,785,839       452,516       795,776       1,310,373       765,987       1,540,506       —         30,650,997  

Rent expense

    2,959,978       46,618       77,632       53,814       74,561       135,002       —         3,347,605  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Expenses

    147,302,361       2,812,802       5,213,213       6,196,143       5,720,048       8,777,764       —         176,022,331  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Income (Loss)

    24,247,277       238,629       (444,704     507,659       (244,696     1,714,623       —         26,018,788  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-Operating Income (Expense)

               

Gain (loss) from investment in affiliates

    (209,520     —         —         —         —         —         209,520       —    

Depreciation and Amortization

    (52,986     —         —         —         —         —         —         (52,986

Interest expense

    (91,154     —         —         —         —         (61,627     —         (152,781
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Non-Operating Income (Expense)

    (353,660     —         —         —         —         (61,627     209,520       (205,767
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before Taxes

    23,893,617       238,629       (444,704     507,659       (244,696     1,652,996       209,520       25,813,021  

Income tax expense

    (775,438     —         —         —         —         —         —         (775,438
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (Loss)

  $ 23,118,179     $ 238,629     $ (444,704   $ 507,659     $ (244,696   $ 1,652,996     $ 209,520     $ 25,037,583  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

20

(Back To Top)

Section 4: EX-99.2 (EX-99.2)

EX-99.2

Exhibit 99.2

COMPASSIONATE CARE HOSPICE GROUP, INC.

AND SUBSIDIARIES AND AFFILIATES

Unaudited Condensed Consolidated and Combined Financial Statements

Nine Months Ended September 30, 2018 and 2017


COMPASSIONATE CARE HOSPICE GROUP, INC.

AND SUBSIDIARIES AND AFFILIATES

Contents

 

Balance Sheets as of September 30, 2018 (unaudited) and December 31, 2017

     1  

Unaudited Statements of Income for the Nine-Month Periods Ended September 30, 2018 and 2017

     2  

Unaudited Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2018 and 2017

     3  

Notes to the Unaudited Financial Statements

     4-8  


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS

 

     September 30,
2018
(unaudited)
    December 31,
2017
 

Assets

    

Current

    

Cash and cash equivalents

   $ 13,675,133     $ 24,015,044  

Patient accounts receivable, less estimated allowance for uncollectible accounts of $39,572,661 and $33,990,617, respectively

     35,650,439       38,016,265  

Prepaid expenses and other current assets

     999,563       2,108,286  
  

 

 

   

 

 

 

Total Current Assets

     50,325,135       64,139,595  

Property and Equipment, Net

     224,365       219,959  

Goodwill

     350,000       —    
  

 

 

   

 

 

 

Total Assets

   $ 50,899,500     $ 64,359,554  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Liabilities

    

Accounts payable and accrued expenses

   $ 11,953,769     $ 11,740,711  

Accrued salaries, benefits and other payroll liabilities

     4,390,572       4,500,455  

Self-insured liability

     768,000       768,000  

Deferred tax liability

     171,304       404,252  

Income tax payable

     182,537       743,935  

Due to third-party payors

     9,396,958       11,940,323  
  

 

 

   

 

 

 

Total Liabilities

     26,863,140       30,097,676  
  

 

 

   

 

 

 

Commitments and Contingencies (Note 6)

    

Stockholders’ Equity

    

Common Stock:

    

Class A, no par value; 100 shares authorized; 100 shares issued and outstanding

     100       100  

Class B, no par value; 900 shares authorized; 900 shares issued and outstanding

     900       900  

Retained earnings

     25,855,646       37,352,669  

Noncontrolling Interest in Affiliates

     (1,820,286     (3,091,791
  

 

 

   

 

 

 

Total Stockholders’ Equity and Noncontrolling Interest

     24,036,360       34,261,878  
  

 

 

   

 

 

 

Total Liabilities, Stockholders’ Equity and Noncontrolling Interest

   $ 50,899,500     $ 64,359,554  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated and combined financial statements.

 

1


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME

(Unaudited)

 

     For the Nine-Month Periods
Ended September 30,
 
     2018     2017  

Net patient service revenue

   $ 157,374,796     $ 152,097,568  

Expenses:

    

General and administrative

     16,881,649       20,200,545  

Salaries and wages

     92,590,540       84,960,496  

Supplies and other expenses

     23,293,168       23,375,806  

Rent expense

     2,593,130       2,501,361  
  

 

 

   

 

 

 

Total Expenses

     135,358,487       131,038,208  
  

 

 

   

 

 

 

Total Operating Income

     22,016,309       21,059,360  

Non-Operating Expenses

    

Depreciation and amortization

     (55,350     (36,475

Interest expense

     (42,388     (72,725
  

 

 

   

 

 

 

Total Non-Operating Expense

     (97,738     (109,200
  

 

 

   

 

 

 

Income Before Taxes

     21,918,571       20,950,160  

Income tax expense

     (678,414     (629,355
  

 

 

   

 

 

 

Net Income

     21,240,157       20,320,805  

Net Income Attributable to Noncontrolling Interests

     1,271,505       1,763,898  
  

 

 

   

 

 

 

Net Income Attributable to Compassionate Care Hospice Group, Inc.

