Cover Page
Cover Page - shares | 6 Months Ended | |
Jun. 30, 2020 | Aug. 11, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 30, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-38900 | |
Entity Registrant Name | THE PENNANT GROUP, INC. | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q2 | |
Entity Central Index Key | 0001766400 | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 83-3349931 | |
Entity Address, Address Line One | 1675 East Riverside Drive | |
Entity Address, Address Line Two | Suite 150 | |
Entity Address, City or Town | Eagle | |
Entity Address, State or Province | ID | |
Entity Address, Postal Zip Code | 83616 | |
City Area Code | (208) | |
Local Phone Number | 506-6100 | |
Title of 12(b) Security | Common Stock, par value $0.001 per share | |
Trading Symbol | PNTG | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 27,980,650 |
CONDENSED CONSOLIDATED AND COMB
CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash | $ 12,129 | $ 402 |
Accounts receivable—less allowance for doubtful accounts of $516 and $677, respectively | 33,858 | 32,183 |
Prepaid expenses and other current assets | 6,443 | 6,098 |
Total current assets | 52,430 | 38,683 |
Property and equipment, net | 19,025 | 14,644 |
Right-of-use assets | 311,821 | 316,328 |
Escrow deposits | 1,639 | 1,400 |
Restricted and other assets | 2,293 | 1,955 |
Intangible assets, net | 38 | 45 |
Goodwill | 45,372 | 41,233 |
Other indefinite-lived intangible assets | 36,628 | 33,462 |
Total assets | 469,246 | 447,750 |
Current liabilities: | ||
Accounts payable | 7,224 | 8,653 |
Accrued wages and related liabilities | 18,278 | 16,343 |
Lease liabilities—current | 13,369 | 12,285 |
Other accrued liabilities | 41,590 | 13,911 |
Total current liabilities | 80,461 | 51,192 |
Long-term lease liabilities—less current portion | 300,621 | 304,044 |
Other long-term liabilities | 5,021 | 2,877 |
Long-term debt, net | 642 | 18,526 |
Total liabilities | 386,745 | 376,639 |
Commitments and contingencies | ||
Equity: | ||
Common stock, $0.001 par value; 100,000 shares authorized; 28,514 and 27,968, shares issued and outstanding at June 30, 2020, respectively, and 28,435 and 27,853 shares issued and outstanding at December 31, 2019, respectively. | 28 | 28 |
Additional paid-in capital | 79,012 | 74,882 |
Retained Earnings/ (Accumulated Deficit) | 3,518 | (3,799) |
Treasury Stock, at cost | (57) | 0 |
Total equity | 82,501 | 71,111 |
Total liabilities and equity | $ 469,246 | $ 447,750 |
CONSOLIDATED AND COMBINED BALAN
CONSOLIDATED AND COMBINED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 516 | $ 677 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 28,514,000 | 28,435,000 |
Common stock, shares outstanding (in shares) | 27,968,000 | 27,853,000 |
CONDENSED CONSOLIDATED AND CO_2
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Income Statement [Abstract] | ||||
Revenue | $ 92,740 | $ 82,734 | $ 184,589 | $ 160,641 |
Expense | ||||
Cost of services | 68,159 | 63,038 | 138,348 | 121,767 |
Rent—cost of services | 9,767 | 8,533 | 19,473 | 16,830 |
General and administrative expense | 7,538 | 6,889 | 14,199 | 15,133 |
Depreciation and amortization | 1,201 | 962 | 2,222 | 1,772 |
Total expenses | 86,665 | 79,422 | 174,242 | 155,502 |
Income from operations | 6,075 | 3,312 | 10,347 | 5,139 |
Other income (expense): | ||||
Interest expense, net | (301) | 0 | (704) | 0 |
Income before provision for income taxes | 5,774 | 3,312 | 9,643 | 5,139 |
Provision/ (benefit) for income taxes | 1,437 | (375) | 2,326 | (32) |
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest, Total | 4,337 | 3,687 | 7,317 | 5,171 |
Less: net income attributable to noncontrolling interest | 0 | 200 | 0 | 350 |
Net income and other comprehensive income attributable to The Pennant Group, Inc. | $ 4,337 | $ 3,487 | $ 7,317 | $ 4,821 |
Earnings per share: | ||||
Basic (in dollars per share) | $ 0.16 | $ 0.13 | $ 0.26 | $ 0.19 |
Diluted (in dollars per share) | $ 0.15 | $ 0.13 | $ 0.25 | $ 0.19 |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 27,952 | 27,834 | 27,922 | 27,834 |
Diluted (in shares) | 29,662 | 27,834 | 29,780 | 27,834 |
CONDENSED CONSOLIDATED AND CO_3
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY AND NET PARENT INVESTMENT - USD ($) shares in Thousands, $ in Thousands | Total | Common Stock | Additional Paid-In Capital | Retained Earnings/ (Accumulated Deficit) | Net Parent Investment | Non-Controlling Interest | Treasury Stock |
Equity, beginning balance at Dec. 31, 2018 | $ 65,288 | $ 0 | $ 0 | $ 0 | $ 55,856 | $ 9,432 | |
Equity, beginning balance (in shares) at Dec. 31, 2018 | 0 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Noncontrolling interest attributable to subsidiary equity plan | 341 | (317) | 658 | ||||
Net Income (Loss) Attributable to Noncontrolling Interest | 150 | 150 | |||||
Net transfer from parent | 4,411 | 4,411 | |||||
Net income attributable to The Pennant Group, Inc. | 1,334 | 1,334 | |||||
Equity, ending balance at Mar. 31, 2019 | 71,524 | $ 0 | 0 | 0 | 61,284 | 10,240 | |
Equity, ending balance (in shares) at Mar. 31, 2019 | 0 | ||||||
Equity, beginning balance at Dec. 31, 2018 | 65,288 | $ 0 | 0 | 0 | 55,856 | 9,432 | |
Equity, beginning balance (in shares) at Dec. 31, 2018 | 0 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net Income (Loss) Attributable to Noncontrolling Interest | 350 | ||||||
Net income attributable to The Pennant Group, Inc. | 4,821 | ||||||
Equity, ending balance at Jun. 30, 2019 | 86,488 | $ 0 | 0 | 0 | 73,315 | 13,173 | |
Equity, ending balance (in shares) at Jun. 30, 2019 | 0 | ||||||
Equity, beginning balance at Mar. 31, 2019 | 71,524 | $ 0 | 0 | 0 | 61,284 | 10,240 | |
Equity, beginning balance (in shares) at Mar. 31, 2019 | 0 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Noncontrolling interest attributable to subsidiary equity plan | 236 | (2,497) | 2,733 | ||||
Net Income (Loss) Attributable to Noncontrolling Interest | 200 | 200 | |||||
Net transfer from parent | 11,041 | 11,041 | |||||
Net income attributable to The Pennant Group, Inc. | 3,487 | 3,487 | |||||
Equity, ending balance at Jun. 30, 2019 | 86,488 | $ 0 | 0 | 0 | $ 73,315 | $ 13,173 | |
Equity, ending balance (in shares) at Jun. 30, 2019 | 0 | ||||||
Equity, beginning balance at Dec. 31, 2019 | 71,111 | $ 28 | 74,882 | (3,799) | $ 0 | ||
Equity, beginning balance (in shares) at Dec. 31, 2019 | 28,435 | 0 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income attributable to The Pennant Group, Inc. | 2,980 | 2,980 | |||||
Stock-based compensation | 1,956 | 1,956 | |||||
Issuance of common stock from the exercise of stock options | 138 | 138 | |||||
Issuance of common stock from the exercise of stock options (in shares) | 38 | ||||||
Issuance/(cancellation) of restricted stock (in shares) | 3 | ||||||
Equity, ending balance at Mar. 31, 2020 | 76,185 | $ 28 | 76,976 | (819) | $ 0 | ||
Equity, ending balance (in shares) at Mar. 31, 2020 | 28,476 | 0 | |||||
Equity, beginning balance at Dec. 31, 2019 | 71,111 | $ 28 | 74,882 | (3,799) | $ 0 | ||
Equity, beginning balance (in shares) at Dec. 31, 2019 | 28,435 | 0 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net Income (Loss) Attributable to Noncontrolling Interest | 0 | ||||||
Net income attributable to The Pennant Group, Inc. | 7,317 | ||||||
Equity, ending balance at Jun. 30, 2020 | 82,501 | $ 28 | 79,012 | 3,518 | $ (57) | ||
Equity, ending balance (in shares) at Jun. 30, 2020 | 28,514 | (2) | |||||
Equity, beginning balance at Mar. 31, 2020 | 76,185 | $ 28 | 76,976 | (819) | $ 0 | ||
Equity, beginning balance (in shares) at Mar. 31, 2020 | 28,476 | 0 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net Income (Loss) Attributable to Noncontrolling Interest | 0 | ||||||
Net income attributable to The Pennant Group, Inc. | 4,337 | 4,337 | |||||
Stock-based compensation | 1,959 | 1,959 | |||||
Issuance of common stock from the exercise of stock options | 77 | 77 | |||||
Issuance of common stock from the exercise of stock options (in shares) | 20 | ||||||
Issuance/(cancellation) of restricted stock (in shares) | 20 | ||||||
Shares of common stock used to satisfy tax withholding | (57) | $ (57) | |||||
Shares of common stock used to satisfy tax withholding (in shares) | (2) | 2 | |||||
Equity, ending balance at Jun. 30, 2020 | $ 82,501 | $ 28 | $ 79,012 | $ 3,518 | $ (57) | ||
Equity, ending balance (in shares) at Jun. 30, 2020 | 28,514 | (2) |
CONDENSED CONSOLIDATED AND CO_4
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Cash flows from operating activities: | ||
Net income | $ 7,317 | $ 5,171 |
Adjustments to reconcile net income to net cash provided by/ (used in) operating activities: | ||
Depreciation and amortization | 2,222 | 1,772 |
Amortization of deferred financing fees | 162 | 0 |
Provision for doubtful accounts | 282 | 460 |
Share-based compensation | 3,915 | 1,127 |
Change in operating assets and liabilities: | ||
Accounts receivable | (2,077) | (3,695) |
Prepaid expenses and other assets | (232) | (1,110) |
Operating lease obligations | 2,168 | 294 |
Accounts payable | (2,019) | 162 |
Accrued wages and related liabilities | (937) | (328) |
Other accrued liabilities | 4,600 | 150 |
Contract Liabilities (CARES Act advance payments) | 27,997 | 0 |
Net cash provided by operating activities | 43,398 | 4,003 |
Cash flows from investing activities: | ||
Proceeds from sale of subsidiary shares | 0 | 2,293 |
Repurchase of subsidiary shares | 0 | (2,293) |
Purchase of property and equipment | (5,963) | (3,641) |
Cash payments for business acquisitions, net of escrow | (6,868) | (14,759) |
Cash payments for asset acquisitions | 0 | (20) |
Escrow deposits | (639) | 0 |
Restricted and other assets | (333) | (147) |
Net cash used in investing activities | (13,803) | (18,567) |
Cash flows from financing activities: | ||
Net investment from parent | 0 | 14,566 |
Proceeds from revolver agreement | 26,500 | 0 |
Payments on revolver agreement | (44,500) | 0 |
Repurchase of shares of common stock to satisfy tax witholding obligations | (57) | 0 |
Payments for deferred financing costs | (26) | 0 |
Issuance of common stock upon the exercise of options | 215 | 0 |
Net cash (used)/ provided by financing activities | (17,868) | 14,566 |
Net increase in cash | 11,727 | 2 |
Cash beginning of period | 402 | 41 |
Cash end of period | 12,129 | 43 |
Cash paid during the period for: | ||
Interest | 619 | 0 |
Income taxes | 2,430 | 0 |
Lease liabilities | 18,462 | 16,721 |
Right-of-use assets obtained in exchange for new operating lease obligations | 3,437 | 4,198 |
Net non-cash adjustment to right-of-use assets and lease liabilities from lease modifications | 441 | 0 |
Non-cash investing activity: | ||
Capital expenditures | $ 1,035 | $ 600 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 6 Months Ended |
Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS | DESCRIPTION OF BUSINESS The Pennant Group, Inc. (herein referred to as “Pennant,” the “Company,” “it,” or “its”), is a holding company with no direct operating assets, employees or revenue. The Company, through its independent operating subsidiaries, provides healthcare services across the post-acute care continuum. As of June 30, 2020, the Company’s subsidiaries operated 67 home health, hospice and home care agencies and 54 senior living communities located in Arizona, California, Colorado, Idaho, Iowa, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming. On October 1, 2019, The Ensign Group, Inc. (NASDAQ: ENSG) (“Ensign” or the “Parent”) completed the separation of Pennant (the “Spin-Off”). To accomplish the Spin-Off, Ensign contributed all of its home health and hospice and substantially all of its senior living businesses into Pennant and distributed to Ensign’s stockholders all of the outstanding shares of Pennant common stock. Each Ensign stockholder received a distribution of one share of Pennant’s common stock for every two shares of Ensign’s common stock, plus cash in lieu of fractional shares. Additionally, the noncontrolling interest was converted into shares of Pennant at the established conversion ratio. As a result of the Spin-Off on October 1, 2019, Pennant began trading as an independent company on the NASDAQ under the symbol “PNTG.” Certain of the Company’s subsidiaries, collectively referred to as the Service Center, provide accounting, payroll, human resources, information technology, legal, risk management, and other services to the operations through contractual relationships. Each of the Company’s affiliated operations are operated by separate, independent subsidiaries that have their own management, employees and assets. References herein to the consolidated “Company” and “its” assets and activities is not meant to imply, nor should it be construed as meaning, that Pennant has direct operating assets, employees or revenue, or that any of the subsidiaries, are operated by Pennant. |
BASIS OF PRESENTATION AND SUMMA
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - The accompanying unaudited condensed consolidated and combined financial statements of the Company (the “Interim Financial Statements”) reflect the Company’s financial position, results of operations and cash flows of the business. The Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the regulations of the Securities and Exchange Commission (“SEC”). Management believes that the Interim Financial Statements reflect, in all material respects, all adjustments which are of a normal and recurring nature necessary to present fairly the Company’s financial position, results of operations, and cash flows for the periods presented in conformity with GAAP. The results reported in these financial statements are not necessarily indicative of results that may be expected for the entire year. The Condensed Consolidated and Combined Balance Sheet as of December 31, 2019 is derived from the Company’s annual audited Consolidated and Combined Financial Statements for the fiscal year ended December 31, 2019 which should be read in conjunction with these Interim Financial Statements. Certain information in the accompanying footnote disclosures normally included in annual financial statements was condensed or omitted for the interim periods presented in accordance with GAAP. All intercompany transactions and balances between the various legal entities comprising the Company have been eliminated in consolidation. The condensed consolidated and combined statements of income reflect income that is attributable to the Company and the noncontrolling interest. The Company consists of various limited liability companies and corporations established to operate home health, hospice, home care, and senior living operations. The Interim Financial Statements include the accounts of all entities controlled by the Company through its ownership of a majority voting interest. Revenue was derived from transactional information specific to the Company’s services provided. The costs in the condensed consolidated and combined statements of income reflect direct costs. Estimates and Assumptions - The preparation of the Interim Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Interim Financial Statements and the reported amounts of revenue and expenses during the reporting periods. The most significant estimates in the Interim Financial Statements relate to revenue, cost allocations, intangible assets and goodwill, right-of-use assets and lease liabilities for leases greater than 12 months, and income taxes. Actual results could differ from those estimates. Prior to Spin Off - Prior to the Spin-Off, the combined financial statements were prepared on a stand-alone basis and derived from the consolidated financial statements and accounting records of Ensign. The Interim Financial Statements include allocations of costs for certain shared services provided to the Company by Ensign subsidiaries prior to the Spin-Off on October 1, 2019. Such allocations include, but are not limited to, executive management, accounting, human resources, information technology, compliance, legal, payroll, insurance, tax, treasury, and other general and administrative items. These costs were allocated to the Company on a basis of revenue, location, employee count, or other measures. These cost allocations are reflected within general and administrative expense in the condensed consolidated and combined statements of income, including for share-based compensation expenses disclosed in Note 12 , Options and Awards . The amount of general and administrative costs allocated for the three and six months ended June 30, 2019, inclusive of share-based compensation expense, was $6,889 and $15,133, respectively. Management believes the basis on which the expenses were allocated to be a reasonable reflection of the services provided to the Company during the periods. Ensign’s external debt and related interest expense were not allocated to the Company for any of the periods presented prior to the Spin-Off as no portion of Ensign’s borrowings were assumed by the Company as part of the Spin-Off. Prior to the date of the Spin-off, the Company’s operations have been included in Ensign’s U.S. federal and state income tax returns and all income taxes have been paid by subsidiaries of Ensign. Income tax expense and other income tax related information contained in these Interim Financial Statements for the periods prior to the Spin-Off were presented using a separate tax return approach. Prior to the Spin-Off, the Company presented the noncontrolling interest and the amount of consolidated net income attributable to the Company in the Interim Financial Statements. The carrying amount of the noncontrolling interest was adjusted by an allocation of subsidiary earnings based on ownership interest prior to the Spin-Off. The noncontrolling subsidiary interest included in the Interim Financial Statements was converted into common shares of Pennant concurrent with the distribution to Ensign stockholders at the date of the Spin-Off. For all prior periods presented prior to the Spin-Off, the earnings per share included on the accompanying Condensed Consolidated and Combined Statements of Income was calculated based on the 27,834 shares of Pennant common stock distributed on October 1, 2019 in conjunction with the Spin-Off, including shares related to the conversion of the noncontrolling interest. Recent Accounting Standards Adopted by the Company FASB Accounting Standards Update, or ASU, ASU 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” or ASU 2020-4 - In March 2020, the FASB concluded its reference rate reform project and issued this ASU. The amendments in this ASU provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The optional expedients and exceptions are available for all entities as of March 12, 2020, through December 31, 2022. The Company has adopted ASU 2020-04, effective March 12, 2020. The impact of this ASU will be determined based on terms of any future contract modification related to a change in reference rate, including future modifications to the Company’s Revolving Credit Facility described in further detail in Note 11, Debt. FASB ASU, 2018-13 “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement” or ASU 2018-13 - In August 2018, the FASB issued amended guidance to simplify fair value measurement disclosure requirements. The new provisions eliminate the requirements to disclose (1) transfers between Level 1 and Level 2 of the fair value hierarchy, (2) policies related to valuation processes and the timing of transfers between levels of the fair value hierarchy, and (3) net asset value disclosure of estimates of timing of future liquidity events. The FASB also modified disclosure requirements of Level 3 fair value measurements. The Company adopted ASU 2018-13 as of January 1, 2020. There was no material impact to the Company’s financial statements or disclosures. FASB ASU, 2017-04 “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” or ASU 2017-04 - In January 2017, the FASB issued amended authoritative guidance to simplify and reduce the cost and complexity of the goodwill impairment test. The new guidance eliminates “Step 2” from the traditional two-step goodwill impairment test and redefines the concept of impairment from a measure of loss when comparing the implied fair value of goodwill to its carrying amount, to a measure comparing the fair value of a reporting unit with its carrying amount. The FASB |
RELATED PARTY TRANSACTIONS AND
RELATED PARTY TRANSACTIONS AND NET PARENT INVESTMENT | 6 Months Ended |
Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS AND NET PARENT INVESTMENT | RELATED PARTY TRANSACTIONS AND NET PARENT INVESTMENT The Interim Financial Statements include a combination of stand-alone and combined business functions between Ensign and the Company’s subsidiaries prior to the Spin-Off. The Company leases 31 of its senior living communities from subsidiaries of Ensign, each of the leases have a term of between 14 and 16 years from the lease commencement date. The total amount of rent expense included in Rent - cost of services paid to subsidiaries of Ensign was $3,071 and $6,172 for the three and six months ended June 30, 2020, respectively, and $2,774 and $5,467, for the three and six months ended June 30, 2019, respectively. The Company’s subsidiaries received services from Ensign’s subsidiaries. Services included in cost of services were $1,166 and $2,188, for the three and six months ended June 30, 2020 and $780 and $1,495, for the three and six months ended June 30, 2019, respectively. Transactions that occurred, prior to the Spin-Off, between subsidiaries of the Company and subsidiaries of Ensign were considered to be effectively settled at the time the transaction was recorded. The net effect of these transactions, including the cash management, is included in the Condensed Consolidated and Combined Statements of Cash Flows as “Net investment from/(to) Parent”. Other related party activity with Ensign |
COMPUTATION OF NET INCOME PER C
COMPUTATION OF NET INCOME PER COMMON SHARE | 6 Months Ended |
Jun. 30, 2020 | |
Earnings Per Share [Abstract] | |
COMPUTATION OF NET INCOME PER COMMON SHARE | COMPUTATION OF NET INCOME PER COMMON SHAREBasic and diluted net income per share are computed by dividing net income by the weighted average number of outstanding common shares during the period. In the basic and diluted earnings per share calculations, net income is equal to net income attributable to The Pennant Group, Inc. adjusted to include net income attributable to noncontrolling interest. Net income attributable to the noncontrolling interest has been included in the numerator for all periods as the non-controlling subsidiary interest included in the Interim Financial Statements was converted into common shares of Pennant concurrent with the distribution to Ensign stockholders at the date of the Spin-Off. The total number of common shares distributed on October 1, 2019 of 27,834 is being utilized for the calculation of basic and diluted earnings per share for all prior periods, as no common stock was outstanding prior to the date of the Spin-Off. The following table sets forth the computation of basic and diluted net income per share for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Numerator: Net income attributable to The Pennant Group, Inc. $ 4,337 $ 3,487 $ 7,317 $ 4,821 Add: net income attributable to noncontrolling interests — 200 — 350 Net Income $ 4,337 $ 3,687 $ 7,317 $ 5,171 Denominator: Weighted average shares outstanding for basic net income per share 27,952 27,834 27,922 27,834 Plus: assumed incremental shares from exercise of options and assumed conversion or vesting of restricted stock (a) 1,710 — 1,858 — Adjusted weighted average common shares outstanding for diluted income per share 29,662 27,834 29,780 27,834 Earnings Per Share: Basic net income per common share $ 0.16 $ 0.13 $ 0.26 $ 0.19 Diluted net income per common share $ 0.15 $ 0.13 $ 0.25 $ 0.19 (a) The calculation of dilutive shares outstanding excludes out-of-the-money stock options (i.e., such options’ exercise prices were greater than the average market price of our common shares for the period) because their inclusion would have been antidilutive. Options outstanding which are anti-dilutive and therefore not factored into the weighted average common shares amount above were 240 and 102 for the three and six months ended June 30, 2020, respectively. |
REVENUE AND ACCOUNTS RECEIVABLE
REVENUE AND ACCOUNTS RECEIVABLE | 6 Months Ended |
Jun. 30, 2020 | |
Revenue from Contract with Customer and Accounts Receivable [Abstract] | |
REVENUE AND ACCOUNTS RECEIVABLE | REVENUE AND ACCOUNTS RECEIVABLE Revenues are recognized when services are provided to the patients at the amount that reflects the consideration to which the Company expects to be entitled from patients and third-party payors, including Medicaid, Medicare and insurers (private, Medicare Advantage and Medicare replacement plans), in exchange for providing patient care. The healthcare services in home health and hospice patient contracts include routine services in exchange for a contractual agreed-upon amount or rate. Routine services are treated as a single performance obligation satisfied over time as services are rendered. As such, patient care services represent a bundle of services that are not capable of being distinct within the context of the contract. Additionally, there may be ancillary services which are not included in the rates for routine services, but instead are treated as separate performance obligations satisfied at a point in time, if and when those services are rendered. Revenue recognized from healthcare services are adjusted for estimates of variable consideration to arrive at the transaction price. The Company determines the transaction price based on contractually agreed-upon amounts or rate, adjusted for estimates of variable consideration. The Company uses the expected value method in determining the variable component that should be used to arrive at the transaction price, using contractual agreements and historical reimbursement experience within each payor type. The amount of variable consideration which is included in the transaction price may be constrained, and is included in the net revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. If actual amounts of consideration ultimately received differ from the Company’s estimates, the Company adjusts these estimates, which would affect net service revenue in the period such variances become known. Revenue from the Medicare and Medicaid programs accounted for 59.4% and 58.7%, for the three and six months ended June 30, 2020, respectively, and 54.9% and 54.1%, of the Company’s revenue for the three and six months ended June 30, 2019, respectively. The Company records revenue from these governmental and managed care programs as services are performed at their expected net realizable amounts under these programs. The Company’s revenue from governmental and managed care programs is subject to audit and retroactive adjustment by governmental and third-party agencies. Consistent with healthcare industry accounting practices, any changes to these governmental revenue estimates are recorded in the period the change or adjustment becomes known based on final settlement. During the quarter the Company received CARES Act Provider Relief Fund (the “PRF”) payments in the amount of $9,858, and during the quarter the Company returned the full amount of payments received. Disaggregation of Revenue The Company disaggregates revenue from contracts with its patients by reportable operating segments and payors. The Company has determined that disaggregating revenue into these categories achieves the disclosure objectives to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The Company’s service specific revenue recognition policies are as follows: Home Health Revenue Medicare Revenue For Medicare episodes that began after January 1, 2020, net service revenue is recognized in accordance with the Patient Driven Groupings Model (“PDGM”). This new reimbursement structure involves case mix calculation methodology refinements, changes to low-utilization payment adjustment (“LUPA”) thresholds, the elimination of therapy thresholds, a change to the unit of payment from a 60-day episode to a 30-day payment period, and reduction of requests for anticipated payments (“RAPs”) to 20% of the estimated payment for a patient’s initial or subsequent period of care up-front (after the initial assessment is completed and upon initial billing). The RAPs will be completely phased out effective January 1, 2021. Under PDGM, Medicare provides agencies with payments for each 30-day payment period provided to beneficiaries. If a beneficiary is still eligible for care after the end of the first 30-day payment period, a second 30-day payment period can begin. There are no limits to the number of periods of care a beneficiary who remains eligible for the home health benefit can receive. While payment for each 30-day payment period is adjusted to reflect the beneficiary’s health condition and needs, a special outlier provision exists to ensure appropriate payment for those beneficiaries that have the most expensive care needs. The payment under the Medicare program is also adjusted for certain variables including, but not limited to: (a) a LUPA if the number of visits is below an established threshold that varies based on the diagnosis of a beneficiary; (b) a partial payment if the patient transferred to another provider or the Company received a patient from another provider before completing the period of care; (c) adjustment to the admission source of claim if it is determined that the patient had a qualifying stay in a post-acute care setting within 14 days prior to the start of a 30-day payment period; (d) the timing of the 30-day payment period provided to a patient in relation to the admission date, regardless of whether the same home health provider provided care for the entire series of episodes; (e) changes to the acuity of the patient during the previous 30-day payment period (f) changes in the base payments established by the Medicare program; (g) adjustments to the base payments for case mix and geographic wages; and (h) recoveries of overpayments. For all episodes that began prior to January 1, 2020, net service revenue was recorded under the Medicare prospective payment system based on a 60-day episode payment rate that is subject to adjustment based on certain variables including, but not limited to: (a) an outlier payment if the patient’s care was unusually costly; (b) a LUPA if the number of visits was fewer than five; (c) a partial payment if the patient transferred to another provider or transferred from another provider before completing the episode; (d) a payment adjustment based upon the level of covered therapy services; (e) the number of episodes of care provided to a patient, regardless of whether the same home health provider provided care for the entire series of episodes; (f) changes in the base episode payments established by the Medicare program; (g) adjustments to the base episode payments for case mix and geographic wages; and (h) recoveries of overpayments. The Company adjusts Medicare revenue on completed episodes to reflect differences between estimated and actual payment amounts, an inability to obtain appropriate billing documentation and other reasons unrelated to credit risk. Therefore, the Company believes that its reported net service revenue and patient accounts receivable will be the net amounts to be realized from Medicare for services rendered. In addition to revenue recognized on completed episodes and periods, the Company also recognizes a portion of revenue associated with episodes and periods in progress. Episodes in progress are 30-day payment periods, if the episode started after January 1, 2020, or 60-day episodes of care, if the episode started prior to January 1, 2020, that begin during the reporting period but were not completed as of the end of the period. As such, the Company estimates revenue and recognizes it on a daily basis. The primary factors underlying this estimate are the number of episodes in progress at the end of the reporting period, expected Medicare revenue per period of care or episode of care and the Company’s estimate of the average percentage complete based on the scheduled end of period and end of episode dates. Non-Medicare Revenue Episodic Based Revenue - The Company recognizes revenue in a similar manner as it recognizes Medicare revenue for episodic-based rates that are paid by other insurance carriers, including Medicare Advantage programs. These rates can vary based upon the negotiated terms. Non-episodic Based Revenue - Revenue is recognized on an accrual basis based upon the date of service at amounts equal to its established or estimated per visit rates, as applicable. Hospice Revenue Revenue is recognized on an accrual basis based upon the date of service at amounts equal to the estimated payment rates. The estimated payment rates are calculated as daily rates for each of the levels of care the Company delivers. Revenue is adjusted for an inability to obtain appropriate billing