Aveanna Healthcare Holdings, Inc 8-K/A, filed Feb 25, 2022
Aveanna Healthcare Holdings, Inc. (AVAH)
About this 8-K/A
Aveanna Healthcare Holdings, Inc filed this 8-K/A on February 25, 2022, reporting on events of December 10, 2021.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): |
(Exact name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction |
(Commission File Number) |
(IRS Employer |
||
|
|
|
|
|
|
||||
|
||||
(Address of Principal Executive Offices) |
|
(Zip Code) |
||
Registrant’s Telephone Number, Including Area Code: |
|
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
|
|
Trading |
|
|
|
|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Introductory Note
As previously reported, on December 10, 2021, Aveanna Healthcare Holdings Inc., a Delaware corporation (the "Company"), completed its acquisition of Comfort Care Home Health Services, LLC, an Alabama limited liability company (“Comfort Care Home Health”), Comfort Care Hospice, L.L.C., an Alabama limited liability company (“Comfort Care Hospice”), Premier Medical Housecall, LLC, an Alabama limited liability company (“Premier Medical Housecall,” and together with Comfort Care Home Health and Comfort Care Hospice, “Comfort Care”), as contemplated by the previously reported Membership Interest Purchase Agreement, entered into on September 27, 2021, by the Company's wholly owned subsidiary, Aveanna Healthcare Senior Services LLC, and the other parties thereto.
This Amendment No. 1 (this "Amendment") to the Current Report on Form 8-K filed by the Company on December 16, 2021 (the "Original Form 8-K") amends the Original Form 8-K to include the financial statements required by Item 9.01(a) and the pro forma financial information required by Item 9.01(b) of Form 8-K. Except as set forth in this Amendment, the disclosure contained in the Original Form 8-K remains unchanged, and this Amendment should be read together with the Original Form 8-K and the Company's other filings with the Securities and Exchange Commission.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses or Funds Acquired
The audited consolidated and combined balance sheet of Comfort Care Home Health Services, LLC and subsidiaries and affiliates as of December 31, 2020, the related audited consolidated and combined statements of operations, members' capital and cash flows of Comfort Care Home Health Services, LLC and subsidiaries and affiliates for the year ended December 31, 2020 and the notes related thereto, together with the report thereon by Warren Averett, LLC included in the audited consolidated and combined financial statements are filed as Exhibit 99.1 hereto and are incorporated herein by reference.
The unaudited consolidated and combined balance sheet of Comfort Care Home Health Services, LLC and subsidiaries and affiliates as of September 30, 2021, the related unaudited consolidated and combined statements of operations, members' capital and cash flows of Comfort Care Home Health Services, LLC and subsidiaries and affiliates for the nine-months ended September 30, 2021 and the notes related thereto are filed as Exhibit 99.2 hereto and are incorporated herein by reference.
(b) Pro Forma Financial Information
The unaudited pro forma condensed consolidated statement of operations of Comfort Care Home Health Services, LLC and subsidiaries for the year ended December 31, 2020 and unaudited pro forma condensed consolidated statement of operations of Comfort Care Home Health Services, LLC and subsidiaries for the nine-months ended September 30, 2021, the unaudited pro forma condensed consolidated balance sheet of Comfort Care Home Health Services, LLC and subsidiaries as of September 30, 2021 and the notes related thereto are filed as Exhibit 99.3 hereto and are incorporated herein by reference.
(d) Exhibits
Exhibit Number |
|
Description |
|
|
|
23.1 |
|
Consent of Warren Averett, LLC related to the financial statements of Comfort Care Home Health Services, LLC. |
99.1 |
|
Audited Consolidated and Combined Financial Statements of Comfort Care Home Health Services, LLC and subsidiaries and affiliates as of and for the year ended December 31, 2020. |
99.2 |
|
Unaudited Consolidated and Combined Financial Statements of Comfort Care Home Health Services, LLC and subsidiaries and affiliates as of and for the nine-months ended September 30, 2021. |
99.3 |
|
Unaudited Pro Forma Condensed Consolidated Financial Statements. |
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
Aveanna Healthcare Holdings Inc. |
|
|
|
|
Date: |
February 24, 2022 |
By: |
/s/ David Afshar |
|
|
|
David Afshar |
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 333-257678 and 333-257675) of Aveanna Healthcare Holdings, Inc. of our audit report dated December 1, 2021 for the year ended December 31, 2020 and our review report dated January 7, 2022 for the period January 1, 2021 through September 30, 2021, with respect to the consolidated and combined financial statements of Comfort Care Home Health Services, LLC and subsidiaries and affiliates, which appears in this Current Report on Form 8-K/A.
/s/ Warren Averett, LLC
Warren Averett, LLC
Birmingham, Alabama
February 24, 2022
COMFORT CARE HOME HEALTH SERVICES, LLC AND SUBSIDIARIES AND AFFILIATES
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
TABLE OF CONTENTS
DECEMBER 31, 2020
INDEPENDENT AUDITORS’ REPORT 1
CONSOLODATED AND COMBINED FINANCIAL STATEMENTS
Consolidated and Combined Balance Sheet 3
Consolidated and Combined Statement of Operations and Members’ Capital 4
Consolidated and Combined Statement of Cash Flows 5
Notes to the Consolidated and Combined Financial Statements 6
INDEPENDENT AUDITORS’ REPORT
To the Board of Directors
Comfort Care Home Health Services, LLC and Subsidiaries and Affiliates
We have audited the accompanying consolidated and combined financial statements of Comfort Care Home Health Services, LLC and Subsidiaries and Affiliates, which comprise the consolidated and combined balance sheet as of December 31, 2020, and the related consolidated and combined statement of operations and members’ capital and cash flows for the year then ended, and the related notes to the consolidated and combined financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated and combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated and combined financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated and combined financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated and combined financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated and combined financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated and combined financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated and combined financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated and combined financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
1
Opinion
In our opinion, the consolidated and combined financial statements referred to above present fairly, in all material respects, the consolidated and combined financial position of Comfort Care Home Health Services, LLC and Subsidiaries and Affiliates as of December 31, 2020, and the consolidated and combined results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
/s/ Warren Averett, LLC
Birmingham, Alabama
December 1, 2021
2
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
CONSOLIDATED AND COMBINED BALANCE SHEET
DECEMBER 31, 2020
See notes to the consolidated and combined financial statements.
3
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
CONSOLIDATED AND COMBINED STATEMENT OF
OPERATIONS AND MEMBERS’ CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2020
See notes to the consolidated and combined financial statements.
4
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2020
See notes to the consolidated and combined financial statements.
5
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Comfort Care Home Health Services, LLC and Subsidiaries is a limited liability company formed under the laws of the state of Alabama to provide various in-home therapy and nursing services in Alabama. Comfort Care Hospice, LLC and Subsidiaries (Affiliate) is a limited liability company formed under the laws of the state of Alabama to provide hospice services in Alabama and Tennessee. Premier Medical Housecall, LLC (Affiliate) is a limited liability company formed under the laws of the state of Alabama to provide various in-home medical services in Alabama. Collectively these entities are referred to as Comfort Care Home Health Services, LLC and Subsidiaries and Affiliates (the Company).