   $ 19,968,652     $ 18,556,907  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated and combined financial statements.

 

2


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     For the Nine-Month Periods Ended September 30,  
     2018     2017  

Cash Flows from Operating Activities:

    

Net income

   $ 21,240,157     $ 20,320,805  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Provision for uncollectibles

     5,582,044       9,132,278  

Depreciation and amortization

     55,350       36,475  

Changes in operating assets and liabilities:

    

(Increase) decrease in assets:

    

Patient accounts receivable

     (3,216,218     (17,032,966

Prepaid expenses and other current assets

     1,108,723       (4,638

Increase (decrease) in liabilities:

    

Accounts payable and accrued expenses

     213,058       (1,176,106

Self-insured liability

     —         64,000  

Accrued salaries, benefits and other payroll liabilities

     (109,883     (99,205

Deferred tax liability

     (232,948     179,301  

Income tax payable

     (561,398     450,054  

Due to third-party payors

     (2,543,365     (898,755
  

 

 

   

 

 

 

Net cash provided by operating activities

     21,535,520       10,971,243  
  

 

 

   

 

 

 

Cash flows from Investing Activities:

    

Purchase of property and equipment

     (59,756     (131,623

Purchase of business

     (350,000     —    
  

 

 

   

 

 

 

Net cash used in investing activities

     (409,756     (131,623
  

 

 

   

 

 

 

Cash flows from Financing Activities:

    

Capital distributions

     (31,465,675     (1,175,403
  

 

 

   

 

 

 

Net cash used in financing activities

     (31,465,675     (1,175,403
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (10,339,911     9,664,217  

Cash and cash equivalents, beginning of period

     24,015,044       6,481,124  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 13,675,133     $ 16,145,341  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated and combined financial statements.

 

3


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

NOTES TO THE CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

 

1. Description of the Organization

Compassionate Care Hospice Group, Inc. (CCH Group) was incorporated in the State of Florida on September 21, 2015. The purpose of CCH Group is to be a holding company for its subsidiaries. CCH Group, along with its wholly owned subsidiaries and affiliates (collectively referred to as the Company), offer hospice and palliative care throughout the country. The Company is committed to providing the highest quality care to patients and their families.

CCH Group’s capital structure includes two classes of Common Stock: Class A Voting Common Stock and Class B Non-Voting Common Stock.

2. Principles of Consolidation and Combination

These unaudited condensed consolidated and combined financial statements include the accounts of CCH Group, its consolidated wholly-owned subsidiaries and affiliates combined under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 810-10-55-1B, “Combined Financial Statements.” All significant intercompany accounts and transactions have been eliminated in the accompanying unaudited condensed consolidated and combined financial statements.

The wholly-owned subsidiaries of CCH Group consolidated within these financial statements are as follows:

 

   

Compassionate Care Hospice of Delaware, LLC

 

   

Compassionate Care Hospice of the Delmar Peninsula, LLC

 

   

Compassionate Care Hospice of Central Georgia, LLC

 

   

Compassionate Care Hospice of Northern Georgia, LLC

 

   

Compassionate Care Hospice of Savannah, LLC

 

   

Compassionate Care Hospice of Illinois, LLC

 

   

Compassionate Care Hospice of Kansas City, LLC

 

   

Compassionate Care Hospice of Central Louisiana, LLC

 

   

Compassionate Care Hospice of Massachusetts, LLC

 

   

Compassionate Care Hospice of Michigan, LLC

 

   

Compassionate Care Hospice of Minnesota, LLC

 

   

Compassionate Care Hospice of Southern Mississippi, LLC

 

   

Pathways to Compassion, LLC

 

   

Compassionate Care Hospice of New Hampshire, LLC

 

   

Compassionate Care Hospice of Clifton, LLC

 

   

Compassionate Care Hospice of Marlton, LLC

 

   

Compassionate Care Hospice of Northern NJ, LLC

 

   

Compassionate Care Hospice of Ohio, LLC

 

   

Compassionate Care Hospice, Inc.

 

   

Compassionate Care Hospice of Gwynedd, Inc.

 

   

Compassionate Care Hospice of Northwestern Pennsylvania, LLC

 

4


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

NOTES TO THE CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

 

   

Compassionate Care Hospice of South Carolina, LLC

 

   

Compassionate Care Hospice of The Midwest, LLC

 

   

Compassionate Care Hospice of Bryan Texas, LLC

 

   

Compassionate Care Hospice of Central Texas, LLC

 

   

Compassionate Care Hospice of Houston, LLC

 

   

Compassionate Care Hospice of North Texas, LLC

 

   

Compassionate Care Hospice of Southeastern Texas, LLC

 

   

Compassionate Care Hospice of The Chesapeake Bay, LLC

 

   

Compassionate Care Hospice of Wisconsin, LLC

The affiliates of CCH Group combined within these financial statements are as follows:

 

   

Pathways to Compassion of California, LLC

 

   

Compassionate Care Hospice of New York, LLC

 

   

Compassionate Care Hospice of Central Florida, Inc.

 

   

Compassionate Care Hospice of Miami Dade and the Florida Keys, Inc.

