☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 27-2170749 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) |
500 Cummings Center Beverly, Massachusetts | 01915 |
(Address of principal executive offices) | (Zip code) |
Large accelerated filer | ☐ | Accelerated filer | ☒ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☒ |
PAGE | ||
• | continuing decline in the number of patients with commercial insurance, including as a result of changes to the healthcare exchanges or changes in regulations or enforcement of regulations regarding the healthcare exchanges and challenges from commercial payors or any regulatory or other changes leading to changes in the ability of patients with commercial insurance coverage to receive charitable premium support; |
• | decline in commercial payor reimbursement rates; |
• | the ultimate resolution of the Centers for Medicare and Medicaid Services (“CMS”) Interim Final Rule published December 14, 2016 related to dialysis facilities Conditions for Coverage (CMS 3337-IFC), including an issuance of a different but related Final Rule; |
• | reduction of government-based payor reimbursement rates or insufficient rate increases or adjustments that do not cover all of our operating costs; |
• | our ability to successfully develop de novo clinics, acquire existing clinics and attract new physician partners; |
• | our ability to compete effectively in the dialysis services industry; |
• | the performance of our joint venture subsidiaries and their ability to make distributions to us; |
• | changes to the Medicare end-stage renal disease (“ESRD”) program that could affect reimbursement rates and evaluation criteria, as well as changes in Medicaid or other non-Medicare government programs or payment rates, including the ESRD prospective payment rate system final rule for 2019 issued November 1, 2018; |
• | federal or state healthcare laws that could adversely affect us; |
• | our ability to comply with all of the complex federal, state and local government regulations that apply to our business, including those in connection with federal and state anti-kickback laws and state laws prohibiting the corporate practice of medicine or fee-splitting; |
• | heightened federal and state investigations and enforcement efforts; |
• | the impact of the now-settled litigation by affiliates of UnitedHealth Group, Inc. and the resolution thereof, including entry into a national network agreement with United; |
• | the impact of the ongoing Department of Justice inquiry; |
• | changes in the availability and cost of erythropoietin-stimulating agents and other pharmaceuticals used in our business; |
• | changes in the reimbursement rates of the calcimimetics pharmaceutical class under the Medicare Transitional Drug Add-on Payment Adjustment; |
• | development of new technologies that could decrease the need for dialysis services or decrease our in-center patient population; |
• | our ability to timely and accurately bill for our services and meet payor billing requirements; |
• | claims and losses relating to malpractice, professional liability and other matters; the sufficiency of our insurance coverage for those claims and rising insurances costs; and any negative publicity or reputational damage arising from such matters; |
• | loss of any members of our senior management; |
• | damage to our reputation or our brand and our ability to maintain brand recognition; |
• | our ability to maintain relationships with our medical directors and renew our medical director agreements; |
• | shortages of qualified skilled clinical personnel, or higher than normal turnover rates; |
• | competition and consolidation in the dialysis services industry; |
• | deteriorations in economic conditions, particularly in states where we operate a large number of clinics, or disruptions in the financial markets; |
• | the participation of our physician partners in material strategic and operating decisions and our ability to favorably resolve any disputes; |
• | our ability to honor obligations under the joint venture operating agreements with our physician partners were they to exercise certain put rights and other rights; |
• | unauthorized disclosure of personally identifiable, protected health or other sensitive or confidential information; |
• | our ability to meet our obligations and comply with restrictions under our substantial level of indebtedness; and |
• | the ability of our principal stockholder, whose interests may conflict with yours, to strongly influence or effectively control our corporate decisions. |
ITEM 1. | FINANCIAL STATEMENTS |
September 30, 2018 | December 31, 2017 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Cash | $ | 61,872 | $ | 71,521 | |||
Accounts receivable, less allowance for doubtful accounts of $426 and $6,757, respectively | 90,596 | 79,662 | |||||
Inventories | 6,382 | 4,665 | |||||
Prepaid expenses and other current assets | 20,608 | 24,998 | |||||
Income tax receivable | 5,306 | 6,745 | |||||
Total current assets | 184,764 | 187,591 | |||||
Property and equipment, net of accumulated depreciation of $191,979 and $167,390, respectively | 168,346 | 168,537 | |||||
Intangible assets, net of accumulated amortization of $24,022 and $23,419, respectively | 24,811 | 25,368 | |||||
Other long-term assets | 18,198 | 9,285 | |||||
Goodwill | 570,944 | 573,427 | |||||
Total assets | $ | 967,063 | $ | 964,208 | |||
Liabilities and Equity | |||||||
Accounts payable | $ | 54,023 | $ | 33,421 | |||
Accrued compensation and benefits | 34,658 | 28,985 | |||||
Accrued expenses and other current liabilities | 43,153 | 49,963 | |||||
Current portion of long-term debt | 47,206 | 44,534 | |||||
Total current liabilities | 179,040 | 156,903 | |||||
Long-term debt, less current portion | 506,750 | 515,554 | |||||
Income tax receivable agreement payable | 9,476 | 7,500 | |||||
Other long-term liabilities | 24,378 | 14,880 | |||||
Deferred tax liabilities | 4,843 | 8,991 | |||||
Total liabilities | 724,487 | 703,828 | |||||
Commitments and contingencies (Note 14 and Note 15) | |||||||
Noncontrolling interests subject to put provisions | 150,152 | 139,895 | |||||
Equity: | |||||||
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued | |||||||
Common stock, $0.01 par value; 300,000,000 shares authorized; 32,514,777 and 32,034,439 issued and outstanding at September 30, 2018 and December 31, 2017, respectively | 195 | 193 | |||||
Additional paid-in capital | 65,965 | 67,853 | |||||
Receivable from noncontrolling interests | (1,340 | ) | (358 | ) | |||
Accumulated deficit | (140,003 | ) | (123,789 | ) | |||
Accumulated other comprehensive income (loss), net of tax | 1,654 | (677 | ) | ||||
Total American Renal Associates Holdings, Inc. deficit | (73,529 | ) | (56,778 | ) | |||
Noncontrolling interests not subject to put provisions | 165,953 | 177,263 | |||||
Total equity | 92,424 | 120,485 | |||||
Total liabilities and equity | $ | 967,063 | $ | 964,208 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Patient service operating revenues | $ | 211,019 | $ | 187,711 | $ | 622,869 | $ | 550,728 | |||||||
Operating expenses: | |||||||||||||||
Patient care costs | 145,300 | 119,599 | 419,593 | 357,959 | |||||||||||
General and administrative | 24,619 | 22,292 | 76,382 | 79,917 | |||||||||||
Transaction-related costs (Note 1) | — | — | 856 | 717 | |||||||||||
Depreciation and amortization | 10,023 | 9,438 | 29,460 | 27,894 | |||||||||||
Certain legal matters (Note 15) | 1,028 | 3,481 | 37,677 | 11,714 | |||||||||||
Total operating expenses | 180,970 | 154,810 | 563,968 | 478,201 | |||||||||||
Operating income | 30,049 | 32,901 | 58,901 | 72,527 | |||||||||||
Interest expense, net | (8,241 | ) | (7,255 | ) | (23,829 | ) | (22,052 | ) | |||||||
Loss on early extinguishment of debt | — | — | — | (526 | ) | ||||||||||
Income tax receivable agreement (expense) income | (3,480 | ) | 3,585 | (2,765 | ) | 5,461 | |||||||||
Income before income taxes | 18,328 | 29,231 | 32,307 | 55,410 | |||||||||||
Income tax (benefit) expense | 34 | 2,559 | (1,977 | ) | (555 | ) | |||||||||
Net income | 18,294 | 26,672 | 34,284 | 55,965 | |||||||||||
Less: Net income attributable to noncontrolling interests | (15,804 | ) | (18,689 | ) | (50,712 | ) | (51,339 | ) | |||||||
Net income (loss) attributable to American Renal Associates Holdings, Inc. | 2,490 | 7,983 | (16,428 | ) | 4,626 | ||||||||||
Less: Change in the difference between the redemption value and estimated fair value for accounting purposes of the related noncontrolling interests | (481 | ) | 5 | (783 | ) | (13,605 | ) | ||||||||
Net income (loss) attributable to common shareholders | $ | 2,009 | $ | 7,988 | $ | (17,211 | ) | $ | (8,979 | ) | |||||
Earnings (loss) per share (Note 12): | |||||||||||||||
Basic | $ | 0.06 | $ | 0.26 | $ | (0.54 | ) | $ | (0.29 | ) | |||||
Diluted | $ | 0.06 | $ | 0.24 | $ | (0.54 | ) | $ | (0.29 | ) | |||||
Weighted-average number of common shares outstanding | |||||||||||||||
Basic | 32,005,544 | 31,095,418 | 31,912,934 | 30,997,218 | |||||||||||
Diluted | 34,578,592 | 33,833,822 | 31,912,934 | 30,997,218 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 18,294 | $ | 26,672 | $ | 34,284 | $ | 55,965 | |||||||
Unrealized gain (loss) on derivative agreements, net of tax | 427 | (27 | ) | 2,545 | (1,347 | ) | |||||||||
Total comprehensive income | 18,721 | 26,645 | 36,829 | 54,618 | |||||||||||
Less: Comprehensive income attributable to noncontrolling interests | (15,804 | ) | (18,689 | ) | (50,712 | ) | (51,339 | ) | |||||||
Total comprehensive income (loss) attributable to American Renal Associates Holdings, Inc. | $ | 2,917 | $ | 7,956 | $ | (13,883 | ) | $ | 3,279 |
Total American Renal Associates Holdings, Inc. Equity (Deficit) | ||||||||||||||||||||||||||||||||||
Noncontrolling Interests subject to put provisions | Common Stock | Additional Paid-in Capital | Receivable from Noncontrolling Interest Holders | Retained Earnings (Deficit) | Accumulated Other Comprehensive Income (loss) | Noncontrolling Interests not subject to put provisions | ||||||||||||||||||||||||||||
Shares | Par Value | Total | ||||||||||||||||||||||||||||||||
Balance at December 31, 2017 | $ | 139,895 | 32,034,439 | $ | 193 | $ | 67,853 | $ | (358 | ) | $ | (123,789 | ) | $ | (677 | ) | $ | (56,778 | ) | $ | 177,263 | |||||||||||||
Net income (loss) | 14,164 | — | — | — | — | (16,428 | ) | — | (16,428 | ) | 36,548 | |||||||||||||||||||||||
Reclassification of stranded tax effects related to the Tax Cuts and Jobs Act of 2017 | — | — | — | — | — | 214 | (214 | ) | — | — | ||||||||||||||||||||||||
Stock-based compensation | — | — | — | 4,174 | — | — | — | 4,174 | — | |||||||||||||||||||||||||
Exercise of stock options | — | 212,383 | 2 | 1,155 | — | — | — | 1,157 | — | |||||||||||||||||||||||||
Issuance of restricted stock awards | — | 357,275 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Forfeiture of restricted stock awards | — | (70,382 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Vested restricted stock awards withheld on net share settlement | — | (18,938 | ) | — | (421 | ) | — | — | — | (421 | ) | — | ||||||||||||||||||||||
Cash dividend equivalents accrued on share-based payments, net | — | — | — | 494 | — | — | — | 494 | — | |||||||||||||||||||||||||
Distributions to noncontrolling interests | (16,511 | ) | — | — | — | — | — | — | — | (38,620 | ) | |||||||||||||||||||||||
Contributions from noncontrolling interests | 1,383 | — | — | — | (982 | ) | — | — | (982 | ) | 3,244 | |||||||||||||||||||||||
Purchases of noncontrolling interests | (1,062 | ) | — | — | (6,081 | ) | — | — | — | (6,081 | ) | (1,586 | ) | |||||||||||||||||||||
Sales of noncontrolling interests | 166 | — | — | (51 | ) | — | — | — | (51 | ) | 63 | |||||||||||||||||||||||
Reclassification/other adjustments | 10,405 | — | — | 554 | — | — | — | 554 | (10,959 | ) | ||||||||||||||||||||||||
Change in fair value of derivative agreements, net of tax | — | — | — | — | — | — | 2,545 | 2,545 | — | |||||||||||||||||||||||||
Change in fair value of noncontrolling interests | 1,712 | — | — | (1,712 | ) | — | — | — | (1,712 | ) | — | |||||||||||||||||||||||
Balance at September 30, 2018 | $ | 150,152 | 32,514,777 | $ | 195 | $ | 65,965 | $ | (1,340 | ) | $ | (140,003 | ) | $ | 1,654 | $ | (73,529 | ) | $ | 165,953 |
Nine Months Ended September 30, | |||||||
Operating activities | 2018 | 2017 | |||||
Net income | $ | 34,284 | $ | 55,965 | |||
Adjustments to reconcile net income to cash provided by operating activities: | |||||||
Depreciation and amortization | 29,460 | 27,894 | |||||
Amortization of discounts, fees and deferred financing costs | 1,384 | 1,534 | |||||
Loss on extinguishment of debt | — | 526 | |||||
Stock-based compensation | 4,174 | 14,762 | |||||
Premium paid for interest rate cap agreements | — | (1,186 | ) | ||||
Deferred taxes | (5,014 | ) | 730 | ||||
Income tax receivable agreement expense (income) | 2,765 | (5,461 | ) | ||||
Non-cash charge related to derivative agreements | 18 | 173 | |||||
Non-cash rent charges | 400 | 588 | |||||
Loss (gain) on disposal of assets | 342 | (377 | ) | ||||
Change in operating assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | (10,934 | ) | (107 | ) | |||
Inventories | (1,717 | ) | 4 | ||||
Prepaid expenses and other current assets | 6,809 | (1,425 | ) | ||||
Other assets | (7,291 | ) | (558 | ) | |||
Accounts payable | 20,602 | 2,736 | |||||
Accrued compensation and benefits | 5,673 | 2,664 | |||||
Accrued expenses and other liabilities | 2,916 | (1,090 | ) | ||||
Cash provided by operating activities | 83,871 | 97,372 | |||||
Investing activities | |||||||
Purchases of property, equipment and intangible assets | (29,074 | ) | (24,780 | ) | |||
Proceeds from asset sales | 2,502 | 1,075 | |||||
Cash used in investing activities | (26,572 | ) | (23,705 | ) | |||
Financing activities | |||||||
Net proceeds from issuance of long-term debt | — | 267,564 | |||||
Cash paid for financing costs | — | (3,914 | ) | ||||
Proceeds from term loans, net of deferred financing costs | 52,576 | 34,742 | |||||
Payments on long-term debt | (59,903 | ) | (312,800 | ) | |||
Dividends and dividend equivalents paid | (320 | ) | (8,715 | ) | |||
Proceeds from exercise of stock options | 1,157 | 683 | |||||
Vested restricted stock awards withheld on net share settlement | (421 | ) | — | ||||
Distributions to noncontrolling interests | (55,131 | ) | (60,509 | ) | |||
Contributions from noncontrolling interests | 3,645 | 3,847 | |||||
Purchases of noncontrolling interests | (8,729 | ) | (27,854 | ) | |||
Proceeds from sales of additional noncontrolling interests | 178 | 66 | |||||
Cash used in financing activities | (66,948 | ) | (106,890 | ) | |||
Decrease in cash and restricted cash | (9,649 | ) | (33,223 | ) | |||