Principles of Consolidation and Combination
The accompanying consolidated and combined financial statements include the accounts of Comfort Care Home Health Services, LLC and its wholly owned subsidiaries, Comfort Care Coastal Home Health, LLC, Comfort Care Home Health of North Alabama, LLC, Comfort Care Home Health of Northeast Alabama, LLC, and Comfort Care Home Health of West Alabama, LLC; and its 75%-owned subsidiary, Woodland Home Health Services – CRMC, LLC, and its Affiliates, Comfort Care Hospice, LLC and its wholly-owned subsidiaries, Comfort Care Coastal Hospice, LLC and Comfort Care Hospice of Middle Tennessee, LLC and Premier Medical Housecall, LLC. All material intercompany balances and transactions have been eliminated upon consolidation and combination.
Comfort Care Home Health Services, LLC applies the guidance for noncontrolling interests in the consolidated financial statements. Accordingly, for consolidated subsidiaries that are less than wholly owned, the third-party holdings of equity interests are referred to as noncontrolling interest. The portion of net income attributable to noncontrolling interests for such subsidiaries is presented on the consolidated and combined statement of operations and members’ capital, and the portion of members’ capital of such subsidiaries is presented as noncontrolling interest on the consolidated and combined balance sheet. The guidance provides that all earnings and losses of a subsidiary should be attributed to the parent and the noncontrolling interest, even if losses attributable to the noncontrolling interest result in a deficit noncontrolling interest balance. At December 31, 2020, the net income attributed to the noncontrolling interest totaled $7,578.
On February 3, 2021, Comfort Care Home Health Services, LLC entered into an agreement to purchase the interest of the noncontrolling member of Woodland Home Health Services – CRMC for $100,000. Per the terms of the agreement, Woodland Home Health Services – CRMC will continue to be operated by Comfort Care Home Health Services, LLC for not less than six years. Comfort Care Home Health Services, LLC also assumes the assets and liabilities of Woodland Home Health Services – CRMC and indemnifies the noncontrolling interest holder of any liability.
Use of Estimates
The preparation of the consolidated and combined financial statements in conformity with generally accepted accounting principles in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated and combined financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
6
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Cash and Cash Equivalents
The Company includes cash equivalents (defined as investments having a maturity of three months or less) in cash flows for each year. The Company maintains cash on deposit at a bank, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.
Revenue Recognition and Accounts Receivable
Net patient service revenue is reported at the amount that reflects the consideration the Company expects to receive in exchange for providing services. Receipts are from Medicare, Medicaid, Managed Care, Commercial, and others for services rendered, and they include implicit price concessions for retroactive revenue adjustments due to actual receipts from third-party payors, settlements of audits and reviews. The estimated uncollectible amounts due from these payors are considered implicit price concessions that are a direct reduction to net patient service revenue. The Company assesses the patient's ability to pay for their healthcare services at the time of patient admission based on the Company's verification of the patient's insurance coverage under the Medicare, Medicaid and other commercial or managed care insurance programs. The promise to provide quality care is accounted for as a single performance obligation. The Company satisfies its performance obligation by providing quality of care services to its patients and residents on a daily basis until termination of the contract.
The following tables summarizes revenue from contracts with customers by payor source for the year ended December 31, 2020:
Property and Equipment
Property and equipment is carried at cost less accumulated depreciation and includes expenditures,
which substantially increase the useful lives of property and equipment. Maintenance, repairs and minor renovations are charged to income as incurred. When property and equipment is retired or otherwise disposed of, the related costs and accumulated depreciation are removed from their respective accounts, and any gain or loss on the disposition is credited or charged to operations.
7
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
The Company provides for depreciation of property and equipment using the straight-line method over estimated useful lives as follows:
Item |
Estimated Useful Life |
|
|
Computers and equipment |
3 - 5 years |
Furniture and fixtures |
5 - 7 years |
Leasehold improvements |
7 - 15 years |
Auto and vehicles |
5 years |
|
|
Goodwill
Goodwill represents, at the time of an acquisition, the amount of purchase price paid in excess of the fair value of net assets acquired. Management evaluates goodwill to determine if it is more likely than not that impairment exists. If there is a greater than 50% likelihood of impairment, the Company assesses the recoverability of goodwill by determining whether the amounts can be recovered through undiscounted cash flows of the business acquired, excluding interest. If impairment is indicated by this analysis, measurement of the loss would be based on the market value of the business acquired. Management considers external factors, including local market developments, regional and national trends, regulatory developments, and other pertinent factors in making its assessments. No indications of impairment were identified at December 31, 2020.
Intangible Assets
Included in intangible assets are the costs of acquiring rights related to various certificates of need from prior acquisitions and a non-compete agreement. The rights to the certificates of need are being amortized over a period of 15 or 40 years. The non-compete agreement is being amortized over 3 years. Amortization expense totaled $245,593 for the year ended December 31, 2020.
The estimated aggregate amortization expense for each of the five succeeding years, thereafter, and in the aggregate for intangible assets subject to amortization is as follows:
Advertising Costs
Advertising costs, which are other than direct-response advertising, are charged to operations when incurred. Total advertising costs were $2,094,641 for the year ended December 31, 2020.
8
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Taxes on Income
As a limited liability company, the Company is generally not subject to federal or state income taxes as the liability flows to the members. Accordingly, the accompanying consolidated and combined financial statements contain no provision or liability for income taxes.
Uncertain Tax Positions
The Company applies guidance issued by the FASB relating to uncertainty in income taxes. This guidance requires entities to assess their tax positions for the likelihood that they would be overturned upon Internal Revenue Service (IRS) examination or upon examination by state taxing authorities. In accordance with this guidance, the Company has assessed its tax positions and determined that it does not have any positions at December 31, 2020, that it would be unable to substantiate.
Coronavirus, Aid, Relief and Economic Security Act (CARES Act) Funds
The Company implemented certain changes to existing accounting policies related to the recognition of stimulus funds through the CARES Act. There is no GAAP that explicitly covers accounting for government "grants" to for-profit entities, with the exception of certain agricultural subsidies. In the absence of authoritative GAAP guidance, the Company considered the application of other authoritative accounting guidance by analogy and concluded that the guidance outlined in International Accounting Standard 20 – Accounting for Government Grants and Disclosures of Government Assistance (IAS 20) was the most appropriate analogy for the purpose of recording and classifying the federal stimulus funds received by the Company. Under IAS 20, once it is reasonably assured that the entity will comply with the conditions of the grant, the grant money should be recognized on a systematic basis over the periods in which the entity recognizes the related expenses or losses for which the grant money is intended to compensate. The Company recognizes grants once both of the following conditions are met: (1) the Company is able to comply with the relevant conditions of the grant and (2) the grant is received. Federal stimulus funds that are recognized to offset healthcare related expenses and lost revenue attributable to COVID-19 are reflected as CARES Act Funds Revenue in the accompanying consolidated and combined statements of operations and changes in members’ equity.