 

   

Compassionate Care Hospice of Lake and Sumter, Inc.

3. Summary of Significant Accounting Policies

Basis of Presentation

In our opinion, the accompanying unaudited condensed consolidated and combined financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations, and cash flows in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial reporting. The Company’s results of operations for the interim periods presented are not necessarily indicative of results of operations for the entire year and have not been audited by our independent auditors.

This report should be read in conjunction with the audited financial statements and notes thereto for the periods ended December 31, 2017 and 2016.

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments with original maturity dates of three months or less from the date purchased to be cash equivalents.

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits. At various times during the year, the Company may have cash deposits at financial institutions in excess of FDIC insurance limits. These financial institutions have strong credit ratings and management believes that credit risk related to these accounts is minimal.

Use of Estimates

The preparation of the unaudited condensed consolidated and combined financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. It also requires disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated and combined financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ significantly from those estimates used by management in the preparation of these unaudited condensed consolidated and combined financial statements.

 

5


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

NOTES TO THE CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

 

Patient Accounts Receivable, Net

Patient accounts receivable, net is recorded at the reimbursed or contracted amount due from Medicare, Medicaid, other third-party payors and patients and do not bear interest. The allowance for uncollectible accounts is management’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Management determines the allowance based on historical write-off experience and reviews the adequacy of the allowance for uncollectible accounts periodically. Past due balances are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Revenue Recognition

Net patient service revenue is recognized in the period services are performed and consists primarily of net patient service revenue that is reported at estimated net realizable amounts. Retroactive adjustments are considered in the recognition of revenue on an estimated basis in the period the related services are rendered, and such amounts are adjusted in future periods as adjustments become known or as years are no longer subject to such audits, reviews, and investigations.

Charity Care

The Company provides care to patients who meet certain criteria under its charity care policy without charge or at amounts less than its established rates. Because the Company does not pursue collection of amounts determined to qualify as charity care, they are not reported as revenue.

Noncontrolling Interest

In accordance with U.S. GAAP, the Company reports noncontrolling interest, sometimes referred to as minority interest, as part of stockholders’ equity in the condensed consolidated and combined balance sheet.

Concentration of Credit Risk

The Company operates in over 20 states nationwide. The Company grants credit without collateral to its patients, most of whom are local residents and are insured under various third-party payor agreements.

The mix of receivables from patients and third party payors is as follows:

 

     September 30, 2018     December 31, 2017  

Medicare

     48     54

Medicaid

     39       34  

Self and other third-party payors

     13       12  
  

 

 

   

 

 

 
     100     100

Accounting Pronouncements Issued but Not Yet Adopted

Revenue Recognition

In May 2014, the FASB issued Accounting Standards Update (ASU) 2014-09, “Revenue from Contracts with Customers (Topic 606),” which is a comprehensive new revenue recognition standard that will supersede existing revenue recognition guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with

 

6


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

NOTES TO THE CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

 

Customers (Topic 606): Deferral of the Effective Date,” which deferred the effective date for the Company until annual periods beginning after December 15, 2018. Earlier adoption is permitted subject to certain limitations. The amendments in this update are required to be applied retrospectively to each prior reporting period presented or with the cumulative effect being recognized at the date of initial application. Management is currently evaluating the impact of this ASU on its consolidated and combined financial statements.

Accounting for Leases

In February 2016, the FASB issued ASU 2016-02, “Accounting for Leases,” which applies a right-of-use (ROU) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the consolidated and combined statement of cash flows, differs depending on the lease classification. In addition, lessees and lessors are required to provide certain qualitative and quantitative disclosures to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which provides for a prospective transition method for the recognition and disclosure requirements under the new guidance. The ASU is effective for fiscal years beginning after December 15, 2019. Management is currently evaluating the impact of this ASU on its consolidated and combined financial statements.

4. Net Patient Service Revenue and Third-Party Reimbursement

Hospice Medicare Revenue

Revenue is recorded on an accrual basis based upon the date of service at amounts equal to the estimated reimbursement rates. The estimated reimbursement rates are daily or hourly rates for each of the four levels of care delivered by the Company: routine care, general inpatient care, continuous home care and respite care. Beginning January 1, 2016, the Center for Medicare and Medicaid Services (CMS) has provided for two separate payment rates for routine care: payments for the first 60 days of care and care beyond 60 days. In addition to the two routine rates, beginning January 1, 2016, Medicare is also reimbursing for a service intensity add-on (SIA). The SIA is based on visits made in the last seven days of life by a registered nurse or medical social worker for patients in a routine level of care.

The Company adjusts Medicare revenue for an inability to obtain appropriate billing documentation or acceptable authorizations and other reasons unrelated to credit risk. These amounts are estimated based on historical experience inclusive of the Company’s historical collection rate on Medicare claims, and are recorded during the period services are rendered as an estimated revenue adjustment and as a reduction to net patient accounts receivable.

Additionally, Medicare hospice is subject to an inpatient cap limit and an overall payment cap for each of their provider numbers. The Company monitors these caps and estimates amounts due back to Medicare if a cap has been exceeded. These amounts are reported as a reduction to revenue and an increase to amounts due to third-party payors. As of September 30, 2018 and December 31, 2017, the Company has recorded $2,528,029 and $2,706,275, respectively, related to the Medicare cap liability.