Cash and restricted cash at beginning of period | 71,621 | 100,916 | |||||
Cash and restricted cash at end of period | $ | 61,972 | $ | 67,693 | |||
Supplemental Disclosure of Cash Flow Information | |||||||
Cash paid for income taxes | $ | 2,152 | $ | 1,571 | |||
Cash paid for interest | 22,221 | 20,111 | |||||
Supplemental Disclosure of Non-Cash Financing Activities | |||||||
Accrued purchases of noncontrolling interests | — | 3,696 | |||||
Liability for accrued dividend equivalent payments, net | 494 | 2,711 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
Source of Revenues: | 2018 | 2017 | 2018 | 2017 | |||||||
Medicare and Medicare Advantage | 65 | % | 59 | % | 64 | % | 59 | % | |||
Commercial and other (1) | 30 | % | 36 | % | 32 | % | 37 | % | |||
Medicaid and Managed Medicaid | 4 | % | 4 | % | 4 | % | 4 | % | |||
Other (2) | 1 | % | 1 | % | — | % | — | % | |||
100 | % | 100 | % | 100 | % | 100 | % |
(1) | Principally commercial insurance companies and also includes the VA, which we refer to collectively as “Commercial and other.” |
(2) | Other sources of revenues include hospitals and patient pay. “Patient pay” revenues consist of payments received directly from patients who are either uninsured or self-pay a portion of the bill. |
September 30, 2018 | ||||
Cash | $ | 61,872 | ||
Restricted cash included in other long-term assets | 100 | |||
Total cash and restricted cash shown in the statement of cash flows | $ | 61,972 |
Balance at December 31, 2017 | $ | 573,427 | |
Acquisitions | — | ||
Divestitures | (2,483 | ) | |
Balance at September 30, 2018 | $ | 570,944 |
September 30, 2018 | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | |||||||||||||||
Interest rate derivative agreements (included in Prepaid expenses and other current assets) | $ | 1,027 | $ | — | $ | 1,027 | $ | — | |||||||
Interest rate derivative agreements (included in Other long-term assets) | 2,066 | — | 2,066 | — | |||||||||||
Total Assets | $ | 3,093 | $ | — | $ | 3,093 | $ | — | |||||||
Liabilities | |||||||||||||||
Tax Receivable Agreement Liability (included in Income tax receivable agreement payable) | $ | 9,500 | $ | — | $ | — | $ | 9,500 | |||||||
Temporary Equity | |||||||||||||||
Noncontrolling interests subject to put provisions | $ | 150,152 | $ | — | $ | — | $ | 150,152 |
December 31, 2017 | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | |||||||||||||||
Interest rate derivative agreements (included in Prepaid expenses and other current assets) | $ | 46 | $ | — | $ | 46 | $ | — | |||||||
Interest rate derivative agreements (included in Other long-term assets) | 255 | — | 255 | — | |||||||||||
Total Assets | $ | 301 | $ | — | $ | 301 | $ | — | |||||||
Liabilities | |||||||||||||||
Tax Receivable Agreement Liability (included in Income tax receivable agreement payable) | $ | 7,500 | $ | — | $ | — | $ | 7,500 | |||||||
Interest rate swap agreement (included in Accrued expenses and other current liabilities) | 403 | — | 403 | — | |||||||||||
Interest rate swap agreement (included in Other long-term liabilities) | 198 | — | 198 | — | |||||||||||
Total Liabilities | $ | 8,101 | $ | — | $ | 601 | $ | 7,500 | |||||||
Temporary Equity | |||||||||||||||
Noncontrolling interests subject to put provisions | $ | 139,895 | $ | — | $ | — | $ | 139,895 |
Balance at December 31, 2017 | $ | 7,500 | |
Options exercised and dividend equivalent payment vesting | (765 | ) | |
Total realized/unrealized losses: | |||
Included in earnings and reported as Income tax receivable agreement expense | 2,765 | ||
Balance at September 30, 2018 | $ | 9,500 |
September 30, 2018 | December 31, 2017 | ||||||
Accrued compensation | $ | 21,027 | $ | 17,987 | |||
Accrued vacation pay | 13,631 | 10,998 | |||||
$ | 34,658 | $ | 28,985 |
September 30, 2018 | December 31, 2017 | ||||||
Payor refunds and retractions | $ | 24,968 | $ | 28,935 | |||
Other | 10,544 | 21,028 | |||||
Accrued settlement | 7,641 | — | |||||
$ | 43,153 | $ | 49,963 |
September 30, 2018 | December 31, 2017 | ||||||
Redemption value | $ | 11,149 | $ | 12,211 | |||
Estimated fair value for accounting purposes | 4,930 | 6,550 | |||||
Difference between the redemption value and estimated fair value for accounting purposes of the related noncontrolling interests | $ | 6,219 | $ | 5,661 |
September 30, 2018 | December 31, 2017 | ||||||
Noncontrolling interest subject to put provisions - estimated fair value | $ | 143,933 | $ | 134,234 | |||
Difference between the redemption value and estimated fair value for accounting purposes of the related noncontrolling interests | 6,219 | 5,661 | |||||
Noncontrolling interests subject to put provisions - maximum redemption value | $ | 150,152 | $ | 139,895 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Change in estimated fair value for accounting purposes | $ | 4,447 | $ | 2,260 | $ | 929 | $ | (5,915 | ) | ||||||
Change in the difference between the redemption value and estimated fair value for accounting purposes of the related noncontrolling interests | 481 | (5 | ) | 783 | 13,605 | ||||||||||
Total change in fair value of noncontrolling interests subject to put provisions - maximum redemption | $ | 4,928 | $ | 2,255 | $ | 1,712 | $ | 7,690 |
September 30, 2018 | December 31, 2017 | ||||||
2017 Credit Agreement | $ | 434,500 | $ | 437,800 | |||
Term Loans (1) | 119,984 | 125,619 | |||||
Lines of Credit | 5,765 | 3,600 | |||||
Other | 2,182 | 2,601 | |||||
562,431 | 569,620 | ||||||
Less: discounts and fees, net of accumulated amortization | (8,475 | ) | (9,532 | ) | |||
Less: current maturities | (47,206 | ) | (44,534 | ) | |||
$ | 506,750 | $ | 515,554 |
2018 (remainder) | $ | 11,804 | |
2019 | 42,759 | ||
2020 | 33,599 | ||
2021 | 25,854 | ||
2022 | 20,161 | ||
Thereafter | 428,254 | ||
$ | 562,431 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Patient care costs | $ | 308 | $ | 127 | $ | 750 | $ | 2,620 | |||||||
General and administrative | 939 | 904 | 3,424 | 12,142 | |||||||||||
Total stock-based compensation before tax | $ | 1,247 | $ | 1,031 | $ | 4,174 | $ | 14,762 | |||||||
Income tax benefit | (324 | ) | (412 | ) | (1,085 | ) | (5,905 | ) |
Nine Months Ended September 30, 2018 | |
Expected volatility | 30-35% |
Weighted average expected term in years | 6.00 |
Weighted average risk-free interest rate | 2.74-2.92% |
Expected annual dividend yield | —% |
Weighted average grant-date fair value | $7.00 |
Nine Months Ended September 30, 2018 | ||||||
Number of Options | Weighted-Average Exercise Price | |||||
Outstanding, beginning of period | 5,280,261 | $ | 11.79 | |||
Granted (1) | 233,389 | 19.28 | ||||
Exercised | (212,383 | ) | 5.44 | |||
Forfeited | (190,631 | ) | 18.97 | |||
Outstanding, end of period | 5,110,636 | $ | 12.12 | |||
Options vested and expected to vest, end of period | 5,110,636 | $ | 12.12 | |||
Options exercisable, end of period | 3,265,998 | $ | 8.01 |
Nine Months Ended September 30, 2018 | ||||||
Number Outstanding | Weighted-Average Grant Date Fair Value per Award | |||||
Unvested at December 31, 2017 | 252,307 | $ | 16.70 | |||
Granted (1) | 357,275 | $ | 22.20 | |||
Vested | (100,553 | ) | $ | 16.91 | ||
Forfeited | (70,382 | ) | $ | 19.48 | ||
Unvested at September 30, 2018 | 438,647 | $ | 20.69 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Basic | ||||||||||||||||
Net income (loss) attributable to American Renal Associates Holdings, Inc. | $ | 2,490 | $ | 7,983 | $ | (16,428 | ) | $ | 4,626 | |||||||
Change in the difference between the redemption value and estimated fair value for accounting purposes of the related noncontrolling interests | (481 | ) | 5 | (783 | ) | (13,605 | ) | |||||||||
Net income (loss) attributable to common shareholders for basic earnings per share calculation | $ | 2,009 | $ | 7,988 | $ | (17,211 | ) | $ | (8,979 | ) | ||||||
Weighted-average common shares outstanding used to calculate basic net loss per share | 32,005,544 | 31,095,418 | 31,912,934 | 30,997,218 | ||||||||||||
Income (loss) per share, basic | $ | 0.06 | $ | 0.26 | $ | (0.54 | ) | $ | (0.29 | ) | ||||||
Diluted | ||||||||||||||||
Net income (loss) attributable to American Renal Associates Holdings, Inc. | $ | 2,490 | $ | 7,983 | $ | (16,428 | ) | $ | 4,626 | |||||||
Change in the difference between the redemption value and estimated fair value for accounting purposes of the related noncontrolling interests | (481 | ) | 5 | (783 | ) | (13,605 | ) | |||||||||
Net income (loss) attributable to common shareholders for diluted earnings per share calculation | $ | 2,009 | $ | 7,988 | $ | (17,211 | ) | $ | (8,979 | ) | ||||||
Weighted-average common shares outstanding, basic | 32,005,544 | 31,095,418 | 31,912,934 | 30,997,218 | ||||||||||||
Weighted-average effect of dilutive securities: | ||||||||||||||||
Effect of assumed exercise of stock options | 2,129,736 | 2,536,750 | — | — | ||||||||||||
Effect of unvested restricted stock | 443,312 | 201,654 | — | — | ||||||||||||
Weighted-average common shares outstanding used to calculate diluted net loss per share | 34,578,592 | 33,833,822 | 31,912,934 | 30,997,218 | ||||||||||||
Income (loss) per share, diluted | $ | 0.06 | $ | 0.24 | $ | (0.54 | ) | $ | (0.29 | ) | ||||||
Outstanding options and restricted stock excluded as impact would be anti-dilutive | 1,234,245 | 1,357,957 | 2,736,134 | 1,988,257 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||
Net income (loss) attributable to American Renal Holdings Associates, Inc. | $ | 2,490 | $ | 7,983 | $ | (16,428 | ) | $ | 4,626 | |||||
(Decrease) increase in paid-in capital for the sales of noncontrolling interest | (80 | ) | 34 | (51 | ) | 34 | ||||||||
Decrease in paid-in capital for the purchase of noncontrolling interest and adjustments to ownership interest | (128 | ) | — | (6,081 | ) | (5,980 | ) | |||||||
Net transfers to/from noncontrolling interests | $ | (208 | ) | $ | 34 | $ | (6,132 | ) | $ | (5,946 | ) | |||
Net income (loss) attributable to American Renal Holdings Associates, Inc., net of transfers to/from noncontrolling interests | $ | 2,282 | $ | 8,017 | $ | (22,560 | ) | $ | (1,320 | ) |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
De novo clinics (1) | 2 | 1 | 8 | 6 | |||||||
Acquired clinics (2) | — | — | — | — | |||||||
Sold or merged clinics (3) | — | (1 | ) | (1 | ) | (3 | ) | ||||
Total net new clinics | 2 | — | 7 | 3 |
(1) | Clinics formed by us which began to operate and dialyze patients in the applicable period. |
(2) | Clinics acquired by us in the applicable period. |
(3) | Clinics sold or merged by us in the applicable period. |
Three Months Ended | ||||||||||||||
March 31, | June 30, | September 30, | December 31, | Total | ||||||||||
2018 | 1 | 5 | 2 | — | 8 | |||||||||
2017 | 3 | 2 | 1 | 9 | 15 | |||||||||
2016 | 2 | 6 | 5 | 7 | 20 | |||||||||
2015 | 1 | 5 | 6 | 4 | 16 | |||||||||
2014 | 2 | 4 | 3 | 6 | 15 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
Source of Treatment Growth: | 2018 | 2017 | 2018 | 2017 | |||||||
Non-acquired treatment growth(1) | 3.9 | % | 6.8 | % | 4.2 | % | 8.6 | % | |||
Acquired treatment growth(2) | 1.1 | % | — | % | 1.1 | % | — | % | |||
Total treatment growth | 5.0 | % | 6.8 | % | 5.3 | % | 8.6 | % |
(1) | Represents net growth in treatments attributable to clinics operating at the end of the period that were also open at the end of the prior period and de novo clinics opened since the end of the prior period. |
(2) | Represents net growth in treatments attributable to clinics acquired since the end of the prior period. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
Source of Revenues: | 2018 | 2017 | 2018 | 2017 | |||||||
Medicare and Medicare Advantage | 65 | % | 59 | % | 64 | % | 59 | % | |||
Commercial and other (1) | 30 | % | 36 | % | 32 | % | 37 | % | |||
Medicaid and Managed Medicaid | 4 | % | 4 | % | 4 | % | 4 | % | |||
Other (2) | 1 | % | 1 | % | — | % | — | % | |||
100 | % | 100 | % | 100 | % | 100 | % |
(1) | Principally commercial insurance companies and also includes the U.S. Department of Veterans Affairs (the “VA”), which we refer to collectively as “Commercial and other.” |
(2) | Other sources of revenues include hospitals and patient pay. “Patient pay” revenues consist of payments received directly from patients who are either uninsured or self-pay a portion of the bill. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
Operating Data and Other Non-GAAP Financial Data: | 2018 | 2017 | 2018 | 2017 | |||||||||||
Number of clinics (as of end of period) | 235 | 217 | 235 | 217 | |||||||||||
Number of de novo clinics opened (during period) | 2 | 1 | 8 | 6 | |||||||||||
Patients (as of end of period) | 16,092 | 15,237 | 16,092 | 15,237 | |||||||||||
Number of treatments | 578,982 | 551,258 | 1,710,847 | 1,625,227 | |||||||||||
Non-acquired treatment growth | 3.9 | % | 6.8 | % | 4.2 | % | 8.6 | % | |||||||
Patient service operating revenues per treatment | $ | 364 | $ | 341 | $ | 364 | $ | 339 | |||||||
Patient care costs per treatment | $ | 251 | $ | 217 | $ | 245 | $ | 220 | |||||||
Adjusted patient care costs per treatment (1) | $ | 251 | $ | 217 | $ | 245 | $ | 219 | |||||||
General and administrative expenses per treatment | $ | 43 | $ | 40 | $ | 45 | $ | 49 | |||||||
Adjusted general and administrative expenses per treatment (2) | $ | 43 | $ | 40 | $ | 45 | $ | 43 | |||||||
Adjusted EBITDA (including noncontrolling interests) (3) | $ | 42,435 | $ | 46,838 | $ | 131,589 | $ | 128,306 | |||||||
Adjusted EBITDA-NCI (3) | $ | 26,631 | $ | 28,149 | $ | 80,877 | $ | 76,967 |
(1) | Adjusted patient care costs per treatment excludes $2.2 million of Modification Expense during the nine months ended September 30, 2017. Additionally, the nine months ended September 30, 2017 exclude $0.1 million of severance expense and $0.6 million of gains on sale of assets. |
(2) | Adjusted general and administrative expenses per treatment excludes $9.5 million of Modification Expense during the nine months ended September 30, 2017. Additionally, the nine months ended September 30, 2017 exclude $0.8 million of severance expense. |
(3) | See “Non-GAAP Financial Measures” below. |
• | do not include stock-based compensation expense, and beginning with the quarter ended June 30, 2017, do not include associated payroll taxes; |
• | do not include transaction-related costs; |
• | do not include depreciation and amortization—because construction and operation of our dialysis clinics requires significant capital expenditures, depreciation and amortization are a necessary element of our costs and ability to generate profits; |
• | do not include interest expense—as we have borrowed money for general corporate purposes, interest expense is a necessary element of our costs and ability to generate profits and cash flows; |
• | do not include income tax receivable agreement income and expense; |
• | do not include loss on early extinguishment of debt; |