documentation or authorizations acceptable to the payor and other reasons unrelated to credit risk. Additionally, as Medicare hospice revenue is subject to an inpatient cap and an overall payment cap, the Company monitors its provider numbers and estimates amounts due back to Medicare if a cap has been exceeded. The Company records these adjustments as a reduction to revenue and an increase to other accrued liabilities. Senior Living Revenue The Company has elected the lessor practical expedient within ASC Topic 842, Leases (“ASC 842”) and therefore recognizes, measures, presents, and discloses the revenue for services rendered under the Company’s senior living residency agreements based upon the predominant component, either the lease or non-lease component, of the contracts. The Company has determined that the services included under the Company’s senior living residency agreements each have the same timing and pattern of transfer. The Company recognizes revenue under ASC 606 for its senior residency agreements, for which it has determined that the non-lease components of such residency agreements are the predominant component of each such contract. The Company’s senior living revenue consists of fees for basic housing and assisted living care. Accordingly, the Company records revenue when services are rendered on the date services are provided at amounts billable to individual residents. Residency agreements are generally for a term of 30 days, with resident fees billed monthly in advance. For residents under reimbursement arrangements with Medicaid, revenue is recorded based on contractually agreed-upon amounts or rates on a per resident, daily basis or as services are rendered. Revenue by payor for the three and six months ended June 30, 2020 and 2019, is summarized in the following tables: Three Months Ended June 30, 2020 Home Health and Hospice Services Home Health Services Hospice Services Senior Living Services Total Revenue Revenue % Medicare $ 11,808 $ 28,550 $ — $ 40,358 43.5 % Medicaid 1,963 3,637 9,155 14,755 15.9 Subtotal 13,771 32,187 9,155 55,113 59.4 Managed care 6,846 397 — 7,243 7.8 Private and other (a) 4,744 39 25,601 30,384 32.8 Total revenue $ 25,361 $ 32,623 $ 34,756 $ 92,740 100.0 % (a) Private and other payors in our home health and hospice services segment includes revenue from all payors generated in our home care operations. Three Months Ended June 30, 2019 Home Health and Hospice Services Home Health Services Hospice Services Senior Living Services Total Revenue Revenue % Medicare $ 11,990 $ 22,390 $ — $ 34,380 41.6 % Medicaid 1,515 2,418 7,100 11,033 13.3 Subtotal 13,505 24,808 7,100 45,413 54.9 Managed care 6,829 370 — 7,199 8.7 Private and other (a) 4,654 42 25,426 30,122 36.4 Total revenue $ 24,988 $ 25,220 $ 32,526 $ 82,734 100.0 % (a) Private and other payors in our home health and hospice services segment includes revenue from all payors generated in our home care operations. Six Months Ended June 30, 2020 Home Health and Hospice Services Home Health Services Hospice Services Senior Living Services Total Revenue Revenue % Medicare $ 24,384 $ 55,230 $ — $ 79,614 43.1 % Medicaid 3,553 6,966 18,188 28,707 15.6 Subtotal 27,937 62,196 18,188 108,321 58.7 Managed care 13,962 813 — 14,775 8.0 Private and other (a) 9,784 54 51,655 61,493 33.3 Total revenue $ 51,683 $ 63,063 $ 69,843 $ 184,589 100.0 % (a) Private and other payors in our home health and hospice services segment includes revenue from all payors generated in our home care operations. Six Months Ended June 30, 2019 Home Health and Hospice Services Home Health Services Hospice Services Senior Living Services Total Revenue Revenue % Medicare $ 23,360 $ 42,039 $ — $ 65,399 40.7 % Medicaid 2,953 4,887 13,697 21,537 13.4 Subtotal 26,313 46,926 13,697 86,936 54.1 Managed care 13,185 690 — 13,875 8.6 Private and other (a) 9,149 62 50,619 59,830 37.3 Total revenue $ 48,647 $ 47,678 $ 64,316 $ 160,641 100.0 % (a) Private and other payors in our home health and hospice services segment includes revenue from all payors generated in our home care operations. Balance Sheet Impact Included in the Company’s condensed consolidated and combined balance sheets are contract assets, comprised of billed accounts receivable and unbilled receivables, which are the result of the timing of revenue recognition, billings and cash collections, as well as, contract liabilities, which primarily represent payments the Company receives in advance of services provided. As of June 30, 2020, the Company had contract liabilities in the amount of $27,997 related to Advance Payments received in connection with the CARES Act. See Note 10, Other Accrued Liabilities, for further discussion. Accounts receivable as of June 30, 2020 and December 31, 2019 is summarized in the following table: June 30, 2020 December 31, 2019 Medicare $ 18,246 $ 17,822 Medicaid 7,624 6,579 Managed care 4,808 4,380 Private and other 3,696 4,079 Accounts receivable, gross 34,374 32,860 Less: allowance for doubtful accounts (516) (677) Accounts receivable, net $ 33,858 $ 32,183 Practical Expedients and Exemptions As the Company’s contracts with its patients have an original duration of one year or less, the Company uses the practical expedient applicable to its contracts and does not consider the time value of money. Further, because of the short duration of these contracts, the Company has not disclosed the transaction price for the remaining performance obligations as of the end of each reporting period or when the Company expects to recognize this revenue. In addition, the Company has applied the practical expedient provided by ASC 340, Other Assets and Deferred Costs (“ASC 340”), and all incremental customer contract acquisition costs are expensed as they are incurred because the amortization period would have been one year or less. |
BUSINESS SEGMENTS
BUSINESS SEGMENTS | 6 Months Ended |
Jun. 30, 2020 | |
Segment Reporting [Abstract] | |
BUSINESS SEGMENTS | BUSINESS SEGMENTS The Company classifies its operations into the following reportable operating segments: (1) home health and hospice services, which includes the Company’s home health, hospice and home care businesses; and (2) senior living services, which includes the operation of assisted living, independent living and memory care communities. The reporting segments are business units that offer different services and are managed separately to provide greater visibility into those operations. Our Chief Executive Officer and President, who is our Chief Operating Decision Maker (“CODM”), reviews financial information at the operating segment level. We also report an “all other” category that includes general and administrative expense from our Service Center. As of June 30, 2020, the Company provided services through 67 affiliated home health, hospice and home care agencies, and 54 affiliated senior living operations. The Company evaluates performance and allocates capital resources to each segment based on an operating model that is designed to maximize the quality of care provided and profitability. The Company’s Service Center provides various services to all lines of business. The Company does not review assets by segment and therefore assets by segment are not disclosed below. The CODM uses Segment Adjusted EBITDAR from Operations as the primary measure of profit and loss for the Company's reportable segments and to compare the performance of its operations with those of its competitors. Segment Adjusted EBITDAR from Operations is net income attributable to the Company's reportable segments excluding interest expense, provision for income taxes, depreciation and amortization expense, rent, and, in order to view the operations performance on a comparable basis from period to period, certain adjustments including: (1) costs at start-up operations, (2) share-based compensation, (3) acquisition related costs, (4) transaction costs, (5) redundant and nonrecurring costs associated with the transition services agreement, (6) operating results of closed operations, (7) net income attributable to noncontrolling interest, and (8) net COVID-19 related costs. General and administrative expenses are not allocated to the reportable segments, and are included as “All Other”, accordingly the segment earnings measure reported is before allocation of corporate general and administrative expenses. The Company's segment measures may be different from the calculation methods used by other companies and, therefore, comparability may be limited. The following table presents certain financial information regarding our reportable segments, general and administrative expenses are not allocated to the reportable segments and are included in “All Other” for the three and six months ended June 30, 2020 and 2019: Home Health and Hospice Services Senior Living Services All Other Total Three Months Ended June 30, 2020 Revenue $ 57,984 $ 34,756 $ — $ 92,740 Segment Adjusted EBITDAR from Operations $ 11,245 $ 13,492 $ (4,112) $ 20,625 Three Months Ended June 30, 2019 Revenue $ 50,208 $ 32,526 $ — $ 82,734 Segment Adjusted EBITDAR from Operations $ 8,103 $ 12,012 $ (4,758) $ 15,357 Home Health and Hospice Services Senior Living Services All Other Total Six Months Ended June 30, 2020 Revenue $ 114,746 $ 69,843 $ — $ 184,589 Segment Adjusted EBITDAR from Operations $ 21,151 $ 25,989 $ (9,001) $ 38,139 Six Months Ended June 30, 2019 Revenue $ 96,325 $ 64,316 $ — $ 160,641 Segment Adjusted EBITDAR from Operations $ 15,374 $ 24,129 $ (9,479) $ 30,024 This table provides a reconciliation of Segment Adjusted EBITDAR from Operations to income from operations: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Segment Adjusted EBITDAR from Operations $ 20,625 $ 15,357 $ 38,139 $ 30,024 Less: Depreciation and amortization 1,201 962 2,222 1,772 Rent—cost of services 9,767 8,533 19,473 16,830 Adjustments to Segment EBITDAR from Operations: Less: Costs at start-up operations (a) 473 81 705 317 Share-based compensation expense (b) 1,959 508 3,915 1,127 Acquisition related costs (c) — 503 — 541 Spin-off related transaction costs (d) — 1,658 — 4,648 Transition services costs (e) 267 — 317 — Net COVID-19 related costs (f) 883 — 1,160 — Add: Net income attributable to noncontrolling interest — 200 — 350 Condensed Consolidated and Combined Income from Operations $ 6,075 $ 3,312 $ 10,347 $ 5,139 (a) Represents results related to start-up operations. This amount excludes rent and depreciation and amortization expense related to such operations. (b) Share-based compensation expense incurred which is included in cost of services and general and administrative expense. (c) Acquisition related costs that are not capitalizable. (d) Costs incurred related to the Spin-Off are included in general and administrative expense. (e) A portion of the costs incurred under the Transition Services Agreement (as defined in Note 3, Related Party Transactions and Net Parent Investment ) identified as redundant or nonrecurring that are included in general and administrative expense. Fees incurred under the Transition Services agreement, net of the Company’s payroll reimbursement, were $1,525 and $2,861 for the three and six months ended June 30, 2020, respectively. (f) Represents incremental costs incurred as part of the Company's response to COVID-19 including direct medical supplies, labor, and other expenses, net of $554 in increased revenue related to the 2% payment increase in Medicare reimbursements for sequestration relief with dates of service from May 1, 2020, through June 30, 2020. The amount reported for the six months ended June 30, 2020 includes net costs of $277 that were incurred in first quarter of 2020. |
ACQUISITIONS
ACQUISITIONS | 6 Months Ended |
Jun. 30, 2020 | |
Business Combinations [Abstract] | |
ACQUISITIONS | ACQUISITIONS The Company’s acquisition focus is to purchase or lease operations that are complementary to the Company’s current businesses, accretive to the Company’s business or otherwise advance the Company’s strategy. The results of all the Company’s independent operating subsidiaries are included in the Financial Statements subsequent to the date of acquisition. Acquisitions are accounted for using the acquisition method of accounting. 2020 Acquisitions During the six months ended June 30, 2020, the Company expanded its operations with the addition of one home health agency, three hospice agencies, and two senior living communities. In connection with the addition of the senior living communities, the Company entered into a new long-term “triple-net” lease with a subsidiary of Ensign. The Company did not acquire any material assets or assume any material liabilities in connection with the acquisitions of the home health and hospice agencies. The addition of these operations added a total of 164 operational senior living units to be operated by the Company’s independent operating subsidiaries. A subsidiary of the Company entered into a separate operations transfer agreement with the prior operator of each acquired operation as part of each transaction. The aggregate purchase price for these acquisitions was $7,268. The fair value of assets for acquisitions was mostly concentrated in goodwill and as such, these transactions were classified as business combinations in accordance with ASC Topic 805, Business Combinations (“ASC 805”). The purchase price for the business combinations was $7,268, which consisted of equipment of $44, goodwill of $4,139, and indefinite-lived intangible assets of $3,166 related to Medicare and Medicaid licenses, net of other liabilities assumed of $81. The Company anticipates that the total goodwill recognized will be fully deductible for tax purposes. There were no acquisition costs that were non-capitalizable related to the business combinations during the six months ended June 30, 2020. 2019 Acquisitions During the six months ended June 30, 2019, the Company expanded its operations with the addition of two home health agencies, four hospice agencies, two home care agencies and one senior living community. In connection with the addition of the senior living community, the Company entered into a new long-term “triple-net” lease with a subsidiary of Ensign. The Company did not acquire any material assets or assume any material liabilities in connection with the acquisitions of the home health agency and hospice agency. The addition of these operations added a total of 52 operational senior living units to be operated by the Company’s independent operating subsidiaries. A subsidiary of the Company entered into a separate operations transfer agreement with the prior operator of each acquired operation as part of each transaction. The aggregate purchase price for these acquisitions was $14,779. The fair value of assets for all home health, hospice and home care acquisitions was concentrated in goodwill and as such, these transactions were classified as business combinations in accordance with ASC 805. The purchase price for the business combinations was $14,759, which mostly consisted of goodwill of $11,500 and indefinite-lived intangible assets of $3,150 related to Medicare and Medicaid licenses. The majority of total goodwill recognized is fully deductible for tax purposes. There were $541 in non-capitalizable acquisition costs related to the business combinations of home health, hospice, and home care during the six months ended June 30, 2019. Subsequent Events On July 1, 2020, the Company closed on two affiliated home health agencies and two hospice agencies that expand the Company’s footprint in Northern Utah and Southeastern Idaho. The combined purchase of the home health and hospice agencies was $6,250. The Company has also signed a definitive agreement to acquire a hospice agency in Nevada, which the Company began managing on August 1, 2020. The purchase price of the hospice agency is $7,400, and the Company expects to close the transaction in 2020 subject to customary closing conditions. |
PROPERTY AND EQUIPMENT_NET
PROPERTY AND EQUIPMENT—NET | 6 Months Ended |
Jun. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT—NET | PROPERTY AND EQUIPMENT—NET Property and equipment, net consist of the following: June 30, 2020 December 31, 2019 Leasehold improvements $ 9,183 $ 6,621 Equipment 22,714 18,930 Furniture and fixtures 1,004 877 32,901 26,428 Less: accumulated depreciation (13,876) (11,784) Property and equipment, net $ 19,025 $ 14,644 Depreciation expense was $1,197 and $2,215 for the three and six months ended June 30, 2020, respectively, and $940 and $1,736 for the three and six months ended June 30, 2019, respectively. The Company measures certain assets at fair value on a non-recurring basis, including long-lived assets and goodwill, which are evaluated for impairment. Long-lived assets include assets such as property and equipment, operating lease assets and certain intangible assets. The inputs used to determine the fair value of long-lived assets and a reporting unit are considered Level 3 measurements due to their subjective nature. Management has evaluated its long-lived assets and goodwill and determined there was no impairment during the three and six months ended June 30, 2020 and 2019. |