In addition to the Medicare cap liability, amounts related to government settlements are also recorded as a reduction to revenue and an increase to amounts due to third-party payors. As of September 30, 2018 and December 31, 2017, the Company has recorded $6,868,929 and $9,234,048, respectively, related to government settlements.

Hospice Non-Medicare Revenue

The Company records revenue on an accrual basis based upon the date of service at amounts equal to our established rates or estimated per day rates, as applicable. Contractual adjustments are recorded for the difference between the Company’s established rates and the amounts estimated to be realizable from patients, third parties and others for services provided and are deducted from the gross revenue to determine net patient service revenue and net patient accounts receivable.

 

7


COMPASSIONATE CARE HOSPICE GROUP, INC. AND SUBSIDIARIES AND AFFILIATES

NOTES TO THE CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

 

5. Acquisitions

In June 2018, the Company acquired the assets of Peaceful Days Hospice, Inc. which services the state of California for a total purchase price of $350,000. The purchase price was paid with cash on hand on the date of the transaction. During the three-month period ended June 30, 2018, the Company recorded goodwill of $350,000 in connection with the acquisition.

6. Commitments and Contingencies

Self-Insured

The Company self-insures a portion of certain insurable risks consisting of employee medical and prescription claims. The Company records its estimated ultimate liability for reported claims plus an estimate for claims incurred but not reported. Accruals for self-insurance claims are included in accounts payable and accrued expenses; the estimated claims incurred but not reported were $768,000 as of each September 30, 2018 and December 31, 2017, respectively.

Litigation

The Company is involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management and the Company’s legal counsel, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.

Corporate Integrity Agreement

In connection with a settlement agreement with the U.S. Department of Justice, on January 30, 2015, the Company entered into a corporate integrity agreement (CIA) with the Office of Inspector General—Health and Human Services (OIG). The CIA requires that the Company report substantial overpayments that the Company discovers it has received from federal health care programs, as well as probable violations of federal health care laws. Upon breach of the CIA, the Company could become liable for payment of certain stipulated penalties, or could be excluded from participation in federal health care programs. The CIA has a term of five years.

In accordance with the CIA, the Company has reported overpayments to the OIG; these amounts have been recorded within due to third-party payors within the condensed consolidated and combined balance sheets as of September 30, 2018 and December 31, 2017.

 

8

(Back To Top)

Section 5: EX-99.3 (EX-99.3)

EX-99.3

Exhibit 99.3

AMEDISYS, INC. AND SUBSIDIARIES

Contents

 

Unaudited Pro Forma Consolidated and Combined Financial Statements

     1  

Unaudited Pro Forma Consolidated and Combined Balance Sheet

     2  

Unaudited Pro Forma Consolidated and Combined Statement of Operations

     3  

Notes to the Unaudited Pro Forma Consolidated and Combined Financial Statements

     4-9  


Unaudited Pro Forma Consolidated and Combined Financial Statements

On February 1, 2019, Amedisys, Inc. (the “Company”) and Amedisys Hospice, L.L.C., a wholly-owned subsidiary of the Company (“Amedisys Hospice”), acquired all of the issued and outstanding equity interests in Compassionate Care Hospice Group, Inc. and its subsidiaries (collectively, “CCH”) pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”) entered into on October 9, 2018 among the Company and Amedisys Hospice and Milton Heching and the Heching 2012 Exempt Irrevocable Trust, as Sellers, (the “CCH Acquisition”).

The unaudited pro forma consolidated and combined balance sheet as of December 31, 2018 has been prepared as if the CCH Acquisition had occurred on such date and combines Amedisys, Inc.’s audited historical balance sheet as of December 31, 2018 with CCH’s unaudited consolidated and combined balance sheet as of September 30, 2018. The unaudited pro forma consolidated and combined statement of operations for the year ended December 31, 2018 has been prepared as if the CCH Acquisition had occurred on January 1, 2018 and combines Amedisys, Inc.’s historical results for the year ended December 31, 2018 with CCH’s historical results for the twelve-months ended September 30, 2018.

The historical consolidated financial information of Amedisys, Inc. and CCH have been adjusted in the unaudited pro forma consolidated and combined financial statements to give effect to pro forma events that are (i) directly attributable to the CCH Acquisition, (ii) factually supportable, and (iii) with respect to the statement of operations, expected to have a continuing impact on the combined results. The unaudited pro forma consolidated and combined financial information should be read in conjunction with the accompanying notes thereto. In addition, the unaudited pro forma consolidated and combined financial information was based on and should be read in conjuntion with the following:

 

   

The historical audited consolidated financial statements as of and for the year ended December 31, 2018 and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Amedisys, Inc. included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2019;

 

   

The historical audited consolidated and combined financial statements of Compassionate Care Hospice Group, Inc. and Subsidiaries and Affiliates as of and for the years ended December 31, 2017 and 2016 included as Exhibit 99.1 to this Current Report on Form 8-K/A; and

 

   

The historical unaudited condensed consolidated and combined financial statements of Compassionate Care Hospice Group, Inc. and Subsidiaries and Affiliates as of September 30, 2018 and for the nine-month periods ended September 30, 2018 and 2017 included as Exhibit 99.2 to this Current Report on Form 8-K/A.