• | do not include costs related to certain legal matters; |
• | do not include executive and management severance costs; |
• | do not include income tax expense or benefit and other non-income based taxes; and |
• | do not reflect the gain on sale of assets. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net income | $ | 18,294 | $ | 26,672 | $ | 34,284 | $ | 55,965 | |||||||
Add: | |||||||||||||||
Interest expense, net | 8,241 | 7,255 | 23,829 | 22,052 | |||||||||||
Income tax (benefit) expense and other non-income based tax | 71 | 2,559 | (1,638 | ) | (555 | ) | |||||||||
Depreciation and amortization | 10,023 | 9,438 | 29,460 | 27,894 | |||||||||||
Transaction-related costs (a) | — | — | 856 | 717 | |||||||||||
Loss on early extinguishment of debt (b) | — | — | — | 526 | |||||||||||
Income tax receivable agreement expense (income) (c) | 3,480 | (3,585 | ) | 2,765 | (5,461 | ) | |||||||||
Certain legal matters (d) | 1,028 | 3,481 | 37,677 | 11,714 | |||||||||||
Executive and management severance costs (e) | — | — | — | 917 | |||||||||||
Stock-based compensation and related payroll taxes | 1,298 | 1,054 | 4,356 | 15,090 | |||||||||||
Gain on sale of assets (f) | (36 | ) | — | (553 | ) | ||||||||||
Adjusted EBITDA (including noncontrolling interests) | $ | 42,435 | $ | 46,838 | $ | 131,589 | $ | 128,306 | |||||||
Less: Net income attributable to noncontrolling interests | (15,804 | ) | (18,689 | ) | (50,712 | ) | (51,339 | ) | |||||||
Adjusted EBITDA –NCI | $ | 26,631 | $ | 28,149 | $ | 80,877 | $ | 76,967 |
(a) | For the nine months ended September 30, 2018, includes costs incurred related to our registration statement, which was declared effective on March 19, 2018, and the secondary offering that was withdrawn on March 28, 2018. For the nine months ended September 30, 2017, represents costs related to debt refinancing. See “Note 9 - Debt” of the notes to the unaudited consolidated financial statements. |
(b) | Represents costs related to debt refinancing. See “Note 9 - Debt” of the notes to the unaudited consolidated financial statements. |
(c) | Represents income associated with the change in fair value of the TRA liability. See “—Components of Earnings—Interest and Taxes” and “Note 5 - Fair Value Measurements” of the notes to the unaudited consolidated financial statements. |
(d) | Represents costs related to the specific legal and regulatory matters described in “Note 15 - Certain Legal Matters” of the notes to the unaudited consolidated financial statements. |
(e) | Represents executive and management severance costs. |
(f) | Represents sale of clinic assets. |
Three Months Ended September 30, | Increase (Decrease) | |||||||||||||
Percentage | ||||||||||||||
(in thousands) | 2018 | 2017 | Amount | Change | ||||||||||
Patient service operating revenues | $ | 211,019 | $ | 187,711 | $ | 23,308 | 12.4 | % | ||||||
Operating expenses: | ||||||||||||||
Patient care costs | 145,300 | 119,599 | 25,701 | 21.5 | % | |||||||||
General and administrative | 24,619 | 22,292 | 2,327 | 10.4 | % | |||||||||
Depreciation and amortization | 10,023 | 9,438 | 585 | 6.2 | % | |||||||||
Certain legal matters | 1,028 | 3,481 | (2,453 | ) | (70.5 | )% | ||||||||
Total operating expenses | 180,970 | 154,810 | 26,160 | 16.9 | % | |||||||||
Operating income | 30,049 | 32,901 | (2,852 | ) | (8.7 | )% | ||||||||
Interest expense, net | (8,241 | ) | (7,255 | ) | (986 | ) | 13.6 | % | ||||||
Income tax receivable agreement (expense) income | (3,480 | ) | 3,585 | (7,065 | ) | (197.1 | )% | |||||||
Income before income taxes | 18,328 | 29,231 | (10,903 | ) | (37.3 | )% | ||||||||
Income tax expense | 34 | 2,559 | (2,525 | ) | (98.7 | )% | ||||||||
Net income | 18,294 | 26,672 | (8,378 | ) | (31.4 | )% | ||||||||
Less: Net income attributable to noncontrolling interests | (15,804 | ) | (18,689 | ) | 2,885 | (15.4 | )% | |||||||
Net income attributable to American Renal Associates Holdings, Inc. | $ | 2,490 | $ | 7,983 | $ | (5,493 | ) | (68.8 | )% |
Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||
Percentage | ||||||||||||||
(in thousands) | 2018 | 2017 | Amount | Change | ||||||||||
Patient service operating revenues | $ | 622,869 | $ | 550,728 | $ | 72,141 | 13.1 | % | ||||||
Operating expenses: | ||||||||||||||
Patient care costs | 419,593 | 357,959 | 61,634 | 17.2 | % | |||||||||
General and administrative | 76,382 | 79,917 | (3,535 | ) | (4.4 | )% | ||||||||
Transaction-related costs | 856 | 717 | 139 | 19.4 | % | |||||||||
Depreciation and amortization | 29,460 | 27,894 | 1,566 | 5.6 | % | |||||||||
Certain legal matters | 37,677 | 11,714 | 25,963 | 221.6 | % | |||||||||
Total operating expenses | 563,968 | 478,201 | 85,767 | 17.9 | % | |||||||||
Operating income | 58,901 | 72,527 | (13,626 | ) | (18.8 | )% | ||||||||
Interest expense, net | (23,829 | ) | (22,052 | ) | (1,777 | ) | 8.1 | % | ||||||
Loss on early extinguishment of debt | — | (526 | ) | 526 | NM | |||||||||
Income tax receivable agreement (expense) income | (2,765 | ) | 5,461 | (8,226 | ) | (150.6 | )% | |||||||
Income before income taxes | 32,307 | 55,410 | (23,103 | ) | (41.7 | )% | ||||||||
Income tax benefit | (1,977 | ) | (555 | ) | (1,422 | ) | 256.2 | % | ||||||
Net income | 34,284 | 55,965 | (21,681 | ) | (38.7 | )% | ||||||||
Less: Net income attributable to noncontrolling interests | (50,712 | ) | (51,339 | ) | 627 | (1.2 | )% | |||||||
Net (loss) income attributable to American Renal Associates Holdings, Inc. | $ | (16,428 | ) | $ | 4,626 | $ | (21,054 | ) | (455.1 | )% |
Nine Months Ended September 30, | |||||||
(dollars in thousands) | 2018 | 2017 | |||||
Net cash provided by operating activities | $ | 83,871 | $ | 97,372 | |||
Net cash used in investing activities | (26,572 | ) | (23,705 | ) | |||
Net cash used in financing activities | (66,948 | ) | (106,890 | ) | |||
Net decrease in cash and restricted cash | $ | (9,649 | ) | $ | (33,223 | ) |
Scheduled payments under contractual obligations (in thousands) | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Third-party clinic-level debt | $ | 125,749 | $ | 10,562 | $ | 66,367 | $ | 36,367 | $ | 12,453 | ||||||||||
Term B loans(1) | 434,500 | 1,100 | 8,800 | 8,800 | 415,800 | |||||||||||||||
Other corporate debt | 2,181 | 142 | 1,191 | 848 | — | |||||||||||||||
Operating leases(2) | 196,702 | 7,791 | 58,138 | 49,492 | 81,281 | |||||||||||||||
Interest payments(3) | 150,218 | 7,647 | 56,512 | 50,675 | 35,384 | |||||||||||||||
Purchase obligation(4) | 116,616 | 12,991 | 52,325 | 51,300 | — | |||||||||||||||
Total | $ | 1,025,966 | $ | 40,233 | $ | 243,333 | $ | 197,482 | $ | 544,918 |
(1) | Bear interest at a variable rate, with principal payments of $1.1 million and interest payments due quarterly. |
(2) | Net of estimated sublease proceeds of approximately $1.3 million per year from 2018 through 2022 and approximately $0.2 million or less thereafter. |
(3) | Represents interest payments on debt obligations, including the 2017 Term B Loan Facility described above under the 2017 Credit Agreement. To project interest payments on floating rate debt, we have used the rate as of September 30, 2018. |
(4) | Reflects amounts payable pursuant to minimum purchase commitments under our agreements with certain suppliers of pharmaceuticals. In the event of a shortfall, we are required to pay in cash a portion or all of the amount of such shortfall or may, under certain circumstances, be subject to a price increase or other fee. |
Noncontrolling interest subject to put provisions (dollars in thousands) | September 30, 2018 | |||
Time-based puts | $ | 118,260 | ||
Event-based puts | 31,892 | |||
Total Obligation | $ | 150,152 |
(dollars in thousands) Year | Amount Exercisable | |||
2018 | 38,588 | |||
2019 | 13,301 | |||
2020 | 23,268 | |||
2021 | 21,732 | |||
2022 | 13,269 | |||
Thereafter | 8,102 | |||
Total | $ | 118,260 |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 1A. | RISK FACTORS |
ITEM 6. | EXHIBITS |
EXHIBIT NUMBER | EXHIBIT DESCRIPTION | |
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Extension Schema Document. | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document. |
AMERICAN RENAL ASSOCIATES HOLDINGS INC. | |
(Registrant) | |
/s/ Jason M. Boucher | |
Name: Jason M. Boucher | |
Title: Chief Financial Officer (Principal Financial and Accounting Officer and Authorized Signatory) |
November 9, 2018 |
(Date) |
1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 of American Renal Associates Holdings, Inc. (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Joseph A. Carlucci |
Joseph A. Carlucci |
Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 of American Renal Associates Holdings, Inc. (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Jason M. Boucher |
Jason M. Boucher |
Chief Financial Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Joseph A. Carlucci |
Joseph A. Carlucci |
Chief Executive Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Jason M. Boucher |
Jason M. Boucher |
Chief Financial Officer |
$ P$ @,! " D*!P4& @0+ __$
M $40 & @$# @,% @L$"P $" P0%!@ '"!$2"1,4(146,2(C%PK6&$%6
MEK8W5W>7MQDYDW98>4(S)-0EM= :DN'2=-^H5W*\41Q_&MCPQE8>)*,;=V=RG)3
MX81K5T=WF3CRH8 P!@# & , 8 P!@# & , 8 P!@# /_TM_& , 8 P!@# &
M, 8 P!@# & , 8 P!@'K=ON51U]6Y:XWRTUZEU*!:F?3EGM%N[;NINW--(L=9T#6?#U^UC:SI]S'O3@I1
M4J4E%]#3:;5:25:Q>R23V&6CRF6?S,[VY.[NXZ:AI>]E^.U5FVL76ATA0+)4
M:5;ZU.5R%LK,EJV@BFE]6R'L90C>0:&E_EY722A"M$A$Q!JLIYMR[.W",N[7
M0MC\Y[]]/['TQTC0=*UK4LK$6M7(-R[^Y&\CSLWRR.+?M.:T%X_>/UEYH[-KJA6
M]JN,+.,JKH^GJJ*E;%6>7YTFX83""+WJB=4ZT9&J&ZB@^6$IB@-4\[FF[6+:
M=R:WO
R3F N5HH5XF*L2N6Q9\B5K"V&QL
MD6:K0R1Q;^Y5] _:99N)Q76\^,LBY8N1Y:2:3Z6G3:7=X+$C]RMV[-Z"XU;R
MW76XR+F9_5NLK;>(>*FP=C$2$A7HEQ(-FDD#!RS>BS751 JGI*IG[1^!@'!J
MOW':LW+B57%-F4?_ /2ERJ_J(X^_[+8_[;XJ4O\ E[W]*/K]YT.F?J8=I-I&
M/_,+B]0)F)^XG*C3+U8JU(_>5("CN/";B[8V_!1[A!NH/XIN@"LF'4<'*.KS
MJN>RFNIT]YI+X=\Q=/
9FJXY
;HC
M-.'2!+E)RLZ>?L:4LZCE6KU$EB=+K NH@=-4H+&$ABFZ" H>9N?//:VZOK+9
M.6/FFW#R_P! V;CSL'16C82JSYZ\Y82U7:W-O-U60K$NPE8E_7!D+0_CV2I"
M,C-#@*!BF9.%DO@!^H"=?U"=^T[4K45%]%=E#COB(Y2&XK
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Nov. 08, 2018 |
|
Document and Entity Information | ||
Entity Registrant Name | American Renal Associates Holdings, Inc. | |
Entity Central Index Key | 0001498068 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Emerging Growth Company | true | |
Entity Small Business | false | |
Entity Ex Transition Period | true | |
Entity Common Stock, Shares Outstanding | 32,517,065 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivables, allowance for doubtful accounts | $ 426 | $ 6,757 |
Accumulated depreciation of property and equipment | 191,979 | 167,390 |
Accumulated amortization of intangible assets | $ 24,022 | $ 23,419 |
Preferred stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Common stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 300,000,000 | 300,000,000 |
Common stock, shares issued (in shares) | 32,514,777 | 32,034,439 |
Common stock, shares outstanding (in shares) | 32,514,777 | 32,034,439 |
Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 18,294 | $ 26,672 | $ 34,284 | $ 55,965 |
Unrealized gain (loss) on derivative agreements, net of tax | 427 | (27) | 2,545 | (1,347) |
Total comprehensive income | 18,721 | 26,645 | 36,829 | 54,618 |
Less: Comprehensive income attributable to noncontrolling interests | (15,804) | (18,689) | (50,712) | (51,339) |
Total comprehensive income (loss) attributable to American Renal Associates Holdings, Inc. | $ 2,917 | $ 7,956 | $ (13,883) | $ 3,279 |
BASIS OF PRESENTATION AND ORGANIZATION |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION AND ORGANIZATION | BASIS OF PRESENTATION AND ORGANIZATION Business American Renal Associates Holdings, Inc. (“the Company”) owns 100% of the membership units of its subsidiary American Renal Holdings Intermediate Company, LLC, which itself has no assets other than 100% of the shares of capital stock of American Renal Holdings Inc. All of the Company's operating activities are conducted through American Renal Holdings Inc. and its operating subsidiaries (“ARH”). The Company is a national provider of kidney dialysis services for patients suffering from chronic kidney failure, also known as end stage renal disease (“ESRD”). As of September 30, 2018, the Company owned and operated 235 dialysis clinics treating 16,092 patients in 26 states and the District of Columbia. The Company’s operating model is based on shared ownership of its facilities with physicians, known as nephrologists, who specialize in treating kidney-related diseases in the local market served by the clinic. Each clinic is maintained as a separate joint venture (“JV”) in which the Company has a controlling interest and its local nephrologist partners have noncontrolling interests. Basis of Presentation and Consolidation The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“U.S.”) for complete financial statements. The Company's consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and variable interest entities that operate its clinics (“joint ventures”). All significant intercompany balances and transactions of the Company's wholly owned subsidiaries and joint ventures, including management fees from subsidiaries, are eliminated in consolidation. Refer to Note 7 - Variable Interest Entities. In the opinion of management, the Company has prepared the accompanying unaudited consolidated financial statements on the same basis as its audited consolidated financial statements, and these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. These unaudited consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 2017. Prior year balances and amounts have been reclassified to conform to the current year presentation. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year. Segment Information Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker as of September 30, 2018, or decision-making group, in making decisions how to allocate resources and assess performance. The Company views its operations and manages its business as one reportable business segment, the ownership and operation of dialysis clinics, all of which are located in the United States. 2018 Secondary Offering The Company recognized $856 of transaction-related costs in the nine months ended September 30, 2018, reflecting expenses incurred for the registration statement and the secondary offering that was withdrawn in March 2018. These costs include legal, accounting, valuation and other professional or consulting fees. Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This amendment modifies the disclosure requirements for assets and liabilities measured at fair value. The requirements to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements have all been removed. However, the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period must be disclosed along with the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements (or other quantitative information if it is more reasonable). This ASU is effective for annual and interim reporting periods beginning after December 15, 2019. The Company is currently assessing the impact the adoption of ASU 2018-13 will have on the consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This amendment provides for the reclassification of the effect of remeasuring deferred tax balances related to items within accumulated other comprehensive income (“AOCI”) to retained earnings resulting from the Tax Cuts and Jobs Act of 2017. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. Adoption of this ASU is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the tax laws or rates were recognized. The Company elected to early adopt ASU 2018-02 during the first quarter of 2018, and elected to reclassify the income tax effects from the Tax Cuts and Jobs Act of 2017 from AOCI to retained earnings. The reclassification decreased AOCI and increased retained earnings by $214. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2018, and interim periods therein; however, early adoption by all entities is permitted. The Company does not believe this ASU will have a material impact on its financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) - Leases: Amendments to the FASB Accounting Standards Codification. The amendments are expected to increase transparency and comparability by recognizing lease assets and liabilities of lessees on the balance sheet and disclosing key information about leasing arrangements in the financial statements. Since February 2016, the FASB has issued additional updates to serve as targeted improvements to the original standard update. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all organizations. The Company will adopt ASU 2016-02 effective January 1, 2019. The Company has engaged a professional services firm and has implemented lease accounting systems to assist in the implementation of ASU 2016-02. The Company expects the standard will add approximately $125,000 in right of use assets and lease liabilities to our consolidated balance sheet principally for certain leases currently accounted for as operating leases. The ultimate impact on the Company will depend on the contract portfolio and interest rates at the effective date. The Company does not expect any impact on the current debt covenants, as described in Note 9 - Debt. The guidance should be applied under a modified retrospective transition approach, with an option to apply the guidance either at the beginning of the earliest comparative period presented, or to apply the new guidance at the adoption date. The Company expects to apply the modified retrospective method at the beginning of the period of adoption after review of the analysis is performed. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), which requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service. Since May 2014, the FASB has issued additional updates to serve as clarification to the original standard update. The standard also requires entities to enhance disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted ASU 2014-09 on January 1, 2018, using the modified retrospective transition method. As a practical expedient, the Company adopted using the portfolio approach, applying the ASU to a portfolio of contracts with similar characteristics. The Company reasonably expects that the effects on the financial statements of applying this guidance to the portfolio of contracts would not differ materially from applying this guidance to the individual contracts within the portfolio. Additionally, the Company elected the practical expedient that allows the recognition of revenue with each dialysis treatment, as that is when the Company has the right to invoice. The Company also adopted the practical expedient to only assess the recognition of revenue for open contracts during the transition period and there was no adjustment to the opening balance of retained earnings at January 1, 2018. The comparative information has not been restated and continues to be reported under the accounting standards in effect for that period. The adoption of ASU 2014-09 did not have a material impact to the timing of revenue recognition; however, a majority of the provision for uncollectible accounts is now recognized as a direct reduction to revenues, instead of separately as a deduction to arrive at net revenue. The Company no longer separately presents a provision for uncollectible accounts on the consolidated statements of operations as it is included in Patient care costs after the adoption of the new accounting standard. As a result of the Company’s election to apply ASU 2014-09 only to contracts not substantially completed as of January 1, 2018, the Company continues to maintain an allowance for doubtful accounts related to performance obligations satisfied prior to the adoption of the accounting standards. Changes to this allowance for doubtful accounts, other than write-offs of uncollectible accounts, are recorded through the provision for uncollectible accounts in accordance with prior accounting standards. The Company's provision for uncollectible accounts was $1,786 and $5,003 for the three and nine months ended September 30, 2017. See Note 2 - Revenue for additional discussion of the Company's revenue recognition accounting policies and expanded disclosures required by the new standard. |
REVENUE |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUE | REVENUE The major component of the Company's revenues, which is included in patient service operating revenues, is derived from dialysis treatments and related services. Sources of revenues are principally from government-based programs, including Medicare, Medicaid and state workers' compensation programs, commercial insurance payors and other sources such as the U.S. Department of Veterans Affairs (the “VA”), hospitals as well as patient pay. Patient service operating revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing dialysis treatments and related services. These amounts are due from third-party payors, including government-based programs and commercial insurance payors, patients and others and may include variable consideration for discounts, price concessions and retroactive revenue adjustments due to new information obtained, such as actual payment receipt, as well as settlement of audits, reviews and investigations. Third-party payors, patients and other payors are generally billed at least monthly, typically in the month the dialysis treatment is performed, and payment is due upon receipt. Revenue is recognized as performance obligations are satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is defined as the unit of account under ASC 606. The Company has determined that one performance obligation exists, the dialysis treatment, which is satisfied over time as a dialysis treatment is provided. While the Company provides patients with other related services, they are considered a bundle of interrelated services with dialysis treatment as the primary service. Revenue is measured using the output method, which is based upon the delivery of a dialysis treatment to the patient. The Company believes that this method provides a faithful depiction of the satisfaction of the performance obligation. All performance obligations are satisfied at the end of each reporting period. A usual and customary fee schedule is maintained for dialysis treatment and other related services; however, the transaction price is typically at a discount to the fee schedule. The transaction prices for Medicare and Medicaid programs are based on predetermined net realizable rates per treatment that are established by statutes or regulation. The transaction prices for contracted payors are based on contracted rates. For other payors, the Company determines the transaction price based on usual and customary rates for services provided, reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients in accordance with the Company’s policy, and/or implicit price concessions. The Company determines its estimates of contractual allowances and discounts based on contractual agreements, regulatory compliance, and historical collection experience. The Company determines its estimate of implicit price concessions based on its historical collection experience with each payor. Amounts billed that have not yet been collected and that meet the conditions for unconditional right to payment are presented as patient receivables. Contractual adjustments result from differences between the rates charged for services performed and expected reimbursements from third-party payors and are largely comprised of balances relating to services billed to non-contracted providers. Contractual adjustments and discounts with third-party payors are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care. In assessing the probability of these claim payments, the Company reviews previous payment history and records a reserve that results in an estimate of expected revenue such that it is probable that a significant revenue reversal will not occur in future periods, at the payor level. This constraint on variable consideration is based on the probability of a reversal of an amount that is significant relative to the cumulative revenue recognized for the contract. Patient service operating revenues may be subject to adjustment of the estimated transaction price as a result of (i) new information obtained, such as actual payment receipt, (ii) examinations of the Company, or Medicare or Medicaid Managed Care programs that the Company serves, by government agencies or contractors, for which the resolution of any matters raised may take extended periods of time to finalize; (iii) differing interpretations of government regulations by different fiscal intermediaries or regulatory authorities; (iv) differing opinions regarding a patient’s medical diagnosis or the medical necessity of service provided; (v) retroactive applications or interpretations of governmental requirements; and (vi) claims for refunds from private payors, including as the result of government actions. Settlements with third-party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing dialysis treatments and related services. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known (i.e., new information becomes available), or as years are settled or are no longer subject to such audits, reviews, and investigations. Adjustments arising from a change in the transaction price in instances where the performance obligation was satisfied in a previous period were immaterial for the three and nine months ended September 30, 2018. These changes in transaction price are mostly attributable to an adjustment for balances with non-contracted payors. The Company obtained new information, such as actual cash receipt, and adjusted the estimated transaction price at the patient level. Amounts pending approval from third-party payors associated with Medicare bad debt claims as of September 30, 2018 and December 31, 2017, other than standard monthly billing, consisted of approximately $12,148 and $10,744, respectively. As of September 30, 2018, $5,380 is classified as Prepaid and other current assets and $6,768 is classified as Other long-term assets. As of December 31, 2017, the entire balance is classified as Prepaid and other current assets. The composition of patient care service revenue by source is as follows:
|
CASH |
9 Months Ended | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||
Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||
CASH | CASH The following table provides a reconciliation of cash and restricted cash reported within the balance sheet that sum to the total of the same such amounts shown in the statement of cash flows.
Restricted cash included in other long-term assets on the balance sheet represent those amounts required to be set aside by contractual agreement with a financial institution. |
GOODWILL |
9 Months Ended | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||
GOODWILL | GOODWILL Changes in goodwill were as follows:
|
FAIR VALUE MEASUREMENTS |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The Company’s interest rate swap and interest rate cap agreements, Income Tax Receivable Agreement and noncontrolling interests subject to put provisions are accounted for at fair value on a recurring basis and are classified and disclosed in one of the following three categories: Level 1: Financial instruments with unadjusted, quoted prices listed on active market exchanges. Level 2: Financial instruments determined using prices for recently traded financial instruments with similar underlying terms, as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3: Financial instruments not actively traded on a market exchange. This category includes situations where there is little, if any, market activity for the financial instrument. The prices are determined using significant unobservable inputs or valuation techniques. The asset or liability fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. There were no changes in the methodologies used at September 30, 2018. Noncontrolling interests subject to put provisions—See Note 8 - Noncontrolling Interests Subject to Put Provisions for a discussion of the Company’s methodology for estimating fair value of noncontrolling interest subject to put provisions. Derivative agreements—See Note 9 - Debt for a discussion of the Company’s methodology for estimating fair value of interest rate swap and interest rate cap agreements. Income Tax Receivable Agreement—The fair value of the Company's Income Tax Receivable Agreement, entered into on April 26, 2016 in connection with the Company's initial public offering (“TRA”), relies upon both Level 2 data and Level 3 data. The liability is remeasured at fair value each reporting period with the change in fair value recognized as Income tax receivable agreement income or expense in the Company’s Consolidated Statements of Operations. The fair value is calculated using a Monte Carlo simulation-based approach that relies on significant assumptions about the Company's stock price, stock volatility and risk-free rate as well as the timing and amounts of options exercised. Changes in assumptions based on future events, including the price of the Company's common stock, will impact the fair value for the TRA. See Note 13 - Related Party Transactions for further discussion of the TRA. Transfers among levels are calculated on values as of the transfer date. There were no transfers between Levels 1, 2 and 3 during the nine months ended September 30, 2018 and the year ended December 31, 2017.