Subsequent Events
Management has evaluated subsequent events and their potential effects on these consolidated and combined financial statements through December 1, 2021.
9
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The purpose of this ASU is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this ASU require that lessees recognize the rights and obligations resulting from leases as assets and liabilities on their balance sheets, initially measured at the present value of the lease payments over the term of the lease, including payments to be made in optional periods to extend the lease and payments to purchase the underlying assets if the lessee is reasonably certain of exercising those options. Topic 842 requires recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous generally accepted accounting principles (GAAP). This guidance is effective for fiscal years beginning after December 15, 2021. Management is currently evaluating the impact of this document to the Company’s consolidated and combined financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. This standard provides guidance on eight specific cash flow issues. The cash flow issues covered by this ASU are: 1) debt prepayment or debt extinguishment costs; 2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3) contingent consideration payments made after a business combination; 4) proceeds from the settlement of insurance claims; 5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; 6) distributions received from equity method investees; 7) beneficial interests in securitization transactions; and 8) separately identifiable cash flows and application of the predominance principle for distributions received from equity method investees in the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2019. The Company adopted the guidance effective January 1, 2020, which did not have a material impact on the Company’s consolidated and combined financial statements.
2. CONCENTRATION OF CREDIT RISK
The Company grants credit without collateral to its patients, most of whom are local residents and are insured under third-party payor agreements. The mix of receivables from patients and third-party payors was as follows at December 31, 2020:
10
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020
3. PROPERTY AND EQUIPMENT
At December 31, 2020, property and equipment consisted of the following:
Depreciation expense totaled $468,189 for the year ended December 31, 2020.
4. LINES OF CREDIT
Comfort Care Home Health Services, LLC maintains a line of credit with a maximum limit of $3,000,000. The line bears interest at the Wall Street Journal Prime Rate minus 1% (2.25% at December 31, 2020). The line of credit is secured by the personal guarantee of certain members and all assets of Comfort Care Home Health Services, LLC. The line of credit matures in November 2021. At December 31, 2020, there was no balance outstanding. The credit agreement requires Comfort Care Home Health Services, LLC to maintain certain financial and affirmative covenants. At December 31, 2020, Comfort Care Home Health Services, LLC was in compliance with its financial covenants.
Comfort Care Hospice, LLC maintains a line of credit with a maximum limit of $5,150,000. The line bears interest at the Wall Street Journal Prime Rate minus 1% (2.25% at December 31, 2020). The line of credit is secured by the personal guarantee of certain members and all assets of Comfort Care Hospice, LLC. The line of credit matures in November 2021. At December 31, 2020, there was $2,140,581 outstanding. The credit agreement requires Comfort Care Hospice, LLC to maintain certain financial and affirmative covenants. At December 31, 2020, Comfort Care Hospice, LLC was in compliance with its financial covenants.
11
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020
5. OPERATING LEASES
The Company lease office space from a related party through common ownership. Rent expense under these operating leases were $225,119 in 2020. Minimum facility lease payments are $16,763 and $1,500 per month. The lease terms expire on April 14, 2022 and August 31, 2026.
The Company leases additional office spaces from a separate related party through common ownership. Rent expense under these operating leases was $104,595 in 2020. Minimum facility lease payments are $8,716 per month. The lease terms renew month to month.
The Company also leases various other facilities, automobiles and equipment from unrelated parties under operating leases expiring at various dates through 2030. Rent expense under these operating leases was $1,832,322 in 2020. Minimum facility lease payments range from $21 to $10,048 per month.
The following is a schedule of future minimum lease payments under all operating leases having initial or remaining noncancelable lease terms in excess of one year:
6. RELATED PARTY TRANSACTIONS
The Company was charged for management fees from a related party through common ownership totaling $1,640,000 in 2020. At December 31, 2020, the Company had no accounts payable to related parties related to the management fees.
The Company shares expenses with and leases employees to and from related parties through common ownership. At December 31, 2020, the Company had $379,087 in accounts receivable from related parties and $40,436 in accounts payable to related parties related to shared expenses and leased employees.
The Company has various notes payable to a related party through common ownership. The amount to be repaid under these notes at December 31, 2020 was $1,316,000. The notes accrue interest at a rate of 2.75% to 5.00%. Interest expense totaled $52,222 for the year ended December 31, 2020.
The Company leases various office space from a related company (see Note 5).
12
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020
7. EMPLOYEE BENEFIT PLANS
The Company sponsors a profit-sharing plan for its employees pursuant to Section 401(k) of the Internal Revenue Code. Contributions are made at the discretion of the Company’s Board of Directors. The Company matched $238,973 in employee contributions to the plan in 2020. Generally, the plan is available to all employees after certain eligibility requirements have been satisfied. The Company may amend or terminate this plan at its sole discretion.
8. LITIGATION
The Company is subject to lawsuits from time to time. Management believes that the ultimate liability resulting from unexpected claims, if any, will not have a material adverse effect on the accompanying consolidated and combined financial statements.
9. MEDICAL MALPRACTICE INSURANCE
The professional liability coverage is on claims-made basis for the years ended December 31, 2020. Per claim coverage for the years ended December 31, 2020, was $1,000,000 with an aggregate maximum annual coverage of $3,000,000.
10. EMPLOYEE GROUP HEALTH INSURANCE PLAN
The Company has a self-insured health insurance plan for its employees’ medical care and assumed liability for employees’ group health costs. The plan includes “excess loss” insurance, which limits claims liability to $125,000 per individual. The Company and related parties are responsible for claims costs in excess of the reinsurer’s individual limit of liability. The Company has recorded its estimate liability for unpaid claims in the accompanying consolidated and combined financial statements.
11. CARES ACT RELIEF FUND
As part of the response to the coronavirus pandemic, the federal government passed legislation, referred to as the Coronavirus Aid, Relief, and Economic Security Act, in March 2020 that included, among other things, financial assistance to offset some of the financial burden expected to be incurred by providers in responding to the pandemic. As a result of this legislation, the Company received $4,316,474 from funds established under the CARES Act in the form of a grant that, as long as certain terms and conditions are met by the Company, is not required to be repaid. The Company has met the terms and conditions as required by the grants and has recognized $4,316,474 of the relief funds to offset lost revenues and additional expenses incurred for the year ended December 31, 2020, due to the coronavirus pandemic. This amount is recorded as other operating income in the accompanying consolidated and combined statement of operations and members’ capital
13
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2020
12. SUBSEQUENT EVENT
On September 27, 2021, the owners of Comfort Care Home Health Services, LLC and Subsidiaries and Affiliates sold their membership interests to Aveanna Healthcare Senior Services, LLC for $345,000,000.
