Accounts and Notes Receivable

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Accounts and Notes Receivable

Note 3— Accounts and Notes Receivable

The Company’s accounts and notes receivable balances consisted of the following as of September 30, 2018 and December 31, 2017:

	September 30, 2018			December 31, 2017
	(in thousands)
Short-term
Accounts and notes receivable	$	392,114		$	390,705
Allowance for doubtful accounts	(38,630		)	(11,985		)
Total net short-term accounts and notes receivable	353,484			378,720
Long-term
Notes receivable	55,906			15,476
Allowance for doubtful accounts	(10,000		)	—
Total net long-term notes receivable	45,906			15,476
Total net accounts and notes receivable	$	399,390		$	394,196

The Company makes credit decisions on a case–by–case basis after reviewing a number of qualitative and quantitative factors related to the specific client as well as current industry variables that may impact that client. There are a variety of factors that impact a client’s ability to pay in accordance with the Company’s service agreements. These factors include, but are not limited to, fluctuating census numbers, litigation costs and the client’s participation in programs funded by federal and state governmental agencies. Deviations in the timing or amounts of reimbursements under those programs can impact the client’s cash flows and their ability to make timely payments. However, the client's obligation to pay the Company in accordance with the service agreements are not contingent upon the client’s cash flows. Notwithstanding the Company’s efforts to minimize its credit risk exposure, the aforementioned factors, as well as other factors that impact client cash flows or ability to make timely payments, could have an indirect, yet material adverse effect on the Company’s results of operations and financial condition.

The Company’s net current accounts and notes receivable balance decreased from December 31, 2017. Fluctuations in net accounts and notes receivable are generally attributable to a variety of factors including, but not limited to, the timing of cash receipts from customers and the inception, transition or termination of client relationships. However, the Company offset its accounts and notes receivable with an increased allowance for doubtful accounts in the first quarter 2018 related primarily to corporate restructurings of two privately-held, multi-state operators that occurred during the first quarter 2018. In addition, the Company converted approximately $24.8 million of accounts receivable to long-term notes receivable, due to the achievement of key operational and financial milestones related to the 2017 dining and nutrition expansion with Genesis HealthCare. Also, in the third quarter of 2018 the Company finalized an agreement for a long-term promissory note receivable related to the previously mentioned corporate restructurings from the first quarter 2018. The promissory note receivable was $10.0 million, net of reserve, and was finalized during the three months ended September 30, 2018. Prior to the promissory note being finalized, the corresponding accounts receivable balance was net of a $10.0 million allowance for doubtful accounts reserve which was originally recorded during the first quarter 2018. As a result of the promissory note, the Company reclassified the reserve balance to an allowance for doubtful accounts on the Company’s long-term notes receivable.

The Company deploys significant resources and has invested in tools and processes to optimize Management’s credit and collections efforts. When appropriate, the Company utilizes interest-bearing promissory notes as an alternative to accounts receivable to enhance the collectability of amounts due, by instituting a definitive repayment plan and providing a means by which to further evidence the amounts owed. As of September 30, 2018 and December 31, 2017, the Company had $66.5 million and $36.6 million, net of reserves, respectively, of such promissory notes outstanding. In addition, the Company may assist clients who are adjusting to changes in their cash flows by amending the Company’s agreements from full-service to management-only arrangements, or by modifying contractual payment terms to accommodate clients who have in good faith established clearly-defined plans for addressing cash flow issues. These efforts are intended to minimize the Company’s collections risk while maintaining relationships with the clients.