The following table provides the fair value rollforward for the nine months ended September 30, 2018 for the TRA liability, which is classified as a Level 3 financial instrument.
The carrying amounts reported in the accompanying consolidated balance sheets for cash, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term nature. The fair value of the Company’s debt is estimated using Level 2 inputs based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The Company estimates the fair value of the first lien term loans to be $431,241 as of September 30, 2018, compared to a carrying value of $434,500. As of December 31, 2017, the Company estimates the fair value of the first lien term loans to be $436,158 compared to the carrying value of $437,800. |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued compensation and benefits consist of the following:
Accrued expenses and other current liabilities consist of the following:
|
VARIABLE INTEREST ENTITIES |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets and Liabilities, Net [Abstract] | |
VARIABLE INTEREST ENTITIES | VARIABLE INTEREST ENTITIES The Company relies on the operating activities of certain entities for which it does not have the majority voting interest, but over which it has indirect influence and of which it is considered the primary beneficiary. These entities are subject to the consolidation guidance applicable to variable interest entities (“VIEs”). Under U.S. generally accepted accounting principles, VIEs typically include entities for which (i) the entity’s equity is not sufficient to finance its activities without additional subordinated financial support; (ii) the equity holders as a group lack the power to direct the activities that most significantly influence the entity’s economic performance, the obligation to absorb the entity’s expected losses, or the right to receive the entity’s expected returns; or (iii) the voting rights of some investors are not proportional to their obligations to absorb the entity’s losses. The Company has determined that substantially all of the entities it is associated with that qualify as VIEs must be included in its consolidated financial statements. For its joint ventures, the Company has determined that contractual rights granted to it provide the Company with the ability to direct the most significant activities of these entities, including development, administrative and management services. In some cases, the contractual agreements include financial terms that may result in the Company absorbing more than an insignificant amount of the entities' expected losses. Therefore, the Company has determined that it is the primary beneficiary of these entities. Accordingly, the financial results of these joint ventures are fully consolidated into the Company’s operating results. The equity interests of the outside investors in the equity and results of operations of these consolidated entities are accounted for and presented as noncontrolling interests. The analysis upon which these consolidation determinations rest is complex, involves uncertainties, and requires significant judgment on various matters, some of which could be subject to different interpretations. As of September 30, 2018, these consolidated financial statements include total assets of VIEs of $17,314 and total liabilities of VIEs of $9,240. Term Loan Holdings The Company has determined that it is not the primary beneficiary under VIE accounting guidance for Term Loan Holdings LLC (“Term Loan Holdings”). Based on its involvement with Term Loan Holdings, the Company does not have the power to direct the activities which most significantly impact Term Loan Holding’s economic performance, and therefore this entity is not included in the Company's consolidated financial statements. The Company’s financial responsibility to repay the loans under its guarantee of a proportionate share of each clinic’s borrowing was not a factor in the Company’s assessment of the power criterion. The maximum exposure to loss with respect to Term Loan Holdings is limited to the proportion of the assigned clinic loans which the Company guarantees. See Note 13 - Related Party Transactions. |
NONCONTROLLING INTERESTS SUBJECT TO PUT PROVISIONS |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Temporary Equity Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NONCONTROLLING INTERESTS SUBJECT TO PUT PROVISIONS | NONCONTROLLING INTERESTS SUBJECT TO PUT PROVISIONS The Company has potential obligations to purchase a portion or all of the noncontrolling interests held by third parties in certain of its consolidated subsidiaries. These obligations are in the form of put provisions and are exercisable at the third-party owners’ discretion within specified periods as outlined in each specific put provision. Additionally, the Company has certain put agreements which are exercisable upon the occurrence of specific events, including the sale of all or substantially all of the Company's assets, closure of the clinic, change of control, departure of key executives, third-party members’ death, disability, bankruptcy, retirement, or if third-party members are dissolved and other events, which could accelerate vesting of the put. The Company has evaluated the applicable terms and determined that the put provisions are not mandatorily redeemable. Some of these puts accelerated as a result of the Company’s IPO, of which some were exercised during the nine months ended September 30, 2018. If the remaining unexercised put provisions are exercised, the Company would be required to purchase all or a portion of the third-party owners’ noncontrolling interests at the estimated fair value as defined within the put provisions. The majority of the put provisions are reported at the greater of the carrying value or estimated fair value for accounting purposes, while some put provisions are stated at the contractual estimated fair value or redemption value, as outlined in each specific put provision. The put options of such noncontrolling interest holders were determined based on inputs that were not readily available in public markets or able to be derived from information available in publicly quoted markets. As such, the Company categorized the put options of the noncontrolling interest holders as Level 3. The fair value of noncontrolling interests subject to puts is arrived at based on the respective merits of the Income, Market and Asset Based Approaches. The primary inputs associated with these valuation methods are Clinic forecasts, Weighted Average Cost of Capital (15.00% - 20.50%) and EBITDA multiples. The estimated fair values of the noncontrolling interests subject to put provisions can also fluctuate, and the implicit multiple of earnings at which these noncontrolling interest obligations may ultimately be settled could vary significantly from our current estimates depending upon market conditions including potential purchasers’ access to the credit and capital markets, which can impact the level of competition for dialysis and non-dialysis related businesses, the economic performance of these businesses and the restricted marketability of the third-party owners’ noncontrolling interests. The Company's computation of the difference between the redemption value and estimated fair value for accounting purposes of the related noncontrolling interests as of September 30, 2018 and December 31, 2017 is set forth below:
In addition, the tables below set forth a reconciliation of noncontrolling interest subject to put provisions.
|
DEBT |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT | DEBT Long-term debt consists of the following:
_____________________________ (1) Includes assigned clinic loans Scheduled maturities of long-term debt as of September 30, 2018 are as follows:
During the nine months ended September 30, 2018, the Company made mandatory principal payments of $3,300 under the 2017 Credit Agreement (as defined below). As of September 30, 2018, there were $3,500 of borrowings outstanding under the 2017 Revolving Credit Facility as provided for under our 2017 Credit Agreement (as defined below). 2017 Credit Agreement and Repayment of First Lien Credit Agreement On June 22, 2017, ARH entered into a new credit agreement (the “2017 Credit Agreement”) to refinance the credit facilities under ARH's prior existing First Lien Credit Agreement. The 2017 Credit Agreement provides ARH with (a) a $100,000 senior secured revolving credit facility (the “2017 Revolving Credit Facility”); (b) a $440,000 senior secured term B loan facility (the “2017 Term B Loan Facility”), and (c) an uncommitted incremental accordion facility equal to the sum of the greater of (i) $125,000 and (ii) 100% of Consolidated EBITDA (as defined in the 2017 Credit Agreement) plus an amount such that certain leverage ratios will not be exceeded after giving pro forma effect to the increase. ARH borrowed the full amount of the 2017 Term B Loan Facility and used such borrowings to repay the outstanding balances under the First Lien Credit Agreement and to pay a portion of the transaction costs and expenses. The obligations of ARH under the 2017 Credit Agreement are guaranteed by American Renal Holdings Intermediate Company, LLC and all of its existing and future wholly owned domestic subsidiaries (collectively, the “Guarantors”) and secured by a pledge of all of ARH’s capital stock and substantially all of the assets of ARH and the Guarantors, including their respective interests in their joint ventures. The 2017 Credit Agreement contains customary events of default, the occurrence of which would permit the lenders to accelerate payment of the full amounts outstanding. Additionally, the 2017 Credit Agreement contains customary representations and warranties, affirmative covenants and negative covenants, including restrictive financial and operating covenants. These include covenants that restrict ARH's and its restricted subsidiaries’ ability to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take certain other corporate actions. The 2017 Credit Agreement events of default, representations and warranties, mandatory prepayments and affirmative and negative covenants are substantially the same as those under the prior first lien credit agreement; provided that the 2017 Credit Agreement contains additional exceptions to the negative covenants that increase the amount ARH and its restricted subsidiaries can use to make restricted payments and increases the flexibility for ARH and its restricted subsidiaries to undertake permitted acquisitions. As of September 30, 2018, ARH is in compliance with these covenants. The Company incurred $9,259 of costs associated with these refinancing activities, of which $717 were charged as transaction costs in 2017, $4,628 represent debt discounts and $3,914 were deferred as financing costs upon the execution of the 2017 Credit Agreement. The write-off of deferred financing fees and discounts in the amount of $526 was charged as early extinguishment of debt in 2017. 2017 Term B Loan Facility The term B loans under the 2017 Term B Loan Facility bear interest at a rate equal to, at ARH's option, either (a) an alternate base rate equal to the higher of (1) the prime rate in effect on such day, (2) the federal funds effective rate plus 0.5% or (3) the Eurodollar rate applicable for a one-month interest period plus 1.0%, plus an applicable margin of 2.25%, (collectively, the “ABR Rate”) or (b) LIBOR, adjusted for changes in Eurodollar reserves, plus a margin of 3.25%. As of September 30, 2018, interest payable quarterly was 5.49% per annum. The 2017 Term B Loan Facility matures in June 2024. The 2017 Credit Agreement includes provisions requiring ARH to offer to prepay term B loans in an amount equal to (i) the net cash proceeds above certain thresholds received from (a) asset sales and (b) casualty events resulting in the receipt of insurance proceeds, subject to customary provisions for the reinvestment of such proceeds, (ii) the net cash proceeds from the incurrence of debt not otherwise permitted under the 2017 Credit Agreement, and (iii) a percentage of consolidated excess cash flow retained in the business from the preceding fiscal year minus voluntary prepayments. There is no prepayment required as of September 30, 2018. ARH is required to make principal payments on the term B loans under the 2017 Term B Loan Facility in equal quarterly installments of $1,100. 2017 Revolving Credit Facility The 2017 Revolving Credit Facility of $100,000 is available through its maturity date of June 2022. Any outstanding loans under the 2017 Revolving Credit Facility bear interest at a rate equal to, at ARH’s option, the ABR Rate or LIBOR, adjusted for changes in Eurodollar reserves, plus, in each case, an applicable margin priced off a grid based upon the consolidated total net leverage ratio of ARH and its restricted subsidiaries. The commitment fee applicable to undrawn revolving commitments under the 2017 Revolving Credit Facility is also priced off a grid based upon the consolidated total net leverage ratio of ARH and its restricted subsidiaries, and as of September 30, 2018, the fee was 0.50%. There were $3,500 of borrowings outstanding under the 2017 Revolving Credit Facility as of September 30, 2018 which had an interest rate of 7.00%. Interest Rate Swap Agreements In March 2017, ARH entered into a forward starting interest rate swap agreement (the “2017 Swap”) with a notional amount of $133,000, as a means of fixing the floating interest rate component on $440,000 of its variable-rate debt under the 2017 Term B Loan Facility, with an effective date of March 31, 2018. The 2017 Swap is designated as a cash flow hedge, with a termination date of March 31, 2021. As a result of the application of hedge accounting treatment, to the extent the 2017 Swap is effective, the unrealized gains and losses related to the derivative instrument are recorded in accumulated other comprehensive income (loss) and are reclassified into operations in the same period in which the hedged transaction affects earnings, and to the extent the swap is ineffective and produces gains and losses differently from the losses or gains being hedged, the ineffectiveness portion is recognized in earnings, immediately. Hedge effectiveness is tested quarterly. Neither the Company nor ARH uses derivative instruments for trading or speculative purposes. Interest Rate Cap Agreements In March 2017, ARH entered into two interest rate cap agreements (the “Caps”) with notional amounts totaling $147,000, as a means of capping the floating interest rate component on $440,000 of its variable-rate debt under the 2017 Term B Loan Facility. The Caps are designated as a cash flow hedge, with a termination date of March 31, 2021. As a result of the application of hedge accounting treatment, to the extent the Caps are effective, the unrealized gains and losses related to the derivative instrument are recorded in accumulated other comprehensive income (loss) and are reclassified into operations in the same period in which the hedged transaction affects earnings and to the extent the Caps are ineffective and produce gains and losses differently from the losses or gains being hedged, the ineffective portion is recognized in earnings immediately. Hedge effectiveness is tested quarterly. Neither the Company nor ARH uses derivative instruments for trading or speculative purposes. As more fully described within Note 5 - Fair Value Measurements, the Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The fair value of the derivative instruments are recorded at fair value based upon valuation models utilizing the income approach and commonly accepted valuation techniques that use inputs from closing prices for similar assets and liabilities in active markets as well as other relevant observable market inputs at quoted intervals such as current interest rates, forward yield curves, and implied volatility. The Company does not believe the ultimate amount that could be realized upon settlement would be materially different from the fair values currently reported. |