14
COMFORT CARE HOME HEALTH SERVICES, LLC AND SUBSIDIARIES AND AFFILIATES
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
TABLE OF CONTENTS
SEPTEMBER 30, 2021
INDEPENDENT ACCOUNTANTS’ REVIEW REPORT 1
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Consolidated and Combined Balance Sheet 2
Consolidated and Combined Statement of Operations and Members’ Capital 3
Consolidated and Combined Statement of Cash Flows 4
Notes to the Consolidated and Combined Financial Statements 5
INDEPENDENT ACCOUNTANTS’ REVIEW REPORT
To the Board of Directors
Comfort Care Home Health Services, LLC and Subsidiaries and Affiliates
We have reviewed the accompanying consolidated and combined financial statements of Comfort Care Home Health Services, LLC and Subsidiaries and Affiliates, which comprise the consolidated and combined balance sheet as of September 30, 2021, and the related consolidated and combined statements of operations and members’ capital and cash flows for the nine months then ended, and the related notes to the consolidated and combined financial statements. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated and combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated and combined financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion.
Accountant’s Conclusion
Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated and combined financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America.
/s/ Warren Averett, LLC
Birmingham, Alabama
January 7, 2022
1
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
CONSOLIDATED AND COMBINED BALANCE SHEET
SEPTEMBER 30, 2021
See independent accountants’ review report and notes to the
consolidated and combined financial statements.
2
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
CONSOLIDATED AND COMBINED STATEMENT OF
OPERATIONS AND MEMBERS’ CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
See independent accountants’ review report and notes to the
consolidated and combined financial statements.
3
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
See independent accountants’ review report and notes to the
consolidated and combined financial statements.
4
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Comfort Care Home Health Services, LLC and Subsidiaries is a limited liability company formed under the laws of the state of Alabama to provide various in-home therapy and nursing services in Alabama. Comfort Care Hospice, LLC and Subsidiaries (Affiliate) is a limited liability company formed under the laws of the state of Alabama to provide hospice services in Alabama and Tennessee. Premier Medical Housecall, LLC (Affiliate) is a limited liability company formed under the laws of the state of Alabama to provide various in-home medical services in Alabama. Collectively these entities are referred to as Comfort Care Home Health Services, LLC and Subsidiaries and Affiliates (the Company).
Principles of Consolidation and Combination
The accompanying consolidated and combined financial statements include the accounts of Comfort Care Home Health Services, LLC and its wholly owned subsidiaries, Comfort Care Coastal Home Health, LLC, Comfort Care Home Health of North Alabama, LLC, Comfort Care Home Health of Northeast Alabama, LLC, and Comfort Care Home Health of West Alabama, LLC; and its 75%-owned subsidiary, Woodland Home Health Services – CRMC, LLC, and its Affiliates, Comfort Care Hospice, LLC and its wholly-owned subsidiaries, Comfort Care Coastal Hospice, LLC and Comfort Care Hospice of Middle Tennessee, LLC and Premier Medical Housecall, LLC. All material intercompany balances and transactions have been eliminated upon consolidation and combination.
On February 3, 2021, Comfort Care Home Health Services, LLC entered into an agreement to purchase the interest of the noncontrolling member of Woodland Home Health Services – CRMC for $100,000. Per the terms of the agreement, Woodland Home Health Services – CRMC will continue to be operated by Comfort Care Home Health Services, LLC for not less than six years. Comfort Care Home Health Services, LLC also assumes the assets and liabilities of Woodland Home Health Services – CRMC and indemnifies the noncontrolling interest holder of any liability.
Use of Estimates
The preparation of the consolidated and combined financial statements in conformity with generally accepted accounting principles in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated and combined financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company includes cash equivalents (defined as investments having a maturity of three months or less) in cash flows for each period. The Company maintains cash on deposit at a bank, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.
Fiscal Year-End
The Company’s fiscal year ends on December 31.
5
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Revenue Recognition and Accounts Receivable
Net patient service revenue is reported at the amount that reflects the consideration the Company expects to receive in exchange for providing services. Receipts are from Medicare, Medicaid, Managed Care, Commercial, and others for services rendered, and they include implicit price concessions for retroactive revenue adjustments due to actual receipts from third-party payors, settlements of audits and reviews. The estimated uncollectible amounts due from these payors are considered implicit price concessions that are a direct reduction to net patient service revenue. The Company assesses the patient's ability to pay for their healthcare services at the time of patient admission based on the Company's verification of the patient's insurance coverage under the Medicare, Medicaid and other commercial or managed care insurance programs. The promise to provide quality care is accounted for as a single performance obligation. The Company satisfies its performance obligation by providing quality of care services to its patients and residents on a daily basis until termination of the contract.
The following tables summarizes revenue from contracts with customers by payor source for the nine months ended September 30, 2021:
Property and Equipment
Property and equipment is carried at cost less accumulated depreciation and includes expenditures,
which substantially increase the useful lives of property and equipment. Maintenance, repairs and minor renovations are charged to income as incurred. When property and equipment is retired or otherwise disposed of, the related costs and accumulated depreciation are removed from their respective accounts, and any gain or loss on the disposition is credited or charged to operations.
The Company provides for depreciation of property and equipment using the straight-line method over estimated useful lives as follows:
Item |
Estimated Useful Life |
|
|
Computers and equipment |
3 - 5 years |
Furniture and fixtures |
5 - 7 years |
Leasehold improvements |
7 - 15 years |
Auto and vehicles |
5 years |
|
|
6
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Goodwill
Goodwill represents, at the time of an acquisition, the amount of purchase price paid in excess of the fair value of net assets acquired. Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. No indications of impairment were identified at September 30, 2021.
Intangible Assets
Included in intangible assets are the costs of acquiring rights related to various certificates of need from prior acquisitions and a non-compete agreement. The rights to the certificates of need are being amortized over a period of 15 or 40 years. The non-compete agreement is being amortized over 3 years. Amortization expense totaled $126,036 for the nine months ended September 30, 2021.
The estimated aggregate amortization expense for each of the five succeeding years, thereafter, and in the aggregate for intangible assets subject to amortization is as follows:
Advertising Costs
Advertising costs, which are other than direct-response advertising, are charged to operations when incurred. Total advertising costs were $1,556,617 for the nine months ended September 30, 2021.
Taxes on Income
As a limited liability company, the Company is generally not subject to federal or state income taxes as the liability flows to the members. Accordingly, the accompanying consolidated and combined financial statements contain no provision or liability for income taxes.
Uncertain Tax Positions
The Company applies guidance issued by the FASB relating to uncertainty in income taxes. This guidance requires entities to assess their tax positions for the likelihood that they would be overturned upon Internal Revenue Service (IRS) examination or upon examination by state taxing authorities. In accordance with this guidance, the Company has assessed its tax positions and determined that it does not have any positions at September 30, 2021, that it would be unable to substantiate.
7
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Subsequent Events
Management has evaluated subsequent events and their potential effects on these consolidated and combined financial statements through January 7, 2022.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The purpose of this ASU is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this ASU require that lessees recognize the rights and obligations resulting from leases as assets and liabilities on their balance sheets, initially measured at the present value of the lease payments over the term of the lease, including payments to be made in optional periods to extend the lease and payments to purchase the underlying assets if the lessee is reasonably certain of exercising those options. Topic 842 requires recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous generally accepted accounting principles (GAAP). This guidance is effective for fiscal years beginning after December 15, 2021. Management is currently evaluating the impact of this document to the Company’s consolidated and combined financial statements.
