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RESTATEMENT OF PREVIOUSLY ISSUED QUARTERLY FINANCIAL STATEMENTS (UNAUDITED)
 12 Months Ended
Dec. 31, 2024
Accounting Changes and Error Corrections [Abstract]  
RESTATEMENT OF PREVIOUSLY ISSUED QUARTERLY FINANCIAL STATEMENTS (UNAUDITED) RESTATEMENT OF PREVIOUSLY ISSUED QUARTERLY FINANCIAL STATEMENTS (UNAUDITED)
Subsequent to the issuance of the Company’s Quarterly Report on Form 10-Q filed on August 12, 2024, the Company received information that indicated certain ancillary services, including respiratory, sensory integration and wound care ultrasound mist therapy, may not be eligible for reimbursement under Medicare Part B. The Company determined that due
to the underlying regulatory ambiguity those certain ancillary services revenue may be subject to significant reversal in the future. As such, the Company has concluded that such revenue should not be recognized until definitive conclusions regarding the eligibility of billing those certain ancillary services under Medicare Part B is permissible.
In accordance with ASC 250 - Accounting Changes and Error Corrections, SEC Staff Accounting Bulletin ("SAB") No. 99 - Materiality, and SAB No. 108 - Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, management concluded the unaudited Condensed Combined/Consolidated financial statements for the three months ended March 31, 2024, and the three and six months ended June 30, 2024 (the "Restatement Periods") required restatement.
The error has been corrected in the unaudited restated condensed combined/consolidated financial statements for the Restatement Periods, whereby the amount of ancillary services billable under Medicare Part B revenue at each relevant reporting date for those certain services has been recognized as a reduction to accounts receivable outstanding or as a refund liability, for cash received, with the corresponding impact of the resulting change as a decrease in the amount of revenue in the unaudited condensed combined/consolidated statements of income (loss) and comprehensive income (loss). As a result of the adjustments to revenue, additional financial statement lines were impacted by the restatement on the unaudited condensed combined/consolidated balance sheets and statements of income (loss) and comprehensive income (loss) for the Restatement Periods related to the associated claw-back of certain bonuses and any related tax impact of the adjustments. The financial statement line items impacted include the following:
•Accounts receivable, net
•Other assets
•Accrued payroll and benefits
•Refund liability
•Other liabilities
•Patient and resident service revenue
•General and administrative expense
In addition to matters that were the subject of the Audit Committee’s independent investigation, the Company determined that certain of its leases were incorrectly classified as operating leases instead of finance leases. The Company corrected this classification as part of the restatement.
The following tables present the unaudited condensed combined/consolidated balance sheets, statements of income (loss) and comprehensive income (loss), statements of stockholders’ equity, and statements of cash flows as previously reported, the restatement adjustments and the unaudited condensed combined/consolidated balance sheets for the quarters ended March 31, 2024 and June 30, 2024 and the unaudited statements of income (loss) and comprehensive income (loss), statements of stockholders’ equity, and statements of cash flows as adjusted for the quarter and year to date periods ended March 31, 2024 and June 30, 2024.
Restatement adjustments are reflected as follows:
•Related to Medicare Part B revenue are labeled “MPB”
•Related to lease classification are labeled “LEA”
In those cases where a financial statement line has been adjusted due to more than one category, a footnote reference detailing the categories has been added.