INCOME TAXES |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The income tax expense included in the accompanying consolidated statements of operations principally relates to the Company’s proportionate share of the pre-tax income of its joint venture subsidiaries. The determination of income tax expense for interim reporting purposes is based upon the estimated effective tax rate for the year adjusted for the impact of any discrete items which are accounted for in the period in which they occur. The Company’s effective income tax rate for the three months ended September 30, 2018 and 2017 was 0.2% and 8.8%, respectively, and (6.1)% and (1.0)% for the nine months ended September 30, 2018 and 2017, respectively. These rates differ from the federal statutory rate of 21% and 35%, respectively, principally due to the portion of pre-tax income that is allocable to noncontrolling interests from the Company's joint venture subsidiaries, which are pass-through entities for income tax purposes, the valuation allowance, as well as the change in fair value of the TRA liability, which is not deductible for income tax purposes, and also other non-deductible expenses. The Company has established a valuation allowance for certain deferred tax assets with respect to which the Company believes future taxable income levels would not be sufficient to realize the tax benefits. On December 22, 2017, the United States enacted tax reform legislation commonly known as the Tax Cuts and Jobs Act (the “2017 Tax Act”), resulting in significant modifications to existing law, which includes a reduction in the federal corporate tax rate from 35% to 21%. On December 22, 2017, Staff Accounting Bulletin No. 118 was issued by the SEC, which provides for a measurement period of one year from the enactment date to finalize the accounting for effects of the 2017 Tax Act. At September 30, 2018, the Company has not completed its accounting for all of the tax effects of the 2017 Tax Act; however, the Company has made a reasonable estimate of the effects. For the nine months ended September 30, 2018 there were no adjustments to the provisional amount initially recorded at December 31, 2017. The Company will continue to make and refine its calculations as additional analysis is completed and as the Company gains a more thorough understanding of the tax law. These changes could be material to income tax expense. |
STOCK-BASED COMPENSATION |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION For the three and nine months ended September 30, 2018 and 2017, stock-based compensation expense was reflected in the accompanying consolidated statements of operations as follows:
As of September 30, 2018, the Company had 5,110,636 options outstanding. 2016 Omnibus Plan On April 7, 2016, the Company approved the 2016 Omnibus Incentive Plan (the “2016 Plan”). The 2016 Plan authorized the Company to issue options and other awards to directors, officers, employees, consultants and advisors to purchase up to a total of 4,000,000 shares of common stock. As of September 30, 2018, options to purchase an aggregate of 2,121,933 shares of common stock were available for future grants under the 2016 Plan. The assumptions used for options granted to acquire common stock during 2018 and the fair value at the date of grant under the 2016 Plan are noted in the following table:
Information concerning options activity under the 2016 Plan for options to acquire common stock is summarized as follows:
(1) Subject to vesting terms of three years. Restricted Stock Awards Employees and directors are eligible to receive grants of restricted stock, which entitle the holder to shares of common stock as the awards vest. The Company determines stock-based compensation expense using the fair value method. The fair value of restricted stock is equal to the closing sale price of the Company’s common stock on the date of grant. In March 2018, the Company granted approximately 95,000 performance-based restricted stock awards to certain executives, with a weighted average grant date fair value per share of $22.33. These awards will vest at the end of the three-year service period and the quantity of awards that vest is dependent upon the Company's achievement of defined performance metrics. The Company has determined that the majority of the performance conditions for these awards are probable of achievement as of September 30, 2018. As of September 30, 2018, a total of 438,647 shares of restricted stock were unvested and outstanding, which results in unamortized stock-based compensation of $5,636 to be recognized as stock-based compensation expense over the remaining weighted average vesting period of 1.58 years. A summary of restricted stock award activity is as follows:
(1) Weighted average vesting of 3.5 years. Special Dividends and Stock Option Modification On April 26, 2016, the Company declared and paid a cash dividend to its pre-IPO stockholders equal to $1.30 per share, or $28,886 in the aggregate. In connection with the dividend, all employees with outstanding options had their option exercise price reduced and in some cases were awarded a future dividend equivalent payment, which were paid on vested options and become due upon vesting for unvested options. This resulted in a modification. Additionally, in connection with the cash dividend, as of September 30, 2018, the Company has made payments equal to $1.30 per share, or $5,329 in the aggregate, to option holders, and, in the case of some performance and market options, a future payment will be due upon vesting totaling $1,397. In connection with these dividends, equitable adjustments are required by the terms of some of the Company's equity incentive plans and, for other plans, were modified at the discretion of our board of directors. The Company also elected to modify the vesting conditions of certain market and performance-based stock options. These modifications are treated as an option modification and the Company accounted for the option modification under ASC Topic 718, Compensation – Stock Compensation. As a result of these modifications made to its outstanding market and performance-based stock options at the time of the IPO, the amount of the unrecognized non-cash compensation costs increased by approximately $38,877. These compensation costs, after giving effect to the modifications, were recognized over a period of approximately 12 months from the time of the IPO. As a result, the Company recognized $9,104 in incremental compensation expense during the nine months ended September 30, 2017. |
EARNINGS (LOSS) PER SHARE |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS (LOSS) PER SHARE | EARNINGS (LOSS) PER SHARE Basic loss per share is computed by dividing net loss attributable to American Renal Associates Holdings, Inc., net of the change in the difference between the redemption value and estimated fair value for accounting purposes of the related noncontrolling interest put provisions, by the weighted-average number of common shares outstanding during the applicable period, less unvested restricted stock. Diluted loss per share is computed using the weighted-average number of common shares outstanding during the applicable period, plus the dilutive effect of outstanding options, using the treasury stock method and the average market price of the Company’s common stock during the applicable period. Certain shares related to some of the Company’s outstanding stock options were excluded from the computation of diluted earnings per share because they were anti-dilutive in the periods presented but could be dilutive in the future.
|
RELATED PARTY TRANSACTIONS |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS Term Loan Holdings The Company partly finances the de novo clinic development costs of some of its joint venture subsidiaries by providing intercompany term loans and revolving loans through its wholly owned operating subsidiary American Renal Associates LLC (“ARA OpCo”). On April 26, 2016, the Company transferred substantially all of the then existing intercompany term loans (“assigned clinic loans”) provided to its joint venture subsidiaries by ARA OpCo to a newly formed entity, Term Loan Holdings, which ownership interest was distributed to our pre-IPO stockholders pro rata in accordance with their ownership in the Company. As a result of the distribution of membership interests in Term Loan Holdings, the balance of such assigned clinic loans is reflected on the Company's consolidated balance sheet. An entity affiliated with Centerbridge Capital Partners, L.P. (together with its affiliates, “Centerbridge”), which does not hold any economic interest in Term Loan Holdings, is the manager of Term Loan Holdings, and affiliates of Centerbridge and certain of the Company's current and former directors and executive officers own economic interests in Term Loan Holdings. As of September 30, 2018, such assigned clinic loans aggregated $6,377, had maturities ranging from November 2018 to July 2020, with a weighted average maturity of approximately 1.1 years (November 2019), and interest rates ranging from 4.25% to 8.08%, with a weighted average interest rate of 5.11%. Fixed principal and interest payments with respect to such assigned clinic loans are payable monthly. The Company will continue to administer and manage the assigned clinic loans as servicer pursuant to the terms of a loan servicing agreement as entered into between the Company and Term Loan Holdings. The Company is paid a quarterly fee for its services based on its reasonable costs and expenses, plus a specified percentage of such costs and expenses, which may be adjusted annually based on negotiations between the Company and Term Loan Holdings. The quarterly fee charged for the nine months ended September 30, 2018 is immaterial. Each assigned clinic loan is guaranteed by the Company and the applicable joint venture partner or partners in proportion to their respective ownership interests in the applicable joint venture with maturities consistent with the aggregate assigned clinic loans. The maximum potential liability for future payments under the assigned clinic loans, not including interest, is $6,377, of which the Company guaranteed $3,523 as of September 30, 2018. These guarantees would become payable if the joint venture fails to meet its obligations under the applicable assigned clinic loan. Income Tax Receivable Agreement On April 26, 2016, the Company entered into the TRA for the benefit of its pre-IPO stockholders, including Centerbridge and certain of the Company's executive officers. The TRA provides for the payment by the Company to its pre-IPO stockholders on a pro rata basis of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that the Company actually realizes as a result of any deductions (including net operating losses resulting from such deductions) attributable to the exercise of (or any payment, including any dividend equivalent right or payment, in respect of ) any compensatory stock option issued by the Company that is outstanding (whether vested or unvested) as of April 20, 2016, which is the record date set by the board of directors of the Company for this distribution. The Company recorded an estimated liability of $23,400 based on the fair value of the TRA as of April 20, 2016. As of September 30, 2018, the Company’s total liability under the TRA was estimated to be $10,390, of which $914 is included as a component of accrued expenses and other current liabilities on the consolidated balance sheet. For the nine months ended September 30, 2018, the Company paid $6,376. Due from Related Party The Company entered into a sublease agreement with a clinic group, who are also noncontrolling interest shareholders, to provide for various facility buildouts. The total amount of initial financing was $2,168. As of September 30, 2018, the loans had an interest rate of 6% with maturities ranging from March 2026 through September 2032. Fixed principal and interest payments with respect to such loans are payable monthly. As of September 30, 2018, the remaining balance to be paid to the Company was $1,998. Software Services Kinetic Decision Solutions LLC (“Kinetic”), a company from which the Company licenses software relating to electronic medical record solutions, is owned 51% by an executive officer of the Company, and 2.5% by his spouse. The executive is also Co-Founder, Chief Executive Officer and Managing Partner of Kinetic. Under the terms of this arrangement, the Company paid to Kinetic $237 and $259 during the nine months ended September 30, 2018 and 2017, respectively. The amounts paid during the three months ended September 30, 2018 and 2017, respectively, were not material. Financing Transactions with Executive Officer An executive officer and his spouse, through a trust in which the executive officer's spouse is trustee and beneficiary, are partners in certain of the Company's clinic joint ventures. The clinics in which the executive officer and/or his spousal trust have an ownership interest all receive intercompany revolving loans made through the Company, and have a portion of their financing in the form of term loans held by Term Loan Holdings. As of September 30, 2018, the aggregate principal amount outstanding of the intercompany revolving loans and assigned clinic loans made to the Company's joint ventures in which the executive officer and/or his spousal trust have an ownership interest was approximately $4,579. As of September 30, 2018, such loans had maturities ranging from February 2019 to August 2024, with a weighted average maturity of approximately 2.26 years (October 2020), and interest rates ranging from 3.31% to 6.30%, with a weighted average interest rate of 4.54%. Fixed principal and interest payments with respect to such loans are payable monthly. Each loan is secured by the assets of the applicable joint venture clinic and is, and will continue to be, guaranteed by the Company and the executive officer and/or his spousal trust in proportion to each party’s ownership interests in the applicable joint venture. Based on their proportionate ownership interest in such joint ventures, the executive officer and/or his spousal trust guaranteed approximately $755 of such outstanding loans as of September 30, 2018. |
COMMITMENTS AND CONTINGENCIES |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Income Tax Receivable Agreement As described in Note 13 - Related Party Transactions, the Company is a party to the TRA under which it is contractually committed to pay its pre-IPO stockholders on a pro rata basis 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that it actually realizes (or are deemed to realize in the case of an early termination payment by the Company, or a change of control, as discussed below) as a result of any option deductions (as defined in the TRA). The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the amount and timing of taxable income we generate in the future, changes in the income tax rate, whether and when any relevant stock options, as defined in the TRA, are exercised and the value of our common stock at the time of such exercise. Litigation The Company and its subsidiaries are defendants in various legal actions in the normal course of business. In the opinion of the Company’s management, based in part on the advice of outside counsel, the resolution of these matters will not have a material effect on the Company’s financial position, results of operations or cash flows. See Note 15 - Certain Legal Matters. Regulatory The healthcare industry is subject to numerous laws and regulations of federal, state, and local governments. Government activity has increased with respect to investigations and allegations concerning possible violations by healthcare providers of fraud and abuse statutes and regulations, which could result in the imposition of significant fines and penalties, as well as significant repayments for patient services previously billed. Compliance with such laws and regulations are subject to government review and interpretations, as well as regulatory actions unknown or unasserted at this time. |
CERTAIN LEGAL MATTERS |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