2. CONCENTRATION OF CREDIT RISK
The Company grants credit without collateral to its patients, most of whom are local residents and are insured under third-party payor agreements. The mix of receivables from patients and third-party payors was as follows at September 30, 2021:
8
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
3. PROPERTY AND EQUIPMENT
At September 30, 2021, property and equipment consisted of the following:
Depreciation expense totaled $367,819 for the year ended September 30, 2021.
4. LINES OF CREDIT
Comfort Care Home Health Services, LLC maintains a line of credit with a maximum limit of $3,000,000. The line bears interest at the Wall Street Journal Prime Rate minus 1% (2.25% at September 30, 2021). The line of credit is secured by the personal guarantee of certain members and all assets of Comfort Care Home Health Services, LLC. The line of credit matures in November 2021. At September 30, 2021, there was no balance outstanding. The credit agreement requires Comfort Care Home Health Services, LLC to maintain certain financial and affirmative covenants. At September 30, 2021, Comfort Care Home Health Services, LLC was in compliance with its financial covenants.
Comfort Care Hospice, LLC maintains a line of credit with a maximum limit of $5,150,000. The line bears interest at the Wall Street Journal Prime Rate minus 1% (2.25% at September 30, 2021). The line of credit is secured by the personal guarantee of certain members and all assets of Comfort Care Hospice, LLC. The line of credit matures in November 2021. At September 30, 2021, there was $2,140,581 outstanding. The credit agreement requires Comfort Care Hospice, LLC to maintain certain financial and affirmative covenants. At September 30, 2021, Comfort Care Hospice, LLC was in compliance with its financial covenants.
5. OPERATING LEASES
The Company leases office space from a related party through common ownership. Rent expense under these operating leases were $164,367 for the nine months ended September 30, 2021. Minimum facility lease payments are $16,763 and $1,500 per month. The lease terms expire on April 14, 2022 and August 31, 2026.
9
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
5. OPERATING LEASES – CONTINUED
The Company leases additional office spaces from a separate related party through common ownership. Rent expense under these operating leases was $78,446 for the nine months ended September 30, 2021. Minimum facility lease payments are $8,716 per month. The lease terms renew month to month.
The Company also leases various other facilities, automobiles and equipment from unrelated parties under operating leases expiring at various dates through 2030. Rent expense under these operating leases was $1,430,338 for the nine months ended September 30, 2021. Minimum facility lease payments range from $21 to $10,048 per month.
The following is a schedule of future minimum lease payments under all operating leases having initial or remaining noncancelable lease terms in excess of one year:
6. RELATED PARTY TRANSACTIONS
The Company was charged for management fees from a related party through common ownership totaling $1,368,000 in 2021. At September 30, 2021, the Company had no accounts payable to related parties related to the management fees.
The Company shares expenses with and leases employees to and from related parties through common ownership. At September 30, 2021, the Company had $10,807 in accounts receivable from related parties and $209,920 in accounts payable to related parties related to shared expenses and leased employees.
The Company has various notes payable to a related party through common ownership. The amount to be repaid under these notes at September 30, 2021 was $1,541,000. The notes accrue interest at a rate of 2.75% to 5.00%. Interest expense totaled $42,653 for the nine months ended September 30, 2020.
The Company leases various office space from a related company (see Note 5).
10
COMFORT CARE HOME HEALTH SERVICES, LLC
AND SUBSIDIARIES AND AFFILIATES
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
7. EMPLOYEE BENEFIT PLANS
The Company sponsors a profit-sharing plan for its employees pursuant to Section 401(k) of the Internal Revenue Code. Contributions are made at the discretion of the Company’s Board of Directors. The Company matched $177,457 in employee contributions to the plan in 2021. Generally, the plan is available to all employees after certain eligibility requirements have been satisfied. The Company may amend or terminate this plan at its sole discretion.
8. LITIGATION
The Company is subject to lawsuits from time to time. Management believes that the ultimate liability resulting from unexpected claims, if any, will not have a material adverse effect on the accompanying consolidated and combined financial statements.
9. MEDICAL MALPRACTICE INSURANCE
The professional liability coverage is on claims-made basis for the nine months ended September 30, 2021. Per claim coverage for the nine months ended September 30, 2021, was $1,000,000 with an aggregate maximum annual coverage of $3,000,000.
10. EMPLOYEE GROUP HEALTH INSURANCE PLAN
The Company has a self-insured health insurance plan for its employees’ medical care and assumed liability for employees’ group health costs. The plan includes “excess loss” insurance, which limits claims liability to $125,000 per individual. The Company and related parties are responsible for claims costs in excess of the reinsurer’s individual limit of liability. The Company has recorded its estimate liability for unpaid claims in the accompanying consolidated and combined financial statements.
11. SUBSEQUENT EVENT
On December 9, 2021, the owners of Comfort Care Home Health Services, LLC and Subsidiaries and Affiliates sold their membership interests to Aveanna Healthcare Senior Services, LLC for $345,000,000.
11
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
References to “we”, “us”, “our”, “Aveanna” and the “Company” refer to Aveanna Healthcare Holdings, Inc., a Delaware corporation. The following unaudited pro forma condensed consolidated financial information and the related notes present our unaudited pro forma condensed consolidated statements of operations for the fiscal year ended January 2, 2021 and for the nine-month period ended October 2, 2021 as well as our unaudited pro forma condensed consolidated balance sheet as of October 2, 2021, after giving forma effect to (i) the acquisition by us of Comfort Care Home Health Services, LLC, Comfort Care Hospice, L.L.C., Premier Medical Housecall, LLC, (collectively, “Comfort Care”), as contemplated by that certain Membership Interest Purchase Agreement, entered into on September 27, 2021, by the Company’s wholly owned subsidiary, Aveanna Healthcare Senior Services LLC (the “Comfort Care Acquisition”) and (ii) our entering into a new Second Lien Credit Agreement (the “New Second Lien Term Loan”) on December 10, 2021 under which we incurred $415.0 million aggregate principal amount of indebtedness to fund the Comfort Care Acquisition (the “New Second Lien Financing”).
We refer to the pro forma adjustments for the Comfort Care Acquisition and for the New Second Lien Financing together as the “Transactions”. The unaudited pro forma condensed consolidated statements of operations have been derived by aggregating our historical consolidated financial statements and the historical financial statements of Comfort Care, including certain pro forma adjustments to such aggregated financial statements, to give effect to the Transactions as if they had occurred on December 29, 2019, which was the first day of our 2020 fiscal year. The unaudited pro forma condensed consolidated balance sheet gives effect to the Transactions as if they had occurred as of October 2, 2021.
The unaudited pro forma condensed consolidated financial information herein has been prepared to illustrate the effects of the Transactions in accordance with GAAP and pursuant to Article 11 of Regulation S-X. Information regarding these pro forma adjustments is subject to risks and uncertainties that could cause actual results to differ materially from our unaudited pro forma condensed consolidated financial information.