The historical audited and unaudited financial statements included in Exhibits 99.1 and 99.2 include Compassionate Care Hospice Group, Inc., its wholly-owned subsidiaries and affiliates, which are listed in Note 2 to the historical financial statements. One of the affiliates, Compassionate Care Hospice of New York, LLC (“CCH NY”), was not acquired by the Company. The unaudited pro forma consolidated and combined financial statements include adjustments to remove CCH NY from the historical financial statements.

The unaudited pro forma consolidated and combined financial statements are provided for information purposes only and are not intended to represent or be indicative of what the actual combined results of operations or the combined financial position of Amedisys, Inc. would have been had the CCH Acquisition been completed as of the dates presented. In addition, the unaudited consolidated and combined financial information does not purport to project the future financial position or operating results of Amedisys, Inc. nor does it reflect any operational efficiencies that may have been achieved if the acquisition had occurred on January 1, 2018 or December 31, 2018.

The unaudited pro forma consolidated and combined financial statements have been prepared using the acquisition method of accounting which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. We believe the fair values assigned to the assets acquired and the liabilities assumed, as reflected in the pro forma financial statements, are based on reasonable assumptions; however, all components of the purchase price allocation are considered preliminary and are subject to change as the Company finalizes the valuations of the assets acquired and liabilities assumed.

 

1


AMEDISYS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED BALANCE SHEET

(Amounts in thousands)

 

     As of December 31, 2018  
     Amedisys,
Inc.
    CCH
including
CCH NY
(Note 2)
    CCH NY (a)     Pro Forma
Adjustments
    Combined
Pro Forma
 
ASSETS           

Current assets:

          

Cash and cash equivalents

   $ 20,229     $ 13,675     $ —       $ (12,176 )(b)    $ 21,728  

Patient accounts receivable

     188,972       35,650       (1,300     —         223,322  

Prepaid expenses

     7,568       767       (10     —         8,325  

Other current assets

     7,349       233       (16     —         7,566  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     224,118       50,325       (1,326     (12,176     260,941  

Property and equipment, net

     29,449       224       —         —         29,673  

Goodwill

     329,480       350       —         302,845  (c)      632,675  

Intangible assets, net

     44,132       —         —         18,785  (d)      62,917  

Deferred income taxes

     35,794       —         —         —         35,794  

Other assets

     54,145       —         —         —         54,145  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 717,118     $ 50,899     $ (1,326   $ 309,454     $ 1,076,145  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
LIABILITIES AND EQUITY           

Current liabilities:

          

Accounts payable

   $ 28,531     $ 10,556     $ (499   $ —       $ 38,588  

Payroll and employee benefits

     92,858       5,159       (226     5,369  (e)      103,160  

Accrued expenses

     99,475       10,977       (1,674     320  (f)      109,098  

Current portion of long-term obligations

     1,612       —         —         —         1,612  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     222,476       26,692       (2,399     5,689       252,458  

Deferred income taxes

     —         171       —         (171 )(g)      —    

Long-term obligations, less current portion

     5,775       —         —         329,153  (h)      334,928  

Other long-term obligations

     6,234       —         —         —         6,234  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     234,485       26,863       (2,399     334,671       593,620  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity:

          

Preferred stock

     —         —         —         —         —    

Common stock

     36       1       —         (1 )(i)      36  

Additional paid-in capital

     603,666       —         —         —         603,666  

Treasury stock, at cost

     (241,685     —         —         —         (241,685

Accumulated other comprehensive income

     15       —         —         —         15  

Retained earnings

     119,550       25,855       2,492       (28,455 )(i)      119,442  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Amedisys, Inc. stockholders’ equity

     481,582       25,856       2,492       (28,456     481,474  

Noncontrolling interests

     1,051       (1,820     (1,419     3,239  (i)      1,051  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     482,633       24,036       1,073       (25,217     482,525  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 717,118     $ 50,899     $ (1,326   $ 309,454     $ 1,076,145  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited pro forma consolidated and combined financial statements.

 

2


AMEDISYS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS

(Amounts in thousands, except per share data)

 

     For the Year Ended December 31, 2018  
     Amedisys,
Inc.
    CCH
including
CCH NY

(Note 2)
    CCH NY (a)     Pro Forma
Adjustments
    Combined
Pro Forma
 

Net service revenue

   $ 1,662,578     $ 207,318     $ (9,355   $ (8,066 )(b)    $ 1,852,475  

Cost of service, excluding depreciation and amortization

     992,863       117,792       (5,218     —         1,105,437  

General and administrative expenses:

          

Salaries and benefits

     316,522       34,781       (1,610     —         349,693  

Non-cash compensation

     17,887       —         —         —         17,887  

Other

     166,897       27,769       (1,367     (9,002 )(c)      184,297  

Depreciation and amortization

     13,261       72       —         5,033 (d)      18,366  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     1,507,430       180,414       (8,195     (3,969     1,675,680  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     155,148       26,904       (1,160     (4,097     176,795  

Other income (expense):

          

Interest income

     278       69       —         —         347  

Interest expense

     (7,370     (192     60       (13,369 )(e)      (20,871

Equity in earnings from equity method investments

     7,692       —         —         —         7,692  

Miscellaneous, net

     3,240       —         —         —         3,240  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense), net

     3,840       (123     60       (13,369     (9,592
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     158,988       26,781       (1,100     (17,466     167,203  

Income tax expense

     (38,859     (824     —         (1,312 )(f)      (40,995
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     120,129       25,957       (1,100     (18,778     126,208  

Net income attributable to noncontrolling interests

     (783     (1,233     1,100       133 (g)      (783
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Amedisys, Inc.