CERTAIN LEGAL MATTERS | CERTAIN LEGAL MATTERS United Litigation As previously disclosed, the wholly owned operating subsidiary of ARA, American Renal Associates LLC (“ARA OpCo”), and its subsidiary, American Renal Management LLC (“ARM”), were defendants in lawsuits filed by affiliates of UnitedHealth Group Incorporated (“United”) in the United States District Court for the Southern District of Florida (Case Number 9:16-cv-81180-KAM) and the United States District Court for the District of Massachusetts (Case Number 1:18-cv-10622-ADB). On May 30, 2018, the Company and United engaged in a mediation, following which the parties continued to negotiate the terms of a potential settlement. On July 2, 2018, ARA OpCo and ARM executed a binding Settlement Term Sheet with the plaintiffs with respect to a settlement to resolve all ongoing litigation between the Company and United, and on August 1, 2018, the parties entered into a final settlement agreement (the “Settlement Agreement”) on substantially the same terms as provided in the Settlement Term Sheet. The Settlement Agreement includes a release of all claims arising from or related to the above-referenced litigations that were asserted or that could have been asserted against the Company or against the nephrologists or other healthcare providers who have entered into joint venture arrangements or medical directorships with the Company (the “Joint Venture Providers”) and the joint venture entities without any admission of liability or wrongdoing. Pursuant to the Settlement Agreement, the Company will make total settlement payments of $32,000, inclusive of administrative fees and fees for plaintiffs’ counsel, in five installments, with an initial present value of $29,614, which is included in Certain legal matters in the Statement of Operations during the nine months ended September 30, 2018, and a remaining present value of $19,614. As of September 30, 2018, $7,641 is classified as Accrued expenses and other current liabilities and $11,973 is classified in Other long-term liabilities. The Company paid the first installment in the amount of $10,000 on August 1, 2018, and expects to pay $8,000 on August 1, 2019, $7,000 on August 1, 2020, $3,500 on August 1, 2021 and $3,500 on August 1, 2022. The Company also agreed to share certain information with United and to follow certain procedures with respect to patients covered by United. Subject to the mutual releases provided in the Settlement Agreement, United also agreed to renew, reinstate, and/or not to terminate the network agreements for any Joint Venture Providers whose network agreements United terminated or chose not to renew from August 1, 2017 through the date of the Settlement Agreement. The Settlement Agreement includes customary terms and conditions. In connection with the Settlement Agreement, the Company also entered into a three-year national network agreement with United on August 1, 2018 that provides for specified reimbursement rates for patients covered by Medicare Advantage, Medicaid HMO and commercial insurance products over the term of the agreement. Certain Other Legal Matters On June 15, 2018, the United States District Court for the Southern District of New York approved the Stipulation of Settlement, entered into between the Company and Lead Plaintiff on January 30, 2018 in the matter captioned Esposito, et al. v. American Renal Associates Holdings, Inc., et al., Case No. 16-cv-11797 (ADB). The Stipulation of Settlement provides for a total settlement payment of $4,000, inclusive of administrative fees and fees for the lead plaintiff’s counsel. Substantially all of the settlement was funded by insurance proceeds. The settlement releases all claims asserted against the Company and the other named defendants in the action without any liability or wrongdoing attributed to them. In addition, on May 31, 2018, the United States District Court for the District of Massachusetts approved the settlement agreement, entered into between the Company and Steven Bushansky on March 29, 2018 in the matter captioned Stephen Bushansky, Derivatively on Behalf of American Renal Associates Holdings, Inc. v. Joseph A. Carlucci, et. al., Case No. 17-cv-12091 (ADB). The settlement agreement provides for, among other things, a settlement payment of $350, inclusive of attorney’s fees, and certain corporate governance changes. The payment was made by the Company’s insurer. The settlement resolves the claims asserted against all defendants in the action without any liability or wrongdoing attributed to them. On January 3, 2017, the Company received a subpoena from the United States Attorney’s Office, District of Massachusetts, requesting information relating to the Company’s payments and other interactions with the AKF and any efforts to educate patients qualified or enrolled in Medicare or Medicaid about enrollment in ACA-compliant individual marketplace plans, among other related matters under applicable healthcare laws for the period from January 1, 2013 through the present. As it has done with the other regulators who have expressed interest in such matters, the Company has cooperated fully with the government and will continue to do so. In the event that the United States Attorney’s Office, District of Massachusetts, were to find violations of any federal criminal or civil laws, our business, financial condition and results of operations could be materially adversely affected. In October 2018, the Staff of the Securities and Exchange Commission requested that the Company voluntarily provide documents and information relating to certain revenue recognition, collections and related matters. The Company intends to fully cooperate with this inquiry. Other From time to time, we are subject to various legal actions and proceedings involving claims incidental to the conduct of our business, including contractual disputes and professional and general liability claims, as well as audits and investigations by various government entities, in the ordinary course of business. Based on information currently available, established reserves, available insurance coverage and other resources, we do not believe that the outcomes of any such pending actions, proceedings or investigations are likely to be, individually or in the aggregate, material to our business, financial condition, results of operations or cash flows. However, legal actions and proceedings are subject to inherent uncertainties, and it is possible that the ultimate resolution of such matters, if unfavorable, may be materially adverse to our business, financial condition, results of operations or cash flows. Although we are not currently subject to any regulatory proceedings, there is no assurance that formal regulatory investigations or proceedings will not be commenced by any U.S. federal or state healthcare or other regulatory agencies. In addition, we may in the future be subject to additional inquiries, litigation or other proceedings or actions, regulatory or otherwise, arising in relation to the matters described above and related litigation and investigative matters. An unfavorable outcome of any such litigation or regulatory proceeding or action could have a material adverse effect on our business, financial condition and results of operations. We also record in Certain legal matters legal fees and other expenses relating to matters outside the ordinary course of our business. |
CHANGES IN OWNERSHIP INTEREST IN CONSOLIDATED SUBSIDIARIES |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHANGES IN OWNERSHIP INTEREST IN CONSOLIDATED SUBSIDIARIES | CHANGES IN OWNERSHIP INTEREST IN CONSOLIDATED SUBSIDIARIES The effects of changes in the Company's ownership interest on the Company's equity are as follows:
|
BASIS OF PRESENTATION AND ORGANIZATION (Policies) |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Consolidation | Basis of Presentation and Consolidation The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“U.S.”) for complete financial statements. The Company's consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and variable interest entities that operate its clinics (“joint ventures”). All significant intercompany balances and transactions of the Company's wholly owned subsidiaries and joint ventures, including management fees from subsidiaries, are eliminated in consolidation. Refer to Note 7 - Variable Interest Entities. In the opinion of management, the Company has prepared the accompanying unaudited consolidated financial statements on the same basis as its audited consolidated financial statements, and these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. These unaudited consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 2017. Prior year balances and amounts have been reclassified to conform to the current year presentation. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year. |
Segment Information | Segment Information Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker as of September 30, 2018, or decision-making group, in making decisions how to allocate resources and assess performance. The Company views its operations and manages its business as one reportable business segment, the ownership and operation of dialysis clinics, all of which are located in the United States. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This amendment modifies the disclosure requirements for assets and liabilities measured at fair value. The requirements to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements have all been removed. However, the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period must be disclosed along with the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements (or other quantitative information if it is more reasonable). This ASU is effective for annual and interim reporting periods beginning after December 15, 2019. The Company is currently assessing the impact the adoption of ASU 2018-13 will have on the consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This amendment provides for the reclassification of the effect of remeasuring deferred tax balances related to items within accumulated other comprehensive income (“AOCI”) to retained earnings resulting from the Tax Cuts and Jobs Act of 2017. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. Adoption of this ASU is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the tax laws or rates were recognized. The Company elected to early adopt ASU 2018-02 during the first quarter of 2018, and elected to reclassify the income tax effects from the Tax Cuts and Jobs Act of 2017 from AOCI to retained earnings. The reclassification decreased AOCI and increased retained earnings by $214. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2018, and interim periods therein; however, early adoption by all entities is permitted. The Company does not believe this ASU will have a material impact on its financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) - Leases: Amendments to the FASB Accounting Standards Codification. The amendments are expected to increase transparency and comparability by recognizing lease assets and liabilities of lessees on the balance sheet and disclosing key information about leasing arrangements in the financial statements. Since February 2016, the FASB has issued additional updates to serve as targeted improvements to the original standard update. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all organizations. The Company will adopt ASU 2016-02 effective January 1, 2019. The Company has engaged a professional services firm and has implemented lease accounting systems to assist in the implementation of ASU 2016-02. The Company expects the standard will add approximately $125,000 in right of use assets and lease liabilities to our consolidated balance sheet principally for certain leases currently accounted for as operating leases. The ultimate impact on the Company will depend on the contract portfolio and interest rates at the effective date. The Company does not expect any impact on the current debt covenants, as described in Note 9 - Debt. The guidance should be applied under a modified retrospective transition approach, with an option to apply the guidance either at the beginning of the earliest comparative period presented, or to apply the new guidance at the adoption date. The Company expects to apply the modified retrospective method at the beginning of the period of adoption after review of the analysis is performed. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), which requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service. Since May 2014, the FASB has issued additional updates to serve as clarification to the original standard update. The standard also requires entities to enhance disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted ASU 2014-09 on January 1, 2018, using the modified retrospective transition method. As a practical expedient, the Company adopted using the portfolio approach, applying the ASU to a portfolio of contracts with similar characteristics. The Company reasonably expects that the effects on the financial statements of applying this guidance to the portfolio of contracts would not differ materially from applying this guidance to the individual contracts within the portfolio. Additionally, the Company elected the practical expedient that allows the recognition of revenue with each dialysis treatment, as that is when the Company has the right to invoice. The Company also adopted the practical expedient to only assess the recognition of revenue for open contracts during the transition period and there was no adjustment to the opening balance of retained earnings at January 1, 2018. The comparative information has not been restated and continues to be reported under the accounting standards in effect for that period. The adoption of ASU 2014-09 did not have a material impact to the timing of revenue recognition; however, a majority of the provision for uncollectible accounts is now recognized as a direct reduction to revenues, instead of separately as a deduction to arrive at net revenue. The Company no longer separately presents a provision for uncollectible accounts on the consolidated statements of operations as it is included in Patient care costs after the adoption of the new accounting standard. As a result of the Company’s election to apply ASU 2014-09 only to contracts not substantially completed as of January 1, 2018, the Company continues to maintain an allowance for doubtful accounts related to performance obligations satisfied prior to the adoption of the accounting standards. Changes to this allowance for doubtful accounts, other than write-offs of uncollectible accounts, are recorded through the provision for uncollectible accounts in accordance with prior accounting standards. The Company's provision for uncollectible accounts was $1,786 and $5,003 for the three and nine months ended September 30, 2017. See Note 2 - Revenue for additional discussion of the Company's revenue recognition accounting policies and expanded disclosures required by the new standard. |
REVENUE (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sources of Revenue | The composition of patient care service revenue by source is as follows:
|
CASH (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||
Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||
Schedule of reconciliation of cash | The following table provides a reconciliation of cash and restricted cash reported within the balance sheet that sum to the total of the same such amounts shown in the statement of cash flows.
|
||||||||||||||||||||||||||||||
Schedule of reconciliation of restricted cash | The following table provides a reconciliation of cash and restricted cash reported within the balance sheet that sum to the total of the same such amounts shown in the statement of cash flows.
|
GOODWILL (Tables) |
9 Months Ended | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||
Schedule of changes in goodwill | Changes in goodwill were as follows:
|
FAIR VALUE MEASUREMENTS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of the fair value of financial instruments |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value rollforward for the Tax receivable agreement liability, which is classified as a Level 3 financial instrument | The following table provides the fair value rollforward for the nine months ended September 30, 2018 for the TRA liability, which is classified as a Level 3 financial instrument.
|
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of accrued compensation and benefits | Accrued compensation and benefits consist of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of accrued expenses and other current liabilities | Accrued expenses and other current liabilities consist of the following:
|
NONCONTROLLING INTERESTS SUBJECT TO PUT PROVISIONS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Temporary Equity Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedules of Noncontrolling Interests Subject to Put Provisions | The Company's computation of the difference between the redemption value and estimated fair value for accounting purposes of the related noncontrolling interests as of September 30, 2018 and December 31, 2017 is set forth below:
In addition, the tables below set forth a reconciliation of noncontrolling interest subject to put provisions.