GOODWILL AND OTHER INDEFINITE-L
GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS | 6 Months Ended |
Jun. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS | GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS The following table represents activity in goodwill by segment as of and for the six months ended June 30, 2020: Home Health and Hospice Services Senior Living Services Total December 31, 2019 $ 37,591 $ 3,642 $ 41,233 Additions 4,139 — 4,139 June 30, 2020 $ 41,730 $ 3,642 $ 45,372 Other indefinite-lived intangible assets consist of the following: June 30, 2020 December 31, 2019 Trade name $ 355 $ 355 Medicare and Medicaid licenses 36,273 33,107 Total $ 36,628 $ 33,462 |
OTHER ACCRUED LIABILITIES
OTHER ACCRUED LIABILITIES | 6 Months Ended |
Jun. 30, 2020 | |
Payables and Accruals [Abstract] | |
OTHER ACCRUED LIABILITIES | OTHER ACCRUED LIABILITIES Other accrued liabilities consist of the following: June 30, 2020 December 31, 2019 Refunds payable $ 2,289 $ 2,152 Deferred revenue 1,836 1,937 Contract Liabilities (CARES Act advance payments) 27,997 — Resident deposits 6,171 6,292 Property taxes 866 1,130 Other 2,431 2,400 Other accrued liabilities $ 41,590 $ 13,911 |
DEBT
DEBT | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT Long-term debt, net consists of the following: June 30, 2020 December 31, 2019 Revolving Credit Facility $ 2,000 $ 20,000 Less: unamortized debt issuance costs (a) (1,358) (1,474) Long-term debt, net $ 642 $ 18,526 (a) Amortization expense for debt issuance costs was $80 and $162 for the three and six months ended June 30, 2020, and is recorded in interest expense, net on the condensed consolidated and combined statements of income. On October 1, 2019, Pennant entered into a credit agreement (the “Credit Agreement”), which provides for a revolving credit facility with a syndicate of banks with a borrowing capacity of $75.0 million (the “Revolving Credit Facility”). The interest rates applicable to loans under the Revolving Credit Facility are, at the Company’s election, either (i) Adjusted LIBOR (as defined in the Credit Agreement) plus a margin ranging from 2.5% to 3.5% per annum or (ii) Base Rate plus a margin ranging from 1.5% to 2.5% per annum, in each case based on the ratio of Consolidated Total Net Debt to Consolidated EBITDA (each, as defined in the Credit Agreement). In addition, Pennant will pay a commitment fee on the undrawn portion of the commitments under the Revolving Credit Facility that is estimated to be 0.6% per annum. The Company is not required to repay any loans under the Credit Agreement prior to maturity in 2024, other than to the extent the outstanding borrowings exceed the aggregate commitments under the Credit Agreement. As of June 30, 2020, the Company’s weighted average interest rate on its outstanding debt was 4.8%. As of June 30, 2020, the Company had availability on the Revolving Credit Facility of $69,987, which is net of outstanding letters of credit of $3,013. The fair value of the Company’s Revolving Credit Facility approximates carrying value, due to the short-term nature and variable interest rates. The fair value of this debt is categorized within Level 2 of the fair value hierarchy based on the observable market borrowing rates. The Credit Agreement is guaranteed, jointly and severally, by certain of the Company’s wholly-owned subsidiaries, and is secured by a pledge of stock of the Company's material independent operating subsidiaries as well as a first lien on substantially all of each material operating subsidiary's personal property. The Credit Agreement contains customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its independent operating subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, amend certain material agreements and pay certain dividends and other restricted payments. Financial covenants |
OPTIONS AND AWARDS
OPTIONS AND AWARDS | 6 Months Ended |
Jun. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
OPTIONS AND AWARDS | OPTIONS AND AWARDS For all periods prior to the Spin-Off, employees of the Company participated in Ensign's stock-based compensation plans. The compensation expense recorded by the Company included the expense associated with these employees, as well as an allocation of stock-based compensation of certain Ensign employees who provided general and administrative services on behalf of the Company. Outstanding options held by employees of the Company under the Ensign stock plans (collectively the “Ensign Plans”) and outstanding options and restricted stock awards under the Company Subsidiary Equity Plan (together with the Ensign Plans the “Pre-Spin Plans”) were modified and replaced with Pennant awards under the Pennant Plans at the Spin-Off date. Additionally, in connection with the Spin-Off, the Company issued new options and restricted stock awards to Pennant and Ensign employees under the 2019 Omnibus Incentive Plan (the “ OIP ” ) and Long-Term Incentive Plan (the “ LTIP ”, together referred to as the “Pennant Plans” ). Under the Ensign Plans and the Pennant Plans, stock-based payment awards, including employee stock options, restricted stock awards (“RSA”), and restricted stock units (“RSU” and together with RSA, “Restricted Stock”) are issued based on estimated fair value. The following disclosures represent share-based compensation expense relating to the Ensign and Pennant Plans, including awards to employees of the Company’s subsidiaries, an allocation of costs from employees in the Service Center prior to the Spin-Off, and total share-based compensation after the Spin-Off. Total share-based compensation expense for all of the Plans for the three and six months ended June 30, 2020 and 2019 was: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Prior to the Spin-Off: Total share-based compensation $ — $ 508 $ 1,127 Following the Spin-Off: Share-based compensation expense related to stock options 343 — 632 — Share-based compensation expense related to Restricted Stock 1,542 — 3,085 — Share-based compensation expense related to Restricted Stock to non-employee directors 74 — 198 — Total share-based compensation $ 1,959 $ 508 $ 3,915 $ 1,127 In future periods, the Company estimates it will recognize the following share-based compensation expense for unvested stock options and unvested Restricted Stock, which were unvested as of June 30, 2020: Unrecognized Compensation Expense Weighted Average Recognition Period (in years) Unvested stock options $ 6,631 4.4 Unvested Restricted Stock 14,093 2.3 Total unrecognized share-based compensation expense $ 20,724 Stock Options Under the Pennant Plans, options granted to employees of the subsidiaries of Pennant generally vest over five years at 20% per year on the anniversary of the grant date. Options expire ten years after the date of grant. The Company uses the Black-Scholes option-pricing model to recognize the value of stock-based compensation expense for share-based payment awards under the Plans. Determining the appropriate fair-value model and calculating the fair value of stock-based awards at the grant date requires considerable judgment, including estimating stock price volatility and expected option life. The Company develops estimates based on historical data and market information, which can change significantly over time. The fair value of each option is estimated on the grant date using a Black-Scholes option-pricing model with the following weighted average assumptions for stock options granted after the Spin-Off: Grant Year Options Granted Risk-Free Interest Rate Expected Life (a) Expected Volatility (b) Dividend Yield Weighted Average Fair Value of Options 2020 366 0.6 % 6.5 35.8 % — % $ 8.44 (a) Under the midpoint method, the expected option life is the midpoint between the contractual option life and the average vesting period for the options being granted. This resulted in an expected option life of 6.5 years for the options granted. (b) Because the Company’s equity shares have been traded for a relatively short period of time, expected volatility assumption was based on the volatility of related industry stocks. The following table represents the employee stock option activity during the six months ended June 30, 2020: Number of Options Outstanding Weighted Average Exercise Price Number of Options Vested Weighted Average Exercise Price of Options Vested December 31, 2019 1,573 $ 9.71 607 $ 4.80 Granted 366 23.26 Exercised (59) 3.63 Forfeited (15) 12.44 June 30, 2020 1,865 $ 12.54 631 $ 5.20 Restricted Stock A summary of the status of Pennant’s non-vested Restricted Stock, and changes during the six months ended June 30, 2020, is presented below: Non-Vested Restricted Stock Weighted Average Grant Date Fair Value December 31, 2019 1,793 $ 14.44 Granted 20 25.04 Vested (72) 11.56 Forfeited (4) 9.99 June 30, 2020 1,737 $ 14.69 |
LEASES
LEASES | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
LEASES | LEASES The Company’s independent operating subsidiaries lease 54 senior living communities and its administrative offices under non-cancelable operating leases, most of which have initial lease terms ranging from five . The existing leases with subsidiaries of Ensign are generally for initial terms of between 14 to 16 years. In addition to rent, each of the operating companies are required to pay the following: (1) all impositions and taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor); (2) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties; (3) all insurance required in connection with the leased properties and the business conducted on the leased properties; (4) all community maintenance and repair costs; and (5) all fees in connection with any licenses or authorizations necessary or appropriate for the leased properties and the business conducted on the leased properties. Fifteen of the Company’s affiliated senior living communities, excluding the communities that are operated under the Ensign Leases (as defined herein), are operated under two separate master lease arrangements. Under these master leases, a breach at a single community could subject one or more of the other communities covered by the same master lease to the same default risk. Failure to comply with Medicare and Medicaid provider requirements is a default under several of the Company’s leases and master leases. With an indivisible lease, it is difficult to restructure the composition of the portfolio or economic terms of the master lease without the consent of the landlord. The components of operating lease cost, are as follows: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Operating Lease Costs: Facility Rent—cost of services $ 8,892 $ 7,754 $ 17,748 $ 15,416 Office Rent—cost of services 949 779 1,799 1,414 Sublease Income $ (74) $ — $ (74) $ — Rent—cost of services $ 9,767 $ 8,533 $ 19,473 $ 16,830 General and administrative expense $ 27 $ 29 $ 57 $ 62 Variable lease cost (a) $ 1,347 $ 1,147 $ 2,676 $ 2,179 (a) Represents variable lease cost for operating leases, which costs include property taxes and insurance, common area maintenance, and consumer price index increases, incurred as part of our triple net lease, and which is included in cost of services for the three and six months ended June 30, 2020 and 2019. The following table shows the lease maturity analysis for all leases as of June 30, 2020, for the years ended December 31: Year Amount 2020 (Remainder) $ 19,004 2021 37,650 2022 37,109 2023 36,582 2024 35,921 Thereafter 388,207 Total lease payments 554,473 Less: present value adjustments (240,483) Present value of total lease liabilities 313,990 Less: current lease liabilities (13,369) Long-term operating lease liabilities $ 300,621 Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at each lease’s commencement date to determine each lease's operating lease liability. As of June 30, 2020, the weighted average remaining lease term is 15.5 years and the weighted average discount rate is 8.1%. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXESPrior to the date of the Spin-Off, the Company's operations were included in Ensign’s U.S. federal and state income tax returns and all income taxes were paid by Ensign. Additionally, prior to the date of the Spin-Off, income tax expense and other income tax related information contained in the Interim Financial Statements were presented on a separate tax return approach. The Company recorded income tax expense of $1,437 and $2,326 for the three and six months ended June 30, 2020, respectively, and tax benefit of $375 and $32 during the three and six months ended June 30, 2019, respectively, or 24.9% and 24.1% of earnings before income taxes for the three and six months ended June 30, 2020, respectively, compared to a benefit of 11.3% and 0.6% for the three and six months ended June 30, 2019, respectively. The effective tax rate for both three and six month periods includes excess tax benefits from stock-based compensation which were offset by non-deductible expenses including non-deductible compensation. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Regulatory Matters - The Company provides services in complex and highly regulated industries. The Company’s compliance with applicable U.S. federal, state and local laws and regulations governing these industries may be subject to governmental review and adverse findings may result in significant regulatory action, which could include sanctions, damages, fines, penalties (many of which may not be covered by insurance), and even exclusion from government programs. The Company is a party to various regulatory and other governmental audits and investigations in the ordinary course of business and cannot predict the ultimate outcome of any federal or state regulatory survey, audit or investigation. While governmental audits and investigations are the subject of administrative appeals, the appeals process, even if successful, may take several years to resolve. The Department of Justice, CMS, or other federal and state enforcement and regulatory agencies may conduct additional investigations related to the Company's businesses. The Company believes that it is presently in compliance in all material respects with all applicable laws and regulations. Cost-Containment Measures - Government and third party payors have instituted cost-containment measures designed to limit payments made to providers of healthcare services, and there can be no assurance that future measures designed to limit payments made to providers will not adversely affect the Company. Indemnities - From time to time, the Company enters into certain types of contracts that contingently require the Company to indemnify parties against third-party claims. These contracts primarily include (i) certain real estate leases, under which the Company may be required to indemnify property owners or prior operators for post-transfer environmental or other liabilities and other claims arising from the Company’s use of the applicable premises, (ii) operations transfer agreements, in which the Company agrees to indemnify past operators of agencies and communities the Company acquires against certain liabilities arising from the transfer of the operation and/or the operation thereof after the transfer, (iii) certain Ensign lending agreements, and (iv) certain agreements with management, directors and employees, under which the subsidiaries of the Company may be required to indemnify such persons for liabilities arising out of their employment relationships. The terms of such obligations vary by contract and, in most instances, a specific or maximum dollar amount is not explicitly stated therein. Generally, amounts under these contracts cannot be reasonably estimated until a specific claim is asserted. Consequently, because no claims have been asserted, no liabilities have been recorded for these obligations on the Company’s consolidated and combined balance sheets for any of the periods presented. Litigation - The Company’s businesses involve a significant risk of liability given the age and health of the patients and