   $ 119,346     $ 24,724     $ —       $ (18,645   $ 125,425  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per common share:

          

Net income attributable to Amedisys, Inc. common stockholders

   $ 3.64           $ 3.82  

Weighted average shares outstanding

     32,791             32,791  

Diluted earnings per common share:

          

Net income attributable to Amedisys, Inc. common stockholders

   $ 3.55           $ 3.73  

Weighted average shares outstanding

     33,609             33,609  

See accompanying notes to the unaudited pro forma consolidated and combined financial statements.

 

3


AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

1. Description of Transaction

On February 1, 2019, Amedisys, Inc. (the “Company”) and Amedisys Hospice, L.L.C., a wholly-owned subsidiary of the Company (“Amedisys Hospice”), completed the acquisition of all of the issued and outstanding equity interests in Compassionate Care Hospice Group, Inc. and its subsidiaries (collectively “CCH”) pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”) entered into on October 9, 2018 among the Company and Amedisys Hospice and Milton Heching and the Heching 2012 Exempt Irrevocable Trust, as Sellers, for a base purchase price of $340 million (which purchase price was subject to customary purchase price adjustments based on the amount of cash of the acquired companies as of the closing as well as certain tax payments owed by CCH) (the “CCH Acquisition”). A portion of the purchase price was paid by the issuance of a one business day promissory note, which the Company paid off in full on February 4, 2019 pursuant to the proceeds from the Term Loan Facility advanced under the Company’s Amended Credit Agreement.

2. Basis of Presentation

The unaudited pro forma consolidated and combined balance sheet as of December 31, 2018 and the unaudited pro forma consolidated and combined statement of operations for the year ended December 31, 2018 are based on the historical financial statements of the Company after giving effect to the Company’s acquisition of CCH and the assumptions and adjustments described in the notes herein. The unaudited pro forma consolidated and combined balance sheet as of December 31, 2018 is presented as if the acquisition occurred on December 31, 2018 and combines Amedisys, Inc.’s audited historical balance sheet as of December 31, 2018 with CCH’s unaudited consolidated and combined balance sheet as of September 30, 2018. The unaudited pro forma consolidated and combined statement of operations for the year ended December 31, 2018 is presented as if the acquisition occurred on January 1, 2018 and combines Amedisys, Inc.’s historical results for the year ended December 31, 2018 with CCH’s historical results for the twelve-months ended September 30, 2018.

The unaudited pro forma consolidated and combined financial statements are not intended to represent or be indicative of the results of operations or financial position of the Company that would have been reported had the acquisition been completed as of the dates presented, and should not be taken as representative of the future results of operations or financial position of the Company. The unaudited pro forma consolidated and combined financial statements, including the notes thereto, do not reflect any potential operating synergies that the Company may achieve with respect to the combined companies. The unaudited pro forma consolidated and combined financial statements and notes thereto should be read in conjunction with the historical financial statements of the Company included in the Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission (“SEC”) on February 28, 2019, and in conjunction with the historical financial statements of CCH as presented in Exhibits 99.1 and 99.2 of this Form 8-K/A.

The historical audited and unaudited financial statements of CCH include Compassionate Care Hospice Group, Inc., its wholly-owned subsidiaries and affiliates, which are listed in Note 2 to the historical financial statements. One of the affiliates, Compassionate Care Hospice of New York, LLC (“CCH NY”), was not acquired by the Company. The unaudited pro forma consolidated and combined financial statements include adjustments to remove CCH NY from the historical financial statements.

The tax rate used for the CCH pro forma financial information is the Company’s statutory tax rate of 26.0%, which will likely vary from the actual effective tax rate in periods subsequent to completion of the pro forma events.

The unaudited pro forma consolidated and combined financial statements have been prepared using the acquisition method of accounting which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. We believe the fair values assigned to the assets acquired and the liabilities assumed, as reflected in the pro forma financial statements, are based on reasonable assumptions; however, all components of the purchase price allocation are considered preliminary and are subject to change as the Company finalizes the valuations of the assets acquired and liabilities assumed.

 

4


AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

3. Accounting Policies

Based on the Company’s review of CCH’s significant accounting policies, the following pro forma adjustments are necessary to conform CCH’s accounting policies to the Company’s accounting policies.

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) and ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (collectively, “ASC 606”) on a full retrospective basis. The pro forma financial statements assume that CCH also adopted ASC 606 on January 1, 2018, on a full retrospective basis.