PACS GROUP, INC. AND SUBSIDIARIES
RESTATED UNAUDITED CONDENSED COMBINED/CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands, except for share and per share values)
Common StockAdditional Paid-In CapitalRetained Earnings
Noncontrolling Interest
Accumulated Other Comprehensive IncomeTotal
SharesAmount
Balance January 1, 2024128,723,386 $129 $— $95,997 $5,600 $— $101,726 
Dividends on common stock ($0.1358 per share)
— — — (17,474)— — (17,474)
Other comprehensive income— — — — — 201 201 
Net income attributable to noncontrolling interest— — — — 2 — 2 
Net income attributable to PACS Group, Inc.(1)
— — — 49,138 — — 49,138 
Restatement Adjustments:
Net income attributable to PACS Group, Inc.(1)
— — — (14,321)— — (14,321)
Balance March 31, 2024 (as restated)128,723,386 $129 $— $113,340 $5,602 $201 $119,272 
Contributions— — — — 502 — 502 
Issuance of common stock21,428,572 21 414,136 — — — 414,157 
Employee stock-based compensation3,847,652 4 90,932 — — — 90,936 
Tax withholdings related to net share settlement of equity awards(1,599,877)(2)(33,596)— — — (33,598)
Dividends on common stock ($0.1066 per share)
— — — (16,247)— — (16,247)
Other comprehensive loss— — — — — (201)(201)
Net income attributable to noncontrolling interest— — — — 2 — 2 
Net loss attributable to PACS Group, Inc.(2)
— — — (10,910)— — (10,910)
Restatement Adjustments:
Net loss attributable to PACS Group, Inc.(2)
— — — (20,968)— — (20,968)
Balance June 30, 2024 (as restated)152,399,733 $152 $471,472 $65,215 $6,106 $— $542,945 
(1) Restated net income attributable to PACS Group, Inc. for the three months ended March 31, 2024 is the sum of the previously reported $49,138 and the restatement adjustment of $(14,321): $34,817
(2) Restated net loss attributable to PACS Group, Inc. for the three months ended June 30, 2024 is the sum of the previously reported $(10,910) and the restatement adjustment of $(20,968): $(31,878)
PACS GROUP, INC. AND SUBSIDIARIES
RESTATED UNAUDITED CONDENSED COMBINED/CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Three Months Ended March 31, 2024
As Previously Reported
Restatement Adjustments
As Restated
Cash flows from operating activities:
Net income$49,140 $(14,321)$34,819 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization7,902 214 8,116 
Amortization and write-off of deferred financing fees775 — 775 
Loss on disposition of property and equipment
343 — 343 
Gain on investment in partnership
(120)— (120)
Deferred taxes4,985 (1,035)3,950 
Noncash lease expense7,262 (399)6,863 
Change in operating assets and liabilities
Accounts receivable, net(74,930)10,938 (63,992)
Other receivables(13,755)— (13,755)
Prepaid expenses and other current assets(5,009)— (5,009)
Other assets(1,802)— (1,802)
Escrow funds(5,807)— (5,807)
Operating lease obligations(8,572)338 (8,234)
Accounts payable13,938 — 13,938 
Accrued payroll and benefits51,577 — 51,577 
Accrued self-insurance liabilities10,399 — 10,399 
Refund liability
— 3,947 3,947 
Other accrued expenses1,340 (36)1,304 
Other liabilities21,121 318 21,439 
NET CASH PROVIDED BY OPERATING ACTIVITIES$58,787 $(36)$58,751 
Cash flows from investing activities
Investment in partnership$(5,081)$— $(5,081)
Non-operating distributions from investment in partnership673 — 673 
Purchase of investments(25,000)— (25,000)
Acquisition of facilities(78,500)— (78,500)
Purchase of property and equipment(10,761)— (10,761)
NET CASH USED IN INVESTING ACTIVITIES$(118,669)$— $(118,669)
Cash flows from financing activities
Borrowing on lines-of-credit, net of deferred financing fees117,000 — 117,000 
Payments on lines-of-credit(100,000)— (100,000)
Dividends on common stock(17,474)— (17,474)
Borrowings of long-term debt, net of deferred financing fees39,786 — 39,786 
Payments on long-term debt(4,859)36 (4,823)
NET CASH PROVIDED BY FINANCING ACTIVITIES$34,453 $36 $34,489 
Net change in cash (25,429)— (25,429)
Cash, cash equivalents, and restricted cash - beginning of period118,704 — 118,704 
Cash, cash equivalents, and restricted cash - end of period$93,275 $— $93,275 
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest$15,638 $705 $16,343 
Income taxes$— $— $— 
Non-cash financing and investing activity
Accrued capital expenditures$4,112 $— $4,112 
Assets acquired in operation expansions in exchange for notes payable$— $— $— 
Assets acquired in operation expansions through settlement of notes receivable$500 $— $500