residents served by its independent operating subsidiaries. The Company, its operating companies, and others in the industry may be subject to a number of claims and lawsuits, including professional liability claims, alleging that services provided have resulted in personal injury, elder abuse, wrongful death or other related claims. Healthcare litigation (including class action litigation) is common and is filed based upon a wide variety of claims and theories, and the Company is routinely subjected to these claims in the ordinary course of business, including potential claims related to patient care and treatment, professional negligence, as well as employment related claims. If there were a significant increase in the number of these claims or an increase in amounts owing should plaintiffs be successful in their prosecution of these claims, this could materially adversely affect the Company’s business, financial condition, results of operations and cash flows. In addition, the defense of these lawsuits may result in significant legal costs, regardless of the outcome, and can result in large settlement amounts or damage awards. In addition to the potential lawsuits and claims described above, the Company is also subject to potential lawsuits under the False Claims Act (the “FCA”) and comparable state laws alleging submission of fraudulent claims for services to any healthcare program (such as Medicare) or payor. A violation may provide the basis for exclusion from federally funded healthcare programs. Such exclusions could have a correlative negative impact on the Company’s financial performance. Some states, including California, Arizona and Texas, have enacted similar whistleblower and false claims laws and regulations. In addition, the Deficit Reduction Act of 2005 created incentives for states to enact anti-fraud legislation modeled on the FCA. As such, the Company could face increased scrutiny, potential liability and legal expenses and costs based on claims under state false claims acts in markets in which it does conduct business. In May 2009, Congress passed the Fraud Enforcement and Recovery Act (“FERA”) which made significant changes to the FCA, expanding the types of activities subject to prosecution and whistleblower liability. Following changes by FERA, healthcare providers face significant penalties for the knowing retention of government overpayments, even if no false claim was involved. Providers can now be liable for knowingly and improperly avoiding or decreasing an obligation to pay money or property to the government, including the retention of any government overpayment. The Patient Protection and Affordable Care Act of 2010 (the “ACA”) supplemented FERA by imposing an affirmative obligation on healthcare providers to return an overpayment to CMS within 60 days of “identification” or the date any corresponding cost report is due, whichever is later. According to CMS’s February 12, 2016, final rule with respect to Medicare Parts A and B, providers have an obligation to proactively exercise “reasonable diligence” to identify overpayments. The 60-day clock begins to run after the reasonable diligence period has concluded, which may take, at most, six months from the receipt of credible information. Retention of any overpayment beyond this period may create liability under the FCA. In addition, FERA extended protections against retaliation for whistleblowers, including protections not only for employees, but also contractors and agents. Thus, there is generally no need for an employment relationship in order to qualify for protection against retaliation for whistleblowing. The Company cannot predict or provide any assurance as to the possible outcome of any litigation. If any litigation were to proceed, and the Company and its operating companies are subjected to, alleged to be liable for, or agree to a settlement of, claims or obligations under federal Medicare statutes, the FCA, or similar state and federal statutes and related regulations, the Company’s business, financial condition and results of operations and cash flows could be materially and adversely affected. Among other things, any settlement or litigation could involve the payment of substantial sums to settle any alleged civil violations, and may also include the assumption of specific procedural and financial obligations by the Company or its independent operating subsidiaries going forward under a corporate integrity agreement and/or other arrangement with the government. Medicare Revenue Recoupments - The Company is subject to probe reviews relating to Medicare services, billings and potential overpayments by Unified Program Integrity Contractors (“UPIC”), Recovery Audit Contractors (“RAC”), Zone Program Integrity Contractors (“ZPIC”), Program Safeguard Contractors (“PSC”), Supplemental Medical Review Contractors (“SMRC”) and Medicaid Integrity Contributors (“MIC”) programs, each of the foregoing collectively referred to as “Reviews.” As of June 30, 2020, six of the Company’s independent operating subsidiaries had Reviews scheduled, on appeal or in dispute resolution process, both pre- and post-payment. If an operation fails an initial or subsequent Review, the operation could then be subject to extended Review, suspension of payment, or extrapolation of the identified error rate to all billing in the same time period. As of June 30, 2020, and through the filing of this Quarterly Report on Form 10-Q, the Company’s independent operating subsidiaries have responded to the Reviews that are currently ongoing, on appeal or in dispute resolution process and the Company has no probable or estimable contingencies. Insurance - Prior to the Spin-Off, Ensign was partially self-insured for healthcare, general and professional liability, and workers’ compensation, and historically allocated premium expense to all subsidiaries of Ensign in its accounting records. To reflect all of the insurance costs, quarterly actuary determined adjustments were allocated to the Company based on the proportional historical premium expense. No self-insurance accruals were allocated to the Company as these accruals represent the obligations of Ensign. In connection with the Spin-Off, the Company purchased insurance through a third-party to replace the coverage provided by Ensign’s self-insured policies. While the Company maintains various insurance programs to cover these risks, it retains risk for a substantial portion of potential claims for general and professional liability and workers’ compensation. The Company does not retain risk related to its employee health plans. The Company recognizes obligations associated with these costs, up to specified deductible limits in the period in which a claim is incurred, including with respect to both reported claims and claims incurred but not reported. The general and professional liability insurance has a retention limit of $250 per claim and the workers’ compensation insurance has a retention limit of $150 per claim, except for policies held in Texas and Washington which are subject to state insurance and possess their own limits. Concentrations Credit Risk - The Company has significant accounts receivable balances, the collectability of which is dependent on the availability of funds from certain governmental programs, primarily Medicare and Medicaid. These receivables represent the only significant concentration of credit risk for the Company. The Company does not believe there are significant credit risks associated with these governmental programs. The Company believes that an appropriate allowance has been recorded for |
BASIS OF PRESENTATION AND SUM_2
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation - The accompanying unaudited condensed consolidated and combined financial statements of the Company (the “Interim Financial Statements”) reflect the Company’s financial position, results of operations and cash flows of the business. The Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the regulations of the Securities and Exchange Commission (“SEC”). Management believes that the Interim Financial Statements reflect, in all material respects, all adjustments which are of a normal and recurring nature necessary to present fairly the Company’s financial position, results of operations, and cash flows for the periods presented in conformity with GAAP. The results reported in these financial statements are not necessarily indicative of results that may be expected for the entire year. |
Consolidation | All intercompany transactions and balances between the various legal entities comprising the Company have been eliminated in consolidation. The condensed consolidated and combined statements of income reflect income that is attributable to the Company and the noncontrolling interest. The Company consists of various limited liability companies and corporations established to operate home health, hospice, home care, and senior living operations. The Interim Financial Statements include the accounts of all entities controlled by the Company through its ownership of a majority voting interest. Revenue was derived from transactional information specific to the Company’s services provided. The costs in the condensed consolidated and combined statements of income reflect direct costs. Estimates and Assumptions - The preparation of the Interim Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Interim Financial Statements and the reported amounts of revenue and expenses during the reporting periods. The most significant estimates in the Interim Financial Statements relate to revenue, cost allocations, intangible assets and goodwill, right-of-use assets and lease liabilities for leases greater than 12 months, and income taxes. Actual results could differ from those estimates. Prior to Spin Off - Prior to the Spin-Off, the combined financial statements were prepared on a stand-alone basis and derived from the consolidated financial statements and accounting records of Ensign. The Interim Financial Statements include allocations of costs for certain shared services provided to the Company by Ensign subsidiaries prior to the Spin-Off on October 1, 2019. Such allocations include, but are not limited to, executive management, accounting, human resources, information technology, compliance, legal, payroll, insurance, tax, treasury, and other general and administrative items. These costs were allocated to the Company on a basis of revenue, location, employee count, or other measures. These cost allocations are reflected within general and administrative expense in the condensed consolidated and combined statements of income, including for share-based compensation expenses disclosed in Note 12 , Options and Awards . The amount of general and administrative costs allocated for the three and six months ended June 30, 2019, inclusive of share-based compensation expense, was $6,889 and $15,133, respectively. Management believes the basis on which the expenses were allocated to be a reasonable reflection of the services provided to the Company during the periods. Ensign’s external debt and related interest expense were not allocated to the Company for any of the periods presented prior to the Spin-Off as no portion of Ensign’s borrowings were assumed by the Company as part of the Spin-Off. Prior to the date of the Spin-off, the Company’s operations have been included in Ensign’s U.S. federal and state income tax returns and all income taxes have been paid by subsidiaries of Ensign. Income tax expense and other income tax related information contained in these Interim Financial Statements for the periods prior to the Spin-Off were presented using a separate tax return approach. Prior to the Spin-Off, the Company presented the noncontrolling interest and the amount of consolidated net income attributable to the Company in the Interim Financial Statements. The carrying amount of the noncontrolling interest was adjusted by an allocation of subsidiary earnings based on ownership interest prior to the Spin-Off. The noncontrolling subsidiary interest included in the Interim Financial Statements was converted into common shares of Pennant concurrent with the distribution to Ensign stockholders at the date of the Spin-Off. For all prior periods presented prior to the Spin-Off, the earnings per share included on the accompanying Condensed Consolidated and Combined Statements of Income was calculated based on the 27,834 shares of Pennant common stock distributed on October 1, 2019 in conjunction with the Spin-Off, including shares related to the conversion of the noncontrolling interest. |
Revenue Recognition | Revenues are recognized when services are provided to the patients at the amount that reflects the consideration to which the Company expects to be entitled from patients and third-party payors, including Medicaid, Medicare and insurers (private, Medicare Advantage and Medicare replacement plans), in exchange for providing patient care. The healthcare services in home health and hospice patient contracts include routine services in exchange for a contractual agreed-upon amount or rate. Routine services are treated as a single performance obligation satisfied over time as services are rendered. As such, patient care services represent a bundle of services that are not capable of being distinct within the context of the contract. Additionally, there may be ancillary services which are not included in the rates for routine services, but instead are treated as separate performance obligations satisfied at a point in time, if and when those services are rendered. Revenue recognized from healthcare services are adjusted for estimates of variable consideration to arrive at the transaction price. The Company determines the transaction price based on contractually agreed-upon amounts or rate, adjusted for estimates of variable consideration. The Company uses the expected value method in determining the variable component that should be used to arrive at the transaction price, using contractual agreements and historical reimbursement experience within each payor type. The amount of variable consideration which is included in the transaction price may be constrained, and is included in the net revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. If actual amounts of consideration ultimately received differ from the Company’s estimates, the Company adjusts these estimates, which would affect net service revenue in the period such variances become known. Revenue from the Medicare and Medicaid programs accounted for 59.4% and 58.7%, for the three and six months ended June 30, 2020, respectively, and 54.9% and 54.1%, of the Company’s revenue for the three and six months ended June 30, 2019, respectively. The Company records revenue from these governmental and managed care programs as services are performed at their expected net realizable amounts under these programs. The Company’s revenue from governmental and managed care programs is subject to audit and retroactive adjustment by governmental and third-party agencies. Consistent with healthcare industry accounting practices, any changes to these governmental revenue estimates are recorded in the period the change or adjustment becomes known based on final settlement. During the quarter the Company received CARES Act Provider Relief Fund (the “PRF”) payments in the amount of $9,858, and during the quarter the Company returned the full amount of payments received. Disaggregation of Revenue The Company disaggregates revenue from contracts with its patients by reportable operating segments and payors. The Company has determined that disaggregating revenue into these categories achieves the disclosure objectives to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The Company’s service specific revenue recognition policies are as follows: Home Health Revenue Medicare Revenue For Medicare episodes that began after January 1, 2020, net service revenue is recognized in accordance with the Patient Driven Groupings Model (“PDGM”). This new reimbursement structure involves case mix calculation methodology refinements, changes to low-utilization payment adjustment (“LUPA”) thresholds, the elimination of therapy thresholds, a change to the unit of payment from a 60-day episode to a 30-day payment period, and reduction of requests for anticipated payments (“RAPs”) to 20% of the estimated payment for a patient’s initial or subsequent period of care up-front (after the initial assessment is completed and upon initial billing). The RAPs will be completely phased out effective January 1, 2021. Under