In addition, certain balances from CCH’s historical financial statements were reclassified to conform to the Company’s financial statement presentation. The reclassifications reflected within the “CCH including CCH NY” column of the unaudited pro forma consolidated and combined balance sheet are as follows:

 

   

The “prepaid expenses and other current assets” line item in CCH’s historical balance sheet was split into two separate line items, “prepaid expenses” and “other current assets,” in the unaudited pro forma consolidated and combined balance sheet. The amounts reclassified are as follows:

 

     Amount (in thousands)  

CCH Historical Financial Statements:

  

Prepaid expenses and other current assets

   $ 1,000  

CCH Pro Forma Financial Statements:

  

Prepaid expenses

   $ 767  

Other current assets

     233  
  

 

 

 

Total

   $ 1,000  
  

 

 

 

 

   

The “accounts payable and accrued expenses” line item in CCH’s historical balance sheet was split into two separate line items, “accounts payable” and “accrued expenses,” in the unaudited pro forma consolidated and combined balance sheet. The amounts reclassified are as follows:

 

     Amount (in thousands)  

CCH Historical Financial Statements:

  

Accounts payable and accrued expenses

   $ 11,954  

CCH Pro Forma Financial Statements:

  

Accounts payable

   $ 10,556  

Accrued expenses

     1,398  
  

 

 

 

Total

   $ 11,954  
  

 

 

 

 

   

The “self-insured liability” and “accrued salaries, benefits and other payroll liabilities” line items in CCH’s historical balance sheet were combined and included in the “payroll and employee benefits” line item in the unaudited pro forma consolidated and combined balance sheet. The amounts reclassified are as follows:

 

     Amount (in thousands)  

CCH Historical Financial Statements:

  

Self-insured liability

   $ 768  

Accrued salaries, benefits and other payroll liabilities

     4,391  
  

 

 

 

Total

   $ 5,159  
  

 

 

 

CCH Pro Forma Financial Statements:

  

Payroll and employee benefits

   $ 5,159  

 

5


AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

   

The “income tax payable” and “due to third-party payors” line items in CCH’s historical balance sheet were included in the “accrued expenses” line item in the unaudited pro forma consolidated and combined balance sheet. The amounts reclassified are as follows:

 

     Amount (in thousands)  

CCH Historical Financial Statements:

  

Income tax payable

   $ 182  

Due to third-party payors

     9,397  
  

 

 

 

Total

   $ 9,579  
  

 

 

 

CCH Pro Forma Financial Statements:

  

Accrued expenses

   $ 9,579  

The reclassifications reflected within the “CCH including CCH NY” column of the unaudited pro forma consolidated and combined statement of operations are as follows:

 

   

The “general and administrative” line item in CCH’s historical consolidated and combined statement of income includes medical insurance and workers compensation insurance expenses as well as other general and administrative expenses.

 

   

Expenses related to CCH’s self-insured medical insurance plan as well as CCH’s workers’ compensation insurance plan have been reclassified to either “cost of service, excluding depreciation and amortization” or “general and administrative expenses: salaries and benefits” in the unaudited pro forma consolidated and combined statement of operations based on the classification of the employee that the expenses relate to.

 

   

The remaining expenses have been reclassified to “general and administrative expenses: other” in the unaudited pro forma consolidated and combined statement of operations.

The amounts reclassified are as follows:

 

     Amount (in thousands)  

CCH Historical Financial Statements:

  

General and administrative expenses

   $ 24,362  

CCH Pro Forma Financial Statements:

  

Cost of service, excluding depreciation and amortization

   $ 4,720  

General and administrative expenses: salaries and benefits

     1,876  

General and administrative expenses: other

     17,766  
  

 

 

 

Total

   $ 24,362  
  

 

 

 

 

   

The “salaries and wages” line item in CCH’s historical consolidated and combined statement of income includes salaries and wages for all employees, as well as medical director fees. These amounts have been reclassified to either “cost of service, excluding depreciation and amortization,” “general and administrative expenses: salaries and benefits” or “general and administrative expenses: other” in the unaudited pro forma consolidated and combined statement of operations based on the classification of the employee that the expenses relate to. The amounts reclassified are as follows:

 

     Amount (in thousands)  

CCH Historical Financial Statements:

  

Salaries and wages

   $ 121,973  

CCH Pro Forma Financial Statements:

  

Cost of service, excluding depreciation and amortization

   $ 82,504  

General and administrative expenses: salaries and benefits

     32,905  

General and administrative expenses: other

     6,564  
  

 

 

 

Total

   $ 121,973  
  

 

 

 

 

6


AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

   

The “supplies and other expenses” line item in CCH’s historical consolidated and combined statement of income has been reclassified to “cost of service, excluding depreciation and amortization” in the unaudited pro forma consolidated and combined statement of operations. The amounts reclassified are as follows:

 

     Amount (in thousands)  

CCH Historical Financial Statements:

  

Supplies and other expenses

   $ 30,568  

CCH Pro Forma Financial Statements:

  

Cost of service, excluding depreciation and amortization

   $ 30,568  

 

   

The “rent expense” line item in CCH’s historical consolidated and combined statement of income has been reclassified to “general and administrative expenses: other” in the unaudited pro forma consolidated and combined statement of operations. The amounts reclassified are as follows:

 

     Amount (in thousands)  

CCH Historical Financial Statements:

  

Rent expense

   $ 3,439  

CCH Pro Forma Financial Statements:

  

General and administrative expenses: other

   $ 3,439  

At this time, the Company is not aware of any other differences that would have a material impact on the pro forma financial statements.