In our opinion, all adjustments necessary to reflect the effects of the Transactions have been included and are based upon currently available information and assumptions that we believe are reasonable as of the date of filing of this Current Report on Form 8-K/A; however, such adjustments are subject to change. Any of the factors underlying these estimates and assumptions may change or prove to be materially different than expected. The unaudited pro forma condensed consolidated financial information also does not purport to represent what our actual results of operations and financial position would have been had the Transactions occurred as of the dates indicated, nor are they intended to be representative of or project our future financial condition or results of operations or financial position.
The unaudited pro forma condensed consolidated financial information and the accompanying notes are provided for informational and illustrative purposes only and should be read in conjunction with (i) our historical audited annual consolidated financial statements for the year ended January 2, 2021 included in our prospectus dated April 28, 2021, which is deemed to be part of our Registration Statement on Form S-1 (File No. 333-254981), (ii) our interim unaudited consolidated financial statements for the nine-month period ended October 2, 2021 included in our Quarterly Report on Form 10-Q filed with the SEC on November 15, 2021, (iii) the audited annual consolidated and combined financial statements of Comfort Care Home Health Services, LLC and subsidiaries and affiliates for the year ended December 31, 2020 included in this Current Report on Form 8-K/A, and (iv) the unaudited interim consolidated and combined financial statements of Comfort Care Home Health Services, LLC and subsidiaries and affiliates as of and for the nine-month period ended September 30, 2021 included in this Current Report on Form 8-K/A.
AVEANNA HEALTHCARE HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
as of October 2, 2021
(Amounts in thousands, except share and per share data)
|
Historical |
|
|
|
|
|
|||
|
Aveanna as of October 2, 2021 |
|
Comfort Care as of September 30, 2021, after reclassification (Note 2) |
|
Transaction Accounting Adjustments for the Acquisition |
|
Note 3 |
|
Pro Forma for the Acquisition |
ASSETS |
|||||||||
Current Assets: |
|
|
|
|
|
|
|
|
|
Cash & Cash Equivalents |
$ 121,708 |
|
$ 17,286 |
|
$ 35,692 |
|
(a)(b)(e)(f)(g) |
|
$ 174,686 |
Patient accounts receivable |
189,033 |
|
11,123 |
|
- |
|
|
|
200,156 |
Receivables under insured programs |
8,264 |
|
- |
|
- |
|
|
|
8,264 |
Prepaid expenses |
13,038 |
|
803 |
|
- |
|
|
|
13,841 |
Other current assets |
10,692 |
|
132 |
|
- |
|
|
|
10,824 |
Total current assets |
342,735 |
|
29,344 |
|
35,692 |
|
|
|
407,771 |
Property and equipment, net |
31,599 |
|
1,257 |
|
- |
|
|
|
32,856 |
Operating lease right of use assets |
46,817 |
|
- |
|
3,952 |
|
(i) |
|
50,769 |
Goodwill |
1,419,591 |
|
3,558 |
|
314,857 |
|
(d) |
|
1,738,006 |
Intangible assets, net |
77,612 |
|
5,518 |
|
15,032 |
|
(c) |
|
98,162 |
Receivables under insured programs |
25,423 |
|
- |
|
- |
|
|
|
25,423 |
Deferred income taxes |
2,931 |
|
- |
|
1,519 |
|
(h) |
|
4,450 |
Other long-term assets |
8,946 |
|
- |
|
- |
|
|
|
8,946 |
Total assets |
$ 1,955,654 |
|
$ 39,677 |
|
$ 371,052 |
|
|
|
$ 2,366,383 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES, DEFERRED RESTRICTED STOCK UNITS, AND STOCKHOLDERS’ EQUITY |
|||||||||
Current Liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable and other accrued liabilities |
$ 46,883 |
|
$ 2,285 |
|
$ (1,971) |
|
(e)(h) |
|
$ 47,197 |
Accrued payroll and employee benefits |
55,211 |
|
8,291 |
|
- |
|
|
|
63,502 |
Accrued interest |
1,801 |
|
146 |
|
(146) |
|
(a) |
|
1,801 |
Notes payable |
2,671 |
|
- |
|
- |
|
|
|
2,671 |
Current portion of insurance reserve- insured program |
8,264 |
|
- |
|
- |
|
|
|
8,264 |
Current portion of insurance reserves |
14,105 |
|
- |
|
- |
|
|
|
14,105 |
Current portion long-term obligations |
8,600 |
|
3,682 |
|
(3,682) |
|
(a)(b) |
|
8,600 |
Current portion of operating lease liabilities |
12,166 |
|
- |
|
1,041 |
|
(i) |
|
13,207 |
Current portion of deferred payroll taxes |
25,699 |
|
- |
|
- |
|
|
|
25,699 |
Other current liabilities |
44,173 |
|
1,024 |
|
- |
|
|
|
45,197 |
Total current liabilities |
219,573 |
|
15,428 |
|
(4,758) |
|
|
|
230,243 |
Long-term obligations, less current portion |
829,674 |
|
- |
|
400,378 |
|
(f)(g) |
|
1,230,052 |
Long-term insurance reserves - insured programs |
25,423 |
|
- |
|
- |
|
|
|
25,423 |
Long-term insurance reserves |
31,296 |
|
- |
|
- |
|
|
|
31,296 |
Operating lease liabilities, less current portion |
40,099 |
|
- |
|
2,911 |
|
(i) |
|
43,010 |
Deferred payroll taxes, less current portion |
25,699 |
|
935 |
|
(935) |
|
(b) |
|
25,699 |
Deferred income taxes |
3,430 |
|
- |
|
- |
|
|
|
3,430 |
Other long-term liabilities |
23,893 |
|
- |
|
- |
|
|
|
23,893 |
Total liabilities |
1,199,087 |
|
16,363 |
|
397,596 |
|
|
|
1,613,046 |
Deferred restricted stock units |
2,135 |
|
- |
|
- |
|
|
|
2,135 |
Stockholders' equity: |
|
|
|
|
|
|
|
|
- |
Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued or outstanding |
- |
|
- |
|
- |
|
|
|
- |
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 184,164,184 issued and outstanding |
1,841 |
|
- |
|
- |
|
|
|
1,841 |
Comfort Care's members' capital |
|
|
23,314 |
|
(23,314) |
|
(h) |
|
- |
Additional paid-in capital |
1,201,075 |
|
- |
|
- |
|
|
|
1,201,075 |
Accumulated deficit |
(448,484) |
|
- |
|
(3,230) |
|
(h) |
|
(451,714) |
Total stockholders' equity |
754,432 |
|
23,314 |
|
(26,544) |
|
|
|
751,202 |
Total liabilities, deferred restricted stock units, and stockholders' equity |
$ 1,955,654 |
|
$ 39,677 |
|
$ 371,052 |
|
|
|
$ 2,366,383 |
The accompanying notes are an integral part of this Unaudited Pro Forma Condensed Consolidated Balance Sheet.