PDGM, Medicare provides agencies with payments for each 30-day payment period provided to beneficiaries. If a beneficiary is still eligible for care after the end of the first 30-day payment period, a second 30-day payment period can begin. There are no limits to the number of periods of care a beneficiary who remains eligible for the home health benefit can receive. While payment for each 30-day payment period is adjusted to reflect the beneficiary’s health condition and needs, a special outlier provision exists to ensure appropriate payment for those beneficiaries that have the most expensive care needs. The payment under the Medicare program is also adjusted for certain variables including, but not limited to: (a) a LUPA if the number of visits is below an established threshold that varies based on the diagnosis of a beneficiary; (b) a partial payment if the patient transferred to another provider or the Company received a patient from another provider before completing the period of care; (c) adjustment to the admission source of claim if it is determined that the patient had a qualifying stay in a post-acute care setting within 14 days prior to the start of a 30-day payment period; (d) the timing of the 30-day payment period provided to a patient in relation to the admission date, regardless of whether the same home health provider provided care for the entire series of episodes; (e) changes to the acuity of the patient during the previous 30-day payment period (f) changes in the base payments established by the Medicare program; (g) adjustments to the base payments for case mix and geographic wages; and (h) recoveries of overpayments. For all episodes that began prior to January 1, 2020, net service revenue was recorded under the Medicare prospective payment system based on a 60-day episode payment rate that is subject to adjustment based on certain variables including, but not limited to: (a) an outlier payment if the patient’s care was unusually costly; (b) a LUPA if the number of visits was fewer than five; (c) a partial payment if the patient transferred to another provider or transferred from another provider before completing the episode; (d) a payment adjustment based upon the level of covered therapy services; (e) the number of episodes of care provided to a patient, regardless of whether the same home health provider provided care for the entire series of episodes; (f) changes in the base episode payments established by the Medicare program; (g) adjustments to the base episode payments for case mix and geographic wages; and (h) recoveries of overpayments. The Company adjusts Medicare revenue on completed episodes to reflect differences between estimated and actual payment amounts, an inability to obtain appropriate billing documentation and other reasons unrelated to credit risk. Therefore, the Company believes that its reported net service revenue and patient accounts receivable will be the net amounts to be realized from Medicare for services rendered. In addition to revenue recognized on completed episodes and periods, the Company also recognizes a portion of revenue associated with episodes and periods in progress. Episodes in progress are 30-day payment periods, if the episode started after January 1, 2020, or 60-day episodes of care, if the episode started prior to January 1, 2020, that begin during the reporting period but were not completed as of the end of the period. As such, the Company estimates revenue and recognizes it on a daily basis. The primary factors underlying this estimate are the number of episodes in progress at the end of the reporting period, expected Medicare revenue per period of care or episode of care and the Company’s estimate of the average percentage complete based on the scheduled end of period and end of episode dates. Non-Medicare Revenue Episodic Based Revenue - The Company recognizes revenue in a similar manner as it recognizes Medicare revenue for episodic-based rates that are paid by other insurance carriers, including Medicare Advantage programs. These rates can vary based upon the negotiated terms. Non-episodic Based Revenue - Revenue is recognized on an accrual basis based upon the date of service at amounts equal to its established or estimated per visit rates, as applicable. Hospice Revenue Revenue is recognized on an accrual basis based upon the date of service at amounts equal to the estimated payment rates. The estimated payment rates are calculated as daily rates for each of the levels of care the Company delivers. Revenue is adjusted for an inability to obtain appropriate billing documentation or authorizations acceptable to the payor and other reasons unrelated to credit risk. Additionally, as Medicare hospice revenue is subject to an inpatient cap and an overall payment cap, the Company monitors its provider numbers and estimates amounts due back to Medicare if a cap has been exceeded. The Company records these adjustments as a reduction to revenue and an increase to other accrued liabilities. Senior Living Revenue The Company has elected the lessor practical expedient within ASC Topic 842, Leases (“ASC 842”) and therefore recognizes, measures, presents, and discloses the revenue for services rendered under the Company’s senior living residency agreements based upon the predominant component, either the lease or non-lease component, of the contracts. The Company has determined that the services included under the Company’s senior living residency agreements each have the same timing and pattern of transfer. The Company recognizes revenue under ASC 606 for its senior residency agreements, for which it has determined that the non-lease components of such residency agreements are the predominant component of each such contract. Practical Expedients and Exemptions As the Company’s contracts with its patients have an original duration of one year or less, the Company uses the practical expedient applicable to its contracts and does not consider the time value of money. Further, because of the short duration of these contracts, the Company has not disclosed the transaction price for the remaining performance obligations as of the end of each reporting period or when the Company expects to recognize this revenue. In addition, the Company has applied the practical expedient provided by ASC 340, Other Assets and Deferred Costs (“ASC 340”), and all incremental customer contract acquisition costs are expensed as they are incurred because the amortization period would have been one year or less. |
Earnings Per Share | Basic and diluted net income per share are computed by dividing net income by the weighted average number of outstanding common shares during the period. In the basic and diluted earnings per share calculations, net income is equal to net income attributable to The Pennant Group, Inc. adjusted to include net income attributable to noncontrolling interest. Net income attributable to the noncontrolling interest has been included in the numerator for all periods as the non-controlling subsidiary interest included in the Interim Financial Statements was converted into common shares of Pennant concurrent with the distribution to Ensign stockholders at the date of the Spin-Off. |
Recent Accounting Pronouncements | Recent Accounting Standards Adopted by the Company FASB Accounting Standards Update, or ASU, ASU 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” or ASU 2020-4 - In March 2020, the FASB concluded its reference rate reform project and issued this ASU. The amendments in this ASU provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The optional expedients and exceptions are available for all entities as of March 12, 2020, through December 31, 2022. The Company has adopted ASU 2020-04, effective March 12, 2020. The impact of this ASU will be determined based on terms of any future contract modification related to a change in reference rate, including future modifications to the Company’s Revolving Credit Facility described in further detail in Note 11, Debt. FASB ASU, 2018-13 “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement” or ASU 2018-13 - In August 2018, the FASB issued amended guidance to simplify fair value measurement disclosure requirements. The new provisions eliminate the requirements to disclose (1) transfers between Level 1 and Level 2 of the fair value hierarchy, (2) policies related to valuation processes and the timing of transfers between levels of the fair value hierarchy, and (3) net asset value disclosure of estimates of timing of future liquidity events. The FASB also modified disclosure requirements of Level 3 fair value measurements. The Company adopted ASU 2018-13 as of January 1, 2020. There was no material impact to the Company’s financial statements or disclosures. FASB ASU, 2017-04 “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” or ASU 2017-04 - In January 2017, the FASB issued amended authoritative guidance to simplify and reduce the cost and complexity of the goodwill impairment test. The new guidance eliminates “Step 2” from the traditional two-step goodwill impairment test and redefines the concept of impairment from a measure of loss when comparing the implied fair value of goodwill to its carrying amount, to a measure comparing the fair value of a reporting unit with its carrying amount. The FASB |
COMPUTATION OF NET INCOME PER_2
COMPUTATION OF NET INCOME PER COMMON SHARE (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Earnings Per Share [Abstract] | |
Computation of basic and diluted net income per share | The following table sets forth the computation of basic and diluted net income per share for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Numerator: Net income attributable to The Pennant Group, Inc. $ 4,337 $ 3,487 $ 7,317 $ 4,821 Add: net income attributable to noncontrolling interests — 200 — 350 Net Income $ 4,337 $ 3,687 $ 7,317 $ 5,171 Denominator: Weighted average shares outstanding for basic net income per share 27,952 27,834 27,922 27,834 Plus: assumed incremental shares from exercise of options and assumed conversion or vesting of restricted stock (a) 1,710 — 1,858 — Adjusted weighted average common shares outstanding for diluted income per share 29,662 27,834 29,780 27,834 Earnings Per Share: Basic net income per common share $ 0.16 $ 0.13 $ 0.26 $ 0.19 Diluted net income per common share $ 0.15 $ 0.13 $ 0.25 $ 0.19 (a) The calculation of dilutive shares outstanding excludes out-of-the-money stock options (i.e., such options’ exercise prices were greater than the average market price of our common shares for the period) because their inclusion would have been antidilutive. Options outstanding which are anti-dilutive and therefore not factored into the weighted average common shares amount above were 240 and 102 for the three and six months ended June 30, 2020, respectively. |
REVENUE AND ACCOUNTS RECEIVAB_2
REVENUE AND ACCOUNTS RECEIVABLE (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Revenue from Contract with Customer and Accounts Receivable [Abstract] | |
Revenue by major payor source | Revenue by payor for the three and six months ended June 30, 2020 and 2019, is summarized in the following tables: Three Months Ended June 30, 2020 Home Health and Hospice Services Home Health Services Hospice Services Senior Living Services Total Revenue Revenue % Medicare $ 11,808 $ 28,550 $ — $ 40,358 43.5 % Medicaid 1,963 3,637 9,155 14,755 15.9 Subtotal 13,771 32,187 9,155 55,113 59.4 Managed care 6,846 397 — 7,243 7.8 Private and other (a) 4,744 39 25,601 30,384 32.8 Total revenue $ 25,361 $ 32,623 $ 34,756 $ 92,740 100.0 % (a) Private and other payors in our home health and hospice services segment includes revenue from all payors generated in our home care operations. Three Months Ended June 30, 2019 Home Health and Hospice Services Home Health Services Hospice Services Senior Living Services Total Revenue Revenue % Medicare $ 11,990 $ 22,390 $ — $ 34,380 41.6 % Medicaid 1,515 2,418 7,100 11,033 13.3 Subtotal 13,505 24,808 7,100 45,413 54.9 Managed care 6,829 370 — 7,199 8.7 Private and other (a) 4,654 42 25,426 30,122 36.4 Total revenue $ 24,988 $ 25,220 $ 32,526 $ 82,734 100.0 % (a) Private and other payors in our home health and hospice services segment includes revenue from all payors generated in our home care operations. Six Months Ended June 30, 2020 Home Health and Hospice Services Home Health Services Hospice Services Senior Living Services Total Revenue Revenue % Medicare $ 24,384 $ 55,230 $ — $ 79,614 43.1 % Medicaid 3,553 6,966 18,188 28,707 15.6 Subtotal 27,937 62,196 18,188 108,321 58.7 Managed care 13,962 813 — 14,775 8.0 Private and other (a) 9,784 54 51,655 61,493 33.3 Total revenue $ 51,683 $ 63,063 $ 69,843 $ 184,589 100.0 % (a) Private and other payors in our home health and hospice services segment includes revenue from all payors generated in our home care operations. Six Months Ended June 30, 2019 Home Health and Hospice Services Home Health Services Hospice Services Senior Living Services Total Revenue Revenue % Medicare $ 23,360 $ 42,039 $ — $ 65,399 40.7 % Medicaid 2,953 4,887 13,697 21,537 13.4 Subtotal 26,313 46,926 13,697 86,936 54.1 Managed care 13,185 690 — 13,875 8.6 Private and other (a) 9,149 62 50,619 59,830 37.3 Total revenue $ 48,647 $ 47,678 $ 64,316 $ 160,641 100.0 % (a) Private and other payors in our home health and hospice services segment includes revenue from all payors generated in our home care operations. |
Accounts receivable | Accounts receivable as of June 30, 2020 and December 31, 2019 is summarized in the following table: June 30, 2020 December 31, 2019 Medicare $ 18,246 $ 17,822 Medicaid 7,624 6,579 Managed care 4,808 4,380 Private and other 3,696 4,079 Accounts receivable, gross 34,374 32,860 Less: allowance for doubtful accounts (516) (677) Accounts receivable, net $ 33,858 $ 32,183 |
BUSINESS SEGMENTS (Tables)
BUSINESS SEGMENTS (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Segment Reporting [Abstract] | |
Financial data combined by business segment | The following table presents certain financial information regarding our reportable segments, general and administrative expenses are not allocated to the reportable segments and are included in “All Other” for the three and six months ended June 30, 2020 and 2019: Home Health and Hospice Services Senior Living Services All Other Total Three Months Ended June 30, 2020 Revenue $ 57,984 $ 34,756 $ — $ 92,740 Segment Adjusted EBITDAR from Operations $ 11,245 $ 13,492 $ (4,112) $ 20,625 Three Months Ended June 30, 2019 Revenue $ 50,208 $ 32,526 $ — $ 82,734 Segment Adjusted EBITDAR from Operations $ 8,103 $ 12,012 $ (4,758) $ 15,357 Home Health and Hospice Services Senior Living Services All Other Total Six Months Ended June 30, 2020 Revenue $ 114,746 $ 69,843 $ — $ 184,589 Segment Adjusted EBITDAR from Operations $ 21,151 $ 25,989 $ (9,001) $ 38,139 Six Months Ended June 30, 2019 Revenue $ 96,325 $ 64,316 $ — $ 160,641 Segment Adjusted EBITDAR from Operations $ 15,374 $ 24,129 $ (9,479) $ 30,024 |
Reconciliation of total Combined Adjusted EBITDAR from Operations for our reportable segments to Combined Income from Operations | This table provides a reconciliation of Segment Adjusted EBITDAR from Operations to income from operations: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Segment Adjusted EBITDAR from Operations $ 20,625 $ 15,357 $ 38,139 $ 30,024 Less: Depreciation and amortization 1,201 962 2,222 1,772 Rent—cost of services 9,767 8,533 19,473 16,830 Adjustments to Segment EBITDAR from Operations: Less: Costs at start-up operations (a) 473 81 705 317 Share-based compensation expense (b) 1,959 508 3,915 1,127 Acquisition related costs (c) — 503 — 541 Spin-off related transaction costs (d) — 1,658 — 4,648 Transition services costs (e) 267 — 317 — Net COVID-19 related costs (f) 883 — 1,160 — Add: Net income attributable to noncontrolling interest — 200 — 350 Condensed Consolidated and Combined Income from Operations $ 6,075 $ 3,312 $ 10,347 $ 5,139 (a) Represents results related to start-up operations. This amount excludes rent and depreciation and amortization expense related to such operations. (b) Share-based compensation expense incurred which is included in cost of services and general and administrative expense. (c) Acquisition related costs that are not capitalizable. (d) Costs incurred related to the Spin-Off are included in general and administrative expense. (e) A portion of the costs incurred under the Transition Services Agreement (as defined in Note 3, Related Party Transactions and Net Parent Investment ) identified as redundant or nonrecurring that are included in general and administrative expense. Fees incurred under the Transition Services agreement, net of the Company’s payroll reimbursement, were $1,525 and $2,861 for the three and six months ended June 30, 2020, respectively. (f) Represents incremental costs incurred as part of the Company's response to COVID-19 including direct medical supplies, labor, and other expenses, net of $554 in increased revenue related to the 2% payment increase in Medicare reimbursements for sequestration relief with dates of service from May 1, 2020, through June 30, 2020. The amount reported for the six months ended June 30, 2020 includes net costs of $277 that were incurred in first quarter of 2020. |