4. Preliminary Purchase Price Allocation

The Company’s acquisition of CCH was accounted for using the acquisition method of accounting which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair value as of the acquisition date. The initial purchase consideration paid to acquire CCH was $334.5 million or $327.9 million, net of cash acquired.

The Company is in the process of finalizing its valuation of the assets acquired and liabilities assumed. Based on the Company’s preliminary valuation, the total estimated consideration net of cash acquired of $327.9 million has been allocated to assets acquired and liabilities assumed as of the acquisition date as follows:

 

     Amount (in thousands)  

Current assets

   $ 35,324  

Property and equipment, net

     224  

Intangible assets

     18,785  
  

 

 

 

Total assets acquired

     54,333  
  

 

 

 

Current liabilities

     (29,662
  

 

 

 

Total liabilities assumed

     (29,662
  

 

 

 

Net identifiable assets acquired

     24,671  

Goodwill

     303,195  
  

 

 

 

Total consideration transferred

   $ 327,866  
  

 

 

 

5. Pro Forma Adjustments—Balance Sheet

The following pro forma adjustments are included in the unaudited pro forma consolidated and combined balance sheet:

(a) To eliminate assets and liabilities of CCH NY, which was not acquired in the acquisition.

 

7


AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

(b) To reflect the cash inflows and outflows as a result of the CCH Acquisition, as follows:

 

     Amount (in thousands)  

Proceeds from borrowings under Amended Credit Agreement

   $ 330,000  

Cash paid to seller/deposited into escrow account at closing

     (333,503

Cash in excess of $6.7 million retained by seller

     (7,008

Payment of transaction costs on behalf of seller

     (1,030

Payment of financing fees

     (527

Payment of Amedisys transaction costs

     (108
  

 

 

 

Adjustment to cash and cash equivalents

   $ (12,176
  

 

 

 

(c) To reflect changes in goodwill that would have been recognized if the acquisition occurred on December 31, 2018 as follows:

 

     Amount (in thousands)  

Eliminate the historical goodwill of CCH

   $ (350

Record estimated excess of purchase price over net assets acquired

     303,195  
  

 

 

 

Adjustment to goodwill

   $ 302,845  
  

 

 

 

(d) To record the estimated fair value of the intangible assets acquired, which include Medicare licenses, certificates of need, non-compete agreements and trade names. The non-compete agreements and trade names will be amortized over a weighted average period of 2.3 and 2.0 years, respectively.

(e) To record the accrual of retention and change-in-control bonus payments.

(f) To record the accrual of deferred financing fees that were not paid as of closing.

(g) To eliminate the historical deferred tax liability of CCH.

(h) To reflect changes in long-term obligations, less current portion, as follows:

 

     Amount (in thousands)  

Borrowings under Amended Credit Agreement to fund acquisition

   $ 330,000  

Deferred financing fees associated with additional borrowings

     (847
  

 

 

 

Adjustment to long-term obligations, less current portion

   $ 329,153  
  

 

 

 

(i) To eliminate the historical equity of CCH and to adjust for transaction costs totaling approximately $108,000.

6. Pro Forma Adjustments—Statement of Operations

The following pro forma adjustments are included in the unaudited pro forma consolidated and combined statement of operations:

(a) To eliminate revenue and expenses of CCH NY, which was not acquired in the acquisition.

(b) To record changes in net service revenue as a result of changes in accounting policy due to the adoption of ASC 606 on January 1, 2018.

(c) To reflect changes in general and administrative expenses—other as follows:

 

     Amount (in thousands)  

Adoption of ASC 606 on January 1, 2018

   $ (8,066

Elimination of non-recurring transaction costs related to the acquisition

     (936
  

 

 

 

Adjustment to general and administrative expenses—other

   $ (9,002
  

 

 

 

 

8


AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

(d) To record estimated amortization expense associated with the acquired intangible assets.

(e) To reflect changes in interest expense as follows:

 

     Amount (in thousands)  

Estimated interest expense associated with additional Amedisys borrowings

   $ (13,200

Amortization of deferred financing fees associated with additional Amedisys borrowings

     (169
  

 

 

 

Adjustment to interest expense

   $ (13,369
  

 

 

 

Estimated interest expense associated with the additional Amedisys, Inc. borrowings was computed using an interest rate of 4.02%, which represents the interest rate in effect at December 31, 2018.

(f) To record changes in income tax expense as follows:

 

     Amount (in thousands)  

Adjustment to record the income tax effect of pro forma adjustments based on the Company’s statutory rate of 26%

   $ 4,541  

Adjustment to record the income tax expense of CCH excluding NY at the Company’s statutory rate of 26%

     (5,853
  

 

 

 

Adjustment to income tax expense

   $ (1,312
  

 

 

 

(g) To eliminate the historical noncontrolling interests of CCH.

 

9

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