AVEANNA HEALTHCARE HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
for the Fiscal Year Ended January 2, 2021
(Amounts in thousands, except per share data)
|
Historical Aveanna Year ended January 2, 2021 |
|
Historical Comfort Care Year ended December 31, 2021, after reclassification (Note 2) |
|
Transaction Accounting Adjustments for the Acquisition |
|
Note 4 |
|
Pro Forma for the Acquisition |
Revenue |
$ 1,495,105 |
|
$ 93,168 |
|
$ - |
|
|
|
$ 1,588,273 |
Cost of revenue, excluding depreciation and amortization |
1,040,590 |
|
43,081 |
|
- |
|
|
|
1,083,671 |
Branch and regional expenses |
240,946 |
|
23,814 |
|
- |
|
|
|
264,760 |
Corporate expenses |
113,828 |
|
10,298 |
|
- |
|
|
|
124,126 |
Goodwill Impairment |
75,727 |
|
- |
|
- |
|
|
|
75,727 |
Depreciation and amortization |
17,027 |
|
713 |
|
2,004 |
|
(a) |
|
19,744 |
Acquisition-related costs |
9,564 |
|
- |
|
13,423 |
|
(b) |
|
22,987 |
Other operating expenses (income) |
910 |
|
(4,316) |
|
- |
|
|
|
(3,406) |
Operating (loss) income |
(3,487) |
|
19,578 |
|
(15,427) |
|
|
|
664 |
Interest income |
345 |
|
46 |
|
- |
|
|
|
391 |
Interest expense |
(82,983) |
|
(129) |
|
(33,052) |
|
(c) |
|
(116,164) |
Loss on debt extinguishment |
(73) |
|
- |
|
- |
|
|
|
(73) |
Other income (expense) |
34,464 |
|
165 |
|
- |
|
|
|
34,629 |
Income (loss) before income taxes |
(51,734) |
|
19,660 |
|
(48,479) |
|
|
|
(80,553) |
Income tax benefit (expenses) |
(5,316) |
|
- |
|
7,493 |
|
(d) |
|
2,177 |
Net income (loss) |
(57,050) |
|
19,660 |
|
(40,986) |
|
|
|
(78,376) |
Net income (loss) attributable to noncontrolling interest |
- |
|
(8) |
|
- |
|
|
|
(8) |
Net income (loss) attributable to Aveanna |
$ (57,050) |
|
$ 19,652 |
|
$ (40,986) |
|
|
|
$ (78,384) |
Income (loss) per share attributable to Aveanna: |
|
|
|
|
|
|
|
|
|
Net (loss) income per share, basic |
$ (0.40) |
|
|
|
|
|
|
|
$ (0.56) |
Weighted average shares outstanding, basic |
140,972 |
|
|
|
|
|
|
|
140,972 |
Net (loss) income per share, diluted |
$ (0.40) |
|
|
|
|
|
|
|
$ (0.56) |
Weighted average shares outstanding, diluted |
140,972 |
|
|
|
|
|
|
|
140,972 |
The accompanying notes are an integral part of this Unaudited Pro Forma Condensed Consolidated Statement of Operations.
AVEANNA HEALTHCARE HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
for the Nine-month Period Ended October 2, 2021
(Amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
Historical Aveanna Nine-month period ended October 2, 2021 |
|
Historical Comfort Care Nine-month period ended September 30, 2021, after reclassification (Note 2) |
|
Transaction Accounting Adjustments for the Acquisition |
|
Note 4 |
|
Pro Forma for the Acquisition |
Revenue |
$ 1,264,548 |
|
$ 74,145 |
|
$ - |
|
|
|
$ 1,338,693 |
Cost of revenue, excluding depreciation and amortization |
846,534 |
|
31,871 |
|
- |
|
|
|
878,405 |
Branch and regional expenses |
223,462 |
|
19,082 |
|
- |
|
|
|
242,544 |
Corporate expenses |
97,673 |
|
8,370 |
|
- |
|
|
|
106,043 |
Goodwill Impairment |
- |
|
- |
|
- |
|
|
|
- |
Depreciation and amortization |
15,163 |
|
494 |
|
(126) |
|
(a) |
|
15,531 |
Acquisition-related costs |
4,779 |
|
- |
|
(1,094) |
|
(b) |
|
3,685 |
Other operating expenses (income) |
- |
|
- |
|
- |
|
|
|
- |
Operating (loss) income |
76,937 |
|
14,328 |
|
1,220 |
|
|
|
92,485 |
Interest income |
182 |
|
19 |
|
- |
|
|
|
201 |
Interest expense |
(53,793) |
|
(78) |
|
(24,804) |
|
(c) |
|
(78,675) |
Loss on debt extinguishment |
(13,702) |
|
- |
|
- |
|
|
|
(13,702) |
Other expense (income) |
(1,088) |
|
1 |
|
- |
|
|
|
(1,087) |
Income (loss) before income taxes |
8,536 |
|
14,270 |
|
(23,584) |
|
|
|
(778) |
Income tax benefit (expense) |
612 |
|
- |
|
2,455 |
|
(d) |
|
3,067 |
Net income (loss) |
$ 9,148 |
|
$ 14,270 |
|
$ (21,129) |
|
|
|
$ 2,289 |
Income (loss) per share: |
|
|
|
|
|
|
|
|
|
Net income (loss) per share, basic |
$ 0.06 |
|
|
|
|
|
|
|
$ 0.01 |
Weighted average shares outstanding, basic |
165,877 |
|
|
|
|
|
|
|
165,877 |
Net income (loss) per share, diluted |
$ 0.05 |
|
|
|
|
|
|
|
$ 0.01 |
Weighted average shares outstanding, diluted |
170,667 |
|
|
|
|
|
|
|
170,667 |
The accompanying notes are an integral part of this Unaudited Pro Forma Condensed Consolidated Statement of Operations.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The Comfort Care Acquisition has been accounted for within the unaudited pro forma condensed consolidated financial information as a business combination using the acquisition method of accounting under the provisions of ASC 805, Business Combinations (“ASC 805”), and using the fair value concepts defined in ASC 820, Fair Value Measurements. Under ASC 805, all assets acquired and liabilities assumed are recorded at their acquisition date fair value. The determination of the fair values of the assets acquired and liabilities assumed (and the related determination of estimated useful lives of amortizable identifiable intangible assets) requires significant judgment and estimates. The estimates and assumptions used include the projected timing and amount of future cash flows and discount rates reflecting risk inherent in the future cash flows related to the businesses acquired. Although the Company believes the fair values assigned to the assets acquired and liabilities assumed from the acquisitions are accurate, new information may be obtained about facts and circumstances that existed as of the date of the Comfort Care Acquisition during the twelve-month period following which could cause actual results to differ materially from the unaudited pro forma condensed consolidated financial information.
Aveanna and Comfort Care incurred a total of $5.8 million and $7.6 million, respectively, of non-recurring acquisition-related costs related to the Comfort Care Acquisition.