PROPERTY AND EQUIPMENT_NET (Tab
PROPERTY AND EQUIPMENT—NET (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment, net | Property and equipment, net consist of the following: June 30, 2020 December 31, 2019 Leasehold improvements $ 9,183 $ 6,621 Equipment 22,714 18,930 Furniture and fixtures 1,004 877 32,901 26,428 Less: accumulated depreciation (13,876) (11,784) Property and equipment, net $ 19,025 $ 14,644 |
GOODWILL AND OTHER INDEFINITE_2
GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Activity in goodwill by segment | The following table represents activity in goodwill by segment as of and for the six months ended June 30, 2020: Home Health and Hospice Services Senior Living Services Total December 31, 2019 $ 37,591 $ 3,642 $ 41,233 Additions 4,139 — 4,139 June 30, 2020 $ 41,730 $ 3,642 $ 45,372 |
Other indefinite-lived intangible assets | Other indefinite-lived intangible assets consist of the following: June 30, 2020 December 31, 2019 Trade name $ 355 $ 355 Medicare and Medicaid licenses 36,273 33,107 Total $ 36,628 $ 33,462 |
OTHER ACCRUED LIABILITIES (Tabl
OTHER ACCRUED LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Payables and Accruals [Abstract] | |
Other accrued liabilities | Other accrued liabilities consist of the following: June 30, 2020 December 31, 2019 Refunds payable $ 2,289 $ 2,152 Deferred revenue 1,836 1,937 Contract Liabilities (CARES Act advance payments) 27,997 — Resident deposits 6,171 6,292 Property taxes 866 1,130 Other 2,431 2,400 Other accrued liabilities $ 41,590 $ 13,911 |
DEBT (Tables)
DEBT (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt | Long-term debt, net consists of the following: June 30, 2020 December 31, 2019 Revolving Credit Facility $ 2,000 $ 20,000 Less: unamortized debt issuance costs (a) (1,358) (1,474) Long-term debt, net $ 642 $ 18,526 |
OPTIONS AND AWARDS (Tables)
OPTIONS AND AWARDS (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Total share-based compensation expense | Total share-based compensation expense for all of the Plans for the three and six months ended June 30, 2020 and 2019 was: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Prior to the Spin-Off: Total share-based compensation $ — $ 508 $ 1,127 Following the Spin-Off: Share-based compensation expense related to stock options 343 — 632 — Share-based compensation expense related to Restricted Stock 1,542 — 3,085 — Share-based compensation expense related to Restricted Stock to non-employee directors 74 — 198 — Total share-based compensation $ 1,959 $ 508 $ 3,915 $ 1,127 |
Stock options granted fair value assumptions | The fair value of each option is estimated on the grant date using a Black-Scholes option-pricing model with the following weighted average assumptions for stock options granted after the Spin-Off: Grant Year Options Granted Risk-Free Interest Rate Expected Life (a) Expected Volatility (b) Dividend Yield Weighted Average Fair Value of Options 2020 366 0.6 % 6.5 35.8 % — % $ 8.44 (a) Under the midpoint method, the expected option life is the midpoint between the contractual option life and the average vesting period for the options being granted. This resulted in an expected option life of 6.5 years for the options granted. (b) Because the Company’s equity shares have been traded for a relatively short period of time, expected volatility assumption was based on the volatility of related industry stocks. |
Employee stock option activity | The following table represents the employee stock option activity during the six months ended June 30, 2020: Number of Options Outstanding Weighted Average Exercise Price Number of Options Vested Weighted Average Exercise Price of Options Vested December 31, 2019 1,573 $ 9.71 607 $ 4.80 Granted 366 23.26 Exercised (59) 3.63 Forfeited (15) 12.44 June 30, 2020 1,865 $ 12.54 631 $ 5.20 |
Summary of non-vested restricted stock awards | A summary of the status of Pennant’s non-vested Restricted Stock, and changes during the six months ended June 30, 2020, is presented below: Non-Vested Restricted Stock Weighted Average Grant Date Fair Value December 31, 2019 1,793 $ 14.44 Granted 20 25.04 Vested (72) 11.56 Forfeited (4) 9.99 June 30, 2020 1,737 $ 14.69 |
LEASES (Tables)
LEASES (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
Components of operating lease cot | The components of operating lease cost, are as follows: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Operating Lease Costs: Facility Rent—cost of services $ 8,892 $ 7,754 $ 17,748 $ 15,416 Office Rent—cost of services 949 779 1,799 1,414 Sublease Income $ (74) $ — $ (74) $ — Rent—cost of services $ 9,767 $ 8,533 $ 19,473 $ 16,830 General and administrative expense $ 27 $ 29 $ 57 $ 62 Variable lease cost (a) $ 1,347 $ 1,147 $ 2,676 $ 2,179 (a) Represents variable lease cost for operating leases, which costs include property taxes and insurance, common area maintenance, and consumer price index increases, incurred as part of our triple net lease, and which is included in cost of services for the three and six months ended June 30, 2020 and 2019. |
Future minimum lease payments | The following table shows the lease maturity analysis for all leases as of June 30, 2020, for the years ended December 31: Year Amount 2020 (Remainder) $ 19,004 2021 37,650 2022 37,109 2023 36,582 2024 35,921 Thereafter 388,207 Total lease payments 554,473 Less: present value adjustments (240,483) Present value of total lease liabilities 313,990 Less: current lease liabilities (13,369) Long-term operating lease liabilities $ 300,621 |
DESCRIPTION OF BUSINESS (Detail
DESCRIPTION OF BUSINESS (Details) | Jun. 30, 2020facilityagency | Oct. 01, 2019 |
Segment Reporting Information [Line Items] | ||
Spin-Off transaction, distribution ratio | 0.50 | |
Home Health and Hospice Services | ||
Segment Reporting Information [Line Items] | ||
Number of service providers | agency | 67 | |
Senior Living Services | ||
Segment Reporting Information [Line Items] | ||
Number of operating facilities | facility | 54 |
BASIS OF PRESENTATION AND SUM_3
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) shares in Thousands, $ in Thousands | Oct. 01, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 |
Accounting Policies [Abstract] | |||||
General and administrative expense | $ 7,538 | $ 6,889 | $ 14,199 | $ 15,133 | |
Common stock | |||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||
Shares issued (in shares) | 27,834 |
RELATED PARTY TRANSACTIONS AN_2
RELATED PARTY TRANSACTIONS AND NET PARENT INVESTMENT (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020USD ($)facilityproperty | Jun. 30, 2019USD ($) | Jun. 30, 2020USD ($)facilityproperty | Jun. 30, 2019USD ($) | |
Senior Living Services | ||||
Related Party Transaction [Line Items] | ||||
Number of operating facilities | facility | 54 | 54 | ||
Senior Living Services | Minimum | ||||
Related Party Transaction [Line Items] | ||||
Lease term | 5 years | 5 years | ||
Senior Living Services | Maximum | ||||
Related Party Transaction [Line Items] | ||||
Lease term | 21 years | 21 years | ||
Related party | ||||
Related Party Transaction [Line Items] | ||||
Cost of services | $ 2,188 | $ 1,495 | ||
Related party | Operating lease, rent expense | ||||
Related Party Transaction [Line Items] | ||||
Expenses from transactions with related party | $ 3,071 | $ 2,774 | 6,172 | $ 5,467 |
Related party | Transition Services Agreement | ||||
Related Party Transaction [Line Items] | ||||
Expenses from transactions with related party | 1,525 | $ 2,861 | ||
Cost of services | $ 1,166 | $ 780 | ||
Related party | Senior Living Services | ||||
Related Party Transaction [Line Items] | ||||
Number of operating facilities | property | 31 | 31 | ||
Related party | Senior Living Services | Minimum | ||||
Related Party Transaction [Line Items] | ||||
Lease term | 14 years | 14 years | ||
Related party | Senior Living Services | Maximum | ||||
Related Party Transaction [Line Items] | ||||
Lease term | 16 years | 16 years |
COMPUTATION OF NET INCOME PER_3
COMPUTATION OF NET INCOME PER COMMON SHARE - NARRATIVE (Details) shares in Thousands | Oct. 01, 2019shares |
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | |
Spin-Off transaction, distribution ratio | 0.50 |
Common stock | |
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | |
Shares issued (in shares) | 27,834 |
COMPUTATION OF NET INCOME PER_4
COMPUTATION OF NET INCOME PER COMMON SHARE - RECONCILIATION (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Net Income (Loss) Available to Common Stockholders, Diluted [Abstract] | ||||||
Net income attributable to The Pennant Group, Inc. | $ 4,337 | $ 2,980 | $ 3,487 | $ 1,334 | $ 7,317 | $ 4,821 |
Add: net income attributable to noncontrolling interests | 0 | 200 | $ 150 | 0 | 350 | |
Net income | $ 4,337 | $ 3,687 | $ 7,317 | $ 5,171 | ||
Weighted Average Number of Shares Outstanding Reconciliation [Abstract] | ||||||
Weighted average shares outstanding for basic net income per share (in shares) | 27,952 | 27,834 | 27,922 | 27,834 | ||
Plus: incremental shares from assumed conversion or vesting of restricted stock (in shares) | 1,710 | 0 | 1,858 | 0 | ||
Adjusted weighted average common shares outstanding for diluted income per share (in share) | 29,662 | 27,834 | 29,780 | 27,834 | ||
Earnings Per Share, Basic and Diluted [Abstract] | ||||||
Basic net income per share (in dollars per share) | $ 0.16 | $ 0.13 | $ 0.26 | $ 0.19 | ||
Diluted net income per share (in dollars per share) | $ 0.15 | $ 0.13 | $ 0.25 | $ 0.19 | ||
Options which are anti-dilutive and not factored into the weighted average common shares amount (in shares) | 240 | 102 |
REVENUE AND ACCOUNTS RECEIVAB_3
REVENUE AND ACCOUNTS RECEIVABLE - NARRATIVE (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Disaggregation of Revenue [Line Items] | |||||
Funds received from the PRF | $ 9,858 | ||||
Contract Liabilities (CARES Act advance payments) | $ 27,997 | $ 27,997 | $ 0 | ||
Senior Living Services | |||||
Disaggregation of Revenue [Line Items] | |||||
Payment terms | Residency agreements are generally for a term of 30 days, with resident fees billed monthly in advance. For residents under reimbursement arrangements with Medicaid, revenue is recorded based on contractually agreed-upon amounts or rates on a per resident, daily basis or as services are rendered. | ||||
Customer concentration risk | Revenue | |||||
Disaggregation of Revenue [Line Items] | |||||
Revenue % | 100.00% | 100.00% | 100.00% | 100.00% | |
Customer concentration risk | Revenue | Medicare and medicaid | |||||
Disaggregation of Revenue [Line Items] | |||||
Revenue % | 59.40% | 54.90% | 58.70% | 54.10% |
REVENUE AND ACCOUNTS RECEIVAB_4
REVENUE AND ACCOUNTS RECEIVABLE - REVENUE BY MAJOR PAYOR (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 92,740 | $ 82,734 | $ 184,589 | $ 160,641 |
Revenue | Customer concentration risk | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue % | 100.00% | 100.00% | 100.00% | 100.00% |
Medicare and medicaid | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 55,113 | $ 45,413 | $ 108,321 | $ 86,936 |
Medicare and medicaid | Revenue | Customer concentration risk | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue % | 59.40% | 54.90% | 58.70% | 54.10% |
Medicare | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 40,358 | $ 34,380 | $ 79,614 | $ 65,399 |
Medicare | Revenue | Customer concentration risk | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue % | 43.50% | 41.60% | 43.10% | 40.70% |
Medicaid | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 14,755 | $ 11,033 | $ 28,707 | $ 21,537 |
Medicaid | Revenue | Customer concentration risk | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue % | 15.90% | 13.30% | 15.60% | 13.40% |
Managed care | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 7,243 | $ 7,199 | $ 14,775 | $ 13,875 |
Managed care | Revenue | Customer concentration risk | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue % | 7.80% | 8.70% | 8.00% | 8.60% |
Private and other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 30,384 | $ 30,122 | $ 61,493 | $ 59,830 |
Private and other | Revenue | Customer concentration risk | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue % | 32.80% | 36.40% | 33.30% | 37.30% |
Home Health and Hospice Services | Home Health Services | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 25,361 | $ 24,988 | $ 51,683 | $ 48,647 |
Home Health and Hospice Services | Home Health Services | Medicare and medicaid | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 13,771 | 13,505 | 27,937 | 26,313 |
Home Health and Hospice Services | Home Health Services | Medicare | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 11,808 | 11,990 | 24,384 | 23,360 |
Home Health and Hospice Services | Home Health Services | Medicaid | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 1,963 | 1,515 | 3,553 | 2,953 |
Home Health and Hospice Services | Home Health Services | Managed care | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 6,846 | 6,829 | 13,962 | 13,185 |
Home Health and Hospice Services | Home Health Services | Private and other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 4,744 | 4,654 | 9,784 | 9,149 |
Home Health and Hospice Services | Hospice Services | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 32,623 | 25,220 | 63,063 | 47,678 |
Home Health and Hospice Services | Hospice Services | Medicare and medicaid | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 32,187 | 24,808 | 62,196 | 46,926 |
Home Health and Hospice Services | Hospice Services | Medicare | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 28,550 | 22,390 | 55,230 | 42,039 |
Home Health and Hospice Services | Hospice Services | Medicaid | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 3,637 | 2,418 | 6,966 | 4,887 |
Home Health and Hospice Services | Hospice Services | Managed care | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 397 | 370 | 813 | 690 |
Home Health and Hospice Services | Hospice Services | Private and other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 39 | 42 | 54 | 62 |
Senior Living Services | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 34,756 | 32,526 | 69,843 | 64,316 |
Senior Living Services | Medicare and medicaid | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 9,155 | 7,100 | 18,188 | 13,697 |
Senior Living Services | Medicare | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 0 | 0 | 0 | 0 |
Senior Living Services | Medicaid | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 9,155 | 7,100 | 18,188 | 13,697 |
Senior Living Services | Managed care | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 0 | 0 | 0 | 0 |
Senior Living Services | Private and other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 25,601 | $ 25,426 | $ 51,655 | $ 50,619 |
REVENUE AND ACCOUNTS RECEIVAB_5
REVENUE AND ACCOUNTS RECEIVABLE - ACCOUNTS RECEIVABLE (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Accounts Receivable [Abstract] | ||
Accounts receivable, gross | $ 34,374 | $ 32,860 |
Less: allowance for doubtful accounts | (516) | (677) |
Accounts receivable, net | 33,858 | 32,183 |
Medicare | ||
Accounts Receivable [Abstract] | ||
Accounts receivable, gross | 18,246 | 17,822 |
Medicaid | ||
Accounts Receivable [Abstract] | ||
Accounts receivable, gross | 7,624 | 6,579 |
Managed care | ||
Accounts Receivable [Abstract] | ||
Accounts receivable, gross | 4,808 | 4,380 |
Private and other | ||
Accounts Receivable [Abstract] | ||
Accounts receivable, gross | $ 3,696 | $ 4,079 |
BUSINESS SEGMENTS - NARRATIVE (
BUSINESS SEGMENTS - NARRATIVE (Details) | Jun. 30, 2020facilityagency |
Home Health and Hospice Services | |
Segment Reporting Information [Line Items] | |
Number of service providers | agency | 67 |
Senior Living Services | |
Segment Reporting Information [Line Items] | |
Number of operating facilities | facility | 54 |
BUSINESS SEGMENTS - FINANCIAL D