|
DEBT (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt | Long-term debt consists of the following:
_____________________________ (1) Includes assigned clinic loans |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of maturities of long-term debt | Scheduled maturities of long-term debt as of September 30, 2018 are as follows:
|
STOCK-BASED COMPENSATION (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of stock-based compensation expense | For the three and nine months ended September 30, 2018 and 2017, stock-based compensation expense was reflected in the accompanying consolidated statements of operations as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assumptions used for options granted to acquire Common Stock and the fair value at the date of grant | The assumptions used for options granted to acquire common stock during 2018 and the fair value at the date of grant under the 2016 Plan are noted in the following table:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of information concerning options activity for options to acquire Common Stock | Information concerning options activity under the 2016 Plan for options to acquire common stock is summarized as follows:
(1) Subject to vesting terms of three years. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of restricted stock award activity | A summary of restricted stock award activity is as follows:
(1) Weighted average vesting of 3.5 years. |
EARNINGS (LOSS) PER SHARE (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of basic and diluted earnings (loss) per share |
|
CHANGES IN OWNERSHIP INTEREST IN CONSOLIDATED SUBSIDIARIES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of effect of changes in Company's ownership interest on Company's equity | The effects of changes in the Company's ownership interest on the Company's equity are as follows:
|
CASH (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|
Cash and Cash Equivalents [Abstract] | ||||
Cash | $ 61,872 | $ 71,521 | ||
Restricted cash included in other long-term assets | 100 | |||
Total cash and restricted cash shown in the statement of cash flows | $ 61,972 | $ 71,621 | $ 67,693 | $ 100,916 |
GOODWILL (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2018
USD ($)
| |
Goodwill [Roll Forward] | |
Balance at December 31, 2017 | $ 573,427 |
Acquisitions | 0 |
Divestitures | (2,483) |
Balance at September 30, 2018 | $ 570,944 |
FAIR VALUE MEASUREMENTS - Fair value rollforward for tax receivable agreement liability (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2018
USD ($)
| |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Balance at December 31, 2017 | $ 7,500 |
Options exercised and dividend equivalent payment vesting | (765) |
Total realized/unrealized losses: | |
Included in earnings and reported as Income tax receivable agreement expense | 2,765 |
Balance at June 30, 2018 | $ 9,500 |
FAIR VALUE MEASUREMENTS - Narrative (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Carrying amount of long-term debt | $ 562,431 | $ 569,620 |
First lien term loans | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of debt | 431,241 | 436,158 |
Carrying amount of long-term debt | $ 434,500 | $ 437,800 |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Accrued compensation and benefits: | ||
Accrued compensation | $ 21,027 | $ 17,987 |
Accrued vacation pay | 13,631 | 10,998 |
Accrued compensation and benefits | 34,658 | 28,985 |
Accrued expenses and other current liabilities: | ||
Payor refunds and retractions | 24,968 | 28,935 |
Other | 10,544 | 21,028 |
Accrued settlement | 7,641 | 0 |
Accrued expenses and other current liabilities | $ 43,153 | $ 49,963 |
VARIABLE INTEREST ENTITIES (Details) $ in Thousands |
Sep. 30, 2018
USD ($)
|
---|---|
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets and Liabilities, Net [Abstract] | |
Total assets of VIEs | $ 17,314 |
Total liabilities of VIEs | $ 9,240 |
DEBT - Schedule of long-term debt (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
LONG-TERM DEBT | ||
Total long-term debt | $ 562,431 | $ 569,620 |
Less: discounts and fees, net of accumulated amortization | (8,475) | (9,532) |
Less: current maturities | (47,206) | (44,534) |
Long-term debt, less current portion | 506,750 | 515,554 |
2017 Credit Agreement | ||
LONG-TERM DEBT | ||
Long-term debt, gross | 434,500 | 437,800 |
Term Loans | ||
LONG-TERM DEBT | ||
Long-term debt, gross | 119,984 | 125,619 |
Lines of Credit | ||
LONG-TERM DEBT | ||
Long-term debt, gross | 5,765 | 3,600 |
Other | ||
LONG-TERM DEBT | ||
Long-term debt, gross | $ 2,182 | $ 2,601 |
DEBT - Scheduled maturities of long-term debt (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Disclosure [Abstract] | ||
2018 (remainder) | $ 11,804 | |
2019 | 42,759 | |
2020 | 33,599 | |
2021 | 25,854 | |
2022 | 20,161 | |
Thereafter | 428,254 | |
Total long-term debt | $ 562,431 | $ 569,620 |
INCOME TAXES (Details) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Income Tax Disclosure [Abstract] | ||||
Effective income tax rate | 0.20% | 8.80% | (6.10%) | (1.00%) |
STOCK-BASED COMPENSATION - Schedule of Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Total stock-based compensation before tax | $ 1,247 | $ 1,031 | $ 4,174 | $ 14,762 |
Income tax benefit | (324) | (412) | (1,085) | (5,905) |
Patient care costs | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Total stock-based compensation before tax | 308 | 127 | 750 | 2,620 |
General and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Total stock-based compensation before tax | $ 939 | $ 904 | $ 3,424 | $ 12,142 |
STOCK-BASED COMPENSATION - Assumptions used for options granted (Details) |
9 Months Ended |
---|---|
Sep. 30, 2018
$ / shares
| |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Expected volatility (minimum) | 30.00% |
Expected volatility (maximum) | 35.00% |
Weighted average expected term in years | 6 years |
Weighted average risk free interest rate (minimum) | 2.74% |
Weighted average risk free interest rate (maximum) | 2.92% |
Expected annual dividend yield | 0.00% |
Weighted average grant-date fair value (in USD per share) | $ 7.00 |
STOCK-BASED COMPENSATION - Restricted stock awards (Details) - Restricted stock awards |
9 Months Ended |
---|---|
Sep. 30, 2018
$ / shares
shares
| |
Number Outstanding | |
Beginning balance (in shares) | shares | 252,307 |
Granted (in shares) | shares | 357,275 |
Vested (in shares) | shares | (100,553) |
Forfeited (in shares) | shares | (70,382) |
Ending balance (in shares) | shares | 438,647 |
Weighted-Average Grant Date Fair Value per Award | |
Beginning balance (in USD per share) | $ / shares | $ 16.70 |
Granted (in USD per share) | $ / shares | 22.20 |
Vested (in USD per share) | $ / shares | 16.91 |
Forfeited (in shares) | $ / shares | 19.48 |
Ending balance (in USD per share) | $ / shares | $ 20.69 |
Vesting period (in years) | 3 years 6 months |
COMMITMENTS AND CONTINGENCIES (Details) |
Apr. 26, 2016 |
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Percentage tax savings payable to pre-IPO stockholders | 85.00% |
CERTAIN LEGAL MATTERS (Details) - USD ($) $ in Thousands |
Aug. 01, 2018 |
Mar. 29, 2018 |
Jan. 31, 2018 |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|---|
Certain Legal Matters | |||||
Accrued expenses and other current liabilities | $ 43,153 | $ 49,963 | |||
Other long-term liabilities | 24,378 | $ 14,880 | |||
ARA, ARA OpCo And ARM vs UnitedHealth Group Inc. | |||||
Certain Legal Matters | |||||
Settlement payment | $ 32,000 | ||||
Certain legal matters | $ 29,614 | 19,614 | |||
Accrued expenses and other current liabilities | 7,641 | ||||
Other long-term liabilities | 11,973 | ||||
Installment payment on August 1, 2018 | 10,000 | ||||
Installment payment on August 1, 2019 | 8,000 | ||||
Installment payment on August 1, 2020 | 7,000 | ||||
Installment payment on August 1, 2021 | 3,500 | ||||
Installment payment on August 1, 2022 | $ 3,500 | ||||
Agreement term | 3 years | ||||
Esposito, Et Al. v. American Renal Associates Holdings, Inc., Et Al | |||||
Certain Legal Matters | |||||
Settlement payment | $ 4,000 | ||||
Bushansky On Behalf Of Company V. Board Of Directors | |||||
Certain Legal Matters | |||||
Settlement payment | $ 350 |
CHANGES IN OWNERSHIP INTEREST IN CONSOLIDATED SUBSIDIARIES (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Noncontrolling Interest [Abstract] | ||||
Net income (loss) attributable to American Renal Associates Holdings, Inc. | $ 2,490 | $ 7,983 | $ (16,428) | $ 4,626 |
(Decrease) increase in paid-in capital for the sales of noncontrolling interest | (80) | 34 | (51) | 34 |
Decrease in paid-in capital for the purchase of noncontrolling interest and adjustments to ownership interest | (128) | 0 | (6,081) | (5,980) |
Net transfers to/from noncontrolling interests | (208) | 34 | (6,132) | (5,946) |
Net income (loss) attributable to American Renal Holdings Associates, Inc., net of transfers to/from noncontrolling interests | $ 2,282 | $ 8,017 | $ (22,560) | $ (1,320) |
VZ<36KZ3LGX- G"O:$O'$>MJI
M+U?&6R)5E]\"T7-*+H;4-@$.PS1H2=WY96'&CKPLV%TV=4>/W!/WMB7\]YXV
M;-CZR'\?>*EOE=0#05GTY$:_4?F]/W+5"^8HE[JEG:A9YW%ZW?H[]'Q F288
MQ(^:#F+1]G0J)\9>=>?S9>N'>D:TH6>I0Q#U>M #;1H=2 .$ZY.[$L+A_XF>7RGP,O
MLEC(S^+HE.>"Q?N:E*4.02APLCC)[?FT'GLNYE-^$6F2L^?"*B]9%A=_%RSE
MMYF-[?>![\GQ)*H!9SX]QT?V@XF?Y^="?CEME'V2L;Q,>&X5[#"S'_%D2TA%
MJ!&_$G8K.^]6-947SE^KCR_[F8VJC%C*=J(*$ &!?<'K<.X/8"
M4#B !P;PZ@!>)X"K[=VB@80U)*\A41"BP$5(W^71R"V$] BB760O>Q_,WC>R
M)S32DFHP?D>*N#XL$H B@2D2Z3,/#!$ 4 TXK@; FQP>U!!(Z'[8[
MW-OI6DV!-\/\8NCR;.N_4$L#!!0 ( 'F$:4VJ/[)V3P, / - 9
M>&PO=V]R:W-H965T F&.
MKEIHPNQ%Y@\#UB;T%D,P2I N8JL+4*;/C!DN\]$0BL H$1".]B1*L8(R8Q
MF,Y@?#]=A+VS":TVH9&(%A+8\[.5SR,HQ$GT)$YD]8DL/MA;^3R"@B#*GOC$
M5I_8YN.O?"R@*(V>K%MB]4EL/JM#M+.!_-BW^Z16G]1R#.*536K9GA0_RY-9
M?;('GR!+5C[9PW&+8AP&J]7=VV!9O-CLL1RT^*#U!?N#\'/3">?(I+H;S!=<
M,29!27HO*ERM[O1Y0*&2NINH/A]OMG$@63]=VFC^ 7P->F@5"L[M\&7;K&.,MM?+@IY:/O3N#NOQT^+XT6K3OJS
MJ7_Y=KO]#U!+ P04 " !YA&E-9!&J. (" ",!0 &0 'AL+W=O %M$^4#3
MB207\T:8+SPQYLKT9)BW4DJ/U]A[XE-=$U!+ELZPEW@>N6D2E
MC@JW)K$G@VR+&T:ZF6D!'BVR)9 RV,9PJDFH3"A4 &7[F3_XY(=&?U5+!9G-
MDR#16^<%\@"^KV*3R*>(#/U%(O35^=Q[ESIQAZK=]O@ W+UI?H1&$S=$9O!H
M(VV/AVJ!>/=>"&H!7]&[V84=01148V[6+K3Y^X<*!9-@[4-#RON0YWTIOXM=
M>@4FRL?UG)B*+;$.B%H@Y]FLW$ GH&)._,6;%?H/K$6W0]MR,*!PN1B9-BV7
M!<'VYLGGI?44N<=?L?G49+%8_? 5ERV@R(L-=G3*CQIWLD<23)B@R9:4U\;(-R*#L6
M5;CJ >WG,0\:*NE5M6G"LB"JL>!$_4IUUOGEZ=7'L^AN\N]5% N#R7E00I$=
MB[8A\TA&'HLRK/IKQAPJ D1*PRUMJV[FX,[U7VGC6%_-)PZ-8YR8PF4^5.O7
M:\S%2O>BFB4^:&NH;&&1/C4+K=H6UB>Q>1Y*Z$^$BR2>)O*W!&8WW4I.3%XQ
M?J\4;"$(1+JPI5-AB;+6?%0ES0L''.OK*_WDS**#.3*:]B$ CZ1QL.79_89^
M,VJ-OBGU(Q%_UK#5> @+]
MZ**O+AUDGGQVA^YR&Z.<3W#EVEWH-?/1;L]2D-CQDL&P<.>:M@;VX^&!@"?$
M1G@'ZENZ(86M%770R81X0XC2)F6W:71[=JJ3J9)"56.H2@:7S@O\-F\YG;%>)$8(>*P"Q:K&6 7*2R.L,]@1IY/&
MF,08 0]6H&*S $#-N@]@/5473B5(2$K4HY2K.NP#*2]#*X3>,D4F=YRD_
M/%6!4M5@J@*EIA#
M9.D&D#:$PMPAC% "")59SXHT'O.C"M*.5HWA5UAB"&.4 $:#7'Y)$S)QBFKR
M:%D5.1;R <(H)9!\EE(*POPCG7[:H&:@3BT75!F5XT"=BZDTS)BG!'@:U"S4
MG"2O8P+DH2:6D(%I2B 3E2G#B@!.*?BH#"$=1U.RA*%*%7CNA4AG#$(&( QR
M$\4_3B6!A$+TI4AGC$$&N6202RAKP"DW(-WDRI;,8 @RR"2#7",84)!\E-P!
M,G;1%6*4"_MEP,$H.TYA"D#)F(0,62LBM6$-NP:0>&E!E
M8!9"@C$*&625,OI6K!-&>YGMG?QH54B%A)LQ51E0E24S&-#2D5PH@*KTI#!.
M&>"45:2#M--[R\H-T 7C+Y*U]Y8P4AD@E56X:U1R<'*OAE2I]#:),4X9;/)9
M!3Q(/U/."J4?(*.8? %!#M/9 3K+%&OE-'IME+M'("JM% ZSV0$VRY5_Y0!X
M0ZB
CK!L7'"Q/.U'##W _
MNY/Q%IM92JFAM1);8J#*Z.WF<-R%^!CP2\)@%V<2*CDC/@7C>YG1) @"!84+
M#,)O%[@#I0*1E_%GXJ1SR@!1=8^2"+HO?4C>,?
M[=2[Q.P-I^>?WA^'Y+MD7K-&/JCB[WS?'C=>XJWV\I"]%^UW=7Z6.J'06^GL
M?Y,?LNCD_4BZM5-,/_U>Z]:56IO71#*;.?XS&OAN-9^_\TPP:D#>AB0.RJ
M =<&?*F!T 9BJ4&H#<*E!I$VB)8:Q-H@7FJ0:(/D8B"28<7'Y1C6]VO69MMU
MKB*[F)8.* E#NVE
D"4D6-B0&.3' H1-./.-\P@A1&L*@! 0E "B>@)(Y*$%ANG! *O@P*?E%VV%B
MQK)K9-U$BZ9OTL'P3V'W'U!+ P04 " !YA&E-YU%L%-8# !@$0 &0
M 'AL+W=O?2O--GW]5HR 1!J/ZW]6'*BW>K<3.L=%EV_\/-J?6Z&KT8I=2
MY3^&:U'WU_/H_],,-Z"C ;T8V+GO&;#1@/TTX'<-^&C 'YU!C ;"F2$:M/?!
M7.4F7\P:?0Z:83\<\V[;P8NPZ=IT@WUV^L]L/%L[^K$0E,^BC\[1R"P'ADZ8
ME%PC*Q^!"Q'9!5Q60;%5+*EG3J\GR'PB!6<-7SI9WW5RM4R&!HOU]NPJ6 )W
MP%$'O'? )PZD=((]($F/U(,*+IUP9SZ4R)0Y\?"A)X@Y39V@^!B/:8RK$J@J
MX:EBTDG.$<>N6O17HB
M!>^>WWN1R<)2ZB0TSG[W3--#=:SPM4*E8^(MCH,EN3WHAP,.457EB (Z\#*N
MUZ@WTYH<@-.&YQJ4^->\'DBZBMJP7:]9CX(= 65G"KJY:(E.F.W*.0J);I?7
MK?PD[_8KYH,\E>?DSF#2+#*%-ZV_1)?2T/J+.KMHJ!J*W:T[OIO9C3,&M:%B3;IGIRLHYI\E1\M%3QU;@.%P -4L
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MN*Q&OP[5ZQU)S3(H'08Q0Y\[T;C>PN4+APQAO1YZ)]+2.QAP0:3#,9@-%H*7W3%TS$B".,)JB3$^8"
MIJKE"5[[A^8Y:K(P!8,E\1:MW""^[X0,F?G^7^4*
X(2+:/ZY;#>/]*.SNT0!;)+'5N@A>/S^PKI=&]WXM[0!"^
M2T ]_1T9HY<$W-M]40K-<8(-DBY)IZ>\EB) 0&]@0$G[Y)T4^/?Y!)?$BF
M4J)@H D9N0Y?1$WW\#G7/XG$?9-J3B),]0.E55U@6E7EX:ME]-,6#J/;54B%
MR+FB]0YM.*=:@+8
M34+>ZZZ5E..0!U#F&++/;+GU$7L&P%-1)RH:V^W=U>F?CM]-;L_>
M1Z!O(=3IZQ2KF8I?>-$IBM$?MPFD:#Q"S*TC4.'[W1$9&UC;
M.?QG0W@Z0HBGM]$ S")R\AT)RM/; _;%WC4U,G ^][2O-31BPHVT5^WV6/9J
M1'MU0M!RN%='HWA\,HZ\H>6N>O,%URQ!U\95)N(8N)](#[\]H)Y(8&>VQX.X
M#T0!/XX[W7C