The unaudited pro forma condensed consolidated financial information does not include the realization of any cost savings from operating efficiencies, synergies or other restructuring activities which might result from the Comfort Care Acquisition. Further, the unaudited pro forma condensed consolidated financial information does not assume any differences in accounting policies, except as described in “Note 2. Historical Comfort Care”, as we are not aware of any differences that would have a material impact on the unaudited pro forma condensed consolidated financial statements. Further review of Comfort Care’s detailed accounting policies in the twelve-month period following the Comfort Care Acquisition may result in the identification of additional differences between the accounting policies of the two companies that, when conformed, could have a material impact on the financial statements of the combined company.
Certain reclassifications have been made to the historical financial statements of Comfort Care to conform to our presentation as follows:
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of October 2, 2021
Presentation in Comfort Care Financial Statements |
|
Amount |
|
Presentation in Unaudited Pro Forma Condensed Consolidated Balance Sheet |
Accounts receivable - related parties |
$ |
11 |
|
Other current assets |
Accounts receivable - other |
|
21 |
|
Other current assets |
Accounts payable and accrued expenses |
|
2,075 |
|
Accounts payable and other accrued liabilities |
Accounts payable and accrued expenses |
|
837 |
|
Other current liabilities |
Accounts payable and accrued expenses |
|
10 |
|
Accrued interest |
Accounts payable - related parties |
|
210 |
|
Accounts payable and other accrued liabilities |
Accrued payroll and withholdings |
|
8,291 |
|
Accrued payroll and employee benefits |
Accrued other |
|
187 |
|
Other current liabilities |
Notes payable - related parties |
|
1,541 |
|
Current portion of long-term obligations |
Lines of credit |
|
2,141 |
|
Current portion of long-term obligations |
Noncurrent liabilities |
$ |
935 |
|
Deferred payroll taxes, less current portion |
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended January 2, 2021
Presentation in the Comfort Care Statement of Operations |
|
Amount (in thousands) |
|
|
Presentation in the Unaudited Pro Forma Condensed Consolidated Statement of Operations |
|
Cost of revenue |
|
$ |
43,081 |
|
|
Cost of revenue, excluding depreciation and amortization |
Branch and regional administrative expenses |
|
$ |
23,814 |
|
|
Branch and regional expenses |
|
|
|
|
|
|
|
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Nine-Month period ended October 2, 2021
Presentation in the Comfort Care Statement of Operations |
|
Amount (in thousands) |
|
|
Presentation in the Unaudited Pro Forma Condensed Consolidated Statement of Operations |
|
Cost of revenue |
|
$ |
31,871 |
|
|
Cost of revenue, excluding depreciation and amortization |
Branch and regional administrative expenses |
|
|
19,082 |
|
|
Branch and regional expenses |
Loss on sale of property and equipment |
|
$ |
(11) |
|
|
Other income (expense) |
|
|
|
|
|
|
|
The preliminary GAAP purchase price is as follows (in thousands):
|
|
|
Cash consideration to shareholders |
$ |
304,355 |
Settlement of closing debt (1) |
|
1,888 |
Settlement of seller transaction costs (2) |
|
7,580 |
Cash paid into escrow and reserve accounts |
|
32,653 |
Total preliminary GAAP purchase price |
$ |
346,476 |
|
Estimated Useful Lives |
|
|
Fair Value |
||
Licenses |
|
Indefinite |
|
|
$ |
18,300 |
Trade names |
|
12 months |
|
|
|
2,250 |
Fair values of intangible assets |
|
|
|
|
|
20,550 |
Less: historical carrying value of intangible assets |
|
|
|
|
|
(5,518) |
Pro forma adjustment |
|
|
|
|
$ |
15,032 |
No assurances can be given that the underlying assumptions and estimates used to estimate the fair values of the licenses and tradenames will not change. For this and other reasons, actual results may vary significantly from estimated results.
Goodwill represents the excess of the aggregate purchase consideration over the preliminary estimated fair values of recorded tangible and intangible assets acquired and liabilities assumed in the Comfort Care Acquisition. The actual amount of goodwill to be recorded in connection with the Comfort Care Acquisition is subject to change once the valuation of the fair value of tangible and intangible assets acquired and liabilities assumed has been completed. The final valuation of such assets and liabilities is expected to be completed as soon as practicable but no later than one year after the consummation of the Comfort Care Acquisition. The table below reflects the preliminary purchase price allocation based on estimates, assumptions, valuations and other analyses (in thousands):
Total preliminary GAAP purchase price, net of cash acquired |
$ |
342,651 |
|
Patient accounts receivable |
|
11,123 |
|
Prepaid expenses and other current assets |
|
803 |
|
Other current assets |
|
132 |
|
Intangible assets |
|
20,550 |
|
Property and equipment, net |
|
1,257 |
|
Operating lease right of use assets |
|
3,952 |
|
Accounts payable and other accrued liabilities |
|
(314) |
|
Accrued payroll and employee benefits |
|
(8,291) |
|
Current portion of operating lease liabilities |
|
(1,041) |
|
Other current liabilities |
|
(1,024) |
|
Operating lease liabilities |
|
(2,911) |
|
Net assets acquired, excluding goodwill |
|
24,236 |
|
Goodwill |
|
318,415 |
|
Less: historical Comfort Care goodwill |
|
(3,558) |
|
Pro forma adjustment |
$ |
314,857 |
|
Accrual for seller transaction costs not recorded in the historical results of Comfort Care as they had not yet been incurred |
$ |
(7,580) |
Tax effect of deductible seller transaction costs (1) |
|
1,971 |
Elimination of historical Comfort Care members’ equity as well as the aforementioned transaction costs not yet incurred and the tax effect of deductible transaction costs (2) |
|
(17,705) |
Non-capitalizable buyer transaction costs |
|
(4,749) |
Tax effect of deductible buyer transaction costs (1) |
|
1,519 |
Total pro forma adjustment |
$ |
(26,544) |
4. Unaudited Pro Forma Condensed Consolidated Statements of Operations Transaction Accounting Adjustments
|
For the Nine-Month period ended October 2, 2021 |
|
|
For the Fiscal Year ended January 2, 2021 |
||
Pro forma amortization expense |
$ |
- |
|
|
$ |
2,250 |
Historical Comfort Care amortization expense |
|
(126) |
|
|
|
(246) |
Pro forma adjustment |
$ |
(126) |
|
|
$ |
2,004 |
|
For the Nine-Month period ended October 2, 2021 |
|
|
For the Fiscal Year ended January 2, 2021 |
||
Pro forma interest expense (1) |
$ |
(24,847) |
|
|
$ |
(33,104) |
Historical Comfort Care interest expense |
|
43 |
|
|
|
52 |
Pro forma adjustment |
$ |
(24,804) |
|
|
$ |
(33,052) |
Additionally, reflects the increased income tax expense as if Comfort Care’s historical income before income taxes was taxed as a C corporation, consistent with Aveanna’s tax structure as opposed to Comfort Care’s historical filing status which did not have a separate entity level federal and state income tax, using a combined state and federal statutory tax rate of 26%.