BUSINESS SEGMENTS - FINANCIAL DATA (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Segment Reporting Information [Line Items] | ||||
Revenue | $ 92,740 | $ 82,734 | $ 184,589 | $ 160,641 |
Segment Adjusted EBITDAR from Operations | 20,625 | 15,357 | 38,139 | 30,024 |
Senior Living Services | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 34,756 | 32,526 | 69,843 | 64,316 |
Operating segments | Home Health and Hospice Services | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 57,984 | 50,208 | 114,746 | 96,325 |
Segment Adjusted EBITDAR from Operations | 11,245 | 8,103 | 21,151 | 15,374 |
Operating segments | Senior Living Services | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 34,756 | 32,526 | 69,843 | 64,316 |
Segment Adjusted EBITDAR from Operations | 13,492 | 12,012 | 25,989 | 24,129 |
All Other | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 0 | 0 | 0 | 0 |
Segment Adjusted EBITDAR from Operations | $ (4,112) | $ (4,758) | $ (9,001) | $ (9,479) |
BUSINESS SEGMENTS - INCOME FROM
BUSINESS SEGMENTS - INCOME FROM OPERATIONS (Details) - USD ($) $ in Thousands | 2 Months Ended | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Segment Reporting [Abstract] | |||||||
Segment Adjusted EBITDAR from Operations | $ 20,625 | $ 15,357 | $ 38,139 | $ 30,024 | |||
Less: Depreciation and amortization | 1,201 | 962 | 2,222 | 1,772 | |||
Rent—cost of services | 9,767 | 8,533 | 19,473 | 16,830 | |||
Less: Costs at start-up operations | 473 | 81 | 705 | 317 | |||
Share-based compensation expense | 1,959 | 508 | 3,915 | 1,127 | |||
Acquisition related costs | 0 | 503 | 0 | 541 | |||
Spin-off related transaction costs | 0 | 1,658 | 0 | 4,648 | |||
Transaction services costs | 267 | 0 | 317 | 0 | |||
Net COVID-19 related costs | 883 | 0 | 1,160 | 0 | |||
Add: net income attributable to noncontrolling interests | 0 | 200 | $ 150 | 0 | 350 | ||
Income from operations | 6,075 | $ 3,312 | 10,347 | $ 5,139 | |||
Revenue, Major Customer [Line Items] | |||||||
Direct medical supplies, labor, and other expenses | $ 554 | $ 277 | |||||
Transition Services Agreement | Related party | |||||||
Revenue, Major Customer [Line Items] | |||||||
Fees incurred under Transition Services agreement | $ 1,525 | $ 2,861 |
ACQUISITIONS - NARRATIVE (Detai
ACQUISITIONS - NARRATIVE (Details) $ in Thousands | Jul. 01, 2020USD ($)home_health_agencyhospice_agency | Jun. 30, 2020USD ($)senior_living_unit | Jun. 30, 2019USD ($)senior_living_unit | Jun. 30, 2020USD ($)senior_living_unit | Jun. 30, 2019USD ($)hospice_agencysenior_living_unithome_health_agencystand-alone_senior_living_operation | Dec. 31, 2019USD ($) |
Business Acquisition [Line Items] | ||||||
Business combination, purchase price | $ 14,759 | |||||
Business combination, preliminary allocation of purchase price, goodwill | $ 45,372 | $ 45,372 | $ 41,233 | |||
Acquisition related costs | 0 | $ 503 | 0 | 541 | ||
Asset acquisitions 2020 | ||||||
Business Acquisition [Line Items] | ||||||
Business combination, purchase price | 7,268 | |||||
Business combination, preliminary allocation of purchase price, equipment | 44 | 44 | ||||
Business combination, preliminary allocation of purchase price, goodwill | 4,139 | 4,139 | ||||
Preliminary allocation of purchase price, indefinite-lived intangible assets | 3,166 | 3,166 | ||||
Business combination, preliminary allocation of purchase price, other liabilities, net | (81) | (81) | ||||
Asset acquisitions 2020 | Subsequent event | ||||||
Business Acquisition [Line Items] | ||||||
Business combination, purchase price | $ 6,250 | |||||
Business acquisitions 2019 | ||||||
Business Acquisition [Line Items] | ||||||
Business combination, purchase price | 14,779 | |||||
Business combination, preliminary allocation of purchase price, goodwill | 11,500 | 11,500 | ||||
Preliminary allocation of purchase price, indefinite-lived intangible assets | $ 3,150 | 3,150 | ||||
Acquisition related costs | $ 541 | |||||
Home Health and Hospice Services | ||||||
Business Acquisition [Line Items] | ||||||
Business combination, preliminary allocation of purchase price, goodwill | $ 41,730 | $ 41,730 | 37,591 | |||
Home Health and Hospice Services | Business acquisitions 2019 | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired | hospice_agency | 2 | |||||
Home Health and Hospice Services | Home Health Services | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired and assets acquisitions | home_health_agency | 1 | |||||
Home Health and Hospice Services | Home Health Services | Subsequent event | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired and assets acquisitions | home_health_agency | 2 | |||||
Home Health and Hospice Services | Home Health Services | Business acquisitions 2019 | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired | home_health_agency | 2 | |||||
Home Health and Hospice Services | Hospice Services | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired and assets acquisitions | hospice_agency | 3 | |||||
Home Health and Hospice Services | Hospice Services | Subsequent event | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired and assets acquisitions | hospice_agency | 2 | |||||
Business combination, purchase price | $ 7,400 | |||||
Home Health and Hospice Services | Hospice Services | Business acquisitions 2019 | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired | hospice_agency | 4 | |||||
Senior Living Services | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired and assets acquisitions | stand-alone_senior_living_operation | 2 | |||||
Number of units (in units) | senior_living_unit | 164 | 52 | 164 | 52 | ||
Business combination, preliminary allocation of purchase price, goodwill | $ 3,642 | $ 3,642 | $ 3,642 | |||
Senior Living Services | Business acquisitions 2019 | ||||||
Business Acquisition [Line Items] | ||||||
Number of asset acquisitions | stand-alone_senior_living_operation | 1 |
PROPERTY AND EQUIPMENT_NET (Det
PROPERTY AND EQUIPMENT—NET (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 32,901 | $ 32,901 | $ 26,428 | ||
Less: accumulated depreciation | (13,876) | (13,876) | (11,784) | ||
Property and equipment, net | 19,025 | 19,025 | 14,644 | ||
Depreciation | 1,197 | $ 940 | 2,215 | $ 1,736 | |
Leasehold improvements | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 9,183 | 9,183 | 6,621 | ||
Equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 22,714 | 22,714 | 18,930 | ||
Furniture and fixtures | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 1,004 | $ 1,004 | $ 877 |
GOODWILL AND OTHER INDEFINITE_3
GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS - ACTIVITY IN GOODWILL (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2020USD ($) | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | $ 41,233 |
Additions | 4,139 |
Goodwill, ending balance | 45,372 |
Home Health and Hospice Services | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 37,591 |
Additions | 4,139 |
Goodwill, ending balance | 41,730 |
Senior Living Services | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 3,642 |
Additions | 0 |
Goodwill, ending balance | $ 3,642 |
GOODWILL AND OTHER INDEFINITE_4
GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS - INDEFINITE-LIVED INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Indefinite-lived Intangible Assets [Line Items] | ||
Other indefinite-lived intangible assets | $ 36,628 | $ 33,462 |
Trade name | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Other indefinite-lived intangible assets | 355 | 355 |
Medicare and Medicaid licenses | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Other indefinite-lived intangible assets | $ 36,273 | $ 33,107 |
OTHER ACCRUED LIABILITIES (Deta
OTHER ACCRUED LIABILITIES (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Other Accrued Liabilities, Current [Abstract] | ||
Refunds payable | $ 2,289 | $ 2,152 |
Deferred revenue | 1,836 | 1,937 |
Contract Liabilities (CARES Act advance payments) | 27,997 | 0 |
Resident deposits | 6,171 | 6,292 |
Property taxes | 866 | 1,130 |
Other | 2,431 | 2,400 |
Other accrued liabilities | $ 41,590 | $ 13,911 |
DEBT - SCHEDULE OF LONG-TERM DE
DEBT - SCHEDULE OF LONG-TERM DEBT (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Debt Instrument [Line Items] | ||||
Less: unamortized debt issuance costs | $ (1,358) | $ (1,358) | $ (1,474) | |
Long-term debt, net | 642 | 642 | 18,526 | |
Amortization expense for debt issuance costs | 80 | 162 | $ 0 | |
Revolving credit facility | Line of credit | ||||
Debt Instrument [Line Items] | ||||
Revolving Credit Facility | $ 2,000 | $ 2,000 | $ 20,000 |
DEBT - NARRATIVE (Details)
DEBT - NARRATIVE (Details) - Line of credit - USD ($) | Oct. 01, 2019 | Jun. 30, 2020 |
Revolving credit facility | ||
Debt Instrument [Line Items] | ||
Borrowing capacity | $ 75,000,000 | |
Commitment fee on undrawn portion | 0.60% | |
Weighted average interest rate | 4.80% | |
Borrowing availability | $ 69,987,000 | |
Revolving credit facility | Minimum | LIBOR | ||
Debt Instrument [Line Items] | ||
Margin | 2.50% | |
Revolving credit facility | Minimum | Base Rate | ||
Debt Instrument [Line Items] | ||
Margin | 1.50% | |
Revolving credit facility | Maximum | LIBOR | ||
Debt Instrument [Line Items] | ||
Margin | 3.50% | |
Revolving credit facility | Maximum | Base Rate | ||
Debt Instrument [Line Items] | ||
Margin | 2.50% | |
Letters of credit | ||
Debt Instrument [Line Items] | ||
Letters of credit outstanding | $ 3,013,000 |
OPTIONS AND AWARDS - SHARE-BASE
OPTIONS AND AWARDS - SHARE-BASED COMPENSATION (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation | $ 1,959 | $ 508 | $ 3,915 | $ 1,127 |
Stock options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation | 343 | 0 | 632 | 0 |
Restricted stock awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation | 1,542 | 0 | 3,085 | 0 |
Non-employee director | Restricted stock awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation | $ 74 | $ 0 | $ 198 | $ 0 |
OPTIONS AND AWARDS - ADDITIONAL
OPTIONS AND AWARDS - ADDITIONAL INFORMATION (Details) - The Ensign Plans $ in Thousands | 6 Months Ended |
Jun. 30, 2020USD ($) | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Total unrecognized share-based compensation expense | $ 20,724 |
Stock options | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested stock options | $ 6,631 |
Unvested options and stock awards, cost net yet recognized, period for recognition | 4 years 4 months 24 days |
Options, vesting percent per year | 20.00% |
Options, expiration period | 10 years |
Restricted stock awards | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested Restricted Stock | $ 14,093 |
Unvested options and stock awards, cost net yet recognized, period for recognition | 2 years 3 months 18 days |
Vesting period | 5 years |
OPTIONS AND AWARDS - OPTIONS GR
OPTIONS AND AWARDS - OPTIONS GRANTED (Details) - The Ensign Plans shares in Thousands | 6 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Options Granted (in shares) | 366 |
2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Options Granted (in shares) | 366 |
Weighted Average Fair Value of Options (in dollars per share) | $ / shares | $ 8.44 |
2019 | Stock options | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Risk-Free Interest Rate | 0.60% |
Expected Life | 6 years 6 months |
Expected Volatility | 35.80% |
Dividend Yield | 0.00% |
OPTIONS AND AWARDS - EMPLOYEE S
OPTIONS AND AWARDS - EMPLOYEE STOCK OPTION ACTIVITY (Details) - The Ensign Plans shares in Thousands | 3 Months Ended | 6 Months Ended |
Dec. 31, 2019$ / sharesshares | Jun. 30, 2020$ / sharesshares | |
Number of Options Outstanding | ||
Beginning balance, outstanding (in shares) | shares | 1,573 | |
Granted (in shares) | shares | 366 | |
Exercised (in shares) | shares | (59) | |
Forfeited (in shares) | shares | (15) | |
Ending balance, outstanding (in shares) | shares | 1,573 | 1,865 |
Weighted Average Exercise Price | ||
Beginning of period, weighted average exercise price (in dollars per share) | $ / shares | $ 9.71 | |
Granted (in dollars per share) | $ / shares | 23.26 | |
Exercised (in dollars per share) | $ / shares | 3.63 | |
Forfeited (in dollars per share) | $ / shares | $ 12.44 | |
End of period, weighted average exercise price (in dollars per share) | $ / shares | $ 9.71 | $ 12.54 |
Number of options vested (in shares) | shares | 607 | 631 |
Weighted average exercise price of options vested (in dollars per share) | $ / shares | $ 4.80 | $ 5.20 |
OPTIONS AND AWARDS - RESTRICTED
OPTIONS AND AWARDS - RESTRICTED STOCK AWARDS ACTIVITY (Details) - The Ensign Plans - Restricted stock awards shares in Thousands | 6 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Non-Vested Restricted Stock | |
Beginning balance, outstanding (in shares) | shares | 1,793 |
Granted (in shares) | shares | 20 |
Vested (in shares) | shares | (72) |
Forfeited (in shares) | shares | (4) |
Ending balance, outstanding (in shares) | shares | 1,737 |
Weighted Average Grant Date Fair Value | |
Beginning of period, weighted average exercise price (in dollars per share) | $ / shares | $ 14.44 |
Granted (in dollars per share) | $ / shares | 25.04 |
Vested (in dollars per share) | $ / shares | 11.56 |
Forfeited (in dollars per share) | $ / shares | 9.99 |
End of period, weighted average exercise price (in dollars per share) | $ / shares | $ 14.69 |
LEASES - NARRATIVE (Details)
LEASES - NARRATIVE (Details) | Jun. 30, 2020facilitypropertyarrangement |
Lessee, Lease, Description [Line Items] | |
Weighted average remaining lease term | 15 years 6 months |
Weighted average discount rate | 8.10% |
Senior Living Services | |
Lessee, Lease, Description [Line Items] | |
Number of properties under lease | 54 |
Number of operating facilities | 54 |
Senior Living Services | Minimum | |
Lessee, Lease, Description [Line Items] | |
Lease term | 5 years |
Senior Living Services | Maximum | |
Lessee, Lease, Description [Line Items] | |
Lease term | 21 years |
Senior Living Services | Related party | |
Lessee, Lease, Description [Line Items] | |
Number of operating facilities | property | 31 |
Number of properties under lease, master lease agreement | 15 |
Number of separate master lease arrangements | arrangement | 2 |
Senior Living Services | Related party | Minimum | |
Lessee, Lease, Description [Line Items] | |
Lease term | 14 years |
Senior Living Services | Related party | Maximum | |
Lessee, Lease, Description [Line Items] | |
Lease term | 16 years |
LEASES - IMPACT OF NEW LEASES G
LEASES - IMPACT OF NEW LEASES GUIDANCE (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Lease, Cost [Abstract] | ||||
Sublease Income | $ (74) | $ 0 | $ (74) | $ 0 |
Variable rent expense | 1,347 | 1,147 | 2,676 | 2,179 |
Cost of services | ||||
Lease, Cost [Abstract] | ||||
Operating lease costs | 9,767 | 8,533 | 19,473 | 16,830 |
Cost of services | Facility | ||||
Lease, Cost [Abstract] | ||||
Operating lease costs | 8,892 | 7,754 | 17,748 | 15,416 |
Cost of services | Office | ||||
Lease, Cost [Abstract] | ||||
Operating lease costs | 949 | 779 | 1,799 | 1,414 |
General and administrative expense | ||||
Lease, Cost [Abstract] | ||||
Operating lease costs | $ 27 | $ 29 | $ 57 | $ 62 |
LEASES - FUTURE MINIMUM LEASE P
LEASES - FUTURE MINIMUM LEASE PAYMENTS (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Leases, Under Adoption of ASC 842 [Abstract] | ||
2020 (Remainder) | $ 19,004 | |
2021 | 37,650 | |
2022 | 37,109 | |
2023 | 36,582 | |
2024 | 35,921 | |
Thereafter | 388,207 | |
Total lease payments | 554,473 | |
Less: present value adjustments | (240,483) | |
Present value of total lease liabilities | 313,990 | |
Less: current lease liabilities | (13,369) | $ (12,285) |
Long-term operating lease liabilities | $ 300,621 | $ 304,044 |
INCOME TAXES - NARRATIVE (Detai
INCOME TAXES - NARRATIVE (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||||
Income tax expense | $ 1,437 | $ (375) | $ 2,326 | $ (32) |
Effective tax rate | 24.90% | (11.30%) | 24.10% | (0.60%) |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |||||
General and professional liability, retention limit | $ 250,000 | $ 250,000 | |||
Workers' compensation, retention limit | $ 150,000 | $ 150,000 | |||
Revenue | Customer concentration risk | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percent | 100.00% | 100.00% | 100.00% | 100.00% | |
Medicare and medicaid | Receivables | Customer concentration risk | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percent | 75.30% | 74.30% | |||
Medicare and medicaid | Revenue | Customer concentration risk | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percent | 59.40% | 54.90% | 58.70% | 54.10% |